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Issued: January 20, 2011 by Judge Doyle

Case #: 09 B 46723, 10 A 01292

The Issue: Whether an individual creditor has standing under § 523(a)(4) to bring a direct action against directors of an insolvent corporation for breach of fiduciary duty.

The Story: Debtor owned a plumbing company. Plaintiff claimed that Debtor breached his fiduciary duty to creditors after the plumbing company became insolvent due to the diversion of company funds to pay for the Debtor’s personal debts. Creditor claimed that the debt was non-dischargeable in bankruptcy under Rule 523(a)(4). The court held that the individual creditor lacked standing.

Also a good walk thru on Illinois law about “Special Circumstances Fiduciary Duty.”

Click here to view and download the opinion in .pdf format.

In re Richard Sharif, 09-05868
Issued on March 14, 2011
By Hon. Jacqueline P. Cox

The Story: The Court entered orders in an Adversary case providing, among other things, that the Soad Wattar Revocable Trust of 1992 was the alter ego of Debtor Richard Shariff (July 06, 2010 Order), and that Wells Fargo Financial Advisors must turn over Trust assets to the Bankruptcy Trustee pursuant to FRCP 60 (August 5, 2010). Movant Ragda Sharifeh sought relief from those orders and leave to intervene in the proceedings. On March 10, 2011 the Court ruled.

The Issues: Movant Sharifeh sought to vacate the portion of the July 06 Order that deemed the Trust to be the Debtor’s alter ego; and overturn the order relating to Wells Fargo. In the alternative, the movant invoked FRBP 8005 and asked that enforcement of the August 5 Order be stayed pending final disposition of a related adversary proceeding.

The Upshot: On March 10, 2011 the Court denied Sharifeh’s motion and ruled that

(1) The movant had failed to establish the the prerequisites for the imposition of a stay under FRBP 8005;
(2) FRCP 60 was not the proper vehicle for asserting the movant’s legal error argument in any case; and
(3) The Court no longer had jurisdiction to act on the orders; which could be appealed to the District Court.

Click here to view and download the opinion in .pdf format

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In re Jahelka ,(Bkrtcy.N.D.Ill.)
The Upshot: An adversary complaint seeking to deny the discharge of an individual Ch. 11 debtor due to his inability to produce financial records or explain the loss of his assets was determined to be premature.

The Opinion: The Court ruled that in a liquidating Ch. 11 such as the one under consideration, 11 U.S.C.A. 1141(d)(3) made exceptions to discharge inaplicable until the debtor proposed a plan by which to dispose of property of the estate.