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April 1, 2020From: NY PostBy: Thornton McEneryA Brooklyn taxi operator who got his first medallion in the 1970s has filed for bankruptcy as the coronavirus ravages an already struggling industry, The Post has learned.Joe Pross, who started driving a taxi in 1975 and now runs a fleet of 42 cabs, filed for Chapter 11 bankruptcy protection for his Crown Heights-based medallion company, Walker Service Corp., on March 27, court papers show.Pross, 75, declined to be interviewed for this story. But his Brooklyn federal court bankruptcy filings underscore how vulnerable taxi operators were prior to the coronavirus crippling tourism and forcing thousands of New Yorkers inside. Walker Service Corp. appears to be the first medallion owner to file for bankruptcy protection since the pandemic shut down the city, but it’s not likely the last, industry experts say. “This industry was on the brink before this happened, and this virus has just pushed it totally over the edge,” said Matthew Daus, a former TLC commissioner who’s now a lawyer with Windels Marx. “I hope we don’t see more bankruptcies, but I’m afraid a lot of people might go under and file for bankruptcy protection. This will be worse than 9/11 economically, especially for the black cars and luxury livery.”In an affidavit filed with his bankruptcy papers, Pross says his medallions — “once worth millions” — plummeted in value as ride-hailing apps and Uber and Lyft grew in popularity, leaving him and his wife struggling to pay off loans they took out on their medallions to build the business.By 2019, before the coronavirus even hit, Pross’ fleet was pulling in $29,400 a month — far short of the $105,610 a month he needed to repay $18.7 million in medallion loans, court papers show.In late February, his lender, Virginia-based Pentagon Federal Credit Union, issued notices of default on six loans and demanded $158,186 within 30 days to rectify the situation.Pross says he tried to negotiate repayment. Then the coronavirus hit — slamming the brakes on taxi revenue even as drivers and operators continue to face expenses for parking, dispatchers, mechanics and administrative workers.“The current COVID-19 pandemic has now rendered the debtors with virtually no income to operate its businesses as the debtors have recently suspended operations during the COVID-19 pandemic for March, April and possibly May 2020,” Pross’ filing says.As The Post reported on March 15 - before Gov. Cuomo even ordered restaurants shut down and non-essential workers stay home — taxi drivers were making as little as $50 a week as people afraid of contagion avoided public spaces.“The drivers are coming back asking if I can pay their gas because their fares didn’t even cover it. We can’t go on like this,” a taxi operator who asked not to be named told The Post on Wednesday.Pross’s affidavit also blames Walker’s debt holder, PenFed, saying it has been playing hardball by “shockingly” refusing to extend its 30-day payment deadline.PenFed acquired $290 million worth of medallion loans, including Pross’s, as part of its 2019 merger with New York-based Progressive Credit Union, according to reports at the time.The credit union declined to comment on how many medallion loans it currently possesses, but insisted its working hard to keep taxi operators in business.  The credit union declined to comment on how many medallion loans it currently possess, but insisted it’s working hard to keep taxi operators in business.“PenFed actively works with our members experiencing financial hardships, including taxi medallion borrowers who have requested relief,” a PenFed spokesperson said in a statement. “PenFed has an extensive team in New York working to help members who need assistance during this challenging time.”Pross is hoping to come out of bankruptcy with reduced loans so he can continue to run the business through his main business, Utica Taxi, which operates the cars and garages and employs the dispatchers and other workers, filings show.But with coronavirus deaths in New York nearing 2,000 and growing, the main business also faces the threat of going under.“The proliferation of ride-sharing apps such as Uber and Lyft … combined with the economic devastation associated with the COVID-19 pandemic, may eventually render Utica Taxi bankrupt as well,” Pross’ affidavit said.

When a judge hears from multiple witnesses, he or she must make a decision on how much weight to give to what each witness says. Bankruptcy judges frequently make their credibility decisions a part of their opinions. This is both helpful to the parties and increases the likelihood that fact findings will not be found to be clearly erroneous on appeal.Judge H. Christopher Mott's opinion in Adv. No. 18-1091, Kansas City Southern Railway v. Chavez, which can be found here is a good illustration on how judges assess credibility. For more background on the case, you can read my prior post here.  During the trial, Judge Mott heard testimony from thirteen witnesses, some of whom testified live and some of whom testified by deposition.  I have listed the witnesses below and have quoted Judge Mott's credibility findings.The Witnesses and What The Judge FoundMr. Leonard Wagner, was associate general counsel of Kansas City Southern RailwayCompany.Mr. Leonard Wagner, associate general counsel of Kansas City Southern Railway Company, provided brief testimony at trial in person. The Court finds that Mr. Wagner isa credible witness.Merritt Clements was an attorney representing Kansas City Southern Railway Company.Clements was also a fact witness that testified in person at trial. As a result, Clements also acted in dual roles—as an attorney advocate for KCSR and a fact witness in this adversary proceeding. Clements’ testimony included background information regarding the litigation with the Chavez Family, as well as his role in negotiating the 2010 settlement for KCSR with Dean. Clements was candid, honest, and competent as a witness. Given his dual role as both advocate and witness in a bitter, lengthy dispute, theCourt gives his non-background testimony limited weight to the extent it was not supported by contemporaneous records.Stephen T. Dennis was another attorney representing Kansas City Southern Railway.Dennis provided brief testimony only by deposition, on a very tangential matter. The Court finds that the testimony of Dennis was credible, although the subject matter of his testimony had remote relevance to the disputes in this adversary proceeding.Luz Chavez was the matriarch of the Chavez family. She was the husband and mother of the two decedents. Luz was a key witness in this adversary proceeding. She testified at trial in person and by deposition. Luz suffers from legitimate memory problems and appears to have some cognitive difficulties. Some of her memory lapses are attributable to the stress of tragically losing a husband and son and the time that has passed since many critical events between 2007 and 2011. Portions of sworn statements signed and filed by Luz in State Court were shown to be incorrect (at best) and false (at worst) during the trial of this adversary proceeding. Her testimony was sometimes inconsistent, riddled with responses like “I don’t remember” and “I don’t recall,” and when pressed, she was easilyconfused. As a result, the Court gives limited weight to much of her testimony.Darlene Chavez and Allen Chavez were adult children of Luz Chavez.Darlene was an important witness in this adversary proceeding. She testified at trial in person and by deposition. Darlene appeared both honest and competent. The Court finds Darlene’s testimony to be credible on matters within her personal knowledge.Allen was also an important witness in this adversary proceeding. He testified at trial in person and by deposition. Allen appeared candid and forthright to the Court. The Court finds Allen’s testimony to be credible on matters within his personal knowledge.Juanita "Lynn" Watson was a partner in Rosenthal & Watson, the firm which represented the Chavez family in the underlying state court suit.Watson was a key non-party witness in this adversary proceeding. She testified at trial in person and by deposition. At trial, Watson appeared competent and straightforward to the Court. However, her testimony appeared intentionally vague and non-specific in certain critical areas, such as obtaining the approval of all adult Chavez Family members to the 2010 settlement with KCSR. To the extent that Watson provided specific testimony, the Court finds much of her testimony to be credible. On the other hand, Watson’s generalized and vague testimony about the approval of the entire Chavez Family to the settlement and the surrounding circumstances is given limited weight by the Court.Marc Rosenthal was the other partner in Rosenthal & Watson. He gave his testimony by deposition from prison. Rosenthal testified at trial only by deposition, taken at a federal prison where he is presently incarcerated. In 2013, Rosenthal was convicted for a criminal scheme that spanned four years. His crimes included conspiring with witnesses to provide false testimony, extortion, fabrication of evidence, bribery of a state court judge, and other actsof fraud by Rosenthal while an attorney with R&W. The conviction included actions taken by Rosenthal in several wrongful death suits filed against railroads, but do not appear to involve the suit filed for the Chavez Family against KCSR. See U.S. v. Rosenthal, 805 F.3d 523, 526-28 (5th Cir. 2015); (Ex. P-45). The Court gives Rosenthal’s testimony little weight.James Christopher Dean was an attorney who Rosenthal & Watson hired to try the underlying state court case.Dean was an important non-party witness. As Dean testified only by deposition, the Court was unable to assess his demeanor. Dean’s independent recollection of events appeared limited, and he had no direct contact with the Chavez Family regarding the 2010 settlement. In his testimony, Dean generally seemed cooperative and honest. The Court finds Dean’s testimony generally to be credible on matters within his personal recollection and knowledge.Mark Alvarado is an attorney who used to practice with Rosenthal & Watson and now represents the Chavez family.Alvarado was a fact witness and testified in person at trial. Alvarado has continued to wear multiple hats. At trial in this adversary proceeding, Alvarado was both the attorney advocate for the Chavez Family and a fact witness. Significant personal animosity exists between Alvarado (as counsel for the Chavez Family) and Merritt Clements (longtime counsel for KCSR in the disputes for the Chavez Family). Alvarado’s testimony to the Court covered primarily background information regarding the lengthy litigation between the Chavez Family and KCSR. Although Alvarado appeared (for the most part) straightforward, given his dual role as advocate and witness in a bitter, lengthy dispute, the Court gives his non-background testimony only limited weight.Adriana Maddox and Edward Maddox served as guardians ad litem for Joel Chavez, the minor son of Luz Chavez. Adriana played a peripheral role in this controversy. She testified at trial only by deposition. She only had a partial recollection of events. In her testimony, Adriana seemed straightforward and honest. The Court finds Adriana’s testimony to be credible on matters within her personal recollection.Like his spouse, Edward had a peripheral role in this controversy. He testified at trial only by deposition. Edward had a limited recollection of events. In his testimony,Edward seemed candid. The Court finds Edward’s testimony to be credible on matters within his personal recollection. Alphonso "Pancho" Gonzales was a private investigator hired by Rosenthal & Watson.Gonzales had a very limited role in this controversy. He testified at trial only by deposition. Gonzales appeared to have a good recollection of events and was candid. The Court finds the testimony of Gonzales to be credible on the limited matters that were the subject of his testimony.Lessons to be LearnedWhat to make of all these credibility decisions? First, it is interesting to note that nine out of thirteen witnesses who testified were attorneys.  This has a certain logic given that this was a trial about whether a binding settlement agreement had been reached in a state court lawsuit.There are some patterns. Witnesses who are found to be credible are described with words like candid, honest, and forthright. Candid and forthright are words that describe a witness who answers questions directly without beating around the bush.  They contrast with the generalized and vague testimony given by Juanita Watson and the inconsistent and confused testimony given by Luz Chavez.Competent is another word used to describe credible witnesses. It contrasts with the cognitive difficulties observed with Luz Chavez's testimony. However, it is also contrasted with the testimony of the guardians ad litem who were honest but had limited memory.It perhaps goes without saying but being a convicted felon who tampered with witnesses is not conducive to credibility.Bias and emotion also affect credibility. Merritt and Alvarado were both lawyers who represented parties and testified as fact witnesses. Despite having no problem with their honest, the court gave them little credibility beyond background information.  The court also used the phrase "within his/her personal recollection" several times. This qualifier states the obvious qualifier that witnesses only know what they know. While unobjected to hearsay does constitute evidence, it is not as strong as something the witness has personal knowledge of.Finally, there are major witnesses and minor witnesses. There were several witnesses like Stephen Dennis and Pancho Alvarado who were honest but whose testimony was just not that important.My final point is that lack of credibility does not mean that the witness's testimony cannot have a substantial impact. One of the more important scenes in the trial consisted of a phone call between Juanita Watson and Luz Chapa. These were two witnesses who both had credibility problems. Watson was vague and generalized about the family's approval of the settlement while Chapa had cognitive difficulties and was confused. Chapa's credibility problems actually appear to have helped the court conclude that she did not understand the settlement sufficiently to give informed consent.From this survey, we can develop the following rules for witnesses:Answer the question directly.Only answer the question being asked.Be cooperative. If asked about page 3 of Exhibit 2 don't repeatedly go to page 2 of Exhibit 3 or find other excuses to evade the question. Admit what you do not know.Do not testify about things you do not know.Don't contradict yourself.Do not have convenient memory, that is, memory which is clear and direct on points helpful to you and vague and fuzzy on points which hurt you.

Here, the Court grapples with an inheritance—the latest chapter of a litigation odyssey that began over a decade ago in a different domain.Adv. No. 18-1091, Kansas City Southern Railway Company vs. Luz Chavez vs. Rosenthal & Watson, P.C. (Bankr. W.D. Tex. 1/31/20), p.1.  The opinion can be found here.To the outsider, proceedings in bankruptcy court may seem like lawyers talking in incomprehensible jargon while the judge looks down from on high staring Sphinx-like until called upon to make a ruling. However, there is a part of trial work that applies to bankruptcy as well and that is telling stories. The lawyers each spin their tales through arguments, witnesses and exhibits. The judge then takes the raw material the lawyers have given him and fashions it into his own tale.  This case is a tragic tale of clients and some lawyers who failed to serve them well. Note: on the cold light of the digital page, as drafted by the judge and his clerks, the story takes on clear heroes and villains. In this post, I do not seek to judge the parties, the judge has already done that. Instead, I am re-telling a story that I heard from a judge and found compelling.The Prelude: How the Dispute Reached Bankruptcy Court Judge Mott succinctly lays out the dispute in his opening paragraphs before delving into a 106 page opinion. I can't tell the story better than he did, so here it is.The saga began in 2007, when a father and son were tragically killed in a train accident at a South Texas railroad crossing. Surviving family members hired a law firm that immediately filed a wrongful death suit against the railway in state court. Just before trial in 2009, the law firm (without the family’s knowledge) saw fit to associate a different attorney who tried the case to a jury. A unanimous defense verdict was rendered by the jury against the family in 2009, which appeared to end the saga. Fate then intervened, as the family was granted a new trial against the railway based on newly discovered evidence.In 2010, the railway made a seemingly reasonable settlement offer to the associated trial attorney hired by the family’s law firm. The associated attorney communicated the settlement offer to the family’s law firm, who relayed the settlement offer to one family member. The law firm obtained the disputed oral consent of one family member (the widow) to the railway’s settlement offer on the phone, but never discussed the settlement with the four other adult family members. After the associated attorney sent the railway a letter accepting the settlement offer for the whole family, the entire family denied authorizing any settlement.The litigation odyssey then restarted in earnest, this time with a complete role reversal. In 2011, the railway sued the family to enforce the settlement, winning temporary success twice through summary proceedings in state trial court. This spawned two journeys to the Texas Court of Appeals, one journey to Texas Supreme Court, and three written appellate opinions. Ultimately, in 2017, the settlement enforcement suit against the family was reversed and remanded for trial in state court.Meanwhile, the lead partner of the law firm was convicted of bribing witnesses and fabricating evidence in other railroad cases, resulting in a 20-year federal prison sentence. This twist in the voyage led the law firm to close operations and file Chapter 7 bankruptcy. The bankruptcy trustee then attempted to collect the law firm’s expenses owed by the family out of the still disputed settlement with the railway, by removing the settlement enforcement suit from the domain of the state court to this Court.Now, through this Opinion, the Court will deal with the inherited chapter of this litigation odyssey. Opinion, pp. 2-3.Proceedings in Bankruptcy CourtThe law firm, Rosenthal & Watkins, filed Chapter 7 in 2014. Ron Satija was appointed as Chapter 7 trustee. On October 1, 2018, the Trustee removed the state court action to bankruptcy court. After a bunch of pleadings and motions were filed and decided, the parties filed their joint pre-trial order and a trial was commenced. Judge Mott heard evidence over four days in December 2019. He heard from thirteen witnesses either in person or through deposition or both.He made extensive findings about credibility of the witnesses. I am going to do a separate post looking at how judges examine credibility. Where Things Went WrongRosenthal & Watson (R & W) made critical mistakes at several junctures. The first was that they hired another lawyer to actually try the case and entered into a fee sharing agreement with him without obtaining the consent of their clients.  James Christopher Dean was the trial attorney hired by the firm. The engagement agreement signed by the members of the Chavez family referred to "such other attorneys or law firms as Attorneys in their sole discretion shall employ or associate with in my behalf." This certainly allowed R & W to hire Dean to assist with the case. However, it did not allow them to do so and not tell their clients.  Importantly Texas Rule of Disciplinary Conduct 1.09(f) states that no fee sharing may take place unless the client consents to both the fee sharing and the identity of the person with whom the fees would be shared.Things really went south when Dean and R & W succeeded in getting the initial take-nothing judgment thrown out and a new trial date was set. At this point, the firm had expended hundreds of thousands of dollars pursuing the case and it was facing financial difficulties due to the criminal investigation of Rosenthal, one of its partners. The railroad saw some risk in a re-trial as well since newly discovered evidence showed the engineer using his cell phone.  Dean began engaging in settlement negotiations with Merritt Clements, the railroad's attorney. The engagement agreement entered into by R & W with the five members of the Chavez family allowed the attorneys to engage in settlement negotiations but reserved the sole authority to settle to the clients (as it necessarily must have). Clements did not know that Dean was negotiating without the authority of his clients or for that matter, without any communication with them.Clements made a global settlement offer to Dean covering all five members of the Chavez family.  Rosenthal, the soon to be disgraced partner of R & W, came up with an allocation of the settlement proceeds between the law firm and his clients. The lion's share of the funds were to go to R & W to cover its expenses. Other funds would go to reimburse worker's comp insurers who had subrogation rights and some would go to the family members. Rosenthal had one conversation with Luz Chavez, the matriarch of the family. She did not agree to the settlement in this conversation. In fact, she began refusing to return phone calls from R & W. Eventually R & W grew desperate and hired a private investigator to contact Luz. Luz eventually did contact Watson, the other partner of R & W. After a brief phone call which was not followed up with anything in writing, Luz agreed to the settlement. However, Judge Mott found that the phone call was not sufficient to gain her informed consent to the settlement and that she did not understand what she had agreed to.  Among other things, the settlement included a confidentiality agreement with a 10% liquidated damages clause and required the Chavez family to indemnify the railroad.Watson then informed Dean that the family had approved the settlement even though she had not communicated with four out of five of the adult family members. In the meantime, the railroad increased its offer by $25,000 which R & W added to their share of the proceeds. They then added $1,000 per plaintiff as compensation for the confidentiality clause that the plaintiffs had not been informed of.Dean sent a letter to Merritt accepting the offer.  Merritt accepted subject to the confidentiality and indemnity provisions he had requested. Dean sent a copy of this letter to Watson but neither Dean nor Watson sent a copy to the family. Merritt then prepared a formal settlement agreement. This document was never provided to the family.  Dean informed the court that the parties had reached a settlement and to take the case off the docket.The court appointed a guardian ad litem to represent the interest of one plaintiff who was a minor. The ad litem negotiated some improvements to the agreement for the minor and ultimately recommended that it be approved.  The railroad's attorney filed a motion to approve the settlement with the minor. The ad litem met with Luz who did not voice any objection to the settlement. However, shortly before the hearing, Luz told Alvarado, a former attorney with R & W, that she did not want to go through with the settlement. She then told the state court that she did not want to go through with the settlement and that she wanted three months in which to find another lawyer because she had become dissatisfied with R & W.Several weeks later, the railroad filed a motion to enforce settlement agreement. The trial court granted the motion. The case went up on appeal and was reversed because the settlement letter had not been filed with the court and therefore could not be enforced as a Rule 11 agreement. The railroad then filed with settlement letter (signed by Dean) with the court and the court approved it a second time. This time the court of appeals affirmed but the Texas Supreme Court reversed and remanded, leading to the trial before Judge Mott.Judge Mott's RulingJudge Mott's ruling is really, really long. However, I will convey the high points. He found that the Chavez family was not bound by the settlement agreement. The family had never done anything to clothe Dean with apparent authority. Indeed, they did not even know that he was their attorney. A principal cannot be bound by a person purporting to act on its behalf. Additionally, the family did not actually agree. Luz agreed verbally but was not given sufficient information to understand what she was agreeing to and the lawyer did not go out of their way to fully explain. The four other family members were not even told about the settlement so that they could not have consented. Finally, the settlement agreement violated what is known as the aggregate settlement rule. If an attorney represents multiple clients, he must negotiate separately on behalf of each client. If he does not, the settlement is void as against public policy. Here, Rosenthal decided the allocation and there was never any negotiation on behalf of the individual plaintiffs.  Thus, Judge Mott found that the settlement was unenforceable.Next, Judge Mott concluded that R & W breached its fiduciary duty to the Chavez family. An attorney owes his client a fiduciary duty. However, breach of fiduciary duty is different than malpractice. Malpractice consists of negligence in representing the client.  Breach of fiduciary duty by an attorney most often involves conflicts of interest, failure to deliver funds, placing an attorney’s interests over a client’s interest, improper use of client confidences, taking advantage of a client’s trust, engaging in self-dealing, and making misrepresentations.Opinion, p. 75. Judge Mott found that R & W breached its fiduciary duty by entering into a fee sharing agreement without the consent of the clients, by misrepresenting that the family had agreed to the settlement, and by entering into an aggregate settlement.As a remedy, Judge Mott applied the equitable remedy of forfeiture of fees. A fiduciary who breaches his duty can be forced to forfeit all fees. Judge Mott ruled that R & W should forfeit all fees and 50% of its expenses. Thus, the Trustee was left with a claim for $208,811. Judge Mott found that this amount was secured by a valid attorney's lien against any settlement or judgment based on the contractual language.Where Does This Leave the Parties?The railroad spent a ton of money trying to enforce a settlement which was ultimately denied. It faces re-trial on a case based on an accident which occurred thirteen years ago. R & W is in chapter 7 and its trustee will not recover anything for it unless the Chavez family recovers an award. The Chavez family succeeded in voiding the settlement. However, it faces a new trial and must obtain new counsel. There are several obscene terms for this situation which I will leave to the reader's imagination.Recognizing the legal carnage which had been inflicted on the parties, Judge Mott counseled settlement. He said: If history repeats itself, this Opinion (effectively Chavez IV) will not be the last written chapter in this litigation odyssey. But after a full-blown trial in this Court followed by this full-length Opinion, perhaps the Chavez Family will agree to end their litigation marathon with KCSR now, without further expense and delay. Failing that, the Court is concerned that history may repeat itself during the next phase of the journey—a second jury trial of the wrongful death suit in state court. Opinion, p.  106.Why Write About This Case?The short answer is that I am under a shelter in place order and have time to write. However, there is another reason. Early in my blogging career, I was accused of placing Texas lawyers in a bad light by writing articles which explored ethical lapses. That is not and was not my intent. I practice with and against some great lawyers (including the trustee in this case). However, while this case demonstrates the deepest levels of legal perfidy, the issues here are ones that any lawyer can be faced with. In the midst of hearings, conference calls and meetings, it is hard to slow down and have good, solid communication with the client, especially if the client is a challenging one. It is also tempting that an attorney wanting to avoid a bad result for his client will focus on getting the deal done no matter what. Joe Martinec refers to this as placing your loyalty to the deal instead of the client. This case, by showing what lawyers should not do, highlights what they should do. Lawyers should communicate with their clients. Lawyers should take the time to educate their clients. Lawyers should put things in writing.  By writing about this train wreck of a case, I hope that lawyers will be reminded, as I have been reminded, to "be best" as the saying goes.

Can I File for Bankruptcy Even Though I Can’t Leave My House Due to COVID-19? Filing Bankruptcy From Home in Arizona Even though it feels like the entire world is shut down, debt and its collection attempts are not. Whether you were struggling financially before the pandemic, or quarantining has sent you into a state of immediate financial peril, you may need the protections provided by filing bankruptcy. Once your bankruptcy is filed, you have an automatic stay of protection. When the stay is in effect, your wages can’t be garnished, and repossession and foreclosure efforts will be halted. The stay remains in effect until your case is discharged or dismissed. If you are in need of bankruptcy protection, you may be wondering how the spread of coronavirus will affect your ability to file File Bankruptcy From Home On March 30, 2020, Arizona Governor Doug Ducey recently asked Arizonans to stay home unless they need to perform essential functions. Many bankruptcy attorneys offer telephonic consultations so you can avoid going into the office. Our office offers telephonic consultations free of charge. We can scan or e-mail any documents needed.  Our COVID-19 safe bankruptcy law firm is here to assist. Steps to Filing Your Bankruptcy During COVID-19 in Arizona Once you have retained a bankruptcy attorney, you will have to send them to your attorney so they can draft your petition. While some offices may have drop-off still available, you will likely need to remotely submit your documents. Besides filing bankruptcy from home, other options your attorney may have available include: fax, email, and an online client portal system.  Our Arizona debt relief lawyers are currently offering a bankruptcy by phone option. Your attorney will draft your petition once they have all of your documents. They should be able to email it to you before going over it with the attorney. Offices will vary on the procedure used to sign your petition. Your attorney will then file your petition electronically. If you are considering filing pro se, or on your own, check with your courthouse to make sure that electronic filing isn’t restricted to attorneys only. You will also need to complete a credit counseling course before filing, which can be done online. 341 Hearings Being Held Telephonically Bankruptcy filers typically only need to attend one hearing in person- the 341 Meeting of Creditors. These hearings have been temporarily suspended, and your Phoenix bankruptcy attorney will inform you on how the hearing will be handled once they hear from your trustee. You will also need to take one more online credit counseling course within 60 days of your 341 Meeting of Creditors. Once these steps have been completed, you can remain quarantined in your home waiting for your case to be discharged. If your 341 Meeting of Creditors is delayed by coronavirus, the automatic stay will protect you in the meantime. Don’t wait until it is too late to begin the bankruptcy process- call and schedule a consultation today. You can begin your journey towards a financial clean slate without leaving your home.  Contact our experienced Arizona bankruptcy attorneys today, in this ever-changing COVID-19 climate, our attorneys and staff are here to assist. The post Can I File for Bankruptcy Even Though I Can’t Leave My House Due to COVID-19? appeared first on My AZ Lawyers.

Can I File for Bankruptcy Even Though I Can’t Leave My House Due to COVID-19? Filing Bankruptcy From Home in Arizona Even though it feels like the entire world is shut down, debt and its collection attempts are not. Whether you were struggling financially before the pandemic, or quarantining has sent you into a state of immediate financial peril, you may need the protections provided by filing bankruptcy. Once your bankruptcy is filed, you have an automatic stay of protection. When the stay is in effect, your wages can’t be garnished, and repossession and foreclosure efforts will be halted. The stay remains in effect until your case is discharged or dismissed. If you are in need of bankruptcy protection, you may be wondering how the spread of coronavirus will affect your ability to file File Bankruptcy From Home On March 30, 2020, Arizona Governor Doug Ducey recently asked Arizonans to stay home unless they need to perform essential functions. Many bankruptcy attorneys offer telephonic consultations so you can avoid going into the office. Our office offers telephonic consultations free of charge. We can scan or e-mail any documents needed.  Our COVID-19 safe bankruptcy law firm is here to assist. Steps to Filing Your Bankruptcy During COVID-19 in Arizona Once you have retained a bankruptcy attorney, you will have to send them to your attorney so they can draft your petition. While some offices may have drop-off still available, you will likely need to remotely submit your documents. Besides filing bankruptcy from home, other options your attorney may have available include: fax, email, and an online client portal system.  Our Arizona debt relief lawyers are currently offering a bankruptcy by phone option. Your attorney will draft your petition once they have all of your documents. They should be able to email it to you before going over it with the attorney. Offices will vary on the procedure used to sign your petition. Your attorney will then file your petition electronically. If you are considering filing pro se, or on your own, check with your courthouse to make sure that electronic filing isn’t restricted to attorneys only. You will also need to complete a credit counseling course before filing, which can be done online. 341 Hearings Being Held Telephonically Bankruptcy filers typically only need to attend one hearing in person- the 341 Meeting of Creditors. These hearings have been temporarily suspended, and your Phoenix bankruptcy attorney will inform you on how the hearing will be handled once they hear from your trustee. You will also need to take one more online credit counseling course within 60 days of your 341 Meeting of Creditors. Once these steps have been completed, you can remain quarantined in your home waiting for your case to be discharged. If your 341 Meeting of Creditors is delayed by coronavirus, the automatic stay will protect you in the meantime. Don’t wait until it is too late to begin the bankruptcy process- call and schedule a consultation today. You can begin your journey towards a financial clean slate without leaving your home.  Contact our experienced Arizona bankruptcy attorneys today, in this ever-changing COVID-19 climate, our attorneys and staff are here to assist. The post Can I File for Bankruptcy Even Though I Can’t Leave My House Due to COVID-19? appeared first on My AZ Lawyers.

As confirmed cases of the Covid-19 virus climbed across the country, bankruptcy courts and the U.S. Trustee's office have been seeking ways to adapt to the new normal.  This post will look at how the court system has rolled out its disaster preparedness through the lens of the Bankruptcy Courts for the Western District of Texas, Southern District of Texas and District of Delaware.Here is a timeline of announcements from the Courts with a few random anecdotes thrown in.  All of the standing orders and announcements can be found on the respective websites of their courts.A Covid-19 TimelineMarch 9, 2020: The Southern District of Texas, issued the first of several orders addressing the pandemic.  Prior to a public health emergency being announced, the Court adopted General Order 2020-4 which announced Hearing Protocols That May Be Implemented Under Certain Public Health or Safety Concerns.  This order set out nine principles to be followed if the protocols were to be implemented, including respecting due process, avoiding in-person hearings, minimizing hearings required only by procedural rules and using technology where possible.  The order then contained ten pages of specific protocols covering everything from how to handle chapter 13 hearings to how witnesses will appear electronically. The Southern District has made it possible attorneys to monitor hearings by both phone and www.join.me. Witnesses would be required to appear both by video and telephonically.  March 11, 2020:The Western District of Texas announced basic safety rules to avoid coming in contact with Covid-19.  These were similar to the guidance given by the CDC. March 13, 2020:President Trump declared a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak.The U.S. Trustee began announcing that all 341 meetings scheduled through April 10 would be continued and that any meetings which did take place would not involve in person attendance. March 16, 2020:The District of Delaware issued a short general order providing that all hearings that were not time sensitive would be rescheduled until after April 15. It also provided that all hearings prior to April 15 would be conducted telephonically or by video. The Court provided that the chapter 13 confirmation hearings scheduled for March 23 would go forward but that clients represented by counsel were encouraged not to appear.The Southern District of Texas issued an order regarding chapter 13 proceedings stating that debtors were encouraged to participate by telephone and that counsel and trustees should appear in accordance with the presiding judge's normal procedures. All confirmation hearings were continued until after April 30.The Southern District of Texas also issued an order continuing 341 meetings until after April 10 unless scheduled telephonically.March 17, 2020:The District of Delaware eliminated counter service at the Clerk's office and provided a link for pro se debtors to file petitions electronically.  It also stated that filing fees for pro se parties would be deferred.The Western District of Texas announced that beginning on March 23 and going forward, all hearings would be conducted by teleconference. March 19, 2020:The Southern District of Texas adopted a procedure for chapter 13 debtors to request a reduction in their plan payments for the period from March 1 to May 31 with arrearages to be cured by a plan modification to be filed in June. The Southern District of Texas announced that it would allow digital signatures which complied with the federal ESIGN Act and that the Court intended to consider this practice for long-term adoption.March 23, 2020:The Western District of Texas announced that it would allow digital signatures which complied with the federal ESIGN Act.The Western District of Texas also announced that pro se parties could file their petitions by U.S. mail, email or fax.Finally, the Western District of Texas extended the time to obtain confirmation of chapter 13 plans from 45 days to 60 days after completion of the 341 meeting.March 24, 2020:The Southern District of Texas invoked its emergency protocols (see March 9) for the Brownsville, Galveston and Houston divisions.The Southern District of Texas issued an order temporarily amending its requirement for attorney declarations in connection with flat fee contracts. Under the amended declaration, an attorney must certify that he spent at least one hour with the debtor in person, by video or by phone with video being preferred.March 26, 2020:The District of Delaware entered an order temporarily suspending the requirement that attorneys obtain a debtor's physical signature so long as the debtor signed electronically or otherwise approved the document, which could be done by email.The Southern District of Texas invoked its emergency protocols for all divisions.Some StoriesHere are two stories about hearings taking place in the new reality. Please feel free to share your own.March 24, 2020:Judge David Jones held a hearing in Newsco International Energy Services USA, Inc. In the middle of a brief and uncontroversial hearing, the judge asked counsel for the Debtor and the Committee if they were in front of their computers. He encouraged them to log in to join.me so they could get comfortable with it. It was then revealed that Committee Counsel was wearing a tshirt and a baseball cap. The attorneys received an impromptu demonstration of join.me and Judge Jones seemed pleased to show off his technology.  March 30, 2020:A hearing in Craftworks Parent, LLC in the District of Delaware illustrated the challenges that attorneys are facing adapting to technology and remote officing. Judge Brendan Shannon arranged for attorneys to appear by telephone and skype. One attorney was unable to get skype to work but was able to appear telephonically. Another attorney mastered skype but apologized to the court for not having a tie available at his current location. (The court was very gracious). Another attorney was called upon and accidentally hit the hang up button instead of unmute. Notwithstanding the technological challenges, the hearing was both civil and substantive.  Take-AwaysThis sampling of general orders shows courts being proactive in addressing a public health emergency. Given the emergency protocols issued by the Southern District of Texas, I suspect that this is something they were preparing for well before the current crisis. The standing orders cover similar territory with local variations. First, the courts have been going out of their way to implement social distancing. This has taken the form of eliminating in person hearings and 341 meetings as well as in person meetings between counsel and client. The courts have also looked for way to accomodate pro se filers without having them visit the clerk's office. Finally, the crisis has encouraged the courts to adopt technologies which will change the practice of law once this challenge has past.

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION AT COLUMBUS In re: NASHEL : : : : : Jose J. Cabrera, Case No. 18-56909 Chapter 7 Judge Hoffman : : Plaintiff, v. Nashely J. Wilson, Defendant. : : : : : : : Adv. Pro. No. 18-2155 Capitol South Community Urban Redevelopment Corporation, Plaintiff, v. Nashely J. Wilson, Defendant. : : : : : : : : : : Adv. Pro. No. 19-2013 OPINION ON COMPLAINTS TO DETERMINE DISCHARGEABILITY OF DEBTS This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: March 27, 2020 Case 2:19-ap-02013 Doc 28 Filed 03/27/ 03/27/20 11:19:08 Desc Main Document f 28 Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 2 of 28 I. Introduction These adversary proceedings have their genesis in a concert produced by the Chapter 7 debtor, Nashely Wilson. The manager of the concert venue, Capitol South Community Urban Redevelopment Corporation, remained unpaid after the concert, as did Jose Cabrera, a friend of Wilson’s who provided her funds to cover the event’s expenses in exchange for the promise of receiving his money back twofold. Capitol South and Cabrera ask that Wilson’s debts to them be excepted from her bankruptcy discharge. Capitol South contends that Wilson obtained the use of the concert venue through false pretenses, a false representation, or actual fraud within the meaning of § 523(a)(2)(A) of the Bankruptcy Code. Cabrera alleges that Wilson persuaded him to lend her money using those same means and that she also willfully injured him by taking his money without intending to repay it, making her debt to him nondischargeable under both § 523(a)(2)(A) and § 523(a)(6). To prevail on a nondischargeability claim under § 523(a)(2)(A), a creditor must demonstrate that the debtor intended to defraud the creditor, and to succeed under § 523(a)(6) the creditor must show that the debtor intended to injure the creditor or the creditor’s property. The plaintiffs, however, were unable to prove that Wilson had any such intent. Instead, it appears that they went unpaid because Wilson lacked the ability to pay all her debts arising from the concert after it generated little, if any, net revenue. Wilson’s debts to Cabrera and Capitol South accordingly are discharged. In the end, while the plaintiffs succeeded in showing that Wilson was an inexperienced—and perhaps inept—concert promoter, they failed to demonstrate that she is a fraudster or that she acted with intent to harm them. II. Jurisdiction and Constitutional Authority The Court has jurisdiction to hear and determine these adversary proceedings under 28 U.S.C. § 1334(b) and the general order of reference entered in this district under 28 U.S.C. § 157(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(I). Because disputes over the 2 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 3 of 28 dischargeability of debts “stem[] from the bankruptcy itself,” the Court also has the constitutional authority to enter final judgments in these adversary proceedings. Hart v. S. Heritage Bank (In re Hart), 564 F. App’x 773, 776 (6th Cir. 2014) (quoting Stern v. Marshall, 564 U.S. 462, 499 (2011)). III. Procedural History On October 31, 2018, Wilson filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. That same day, she filed her schedules of assets and liabilities, listing on Schedule E/F an unsecured debt to Capitol South in the amount of $70,290 and an unsecured debt to Cabrera in the amount of $80,000. Wilson received a discharge under § 727 of the Bankruptcy Code. Cabrera and Capitol South, however, commenced adversary proceedings seeking to have the debts owed to them declared nondischargeable. With the agreement of the parties, the Court entered an order providing that the adversary proceedings would be tried concurrently. Doc. 8. The trial was held over the course of two days. The transcript of the first day of the trial is docketed at Doc. 17 in Adv. No. 18-2155 (“Transcript I”), and the transcript of the second day is located at Doc. 19 of the same adversary proceeding (“Transcript II”). The Court heard the testimony of Wilson, Cabrera, and Nicholas Stefanik, a representative of Capitol South. In addition, the parties stipulated to the admission into evidence of Plaintiffs’ Exhibits 1 through 22, and Plaintiffs’ Exhibits 23 through 25 were admitted into evidence without objection. The parties submitted proposed findings of fact and conclusions of law after the trial. IV. Findings of Fact Based on the evidence adduced at trial, including the documentary evidence and the testimony presented, and having considered the demeanor and credibility of the witnesses, the Court makes the findings of fact set forth below. 3 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 4 of 28 A. Events Leading to the Yandel Concert Wilson, who is originally from Bolivia, is bilingual in Spanish and English, while Cabrera primarily speaks Spanish. Tr. I at 19; Tr. II at 20.1 Beginning around 2013, Wilson began marketing what she described as her “brand” to the Spanish-speaking community in Columbus, Ohio. She did this through a magazine known as “Hola Columbus” and a television show called “Hola TV” that included segments focused on fashion and local events of interest to the Hispanic community. Tr. II at 22. Her twin goals were “becoming the bridge between the American market and the Hispanic market” and “building a career as an entrepreneur.” Id. at 23. Working toward those goals, Wilson started producing concerts in local clubs, undeterred by her lack of any education or experience that would have prepared her to handle the financial aspects of concert production. Id. at 21–23. By the time Wilson met Cabrera in the summer of 2016, she had spent the past several years producing one or two concerts per year in the Columbus area. Tr. I at 140–41; Tr. II at 22. With an average attendance of around 200, those events were viewed by Wilson as successful, and they increased her confidence in her ability as a producer. Tr. II at 22. It was then that Cabrera contacted Wilson through a social media platform in order to purchase VIP tables at a Wilson- produced concert to be held in a nightclub called Euphoria. Tr. I at 140; Tr. II at 25. Wilson and Cabrera met face-to-face for the first time at the Euphoria concert. Tr. II at 14. Cabrera considered the event a success, estimating a crowd that numbered around 700 to 800 to be much higher— anywhere from 1,000 to 1,200. Tr. I at 114–15; Tr. II at 7–8, 43. 1 Wilson testified in English while Cabrera testified in Spanish through an interpreter, who not only translated his testimony, but also interpreted statements made by others so that Cabrera could understand everything that was said during the trial. 4 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 5 of 28 After the Euphoria concert, Cabrera and Wilson began meeting at clubs and various other venues for social gatherings with friends and family members, including Cabrera’s now ex-wife, Fabiola Alvarez. Tr. I at 141–42, 145; Tr. II at 8, 25. According to Cabrera, “there are very few of us Latinos here in Columbus, and so those that are here, we try to get together with each other and do things together . . . . And I would say that all of us know each other in those places.” Tr. I at Wilson used the affectionate nickname “Juancito” for Cabrera, and she endeared herself not only to him, but to Alvarez as well. Tr. I at 142, 147. Over time, Cabrera developed a relationship with Wilson that he considered a friendship. Tr. I at 141–43, 150, 152; Tr. II at 9, 14. He even came to trust Wilson enough to lend her $1,000 on one occasion and an undisclosed amount on another. Id. at 142, 157. She paid him back in a timely fashion both times, increasing his trust in her. Id.; Tr. II at 9. Buoyed by her earlier success producing relatively small events, Wilson became determined to produce a concert on a much larger scale. She ultimately decided on the singer Yandel, whom she describes as “one of the most well-known artists in the Hispanic community” and “the Justin Bieber of the Latin community.” Tr. II at 24. Yandel agreed to appear for a concert in Columbus on May 20, Wilson’s research revealed that Yandel had “performed in many different places” and that he had “filled out different venues [with] thousands of people[.]” Id. atBased on the size of the crowds that Yandel had drawn in other cities, Wilson believed that his concert in Columbus would draw an audience of no less than 5,000. Id. at 24, 33–34. In a development that could only have encouraged her optimism, several corporate sponsors— Musicon, Corona, Modelo, El Manantial, and La Michoacana Market—collectively provided her a total of $43,500 of sponsorship dollars in exchange for advertising during the concert. Tr. I at 20–24. 5 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 6 of 28 Despite the financial boost those funds provided, Wilson still needed additional capital to cover the concert’s up-front costs. For one thing, sponsorship dollars were Wilson’s primary source of income, and she would have needed to use some of those funds for living expenses. Id. at 20–21. For another, Yandel’s flat performance fee alone was $50,000, and thousands of dollars more were needed to pay for flights and hotels rooms for the musician and his entourage in addition to all the other concert-related expenses. Tr. II at 69–72. Wilson originally planned to obtain the additional funding from “Fadi,” a local restaurateur who had provided her with funds in connection with an earlier event that she had produced. Id. at 31–32. Cabrera was aware of this potential infusion of cash from Fadi and offered to provide funds for the Yandel concert himself if Fadi decided not to do so. Id. at 32. After Fadi ultimately declined to fund the concert, Wilson recalled Cabrera’s offer and reached out to him by phone. Id. During the call, she made Cabrera aware of the sponsorships she had obtained and told him how confident she was that the Yandel concert would be a success. Tr. II at 9. She also told him that she needed $40,000 within two days for the concert to take place. Tr. I at 149; Tr. II at 14–15. Cabrera said he would try to raise the money she needed. He then asked Alvarez to help with the funding, and she agreed to participate. Tr. I at 149–50. So too did a friend of Cabrera’s, Sergio Flores. Id. The terms of the funding that Cabrera arranged were memorialized in an agreement dated March 28, 2017 (the “Cabrera Agreement”), which stated: Investment agreement by and between Jose J. Cabrera, Fabiola Alvarez, and [Nashely] Wilson DBA Hola TV, LLC. Mr. Jose J. Cabrera and Ms. Fabiola Alvarez deposited $40,000 (forty thousand and 00/100) as investing amount for the Yandel concert event taking place May 20th, 2017 at the Columbus Commons. In return, they will receive the full amount of $40,000 (forty thousand and 00/100) back plus 50% of all revenue after 6 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 7 of 28 expenses, totaled at $80,000 (eighty thousand and 00/100), by June 30th, 2017. Ex. 20. Complying with the agreement, Cabrera provided Wilson $40,000 in two separate installments: (i) a $24,000 check written by Flores; and (ii) a $16,000 check comprised of $6,000 from Cabrera and $10,000 from Alvarez. Tr. I at 150–51; Tr. II at 6–7; Ex. 15. The Cabrera Agreement made clear that the amount being contributed by Cabrera, Alvarez, and Flores was to be used “for the Yandel concert.” Ex. 20. Consistent with that requirement, the $16,000 contributed by Cabrera and Alvarez was deposited into one of Wilson’s bank accounts on March 28, 2017, and this very amount was then wired to an entity known as Live Nation on behalf of Yandel that same day. Ex. 3 at 13–14. No evidence was offered by the plaintiffs demonstrating how Wilson used the $24,000 contributed by Flores. Nor did they present evidence suggesting that any of the funds Wilson received under the Cabrera Agreement were used for anything other than the Yandel concert. Under the terms of the Cabrera Agreement, Wilson agreed to return to Cabrera and Alvarez the $40,000 she received while also paying them “50% of all revenue after expenses,” estimated to be an additional $40,000, within 40 days after the concert. Ex. 20. With a minimum ticket price of $35 and a price of $65 for VIP tickets, Tr. I at 64, ticket sales of 5,000 would have generated more than $175,000 of gross revenue. Given this, Wilson’s estimate that “50% of all revenue after expenses” would equal $40,000 was not completely unreasonable, and her intentions “were always to pay back” Cabrera. Tr. II at 73. At the time she obtained the funding from Cabrera, Wilson had already entered into an agreement with Capitol South, the manager of a park in downtown Columbus known as the Columbus Commons, to use the park as the concert venue. Ex. 1; Tr. I at 124–26. Wilson chose 7 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 8 of 28 Capitol South because the Commons had the capacity to hold the thousands of concertgoers Wilson was anticipating. Tr. I at 27, 61–62. Upon receipt of Wilson’s application to use the Commons, Stefanik, who was Capitol South’s event manager, reached out to her to discuss the logistics of the event. Id. at 136. During their initial discussions, Wilson informed Stefanik that she had produced several concerts in smaller venues. Id. Stefanik recognized that a concert held at the Commons “would be a step up, but it seemed like the prerequisite foundational skills were there from [their] initial conversations.” Id. at 137. Following these discussions, Wilson and Capitol South entered into a license agreement in January 2017 for the use of the Commons four months later on May 20, 2017 (the “Capitol South Agreement”). Ex. 1 at 1. The Capitol South Agreement required Wilson to make an initial deposit of $2,000, which Wilson paid. Tr. I at 127. In addition to requiring the deposit, the Capitol South Agreement also imposed future obligations on Wilson, including the obligation to obtain insurance for the event and to pay a percentage of the amount due Capitol South no later than five days before the concert, with the balance due within 14 days following the event. Ex. 1 at 1. Capitol South and Wilson ultimately agreed that the amount she would need to pay before the concert was $20,000. Tr. I at 127. With the venue and funding secured, Wilson promoted the concert in various ways. She gave an estimated 50 to 100 tickets to a disk jockey known as “DJ Juan” in exchange for his assistance in promoting the concert and provided 50 complementary tickets to a radio station, La Mega 103.1, that also helped promote the concert. Id. at 28–29. Wilson sold tickets for the Yandel concert through Eventbrite and the La Michoacana Market. Id. at 30. At some point after Wilson obtained the funding from Cabrera, it became evident that ticket sales were falling far below her expectations. Concerned about the pace of ticket sales in the days leading up to the concert, she redoubled her promotional efforts, driving to other major cities 8 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 9 of 28 around Ohio in an attempt to bring in concertgoers from outside of Columbus. Id. at 75–76. And yet, the day before the event, only about 239 tickets had been sold by Eventbrite and Michoacana combined. Ex. 18; Tr. I at 91. Around 100 of those tickets were sold through Michoacana, generating roughly $3,500 a few days before the concert. Id. at 31–32. Eventbrite sold the remaining 139 tickets, providing Wilson with proceeds of $7,403 starting in March 2017 and continuing up to a couple of days before the concert. Id. at 38; Exs. 18, 23. In total, the proceeds of ticket sales before the concert were approximately $10,900. In the meantime, Capitol South was asking Wilson for the $20,000 that was due no later than five days before the concert. Tr. I at 82, 127–28. Rather than paying Capitol South, Wilson instead paid other concert-related expenses using the proceeds of pre-concert ticket sales, sponsorship funds, and the funding she had received from Cabrera and Alvarez. Wilson authorized funds to be deposited from one of her bank accounts into an account maintained by her brother so that he could take care of the logistics of paying certain expenses, including approximately $8,300 for hotel rooms for Yandel and his team and $1,100 for the portable restrooms that were going to be installed at the Commons for the event. Id. at 32–33, 72–73. An unnamed friend of Wilson’s used a credit card to cover the approximately $15,000 cost of airfare for Yandel and his retinue. Tr. II at 54, 58–59. An individual named Carlos Rodriguez lent Wilson $10,000 to pay for other expenses related to the concert, and she also used between $5,000 and $5,500 of her own savings to pay for still other expenses. Id. at 32, 47–48, 57–58. Any portion of Yandel’s $50,000 appearance fee that had not yet been paid would have been paid at this point. Although only $41,000 of the $50,000 is readily identifiable in Wilson’s bank statements as having been paid, the entire fee must have been paid, because Yandel would not have performed if his up-front appearance fee had not been paid in full before the concert. Id. at 69–71. 9 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 10 of 28 Likewise, Capitol South would not have made the Commons available to Wilson on the day of the concert if it had not received a check for the $20,000 that was then due. Tr. I at 128. On the morning of the concert, therefore, Wilson issued a check to Capitol South in the amount of $20,000. Ex. 2; Tr. I at 52–53, 127. Because the balance in her bank accounts on an aggregate basis was close to zero or even negative at that point, Wilson almost certainly knew when she issued the check that the account lacked sufficient funds to cover it. Tr. I at 60–61. But no evidence suggests that Wilson represented to Capitol South that the account contained sufficient funds. And because it was inconceivable to Wilson that Yandel would not draw thousands to his concert, she was still anticipating an influx of ticket buyers at the door. She accordingly issued the check the morning of the concert with the expectation that the proceeds of ticket sales later in the day would be enough for her to deposit the funds needed to cover the check after the concert. Id. at 61–62; Tr. II at 30. But it was not to be. B. The Concert’s Financial Failure Despite Wilson’s last-ditch efforts to salvage the concert, her prediction that Yandel would bring in at least 5,000 concertgoers ultimately turned out to be high by several thousand people. Cabrera estimated the crowd at “between 1,500 to 1,800 people in addition to the 30 VIP tables that were full.” Tr. I at 153. But Cabrera appears to have overestimated the size of the crowd by several hundred people, just as he did with the Euphoria concert. The size of the crowd was more likely in line with the 1,000 to 1,500 range estimated by Wilson. Id. at 69. On top of that, only a portion of those in attendance had actually paid for tickets purchased through Eventbrite or Michoacana. About 150 of the concertgoers used complementary tickets that Wilson had given away to promote the concert. And, exploiting her failure to use ticket scanners, several hundred more used counterfeit tickets, the proceeds of which did not make their way to Wilson. Id. at 64– 65. 10 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 11 of 28 The precise number of tickets actually purchased from Wilson at the gate is uncertain, but appears to have been around 250. Id. at 91. This number of tickets would have generated gross proceeds of only $8,750 (250 times $35 per ticket). Wilson also sold alcohol at the concert, but the only evidence presented regarding the amount of cash generated by alcohol sales is that Cabrera purchased $700 of alcohol for his friends and family. Although additional alcohol was purchased, no evidence was offered that would provide a basis for placing a dollar amount on purchases other than those made by Cabrera. Id. at 64; Tr. II at 16–18, 42. In total, then, the evidence establishes that tickets purchased at the gate and the sale of alcohol generated gross proceeds of approximately $9,450. Wilson used proceeds from tickets sold at the gate and alcohol sales to cover various expenses that had to be paid the day of the concert, including the per-diem expenses of Yandel’s team and the costs of providing a disk jockey, bartenders, and security personnel, all of which would have totaled $7,300 if the per-diem expenses for Yandel were the $2,800 budgeted by Wilson. Tr. I at 63–69. Given that the per-diem expenses were closer to $3,500, id. at 63, the total expenses the day of the concert were at least $8,000. With gross proceeds of $9,450 and same- day expenses of at least $8,000, the net profit generated the day of the concert was at most $1,450. Wilson’s net profit was perhaps closer to zero. When Yandel’s manager asked Wilson to pay the per-diem expenses immediately before the artist went on stage, she “started collecting all the money that was at the door,” then “counted everything around behind the stage,” and “started counting cash to him, because [she] just needed the event to go through.” Id. at 63. She does not “remember who [she] gave cash to” and it “all got out of hand.” Id. at 63. Her method of paying other expenses later that evening was equally shambolic: “I had a lot of people, like the bartenders and securities, done with their work and they were all coming up to me for payments, so I started 11 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 12 of 28 pulling out money from the door or the alcohol to start paying everybody that worked the night of the event.” Tr. II at 44. Given the haphazard manner in which Wilson distributed cash the day of the concert in order to pay the event’s expenses, her net profit may have been less than the amount the Court calculated above, and it very likely was zero or close to it.2 Wilson’s recollection is that she had no cash left at the end of the day. Tr. I at 63. Although the plaintiffs posit that Wilson walked away from the concert with close to $20,000 of cash that she never deposited into any of her bank accounts, there is simply no evidence supporting that contention. C. Events Occurring After the Concert Several days after the concert, the $20,000 check that Wilson issued to Capitol South was returned for insufficient funds. Ex. 2; Tr. I at 129.3 Upon the check’s return, Capitol South reached out to Wilson with a request that she pay the amount due under the Capitol South Agreement, but she failed to respond. Exs. 7, 8, 9; Tr. I at 130–31. Instead, like a gambler trying to recoup her losses by doubling down, Wilson planned to pay the outstanding expenses from the Yandel concert 2 Capitol South points to Exhibit 19, a document entitled “Yandel Concert,” as a basis for finding that her expenses both before and after the concert were only $86,400 (the $95,400 set forth in the document minus the $9,000 that Capitol South contends was not ultimately paid to Yandel). No evidence was presented establishing the date on which the document was prepared, but at trial the document was consistently described as a “budget.” Tr. I at 67–69. By definition, a budget is a pre-event estimate of expenses, not a tally of expenses actually paid. 3 Capitol South contends that the insurance policy that was required to be in place for the concert to go forward never became effective because the check Wilson issued to the insurance agency also was returned for insufficient funds. Emails among Wilson, Capitol South, and the representative of the insurance agency show only that Wilson attempted to pay for the insurance with cash, but that the payment was refused and that she then issued the agency a check. Ex. 11. Regarding the purported return of the check, Stefanik ambiguously testified that “we had received verification after the fact that I believe a check was received.” Tr. I at 129. In other words, the evidence shows only that “a check was received,” but does not establish that the check was returned for insufficient funds. There also is no documentary evidence in the record establishing that the insurance check was returned for insufficient funds. 12 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 13 of 28 using the proceeds of another concert: “I said maybe if I do the next event, I will be able to cover what I owe for the one that I just did.” Tr. II at 39; see also id. at 48, 53. Rodriguez, who had lent Wilson $10,000 for expenses related to the Yandel concert, gave her a cashier’s check in the amount of $25,000 about a week after the concert for the purpose of producing a large-scale concert by the artist Daddy Yankee. Id. at 48–51, 56–60; Ex. 25. Wilson deposited the check into her bank account and withdrew the funds in cash that same day. At some point, she gave Rodriguez $10,000 of his own money back as payment for the $10,000 he had lent her for the Yandel concert. Tr. II at 58. She then paid the remaining $15,000 that she received from Rodriguez to the unidentified friend who had previously used a credit card to cover the costs of airfare for Yandel and his team. Id. at 53, 58–59. Wilson did not advise Rodriguez that she was going to use his $25,000 in this manner rather than for the Daddy Yankee concert. In other words, she may have convinced Rodriguez to give her the $25,000 by misrepresenting how she was going to use the money. But that does not mean that she misled Cabrera about the use of his money. To the contrary, there is no evidence that she used the funds she received from Cabrera, Alvarez, or Flores for anything other than the Yandel concert, and there is direct evidence that she in fact used $16,000 of those funds to pay Live Nation for Yandel’s appearance. Other than the income generated by sales of concert tickets and alcohol, sponsors were Wilson’s only source of income in 2017. Tr. I at 20–21. She deposited that income into several bank accounts and used the same accounts to pay both her business and personal expenses, including meals and other daily living expenses. Tr. II at 67–68. Shortly after the concert, Wilson visited Miami with Alvarez, who did not yet know that Wilson was unable to repay her and Cabrera. Tr. I at 147, 154; Tr. II at 37. The expenses associated with the trip, however, were minimal. Wilson’s flight was inexpensive, her mother paid for her ticket, and she stayed with a 13 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 14 of 28 friend during the trip. Tr. I at 114; Tr. II at 37. At Alvarez’s suggestion, they took a day trip from Miami to the Bahamas via ferry, but the ferry ticket cost only about $50, and Wilson’s only other expense that day was $10 for lunch. Tr. II at 38. In an attempt to reestablish her “brand,” Wilson also attended several fashion events in New York and Los Angeles to which she was invited because of her prior involvement with Hola TV. Tr. I at 108–12; Tr. II at 34–36, 79–81. But all her expenses were covered other than airfare, which was paid for by her mother. Tr. II at 35–36. Although Wilson sometimes wore relatively expensive clothing during the fashion events, the clothes were provided by her sponsors, and she typically was required to return them. Tr. I at 113; Tr. II at 36–37. A few weeks after the Yandel concert, Wilson contacted Cabrera and Alvarez to arrange a meeting. Tr. I at 153. At the meeting, Wilson raised the idea of their providing funding for the concert she hoped to promote next. Id. at 154. They declined to do so and inquired about the funds they had expected to receive from the Yandel concert. Based on Wilson’s response, Cabrera’s understanding was that he and Alvarez would only be receiving their initial $40,000 back. He also understood that she would begin repaying them starting the next week and that she intended to use funds she anticipated receiving from sponsors for the new concert she was planning. Id. at 154–55. Cabrera contacted Wilson a few days later and, hoping to be able to confirm that any check she gave him would be honored, asked her to meet him at Chase Bank before it closed. Id. at 155–56. Wilson ultimately was late for the meeting and, once Cabrera reached her, asked to meet in the parking lot of a Sam’s Club instead of at the bank. Id. at 157. Cabrera met her at the Sam’s Club after the bank had closed, and Wilson gave him a check for $25,000. Id. At the time Wilson gave Cabrera the check, she knew that the account on which it was drawn lacked sufficient funds for the check to be honored. Id.at 120. It is even possible that 14 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 15 of 28 she delayed meeting Cabrera and changed the meeting place so Cabrera could not determine that the check would not be honored at that point. But no evidence was presented showing that Wilson represented to Cabrera when she gave him the check that the account on which it was drawn contained sufficient funds. And Wilson issued the check believing that she would be able to deposit new sponsorship dollars into the account within the next few days so that the check would be honored: “I was expecting the money to be there, because I was doing everything I could to organize—to come up with the next event.” Id. at 120; see also Tr. II at 75–77. The sums she hoped to receive from sponsors would have been for advertising at the next concert and thus were not funds that she would have been required to repay. Tr. II at 78. The concert that Wilson planned to produce in order to earn money to repay her debts from the Yandel concert never happened. This was due at least in part to her inability to obtain sponsors for the event. Id. at 26–27, 39, 78. For this Wilson blames comments made about her on social media to the effect that she had engaged in fraud—negative publicity that began around the time she issued the $25,000 check to Cabrera. Id. at 26–27, 78–79. Regardless of the reason, Wilson was no longer able to generate income as a concert producer. Cabrera sued Wilson in state court for $80,000 and obtained a default judgment against her. Tr. I at 115; Tr. II at 7. Capitol South also obtained a default judgment against Wilson in an amount exceeding $70,000 for treble damages plus attorneys’ fees. Ex. 10; Tr. I at 131–32. A tax return was prepared on Wilson’s behalf in October 2018 for the calendar year ending December 31, 2017. Ex. 6. Apparently trying to call Wilson’s credibility into question, Capitol South contends that Wilson “failed to declare at least $60,000 in income” on that return. Doc. 26 at 7. In calculating that number, however, Capitol South included funds she was obligated to 15 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 16 of 28 repay. But funds that must be repaid typically are not considered taxable income.4 Wilson was obligated to repay the funds received from Cabrera regardless of the revenue generated by the Yandel concert, and she demonstrated her intent to do so by testifying to her attempts to obtain funds from sponsors that she would have used to repay Cabrera. Cabrera, of course, intended to seek repayment. Thus, there is no basis to conclude that the income reflected on Wilson’s 2017 income tax return was understated. Nor does the tax return call Wilson’s credibility into question for any other reason. Wilson filed her bankruptcy case in October 2018. As of the date of the filing, she was living with her mother and making only about $1,000 a month as a server at a restaurant. Tr. I at She never recovered the approximately $5,000 of her own savings that she used to pay expenses related to the Yandel concert. Id. at 118–19, 154; Tr. II at 32, 40, 47–48, 60–61. D. Wilson’s Ability to Pay In order to establish that Wilson had the ability to pay them, the plaintiffs submitted copies of certain bank records through September 2017. Based on the records provided, an analysis of Wilson’s total deposits and expenses reveals the following information: 5 4 See Milenbach v. Comm’r, 318 F.3d 924, 930 (9th Cir. 2003) (“A loan is generally not taxable income because the receipt of the loan is offset by the obligation to repay the loan. For this rule to apply . . . the loan must be an ‘existing, unconditional, and legally enforceable obligation for the payment of a principal sum’ [and there also must be] ‘an unconditional obligation on the part of the transferee to repay the money, and an unconditional intention on the part of the transferor to secure repayment[.]’”) (citations omitted). 5 The data provided in this table is a compilation of all account deposits and debits (reflecting payment of expenses by Wilson) over the time period covered by the bank account statements introduced as exhibits by the plaintiffs. 16 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 17 of 28 Account Total Deposits Total Withdrawals 8232 60,357.57 35,501.57 9769 40,071.74 32,389.22 0189 27,822.54 44,820.37 9683 2,950.00 2,800.00 2731 5,420.00 5,595.00 3298 2,008.66 40,317.30 Total $138,630.51 $161,423.46 The information summarized above incorporates all deposits and withdrawals reflected in (i) the five bank accounts6 Wilson used for both her personal and business expenses and (ii) her brother’s bank account7 insofar as the deposits to and withdrawals from that account relate to the Yandel concert. As the chart reflects, over the course of several months leading up to and following the Yandel concert, Wilson’s total expenses exceeded her total deposits by over $20,000. Wilson’s ability to remain afloat despite this untenable financial situation was made possible only by her banks’ willingness to cover a number of account overdrafts. The chart does not list the cash obtained from ticket sales at the gate (“Gate Sales”) and amounts paid in cash to various parties on the day of the concert (“Gate Expenses”). Wilson testified that she used Gate Sales to pay the following Gate Expenses in cash on the day of the Yandel concert: $3,500 for Yandel’s per diems; $1,000 for a disk jockey; $2,000 for security; and $1,500 for bartenders. Because the Court knows from Wilson’s testimony that she paid Gate Expenses using Gate Sales, the Gate Sales must have generated at least $8,000 in cash. While these amounts are gleaned from Wilson’s testimony rather than from the bank accounts, they still must be added to the total sums of Wilson’s deposits and expenses to convey a more accurate picture of her overall financial position. Given the account information contained in the bank 6 Bank accounts ending in # 8232, # 9769, # 0189, # 9683 and # 2731. 7 Bank account ending in # 3298. 17 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 18 of 28 statements—as well as the testimony regarding Gate Sales and Gate Expenses—the Court concludes that she did not have the ability to pay Cabrera and Capitol South while also paying her other debts. V. Legal Analysis A. The Intent Requirement To prevail on a nondischargeability complaint under § 523(a)(2)(A), a creditor must demonstrate that the debtor intended to defraud the creditor, and to succeed under § 523(a)(6) the creditor must show that the debtor intended to injure the creditor or the creditor’s property. See Duley v. Thompson (In re Thompson), 528 B.R. 721, 740 (Bankr. S.D. Ohio 2015). The creditor must prove the element of intent by a preponderance of the evidence. See Grogan v. Garner, 498 U.S. 279, 286 (1991). If the creditor fails to do so, then the other elements required to establish nondischargeability under each subsection need not be addressed. See Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 283 (6th Cir. 1998). That is the case here. As explained below, Cabrera and Capitol South have failed to prove by a preponderance of the evidence that Wilson had the requisite intent—either to defraud or to injure—required to establish a basis for nondischargeability under either § 523(a)(2)(A) or § 523(a)(6). B. The Requirement of Intent Under § 523(a)(2)(A) Section 523(a)(2)(A) provides as follows: (a) A discharge under section 727 . . . does not discharge an individual debtor from any debt— (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by— (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition. 18 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 19 of 28 11 U.S.C. § 523(a)(2)(A). Because § 523(a)(2)(A) is “phrased in the disjunctive,” a creditor need only prove one of the “three distinct categories of debtor misconduct” to render a debt nondischargeable: false representation, false pretenses, or actual fraud. Schafer v. Rapp (In re Rapp), 375 B.R. 421, 433 (Bankr. S.D. Ohio 2007). A false representation involves an actual, express misrepresentation. See id. False pretenses, on the other hand, involve implied misrepresentations or conduct that attempts to create a false impression. See id. A debt arising from a false representation or from false pretenses is nondischargeable if the creditor establishes, among other things, that “the debtor intended to deceive the creditor.” Rembert, 141 F.3d at 280. Actual fraud more broadly consists of “any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another.” Mellon Bank, N.A. v. Vitanovich (In re Vitanovich), 259 B.R. 873, 877 (B.A.P. 6th Cir. 2001) (quoting McClellan v. Cantrell, 217 F.3d 890, 893 (7th Cir. 2000)). Although actual fraud does not necessarily involve a representation, “wrongful intent” must exist for there to be a finding of actual fraud. Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581, 1586 (2016). In Rembert, the Sixth Circuit held in the context of a credit card transaction that “the representation . . . is not that [the debtor] has an ability to repay the debt; it is that he has an intention to repay.” Rembert, 141 F.3d at 281 (quoting Anastas v. Am. Sav. Bank (In re Anastas), 94 F.3d 1280, 1285 (9th Cir. 1996)). Just so when a debtor enters into a contract—the representation made by the debtor is that she intends to perform under the contract. And “the appropriate time to measure the intent of a debtor not to perform a contract is at the moment of its formation.” Webb v. Isaacson (In re Isaacson), 478 B.R. 763, 775 (Bankr. E.D. Va. 2012). That is, the debtor’s “intent at the time the debt is incurred is critical in proving fraud.” Vitanovich, 259 B.R. at 877. 19 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 20 of 28 The standard for determining the debtor’s intent is subjective, and the issue therefore is “whether the debtor subjectively intended to repay the debt.” Rembert, 141 F.3d at 281. A debtor who intends to repay a debt using anticipated future income still has an intent to repay notwithstanding significant uncertainty surrounding the receipt of the income. For example, the Sixth Circuit held in Rembert that the debtor’s conduct “was entirely consistent with a subjective intent to repay” even though her basis for believing she could repay her debts was her anticipation that she “would win enough money” from gambling. Id. at 282. And the Sixth Circuit so held despite finding that the debtor’s expectations likely were unreasonable: “The fact that Rembert later admitted that it probably was not reasonable to believe that she would win enough money to repay . . . does not indicate a subjective intent not to repay her debts in this case.” Id.; see also Hall v. Jackson (In re Jackson), 348 B.R. 595, 599 (Bankr. M.D. Ga. 2006) (“A debtor’s honest belief that a debt would be repaid in the future, even if in hindsight found to have been very unrealistic, negates any fraudulent intent.”) (quoting 4 Collier on Bankruptcy ¶ 523.08[1][d] (15th ed. rev. 2006)). Debtors, of course, “have an incentive to make self-serving statements and will rarely admit an intent not to repay.” Rembert, 141 F.3d. at 282. Thus, a “debtor’s intention—or lack thereof— must be ascertained by the totality of the circumstances.” Id. Among other things, a court may consider events occurring after the debt was incurred. For although the intent to defraud must have existed at the time the debt was incurred, “the debtor’s subsequent conduct may help to shed light on the debtor’s state of mind at [that] time.” Risk v. Hunter (In re Hunter), 535 B.R. 203, 213 (Bankr. N.D. Ohio 2015). Of course, even if the debtor intended to repay the debt, grounds for nondischargeability will still exist if the debtor misled the creditor in some other way. See In re Haden, No. C 98-3011 20 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 21 of 28 FMS, 1998 WL 822997, at *3 (N.D. Cal. Nov. 17, 1998) (holding that the debtor obtained a loan through fraud despite intending to repay the loan because the debtor “misrepresented the degree of risk involved in lending the money”). Ultimately, for a debt to be held nondischargeable under § 523(a)(2)(A), the evidence taken collectively must “lead[] to the conclusion that it is more probable than not that the debtor had requisite fraudulent intent.” Rembert, 141 F.3d at 282 (quoting Chase Manhattan Bank v. Murphy (In re Murphy), 190 B.R. 327, 334 (Bankr. N.D. Ill. 1995)). C. The Requirement of Intent Under § 523(a)(6) Under § 523(a)(6), an individual debtor is not discharged from any debt “for willful and malicious injury by the debtor to another entity or the property of another entity.” 11 U.S.C. § 523(a)(6). For an injury to be “willful,” the debtor must have desired to cause the consequences of her conduct or believed that the consequences were substantially certain to result from it. See Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 464 (6th Cir. 1999) (citing Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998)). In other words, because the word “willful” modifies the word “injury,” “nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury.” Kawaauhau, 523 U.S. at 61. D. Cabrera Has Not Shown That Wilson Intended to Defraud or Injure Him. Having considered the totality of the circumstances, the Court finds by a preponderance of the evidence that Wilson intended at the time she signed the Cabrera Agreement to comply with her obligations under the agreement. Those obligations were threefold: (1) use the $40,000 she received under the Cabrera Agreement for the Yandel concert; (2) return the $40,000 after the concert; and (3) pay Cabrera and Alvarez “50% of all revenue after expenses,” which was estimated to be an additional $40,000. Ex. 20. The representation that Wilson made when she signed the Cabrera Agreement was that she would do all that, and the evidence establishes that she 21 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 22 of 28 intended to do so. Indeed, she used the funds contributed by Cabrera to pay a portion of Yandel’s appearance fee, and she failed to return his money only because she ultimately was unable to do so. She would have known that failing to honor her obligations to Cabrera would tarnish her reputation in the Hispanic community, thereby hindering her goals of becoming an entrepreneur who served that community. Given all this, it is unlikely that Wilson entered into the Cabrera Agreement intending not to keep her promises. Cabrera makes several arguments against this commonsense conclusion, none of them convincing. He first contends that Wilson’s description of his funding as an “investment” means that she did not intend to repay him. Cabrera Proposed Findings (Doc. 22 in Adv. Pro. No. 18- 2155) at 15–18. This argument is not well taken. The evidence shows that Wilson intended to return the funds she received from Cabrera regardless of the outcome of the Yandel concert. Indeed, despite the financial failure of the concert, she advised Cabrera that she would repay him using the sponsorship funds that she hoped to receive in the future. The only reason she did not repay him is that her sponsors declined to fund a future concert promoted by Wilson after she began receiving negative publicity as a result of the failed Yandel concert. Moreover, there is simply no evidence that Cabrera, who himself described his deal with Wilson as an investment, Tr. II at 10, was led to believe that he would double his money regardless of the amount of net profits Wilson derived from the Yandel concert. Under the terms of the Cabrera Agreement, which expressly states that it is an “investment agreement,” Wilson agreed to pay Cabrera and the others “50% of all revenue after expenses,” estimated to be $40,000. Ex. 20. And there is no evidence that Wilson represented to Cabrera either expressly or impliedly that she would pay that $40,000 using a source of funds other than the “revenue after expenses” from the Yandel concert. The fact that Wilson chose to pay other creditors and not Cabrera in no way 22 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 23 of 28 indicates that she did not intend to pay him half of the concert’s net revenue. After all, the amount equal to 50% of revenue after expenses could have been calculated only after Wilson paid all her other expenses associated with the concert. Finally, although it turned out that Wilson was not up to the task of bringing in the number of concertgoers needed to generate the net revenue she and Cabrera expected, there is no evidence that she failed to put forth her best efforts. To the contrary, having invested about $5,000 of her own money—and with her reputation on the line—she undertook every effort she knew to take in order to make the Yandel concert a success. Although her expectations for the Yandel concert proved to be unrealistic, they were no more unreasonable than those of the gambler in Rembert. Cabrera next argues that Wilson used a “classic scammer technique” to defraud him through false pretenses. Cabrera Proposed Findings at 16. He points to their frequent meetings, their mutual introductions to family members, Wilson’s use of a term of endearment for him, the prior borrowings she timely repaid, and her urgent request for money to fund the Yandel concert. Id. at 13–15. Whatever that was, none of it amounts to false pretenses, false representation, or actual fraud under the circumstances of this case. Wilson was confident that the Yandel concert would be successful enough to not only repay Cabrera but also to double his money, and she did not mislead Cabrera about the degree of risk involved or anything else related to the concert. Cabrera testified that Wilson told him and Alvarez that “she would need between 1,500 to 2,000 in order for us to come out with gains.” Tr. I at 153. That range is curiously close to the number Cabrera estimates actually attended the concert, and in light of Wilson’s belief that the Yandel concert would draw at least 5,000 concertgoers, it seems unlikely that she would have so advised Cabrera. And even if Cabrera’s recollection in this regard is accurate, his testimony would establish only that Wilson believed that he would have some gains if the concertgoers numbered 23 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 24 of 28 1,5000 to 2,000, not that she told him that he would double his money at that crowd size. Because Wilson did not mislead Cabrera about the risk involved, and given that Wilson always intended to fulfill her obligations to Cabrera, her efforts to persuade him to fund the concert did not constitute false pretenses or any other form of fraud. Trying a different tack, Cabrera contends that Wilson exhibited fraudulent intent when she attempted to repay him using a $25,000 check drawn on an account that she knew did not yet contain sufficient funds to cover it. Cabrera Proposed Findings at 11–13. It is well established, however, that the issuance of a check in and of itself is not a representation that the account on which it is drawn contains sufficient funds for the check to be honored. See Williams v. United States, 458 U.S. 279, 284 (1982); Stewart v. E. Tenn. Title Ins. Agency, Inc. (In re Union Sec. Mortg. Co.), 25 F.3d 338, 341 (6th Cir. 1994) (“Since a check does not make any representation, it cannot make any misrepresentation.”). Furthermore, because the issuance of a check does not involve a representation, it also does not constitute a false pretense. See Goldberg Sec., Inc. v. Scarlata (In re Scarlata), 979 F.2d 521, 524–25 (7th Cir. 1992) (holding that the issuance of a bad check does not establish that the issuer engaged in false pretenses). To establish a false representation or pretense in this context, Cabrera would need to show that Wilson represented to him that funds were available in her account to satisfy the check. See 119th & Halsted Currency Exch. v. Blake-Ware (In re Blake-Ware), 155 B.R. 476, 477 (Bankr. N.D. Ill. 1993) (holding that the debtor had made a false representation for purposes of § 523(a)(2)(A) by answering in the affirmative when the creditor asked her if funds were available in her account). But there is no evidence that Wilson represented at the time she issued the check that the account on which it was drawn contained sufficient funds. Also, Wilson, who had received tens of thousands of dollars from sponsors in exchange for advertising in connection with the 24 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 25 of 28 Yandel concert, gave Cabrera the $25,000 check anticipating that she would soon receive funds for her next concert from companies that had previously provided her with sponsorship dollars, and she planned to deposit those funds into her account so that the check would be honored. According to Cabrera, Wilson’s plans to pay him using funds she anticipated receiving from sponsors, as well as her use of Rodriguez’s $25,000 to pay other creditors, means that Wilson was engaging in a Ponzi scheme. Cabrera Proposed Findings at 13, 16. This argument misses the mark. A Ponzi scheme is a “fraudulent investment arrangement under which an entity makes payments to investors from monies received from new investors rather than from profits generated by legitimate business operations.” Rieser v. Hayslip (In re Canyon Sys. Corp.), 343 B.R. 615, 629 (Bankr. S.D. Ohio 2006). But Wilson’s corporate sponsors were not investors; they provided her funds in exchange for advertising, not to be repaid. And although Wilson used Rodriguez’s money to pay back earlier creditors (including Rodriguez himself), there is no evidence that she used the funds received from Cabrera to pay creditors from an earlier event or for anything else other than expenses related to the Yandel concert. Cabrera also relies on what he describes as Wilson’s “record of costly spending,” including traveling “luxuriously and internationally,” to argue that Wilson did not intend to repay him. Cabrera Proposed Findings at 9. Here, Cabrera misconstrues the record. Besides paying for meals and other daily living expenses, all Wilson did was take several trips within the United States and a single day trip to the Bahamas. Most of the expenses were paid for by her mother or her fashion sponsors, and the expenses that Wilson herself paid were minimal. In short, Wilson’s post-concert personal expenditures may well have been ill advised. But they were not so extravagant as to suggest that Wilson lacked the intent to repay her debts at the time she incurred them. In light of all the foregoing, the Court finds by a preponderance of the evidence that the debt Wilson incurred 25 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 26 of 28 when she signed the Cabrera Agreement did not arise from false pretenses, false representation, or actual fraud. Cabrera refers to § 523(a)(6) in passing, and in cursory fashion he suggests that Wilson would have had a “substantial certainty” that her actions would injure him. Cabrera Proposed Findings at 2, 6, Under § 523(a)(6), an individual debtor is not discharged from any debt “for willful and malicious injury by the debtor to another entity or the property of another entity.” 11 U.S.C. § 523(a)(6). In order to conclude that Wilson willfully injured Cabrera, the Court would need to find that she intended to injure him or that she was substantially certain that her actions would cause him injury. But such a finding is not warranted here. To the contrary, the evidence shows that Wilson intended to comply with the Cabrera Agreement. Her prior experience producing concerts, her research suggesting a Yandel concert would draw 5,000 concertgoers in Columbus, and her success in obtaining thousands of dollars of sponsorship funds, together gave her good reason to believe that she could fulfill her obligations under the Cabrera Agreement. The Court therefore cannot find that Wilson intended to injure Cabrera or that she was substantially certain that her conduct would do so. E. Capitol South Also Has Failed to Establish Wilson’s Fraudulent Intent. Having considered the totality of the circumstances, the Court finds by a preponderance of the evidence that Wilson intended at the time she signed the Capitol South Agreement to comply with her obligations under the agreement. Indeed, Capitol South does not even argue that Wilson lacked the intent to fulfill her obligations at the time she entered into the agreement. Instead, Capitol South focuses on the moment four months later when Wilson issued it a check that ultimately was returned for insufficient funds, and it also points to her issuance of a check for insurance coverage that also was allegedly returned for insufficient funds. Capitol South Proposed Findings (Doc. 26 in Adv. Pro. No. 19-2013) at 11–12. As already discussed in connection with 26 – Case 2:19-ap-02013 Doc 28 Filed 03/27/20 Entered 03/27/20 11:19:08 Desc Main Document Page 27 of 28 the arguments made by Cabrera, the issuance of a check is not a representation that the account on which it is drawn contains sufficient funds for the check to be honored, and the issuance of a check alone therefore does not constitute false pretenses or a false representation. Again, to have any chance of prevailing in this context, Capitol South needed to show that Wilson represented to it that funds were available in her account sufficient for the check to be honored at the moment she issued it. There is, however, no evidence that Wilson expressly or impliedly made any such representation to Capitol South, nor is there evidence that Wilson misled Capitol South in any other way. Further, Wilson issued the check to Capitol South anticipating that the proceeds of ticket sales at the gate would allow her to deposit the funds needed to cover the check after the Yandel concert. With respect to the check Wilson issued to the insurance agency, there is no testimonial or documentary evidence establishing that it in fact was returned for insufficient funds. For all these reasons, neither the issuance of the check to Capitol South nor the issuance of the check to the insurance agency provides a basis for declaring Wilson’s debt to Capitol South nondischargeable. Capitol South tries to make out a case of actual fraud based on its allegations that Wilson (1) deposited Eventbrite proceeds into her brother’s account, (2) failed to deposit a purported $20,000 of Gate Sales into her own accounts, (3) used Rodriguez’s $25,000 to pay back a friend and Rodriguez himself but not Capitol South, and (4) filed an allegedly fraudulent 2017 federal tax return. Capitol South Proposed Findings at 12–13. Most of this is inaccurate, and none of it demonstrates that Wilson engaged in actual fraud as to Capitol South. As the Court found above, Wilson permitted funds to be deposited into an account maintained by her brother so that he could take care of the logistics of paying certain expenses related to the Yandel concert. As to the $20,000 of alleged Gate Sales, there is no evidence that the Yandel concert produced anywhere 27 –28 – near that amount of gross—let alone net—proceeds. Wilson’s decision to use Rodriguez’s $25,000 to repay Rodriguez and an unnamed friend the amounts she owed them from the Yandel concert do not amount to fraud as to Capitol South. Finally, because the plaintiffs failed to establish that Wilson understated her income on her 2017 federal tax return, the return provides no reason to question Wilson’s credibility. VI. Conclusion For the foregoing reasons, the Court concludes that Wilson is entitled to a judgment in her favor providing that her debts to Cabrera and Capitol South are not excepted from discharge under either § 523(a)(2)(a) or § 523(a)(6) of the Bankruptcy Code. A judgment in accordance with this opinion will be entered separately. IT IS SO ORDERED. Copies to: Joshua J. Brown, Attorney for Plaintiff Jose Cabrera (electronically) James H. Gordon, Attorney for Plaintiff Capitol South Urban Redevelopment Corporation (electronically) Steven D. Sundberg, Attorney for Defendant Nashely Wilson (electronically) Case 2:19-ap-02013 Doc 28 Filed 03/27/ 03/27/20 11:19:08 Desc Main Document f 28 The post In Re: Wilson Complaint to Determine Dischargeability of Debts appeared first on Chris Wesner Law Office.

There are so few travelers left at Kennedy International Airport, one of the world’s busiest airfields, that taxis wait six hours or more for a single passenger.Taxi companies can no longer find enough drivers for their fleets because there is so little business.And some cabdrivers are so fearful of being exposed to the coronavirus they are staying home with no way to pay mounting bills.All this at a time when many of New York City’s taxi owners are already in financial ruin after taking out reckless loans to buy medallions — city-issued permits required to own a yellow cab — at artificially inflated prices, with the reassurance of the city’s taxi commission of their high value.Their industry has increasingly lost riders to the boom in Uber, Lyft and ride-app services, and been shaken by a spate of suicides by desperate taxi owners and for-hire drivers.Now taxi owners and drivers who were barely holding on said their livelihood had evaporated as the city all but shut down to try to slow the spread of the coronavirus.“When you have to wait six or seven hours to get one passenger, it’s really bad,” said Mario Darius, 66, a taxi owner who was camped out at Kennedy Airport after picking up just three fares in three days.Though citywide taxi ridership numbers for March are not yet available, some taxi companies, cab owners and drivers said their rides had plunged by two-thirds or more.The city’s largest taxi group, the Metropolitan Taxicab Board of Trade, which represents the owners of 5,500 yellow cabs, said rides had dropped nearly 91 percent to a total of 20,596 trips over this past Friday, Saturday and Sunday. That is compared with 217,540 total trips for the same three days three weeks ago.

I’m required to give you three legal disclosures Now that most consultations are by phone and zoom, I’m posting these on my webpage.  The first disclosure This first disclosure tell you that you have four choices under the bankruptcy law. Chapter 12 is only for farmers, and fisherman. I’ve never done a farmer Chapter 11 […] The post Required fine print notices by Robert Weed appeared first on Robert Weed - .