You are here

Koos Enter., LLC v. Marvin Earl Hughes & Kathleen Terry Bonnell (In re Hughes & Bonnell), Ch. 7, BK18-41582-SKH, A19-4013-SKH (May 28, 2020)

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.

Thursday, May 28, 2020
Judge Shon Hastings