United States Court of Appeals For the First Circuit
No. 22-1287
IN RE: DONALD C. KUPPERSTEIN,
Debtor.
DONALD C. KUPPERSTEIN,
Appellant,
v.
IRENE SCHALL, Personal Representative of the Estate of Fred W. Kuhn; EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES,
Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Timothy S. Hillman, U.S. District Judge]
Before
Selya and Lynch, Circuit Judges, and McElroy, District Judge.
David G. Baker on brief for appellant. Nicola Yousif and the Law Office of Nick Yousif on brief for appellee Irene Schall. Brian G. Lee on brief for appellee the Executive Office of Health and Human Services.
Of the District of Rhode Island, sitting by designation. February 22, 2023
- 2 - MCELROY, District Judge. The bankruptcy court
determined, upon cross-motions for summary judgment, that Donald
C. Kupperstein knowingly and fraudulently omitted and
misrepresented material facts in his Chapter 7 bankruptcy petition
and related schedules, warranting the denial of his discharge under
11 U.S.C. § 727(a)(4)(A). Kupperstein appeals and we consider now
whether summary judgment was properly granted. For the reasons
below, we affirm.
I. Background
This is the third appearance in this court of a long-
running dispute, which we previously detailed in In re Kupperstein
(Kupperstein II), 994 F.3d 673 (1st Cir. 2021), and In re
Kupperstein (Kupperstein I), 943 F.3d 12 (1st Cir. 2019). We
report here what is necessary to understand the instant appeal.
On January 11, 2018, in the wake of Kupperstein's
multiple violations of judgments and orders of Massachusetts state
courts, he filed in bankruptcy court a voluntary petition for
relief under Chapter 7 of the United States Bankruptcy Code.
Appellees -- the Executive Office of Health and Human Services of
the Commonwealth of Massachusetts and Irene B. Schall, as the
personal representative of the estate of Fred W. Kuhn -- commenced
adversary proceedings on July 16, 2018, seeking the denial of
Kupperstein's bankruptcy discharge under 11 U.S.C. §§ 523,
- 3 - 727(a)(4)(A).1 As for the § 727(a)(4)(A) claim, Appellees posited
that Kupperstein's bankruptcy filings included material omissions
and falsehoods and that Kupperstein's Statement of Financial
Affairs (SOFA) and his Schedule A/B (required filings with his
petition) did not include income from a law practice he failed to
disclose, a title insurance settlement, and an interest in real
estate.
After discovery on the consolidated adversary
proceedings, Kupperstein moved for summary judgment and Appellees
responded with a joint cross-motion. Appellees filed a statement
of undisputed facts in support of their motion and filed a response
to Kupperstein's statement of undisputed facts. Kupperstein,
however, did not timely file a response to Appellees' statement of
facts. At the hearing on the motion, on June 16, 2020, he offered
to file his response within a day. Three days later, on June 19,
2020, Kupperstein filed his response and a motion for leave, which
the bankruptcy court denied because it had already taken the
summary judgment motions under advisement.
In a careful and detailed opinion, the bankruptcy court
1The bankruptcy court dismissed some of the Executive Office of Health and Human Services' (EOHHS) 11 U.S.C. § 523 claims upon consideration of Kupperstein's motion to dismiss. EOHHS voluntarily dismissed the rest after the district court upheld the granting of summary judgment in the Appellees' favor on the § 727(a)(4)(A) claim. Irene Schall voluntarily dismissed her § 523 claims. - 4 - held that on the undisputed evidence of record, the statutory
requirements required that Kupperstein be denied a discharge;
indeed the court held that Kupperstein had engaged in clear and
blatant misconduct. Specifically, the bankruptcy court determined
that Kupperstein made false oaths in both his SOFA and Schedule
A/B. That is, Kupperstein failed to include on the SOFA the source
or amount of income from his law practice or a $17,500 settlement
from a title insurer and, on the Schedule A/B, assets related to
real estate in Boston. The court further held that Kupperstein
knowingly failed to make these disclosures, or in the case of the
Schedule A/B, acted with "reckless disregard for the truth," given
that Kupperstein, an attorney, did report these items in other
places when required: namely, on his federal income tax returns
and in a financial statement supplied to a state court. All these
omissions were material, given that they related to his "financial
transactions" and concerned the "discovery of his business
dealings."
The bankruptcy court thus denied Kupperstein's motion
for summary judgment and granted Appellees' motion on their
§ 727(a)(4)(a) counts. Kupperstein's discharge was thus denied.
He appealed to the district court, which adopted the bankruptcy
court's analysis in total, affirming summary judgment and denying
the appeal. Kupperstein timely appealed to this court.
- 5 - II. Standard of Review
We serve here as a "second tier of appellate review."
Kupperstein II, 994 F.3d at 678 (quoting In re Montreal, Me. &
Atl. Ry., Ltd., 956 F.3d 1, 5-6 (1st Cir. 2020)). In that capacity
"we accord no particular deference to determinations made by the
first-tier appellate tribunal but, rather, focus exclusively on
the bankruptcy court's determinations." In re Montreal, Me. &
Atl. Ry., Ltd., 956 F.3d at 6.
III. Analysis
A.
As an initial matter, Kupperstein argues that the
bankruptcy court erred in denying his motion for leave to file a
belated response to Appellees' joint statement of facts in support
of their motion for summary judgment. We bypass Appellees'
contention that this argument has been waived and find no merit to
the argument.
Local Rule 7056-1 of the United States Bankruptcy Court, which
expressly adopts Local Rule 56.1 of the United States District
Court for the District of Massachusetts, requires: (1) motions for
summary judgment include a statement of undisputed material facts
supported by "page references to affidavits, depositions and other
documentation;" (2) oppositions to motions for summary judgment,
to be filed 21 days after service of the motion, must include a
statement of disputed facts again with references to supporting
- 6 - evidence, and (3) that "[m]aterial facts of record set forth in
the statement . . . be served by the moving party will be deemed
for purposes of the motion to be admitted by opposing parties
unless controverted by the statement required to be served by
opposing parties." D. Mass. L.R. 56.1; D. Mass. L.B.R. 7056-1.
"Such rules are designed to function as a means of
'focusing a district court's attention on what is—and what is not—
genuinely controverted." Cabán Hernández v. Philip Morris USA,
Inc., 486 F.3d 1, 7 (1st Cir. 2007) (quoting Calvi v. Knox County,
470 F.3d 422, 427 (1st Cir. 2006)). Parties ignore such rules "at
their peril." Id.
We review a lower court's application of local rules for
abuse of discretion. CMI Cap. Mkt. Inv., LLC v. González-Toro,
520 F.3d 58, 63 (1st Cir. 2008); NEPSK, Inc. v. Town of Houlton,
283 F.3d 1, 5 (1st Cir. 2002). The bankruptcy court held
Kupperstein to the deadline explicit in the local rule. We are
hard pressed to find that to be an abuse of discretion. See
Crowley v. L.L. Bean, Inc., 361 F.3d 22, 25 (1st Cir. 2004) ("While
a district court may forgive a party's violation of a local rule,
. . . we review deferentially its refusal to do so.").
Kupperstein's argument that the refusal to grant his
motion for leave prejudiced him because Appellees' asserted facts
would be admitted with or without evidence in support rings hollow.
Nowhere were Appellees excused from their own obligation under
- 7 - Local Rule 56.1 — the requirement to cite specific evidence in
support of each asserted fact. Moreover, a court must consider
all motions for summary judgment -- whether properly opposed,
improperly opposed, or unopposed -- on the merits and can grant
them only if the evidence properly presented entitles the moving
party to judgment as a matter of law. Fed. R. Civ. P. 56(e);
Torres-Rosado v. Rotger-Sabat, 335 F.3d 1, 9 (1st Cir. 2003). The
bankruptcy court carried out this obligation on the record properly
submitted.
B.
We now consider the bankruptcy court's granting of
Appellees' joint motion for summary judgment. "The legal
standards traditionally applicable to motions for summary judgment
. . . apply without change in bankruptcy proceedings." In re
Moultonborough Hotel Grp., LLC, 726 F.3d 1, 4 (1st Cir. 2013). We
review a grant of summary judgment de novo, examining the record
in the light most favorable to the non-moving party, drawing all
reasonable inferences in that party's favor. Hardy v. Loon
Mountain Recreation Corp., 276 F.3d 18, 20 (1st Cir. 2002).
"Summary judgment is warranted only if, after reviewing the record
in the manner just described, we determine that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law." Baez v. Town of Brookline, 44
F.4th 79, 82 (1st Cir. 2022) (quotation omitted).
- 8 - The Bankruptcy Code "limits the opportunity for a
completely unencumbered new beginning to the honest but
unfortunate debtor." Premier Cap., LLC v. Crawford (In re
Crawford), 841 F.3d 1, 7 (1st Cir. 2016) (internal quotation marks
omitted) (quoting Grogan v. Garner, 498 U.S. 279, 286-87 (1991)).
"[T]o make certain that those who seek the shelter of the
bankruptcy code do not play fast and loose with their assets or
with the reality of their affairs," 11 U.S.C. § 727 provides
several exceptions to a debtor's discharge from Chapter 7
bankruptcy. Boroff v. Tully (In re Tully), 818 F.2d 106, 110 (1st
Cir. 1987). Although "the statutory right to a discharge should
ordinarily be construed liberally in favor of a debtor," this is
not so when a claim "falls squarely" into one of the § 727(a)
enumerated exceptions. In re Crawford, 841 F.3d at 7-8 (quoting
In re Tully, 818 F.2d at 110). This case involves, "squarely,"
§ 727(a)(4)(A), which authorizes the denial of a discharge when
the debtor "knowingly and fraudulently, in or in connection with
the case . . . made a false oath or account" related to a "material
fact." See id. (alteration in original) (quoting 11 U.S.C.
§ 727(a)(4)(A)).
1. The False Oaths
The false oaths that Appellees brought to the attention
of the bankruptcy court resided in Kupperstein's SOFA and Schedule
A/B of his Chapter 7 petition. A debtor files all petitions,
- 9 - schedules, statements, and amendments in bankruptcy court under
oath. Fed. R. Bankr. P. 1008. Kupperstein, an attorney, never
claimed to have misunderstood the significance of signing
bankruptcy forms.
The SOFA required Kupperstein to disclose all gross
income that he received in the year of his bankruptcy filing and
in the prior two calendar years. Specific questions on the form
organized these disclosures. The questions relevant here sought:
(1) the total income from employment or operating a business, to
which Kupperstein answered "no"; (2) other income, including
"gross income" regardless of whether it was taxable, to which
Kupperstein listed only income from social security, retirement,
and IRA distributions; (3) connections to any business, including
sole proprietor or self-employment, to which Kupperstein responded
"No. None of the above applies"; and (4) any financial statements
provided to "creditors, or other parties," to which Kupperstein
replied "no."
But Kupperstein's individual federal income tax returns
for 2016 and 2017 (which he prepared) told a different story.
They revealed a law practice of which he was the proprietor with
a reported gross income. He also submitted a financial statement
to a state court about three weeks before he filed his bankruptcy
petition where he listed a weekly gross salary for his occupation
- 10 - of "[a]ttorney (semi-retired)."2 In addition, while Kupperstein
did not disclose $17,500 of "other income" from a title insurance
settlement on his SOFA, he did include it on his 2016 individual
federal income tax return.
Kupperstein attempts to explain away these omissions by
parsing language. He claims to have no income from "employment,"
as Massachusetts law would define that term, or from "operating a
business" because he is an "independent contractor" who takes on
occasional clients. However he defines himself under state law,
he failed to disclose income, a term defined broadly in the
Bankruptcy Code. See, e.g., 11 U.S.C. § 101(10A) (defining
"current monthly income" as the "average monthly income from all
sources that the debtor receives . . . without regard to whether
such income is taxable income"); see also Fed. R. Bankr. P. 9009(c)
(requiring construction of bankruptcy forms in a manner consistent
with the Federal Rules of Bankruptcy Procedure and the Bankruptcy
Code). And regarding the settlement funds from a title insurer,
Kupperstein argues that he did not disclose this income on his
SOFA because it was reimbursement for money lost and that the
2 Kupperstein argues that the financial statement (which he acknowledged filing) is inadmissible and should not have been considered on the motions for summary judgment. We find that he has not adequately preserved this issue for appeal. First, the bankruptcy court found that he had waived objection to Appellees' use of the statement as a trial exhibit and, at the summary judgment hearing, he offered to research and provide support for his objection but never did so.
- 11 - settlement was not taxable. Neither argument excuses the failure
to disclose this significant payment. Question 5 of the SOFA
requires disclosure of "money collected from lawsuits" and "income
regardless of whether that income is taxable." In short,
Kupperstein omitted required information on his SOFA, leading to
the indisputable conclusion that Kupperstein made false oaths on
that filing.
And he also did so on the Schedule A/B. That form
required him to disclose certain types of assets, including real
property. What he did not report was that in 2016, Kupperstein
was granted a $250,000 mortgage on a property in Boston. In
addition, Kupperstein received an assignment of the property's
leases and rents. All this information was publicly available as
the mortgage and the assignment were recorded in the registry of
deeds on October 3, 2016.
The bankruptcy court properly examined this evidence and
determined that this omission was a false oath. Contrary to
Kupperstein's assertions, the Schedule A/B omissions are not an
issue of "credibility" that cannot be determined on summary
judgment, but an examination of indisputable documentary evidence.
And his argument that he was not the mortgagee or mortgagor of the
property is contradicted by the mortgage deed, which expressly
granted "mortgage covenants, to secure the payment of $250,000" to
Kupperstein.
- 12 - 2. "Knowingly and Fraudulently"
False oaths alone, however, are not enough to deny a
discharge under 11 U.S.C. § 727(a)(4)(A). The falsehoods must be
made "knowingly and fraudulently." In re Crawford, 841 F.3d at 8
(quoting 11 U.S.C. § 727(a)(4)(A)). A debtor "knowingly and
fraudulently" makes a false oath if, despite knowing the truth,
the debtor "nonetheless willfully and intentionally swears to what
is false." Hannon v. ABCD Holdings, LLC (In re Hannon), 839 F.3d
63, 72 (1st Cir. 2016) (quoting Lussier v. Sullivan (In re
Sullivan), 455 B.R. 829, 837 (1st Cir. BAP 2011)). This standard
also can be met with a showing that the debtor acted with a
"reckless indifference to the truth." In re Tully, 818 F.2d at
112 (quoting Diorio v. Kreisler-Borg Constr. Co. (In re Diorio),
407 F.2d 1330, 1331 (2d Cir. 1969)).
Summary judgment is appropriate when the evidence is
conclusive enough to yield "no plausible conclusion but that the
debtor's intent was fraudulent" or if "the non-movant relies on
conclusory allegations or insupportable inferences" or "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." Id. at 83, 85; In re Marrama, 445 F.3d 518, 522
(1st Cir. 2006); see also Santiago v. Canon U.S.A., Inc., 138 F.3d
1, 5 (1st Cir. 1998).
- 13 - As for the omissions on his SOFA, Kupperstein argues
that these were not made "knowingly and fraudulently" based upon
his legal argument that he was not required to disclose the income
at issue. Having disposed of that argument above, we consider
whether the facts indicate that the false statements were made
"knowingly and fraudulently."
Kupperstein personally prepared his 2016 and 2017 tax
returns, claiming, in direct contrast to his SOFA, a gross income
from a law practice. Moreover, about three weeks before he filed
his bankruptcy petition, he provided a financial statement to a
state court noting a $250 per week salary, which would equal the
roughly $13,000 income he reported on his 2017 tax return. And
the same goes for the "other income" -- the $17,500 settlement
from the title insurer -- which Kupperstein also included on his
self-completed tax return. Yet he omitted all this information
in response to the SOFA's broad and direct questions seeking
disclosure of income and its sources. Moreover, he signed the
SOFA under a paragraph attesting, under penalty of perjury, that
he had "read the answers" provided and that his answers were "true
and correct." The only reasonable conclusion from the evidence,
as the bankruptcy court determined, is that Kupperstein knowingly
supplied a false oath regarding his SOFA.
As to his Schedule A/B, Kupperstein did not dispute that
he knowingly omitted the mortgage and assignment of rents but
- 14 - offered a convoluted, implausible explanation that the mortgage
was valueless despite there being no evidence it was ever
discharged. We agree with the bankruptcy court that Kupperstein's
"belated and illogical justifications only served to enhance the
appearance of fraud."
3. Materiality
Finally, to justify denial of a discharge under 11 U.S.C.
§ 727(a)(4)(A), a false oath made "knowingly and fraudulently"
must also relate to a "material fact." In re Crawford, 841 F.3d
at 8. A false oath is material if it "bears a relationship to the
debtor's business transactions or estate, or concerns the
discovery of assets, business dealings, or the existence and
disposition of property." In re Hannon, 839 F.3d at 75 (quoting
Lussier v. Sullivan (In re Sullivan), 455 B.R. 829, 829 (1st Cir.
BAP 2011)); Daniels, 736 F.3d at 82 ("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.'") (quoting In re Mascolo, 505 F.2d 274,
277 (1st Cir. 1974)). "[T]he threshold to materiality is fairly
low." In re Crawford, 841 F.3d at 8 (quoting In re Sullivan, 455
B.R. at 839).
Kupperstein offers only the conclusory argument that any
false oaths were "certainly not material." Such a conclusory
argument of course is not enough to defeat summary judgment.
- 15 - Garmon v. Nat'l R.R. Passenger Corp., 844 F.3d 307, 313 (1st Cir.
2016). In all events, the subject matter of each false oath, as
the bankruptcy court properly held, was material. Kupperstein's
omitted law practice income related to his business transactions
and the discovery of his business dealings; the title insurance
payment related to his history of financial transactions,
particularly during the look-back periods that apply to fraudulent
transfers; and his omission of the mortgage and the rents
assignment would have provided Appellees insight into
Kupperstein's financial transactions and opportunity to
investigate the same. Kupperstein's false oaths therefore were
material and warranted the denial of his discharge.
IV. Conclusion
The bankruptcy court properly granted Appellees' joint
motion for summary judgment and denied appellant's motion. We
therefore affirm the district court's order and award costs to
- 16 -