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November 2015

Gordon & Rees Pittsburgh Partner John Burns Obtains Judgment of Nondischargeability Order Against Defendant

On November 9, 2015, Gordon & Rees Pittsburgh partner John W. Burns obtained an Order in favor of his client in the United States Bankruptcy Court for the Western District of Pennsylvania declaring that a judgment debt owed by a defendant was nondischargeable.

In 2011, the defendant entered into a contract with Mr. Burns’ client, a large Mexican construction company, wherein he agreed to arrange the financing for the purchase of certain equipment. In accordance with the terms of the contract, the client made a $350,000 deposit which was to be held in escrow until the financing was arranged. When the financing did not materialize and the defendant did not return the deposit, Mr. Burns filed suit on behalf of the plaintiff/client in the Western District of Pennsylvania and ultimately obtained a judgment against defendant in the amount of $350,000. After transferring the judgment, Mr. Burns began executing on the judgment in Erie County, Pennsylvania, when the defendant and his wife filed for bankruptcy in the Western District of Pennsylvania under Chapter 13 of the United States Bankruptcy Code. Thereafter, Mr. Burns instituted an adversary proceeding seeking a judgment declaring that because the initial debt/judgment was obtained by fraud, it was nondischargeable pursuant to certain provisions of the United States Bankruptcy Code. While litigating the adversary proceeding, Mr. Burns had communications with the U.S. Attorney’s office which ultimately led to the defendant being indicted on fraud charges for taking part in what was an alleged “Ponzi” scheme. Thereafter, Mr. Burns continued to litigate the underlying claim using the criminal action and information obtained during discovery as leverage. Once it was learned that the defendant would likely plead guilty to the underlying criminal charges, Mr. Burns informed the defendant’s bankruptcy counsel that doing so would provide the plaintiff with grounds for a motion for summary judgment thereby making any amounts of restitution, namely, the amount of the judgment owed to his client, nondischargeable as a matter of law.

After the defendant did plead guilty and was sentenced, Mr. Burns obtained from the defendant’s bankruptcy counsel an agreement that the $350,000 judgment/debt was nondischargeable. Thereafter, Mr. Burns filed with the court a motion seeking nondischargeability of the debt and granting judgment in favor of his client.

The client was extremely pleased with Mr. Burns’ persistence in seeking this judgment and insuring that the defendant did not erase the debt he owed to his client. As a result, all future restitution payments are going to be made to Mr. Burns’ client and pursuant to the criminal court’s Order and the entry of the bankruptcy court Order, the defendant must file and comply with a repayment plan until the judgment is satisfied.

John W. Burns