Randall Haler v. Boyington Capital Grp, L.L.C.
Court Docket Sheet

5th Circuit Court of Appeals

2017-40229 (ca5)

CASE TENTATIVELY calendared for oral argument for the week of 12/04/2017. [17-40229]

Case: 17-40229 Document: 00514187654 Page: 1 Date Filed: 10/09/2017 United States Court of Appeals FIFTH CIRCUIT OFFICE OF THE CLERK LYLE W. CAYCE TEL. 504-310-7700 CLERK 600 S. MAESTRI PLACE NEW ORLEANS, LA 70130 October 09, 2017 IMPORTANT NOTICE TO ALL COUNSEL LISTED BELOW No. 17-40229 Randall Haler v. Boyington Capital Grp, L.L.C. Projected Week of Hearing 12/04/17-----------------------------------------------------Dear Counsel: We have tentatively scheduled this case for oral argument during the week shown. If you have a serious, irresolvable conflict, contact us IMMEDIATELY via e-mail (clerk_calendaring@ca5.uscourts.gov), stating your conflict or request. Do not ask to reschedule argument unless you can find no other solution. GENERALLY, ENGAGEMENT OF COUNSEL IN ANOTHER COURT IS NOT AN "IRRESOLVABLE CONFLICT." So we can provide all pertinent information to the court before argument, and barring an emergency, we must receive all additional filings by noon on the workday immediately preceding argument. If you are arguing before the Fifth Circuit for the first time, please visit our Internet site at "http://www.ca5.uscourts.gov/docs/default-source/forms-and-documents---clerks-office/oral-argument-notices/handout.pdf" for "Preparing for Oral Argument in the Fifth Circuit" and at "http://www.ca5.uscourts.gov/documents/ltsig-e.pdf" for "Notice to Counsel Attending Oral Argument". If you do not have Internet access, please call and we will send you the information. Counsel are advised it is almost invariably more helpful, in lieu of large exhibits, to furnish the courtroom deputy four smaller sized (not larger than about 8 X 14 inches) copies of charts, diagrams, etc., for the judges' use. If counsel believe it necessary to use large exhibits, please also furnish the small copies. CALENDARING DEPARTMENT clerk_calendaring@ca5.uscourts.gov Mr. Jacob Michael Gold Mr. Michael Krist Haines Mr. Paul Whitfield Hughes Mr. Michael Branch Kimberly

SUPPLEMENTAL AUTHORITIES (FRAP 28j) FILED by Appellant Mr. Randall Haler Date of Service: 12/05/2017 via email - Attorney for Appellants: Hughes, Kimberly, Meazell; Attorney for Appellees: Gold, Haines [17-40229] (Paul Whitfield Hughes)

Case: 17-40229 Document: 00514260800 Page: 1 Date Filed: 12/05/2017 Mayer Brown LLP 1999 K Street, N.W. Washington, D.C. 20006-1101 Main Tel +1 202 263 3000 Main Fax +1 202 263 3300 December 5, 2017 www.mayerbrown.com Paul W. Hughes Direct Tel +1 202 263 3147 Direct Fax +1 202 263 5347 Lyle W. Cayce, Clerk phughes@mayerbrown.com U.S. Court of Appeals for the Fifth Circuit F. Edward Hebert Building 600 S. Maestri Place New Orleans, LA 70130-3408 Re: Haler v. Boyington Capital Group, LLC, No. 17-40229 Dear Mr. Cayce: Pursuant to Fed. R. App. P. 28(j), I write to address an issue that arose at oral argument. The Court asked whether there are mechanism for a party in Boyington’s position to minimize risk in the sort of transaction at issue here. As I explained, one way to do so is to obtain all material representations in writing. In addition to the bankruptcy laws, there is a separate, practical solution. If a party like Boyington wishes to ensure the stability of funds in these circumstances, it may place the funds in third-party escrow, where the funds may be drawn down only upon proof that certain items (like replacement parts) have been purchased or certain repair functions completed. Such third-party escrow is a common means of structuring relationships in construction and other fields. Because money does not move to the custody of the party completing the repair (or the construction) until after verifiable milestones are shown, the circumstances that arose in this case would be unlikely to occur. In sum, to more fully answer the Court’s question, that parties may structure their relationships from the outset using third-party escrow arrangements, so as to protect themselves from the situation that arose here. Sincerely, Paul W. Hughes cc: Counsel of Record by ECF Mayer Brown LLP operates in combination with other Mayer Brown entities (the "Mayer Brown Practices"), which have offices in North America, Europe and Asia and are associated with Tauil & Chequer Advogados, a Brazilian law partnership. Case: 17-40229 Document: 00514260800 Page: 2 Date Filed: 12/05/2017 CERTIFICATE OF ELECTRONIC COMPLIANCE I hereby certify that on December 5, 2017, the foregoing was transmitted to the Clerk of the U.S. Court of Appeals for the Fifth Circuit via the Court’s CM/ECF system, and that (1) the required privacy redactions were made pursuant to Circuit Rule 25.2.13, (2) the electronic submission is an exact copy of the paper document pursuant to Circuit Rule 25.2.1, and (3) the document has been scanned with the most recent version of Microsoft Forefront Endpoint Protection and is free of viruses. DATED: December 5, 2017 MAYER BROWN LLP s/Paul W. Hughes Paul W. Hughes Attorney for Defendant-Appellant Case: 17-40229 Document: 00514260800 Page: 3 Date Filed: 12/05/2017 CERTIFICATE OF SERVICE I hereby certify that on December 5, 2017, the foregoing was electronically filed with the Clerk of Court using the CM/ECF system, which will send notification to all counsel of record in this matter who are registered with the Court’s CM/ECF system./s/Paul W. Hughes Paul W. Hughes MAYER BROWN LLP 1999 K Street NW Washington, DC 20006 202-263-3147 (tel.) AMECURRENT 717867261.1 21-Oct-17 14:17

UNPUBLISHED OPINION FILED. [17-40229 Reversed] Judge: CDK, Judge: JLD, Judge: GJC. Mandate issue date is 01/22/2018 [17-40229]

Case: 17-40229 Document: 00514289510 Page: 1 Date Filed: 12/29/2017 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals No. 17-40229 Fifth Circuit FILED December 29, 2017 In the Matter of: RANDALL LEE HALER Lyle W. Cayce Clerk Debtor RANDALL HALER, Appellant v. BOYINGTON CAPITAL GROUP, L.L.C., Appellee Appeal from the United States District Court for the Eastern District of Texas USDC No. 4:16-CV-185 Before KING, DENNIS, and COSTA, Circuit Judges. PER CURIAM:* Randall Lee Haler filed for Chapter 7 bankruptcy. Boyington Capital Group, L.L.C., then filed a complaint, requesting that a state court judgment debt be declared non-dischargeable pursuant to 11 U.S.C. § 523(a)(2), (4), and (6). Boyington then filed a motion for partial summary judgment. The bankruptcy court granted summary judgment in favor of Boyington. It found * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. 1 of 11 Case: 17-40229 Document: 00514289510 Page: 2 Date Filed: 12/29/2017 No. 17-40229 that the debt, which was obtained by Haler's false representations, was non- dischargeable under § 523(a)(2)(A). The district court affirmed the grant of summary judgment. Haler now appeals. Because Haler's representations were statements respecting financial condition, his debt is outside the scope of the § 523(a)(2)(A) exception. We REVERSE. I. Randall Lee Haler was the Executive Vice President and a limited partner of McKinney Aerospace, L.P. ("McKinney"), a company that repaired and refurbished business jets. In March 2006, McKinney entered into four contracts with Boyington Capital Group, L.L.C. ("Boyington"), to repair and restore a Boyington jet. In April 2006, Boyington tendered a payment of $337,275 to McKinney. Subsequently, the parties agreed on a change order. On June 6, 2006, Boyington tendered an additional $60,000 for that change order. However, later on the same day, Boyington sent a letter to McKinney, asking McKinney to stop work on the jet and to refund any money paid but not yet spent. While McKinney acknowledged that it needed to return money to Boyington, it did not issue any refunds. A month later in July 2006, Boyington sued Haler and other parties in Texas state court for, inter alia, fraud under state law theories of recovery. At the trial, Greg Morse of Boyington stated that Haler had expressed to Boyington that McKinney was in "very fine legally [sic] financial shape" and had "plenty of cash to operate [the] business during the term that [it was] working on" the jet. The jury found, inter alia, that Haler's representations were false and that Haler was therefore liable for fraud. The jury returned a verdict in favor of Boyington and awarded $258,021.73 in damages. The state district court issued a final judgment on December 6, 2011. Haler appealed, but the Texas appeals court affirmed the final judgment with respect to all 2 2 of 11 Case: 17-40229 Document: 00514289510 Page: 3 Date Filed: 12/29/2017 No. 17-40229 issues except for attorneys' fees. In June 2015, the state district court issued an amended judgment, which became final and non-appealable. After the entry of the jury verdict but before the December 2011 final judgment, Haler filed a voluntary Chapter 7 bankruptcy petition in June 2010. Boyington then initiated this adversary proceeding in September 2010, seeking a declaration that the state court judgment debt is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2), (4), and (6). After the state court issued the amended judgment in June 2015, Boyington filed a motion for partial summary judgment. It argued that the debt is non-dischargeable pursuant to § 523(a)(2)(A) and (a)(4) as a matter of law because Haler is collaterally estopped from relitigating the determinations rendered in state court concerning his fraud. The bankruptcy court granted Boyington's motion. It decided that collateral estoppel applied and then declared the debt non- dischargeable under § 523(a)(2)(A). In doing so, it rejected Haler's argument that his oral statements were outside the scope of § 523(a)(2)(A) because they pertained to McKinney's financial condition. Haler appealed, but the district court affirmed the bankruptcy court's decision. Haler then timely appealed to this court. He now contends that his representations that (1) McKinney was in "very fine legally [sic] financial shape" and (2) it had "plenty of cash to operate [the] business" were "statement[s] respecting. . . financial condition" under § 523(a)(2)(A) and thus dischargeable under this subsection. II. We review a bankruptcy court's findings of fact for clear error and its conclusions of law de novo. See Judgment Factors, L.L.C. v. Packer (In re Packer), 816 F.3d 87, 91 (5th Cir. 2016). The meaning of "statement respecting. . . financial condition" in 11 U.S.C. § 523(a)(2) is a question of law, which we consider de novo. See Bandi v. Becnel (In re Bandi), 683 F.3d 671, 674 (5th Cir. 2012). The bankruptcy court granted summary judgment in favor of Boyington, 3 3 of 11 Case: 17-40229 Document: 00514289510 Page: 4 Date Filed: 12/29/2017 No. 17-40229 which is proper when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." In re Packer, 816 F.3d at 91 (quoting Fed. R. Civ. P. 56(a)). In a Chapter 7 bankruptcy proceeding, a court discharges many of the debtor's preexisting obligations. See 11 U.S.C. § 727. While the general purpose of the Bankruptcy Code is to provide debtors with a "fresh start," there are several statutory exceptions to discharge. In re Bandi, 683 F.3d at 674. Some debts incurred as a result of the debtor's fraud or other misconduct cannot be discharged. See 11 U.S.C. § 523. At issue here is whether the exception to discharge set forth in 11 U.S.C. § 523(a)(2)(A) applies to Haler's oral statements, thus rendering the state court judgment debt non-dischargeable. This issue turns on whether his oral statements qualify as "statement[s] respecting. . . financial condition." Id. § 523(a)(2)(A). If his statements indeed qualify, then they are outside the scope of § 523(a)(2)(A) and therefore subject to discharge. See In re Bandi, 683 F.3d at 674. The phrase "statement respecting. . . financial condition" appears in subsections (A) and (B) of 11 U.S.C. § 523(a)(2): (a) A discharge under section 727. . . of this title does not discharge an individual debtor from any debt— ... (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by— (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's[1] financial condition; (B) use of a statement in writing— (i) that is materially false; (ii) respecting the debtor's or an insider's financial condition; 1Haler's statements pertained to McKinney. Boyington pleaded (and it is undisputed) that McKinney is an insider of Haler. 4 4 of 11 Case: 17-40229 Document: 00514289510 Page: 5 Date Filed: 12/29/2017 No. 17-40229 (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive; . . . . (emphasis added). Section 523(a)(2)(A) generally renders debt obtained by false pretenses, false representations, or actual fraud non-dischargeable. See In re Bandi, 683 F.3d at 674. But it contains an exception: if the debt is obtained by a false oral statement respecting financial condition, then it is dischargeable. See id. In contrast, a false written statement respecting financial condition is non-dischargeable under § 523(a)(2)(B), provided that the other conditions in this subsection are met. See id. In In re Bandi, we held that statements respecting financial condition are "those that purport to present a picture of the debtor's overall financial health." Id. at 677 (quoting Cadwell v. Joelson (In re Joelson), 427 F.3d 700, 714 (10th Cir. 2005)). We stated that "financial condition" meant "the general overall financial condition of an entity or individual, that is, the overall value of property and income as compared to debt and liabilities." Id. at 676. A representation regarding a specific asset "says nothing about the overall financial condition of the person making the representation or the ability to repay debt." 2 Id. "Ownership of specific assets does not mean that the assets are unencumbered or that other debts or liabilities of the owner do not exceed the value of the assets." Id. at 678–79. We also stated that "financial condition" 2 Currently, there is a circuit split regarding whether a representation about a specific asset can qualify as a statement respecting financial condition under 11 U.S.C. § 523(a)(2). We concluded in In re Bandi that such a representation cannot qualify. See 683 F.3d at 676. The Tenth and Eighth Circuits have held the same. See In re Joelson, 427 F.3d at 706–07; Rose v. Lauer (In re Lauer), 371 F.3d 406, 413 (8th Cir. 2004). But the Eleventh and Fourth Circuits have reached the opposite conclusion. See Appling v. Lamar, Archer & Cofrin, LLP (In re Appling), 848 F.3d 953, 961 (11th Cir. 2017), petition for cert. filed, (Apr. 11, 2017) (No. 16-1215); Engler v. Van Steinburg (In re Van Steinburg), 744 F.2d 1060, 1061 (4th Cir. 1984). 5 5 of 11 Case: 17-40229 Document: 00514289510 Page: 6 Date Filed: 12/29/2017 No. 17-40229 connoted the "overall net worth of an entity or individual." Id. at 676; see id. at 675 (noting that the Supreme Court had previously "seemed to equate a 'statement' about 'financial condition' with what is commonly understood as something akin to a balance sheet or bank balance" (citing Field v. Mans, 516 U.S. 59, 76–77 (1995))). Finally, we decided that the debtors' representations in In re Bandi regarding the ownership of three properties (i.e., a commercial building, a condominium development, and a residence) were not statements respecting financial condition. Id. at 678. Their representations fell short of conveying the debtors' net worth or "overall financial condition and consequent ability to pay." See id. Haler's representations were "statement[s] respecting. . . financial condition" and therefore outside the scope of § 523(a)(2)(A). The statements at issue are (1) that McKinney was in "very fine legally [sic] financial shape" and (2) that McKinney had "plenty of cash to operate [the] business during the term that [it was] working on" the jet. These representations pertained to the overall financial strength and stability of McKinney. In its complaint filed in the bankruptcy court, Boyington stated that "Haler misrepresented the financial strength and capability of McKinney" (emphasis added). In its motion for partial summary judgment, Boyington again stated Haler had expressly represented "that McKinney Aerospace had the experience, competence and financial stability to perform the repair and restoration work" (emphasis added). Whereas the misrepresentations concerned the debtors' specific assets (i.e., the properties) in In re Bandi, id. at 674, Haler's representations were general and intimated that the overall value of McKinney's property and income was greater than its debt and liabilities. Thus, his statements "present[ed] a picture" of McKinney's "overall financial health," id. at 677 (quoting In re Joelson, 427 F.3d at 714). 6 6 of 11 Case: 17-40229 Document: 00514289510 Page: 7 Date Filed: 12/29/2017 No. 17-40229 Boyington argues that Haler's statements were not akin to a balance sheet or income statement and therefore did not present a picture of overall financial health. This contention is unavailing. As we noted in In re Bandi, a statement respecting financial condition "need not carry the formality of a balance sheet, income statement, statement of changes in financial position, or income and debt statement." Id. at 677 n.29 (quoting In re Joelson, 427 F.3d at 714). The information regarding "overall net worth or overall income flow" contained within such a statement—not the formality of the statement—is what is important. Id. (quoting In re Joelson, 427 F.3d at 714). In sum, we conclude that Haler's statements represented that McKinney was overall financially sound. These oral representations were "statement[s] respecting. . . financial condition" and thus did not render the debt non- dischargeable under § 523(a)(2)(A). III. For the foregoing reasons, we REVERSE the grant of summary judgment in favor of Boyington. 7 7 of 11 Case: 17-40229 Document: 00514289516 Page: 1 Date Filed: 12/29/2017 Print Form UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT BILL OF COSTS NOTE: The Bill of Costs is due in this office within 14 days from the date of the opinion, See FED. R. APP. P. & 5T H CIR. R. 39. Untimely bills of costs must be accompanied by a separate motion to file out of time, which the court may deny. _______________________________________________ v. __________________________________________ No. _____________________ The Clerk is requested to tax the following costs against: _________________________________________________________________________________________ COSTS TAXABLE UNDER REQUESTED ALLOW ED Fed. R. App. P. & 5 th Cir. R. 39 (If different from amount requested) No. of Copies Pages Per Copy Cost per Page* Total Cost No. of Pages per Cost per Page* Total Cost Documents Document Docket Fee ($500.00) Appendix or Record Excerpts Appellant's Brief Appellee's Brief Appellant's Reply Brief Other: Total $ ________________ Costs are taxed in the amount of $ _______________ Costs are hereby taxed in the amount of $ _______________________ this ________________________________ day of __________________________, ___________. LYLE W.CA Y C E, C LERK State of County of _________________________________________________ By ____________________________________________ Deputy Clerk I _____________________________________________________________, do hereby swear under penalty of perjury that the services for which fees have been charged were incurred in this action and that the services for which fees have been charged were actually and necessarily performed. A copy of this Bill of Costs was this day mailed to opposing counsel, with postage fully prepaid thereon. This _______________ day of ________________________________, ______________. _____________________________________________________________________ (Signature) *SEE REVERSE SIDE FOR RULES GOVERNING TAXATION OF COSTS Attorney for __________________________________________ 8 of 11 Case: 17-40229 Document: 00514289516 Page: 2 Date Filed: 12/29/2017 FIFTH CIRCUIT RULE 39 39.1 Taxable Rates. The cost of reproducing necessary copies of the brief, appendices, or record excerpts shall be taxed at a rate not higher than $0.15 per page, including cover, index, and internal pages, for any for of reproduction costs. The cost of the binding required by 5 T H C IR. R. 32.2.3that mandates that briefs must lie reasonably flat when open shall be a taxable cost but not limited to the foregoing rate. This rate is intended to approximate the current cost of the most economical acceptable method of reproduction generally available; and the clerk shall, at reasonable intervals, examine and review it to reflect current rates. Taxable costs will be authorized for up to 15 copies for a brief and 10 copies of an appendix or record excerpts, unless the clerk gives advance approval for additional copies. 39.2 Nonrecovery of Mailing and Com m ercial Delivery Service Costs. Mailing and commercial delivery fees incurred in transmitting briefs are not recoverable as taxable costs. 39.3 Tim e for Filing Bills of Costs. The clerk must receive bills of costs and any objections within the times set forth in F ED. R. A PP. P. 39(D). See 5 T H C IR. R. 26.1. F ED. R. A P P. P. 39. COSTS (a) Against Whom Assessed. The following rules apply unless the law provides or the court orders otherwise; (1) if an appeal is dismissed, costs are taxed against the appellant, unless the parties agree otherwise; (2) if a judgment is affirmed, costs are taxed against the appellant; (3) if a judgment is reversed, costs are taxed against the appellee; (4) if a judgment is affirmed in part, reversed in part, modified, or vacated, costs are taxed only as the court orders. (b) Costs For and Against the United States. Costs for or against the United States, its agency or officer will be assessed under Rule 39(a) only if authorized by law. ©) Costs of Copies Each court of appeals must, by local rule, fix the maximum rate for taxing the cost of producing necessary copies of a brief or appendix, or copies of records authorized by rule 30(f). The rate must not exceed that generally charged for such work in the area where the clerk's office is located and should encourage economical methods of copying. (d) Bill of costs: Objections; Insertion in Mandate. (1) A party who wants costs taxed must – within 14 days after entry of judgment – file with the circuit clerk, with proof of service, an itemized and verified bill of costs. (2) Objections must be filed within 14 days after service of the bill of costs, unless the court extends the time. (3) The clerk must prepare and certify an itemized statement of costs for insertion in the mandate, but issuance of the mandate must not be delayed for taxing costs. If the mandate issues before costs are finally determined, the district clerk must – upon the circuit clerk's request – add the statement of costs, or any amendment of it, to the mandate. (e) Costs of Appeal Taxable in the District Court. The following costs on appeal are taxable in the district court for the benefit of the party entitled to costs under this rule: (1) the preparation and transmission of the record; (2) the reporter's transcript, if needed to determine the appeal; (3) premiums paid for a supersedeas bond or other bond to preserve rights pending appeal; and (4) the fee for filing the notice of appeal. 9 of 11 Case: 17-40229 Document: 00514289517 Page: 1 Date Filed: 12/29/2017 United States Court of Appeals FIFTH CIRCUIT OFFICE OF THE CLERK LYLE W. CAYCE TEL. 504-310-7700 CLERK 600 S. MAESTRI PLACE NEW ORLEANS, LA 70130 December 29, 2017 MEMORANDUM TO COUNSEL OR PARTIES LISTED BELOW Regarding: Fifth Circuit Statement on Petitions for Rehearing or Rehearing En Banc No. 17-40229 Randall Haler v. Boyington Capital Grp, L.L.C. USDC No. 4:16-CV-185 --------------------------------------------------- Enclosed is a copy of the court's decision. The court has entered judgment under FED R. APP. P. 36. (However, the opinion may yet contain typographical or printing errors which are subject to correction.) FED R. APP. P. 39 through 41, and 5TH Cir. R.s 35, 39, and 41 govern costs, rehearings, and mandates. 5TH Cir. R.s 35 and 40 require you to attach to your petition for panel rehearing or rehearing en banc an unmarked copy of the court's opinion or order. Please read carefully the Internal Operating Procedures (IOP's) following FED R. APP. P. 40 and 5TH CIR. R. 35 for a discussion of when a rehearing may be appropriate, the legal standards applied and sanctions which may be imposed if you make a nonmeritorious petition for rehearing en banc. Direct Criminal Appeals. 5TH CIR. R. 41 provides that a motion for a stay of mandate under FED R. APP. P. 41 will not be granted simply upon request. The petition must set forth good cause for a stay or clearly demonstrate that a substantial question will be presented to the Supreme Court. Otherwise, this court may deny the motion and issue the mandate immediately. Pro Se Cases. If you were unsuccessful in the district court and/or on appeal, and are considering filing a petition for certiorari in the United States Supreme Court, you do not need to file a motion for stay of mandate under FED R. APP. P. 41. The issuance of the mandate does not affect the time, or your right, to file with the Supreme Court. Court Appointed Counsel. Court appointed counsel is responsible for filing petition(s) for rehearing(s) (panel and/or en banc) and writ(s) of certiorari to the U.S. Supreme Court, unless relieved of your obligation by court order. If it is your intention to file a motion to withdraw as counsel, you should notify your client promptly, and advise them of the time limits for filing for rehearing and certiorari. Additionally, you MUST confirm that this information was given to your client, within the body of your motion to withdraw as counsel. 10 of 11 Case: 17-40229 Document: 00514289517 Page: 2 Date Filed: 12/29/2017 The judgment entered provides that appellee pay to appellant the costs on appeal. Sincerely, LYLE W. CAYCE, Clerk By: _______________________ Erica A. Benoit, Deputy Clerk Enclosure(s) Mr. Jacob Michael Gold Mr. Michael Krist Haines Mr. Paul Whitfield Hughes Mr. Michael Branch Kimberly Mr. John Glenn Meazell 11 of 11

MANDATE ISSUED. Mandate issue date satisfied. [17-40229]

Case: 17-40229 Document: 00514315500 Page: 1 Date Filed: 01/22/2018 United States Court of Appeals FIFTH CIRCUIT OFFICE OF THE CLERK LYLE W. CAYCE TEL. 504-310-7700 CLERK 600 S. MAESTRI PLACE NEW ORLEANS, LA 70130 January 22, 2018 Mr. David O'Toole Eastern District of Texas, Sherman 101 E. Pecan Street Federal Building Room 216 Sherman, TX 75090-0000 No. 17-40229 Randall Haler v. Boyington Capital Grp, L.L.C. USDC No. 4:16-CV-185 Dear Mr. O'Toole, Enclosed is a copy of the judgment issued as the mandate and a copy of the court's opinion. Sincerely, LYLE W. CAYCE, Clerk By: _________________________ Christina A. Gardner, Deputy Clerk 504-310-7684 cc: Mr. Jacob Michael Gold Mr. Michael Krist Haines Mr. Paul Whitfield Hughes Mr. Michael Branch Kimberly Mr. John Glenn Meazell 1 of 9 Case: 17-40229 Document: 00514315498 Page: 1 Date Filed: 01/22/2018 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _______________________ United States Court of Appeals Fifth Circuit No. 17-40229 FILED _______________________ December 29, 2017 D.C. Docket No. 4:16-CV-185 Lyle W. Cayce Clerk In the Matter of: RANDALL LEE HALER Debtor ***************************************** RANDALL HALER, Appellant Certified as a true copy and issued v. as the mandate on Jan 22, 2018 BOYINGTON CAPITAL GROUP, L.L.C., Attest: Clerk, U.S. Court of Appeals, Fifth Circuit Appellee Appeal from the United States District Court for the Eastern District of Texas Before KING, DENNIS, and COSTA, Circuit Judges. JUDGMENT This cause was considered on the record on appeal and was argued by counsel. It is ordered and adjudged that the judgment of the District Court is reversed. IT IS FURTHER ORDERED that appellee pay to appellant the costs on appeal to be taxed by the Clerk of this Court. 2 of 9 Case: 17-40229 Document: 00514315499 Page: 1 Date Filed: 01/22/2018 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals No. 17-40229 Fifth Circuit FILED December 29, 2017 In the Matter of: RANDALL LEE HALER Lyle W. Cayce Clerk Debtor RANDALL HALER, Appellant v. BOYINGTON CAPITAL GROUP, L.L.C., Appellee Appeal from the United States District Court for the Eastern District of Texas USDC No. 4:16-CV-185 Before KING, DENNIS, and COSTA, Circuit Judges. PER CURIAM:* Randall Lee Haler filed for Chapter 7 bankruptcy. Boyington Capital Group, L.L.C., then filed a complaint, requesting that a state court judgment debt be declared non-dischargeable pursuant to 11 U.S.C. § 523(a)(2), (4), and (6). Boyington then filed a motion for partial summary judgment. The bankruptcy court granted summary judgment in favor of Boyington. It found * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. 3 of 9 Case: 17-40229 Document: 00514315499 Page: 2 Date Filed: 01/22/2018 No. 17-40229 that the debt, which was obtained by Haler's false representations, was non- dischargeable under § 523(a)(2)(A). The district court affirmed the grant of summary judgment. Haler now appeals. Because Haler's representations were statements respecting financial condition, his debt is outside the scope of the § 523(a)(2)(A) exception. We REVERSE. I. Randall Lee Haler was the Executive Vice President and a limited partner of McKinney Aerospace, L.P. ("McKinney"), a company that repaired and refurbished business jets. In March 2006, McKinney entered into four contracts with Boyington Capital Group, L.L.C. ("Boyington"), to repair and restore a Boyington jet. In April 2006, Boyington tendered a payment of $337,275 to McKinney. Subsequently, the parties agreed on a change order. On June 6, 2006, Boyington tendered an additional $60,000 for that change order. However, later on the same day, Boyington sent a letter to McKinney, asking McKinney to stop work on the jet and to refund any money paid but not yet spent. While McKinney acknowledged that it needed to return money to Boyington, it did not issue any refunds. A month later in July 2006, Boyington sued Haler and other parties in Texas state court for, inter alia, fraud under state law theories of recovery. At the trial, Greg Morse of Boyington stated that Haler had expressed to Boyington that McKinney was in "very fine legally [sic] financial shape" and had "plenty of cash to operate [the] business during the term that [it was] working on" the jet. The jury found, inter alia, that Haler's representations were false and that Haler was therefore liable for fraud. The jury returned a verdict in favor of Boyington and awarded $258,021.73 in damages. The state district court issued a final judgment on December 6, 2011. Haler appealed, but the Texas appeals court affirmed the final judgment with respect to all 2 4 of 9 Case: 17-40229 Document: 00514315499 Page: 3 Date Filed: 01/22/2018 No. 17-40229 issues except for attorneys' fees. In June 2015, the state district court issued an amended judgment, which became final and non-appealable. After the entry of the jury verdict but before the December 2011 final judgment, Haler filed a voluntary Chapter 7 bankruptcy petition in June 2010. Boyington then initiated this adversary proceeding in September 2010, seeking a declaration that the state court judgment debt is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2), (4), and (6). After the state court issued the amended judgment in June 2015, Boyington filed a motion for partial summary judgment. It argued that the debt is non-dischargeable pursuant to § 523(a)(2)(A) and (a)(4) as a matter of law because Haler is collaterally estopped from relitigating the determinations rendered in state court concerning his fraud. The bankruptcy court granted Boyington's motion. It decided that collateral estoppel applied and then declared the debt non- dischargeable under § 523(a)(2)(A). In doing so, it rejected Haler's argument that his oral statements were outside the scope of § 523(a)(2)(A) because they pertained to McKinney's financial condition. Haler appealed, but the district court affirmed the bankruptcy court's decision. Haler then timely appealed to this court. He now contends that his representations that (1) McKinney was in "very fine legally [sic] financial shape" and (2) it had "plenty of cash to operate [the] business" were "statement[s] respecting. . . financial condition" under § 523(a)(2)(A) and thus dischargeable under this subsection. II. We review a bankruptcy court's findings of fact for clear error and its conclusions of law de novo. See Judgment Factors, L.L.C. v. Packer (In re Packer), 816 F.3d 87, 91 (5th Cir. 2016). The meaning of "statement respecting. . . financial condition" in 11 U.S.C. § 523(a)(2) is a question of law, which we consider de novo. See Bandi v. Becnel (In re Bandi), 683 F.3d 671, 674 (5th Cir. 2012). The bankruptcy court granted summary judgment in favor of Boyington, 3 5 of 9 Case: 17-40229 Document: 00514315499 Page: 4 Date Filed: 01/22/2018 No. 17-40229 which is proper when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." In re Packer, 816 F.3d at 91 (quoting Fed. R. Civ. P. 56(a)). In a Chapter 7 bankruptcy proceeding, a court discharges many of the debtor's preexisting obligations. See 11 U.S.C. § 727. While the general purpose of the Bankruptcy Code is to provide debtors with a "fresh start," there are several statutory exceptions to discharge. In re Bandi, 683 F.3d at 674. Some debts incurred as a result of the debtor's fraud or other misconduct cannot be discharged. See 11 U.S.C. § 523. At issue here is whether the exception to discharge set forth in 11 U.S.C. § 523(a)(2)(A) applies to Haler's oral statements, thus rendering the state court judgment debt non-dischargeable. This issue turns on whether his oral statements qualify as "statement[s] respecting. . . financial condition." Id. § 523(a)(2)(A). If his statements indeed qualify, then they are outside the scope of § 523(a)(2)(A) and therefore subject to discharge. See In re Bandi, 683 F.3d at 674. The phrase "statement respecting. . . financial condition" appears in subsections (A) and (B) of 11 U.S.C. § 523(a)(2): (a) A discharge under section 727. . . of this title does not discharge an individual debtor from any debt— ... (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by— (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's[1] financial condition; (B) use of a statement in writing— (i) that is materially false; (ii) respecting the debtor's or an insider's financial condition; 1Haler's statements pertained to McKinney. Boyington pleaded (and it is undisputed) that McKinney is an insider of Haler. 4 6 of 9 Case: 17-40229 Document: 00514315499 Page: 5 Date Filed: 01/22/2018 No. 17-40229 (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive; . . . . (emphasis added). Section 523(a)(2)(A) generally renders debt obtained by false pretenses, false representations, or actual fraud non-dischargeable. See In re Bandi, 683 F.3d at 674. But it contains an exception: if the debt is obtained by a false oral statement respecting financial condition, then it is dischargeable. See id. In contrast, a false written statement respecting financial condition is non-dischargeable under § 523(a)(2)(B), provided that the other conditions in this subsection are met. See id. In In re Bandi, we held that statements respecting financial condition are "those that purport to present a picture of the debtor's overall financial health." Id. at 677 (quoting Cadwell v. Joelson (In re Joelson), 427 F.3d 700, 714 (10th Cir. 2005)). We stated that "financial condition" meant "the general overall financial condition of an entity or individual, that is, the overall value of property and income as compared to debt and liabilities." Id. at 676. A representation regarding a specific asset "says nothing about the overall financial condition of the person making the representation or the ability to repay debt." 2 Id. "Ownership of specific assets does not mean that the assets are unencumbered or that other debts or liabilities of the owner do not exceed the value of the assets." Id. at 678–79. We also stated that "financial condition" 2 Currently, there is a circuit split regarding whether a representation about a specific asset can qualify as a statement respecting financial condition under 11 U.S.C. § 523(a)(2). We concluded in In re Bandi that such a representation cannot qualify. See 683 F.3d at 676. The Tenth and Eighth Circuits have held the same. See In re Joelson, 427 F.3d at 706–07; Rose v. Lauer (In re Lauer), 371 F.3d 406, 413 (8th Cir. 2004). But the Eleventh and Fourth Circuits have reached the opposite conclusion. See Appling v. Lamar, Archer & Cofrin, LLP (In re Appling), 848 F.3d 953, 961 (11th Cir. 2017), petition for cert. filed, (Apr. 11, 2017) (No. 16-1215); Engler v. Van Steinburg (In re Van Steinburg), 744 F.2d 1060, 1061 (4th Cir. 1984). 5 7 of 9 Case: 17-40229 Document: 00514315499 Page: 6 Date Filed: 01/22/2018 No. 17-40229 connoted the "overall net worth of an entity or individual." Id. at 676; see id. at 675 (noting that the Supreme Court had previously "seemed to equate a 'statement' about 'financial condition' with what is commonly understood as something akin to a balance sheet or bank balance" (citing Field v. Mans, 516 U.S. 59, 76–77 (1995))). Finally, we decided that the debtors' representations in In re Bandi regarding the ownership of three properties (i.e., a commercial building, a condominium development, and a residence) were not statements respecting financial condition. Id. at 678. Their representations fell short of conveying the debtors' net worth or "overall financial condition and consequent ability to pay." See id. Haler's representations were "statement[s] respecting. . . financial condition" and therefore outside the scope of § 523(a)(2)(A). The statements at issue are (1) that McKinney was in "very fine legally [sic] financial shape" and (2) that McKinney had "plenty of cash to operate [the] business during the term that [it was] working on" the jet. These representations pertained to the overall financial strength and stability of McKinney. In its complaint filed in the bankruptcy court, Boyington stated that "Haler misrepresented the financial strength and capability of McKinney" (emphasis added). In its motion for partial summary judgment, Boyington again stated Haler had expressly represented "that McKinney Aerospace had the experience, competence and financial stability to perform the repair and restoration work" (emphasis added). Whereas the misrepresentations concerned the debtors' specific assets (i.e., the properties) in In re Bandi, id. at 674, Haler's representations were general and intimated that the overall value of McKinney's property and income was greater than its debt and liabilities. Thus, his statements "present[ed] a picture" of McKinney's "overall financial health," id. at 677 (quoting In re Joelson, 427 F.3d at 714). 6 8 of 9 Case: 17-40229 Document: 00514315499 Page: 7 Date Filed: 01/22/2018 No. 17-40229 Boyington argues that Haler's statements were not akin to a balance sheet or income statement and therefore did not present a picture of overall financial health. This contention is unavailing. As we noted in In re Bandi, a statement respecting financial condition "need not carry the formality of a balance sheet, income statement, statement of changes in financial position, or income and debt statement." Id. at 677 n.29 (quoting In re Joelson, 427 F.3d at 714). The information regarding "overall net worth or overall income flow" contained within such a statement—not the formality of the statement—is what is important. Id. (quoting In re Joelson, 427 F.3d at 714). In sum, we conclude that Haler's statements represented that McKinney was overall financially sound. These oral representations were "statement[s] respecting. . . financial condition" and thus did not render the debt non- dischargeable under § 523(a)(2)(A). III. For the foregoing reasons, we REVERSE the grant of summary judgment in favor of Boyington. 7 9 of 9

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Description
doc
10/09/2017
CASE TENTATIVELY calendared for oral argument for the week of 12/04/2017. [17-40229]
10/24/2017
CASE CALENDARED for oral argument on Tuesday, 12/05/2017 in New Orleans in the East Courtroom -- AM session. In accordance with our policy, lead counsel only will receive via email at a later date a copy of the court's docket and an acknowledgment form. All other counsel of record should monitor the court's website for the posting of the oral argument calendars. [17-40229] (Text entry; no document attached.)
doc
12/05/2017
SUPPLEMENTAL AUTHORITIES (FRAP 28j) FILED by Appellant Mr. Randall Haler Date of Service: 12/05/2017 via email - Attorney for Appellants: Hughes, Kimberly, Meazell; Attorney for Appellees: Gold, Haines [17-40229] (Paul Whitfield Hughes)
doc
12/29/2017
UNPUBLISHED OPINION FILED. [17-40229 Reversed] Judge: CDK, Judge: JLD, Judge: GJC. Mandate issue date is 01/22/2018 [17-40229]
doc
01/22/2018
MANDATE ISSUED. Mandate issue date satisfied. [17-40229]
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