Daniels v. Agin ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-2376
WILLIAM M. DANIELS,
Appellant,
v.
WARREN E. AGIN, Chapter 7 Trustee, and WILLIAM K. HARRINGTON,
United States Trustee for Region 1,
Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Lynch, Chief Judge,
Howard and Kayatta, Circuit Judges.
Timothy J. Burke, with whom Burke & Associates was on
brief, for appellant.
John G. Loughnane, with whom Charlotte L. Bednar and
Eckert Seamans Cherin & Mellott, LLC were on brief, for appellee
Warren Agin.
Cameron M. Gulden, with whom Ramona D. Elliott, Deputy
Director/General Counsel, Executive Office for U.S. Trustees,
Department of Justice, P. Matthew Sutko, Associate General Counsel,
Executive Office for U.S. Trustees, Department of Justice, John P.
Fitzgerald, Assistant United States Trustee, Wendy L. Cox, and
Jennifer L. Hertz, were on brief, for appellee William Harrington.
November 25, 2013
KAYATTA, Circuit Judge. Ruling on motions for summary
judgment in a bankruptcy proceeding, the bankruptcy court made two
determinations that are the primary subject of this appeal. First,
the court ruled that the debtor failed to maintain his profit-
sharing plan in substantial compliance with the applicable tax
laws. This ruling meant that assets in the profit-sharing plan and
two IRAs funded with plan assets were part of the bankruptcy
estate, available to satisfy the claims of creditors. Second, the
bankruptcy court ruled that the debtor intentionally failed to
disclose, and in fact deliberately concealed, the existence of the
two IRAs into which the debtor had transferred assets from his
profit-sharing plan. This ruling provided alternative grounds for
treating the IRAs as nonexempt. It also provided the basis for the
bankruptcy court to revoke the debtor's discharge. Daniels, the
debtor, challenges both rulings on appeal. For the reasons set out
below, we affirm.
I. Background
Both Daniels and the Chapter 7 Bankruptcy Trustee,
Appellee Agin, moved for summary judgment on the question of
whether Daniels's profit-sharing plan was exempt from inclusion in
the bankruptcy estate. In accord with Rule 56.1 of the Local Rules
of the District of Massachusetts,1 each filed a statement of
1
Mass. Local Rule 56.1 is made applicable to bankruptcy
proceedings by Mass. Local Bankruptcy Rule 7056-1.
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material facts that they claimed were undisputed. Under the rule,
each was then required to file a statement in response to the
other's statement of material facts, identifying which facts were
disputed, with citations to record evidence establishing the
existence of a dispute. Agin did not file such a responsive
statement, instead filing an opposition brief and moving to strike
Daniels's motion, "reserv[ing] the right to object to the
introduction of" documents offered in support of Daniels's motion.
Daniels did file a response, but it rarely referred to record
evidence.
The bankruptcy court made sense of the procedural
defalcations by comparing Agin's statement of material facts with
Daniels's two statements and deeming all of Agin's averments to be
admitted except where these documents conflicted. Without
suggesting that the bankruptcy court was required to grant such an
indulgence, we will construe the record in the same manner and
apply the same approach to any part of Daniels's statement of
material facts that Agin did not adequately dispute.
A. Daniels's Retirement Accounts
William Daniels was engaged in a decreasingly profitable
business as a broker of fishing boats. He was also the trustee,
administrator, employer and sole participant in the William Daniels
Profit-Sharing Plan ("Plan"). The Plan was a prototype plan
obtained through MassMutual Financial Group. MassMutual, however,
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did not manage the Plan or approve its transactions. From time to
time, MassMututal received letters from the Internal Revenue
Service ("IRS") opining that the form of the prototype plan
qualified it for favorable tax treatment. Nothing in those
letters, however, purported to bless the manner in which the Plan
was operated.
Before 1988, Daniels's wife had been the beneficiary of
a trust, the Walker Realty Trust ("Realty Trust"). Daniels
maintains that the Realty Trust is a Massachusetts nominee trust,
and so is only a titleholding device for its beneficiaries.
Daniels's wife assigned her beneficial interest to the Plan in
1988. The Plan paid fair value for the real estate held by the
Realty Trust.
Since 1988, the Realty Trust has engaged in a number of
real estate transactions, including transactions with Daniels's son
and with the daughter of Tom Florence, a man who had provided
services for the Realty Trust. All transactions with Mr. Florence
and his family were for fair value.
Daniels's uncle, Maurice Lopes, lived with Daniels and
the two held several joint accounts. Jensen v. Daniels, 57 Mass.
App. Ct. 811, 813 (Mass. App. Ct. 2003). After Lopes died in 1996,
Daniels withdrew money from those accounts and placed some into the
Plan. Id. at 813-14. Daniels reported the money from the joint
accounts that he put into the Plan as a tax deduction, and avers
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that the transaction was never challenged "by a tax authority."
Daniels's aunt, as the executrix of Lopes's estate, later sued
Daniels and his wife, alleging that they were not entitled to those
funds. The probate court entered judgment against Daniels and his
wife. The Massachusetts Appeals Court affirmed the judgment in the
amount of $238,538.16, plus interest, but only as to Daniels. Id.
at 819-20. That judgment was not satisfied before Daniels filed
for bankruptcy. Including interest, it totaled more than
$440,000.00 by 2007.
In or around February 2007, Daniels transferred $469,894
from the Plan into two new MassMutual Individual Retirement
Accounts (IRAs) held in his own name.
B. Daniels's Bankruptcy
Approximately six months later, Daniels filed for Chapter
13 bankruptcy. That bankruptcy petition was later converted to a
Chapter 11 bankruptcy, and then into a Chapter 7 bankruptcy.
Bankrupt debtors must file several bankruptcy schedules,
including Schedule B (in which a debtor identifies his personal
property) and Schedule C (in which he lists the property that he
claims is exempt from the bankruptcy estate). Schedule B requires
debtors to disclose any "[i]nterests in IRA, ERISA, Keogh, or other
pension or profit sharing plans," and directs debtors to "[g]ive
[p]articulars." On both his Schedules B and C, Daniels wrote: "As
of 8/06/07: Debtor's 401-qualified pension: 'William Daniels
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Profit-Sharing Plan' (tax ID # [XX-XXX]2459/ formed 8/15/88;
approved by IRS 08/07/01), held by Walker Realty Trust, Wm M.
Daniels, Trustee: inventory and valuations separately
documented[.]"2 Daniels failed to mention the IRAs on his
schedules. Rather, he showed all of the funds--both those
remaining in the Plan and moved out of the Plan--as still being
owned by the Plan.
During his bankruptcy proceedings, Daniels testified at
three creditors' meetings. At the September 25, 2007, meeting, he
affirmed that he had read the schedules before signing them. It
appears that he again avoided any mention of the two IRAs, instead
describing the Plan itself as "an IRA, qualified ERISA."
Prior to another creditors' meeting in April 2009,
Daniels and his attorney submitted revised figures for the profit-
sharing plan to Trustee Agin, reporting a reduced Plan value of
$573,117.38. That total amount, as best one can infer from the
record, still included the funds in the IRAs. At the creditors'
meeting, Daniels again confirmed that he had signed the schedules,
and that they were accurate when filed. When asked where the
proceeds had gone from the sale of several Realty Trust properties,
Daniels replied that they were "invested with Mass Mutual in
annuities." Asked whether the Realty Trust or the Plan owned the
2
Daniels signed the schedules, affirming under penalty of
perjury that they were true and correct to the best of his
knowledge.
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annuities, he falsely claimed that the Plan owned them. When asked
about any life insurance, he responded "I have the annuities in my
retirement program[,]" which, he confirmed, were owned by the Plan.
Daniels did not turn over any documents relating to the
two IRAs at this meeting.3 After that meeting, Daniels provided
some documents to Trustee Agin, including account statements
indicating that the Plan held the beneficial interest in the Realty
Trust and a cash account with $71,169.62. Additional
correspondence and documents sent from Daniels's bankruptcy
counsel, Atty. Cohen, to Agin in April and May, 2009, contained no
discussion of the IRAs.
Daniels received a Chapter 7 discharge on July 1, 2009.
C. The IRS Audit and IRA Rollover
In 2008-2009, the IRS audited the Plan's 2006 tax return.
During the audit, the IRS requested a variety of information,
including: documentation relating to the Plan's form (in order to
verify its "qualification"), information about the Plan's
relationship to the Realty Trust, and information relating to a
3
Some of Daniels's evidence suggests that he claimed to have
turned over information relating to the two IRAs at the April 2009
creditors' meeting. It does not appear, however, that Daniels
cited to such evidence in opposing summary judgment. It is not the
court's job to "ferret out and articulate the record evidence
material to the appellant's claims." Barry v. Moran, 661 F.3d 696,
699 n.3 (1st Cir. 2011) (quoting Taylor v. Am. Chemistry Council,
576 F.3d 16, 32 n.16 (1st Cir. 2009)) (internal quotation marks
omitted); see also Fed R. Civ. P. 56(c)(3) (at summary judgment,
a court need consider only cited materials, but may consider
others).
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loan from the Plan to Daniels's son. At the end of the audit, the
IRS sent Daniels a letter that stated simply: "We have completed
our examination of your return(s) for [2006] and have accepted the
return(s) as filed. However, during the examination we noted
certain items indicated on the enclosure, which require your
attention." The enclosure noted that a loan to Daniels's son, a
"disqualified person," had occurred. It then noted: "[the l]oan
was corrected by the full amount being repaid. The [26 U.S.C. §]
4975(a) tax calculated was deminimus and Form 5330 was not
pursued."4 The letter explained that "corrected" meant
undoing the [prohibited] transaction to the extent
possible, but in any case placing the plan in a financial
position not worse than that in which it would be if the
disqualified person were acting under the highest
fiduciary standards. The loan has been [re]paid in full.
No further action required.
Also in 2009, Daniels rolled one of the two MassMutual
IRAs over into a new, third IRA held with Prudential.
D. The Turnover and Revocation Actions
In August and September, 2009, Trustee Agin filed an
objection to Daniels's claim of exemption for the Plan assets, and
an adversary complaint seeking to have those assets turned over to
the Trustee. Agin argued, among other things, that the Plan was
not exempt from the bankruptcy estate because Daniels had engaged
4
Form 5330 is the IRS's form for the "Return of Excise Taxes
Related to Employee Benefit Plans." See IRS Return of Excise Taxes
Related to Employee Benefit Plans, available at
http://www.irs.gov/pub/irs-pdf/f5330.pdf.
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the Plan in transactions prohibited by the Internal Revenue Code,
including transactions with Daniels's family members.
On March 15, 2010, Daniels sought leave from the
bankruptcy court to wind-up the Plan by, in large part, converting
Plan assets into IRAs. Part of that motion stated: "Plan
regulations controlling actual retirement begin to mandate a series
of timely and proportional actions . . . for example . . . (b) re-
allocation (altering the proportion of overall holdings from 100%
'profit-sharing' funds to partial profit-sharing and partial IRA
. . . .[)]" The motion did not disclose that the bulk of the
former Plan assets had three years earlier been moved into the
undisclosed IRAs. To the contrary, it clearly implied that no such
transfer had occurred, hence the motion. That motion was denied.
There appears to be no dispute that, also around March
15, 2010, Atty. Cohen produced to Agin's counsel documents that
included some account statements and documents for the IRAs.
Shortly thereafter, Agin's counsel sent Atty. Cohen an email
memorializing a recent conversation in which Cohen reported that
Daniels was working on providing information explaining the
reduction in the value of the Plan as reflected in the Plan's 2008
tax return.
In April 2010, Atty. Cohen sent Agin's counsel unsigned
interrogatory responses. One response, to a question about what
assets the Plan held, included a reference to one of the MassMutual
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IRAs. (That response suggested that the Plan's value was just over
$250,000, plus the value of a vacant lot.) Shortly thereafter,
Atty. Cohen wrote to strike that reference, noting (correctly) that
"[t]his is an IRA account and not a part of the Debtor's Profit-
Sharing Plan."
In May 2010, Daniels's counsel again provided a
handwritten account of the Plan's 2010 value to the trustee, now
listing the total value as $103,814.08. Around the same time,
Daniels provided Agin with a sheet entitled "2009 Work Sheet for
William Daniels Retirement Plans for JBPW Corporation 5500 Form
Filing."5 On the one-page worksheet, Daniels listed by name,
account number, and dollar amount his annuities, including the two
Individual Retirement Annuities that are the subject of this
dispute (one of which had, by then, been rolled into a Prudential
annuity). Beneath the annuities, the worksheet lists a second
category of assets, labeled "William M. Daniels Profit Sharing
Plan." That list only included a vacant lot and a brokerage
account, with a total combined value of $107,267.33. In June,
2010, Daniels failed to appear for a Rule 2004 examination.
In response, Trustee Agin moved to have the IRAs turned
over to the bankruptcy estate. That motion was denied but Agin was
5
JBPW Corporation appears to be an accounting firm that
prepared tax returns for the Plan. Form 5500 is the annual return
for employee benefit plans. See Annual Return/Report of Employee
B e n e f i t P l a n , a v a i l a b l e a t
http://www.irs.gov/Retirement-Plans/Form-5500-Corner.
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allowed to amend the original turnover complaint (directed at the
Plan assets) to add the IRAs, which he did in July 2010. Also in
July, 2010, the U.S. Trustee6 filed an adversary case (No. 10-
01180) asking that Daniels's bankruptcy discharge be revoked.
On March 8, 2011, Agin moved for summary judgment in the
turnover action. On April 4, 2011, through his tax attorney (who
became his successor counsel for the adversary action), Daniels
opposed Agin's motion for summary judgment and cross-moved for
judgment. Agin moved to strike the cross-motion, and filed a brief
opposing Daniels's arguments.
After oral argument, the bankruptcy court granted Agin's
motion on June 16, 2011. The court found that the Plan did not
qualify for exemption from the bankruptcy estate, and thus neither
did the IRAs, whose funds derived from the Plan. Alternatively,
the court held, the IRAs should be part of the estate because
Daniels had intentionally concealed them throughout his bankruptcy
proceedings.
Daniels asked the bankruptcy court to "alter, amend and
reconsider" its ruling. He emphasized that because certain IRS
manuals proved that the Plan audit had been broad, and because the
only issue raised by the IRS (the prohibited loan to Daniels's son)
had been corrected, the IRS's audit result should be read as a
6
At the time, the U.S. Trustee was not Appellee Harrington,
but an acting Trustee. We will refer throughout this opinion
simply to the "U.S. Trustee."
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finding that the Plan was qualified and tax-exempt.7 Regarding his
intent to conceal assets, Daniels argued that he had informed his
attorney about the IRAs, disclosed the full amount of the funds,
and "provided evidence of the IRAs to the Trustee at his Section
341 meeting and in documentary form." (Which creditors' meeting,
and what he claimed to provide, was unclear.) In an accompanying
affidavit, Daniels swore that he did not know why the phrase "100%
profit-sharing" appeared in his March, 2010, motion seeking leave
to wind up the Plan, but that he intended no misrepresentation and
had not concealed anything. Daniels's motion to alter or amend the
judgment was denied after a hearing on August 12, 2011. Daniels
appealed to the district court.
In November, 2011, the U.S. Trustee moved for summary
judgment in the revocation action based on the collateral estoppel
effect of the bankruptcy court's ruling in the turnover action
regarding Daniels's intent to conceal the IRAs. Daniels, through
his successor counsel, opposed that motion on December 12, 2011.
On December 29, 2011, Daniels filed a Rule 60 Motion for
Relief from Judgment in the turnover action claiming excusable
7
Daniels also argued that the bankruptcy court had
incorrectly stated that Daniels had enriched his family and friends
through his transactions, pointing to his assertion that all
transactions were for fair value. Daniels does not press this
point on appeal.
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neglect and newly discovered evidence.8 He claimed to be
"blameless" for the errors in his disclosures and filings, which he
attributed to Atty. Cohen's medical state. Among other things,
Daniels proffered:
• excerpts from his December, 2010 deposition, in
which he discussed using Plan funds to purchase
annuities;
• part of a fax he sent to Atty. Cohen on August 6,
2007, suggesting corrections to his Schedule B
(only some of which, arguably, are reflected in the
schedules submitted to the bankruptcy court); and
• a letter he sent to Atty. Cohen, dated March 15,
2010, requesting changes to the motion filed on
that date (which referred to "100% profit-sharing,"
as discussed above). The requested changes
clarified that two IRAs had already been purchased.
They were not reflected in the motion as filed with
the bankruptcy court.
He argued that this, along with previous evidence, proved that he
had not effected any fraud.
The bankruptcy court denied Daniels's Rule 60 motion.
The court rejected the attempt to blame the summary judgment
finding of bad faith on Atty. Cohen because Daniels had not
explained why his successor counsel had not raised the issue of
Atty. Cohen's health in the summary judgment briefing and because
parties customarily bear the burden of their attorneys' mistakes.
The bankruptcy court likewise rejected the appeal to "new"
evidence, observing that the evidence had been available to counsel
and/or Daniels all along. Finally, the court noted, even if the
8
Fed. R. Civ. P. 60 is made applicable to bankruptcy
proceedings under Fed. R. Bankr. P. 9024.
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evidence was newly discovered, it arguably showed that Daniels had
affirmed information that he knew to be inaccurate.
Daniels again sought reconsideration, stressing Atty.
Cohen's medical condition and offering more evidence to suggest
that Cohen was at fault for any appearance of misrepresentation.
That evidence included (again) the March 15, 2010, letter to Atty.
Cohen, along with an email from Cohen to Daniels, sent three days
after Trustee Agin filed his motion for summary judgment. Cohen
suggested in that email that, due to his own ill health, Daniels's
tax attorney should take over the case.
The bankruptcy court denied the motion for
reconsideration, as well as two renewals of that motion, one
purporting to explain the division of labor between successor
counsel and Cohen. Daniels again appealed to the district court.
The bankruptcy court held a hearing on the U.S. Trustee's
motion for summary judgment on January 13, 2012. The court granted
the motion, holding that its previous finding of intentional
concealment entitled the U.S. Trustee to judgment in the revocation
action. Daniels again appealed to the district court.
All three appeals were consolidated. On September 30,
2012, the district court affirmed all three rulings. Daniels's
request for rehearing was denied. Daniels now appeals.
II. Jurisdiction and Standard of Review
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This appeal challenges decisions of the bankruptcy court
entering judgment as a matter of law under Federal Rule of
Bankruptcy Procedure 7056. This Court has jurisdiction over this
matter under 28 U.S.C. § 158(d)(1), which grants us jurisdiction to
hear appeals of final decisions entered by district courts hearing
bankruptcy appeals under 28 U.S.C. § 158(a).
As we recently explained in In re Moultonborough Hotel
Grp., LLC, 726 F.3d 1 (1st Cir. 2013), the "legal standards
traditionally applicable to motions for summary judgment . . .
apply without change in bankruptcy proceedings." Id. at 4; see
generally In re Varrasso, 37 F.3d 760, 762-63 (1st Cir. 1994).
Accordingly, "our inquiry is whether any 'genuine issue of material
fact exists' and whether 'the moving party is entitled to judgment
as a matter of law.'" In re Moultonborough, 726 F.3d at 4 (quoting
Soto–Rios v. Banco Popular de P.R., 662 F.3d 112, 115 (1st Cir.
2011)). A dispute is genuine if a reasonable factfinder "could
resolve the point in favor of the non-moving party." Johnson v.
Univ. of P.R., 714 F.3d 48, 52 (1st Cir. 2013) (internal quotation
marks omitted). A fact is material if it could affect the outcome
of the suit under governing law. Sec. & Exch. Comm'n v. Ficken,
546 F.3d 45, 51 (1st Cir. 2008). In conducting our inquiry, "'we
cede no special deference to the determinations made by the
district court' and instead 'assess the bankruptcy court's decision
directly.'" In re Moultonborough, 726 F.3d at 4 (quoting City
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Sanitation, LLC v. Allied Waste Servs. of Mass., LLC (In re Am.
Cartage, Inc.), 656 F.3d 82, 87 (1st Cir. 2011)). And because the
bankruptcy court entered judgment as a matter of law, that
assessment on appeal is de novo. In re Spookyworld, Inc., 346 F.3d
1, 6 (1st Cir. 2003).
III. Analysis
We explain first why the bankruptcy court correctly ruled
on summary judgment that the Plan assets (including the funds
transferred to the IRAs) were not exempt from inclusion in the
bankruptcy estate, and therefore are available to creditors. We
then explain why we agree that Daniels’s conduct throughout his
bankruptcy proceedings indisputably demonstrated at least a
reckless indifference to the truth of material information that he
provided to the court and to the Trustee.
A. The Plan Assets Are Not Exempt from the Bankruptcy Estate.
Section 522(b)(3)(C) of the Bankruptcy Code lets debtors
(like Daniels) who rely on state-law bankruptcy exemptions exempt
retirement funds from their bankruptcy estate if the money is held
in “a fund or account that is exempt from taxation under section
401 . . . of the Internal Revenue Code of 1986.” 11 U.S.C.
§ 522(b)(3)(C).9 (Section 401 deals with trusts that are a part of
9
Daniels's original Schedule C listed the Plan as exempt
under 29 U.S.C. § 1056(d). The parties now appear to agree that
§ 522(b)(3)(C) determines whether the Plan is exempt; to the extent
that Trustee Agin intended to argue that Daniels never properly
exempted the Plan, he has waived that claim by addressing it
perfunctorily in a footnote. See Soto-Fonalledas v. Ritz-Carlton
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profit-sharing plans. See 26 U.S.C. § 401(a).) The bankruptcy
court found that Daniels's Plan was not exempt, because the Plan's
operation repeatedly violated applicable tax laws. The court
focused in particular on sections 401 and 4975 of the Internal
Revenue Code (hereinafter, the "Tax Code"). 26 U.S.C. §§ 401,
4975.
Section 4975 limits the sorts of transactions that
retirement plans may engage in. It does so by imposing additional
taxes, with certain exceptions, on "prohibited transactions" such
as loans or property sales between a retirement plan and, for
example, a plan fiduciary, the employer, a person providing
services to the plan, or family members of other disqualified
persons. See id. at § 4975 (a), (c), (d), (e). Any transaction
whereby a plan fiduciary "deals with" plan assets "in his own
interests or for his own account," or receives consideration
connected to a transaction involving plan assets, is also
prohibited. Id. at § 4975(c)(1)(E), (F).
The bankruptcy court found that the Plan had engaged in
at least eight substantial transactions prohibited by section 4975.
In re Daniels, 452 B.R. 335, 349-50 (Bankr. D. Mass. 2011). The
bankruptcy court also found that Daniels violated section 401(d) of
the Tax Code by putting money from the Lopes account into the Plan
and by allowing the Plan to accept the assignment of Daniels's
San Juan Hotel Spa & Casino, 640 F.3d 471, 475 n.2 (1st Cir. 2011).
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wife's interest in the Realty Trust.10 Id. at 350. In light of all
this, the bankruptcy court concluded that Daniels's management
practice was to engage the Plan repeatedly in substantial
transactions prohibited by the Tax Code.
On appeal, Daniels does not directly critique these
findings per se. Instead, he argues that when the IRS closed the
Plan's 2006 audit without disqualifying the Plan or imposing
additional taxes, it created a presumption that the Plan assets are
exempt from the bankruptcy estate. The statutory basis for
Daniels's argument is 11 U.S.C. § 522(b)(4), which provides that
for the purposes of section 522(b)(3)(C):
(A) If the retirement funds are in a retirement fund that
has received a favorable determination under section 7805
of the [Tax Code], and that determination is in effect as
of the date of the filing of the petition . . ., those
funds shall be presumed to be exempt from the estate.
(B) If the retirement funds are in a retirement fund that
has not received a favorable determination under such
section 7805, those funds are exempt from the estate if
the debtor demonstrates that—
(i) no prior determination to the contrary has been
made by a court or the Internal Revenue Service;
and
(ii) (I) the retirement fund is in substantial
compliance with the applicable requirements of the
[Tax Code]; or (II) the retirement fund fails to be
in substantial compliance with the applicable
requirements of the [Tax Code] and the debtor is
10
Tax Code section 401(d) provides that, to be qualified for
favorable tax treatment, profit-sharing plans' trusts must restrict
plan contributions made on behalf of any "owner-employee[s]" to
those made "only with respect to the earned income of such owner-
employee which is derived from the trade or business with respect
to which such plan is established." 26 U.S.C. § 401(d).
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not materially responsible for that failure.
11 U.S.C. § 522(b)(4).11
Section 7805 of the Tax Code, to which section 522(b)
refers, generally authorizes the Secretary of the Treasury to enact
regulations. While the Secretary has established procedures for
obtaining determinations that the form of the plan is compliant, 26
C.F.R. § 601.201,12 Daniels points us to no regulation providing
that the results of an audit could be deemed to be a favorable
determination within the meaning of Bankruptcy Code section
522(b)(4).
Even assuming that the results of an audit can serve as
a favorable determination under section 522(b)(4) of those matters
examined in the audit, we would reject Daniels's contention that an
audit closure may be deemed to be a "favorable determination" of
facts or issues of which the IRS was not made aware.13 See In re
11
Daniels does not argue that he was not responsible if the
Plan violated the tax laws. Nor could he readily do so; he admitted
that he was the Plan administrator and Trustee.
12
Daniels objects that the courts below cited IRS Publication
794 to establish that a favorable determination letter expresses
the IRS' opinion about the qualification of a plan's form. Because
the courts could have found the same information in IRS regulations
and our previous opinion, see Fenton v. John Hancock Mut. Life Ins.
Co., 400 F.3d 83, 85 (1st Cir. 2005), the error, if any, was
harmless.
13
Daniels argues that IRS determinations are presumed to be
correct, citing Welch v. Helvering, 290 U.S. 111, 115 (1933) among
others. We do not quarrel with the principle, but it helps Daniels
little. No one disputes that under section 522, a favorable
determination creates a presumption of compliance. See In re
Daley, 717 F.3d 506, 508-511 (6th Cir. 2013). In any event, this
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Plunk, 481 F.3d 302, 307 (5th Cir. 2007) ("The IRS never considered
Plunk's abuse of Plan assets or audited the Plan to determine
whether it was operationally qualified despite Plunk's actions.
Therefore, the bankruptcy court . . . [was] permitted to reach an
independent decision regarding the Plan's qualified
status . . . .").14 To accept Daniels's argument that a closed
audit blesses all operations of a plan would be to reward
concealment in audits and to presume that all audits are all-
encompassing.15
Daniels argues that the IRS necessarily found the Plan's
operational history "acceptable," because it looked at several Plan
tax returns and transactions, only objected to one, and neither
disqualified the Plan nor assessed additional taxes. The problem
case is unlike those in which a party challenges an actual IRS
ruling or assessment. Cf., e.g., Welch, 290 U.S. at 115; Hostar
Marine Transp. Sys., Inc. v. United States, 592 F.3d 202, 208 (1st
Cir. 2010). Here, Daniels asks us to find that the IRS made a
determination regarding events of which it was by all appearances
unaware.
14
Daniels relies heavily on Matter of Youngblood, 29 F.3d 225
(5th Cir. 1994). There, a bankruptcy court deemed a retirement
plan unqualified and thus available to creditors under Texas law,
despite two favorable determination letters and an audit wherein
the IRS declined to disqualify the plan. The Fifth Circuit
reversed. As the Fifth Circuit later explained, however, the IRS
in Youngblood had actually considered "the misconduct at issue and
decided not to disqualify the plan." Plunk, 481 F.3d at 306.
Here, as with the never-audited plan in Plunk, it appears that the
IRS was unaware of at least some of the disqualifying conduct.
15
Because nothing in the Internal Revenue Manuals cited by
Daniels proves that the IRS was aware of all of the challenged
transactions, we need not address Trustee Agin's arguments
regarding waiver and the significance of such Manuals.
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is that he identifies no evidence that the IRS reviewed, or was
even aware of, at least four transactions relied on by the
bankruptcy court in granting summary judgment.16 These included:
(1) the land and loan transactions with Tom Florence's daughter;
(2) a loan from Daniels's wife's other trust, the BD Realty Trust,
to the Plan; (3) the Plan's investment in B.I.T.C.O., a salvage
effort in which Daniels also personally invested; and (4) the
deposit of funds from the Lopes account into the Plan.17 Cf. In re
Daniels, 452 B.R. at 350-51. As noted above, Daniels has not
directly challenged the bankruptcy court's rulings that each of
these substantial and material transactions was barred by sections
4975 or 401(d). Nor does he challenge the bankruptcy court's
conclusion that profits from prohibited transactions are not exempt
from the bankruptcy estate under section 522(b)(3)(C), or that a
pattern of prohibited transactions and violations of section 401(d)
constitutes material noncompliance with applicable tax laws under
section 522(b)(4).
16
Although Daniels included much, if not all, of his
correspondence with the IRS in his summary judgment response, he
did not include all of the attachments and documentation that
accompanied that correspondence.
17
Daniels avers that he reported this deposit as a deduction
on his tax return, and that it was never challenged by any "tax
authority." Given the lack of information about what exactly the
IRS was told, however, we find that Daniels did not create an issue
of fact as to the IRS' awareness of the details of the transaction.
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These were not, moreover, insubstantial or isolated
transactions. At least $20,000 (but possibly $53,000) went from a
retirement account to pay expenses for B.I.T.C.O. Daniels's
transactions with the daughter of Tom Florence appear to have
involved repeated conveyances of a property, and a loan of at least
$125,000. Most importantly, some portion of the more than $238,000
that Daniels took from the Lopes accounts went into the Plan. See
Jensen v. Daniels, 57 Mass. App. Ct. 811, 813-14 (2003). We
therefore find that there is no genuine issue of material fact that
the Plan did not substantially comply with applicable tax laws.
Having thus rejected Daniels's sole challenge to the
ruling that the Plan was not in substantial compliance with the Tax
Code--that the bankruptcy court's conclusion was precluded by the
Plan's audit result--we affirm the judgment that the Plan assets
were not exempt from the bankruptcy estate.
B. Daniels Indisputably Demonstrated a Reckless Indifference to
the Truth of Material Information During His Bankruptcy
Proceedings.
Daniels does not challenge the bankruptcy court's
conclusion that the IRAs purchased with the assets of a
noncompliant and nonexempted Plan are themselves necessarily non-
exempt. See In re Daniels, 452 B.R. 335, 351 (Bankr. D. Mass.
2011). Ordinarily, then, we would not need to reach the bankruptcy
court's alternative ruling, which barred Daniels from claiming the
-22-
IRAs as exempt because he "intentionally conceal[ed] or fail[ed] to
disclose estate property" through "a pattern of bad faith
concealment [of the IRAs] that spans the entire three and a half
years of [his] bankruptcy case." Id. at 351-52. That alternative
holding, however, became the basis for the entry of summary
judgment in the revocation action, itself the subject of appeal.18
We therefore turn to the question of whether the bankruptcy court
correctly ruled on summary judgment that Daniels intentionally
concealed material information about his financial circumstances.
The bankruptcy court held that "if a debtor intentionally
conceals or fails to disclose estate property," he will be barred
from claiming that property as exempt, even if it would have been
exempt had it been properly scheduled and claimed. Id. at 351
(quoting In re Wood, 291 B.R. 219, 226 (B.A.P. 1st Cir. 2003)).
Both parties presume, and hence we need not decide, that the
bankruptcy court had the authority to deny an exemption (as opposed
to a proposed amendment of bankruptcy schedules) purely for bad
faith by the debtor. Cf. 11 U.S.C. § 522(g), 4 Collier on
Bankruptcy ¶ 522.08 (Alan N. Resnick & Henry J. Sommer eds., 16th
ed. 2013). Daniels does contend, however, that the bankruptcy
court's order allowing him to amend his Schedule B precluded its
later finding of bad faith. We disagree. Under the circumstances
18
Daniels has not argued on appeal that an alternative
holding may not be given collateral estoppel effect. We express no
opinion on the matter.
-23-
of this case, the bankruptcy court was entitled to grant Daniels
leave to amend his schedules while in effect preserving the issue
of bad faith for decision at summary judgment, for which briefing
was already nearly complete.
The parties each add a refinement to the standard recited
by the bankruptcy court: Daniels asserts that whatever is concealed
must be material, and Agin contends that reckless indifference to
the truth is tantamount to intentional concealment. Cf. In re
Tully, 818 F.2d 106, 110-11 (1st Cir. 1987) (noting that discharge
can only be denied under § 727(a)(4)(A) if the debtor knowingly and
fraudulently made a material misstatement, and that "reckless
indifference to the truth" has "consistently been treated as the
functional equivalent of fraud for purposes of" that subsection).
Neither party appears to object to the other's refinement, and so
we assume both to be correct.
1. The Omitted Information Was Material.
Daniels argues that because he disclosed the total amount
of his retirement funds, his failure to specifically identify the
IRA accounts was not material. Therefore, he claims, that failure
cannot support a finding of intentional concealment. Information
omitted from a bankruptcy petition or schedule is material if it is
"pertinent to the discovery of assets, including the history of a
bankrupt's financial transactions.” In re Mascolo, 505 F.2d 274,
-24-
277 (1st Cir. 1974) (affirming a revocation of discharge where the
debtor failed to disclose closed accounts).
It cannot be doubted that the creditors are entitled to
inquire into what property has passed through the
bankrupt's hands during a period prior to his bankruptcy
. . . wide latitude must be accorded to such an
examination, and . . . the materiality of [an allegedly]
false oath will not depend upon whether in fact the
falsehood has been detrimental to the creditors.
Id. at 278 (quoting In re Slocum, 22 F.2d 282, 285 (2d Cir. 1927)).
Here, the fact that Daniels had recently moved nearly $470,000 from
a profit-sharing plan into two IRA accounts held in his own name is
most certainly the type of information about the nature and history
of Daniels's assets and transactions that any trustee or creditor
might wish to examine or consider. As evidenced by the fact that
the Trustee's original turnover request covered only the assets in
the Plan, the failure to list the IRAs could have had a huge impact
on the estate and creditors had the IRAs not been later identified
and the turnover request amended. The IRA information was
material.
2. The Record Compels the Conclusion that Daniels was
Recklessly Indifferent to the Truth.
Courts use special caution in granting summary judgment
as to intent. Intent is often proved by inference, after all, and
on a motion for summary judgment, all reasonable inferences must be
drawn in favor of the nonmoving party. See Sec. & Exch. Comm'n v.
Ficken, 546 F.3d 45, 51-52 (1st Cir. 2008) (summary judgment on
scienter is unusual, but proper where the non-movant relies on
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conclusory allegations or insupportable inferences). We have
previously considered the question of summary judgment with regard
to a debtor's fraudulent intent in several cases. Two opinions,
though arising in the context of denying a Chapter 7 discharge, are
particularly helpful here.
In In re Varrasso, 37 F.3d 760, 762 (1st Cir. 1994), we
reviewed the grant of summary judgment barring a discharge on the
ground that the debtors had knowingly and fraudulently made a false
oath or account. There was no dispute that the debtors had failed
to include assets on their bankruptcy schedules--a bank account
with a balance of $100, and home furnishings worth roughly $2,000--
which were not uncovered until their creditors' meeting. Id. The
debtors, however, argued that they had no intent to hinder the
proceedings or defraud any creditors, and their attorney averred
that disclosure had been made at the earliest possible opportunity.
Id. We reversed the grant of summary judgment against the debtors,
noting in particular that the "relatively small value" of the
omitted assets cut against an inference of fraud. Id. at 764.
Even so, we stressed that in some cases, summary judgment on the
issue of intent is permissible. Id.
We encountered such a case in In re Marrama, 445 F.3d 518
(1st Cir. 2006). There, we affirmed summary judgment denying the
debtor a discharge on the grounds that he had transferred assets
less than a year before his bankruptcy, intending to hinder, delay,
-26-
or defraud a creditor. See id. at 521-22. The debtor had
refinanced his vacation home, transferred most of the money to his
girlfriend, and then placed the home in a spendthrift trust (of
which he was the beneficiary). Id. at 520.
Marrama argued that he had properly recorded the home
transfer with the local deeds office and that he had reported the
trust, its holdings, and his interest in it during the bankruptcy.
Id. at 523-24. He also noted that his attorney swore to leaving
information off of the bankruptcy schedules by mistake. Id. at
523. We rejected his explanations as insupportable, however. Id.
at 524. Marramma had admitted to transferring his home "to protect
it," and undisputed facts supported nearly every indicator of fraud
that we use to assess bankruptcy-related property transfers (for
example, he transferred his asset to someone close to him, retained
a beneficial interest in it, received no valuable consideration for
the transfer, and was facing seizure of his assets). Id. at 522-
24. We therefore found that the record permitted no inference but
that of fraud in the transfer. Id. at 524.
While this case differs from both Varrasso and Marramma,
we find it falls in line more with the latter than the former.
Daniels created the IRAs less than seven months before filing for
bankruptcy protection, and in the wake of an affirmance of a large
judgment against him. Schedule B clearly and expressly solicited
the listing of "interests in IRA[s]" and demanded the
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"particulars." The funds moved into the IRAs represented perhaps
50% of his total assets. It is inconceivable that, when completing
his schedules, Daniels somehow forgot that he had recently moved
roughly one-half million dollars entirely outside his Plan into two
IRAs. His suggestion that he thought it was okay to group all
retirement-type funds under his profit-sharing plan because that
was how he completed his 2007 tax return carries little weight
because that return was filed after he had filled out his
bankruptcy schedule.
Daniels then managed to avoid correctly explaining the
IRAs throughout his various creditors’ meetings. Referring to the
Plan itself as an IRA at his 2007 creditors’ meeting is not, as
Daniels argues, an adequate disclosure. And while he referred in
the April, 2009 creditors’ meeting to having purchased MassMutual
Annuities, he stated flatly and falsely that those annuities were
“held by the pension plan now.” Yet, in filling out the July 2009
request to roll one of the IRAs over from MassMutual to Prudential,
Daniels exhibited no confusion about who held what--under "Owner
Name/Plan Name," he typed "William M[.] Daniels."
Daniels failed to take advantage of several other
opportunities to clear up the status of the IRAs. For example, in
responding to an interrogatory asking what assets the Plan held,
Daniels for the first time clearly stated that the MassMutual IRA
mentioned in the draft interrogatory response was not part of the
-28-
Plan. Yet, in response to a request for the details of every
“distribution, loan, transfer or withdrawal from the Plan’s funds
or assets,” he still failed to provide any information relating to
the IRAs or their creation. Daniels then failed to appear for his
Rule 2004 examination in June, 2010.
Most damningly, Daniels's motion seeking leave to
transfer Plan assets to IRAs for tax compliance clearly implied
that there were no IRAs yet. Indeed, that motion (the general gist
of which was to explain that each Plan component had to be sold or
changed in anticipation of retirement) falsely described the Plan's
liquid "holdings" as "100% profit-sharing."
To be sure, a few facts arguably weigh in Daniels’s
favor. Daniels appears to be correct that he fully disclosed the
total amount of money in both the Plan and the IRAs on his initial
schedules, albeit listing all of the assets as part of the Plan.
Therefore, this is not a case in which the debtor out-and-out hid
the amount of his assets. Furthermore, disclosing the full amount
up front rendered problematic any subsequent attempt to avoid
accounting for and turning over the IRA assets should the Plan be
found non-exempt.19 Even so, we have explained before that bad
faith may include conduct that is not, in fact, entirely in a
19
Of course, because the listed assets included real estate,
substantial changes in the value of the Plan might well be seen as
changes in the value of the real estate, reducing the likelihood
that the turnover of Plan assets valued at less than originally
listed would trigger a hunt for other assets.
-29-
debtor's best interest. See In re Hannigan, 409 F.3d 480, 483 (1st
Cir. 2005). And debtors must disclose even those assets they
believe are unavailable to the bankruptcy estate. In re Wood, 291
B.R. at 226 (citing In re Yonikus, 974 F.2d 901, 904 (7th Cir.
1992)). As the Schedules' express instructions indicate, the
"particulars" are indeed material; the form itself would be much
shorter if only concerned with the amount, rather than the form and
location, of assets.
It is also true that, in response to discovery requests
in the adversary action regarding the Plan, Daniels did eventually
turn over both the statements for the individual IRAs and a
worksheet breaking down by name and account number the Plan
components and Daniels's other IRAs. All this shows, though, is
that when the Trustee was conscientious enough to press again for
detail, Daniels eventually became more forthcoming.20
Daniels also claims that he relied on the advice of his
lawyer and accountant. He points, though, to no affidavit from a
lawyer or accountant who claims to have told him that he could omit
mention of the IRAs. More importantly, relying on the advice of
one's fully-informed attorney in reporting assets may negate an
inference of fraud or intentional concealment, but only if it is
20
As noted above, Daniels provided some evidence suggesting
that he gave Agin statements for the IRAs in question at the 2009
creditors' meeting. He did not, however, identify it in briefing
or cite to it in his statement of facts, and so we need not
consider it. Fed. R. Civ. P. 56(c)(3).
-30-
not "transparently plain that the property [in question] should be
scheduled." In re Mascolo, 505 F.2d 274, 277 & n.4 (1st Cir.
1974). Cf. In re Marrama, 445 F.3d at 523-24. Having created the
IRAs in his own name only months before filing for bankruptcy, it
should have been apparent to Daniels and any advisor that he must
separately account for the IRAs and the Plan. Simply put, given
that the form expressly requested the listing of IRAs, given that
Daniels himself had recently created and funded the IRAs, and given
that he knew he owned them, it is hard to conceive of any
legitimate reason to decide not to list them.
Based on these facts, Daniels fails to create any
reasonable basis for avoiding the conclusion that he acted, at
best, with reckless disregard for the truth of the material
information he supplied during his bankruptcy proceedings. Cf. In
re Tully, 818 F.2d 106, 112 (1st Cir. 1987) (noting that "reckless
indifference to" the truth is treated as the "functional equivalent
of fraud for the purposes of [denying discharge to a debtor under
11 U.S.C.] § 727(a)(4)(A)."); In re Donahue, BAP NH 11-026, 2011 WL
6737074, at *11-14 (B.A.P. 1st Cir. Dec. 20, 2011) (affirming
summary judgment denying a discharge under § 727(a)(4)(A) where
debtors made misstatements and did not report a pre-petition
property transfer or ongoing income therefrom, but denied intending
to deceive anyone, had produced some relevant documents amidst
hundreds of others, and blamed their omissions on counsel). The
-31-
few points arguably running in Daniels’s favor simply cannot create
a triable issue of fact in the face of the rather stunning
imprecision and inaccuracy of Daniels's several statements
regarding almost half of his assets. The amounts involved here
render reckless errors that arguably may have been only negligent
if they had concerned less significant items. We therefore affirm
the bankruptcy court's entry of summary judgment on the issue of
Daniels's intentional or reckless concealment.
C. The Bankruptcy Court Did Not Abuse Its Discretion in Denying
Daniels's Rule 60(b) Motion.
As noted above, in December, 2011, Daniels sought relief
from the turnover judgment, claiming newly discovered evidence and
excusable neglect. See Fed. R. Bankr. P. 9024; Fed. R. Civ. P. 60
(b)(1), (2). Essentially, he blamed his erroneous statements and
filings on Atty. Cohen's ill health, arguing that he had given
Cohen all of the relevant information. For support, Daniels
offered a variety of documents, including affidavits claiming that
he had not understood that Cohen was too sick to represent him
effectively and that some of his requested changes to documents in
the litigation were never made. As noted above, he offered a copy
of his request for changes to his draft bankruptcy schedules, such
as the addition of a rifle and $2,000 worth of wearing apparel and
updating the IRAs and profit sharing plan information to match the
Form 5500 and other unspecified "current info." Most of those
changes were reflected in some form on the schedules that Daniels
-32-
signed. Daniels also offered a fax to Cohen requesting changes to
the draft March 15, 2010 motion, including a note that two IRAs had
already been purchased. The March 15, 2010 motion Daniels's
counsel filed with the bankruptcy court did not reflect those
changes.
After his motion was denied, Daniels sought
reconsideration, and included (among other things) the email from
Cohen to Daniels and his successor counsel, suggesting that
successor counsel take over the case due to Cohen’s health. The
motion was denied. Two renewals of that motion, one purporting to
explain the respective roles of Cohen and successor counsel in the
summary judgment briefing, were similarly denied.
We review the denial of a Rule 60(b) motion for abuse of
discretion, which amounts to "de novo review of strictly legal
determinations and deference to the extent that the denial turns on
factual or judgmental determinations." Capability Grp. v. Am. Exp.
Travel Related Servs. Co. Inc., 658 F.3d 75, 79 (1st Cir. 2011).
“[R]elief under Rule 60(b) is extraordinary in nature and motions
invoking that rule should be granted sparingly.” Nansamba v. N.
Shore Med. Ctr., Inc., 727 F.3d 33, 37 (1st Cir. 2013) (quoting
Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st Cir.2002)).
1. Relief Was Not Warranted on “New Evidence” Grounds.
Relief under Rule 60(b)’s “new evidence” prong is
appropriate where: "(1) new evidence has been discovered since the
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[judgment]; (2) [it] could not by due diligence have been
discovered earlier by the movant; (3) [it] is not merely cumulative
or impeaching; and (4) [it] is of such a nature that it would
probably change the result were a new trial to be granted." Morón-
Barradas v. Dept. of Educ. of Com. of P.R., 488 F.3d 472, 482 (1st
Cir. 2007) (quoting U.S. Steel v. M. DeMatteo Constr. Co., 315 F.3d
43, 52 (1st Cir.2002)). Where the evidence was available to the
party before summary judgment, absent some convincing explanation,
denying relief is not an abuse of discretion. Id.
We find nothing approaching an abuse of discretion in the
bankruptcy court’s rejection of Daniels’s appeal to new evidence.
As the court correctly noted, the proffered evidence had been
available to Daniels and/or his successor counsel all along.
Similarly, most of the evidence and argument offered in the
subsequent motions for reconsideration were available before
judgment was entered, and certainly when the first Rule 60(b)
motion was filed. Furthermore, as the bankruptcy court noted, some
of that evidence actually suggests that Daniels signed his
schedules, knowing them to be inaccurate. We therefore affirm the
bankruptcy court's refusal to relieve Daniels of the judgment based
on his late-proffered evidence.
2. Relief Was Not Warranted on “Excusable Neglect”
Grounds.
-34-
As used in Rule 60(b), “excusable neglect” can encompass
ordinary negligence or carelessness. See Pioneer Inv. Servs. Co.
v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 394-95 (1993).
Whether relief is warranted is essentially an equitable inquiry,
and takes into consideration all of the relevant circumstances.
Cf. id. at 395 (discussing Fed. R. Bankr. P. 9006). Particularly
where a party failed to present available evidence before judgment,
they must offer a “convincing” reason why their neglect should be
excused. Nansamba, 727 F.3d at 38-39. “In civil cases, inadequate
representation is normally a matter between the attorney and his
client,” but may justify Rule 60(b) relief in unusual cases.
Capability Grp., 658 F.3d at 82. “[A]t a minimum[, such a claim]
would require both incompetent performance that the client could
not have forestalled and a showing of likely prejudice." Id.
The bankruptcy court noted that parties usually bear the
burden of their attorneys' mistakes, and rejected Daniels’s attempt
to blame the finding of bad faith on Cohen’s “excusable neglect”
absent an explanation why successor counsel had not raised the
issue at summary judgment. Although the bankruptcy court might
have justifiably reached the opposite conclusion, we see no abuse
of discretion here. Daniels’s motion adequately explained neither
his own failure to accurately discuss the IRAs despite many chances
to do so, nor why his claim regarding Cohen’s alleged failings was
not made fully and clearly earlier. Even assuming that Cohen was
-35-
seriously compromised, Daniels and his second lawyer knew that fact
no later than March 11, 2011--when Cohen suggested withdrawing for
medical reasons--well before the summary judgment response was
filed in April.21 Therefore, even if Daniels could not readily have
prevented the earlier missteps (which we need not decide) Daniels
and successor counsel could readily have taken steps to forestall
the extent to which those failings contributed to the bad-faith
judgment. There was no abuse of discretion, and we affirm the
denial of Rule 60(b) relief.
D. The Bankruptcy Court Properly Granted Summary Judgment in the
Revocation Action
Finally, Daniels appeals the bankruptcy court's grant of
summary judgment to the U.S. Trustee in the revocation action. That
judgment was based on the collateral estoppel effect of the bad
faith holding in the turnover action.22 We review the application
of collateral estoppel de novo. See Keystone Shipping Co. v. New
Eng. Power Co., 109 F.3d 46, 50 (1st Cir. 1997). Because the
initial judgment was that of a bankruptcy court applying federal
21
We also note that Cohen referenced his medical condition
in the March 24, 2011 motion seeking more time for Daniels to
respond to the summary judgment motion.
22
Although we affirmed the underlying summary judgment on the
grounds of reckless disregard for the truth, rather than
intentional bad faith, reckless disregard for the truth satisfies
the scienter requirements for both of the grounds the U.S. Trustee
cited for revoking Daniels’s discharge. See In re Tully, 818 F.2d
106, 111 (1st Cir. 1987) (reckless indifference satisfies 11 U.S.C.
§ 727(a)(4)(A)); In re Villani, 478 B.R. 51, 61 (B.A.P. 1st Cir.
2012) (reckless disregard can satisfy § 727(a)(2)).
-36-
law, the application of collateral estoppel is likewise governed by
federal law. Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d 973,
978 (1st Cir. 1995). Collateral estoppel applies when:
(1) the issue sought to be precluded in the later action
is the same as that involved in the earlier action; (2)
the issue was actually litigated; (3) the issue was
determined by a valid and binding final judgment; and (4)
the determination of the issue was essential to the
judgment.
Latin Am. Music Co. Inc. v. Media Power Grp., Inc., 705 F.3d 34,
42 (1st Cir. 2013) (quoting Mercado–Salinas v. Bart Enters. Int'l,
Ltd., 671 F.3d 12, 21–22 (1st Cir.2011)).
Daniels launches three attacks on that judgment: (1)
that the facts here cannot support a fraud-based revocation,
because he only omitted immaterial information from his schedules,
(2) that a debtor should not be denied a discharge where he relied
on the advice of counsel in preparing his bankruptcy schedules, and
(3) that collateral estoppel does not apply "as the issue here is
not identical to the Bankruptcy Court's prior holding."
His first two objections are easy to dispatch; we have
already explained, above, why Daniels's omissions and misstatements
are material and why his claim of reliance on counsel fails.23 Nor
can Daniels use the revocation action to force additional evidence
of Cohen's alleged misfeasance into the record. "Although changes
23
Daniels’s cited cases do not help him as they do not
consider the issue of collateral estoppel.
-37-
in facts essential to a judgment will render collateral estoppel
inapplicable in a subsequent action raising the same issues, a
party cannot circumvent the doctrine's preclusive effect merely by
presenting additional evidence that was available to it at the time
of the first action." Latin Am. Music Co., 705 F.3d at
42 (citations and internal quotation marks omitted).
Finally, Daniels has waived his third argument by failing
to suggest how the two issues in the two proceedings differed. See
United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)
(perfunctory claims are waived); Fed. R. App. P. 28(a)(9).
IV. Conclusion
For the foregoing reasons, the judgments subject to this
appeal are affirmed.
-38-