Gregory Lorber v. FTC Commercial Corp.

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 15 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: GREGORY JULES LORBER, No. 15-56771
Debtor, D.C. No. 2:15-cv-04852-MMM
______________________________
GREGORY JULES LORBER, MEMORANDUM*
Appellant,
v.
FTC COMMERCIAL CORP., a California
corporation,
Appellee.
In re: GREGORY JULES LORBER, No. 15-56831
Debtor, D.C. No. 2:15-cv-04852-MMM
______________________________
FTC COMMERCIAL CORP., a California
corporation,
Appellant,
v.
GREGORY JULES LORBER,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appellee.
Appeal from the United States District Court
for the Central District of California
Margaret M. Morrow, District Judge, Presiding
Submitted May 11, 2017**
Pasadena, California
Before: PREGERSON and FRIEDLAND, Circuit Judges, and DONATO,***
District Judge.
Gregory Lorber appeals the district court’s affirmance of the bankruptcy
court’s judgment. Pursuant to 11 U.S.C. § 727(a)(3), the bankruptcy court denied
Lorber discharge of a debt owed to FTC Commercial Corporation (“FTC”) after
the court found that Lorber failed to maintain adequate business records from
which his financial condition could be ascertained.1 We have jurisdiction under 28
U.S.C. § 1291, and we affirm.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable James Donato, United States District Judge for the
Northern District of California, sitting by designation.
1
The bankruptcy court also deemed the debt non-dischargeable under 11 U.S.C.
§ 523(a)(2)(A) and found that Lorber had failed to explain satisfactorily a loss of
assets, warranting denial of discharge under 11 U.S.C. § 727(a)(5). Because we
hold that denial of discharge under § 727(a)(3) was proper, we need not address
those conclusions or the arguments about § 727(a)(5) raised in FTC’s cross-appeal.
2
1. The bankruptcy court did not err in concluding that Lorber’s discharge
should be denied. A debtor is not eligible for discharge if he “has . . . failed to
keep or preserve any recorded information, including books, documents, records,
and papers, from which the debtor’s financial condition or business transactions
might be ascertained, unless such act or failure to act was justified under all of the
circumstances of the case.” 11 U.S.C. § 727(a)(3). The party objecting to
discharge bears the initial burden of proving that discharge should be denied. In re
Retz, 606 F.3d 1189, 1196 (9th Cir. 2010). But once a creditor has shown that
inadequate records make it impossible to ascertain a debtor’s financial condition,
“the burden of proof then shifts to the debtor to justify the inadequacy . . . of the
records.” In re Caneva, 550 F.3d 755, 761 (9th Cir. 2008) (quoting In re Cox, 41
F.3d 1294, 1296 (9th Cir. 1994)).
After a four-day bench trial, the bankruptcy court determined that FTC, the
creditor, had satisfied its burden by showing that Lorber, the debtor, failed to
produce electronically stored financial records for several entities he owned and
operated, creating uncertainty as to their solvency and, thus, his personal financial
condition. Lorber offered contradictory explanations for that omission, and the
bankruptcy court found him not credible. Moreover, witnesses presented
conflicting accounts of the record-keeping practices at Lorber’s businesses, and he
himself testified inconsistently about how financial information had been
3
maintained, what data remained accessible, and whether he even knew where the
relevant records were. In light of the evidence adduced at trial, it was not illogical
or implausible for the bankruptcy court to conclude that Lorber had failed to
maintain sufficient records of his business transactions to be eligible for discharge.
See Retz, 606 F.3d at 1196 (stating that the bankruptcy court’s factual findings are
reviewed for clear error and reversible only if “illogical, implausible, or without
support in the record”).
2. Lorber does not seriously challenge the bankruptcy court’s findings.
Instead, Lorber contends that, notwithstanding the unaccounted for electronic
records, the bankruptcy court could have ascertained Lorber’s financial condition
from other documents produced in discovery. The record does not support that
claim, which is further undermined by Lorber’s admission that he himself did not
know where all the financial records were. To the extent Lorber focuses on the
“sheer volume” of documents involved in this litigation, he misapprehends the
relevant burdens. Lorber had an “affirmative duty” under § 727(a)(3) to keep and
preserve records of his business affairs; he cannot evade that obligation by shifting
responsibility to his creditors and the courts to glean whatever might be learned
from thousands of pages of discovery. See Caneva, 550 F.3d at 762 (quoting In re
Scott, 172 F.3d 959, 969 (7th Cir. 1999)). Put differently, “if there is a needle in
this haystack [of discovery], it is [not] up to the court to find it.” Id.
4
AFFIRMED.
5