Court Opinion

ID: 9374448
Source: CourtListenerOpinion
Date Created: 2023-02-22 22:00:31.228926+00
Date Added: 2024-06-11T17:16:47.292745
License: Public Domain

United States Court of Appeals
                       For the First Circuit

No. 22-1287

                   IN RE: DONALD C. KUPPERSTEIN,

                              Debtor.

                      DONALD C. KUPPERSTEIN,

                            Appellant,

                                v.

     IRENE SCHALL, Personal Representative of the Estate of
  Fred W. Kuhn; EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES,

                            Appellees.

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Timothy S. Hillman, U.S. District Judge]

                              Before

                 Selya and Lynch, Circuit Judges,
                   and McElroy, District Judge.

     David G. Baker on brief for appellant.
     Nicola Yousif and the Law Office of Nick Yousif on brief for
appellee Irene Schall.
     Brian G. Lee on brief for appellee the Executive Office of
Health and Human Services.

       Of the District of Rhode Island, sitting by designation.
February 22, 2023

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          MCELROY,      District      Judge.          The         bankruptcy     court

determined, upon cross-motions for summary judgment, that Donald

C.   Kupperstein       knowingly     and        fraudulently           omitted        and

misrepresented material facts in his Chapter 7 bankruptcy petition

and related schedules, warranting the denial of his discharge under

11 U.S.C. § 727(a)(4)(A).       Kupperstein appeals and we consider now

whether summary judgment was properly granted.                      For the reasons

below, we affirm.

                                I.    Background

          This is the third appearance in this court of a long-

running dispute, which we previously detailed in In re Kupperstein

(Kupperstein    II),   994   F.3d    673    (1st      Cir.    2021),     and     In    re

Kupperstein (Kupperstein I), 943 F.3d 12 (1st Cir. 2019).                             We

report here what is necessary to understand the instant appeal.

          On    January   11,   2018,      in   the    wake       of   Kupperstein's

multiple violations of judgments and orders of Massachusetts state

courts, he filed in bankruptcy court a voluntary petition for

relief under Chapter 7 of the United States Bankruptcy Code.

Appellees -- the Executive Office of Health and Human Services of

the Commonwealth of Massachusetts and Irene B. Schall, as the

personal representative of the estate of Fred W. Kuhn -- commenced

adversary proceedings on July 16, 2018, seeking the denial of

Kupperstein's    bankruptcy     discharge       under        11    U.S.C.   §§    523,

                                     - 3 -
727(a)(4)(A).1      As for the § 727(a)(4)(A) claim, Appellees posited

that Kupperstein's bankruptcy filings included material omissions

and   falsehoods    and   that   Kupperstein's    Statement   of   Financial

Affairs (SOFA) and his Schedule A/B (required filings with his

petition) did not include income from a law practice he failed to

disclose, a title insurance settlement, and an interest in real

estate.

            After     discovery     on   the     consolidated      adversary

proceedings, Kupperstein moved for summary judgment and Appellees

responded with a joint cross-motion.           Appellees filed a statement

of undisputed facts in support of their motion and filed a response

to Kupperstein's statement of undisputed facts.               Kupperstein,

however, did not timely file a response to Appellees' statement of

facts.    At the hearing on the motion, on June 16, 2020, he offered

to file his response within a day.          Three days later, on June 19,

2020, Kupperstein filed his response and a motion for leave, which

the bankruptcy court denied because it had already taken the

summary judgment motions under advisement.

            In a careful and detailed opinion, the bankruptcy court

      1The bankruptcy court dismissed some of the Executive Office
of Health and Human Services' (EOHHS) 11 U.S.C. § 523 claims upon
consideration of Kupperstein's motion to dismiss.            EOHHS
voluntarily dismissed the rest after the district court upheld the
granting of summary judgment in the Appellees' favor on the
§ 727(a)(4)(A) claim.    Irene Schall voluntarily dismissed her
§ 523 claims.
                                    - 4 -
held that on the undisputed evidence of record, the statutory

requirements required that Kupperstein be denied a discharge;

indeed the court held that Kupperstein had engaged in clear and

blatant misconduct.     Specifically, the bankruptcy court determined

that Kupperstein made false oaths in both his SOFA and Schedule

A/B.    That is, Kupperstein failed to include on the SOFA the source

or amount of income from his law practice or a $17,500 settlement

from a title insurer and, on the Schedule A/B, assets related to

real estate in Boston.       The court further held that Kupperstein

knowingly failed to make these disclosures, or in the case of the

Schedule A/B, acted with "reckless disregard for the truth," given

that Kupperstein, an attorney, did report these items in other

places when required: namely, on his federal income tax returns

and in a financial statement supplied to a state court.             All these

omissions were material, given that they related to his "financial

transactions"     and   concerned    the    "discovery   of   his   business

dealings."

            The bankruptcy court thus denied Kupperstein's motion

for    summary   judgment   and   granted   Appellees'   motion     on   their

§ 727(a)(4)(a) counts.      Kupperstein's discharge was thus denied.

He appealed to the district court, which adopted the bankruptcy

court's analysis in total, affirming summary judgment and denying

the appeal.      Kupperstein timely appealed to this court.

                                    - 5 -
                         II.   Standard of Review

          We serve here as a "second tier of appellate review."

Kupperstein II, 994 F.3d at 678 (quoting In re Montreal, Me. &

Atl. Ry., Ltd., 956 F.3d 1, 5-6 (1st Cir. 2020)).        In that capacity

"we accord no particular deference to determinations made by the

first-tier appellate tribunal but, rather, focus exclusively on

the bankruptcy court's determinations."          In re Montreal, Me. &

Atl. Ry., Ltd., 956 F.3d at 6.

                               III. Analysis

                                     A.

          As    an   initial   matter,    Kupperstein   argues    that   the

bankruptcy court erred in denying his motion for leave to file a

belated response to Appellees' joint statement of facts in support

of their motion for summary judgment.             We bypass      Appellees'

contention that this argument has been waived and find no merit to

the argument.

     Local Rule 7056-1 of the United States Bankruptcy Court, which

expressly adopts Local Rule 56.1 of the United States District

Court for the District of Massachusetts, requires: (1) motions for

summary judgment include a statement of undisputed material facts

supported by "page references to affidavits, depositions and other

documentation;" (2) oppositions to motions for summary judgment,

to be filed 21 days after service of the motion, must include a

statement of disputed facts again with references to supporting

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evidence, and (3) that "[m]aterial facts of record set forth in

the statement . . . be served by the moving party will be deemed

for purposes of the motion to be admitted by opposing parties

unless controverted by the statement required to be served by

opposing parties."       D.    Mass. L.R. 56.1; D. Mass. L.B.R. 7056-1.

             "Such rules are designed to function as a means of

'focusing a district court's attention on what is—and what is not—

genuinely controverted."             Cabán Hernández v. Philip Morris USA,

Inc., 486 F.3d 1, 7 (1st Cir. 2007) (quoting Calvi v. Knox County,

470 F.3d 422, 427 (1st Cir. 2006)).             Parties ignore such rules "at

their peril."     Id.

             We review a lower court's application of local rules for

abuse of discretion.          CMI Cap. Mkt. Inv., LLC v. González-Toro,

520 F.3d 58, 63 (1st Cir. 2008); NEPSK, Inc. v. Town of Houlton,

283   F.3d   1,   5   (1st    Cir.    2002).     The   bankruptcy   court   held

Kupperstein to the deadline explicit in the local rule.                 We are

hard pressed to find that to be an abuse of discretion.                     See

Crowley v. L.L. Bean, Inc., 361 F.3d 22, 25 (1st Cir. 2004) ("While

a district court may forgive a party's violation of a local rule,

. . . we review deferentially its refusal to do so.").

             Kupperstein's argument that the refusal to grant his

motion for leave prejudiced him because Appellees' asserted facts

would be admitted with or without evidence in support rings hollow.

Nowhere were Appellees excused from their own obligation under

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Local Rule 56.1 — the requirement to cite specific evidence in

support of each asserted fact.             Moreover, a court must consider

all motions for summary judgment -- whether properly opposed,

improperly opposed, or unopposed -- on the merits and can grant

them only if the evidence properly presented entitles the moving

party to judgment as a matter of law.                 Fed. R. Civ. P. 56(e);

Torres-Rosado v. Rotger-Sabat, 335 F.3d 1, 9 (1st Cir. 2003).                 The

bankruptcy court carried out this obligation on the record properly

submitted.

                                         B.

          We    now    consider    the    bankruptcy     court's   granting   of

Appellees'     joint   motion     for    summary     judgment.      "The   legal

standards traditionally applicable to motions for summary judgment

. . . apply without change in bankruptcy proceedings."                     In re

Moultonborough Hotel Grp., LLC, 726 F.3d 1, 4 (1st Cir. 2013).                We

review a grant of summary judgment de novo, examining the record

in the light most favorable to the non-moving party, drawing all

reasonable inferences in that party's favor.                     Hardy   v. Loon

Mountain Recreation Corp., 276 F.3d 18, 20 (1st Cir. 2002).

"Summary judgment is warranted only if, after reviewing the record

in the manner just described, we determine that there is no genuine

issue as to any material fact and that the moving party is entitled

to judgment as a matter of law."                Baez v. Town of Brookline, 44

F.4th 79, 82 (1st Cir. 2022) (quotation omitted).

                                        - 8 -
            The    Bankruptcy       Code    "limits     the      opportunity    for    a

completely      unencumbered        new     beginning       to      the    honest    but

unfortunate     debtor."        Premier      Cap.,    LLC     v.    Crawford   (In    re

Crawford), 841 F.3d 1, 7 (1st Cir. 2016) (internal quotation marks

omitted) (quoting Grogan v. Garner, 498 U.S. 279, 286-87 (1991)).

"[T]o    make   certain    that     those    who     seek     the    shelter   of    the

bankruptcy code do not play fast and loose with their assets or

with the reality of their affairs," 11 U.S.C. § 727 provides

several    exceptions      to   a    debtor's      discharge        from    Chapter    7

bankruptcy.       Boroff v. Tully (In re Tully), 818 F.2d 106, 110 (1st

Cir. 1987).       Although "the statutory right to a discharge should

ordinarily be construed liberally in favor of a debtor," this is

not so when a claim "falls squarely" into one of the § 727(a)

enumerated exceptions.          In re Crawford, 841 F.3d at 7-8 (quoting

In re Tully, 818 F.2d at 110).               This case involves, "squarely,"

§ 727(a)(4)(A), which authorizes the denial of a discharge when

the debtor "knowingly and fraudulently, in or in connection with

the case . . . made a false oath or account" related to a "material

fact."     See id.     (alteration in original) (quoting                    11 U.S.C.

§ 727(a)(4)(A)).

                                1. The False Oaths

            The false oaths that Appellees brought to the attention

of the bankruptcy court resided in Kupperstein's SOFA and Schedule

A/B of his Chapter 7 petition.                A debtor files all petitions,

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schedules, statements, and amendments in bankruptcy court under

oath.     Fed. R. Bankr. P. 1008.      Kupperstein, an attorney, never

claimed    to   have   misunderstood      the    significance   of    signing

bankruptcy forms.

            The SOFA required Kupperstein to disclose all gross

income that he received in the year of his bankruptcy filing and

in the prior two calendar years.          Specific questions on the form

organized these disclosures.      The questions relevant here sought:

(1) the total income from employment or operating a business, to

which   Kupperstein    answered   "no";    (2)   other   income,     including

"gross income" regardless of whether it was taxable, to which

Kupperstein listed only income from social security, retirement,

and IRA distributions; (3) connections to any business, including

sole proprietor or self-employment, to which Kupperstein responded

"No. None of the above applies"; and (4) any financial statements

provided to "creditors, or other parties," to which Kupperstein

replied "no."

            But Kupperstein's individual federal income tax returns

for 2016 and 2017 (which he prepared) told a different story.

They revealed a law practice of which he was the proprietor with

a reported gross income.     He also submitted a financial statement

to a state court about three weeks before he filed his bankruptcy

petition where he listed a weekly gross salary for his occupation

                                  - 10 -
of "[a]ttorney (semi-retired)."2   In addition, while Kupperstein

did not disclose $17,500 of "other income" from a title insurance

settlement on his SOFA, he did include it on his 2016 individual

federal income tax return.

          Kupperstein attempts to explain away these omissions by

parsing language.   He claims to have no income from "employment,"

as Massachusetts law would define that term, or from "operating a

business" because he is an "independent contractor" who takes on

occasional clients.    However he defines himself under state law,

he failed to disclose income, a term defined broadly in the

Bankruptcy Code.      See, e.g., 11 U.S.C. § 101(10A) (defining

"current monthly income" as the "average monthly income from all

sources that the debtor receives . . . without regard to whether

such income is taxable income"); see also Fed. R. Bankr. P. 9009(c)

(requiring construction of bankruptcy forms in a manner consistent

with the Federal Rules of Bankruptcy Procedure and the Bankruptcy

Code).   And regarding the settlement funds from a title insurer,

Kupperstein argues that he did not disclose this income on his

SOFA because it was reimbursement for money lost and that the

     2 Kupperstein argues that the financial statement (which he
acknowledged filing) is inadmissible and should not have been
considered on the motions for summary judgment. We find that he
has not adequately preserved this issue for appeal. First, the
bankruptcy court found that he had waived objection to Appellees'
use of the statement as a trial exhibit and, at the summary
judgment hearing, he offered to research and provide support for
his objection but never did so.

                               - 11 -
settlement was not taxable.         Neither argument excuses the failure

to disclose this significant payment.              Question 5 of the SOFA

requires disclosure of "money collected from lawsuits" and "income

regardless    of   whether   that    income   is   taxable."      In    short,

Kupperstein omitted required information on his SOFA, leading to

the indisputable conclusion that Kupperstein made false oaths on

that filing.

             And he also did so on the Schedule A/B.              That form

required him to disclose certain types of assets, including real

property.     What he did not report was that in 2016, Kupperstein

was granted a $250,000 mortgage on a property in Boston.                   In

addition, Kupperstein received an assignment of the property's

leases and rents.     All this information was publicly available as

the mortgage and the assignment were recorded in the registry of

deeds on October 3, 2016.

             The bankruptcy court properly examined this evidence and

determined that this omission was a false oath.                  Contrary to

Kupperstein's assertions, the Schedule A/B omissions are not an

issue   of   "credibility"   that    cannot   be    determined   on    summary

judgment, but an examination of indisputable documentary evidence.

And his argument that he was not the mortgagee or mortgagor of the

property is contradicted by the mortgage deed, which expressly

granted "mortgage covenants, to secure the payment of $250,000" to

Kupperstein.

                                    - 12 -
                         2. "Knowingly and Fraudulently"

            False oaths alone, however, are not enough to deny a

discharge under 11 U.S.C. § 727(a)(4)(A).           The falsehoods must be

made "knowingly and fraudulently."           In re Crawford, 841 F.3d at 8

(quoting 11 U.S.C. § 727(a)(4)(A)).              A debtor "knowingly and

fraudulently" makes a false oath if, despite knowing the truth,

the debtor "nonetheless willfully and intentionally swears to what

is false."    Hannon v. ABCD Holdings, LLC (In re Hannon), 839 F.3d

63,   72   (1st   Cir.    2016)   (quoting   Lussier   v.   Sullivan   (In   re

Sullivan), 455 B.R. 829, 837 (1st Cir. BAP 2011)).             This standard

also can be met with a showing that the debtor acted with a

"reckless indifference to the truth."            In re Tully, 818 F.2d at

112 (quoting Diorio v. Kreisler-Borg Constr. Co. (In re Diorio),

407 F.2d 1330, 1331 (2d Cir. 1969)).

            Summary judgment is appropriate when the evidence is

conclusive enough to yield "no plausible conclusion but that the

debtor's intent was fraudulent" or if "the non-movant relies on

conclusory allegations or insupportable inferences" or "fails to

create any reasonable basis for avoiding the conclusion that he

acted, at best, with reckless disregard for the truth of the

material     information       he   supplied     during     his   bankruptcy

proceedings."      Id. at 83, 85; In re Marrama, 445 F.3d 518, 522

(1st Cir. 2006); see also Santiago v. Canon U.S.A., Inc., 138 F.3d

1, 5 (1st Cir. 1998).

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            As for the omissions on his SOFA, Kupperstein argues

that these were not made "knowingly and fraudulently" based upon

his legal argument that he was not required to disclose the income

at issue.    Having disposed of that argument above, we consider

whether the facts indicate that the false statements were made

"knowingly and fraudulently."

            Kupperstein personally prepared his 2016 and 2017 tax

returns, claiming, in direct contrast to his SOFA, a gross income

from a law practice.    Moreover, about three weeks before he filed

his bankruptcy petition, he provided a financial statement to a

state court noting a $250 per week salary, which would equal the

roughly $13,000 income he reported on his 2017 tax return.      And

the same goes for the "other income" -- the $17,500 settlement

from the title insurer -- which Kupperstein also included on his

self-completed tax return.     Yet he omitted all this information

in response to the SOFA's broad and direct questions seeking

disclosure of income and its sources.       Moreover, he signed the

SOFA under a paragraph attesting, under penalty of perjury, that

he had "read the answers" provided and that his answers were "true

and correct."    The only reasonable conclusion from the evidence,

as the bankruptcy court determined, is that Kupperstein knowingly

supplied a false oath regarding his SOFA.

            As to his Schedule A/B, Kupperstein did not dispute that

he knowingly omitted the mortgage and assignment of rents but

                                - 14 -
offered a convoluted, implausible explanation that the mortgage

was   valueless   despite    there   being   no    evidence   it   was   ever

discharged.   We agree with the bankruptcy court that Kupperstein's

"belated and illogical justifications only served to enhance the

appearance of fraud."

                               3. Materiality

           Finally, to justify denial of a discharge under 11 U.S.C.

§ 727(a)(4)(A), a false oath made "knowingly and fraudulently"

must also relate to a "material fact."            In re Crawford, 841 F.3d

at 8.   A false oath is material if it "bears a relationship to the

debtor's   business   transactions     or    estate,    or    concerns   the

discovery of assets, business dealings, or the existence and

disposition of property."      In re Hannon, 839 F.3d at 75 (quoting

Lussier v. Sullivan (In re Sullivan), 455 B.R. 829, 829 (1st Cir.

BAP 2011)); Daniels, 736 F.3d at 82 ("Information omitted from a

bankruptcy petition or schedule is material if it is 'pertinent to

the discovery of assets, including the history of a bankrupt's

financial transactions.'") (quoting In re Mascolo, 505 F.2d 274,

277 (1st Cir. 1974)).       "[T]he threshold to materiality is fairly

low."   In re Crawford, 841 F.3d at 8 (quoting In re Sullivan, 455

B.R. at 839).

           Kupperstein offers only the conclusory argument that any

false oaths were "certainly not material."              Such a conclusory

argument of course is not enough to defeat summary judgment.

                                 - 15 -
Garmon v. Nat'l R.R. Passenger Corp., 844 F.3d 307, 313 (1st Cir.

2016).    In all events, the subject matter of each false oath, as

the bankruptcy court properly held, was material.                   Kupperstein's

omitted law practice income related to his business transactions

and the discovery of his business dealings; the title insurance

payment   related     to    his    history       of    financial    transactions,

particularly during the look-back periods that apply to fraudulent

transfers;   and    his    omission       of   the     mortgage    and   the   rents

assignment    would        have    provided           Appellees     insight     into

Kupperstein's      financial       transactions          and      opportunity     to

investigate the same.         Kupperstein's false oaths therefore were

material and warranted the denial of his discharge.

                                  IV.    Conclusion

           The bankruptcy court properly granted Appellees' joint

motion for summary judgment and denied appellant's motion.                        We

therefore affirm the district court's order and award costs to

Appellees.

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