The bankruptcy court granted the debtors’ motion to dismiss an adversary proceeding against them, on collateral estoppel and Rooker-Feldman grounds. The adversary complaint sought a determination that debts owed to the plaintiffs, based on a state court judgment, were excepted from discharge under § 523(a)(2). The plaintiffs had filed a lawsuit in state court alleging fraudulent misrepresentation and breach of contract in connection with a lease of real property. The state court ruled against the plaintiffs on the fraudulent misrepresentation claim, specifically finding they did not prove fraudulent intent. Collateral estoppel prevents an issue that was fully and fairly litigated by the parties in state court with a final judgment on the merits from being relitigated in bankruptcy court. Therefore, the § 523(a)(2) claim premised on false representations was barred. In addition, the Rooker-Feldman doctrine bars the bankruptcy court from exercising subject-matter jurisdiction  over the fraudulent misrepresentation claims because of the possibility of undermining the state court decision.

The debtor filed this adversary proceeding alleging breach of contract and fraud against the seller from whom the debtor bought an affordable housing complex. The court denied the defendant’s motion to dismiss the adversary complaint for failure to state a claim, finding that if the allegations in the complaint are construed in favor of the plaintiff, they are legally sufficient to survive dismissal.

After a trial on the dischargeability of the debtor's student loan indebtedness, the court ruled that the debt was excepted from discharge because the plaintiff did not meet her burden of proving an undue hardship. Questions remain as to available sources of income for the debtor and her minor children, and whether certain expenses are necessary or likely to exist for the foreseeable future. The debtor is also eligible for an income-based repayment plan and, as an employee of a non-profit agency, may be eligible for a public service loan forgiveness program under which she could discharge her loan obligation after 10 years of payments. The totality of the debtor's circumstances weighed against discharge of this debt.

The holder of a super-priority unsecured administrative expense claim sought disgorgement of all administrative expenses paid during the Chapter 11 and subsequent Chapter 7 phases of this bankruptcy case in order that the funds could be applied to its claim. The court denied the motion due to the unique facts and circumstances of this case.
First, the court ruled, the Chapter 7 administrative expenses were paid from another creditor's collateral, so disgorgement would simply return those funds to the secured creditor rather than make them available for the super-priority claimant. Moreover, the super-priority claimant had notice of and did not object to the arrangement between the lender and the trustee, and there is no basis now for disturbing that arrangement.
Second, the court ruled, disgorgement of the Chapter 11 administrative expenses would be inequitable because they were paid without objection from the super-priority claimant, even though the debtor was not paying the super-priority claimant at the time. "It simply would be inequitable to allow Hansen's to come in at this late stage to seek disgorgement of duly earned fees from estate professionals. Hansen's had the ability to control this outcome. It could have stopped supplying fuel as soon as debtor defaulted on payment terms. That would have greatly reduced the claim of Hansen's. It also could have objected to payment of administrative claims as soon as it knew that the debtor was not in compliance with payment terms. It did not do those things. Hansen's took a risk that the debtor would successfully reorganize. It gambled and lost."