Court Opinion

ID: 4168473
Source: CourtListenerOpinion
Date Created: 2017-05-15 20:04:38.150702+00
Date Added: 2024-06-11T14:25:16.450818
License: Public Domain

NOT FOR PUBLICATION                         FILED
                    UNITED STATES COURT OF APPEALS                       MAY 15 2017
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

In re: GREGORY JULES LORBER,                    No.    15-56771

             Debtor,                            D.C. No. 2:15-cv-04852-MMM
______________________________

GREGORY JULES LORBER,                           MEMORANDUM*

                Appellant,

 v.

FTC COMMERCIAL CORP., a California
corporation,

                Appellee.

In re: GREGORY JULES LORBER,                    No.    15-56831

             Debtor,                            D.C. No. 2:15-cv-04852-MMM
______________________________

FTC COMMERCIAL CORP., a California
corporation,

                Appellant,

 v.

GREGORY JULES LORBER,

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
                Appellee.

                   Appeal from the United States District Court
                      for the Central District of California
                  Margaret M. Morrow, District Judge, Presiding

                            Submitted May 11, 2017**
                              Pasadena, California

Before: PREGERSON and FRIEDLAND, Circuit Judges, and DONATO,***
District Judge.

      Gregory Lorber appeals the district court’s affirmance of the bankruptcy

court’s judgment. Pursuant to 11 U.S.C. § 727(a)(3), the bankruptcy court denied

Lorber discharge of a debt owed to FTC Commercial Corporation (“FTC”) after

the court found that Lorber failed to maintain adequate business records from

which his financial condition could be ascertained.1 We have jurisdiction under 28

U.S.C. § 1291, and we affirm.

      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      ***
            The Honorable James Donato, United States District Judge for the
Northern District of California, sitting by designation.
1
  The bankruptcy court also deemed the debt non-dischargeable under 11 U.S.C.
§ 523(a)(2)(A) and found that Lorber had failed to explain satisfactorily a loss of
assets, warranting denial of discharge under 11 U.S.C. § 727(a)(5). Because we
hold that denial of discharge under § 727(a)(3) was proper, we need not address
those conclusions or the arguments about § 727(a)(5) raised in FTC’s cross-appeal.

                                         2
      1.     The bankruptcy court did not err in concluding that Lorber’s discharge

should be denied. A debtor is not eligible for discharge if he “has . . . failed to

keep or preserve any recorded information, including books, documents, records,

and papers, from which the debtor’s financial condition or business transactions

might be ascertained, unless such act or failure to act was justified under all of the

circumstances of the case.” 11 U.S.C. § 727(a)(3). The party objecting to

discharge bears the initial burden of proving that discharge should be denied. In re

Retz, 606 F.3d 1189, 1196 (9th Cir. 2010). But once a creditor has shown that

inadequate records make it impossible to ascertain a debtor’s financial condition,

“the burden of proof then shifts to the debtor to justify the inadequacy . . . of the

records.” In re Caneva, 550 F.3d 755, 761 (9th Cir. 2008) (quoting In re Cox, 41
F.3d 1294, 1296 (9th Cir. 1994)).

      After a four-day bench trial, the bankruptcy court determined that FTC, the

creditor, had satisfied its burden by showing that Lorber, the debtor, failed to

produce electronically stored financial records for several entities he owned and

operated, creating uncertainty as to their solvency and, thus, his personal financial

condition. Lorber offered contradictory explanations for that omission, and the

bankruptcy court found him not credible. Moreover, witnesses presented

conflicting accounts of the record-keeping practices at Lorber’s businesses, and he

himself testified inconsistently about how financial information had been

                                           3
maintained, what data remained accessible, and whether he even knew where the

relevant records were. In light of the evidence adduced at trial, it was not illogical

or implausible for the bankruptcy court to conclude that Lorber had failed to

maintain sufficient records of his business transactions to be eligible for discharge.

See Retz, 606 F.3d at 1196 (stating that the bankruptcy court’s factual findings are

reviewed for clear error and reversible only if “illogical, implausible, or without

support in the record”).

      2.     Lorber does not seriously challenge the bankruptcy court’s findings.

Instead, Lorber contends that, notwithstanding the unaccounted for electronic

records, the bankruptcy court could have ascertained Lorber’s financial condition

from other documents produced in discovery. The record does not support that

claim, which is further undermined by Lorber’s admission that he himself did not

know where all the financial records were. To the extent Lorber focuses on the

“sheer volume” of documents involved in this litigation, he misapprehends the

relevant burdens. Lorber had an “affirmative duty” under § 727(a)(3) to keep and

preserve records of his business affairs; he cannot evade that obligation by shifting

responsibility to his creditors and the courts to glean whatever might be learned

from thousands of pages of discovery. See Caneva, 550 F.3d at 762 (quoting In re

Scott, 172 F.3d 959, 969 (7th Cir. 1999)). Put differently, “if there is a needle in

this haystack [of discovery], it is [not] up to the court to find it.” Id.

                                            4
AFFIRMED.

            5