401(k) plan not property of the bankruptcy
estate and not subject to the reach of most creditors:
STEPHEN
L. HOCHBERG v. MAGE, LLC 401 K PROFIT SHARING PLAN, JEFFREY DAVIS, INDIVIDUALLYAND
AS
TRUSTEE OF THE MAGE, LLC 401 K PROFIT SHARING PLAN, AND JONATHAN FREEDMAN,
INDIVIDUALLY AND AS TRUSTEE OF THE MAGE, LLC 401 K PROFIT SHARING PLAN, 2012 U.S. Dist. LEXIS 41567 (D. Mass. March 27, 2012)(Richard
G. Stearns, District Judge).
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS:
Stephen Hochberg brought this lawsuit against defendant Mage, LLC 401(k) Profit Sharing Plan (Mage Plan), and defendants Jeffrey Davis and Jonathan Freedman, individually and as trustees of the Mage Plan, seeking the turnover of funds from a 401(k) employee benefits plan held by defendants. The suit is brought under the provisions of ERISA. Defendants move to dismiss the action on two grounds: (1) that the disputed 401(k) plan is the subject of a pending action in the Massachusetts Superior Court relating to the disputed 401(k); and (2) is also the subject of two prior orders issued by the Superior Court. Hochberg also filed for bankruptcy in 2007, and the Bankruptcy court ruled that it did not have jurisdiction over the disputed 401K funds, citing 11 U.S.C. Section 541(c)(2)(Interests in a plan or trust containing transfer restrictions enforceable under any relevant non-bankruptcy law are excluded from the bankruptcy estate.) Davis, Freedman, and Hochberg were members of Mage, a management consulting firm, from 1999 to 2007. In 2007, Hochberg's employment was terminated. Hochberg was subsequently prosecuted by federal authorities for seventeen counts of wire fraud and securities fraud. Hochberg eventually pled guilty to all of the charges. On September 10, 2007, Freedman and Davis brought a civil action against Hochberg in the Superior Court, seeking damages and injunctive relief in connection with Hochberg's fraudulent activities at Mage. The Superior Court granted a motion by Davis and Freedman for pretrial security, and denied a motion by Hochberg to use the 401(k) funds to pay his attorney. The Superior Court action is still pending, and the Superior Court Order did not reference the disputed 401(k). Under Massachusetts law, a retirement plan subject to ERISA cannot be taken to satisfy a debt or a liability incurred as the result of a civil lawsuit. State law with even an indirect effect on an ERISA-covered benefit plan is preempted, even though ERISA by its terms may not necessarily address the topic covered by the state law.
ORDER: For the foregoing reasons, defendants' motion to dismiss is DENIED. The parties will within fourteen (14) days of the date of this Order submit a joint proposed scheduling order with a view to bringing the federal case to a prompt resolution.
Stephen Hochberg brought this lawsuit against defendant Mage, LLC 401(k) Profit Sharing Plan (Mage Plan), and defendants Jeffrey Davis and Jonathan Freedman, individually and as trustees of the Mage Plan, seeking the turnover of funds from a 401(k) employee benefits plan held by defendants. The suit is brought under the provisions of ERISA. Defendants move to dismiss the action on two grounds: (1) that the disputed 401(k) plan is the subject of a pending action in the Massachusetts Superior Court relating to the disputed 401(k); and (2) is also the subject of two prior orders issued by the Superior Court. Hochberg also filed for bankruptcy in 2007, and the Bankruptcy court ruled that it did not have jurisdiction over the disputed 401K funds, citing 11 U.S.C. Section 541(c)(2)(Interests in a plan or trust containing transfer restrictions enforceable under any relevant non-bankruptcy law are excluded from the bankruptcy estate.) Davis, Freedman, and Hochberg were members of Mage, a management consulting firm, from 1999 to 2007. In 2007, Hochberg's employment was terminated. Hochberg was subsequently prosecuted by federal authorities for seventeen counts of wire fraud and securities fraud. Hochberg eventually pled guilty to all of the charges. On September 10, 2007, Freedman and Davis brought a civil action against Hochberg in the Superior Court, seeking damages and injunctive relief in connection with Hochberg's fraudulent activities at Mage. The Superior Court granted a motion by Davis and Freedman for pretrial security, and denied a motion by Hochberg to use the 401(k) funds to pay his attorney. The Superior Court action is still pending, and the Superior Court Order did not reference the disputed 401(k). Under Massachusetts law, a retirement plan subject to ERISA cannot be taken to satisfy a debt or a liability incurred as the result of a civil lawsuit. State law with even an indirect effect on an ERISA-covered benefit plan is preempted, even though ERISA by its terms may not necessarily address the topic covered by the state law.
ORDER: For the foregoing reasons, defendants' motion to dismiss is DENIED. The parties will within fourteen (14) days of the date of this Order submit a joint proposed scheduling order with a view to bringing the federal case to a prompt resolution.
Debtor may amend Schedule B in Ch.13 case (and is not judicially estopped from doing so) to include prosecution of an FDCPA claim, but any proceeds must be used to pay creditors:
IN RE: RAMIREZ, 2012 Bankr. LEXIS 1334 (Bankr. D.P. R. March 28, 2012)(Enrique S. Lamoutte, Bankruptcy Judge).
Procedural Posture: Debtor moved for reconsideration of an order
that vacated a prior ruling denying a motion filed by a finance company in
which it had objected to debtor's amendment of Schedule B. One issue was the
effect of debtor's inclusion, on the amended schedule, of a claim, against the
company, under the Fair Debt Collection Practices Act, (FDCPA), then being
litigated in the district court. Debtor’s
schedules as originally filed in the Chapter 13 did not include the FDCPA
claim. When debtor amended the schedules to correct what debtor described as an
oversight, debtor listed the action on Schedule B (personal property) at a $1000
value and on Schedule C (exempt property), where $1000 in value was claimed as
exempt. On the trustee’s objection, the amended Schedule C was withdrawn. The
company’s objection was overruled as moot but was later granted when the
company moved to set aside that ruling. Ultimately, the issue was whether
debtor might properly file an amended Schedule B to include the FDCPA claim.
The court held that debtor might properly do so. Citing a district court order
finding that debtor had not been discharged so that Fed. R. Bankr.
P. 1009(a) authorized an amendment, and that debtor was not
judicially estopped from making that amendment, the court held that the
proposed amendment was properly allowed. As for the question of who had
standing to prosecute the action and for whose benefit, the court held that any
recovery on the claim as prosecuted by debtor in the district court must be
distributed to the benefit of the estate per the Chapter 13 plan.
OUTCOME: The court granted debtor's request to amend Schedule B to include the FDCPA action, held that debtor was authorized to prosecute the cause of action pending in the district court for the benefit of the estate, and directed debtor to file a request to modify the plan after confirmation per 11 U.S.C.S. § 1329 to confirm the plan to the court's ruling.
OUTCOME: The court granted debtor's request to amend Schedule B to include the FDCPA action, held that debtor was authorized to prosecute the cause of action pending in the district court for the benefit of the estate, and directed debtor to file a request to modify the plan after confirmation per 11 U.S.C.S. § 1329 to confirm the plan to the court's ruling.
Debtor granted summary judgment where no factual
allegations presented to sustain plaintiff’s complaint other than formulaic recitation
of the elements of a cause of action:
(In
re: DEBAENE) ADONAI OUTREACH MINISTRY v. DEBAENE, 2012 Bankr. LEXIS 1511 (Bankr. D.R. I. 4/9/12)(Votolato, Arthur,
Bankruptcy Judge)
ORDER GRANTING DEFENDANT'S MOTION FOR
SUMMARY JUDGMENT:
Heard on Defendant/Debtor's Motion for Summary Judgment on the grounds that Plaintiff Adonai Outreach Ministry's ("Adonai") Complaint fails to allege genuine issues of material fact to be resolved by the trier of fact. In order to defeat a motion for summary judgment, the nonmoving party must offer "sufficient evidence supporting the claimed factual dispute to require a choice between the parties' differing versions of the truth at trial." LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). "A pleading that offers 'labels and conclusions' or 'a formulaic recitation [*2] of the elements of a cause of action' will not do." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-557, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id.
In its Objection to Defendant's Motion for Summary Judgment, the Plaintiff offers only a bare assertion that DeBaene took its money and performed no work. Plaintiff's argument consists of two conclusionary sentences, and its affidavit fails to address the context of the April 21, 2011, letter written by its agent and offered as Defendant's Exhibit F. Because the Plaintiff offered nothing more than a mere recitation of allegations, it is this Court's ruling that there is no genuine issue of material fact to be resolved at trial. Accordingly, DeBaene's Motion for Summary Judgment is GRANTED.
Debtor's failure to timely seek arbitration as required by ERISA was waiver of right to challenge its liability:
Heard on Defendant/Debtor's Motion for Summary Judgment on the grounds that Plaintiff Adonai Outreach Ministry's ("Adonai") Complaint fails to allege genuine issues of material fact to be resolved by the trier of fact. In order to defeat a motion for summary judgment, the nonmoving party must offer "sufficient evidence supporting the claimed factual dispute to require a choice between the parties' differing versions of the truth at trial." LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). "A pleading that offers 'labels and conclusions' or 'a formulaic recitation [*2] of the elements of a cause of action' will not do." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-557, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id.
In its Objection to Defendant's Motion for Summary Judgment, the Plaintiff offers only a bare assertion that DeBaene took its money and performed no work. Plaintiff's argument consists of two conclusionary sentences, and its affidavit fails to address the context of the April 21, 2011, letter written by its agent and offered as Defendant's Exhibit F. Because the Plaintiff offered nothing more than a mere recitation of allegations, it is this Court's ruling that there is no genuine issue of material fact to be resolved at trial. Accordingly, DeBaene's Motion for Summary Judgment is GRANTED.
Debtor's failure to timely seek arbitration as required by ERISA was waiver of right to challenge its liability:
In re: M&M Fishing
Corp., 2012 Bankr. LEXIS 1480 (Bankr.
D. Mass. 4/6/12)(William C. Hillman).
OVERVIEW: The debtor contended that the
solvency of the plan at the time of the debtor's withdrawal from the plan
precluded any withdrawal liability of the debtor, but the plan argued that the
debtor failed to seek arbitration as required by ERISA to challenge its
withdrawal liability. The bankruptcy
court held that the debtor was liable for its withdrawal from the plan.
Although the debtor was statutorily liable only for its proportionate share of
the plan's unfunded vested liabilities, the only evidence of the plan's
solvency was a purported pleading in an unrelated case against another
employer, and the debtor's failure timely to seek arbitration as required by
ERISA constituted a waiver of the debtor's right to challenge its liability.
OUTCOME: The debtor’s objection to the plan’s claim
was overruled.
Debtor
contractor’s failure to complete residence was a breach of contract but did not
rise to the level of a non-dischargeable debt:
(In re LAUZON)KUN
ZHAO AND YING DING, v. LAUZON, 2012 Bankr.
LEXIS 1570 (Bankr. D. Mass. 4/9/12)(Joan N. Feeney, Bankruptcy Judge).
PROCEDURAL
POSTURE:
Plaintiff creditors brought an adversary proceeding against defendant debtor, a
contractor and the former principal officer of a defunct corporation, seeking a
determination that damages they suffered as a result of debtor's failure to
complete the construction of their residence were nondischargeable pursuant to 11 U.S.C.S. §
523(a)(2)(A) or (a)(6).
OVERVIEW: Debtor agreed to a contract to build the residence where time was of the essence at all times. The parties also agreed that, if the debtor delayed or refused to prosecute his work with reasonable diligence, failed to comply with any of the terms of the contract, or unreasonably delayed completion of the contract, he would be deemed in default. Debtor defaulted and was in breach of the contract. However, his conduct did not rise to the level that would permit the court to find that his debt or a partial amount thereof was nondischargeable under either 11 U.S.C.S. § 523(a)(2)(A) or (a)(6).
OUTCOME: Judgment was entered in favor of the debtor, and the claim was held to be dischargeable.
OVERVIEW: Debtor agreed to a contract to build the residence where time was of the essence at all times. The parties also agreed that, if the debtor delayed or refused to prosecute his work with reasonable diligence, failed to comply with any of the terms of the contract, or unreasonably delayed completion of the contract, he would be deemed in default. Debtor defaulted and was in breach of the contract. However, his conduct did not rise to the level that would permit the court to find that his debt or a partial amount thereof was nondischargeable under either 11 U.S.C.S. § 523(a)(2)(A) or (a)(6).
OUTCOME: Judgment was entered in favor of the debtor, and the claim was held to be dischargeable.
Discussion: Based
upon the evidence presented, the Court finds that the Debtor breached his
contract with the Zhaos by not paying his subcontractors in accordance with the
parties' contract dated April 30, 2008. Additionally, he may have been found to
have engaged in practices that violated Mass. Gen. Laws ch. 93A. The Debtor's
conduct, however, did not rise to the level that would permit this Court to
find that his debt in an unspecified amount is nondischargeable under either 11 U.S.C. §
523(a)(2)(A) or (a)(6).
In view of the foregoing, the Court shall enter judgment in favor of the
Defendant and against the Plaintiffs.
Issues of material fact prevented SJ of debtor's challenge to validity of foreclosure:
(In re: BAILEY)
BAILEY v. WELLS FARGO BANK, NA, 2012 Bankr. LEXIS 1551 (Bankr. D. Mass
4/10/12)(Henry J. Boroff, Bankruptcy Judge).
PROCEDURAL POSTURE: Plaintiff, chapter 13 debtor, and defendant
creditor, the purported assignee of her residential mortgage, brought
cross-motions for summary judgment on the debtor's claim that the pre-petition
foreclosure of her residence was void under Massachusetts law.
OVERVIEW: Debtor asserted that first that the creditor did not provide proper notice of the foreclosure and did not hold the mortgage on the property either when it sent notice of the foreclosure or at the time of the foreclosure sale. Certified mailings of notice of the foreclosure were returned as unclaimed, but delivery of the notice was irrelevant. Debtor also argued that the creditor was not the holder of the mortgage, because the mortgage had been an asset of a limited partnership, and was never transferred to the creditor's predecessor in interest. While the documents on record at the time of the foreclosure need not demonstrate an unbroken chain of ownership of the mortgage, the foreclosing creditor had to establish its standing to bring the action. Debtor's argument was aimed at the ownership of the mortgage at the time it was purportedly assigned, and her injury was the purported termination of her equity of redemption in the property by a party who had no authority to foreclose her equity of redemption. It was possible that the limited partnership assets vested in another party as a result of distribution during its winding-up process.
OUTCOME: Remaining issues of material fact as to the identity of the mortgagee precluded the entry of summary judgment for either party. Before the Court are the parties' cross-motions for summary judgment on the debtor's claim that the defendant's prepetition foreclosure of her residence was void under Massachusetts law because the defendant did not provide proper notice of the foreclosure and did not hold the mortgage on the property at either the time it sent notice of the foreclosure or at the time of the foreclosure sale. Although many of the discrete arguments raised in the motions are determinable on summary judgment, remaining issues of material fact preclude the entry of summary judgment for either party.
Debtor could not assert TILA/related claims where he admitted transaction was commercial in the document, even though he did not read what he signed:
OVERVIEW: Debtor asserted that first that the creditor did not provide proper notice of the foreclosure and did not hold the mortgage on the property either when it sent notice of the foreclosure or at the time of the foreclosure sale. Certified mailings of notice of the foreclosure were returned as unclaimed, but delivery of the notice was irrelevant. Debtor also argued that the creditor was not the holder of the mortgage, because the mortgage had been an asset of a limited partnership, and was never transferred to the creditor's predecessor in interest. While the documents on record at the time of the foreclosure need not demonstrate an unbroken chain of ownership of the mortgage, the foreclosing creditor had to establish its standing to bring the action. Debtor's argument was aimed at the ownership of the mortgage at the time it was purportedly assigned, and her injury was the purported termination of her equity of redemption in the property by a party who had no authority to foreclose her equity of redemption. It was possible that the limited partnership assets vested in another party as a result of distribution during its winding-up process.
OUTCOME: Remaining issues of material fact as to the identity of the mortgagee precluded the entry of summary judgment for either party. Before the Court are the parties' cross-motions for summary judgment on the debtor's claim that the defendant's prepetition foreclosure of her residence was void under Massachusetts law because the defendant did not provide proper notice of the foreclosure and did not hold the mortgage on the property at either the time it sent notice of the foreclosure or at the time of the foreclosure sale. Although many of the discrete arguments raised in the motions are determinable on summary judgment, remaining issues of material fact preclude the entry of summary judgment for either party.
Debtor could not assert TILA/related claims where he admitted transaction was commercial in the document, even though he did not read what he signed:
In re BRACK, Debtor;
BRACK v. LINCOLN FINANCE COMPANY LLC, 2012 Bankr. LEXIS 1571 (Bankr.
D. Mass. 4/9/12)(Joan N. Feeney, Bankruptcy Judge).
PROCEDURAL POSTURE: Plaintiff debtor filed a
complaint against defendant creditor in which the debtor sought in part to
rescind a mortgage loan transaction pursuant to the Truth in Lending Act, and
its Massachusetts counterpart. The debtor also sought damages for violations of
Mass. Gen. Laws ch. 93A. The creditor filed a motion to dismiss, which the
court treated as a motion for summary judgment.
OVERVIEW: The court stated that the dispositive issue was whether the debtor and the creditor entered into a credit transaction primarily for a business or commercial purpose, which would preclude any recovery. The debtor and his father executed a note secured by mortgages on three properties. The debtor said that he did not read the documents before he signed them. He stated that he believed his father when he told him that he needed to sign the documents in order to be repaid money that his father owed him. The court stated that the debtor was bound by the business purpose affidavit he signed, in which he unequivocally represented that the loan transaction was for a business purpose. The caption of the affidavit was set forth in capitalized, bold letters, and "BUSINESS OR COMMERCIAL PURPOSE" was reproduced three times. The general rule was that in the absence of fraud, one who signed a written agreement was bound by its terms whether he read and understood it or not or whether he could read or not. The debtor had the opportunity to review the documents. Had he done so, it would have been immediately apparent that they did not enable his father to repay him.
OUTCOME: Court granted creditor’s motion for summary judgment.
OVERVIEW: The court stated that the dispositive issue was whether the debtor and the creditor entered into a credit transaction primarily for a business or commercial purpose, which would preclude any recovery. The debtor and his father executed a note secured by mortgages on three properties. The debtor said that he did not read the documents before he signed them. He stated that he believed his father when he told him that he needed to sign the documents in order to be repaid money that his father owed him. The court stated that the debtor was bound by the business purpose affidavit he signed, in which he unequivocally represented that the loan transaction was for a business purpose. The caption of the affidavit was set forth in capitalized, bold letters, and "BUSINESS OR COMMERCIAL PURPOSE" was reproduced three times. The general rule was that in the absence of fraud, one who signed a written agreement was bound by its terms whether he read and understood it or not or whether he could read or not. The debtor had the opportunity to review the documents. Had he done so, it would have been immediately apparent that they did not enable his father to repay him.
OUTCOME: Court granted creditor’s motion for summary judgment.
Lien avoidance granted and creditor's objection to exemption overruled:
IN RE: ANDRIS,
2012 Bankr. LEXIS 1550 (Bankr. D. Mass. 4/10/12)(William c. Hillman, Bankruptcy
Judge).
PROCEDURAL POSTURE: Before the court were debtor's
motions to avoid judicial lien pursuant to 11 U.S.C.S. §
522(f)(1)(A) and Bankr. D. Mass. R. 4003-1(a). A creditor filed
objections. Through his motions, debtor sought to avoid two judicial liens held
by the creditor to the extent that they impaired his homestead exemption. The
creditor contended that debtor's homestead exemption was invalid.
OVERVIEW: The creditor argued that the Motions should be denied because debtor was not entitled to the exemption in the Property in light of his failure to occupy or intend to occupy the Property at the time of the 2011 Declaration. The court stated that, in effect, the creditor sought to have his cake and eat it too by asserting that the recordation of the 2011 Declaration, even if invalid, must have terminated any prior estate. Such an argument was at odds with both the statutory text which stated "the acquisition of a new estate or claim of homestead," shall defeat any such previous estate, Mass. Gen. Laws ch. 188, § 2, and the Supreme Judicial Court's (SJC's) directive that the exemption laws should be liberally construed to comport with their beneficent spirit of protecting the family home. The court predicted that the SJC would reject it. Therefore, the exemption was properly supported and it was unnecessary to determine whether the 1996 Declaration or the 2011 Declaration formed its basis. Turning to the question of lien avoidance, the court reviewed the application of the 11 U.S.C.S. § 522(f)(2)(A) formula, and found that both the attachment and the execution were fully avoidable.
OUTCOME: The court overruled the objections and granted the motions to avoid judicial liens.
OVERVIEW: The creditor argued that the Motions should be denied because debtor was not entitled to the exemption in the Property in light of his failure to occupy or intend to occupy the Property at the time of the 2011 Declaration. The court stated that, in effect, the creditor sought to have his cake and eat it too by asserting that the recordation of the 2011 Declaration, even if invalid, must have terminated any prior estate. Such an argument was at odds with both the statutory text which stated "the acquisition of a new estate or claim of homestead," shall defeat any such previous estate, Mass. Gen. Laws ch. 188, § 2, and the Supreme Judicial Court's (SJC's) directive that the exemption laws should be liberally construed to comport with their beneficent spirit of protecting the family home. The court predicted that the SJC would reject it. Therefore, the exemption was properly supported and it was unnecessary to determine whether the 1996 Declaration or the 2011 Declaration formed its basis. Turning to the question of lien avoidance, the court reviewed the application of the 11 U.S.C.S. § 522(f)(2)(A) formula, and found that both the attachment and the execution were fully avoidable.
OUTCOME: The court overruled the objections and granted the motions to avoid judicial liens.
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