Bloom v. Glencove Holdings

• Court: Court of Appeals for the Tenth Circuit
• Decided: July 12, 2022
• Docket: 22-1005
• Status: Unpublished

Opinion

Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 1 FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit

FOR THE TENTH CIRCUIT July 12, 2022 _________________________________ Christopher M. Wolpert Clerk of Court In re: STEVEN W. BLOOM,

Debtor.

------------------------------

GLENCOVE HOLDINGS, LLC,

Plaintiff - Appellee,

v. No. 22-1005 (BAP No. 20-043-CO) STEVEN W. BLOOM, (Bankruptcy Appellate Panel)

Defendant - Appellant. _________________________________

ORDER AND JUDGMENT* _________________________________

Before HARTZ, BALDOCK, and McHUGH, Circuit Judges. _________________________________

Steven W. Bloom, an aircraft sales consultant and the debtor in this matter,

appeals from a United States Bankruptcy Appellate Panel of the Tenth Circuit

(“BAP”) opinion affirming the bankruptcy court’s decision allowing Glencove

* After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist in the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Federal Rule of Appellate Procedure 32.1 and Tenth Circuit Rule 32.1. Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 2

Holdings, LLC’s (“Glencove”) claim as a valid debt against Mr. Bloom and holding

the debt was not dischargeable. Mr. Bloom contends the bankruptcy court erred by

holding Colorado’s economic loss rule did not bar Glencove’s tort claims and

improperly concluding the debt was excepted from discharge under 11 U.S.C.

§ 523(a)(2)(A) and (a)(6). Exercising jurisdiction under 28 U.S.C. § 158(d), we

affirm the bankruptcy court’s decision.1

I. BACKGROUND

Mr. Bloom is the sole member and manager of Bloom Business Jets, LLC

(“BBJ”). BBJ, through Mr. Bloom, entered an Agent Agreement to represent Jennifer

and Huw Pierce (the “Pierces”) in their effort to purchase a pre-owned private jet

through Glencove, a limited liability company owned and managed by the Pierces.2

As part of the Agent Agreement, BBJ agreed to locate a private jet and act as

Glencove’s agent in the purchase of the jet, and Glencove agreed to pay BBJ a fee for

its services. Colorado law governs the Agent Agreement. At all relevant times,

Mr. Bloom acted on behalf of BBJ to represent Glencove in the purchase of the

private jet.

The parties identified a private jet Glencove was interested in purchasing,

Mr. Bloom recommended a target price of $3,600,000 for the jet, and Glencove

1 Judge Hartz joins this order and judgment, except for Part II.B.2. 2 The Pierces formed Glencove the day after the Agent Agreement was executed, but the parties agree on appeal that BBJ and Glencove were the parties to the Agent Agreement. 2 Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 3

agreed. With Glencove’s authorization, Mr. Bloom began negotiating with the seller,

beginning with an offer of about $3,300,000. After receiving Glencove’s initial offer,

the seller counteroffered with a price of $3,400,000, which was significantly lower

than Mr. Bloom expected. At this point, Mr. Bloom began lying to Glencove. He told

Glencove the seller counteroffered to sell the jet for $3,775,000. In response,

Glencove authorized a counteroffer of $3,550,000. Mr. Bloom then represented to

Glencove that he was negotiating with the seller to sell the jet for $3,550,000. This,

of course, was not true because the seller had already counteroffered to sell the jet for

less than that amount. In the end, Glencove agreed to pay $3,550,000 for the jet.

Meanwhile, Mr. Bloom negotiated with the seller, and they agreed to a sale price of

$3,300,000. Mr. Bloom did not tell Glencove about these negotiations or the lower

sale price.

Before finalizing the purchase, Haggan Aviation (“Haggan”) conducted an

inspection of the jet and found more than $67,000 worth of airworthy items that

needed to be repaired. Glencove signed a conditional acceptance, agreeing to accept

the jet subject to the seller fixing the airworthy items. The seller initially refused to

perform any of the repairs and would only sell the jet in as-is condition. Mr. Bloom

then convinced Haggan to reduce the number of airworthy items that needed to be

repaired, which significantly reduced the total estimate. Mr. Bloom did not apprise

Glencove of any of these developments. Instead, he represented that the seller would

pay for all the repairs in the original estimate even though only a portion of those

repairs were completed prior to the sale.

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Mr. Bloom then created Big Horn Exploration, LLC (“Big Horn”), which

purchased the jet from the seller for $3,300,000. Immediately thereafter, Big Horn

sold the jet to Glencove for $3,550,000. As a result of Mr. Bloom’s lies, Glencove

paid an additional $250,000 for the jet, and that amount was distributed between

Mr. Bloom’s attorney, an aircraft finance company, and BBJ. The bankruptcy court

did not find Mr. Bloom personally received any of the money.

Glencove then hired BBJ to manage the jet’s operations. BBJ eventually filed

a state court lawsuit against Glencove for a dispute arising out of the management

agreement. Discovery in that matter revealed the fraud committed during the sale,

and Glencove brought counterclaims against Mr. Bloom and others who were

involved. Mr. Bloom filed for bankruptcy, and Glencove brought an adversary

proceeding asserting its tort claims as a debt against Mr. Bloom. We refer to the debt

Glencove asserted as the Glencove Claim. In the adversary proceeding, Glencove

brought claims for the nondischargeability of the Glencove Claim.

The bankruptcy court held a trial on the tort claims and allowed the Glencove

Claim in the amount of $458,470 for fraud by false representation and fraudulent

concealment. The bankruptcy court also concluded the Glencove Claim was not

dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and (a)(6). Mr. Bloom appealed

to the BAP, arguing in part that (1) the bankruptcy court should not have allowed the

Glencove Claim because Colorado’s economic loss rule bars the fraud and fraudulent

concealment claims and (2) the Glencove Claim is dischargeable. The BAP affirmed

the bankruptcy court’s ruling. Mr. Bloom now appeals to this court.

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II. DISCUSSION

When a party appeals a decision by the BAP, “we treat the BAP as a

subordinate appellate tribunal whose rulings are not entitled to any deference,” so

“we review only the [b]ankruptcy [c]ourt’s decision.” In re Tung Thanh Nguyen, 783

F.3d 769, 772 (10th Cir. 2015) (quotation marks omitted). “We review matters of law

de novo, and we review factual findings made by the bankruptcy court for clear

error.” Id. (quotation marks omitted).

On appeal, Mr. Bloom contends the bankruptcy court erred when it determined

the Glencove Claim was valid. He says Colorado’s economic loss rule bars Glencove

from recovering on its fraud and fraudulent concealment claims against him. He also

argues the bankruptcy court erred by concluding the debt is not dischargeable. We

address each argument in turn.

A. Economic Loss Rule

Mr. Bloom argues primarily that the bankruptcy court erred by allowing the

Glencove Claim because Colorado’s economic loss rule prevents Glencove from

recovering on its state fraud and fraudulent concealment claims against him. See

Grogan v. Garner, 498 U.S. 279, 183 (1991) (“The validity of a creditor’s claim is

determined by rules of state law.”). Whether the economic loss rule bars a tort claim

“is an issue of law we review de novo.” Haynes Trane Serv. Agency, Inc. v. Am.

Standard, Inc., 573 F.3d 947, 962 (10th Cir. 2009) (quotation marks omitted).

Colorado’s economic loss rule provides that “a party suffering only economic

loss from the breach of an express or implied contractual duty may not assert a tort

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claim for such a breach absent an independent duty of care under tort law.” Alma v.

AZCO Constr., Inc., 10 P.3d 1256, 1264 (Colo. 2000). To determine whether the

economic loss rule bars a tort claim in Colorado, courts consider “the source of the

duty that forms the basis of the action.” Id. at 1262. If the contract is the source of the

duty, then the economic loss rule bars tort claims for purely economic loss. Id.

Otherwise, the economic loss rule does not bar the claim. Id. The Colorado Supreme

Court also explained, “certain common law claims that sound in tort and are

expressly designed to remedy economic loss,” such as common law fraud or

negligent misrepresentation, “may exist independent of a breach of contract claim.”

Id. at 1263. Such claims are outside the scope of the economic loss rule. Id.

After Alma, some divisions of the Colorado Court of Appeals held the

economic loss rule barred post-contractual fraud claims related to the performance of

the contract. See Top Rail Ranch Estates, LLC v. Walker, 327 P.3d 321, 328–29

(Colo. App. 2014); Former TCHR, LLC v. First Hand Mgmt. LLC, 317 P.3d 1226,

1232–33 (Colo. App. 2012); Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229

P.3d 282, 291–95 (Colo. App. 2009). These divisions reasoned that all contracts

contain the implied covenant of good faith and fair dealing, and the implied covenant

of good faith and fair dealing includes the duty not to commit fraud. See Top Rail

Ranch Estates, 327 P.3d at 329; Former TCHR, 317 P.3d at 1233; Hamon

Contractors, 229 P.3d at 292–93. Accordingly, the courts concluded the duty to not

commit post-contractual fraud did not arise independent of the contract. See Top Rail

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Ranch Estates, 327 P.3d at 329; Former TCHR, 317 P.3d at 1233; Hamon

Contractors, 229 P.3d at 293–95.

Recently, however, the Colorado Supreme Court suggested this is not the

proper understanding of the economic loss rule. In Bermel v. BlueRadios, Inc., the

Colorado Supreme Court explained it had previously applied the economic loss rule

only “to bar common law tort claims of negligence or negligent misrepresentation.”

440 P.3d 1150, 1155 (Colo. 2019). The Bermel court also clarified in a footnote that

“the economic loss rule generally should not be available to shield intentional

tortfeasors from liability for misconduct that happens also to breach a contractual

obligation.” Id. at 1154 n.6

Mr. Bloom asks us to apply the analysis in Top Rail Ranch Estates, Former

TCHR, and Hamon Contractors, and to ignore the contrary language in Bermel.

Accordingly, Mr. Bloom contends the economic loss rule bars Glencove’s fraud by

false representations and fraudulent concealment claims against him because (1) he is

a member of BBJ who acted on behalf of BBJ, an entity that had a contractual

relationship with Glencove when the fraud occurred; (2) the Agent Agreement

included the implied covenant of good faith and fair dealing, which required BBJ not

to act fraudulently; and (3) Glencove experienced only economic damages. Thus,

according to Mr. Bloom, these claims arise from a breach of an implied contractual

duty that resulted only in economic loss, which bars Glencove from recovering in

tort.

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As an initial matter, we note Mr. Bloom does not personally have a contractual

relationship with Glencove because BBJ, not Mr. Bloom, entered the agreement with

Glencove. This means Mr. Bloom did not owe any contractual duties to Glencove,

and Glencove cannot bring any contract claims against Mr. Bloom. See Rhino Fund,

LLLP v. Hutchins, 215 P.3d 1186, 1195 (Colo. App. 2008) (holding the economic

loss rule does not apply because the plaintiff had not entered into the contract and

had no contractual remedies). As such, the economic loss rule would not normally

apply to bar any tort claims against Mr. Bloom. Id. However, “[w]hen the economic

loss rule bars a claim against a corporate entity, it may also bar claims against that

entity’s officers and directors, even if the officers and directors were not parties to

the contract at issue,” when “the officers’ and directors’ duties, rights, obligations, or

liabilities arise from the contract between the corporate entity and another.” Former

TCHR, 317 P.3d at 1232; see also Parr v. Triple L & J Corp., 107 P.3d 1104, 1108

(Colo. App. 2004) (applying the economic loss rule to the sole shareholder of the

corporate party to the contract). Because Mr. Bloom is the sole member of BBJ, we

must therefore determine the source of Mr. Bloom’s duty not to act fraudulently. For

the reasons below, we hold the duty not to commit fraud arises from the common

law, independent of the Agent Agreement.

As a matter of state law, we must attempt to determine how the Colorado

Supreme Court would rule on this issue. Wade v. EMCASCO Ins. Co., 483 F.3d 657,

8 Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 9

666 (10th Cir. 2007).3 As noted, the Colorado Supreme Court looks to whether the

tort claim arises from a duty independent of the contract, and if not, then the

economic loss rule applies. Alma, 10 P.3d at 1263. As an example, the Colorado

Supreme Court said intentional tort claims such as common law fraud generally arise

from duties independent of contracts and are outside the economic loss rule. Id.;

Bermel, 440 P.3d at 1154 n.6; but see Dream Finders Homes LLC v. Weyerhaeuser

NR Co., 506 P.3d 108, 124–26 (Colo. App. 2021) (concluding the economic loss rule

bars a fraud claim where the contract expressly waives the damages sought via the

fraud claim). The common law fraud and fraudulent concealment claims are both tort

claims that arise independent of a contract, so they would not be barred by the

economic loss rule.

Mr. Bloom does not agree that the Bermel footnote limiting the application of

the economic loss rule is binding. Instead, he contends the footnote is only dicta and

urges us to rely on the pre-Bermel Colorado Court of Appeals opinions that held the

economic loss rule bars post-contractual fraud claims. Even if the footnote in Bermel

3 Mr. Bloom moved to certify the question of whether the economic loss rule bars claims for intentional torts to the Colorado Supreme Court. We have discretion to certify a question of state law to a state supreme court when state law permits and the question “(1) may be determinative of the case at hand and (2) is sufficiently novel that we feel uncomfortable attempting to decide it without further guidance.” Pino v. United States, 507 F.3d 1233, 1236 (10th Cir. 2007). Here, the Colorado Supreme Court has provided guidance about how the economic loss rule applies in Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo. 2000), and more recently in Bermel v. BlueRadios, Inc., 440 P.3d 1150 (Colo. 2019). Taking these cases into consideration, this question is not so novel that we feel uncomfortable deciding it without further guidance. Therefore, we deny the motion to certify. 9 Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 10

discussing the application of the economic loss doctrine to intentional torts is dicta,

see Dream Finders, 506 P.3d at 122 (referring to the footnote as “dicta”), we may

consider Colorado Supreme Court dicta because it “represents the court’s own

comment on the development of Colorado law,” Valley Forge Ins. Co. v. Health Care

Mgmt. Partners, Ltd., 616 F.3d 1086, 1093 (10th Cir. 2010).

Importantly, Mr. Bloom’s interpretation of the economic loss rule directly

conflicts with the Colorado Supreme Court’s comment on the development of

Colorado law. In Mr. Bloom’s view, all post-contractual fraud claims would be

barred by the economic loss rule because all contracts in Colorado include the

implied covenant of good faith and fair dealing. See Colo. Rev. Stat. § 4-1-304

(“Every contract or duty within this title imposes an obligation of good faith in its

performance and enforcement.”). Thus, the economic loss rule would always be

available to shield intentional tortfeasors from liability for post-contract misconduct

that breaches the implied covenant of good faith and fair dealing. The Colorado

Supreme Court, however, explained “the economic loss rule generally should not be

available to shield intentional tortfeasors from liability for misconduct that happens

also to breach a contractual obligation.” Bermel, 440 P.3d at 1154 n.6. This language

is not up for debate; it clearly suggests the Colorado Supreme Court would disagree

with Mr. Bloom’s understanding of the economic loss rule.

In applying the Colorado Supreme Court’s understanding of the economic loss

rule, as we must, we conclude the economic loss rule does not bar Glencove’s fraud

and fraudulent concealment claims against Mr. Bloom. The claims are both

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intentional torts that arise from the common law—that is, they arise from duties

independent of the Agent Agreement. Alma, 10 P.3d at 1263. Without an express

waiver of damages from fraud, the economic loss rule does not bar these intentional

tort claims. See id.; Dream Finders, 506 P.3d at 122 (recognizing Bermel did not

create a bright line rule prohibiting the economic loss rule from barring all

intentional torts). Here, there is no such waiver within the Agent Agreement. Thus,

the bankruptcy court did not err by holding Mr. Bloom’s duty not to commit fraud

arose independent of the Agent Agreement and allowing the Glencove Claim as a

valid debt.

B. Exceptions to Discharge Having concluded the bankruptcy court did not err in allowing the Glencove

Claim as a valid debt, we turn now to the dischargeability of that debt. See In re

Thompson, 555 B.R. 1, 8 (B.A.P. 10th Cir. 2016) (explaining a court must first

determine whether the debt is valid then determine whether it is dischargeable). The

Bankruptcy Code was enacted to give debtors a fresh start. In re Merrill, 252 B.R.

497, 503 (B.A.P. 10th Cir. 2000). Accordingly, “most debts are dischargeable in

bankruptcy.” Id. However, 11 U.S.C. § 523 lists the circumstances in which a debt is

not dischargeable. The bankruptcy court held the Glencove Claim was excepted from

discharge under § 523(a)(2)(A) and (a)(6). Mr. Bloom argues this was in error.

“We review a bankruptcy court’s construction of the Bankruptcy Code de

novo.” In re McDaniel, 973 F.3d 1083, 1092 (10th Cir. 2020) (quotation marks

omitted). We review factual findings related to the dischargeability of a debt for clear

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error. In re Young, 91 F.3d 1367, 1370 (10th Cir. 1996). To promote the policy of

providing debtors with a fresh start, “exceptions to discharge are to be narrowly

construed, and . . . doubt is to be resolved in the debtor’s favor.” In re Kaspar, 125

F.3d 1358, 1361 (10th Cir. 1997).

1. 11 U.S.C. § 523(a)(2)(A) Section 523(a)(2)(A) excepts from discharge a debt

for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition. We have held a claim is not dischargeable pursuant to this subsection when (1) “[t]he

debtor made a false representation,” (2) “the debtor made the representation with the

intent to deceive the creditor,” (3) “the creditor relied on the representation,” (4) “the

creditor’s reliance was reasonable,” and (5) “the debtor’s representation caused the

creditor to sustain a loss.” Young, 91 F.3d at 1373. Mr. Bloom contends the language of

the statute also requires the debtor to have personally obtained money, property, services,

or credit from the false pretenses, false representation, or actual fraud. Mr. Bloom further

argues the bankruptcy court’s findings do not satisfy that requirement because the court

did not find he personally obtained money from the fraud. We begin by addressing

Mr. Bloom’s argument.

Courts have identified three views about whether the debtor must have

personally obtained the money, property, or services to except the debt from

discharge under § 523(a)(2)(A). In re Wade, 43 B.R. 976, 980–82 (Bankr. D. Colo.

1984), abrogated on other grounds by Cohen v. de la Cruz, 523 U.S. 213 (1998), as 12 Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 13

recognized by In re Denbleyker, 251 B.R. 891 (2000). First, some courts have

suggested the debtor must personally receive the money, property, or services for the

debt to be excepted from discharge under § 523(a)(2)(A). Id. at 980–81 (citing

Rudstrom v. Sheridan, 142 N.W. 313, 314 (Minn. 1913)). However, we have found

no courts that applied this narrow interpretation of the statute.4 See In re Ritz, 567

B.R. 715, 763 (Bankr. S.D. Tex. 2017) (“There are no circuit courts that have

adopted the first view.”). Second, some courts apply the “receipt of benefits” test

which requires the debtor to have received a benefit from the money, property,

services, or credit to render the debt nondischargeable. Wade, 43 B.R. at 981 (citing

Hyland v. Finch, 178 N.Y.S. 114, 115 (1919)). Third, some courts have held that the

debtor need not have personally obtained or benefited from the money or property

obtained by fraud. Id. (citing In re Kunkle, 40 F.2d 563, 563–64 (E.D. Mich. 1930)).

Mr. Bloom argues we should adopt the first view.

Importantly, the Supreme Court has provided some guidance for interpreting

§ 523(a)(2)(A) in Cohen v. de la Cruz, 523 U.S. 213 (1998). There, the Supreme

Court considered whether § 523(a)(2)(A) bars the discharge of treble damages

awarded against the debtor for fraud or whether the exception to discharge is limited

4 Courts have determined this view in Rudstrom v. Sheridan, 142 N.W. 313, 314 (Minn. 1913), was merely dicta and was not the holding of the court. See, e.g., In re Bilzerian, 100 F.3d 886, 890 n.3 (11th Cir. 1996); In re Ward, 115 B.R. 532, 538 (W.D. Mich. 1990); In re Wade, 43 B.R. 976, 980–81 (Bankr. D. Colo. 1984), abrogated on other grounds by Cohen v. de la Cruz, 523 U.S. 213 (1998), as recognized by In re Denbleyker, 251 B.R. 891 (2000). 13 Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 14

to the value of the money, property, services, or credit the debtor actually obtained

through fraud. Id. at 215. In analyzing the statute, the Court explained “the phrase ‘to

the extent obtained by’ . . . does not impose any limitation on the extent to which

‘any debt’ arising from fraud is excepted from discharge.” Id. at 218 (quoting 11

U.S.C. § 523(a)(2)(A)). The Cohen Court held § 523(a)(2)(A) prevents the discharge

of all liability arising from the fraud, including treble damages which do not

represent money the debtor obtained. Id. at 215.

Prior to the Cohen decision, the circuit courts that reached the issue required

the debtor to have received a benefit from the fraud to render the claim

nondischargeable under the subsection. Muegler v. Bening, 413 F.3d 980, 983 (9th

Cir. 2005) (collecting pre-Cohen cases applying the receipt-of-benefits requirement

from the Ninth, Eleventh, and Fifth Circuits). With the language in Cohen, however,

the Supreme Court applied a broader interpretation of § 523(a)(2)(A) such that the

“obtained by” language amounts to a causation requirement. Denbleyker, 251 B.R. at

896–97 (concluding the Cohen analysis treated the phrase “obtained by” as if it was

referring simply to causation); see also Husky Int’l Elecs., Inc. v. Ritz, 578 U.S. 356,

365 (2016) (holding any debts traceable to a fraudulent conveyance is

nondischargeable under § 523(a)(2)(A) even though the debtor did not receive the

funds in the fraudulent conveyance). That is, it requires only that the debt be

traceable to fraud. Husky Int’l Elecs., 578 U.S. at 365; see also Denbleyker, 251 B.R.

at 896–97.

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Since Cohen, an increasing number of courts have applied the third view—that

the debtor need not have personally obtained or benefited from the money or property

obtained by fraud. Denbleyker, 251 B.R. at 897–99; Muegler, 413 F.3d at 983–84

(holding the receipt-of-benefits element under § 523(a)(2)(A) no longer applies after

Cohen); In re M.M. Winkler & Assocs., 239 F.3d 746, 749–51 (5th Cir. 2001)

(considering Supreme Court precedent and clarifying that § 523(a)(2)(A) does not

require a “receipt of benefit” to except a debt from discharge); In re Pleasants, 219

F.3d 372, 375 (4th Cir. 2000) (applying Cohen and holding § 523(a)(2)(A) applies

even when “no portion of a creditor’s claim was literally transferred to the fraudulent

debtor”); In re Speisman, 495 B.R. 398, 403 (Bankr. N.D. Ill. 2013) (collecting cases

holding § 523(a)(2)(A) does not require the debtor to have received a benefit); cf. In

re Rountree, 330 B.R. 166, 170–75 (E.D. Va. 2004) (holding the creditor must have

lost some money, property, or services as a result of the fraud to satisfy the

requirements of § 523(a)(2)(A)). We have yet to decide which approach applies.

With the broad interpretation in Cohen, the Supreme Court has suggested

§ 523(a)(2)(A) does not require that the debtor personally obtain money, property, or

services to render the debt nondischargeable. This leaves open the question of

whether the debtor needs to have received a benefit from the fraud to be excepted

from discharge or whether the creditor must show only that the debt arose from the

debtor’s fraud. We need not decide this question, however, because even if we apply

the receipt-of-benefits requirement, the bankruptcy court’s findings support the

nondischargeability of the Glencove Claim under § 523(a)(2)(A). Specifically, the

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bankruptcy court found Mr. Bloom is the sole member of BBJ and BBJ obtained

money from Mr. Bloom’s fraud. Mr. Bloom thus received a benefit from the fraud.

See In re Grasso, 497 B.R. 434, 443 (Bankr. E.D. Pa. 2013) (concluding the debtor

received a benefit from the alleged fraud because he was a managing member and

held an ownership interest in the entity that received the proceeds of the loan); In re

Holwerda, 29 B.R. 486, 489 (Bankr. M.D. Fla. 1983) (explaining the defendant

received a benefit from the fraud because he was a principal of the corporation that

received the loan). Therefore, even if the receipt-of-benefits requirement applies, that

requirement has been met.

Moreover, the bankruptcy court did not commit clear error by finding the

Glencove Claim meets the other elements of § 523(a)(2)(A) because there was

evidence in the record supporting those findings. See Young, 91 F.3d at 1373 (listing

the elements required for nondischargeability under § 523(a)(2)(A)). Specifically,

there was evidence that Mr. Bloom made a false representation with the intent to

deceive Glencove when he lied about the negotiations with the seller and the amount

of the sale price. There was also evidence that BBJ, through Mr. Bloom, acted as an

agent for Glencove pursuant to the Agent Agreement, and Glencove reasonably relied

on its agent’s representations about the negotiations. Evidence also supported a

finding that Mr. Bloom’s lies caused Glencove to sustain a loss of at least the

difference between the seller’s price and the price Glencove agreed to pay as well as

the difference between the amount of repairs that Glencove believed would be

completed and the amount of repairs that were completed. Thus, Glencove has shown

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the necessary elements, and the bankruptcy court did not err by holding the Glencove

Claim was nondischargeable under § 523(a)(2)(A).

2. 11 U.S.C. § 523(a)(6) The bankruptcy court also concluded the Glencove Claim was not

dischargeable under 11 U.S.C. § 523(a)(6). Section 523(a)(6) excepts from discharge

a debt “for willful and malicious injury by the debtor to another entity or to the

property of another entity.” Mr. Bloom argues this subsection does not apply because

(1) § 523(a)(6) cannot apply when the more specific exception to discharge in

§ 523(a)(2)(A) applies and (2) the Glencove Claim does not meet the willful-injury or

malicious-injury requirements for nondischargeability under § 523(a)(6).

While there are meaningful distinctions between § 523(a)(2)(A) and

§ 523(a)(6), a debt that is nondischargeable under one subsection may also be

nondischargeable under the other so long as all the requirements are met under both

subsections. Husky Int’l Elecs., 578 U.S. at 363–64. Thus, to determine

nondischargeability under § 523(a)(6) we must review whether Mr. Bloom caused

both a willful and malicious injury. See In re Moore, 357 F.3d 1125, 1129 (10th Cir.

2004) (noting nondischargeability under § 523(a)(6) requires both willful injury and

malicious injury).

“Willful injury may be established by direct evidence of specific intent to

harm a creditor or the creditor’s property.” In re Longley, 235 B.R. 651, 657 (B.A.P.

10th Cir. 1999). The Supreme Court suggested the willfulness requirement is more

akin to intentional torts than negligent or reckless torts or a “knowing breach of

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contract.” Kawaauhau v. Geiger, 523 U.S. 57, 61–62 (1998). Mr. Bloom, therefore,

argues the willful-injury requirement cannot be met because Colorado’s economic

loss rule bars any tort claims against him arising out of the Agent Agreement. We

already concluded Colorado’s economic loss rule does not apply, so Mr. Bloom’s

argument against the willful-injury finding cannot succeed. Moreover, the bankruptcy

court did not clearly err by finding a willful injury because there is evidence that

Mr. Bloom deceived Glencove with the intent to make Glencove pay an extra

$250,000 for the private jet.

Next, malicious injury requires “evidence of the debtor’s motives.” In re

Smith, 618 B.R. 901, 919 (B.A.P. 10th Cir. 2020) (quotation marks omitted). To be

malicious, the debtor must have “acted with a culpable state of mind vis-à-vis the

actual injury caused the creditor.” Id. (quotation marks omitted). The malicious

element requires that the action be “wrongful and without just cause or excuse.” Id.

Mr. Bloom, however, argues there is no malicious injury here because there is no

evidence that he had personal animus against Glencove or the Pierces. This argument

was not raised before the bankruptcy court or the BAP, so the argument is forfeited,

and we would normally decline to address it. In re Williams, 49 F. App’x 845, 849

(10th Cir. 2002) (unpublished) (applying the preservation rule to a bankruptcy

appeal); see also United States v. Leffler, 942 F.3d 1192, 1196 (10th Cir. 2019)

(describing the principles of forfeiture and waiver). Even considering it on appeal,

however, Mr. Bloom cannot succeed because personal animus is not a requirement

for malicious injury. Smith, 618 B.R. at 919 (describing the requirements for

18 Appellate Case: 22-1005 Document: 010110709338 Date Filed: 07/12/2022 Page: 19

malicious injury); see also Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d Cir. 2006)

(explaining malicious injury means “wrongful and without just cause or excuse, even

in the absence of personal hatred, spite, or ill-will” (quoting In re Stelluti, 94 F.3d 84,

87 (2d Cir. 1996))).

The bankruptcy court did not commit clear error in finding malicious injury

because evidence in the record suggests Mr. Bloom deceived Glencove in order to

benefit himself and his colleagues through BBJ. This does not constitute a just cause

or excuse and supports a finding that Mr. Bloom “acted with a culpable state of mind

vis-à-vis the actual injury caused” to Glencove. Smith, 618 B.R. at 919. Therefore,

the bankruptcy court did not err by concluding the Glencove Claim was

nondischargeable under § 523(a)(6).

III. CONCLUSION Because the bankruptcy court did not err by allowing the Glencove Claim and

concluding it was not dischargeable, we AFFIRM the bankruptcy court’s decision in

this matter. We also DENY Mr. Bloom’s Motion for Certification of Question of

State Law.

Entered for the Court

Carolyn B. McHugh Circuit Judge