Rajsic v. Valley Forge Insurance Co

Filing 36

Order on Appeal/ Closing Case with Notice of Entry 8024 Closing Case. Signed by Judge Robert N. Scola, Jr on 5/15/2017. (lh) NOTICE: If there are sealed documents in this case, they may be unsealed after 1 year or as directed by Court Order, unless they have been designated to be permanently sealed. See Local Rule 5.4 and Administrative Order 2014-69.

United States District Court
for the
Southern District of Florida
Goran Rajsic, Appellant,

)
)
)
)
)

v.
Valley Forge Insurance Co.,
Appellee.

Bankruptcy Appeal
Case No. 16-61937-Civ-Scola

Order on appeal
This matter is before the Court on the Appellant Goran Rajsic’s appeal of
the bankruptcy court’s order granting the Appellee Valley Forge Insurance
Company’s motion for summary judgment, as well as the bankruptcy court’s
entry of final judgment against Rajsic. (Notice of Appeal, ECF No. 1). After
reviewing the parties’ briefs, the record on appeal, the relevant legal authorities,
and for the reasons explained below, the Court affirms the bankruptcy court’s
entry of summary judgment in favor of Valley Forge.

1. Procedural Background
Rajsic filed for Chapter 7 bankruptcy on August 19, 2014. (IB at 6, ECF No.
16.) Valley Forge filed an adversary complaint against Rajsic, in which Valley
Forge objected to the dischargeability, pursuant to 11 U.S.C. § 523(a)(2)(A) and
(a)(6), of a debt Rajsic owed to Valley Forge. (R. 7-10 at 27.) After Rajsic received
his general discharge on October 27, 2015, Valley Forge moved for summary
judgment on its claim of nondischargeability. (IB. at 7.) The bankruptcy court
heard argument on May 11, 2016, granted summary judgment on July 15, 2016,
and entered judgment on July 28, 2016. (Id.; (Order Granting Mot. Summ. J., DE
117, ECF No. 7-10 at 119–127; J., DE 126, ECF No. 7-10 at 128–131.) This
appeal followed.

2. Factual Background
Rajsic, the principal of REC Entertainment, Inc. (“REC”), owned real
property located at 4244 West Diversey Avenue, Chicago, Illinois. (AB at 11; R. 72 at 15–16; R. 7-4 at 4.)1 On May 26, 2009, the property sustained severe water
damage (“the incident”), for which Rajsic initiated an insurance claim with Valley
Forge. (AB at 11.) Rajsic contended that the roof had been damaged by a faulty
utility pole alongside the building. (AB at 13; R. 7-4 at 11–12.) PuroClean, a
disaster recovery company, was hired to clean up and mitigate the property
damage, for which PuroClean submitted an invoice of $19,823.45. (AB at 12;
Citations to “R.” will refer to the Record on Appeal, which appears on this docket as ECF
Number 7. Parallel citations to the bankruptcy-court docket entry will appear as “DE”.
1

Valley Forge’s State-Court Mot. Summ. J. Ex. 2, Aff. of Peter Quinn ¶ 4, DE 103,
R. 7-11 at 43, 52.) During the claim process, Rajsic submitted a letter to Valley
Forge noting that PuroClean had completed work on the property and that REC
was renting temporary studios. (R. 7-3 at 8.) Rajsic stated in the letter that he
had “already paid” the invoices for rental of the temporary studios and requested
reimbursement of $136,324.85. (Id.) Rajsic further requested that Valley Forge
issue payment of the PuroClean invoice. (Id.)
Meanwhile, Valley Forge investigated the claim. (AB at 12–14.) Valley
Forge’s investigation involved retaining several independent contractors,
including a private investigator, a forensic accounting firm, a damage assessment
firm, a construction consultant, and a forensic engineering firm. (Am. Compl. Ex.
3, Aff. of Tognarelli ¶ 27, DE 48, R. 7-2 at 27.) The cost of hiring these
independent contractors totaled $33,269.94. (Id.; R. 7-9 at 14.) Based on
information obtained during the investigation, Valley Forge determined that
Rajsic’s claim had a total value of $1,469,387.80.2 (Am. Compl. Ex. 3, Aff. of
Tognarelli ¶ 26, DE 48, R. 7-2 at 27.) The total value of the claim included costs
for repairing the portions of the property affected by the water intrusion, which in
turn included the PuroClean invoice. (Id. ¶¶ 6, 23, 26, R. 7-2 at 23, 26-27.)
Rajsic provided little to no cooperation with the investigation, failing to
submit requested documents and repeatedly failing to appear for an examination
under oath. (Valley Forge’s State-Court Mot. Summ. J. at 8–11, DE 103 Ex. 5, R.
7-11 at 75–78.) In fact, on April 10, 2010, Rajsic withdrew his insurance claim.
(Id. at R. 7-11 at 78; IB at 8.)
Valley Forge concluded that Rajsic had staged the incident and had
submitted forged invoices for the temporary rental studios. (AB at 14.) Thus,
Valley Forge denied the claim on June 7, 2010. (IB at 8.) Nonetheless, although
the record is unclear as to the underlying facts, Valley Forge submitted partial
payment to PuroClean in the amount of $10,000.00 as a full and final settlement
of PuroClean’s invoice for $19,823.45. (Valley Forge’s State-Court Mot. Summ. J.
Ex. 2, Aff. of Peter Quinn ¶ 7, DE 103, R. 7-11 at 43, 61.)
These events led to both criminal and civil proceedings in Illinois state
court. Rajsic was indicted for crimes involving schemes to defraud Valley Forge
and two other insurance companies. (Am. Compl. Ex. 4, Plea Agreement, DE 48,
R. 7-10 at 2.) On January 18, 2012, Rajsic pleaded guilty to forgery by delivery,
one of four felony counts in the indictment. (Id. at 3.) As part of his plea, Rajsic
The record at times includes a total valuation of the claim at $1,717,700.00. (Am. Compl. Ex. 3,
Aff. of Tognarelli ¶ 18, DE 48, R. 7-2 at 25; Valley Forge’s State-Court Mot. Summ. J. at 18, DE
103 Ex. 5, R. 7-11 at 85.) Valley Forge provided no explanation for this difference. However, the
state-court final judgment and the bankruptcy proceedings use the total value of $1,469,387.80.
(Final Summ. J., R. 7-10 at 16; Mot. Summ. J. ¶ 11, DE 82, R. 7-10 at 31.)
2

“admit[ted] that he knowingly executed a scheme to defraud [Valley
Forge] . . . and in furtherance of the scheme [he], with the intent to defraud,
knowingly delivered a document apparently capable of defrauding another . . . .”
(Id. at 5.) Rajsic further admitted that the invoices for rental of the temporary
studios that Rajsic submitted to Valley Forge on June 11, 2009, “were capable of
defrauding [Valley Forge] because . . . [Valley Forge] uses such a document to
determine whether to pay a claim for loss and how much to pay on such a
claim . . . .” (Id.)
Valley Forge brought civil suit against Rajsic in Illinois state court. (AB at
14.) Valley Forge sought, in part, civil damages for insurance fraud in violation of
Section 46-5 of the Illinois Criminal Code (720 ILCS 5/46-5, now 720 ILCS 5/1710.5). (Valley Forge’s State-Court Mot. Summ. J., DE 103, R. 7-11 at 80–81.)
Those proceedings culminated in the Illinois state court granting partial summary
judgment in favor of Valley Forge on May 24, 2012. (Partial Summ. J., R. 7-10 at
13–15.) The Illinois state court specifically found that no issue of fact existed and
that REC and Rajsic had “attempted to obtain, by deception, control over Valley
Forge’s property by making, or causing to be made, a false and fraudulent
claim . . . .” (Id. ¶ 3.) The Illinois state court further found that REC had violated
the terms of the insurance policy “by intentionally concealing and
misrepresenting material facts concerning a claim under the Policy . . . .” (Id. ¶ 2.)
Thereafter, the Illinois state court entered final summary judgment in favor
of Valley Forge. (Final Summ. J., R. 7-10 at 16–17.) The court found damages in
the following amounts: (1) $2,938,775.60 for two times the value of the property
that Rajsic had attempted to obtain from Valley Forge ($1,469,387.80); (2)
$99,809.82 for three times the amount that Rajsic had in fact wrongfully
obtained ($33,269.94); plus (3) attorney’s fees and costs of $212,746.40. (Id.)
Thus, Valley Forge was entitled to a total judgment amount of $3,251,331.82.
(Id.) This judgment was part of the debt Rajsic sought to discharge in his
bankruptcy proceedings.

3. Legal Standard
This Court has jurisdiction over appeals of a final judgment in a
bankruptcy adversary proceeding. 28 U.S.C. § 158(a)(1); In re Donovan, 532 F.3d
1134, 1136 (11th Cir. 2008). A district court reviews a bankruptcy court’s legal
conclusions de novo and its factual findings for clear error. In re Globe Mfg. Corp.,
567 F.3d 1291, 1296 (11th Cir. 2009); In re Club Assocs., 951 F.2d 1223, 1228–
29 (11th Cir. 1992).

4. Legal Analysis
Rajsic raises four errors with the Bankruptcy Court’s order and judgment:
(1) collateral estoppel did not apply to the state-court judgments because the

issues in state court were not identical to the issues raised in bankruptcy court;
(2) an issue of material fact existed—namely, whether Rajsic received a benefit
from Valley Forge—which precluded entry of summary judgment; (3) Valley Forge
did not properly plead the elements of a § 523(a)(2)(A) or (a)(6) claim; (4) and the
Bankruptcy Court erroneously relied on affidavits attached to Valley Forge’s reply.
(IB at 5–6.)
Valley Forge argues that the Supreme Court abolished the “receipt of
benefits” requirement for nondischargeability under § 523(a)(2)(A), but even if this
were not so, Rajsic did in fact receive a benefit. (AB at 23.) Valley Forge contends
that Rajsic waived any argument regarding collateral estoppel by raising it for the
first time on appeal. Further, Valley Forge denies any pleading or procedural
errors.
A. The doctrine of collateral estoppel precludes Rajsic from relitigating
the Illinois state judgments
Collateral estoppel, or issue preclusion, “prevents successive litigation of an
issue of fact or law actually litigated and resolved in a valid court determination
essential to the prior judgment.” Novak v. State Parkway Condo. Ass’n, 141 F.
Supp. 3d 901, 906 (N.D. Ill. 2015) (quoting Taylor v. Sturgell, 553 U.S. 880, 892
(2008)) (internal quotations omitted). “It is well-established that the doctrine of
collateral estoppel applies in a discharge exception proceeding in bankruptcy
court.” In re Bilzerian, 100 F.3d 886, 892 (11th Cir. 1996) (citing Grogan v.
Garner, 498 U.S. 279, 284 n.11 (1991)) (“Bilzerian 1”). The Court must consider
Illinois law with respect to collateral estoppel because the judgments at issue
were rendered by Illinois state courts. See In re Gonsalves, 519 B.R. 466, 473–74
(Bankr. D. Md. 2014) (“Determinations regarding the preclusive effect of state
court judgments are made using the law of the state in which the judgment was
rendered.” (citing Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373
(1985))).
In these bankruptcy adversary proceedings, Valley Forge had the burden to
show: (1) the parties litigated the issue in a previous proceeding, and the court
rendered a final adjudication on the merits of that issue; (2) the issue formed a
critical and necessary part of the litigation; (3) the issue in the previous and later
trial were identical; and (4) the party against whom collateral estoppel is asserted
was a party to, or in privity with a party to, the prior proceedings. People v.
Daniels, 718 N.E.2d 149, 161–62 (Ill. 1999); Du Page Forklift Serv., Inc. v. Material
Handling Servs., Inc., 744 N.E.2d 845, 849 (Ill. 2001). Further, a criminal
conviction might serve to estop further litigation of a particular issue in a civil
action, due to the higher standard of proof, but not vice versa. In re Owens, 532
N.E.2d 248, 252 (Ill. 1988).

(1) The parties raised the issue of collateral estoppel
In its motion for summary judgment before the bankruptcy court, Valley
Forge raised the issue, albeit poorly, of collateral estoppel. Valley Forge delineated
the facts underlying the criminal and civil judgments against Rajsic and provided
the legal basis for applying collateral estoppel to the fraud judgments in the
bankruptcy proceedings. (Mot. Summ. J. at 2–3, 5, DE 82, R. 7-10 at 28-29, 31.)
Rajsic’s single opposition to the application of collateral estoppel in his response
concerned Valley Forge’s purported failure to prove that Rajsic had obtained a
benefit as a result of the fraudulent conduct.3 (Opp’n to Mot. Summ. J. at 2–5,
DE 95, R. 7-10 at 38–41.) However, during the summary-judgment hearing,
Rajsic raised several times––in a cursory and conclusory manner––the additional
issue of justifiable reliance. (Transcript at 13, 16–17, DE 150, ECF No. 8.) The
bankruptcy court then determined that Rajsic was “collaterally estopped from
challenging the determination of fraud by the State Court . . . .” (Order Granting
Mot. Summ. J. at 7, DE 117, ECF No. 7-10 at 125.)
Rajsic, then, did not raise the issue for the first time on appeal, as Valley
Forge alleges. Nor did Rajsic only make passing reference to collateral estoppel in
his appellate brief, as he did before the bankruptcy court. Thus, Rajsic has not
waived appellate review of the application of collateral estoppel. Cf. United States
v. Hale, 618 F. App’x 521, 524 (11th Cir. 2015) (declining to resolve an issue not
discussed in any meaningful way in the appellate brief); Greenbriar, Ltd. v. City of
Alabaster, 881 F.2d 1570, 1573 n.6 (11th Cir. 1989) (declining to address the
merits of a claim not raised in the appellate briefs).
(2) The bankruptcy court properly estopped relitigation of the issue of
fraud
The bankruptcy court specifically found that the elements of collateral
estoppel existed with respect to a factual finding that Rajsic had committed
fraud.4 (Order Granting Mot. Summ. J. at 7, DE 117, ECF No. 7-10 at 125.) The
record supports this finding.
However, whether the “issue” decided in the state adjudications was
identical to the “issue” before the bankruptcy court requires clarification. Rajsic
insists on appeal that the bankruptcy court erred in applying the doctrine of
collateral estoppel because the central issue in the state-court actions was not
identical to the issue before the bankruptcy court. (IB at 13.) Rajsic appears to
argue—in terms specific to this case—that no exact similitude exists between the
As discussed below, whether Rajsic obtained a benefit has absolutely no bearing on the
application of collateral estoppel to the issue of fraud.
4 While the bankruptcy court did not make a specific finding that the parties were the same here
as in the state-court proceedings, this element indisputably was met.
3

elements of fraud in the state actions and the elements required for nondischargeability under §§ 523(a)(2)(A) and (a)(6). And while Rajsic is partly correct
in this regard, his argument fails to defeat the application of collateral estoppel.
The bankruptcy court likely contributed to the confusion by stating
somewhat imprecisely, “[A]ll the elements of collateral estoppel are present. The
elements for finding nondischargeability under § 523(a)(2)(A) are identical to those
required to impose liability under the Illinois Insurance Fraud Act . . . .” (Order
Granting Mot. Summ. J. at 7, CE 117, ECF No. 7-10 at 125) (emphasis added).
Rajsic also contributed to the confusion by insisting, in his summary judgment
pleadings before the bankruptcy court and in his briefs before this Court, that no
identity of the issues existed because the elements of fraud under Illinois law do
not require that Rajsic obtain a benefit. (Opp’n to Mot. Summ. J. at 2, DE 95, R.
7-10 at 38; IB at 27.) The “receipt of benefits” approach relates to a determination
of nondischargeability pursuant to § 523(a)(2)(A), which the Court will discuss
separately, and does not constitute an element of fraud as defined either under
Illinois law or under § 523(a)(2)(A). Thus, whether Rajsic received a benefit
remains entirely inapposite to the collateral estoppel arguments. See In re St.
Laurent, 991 F.2d 672, 676 (11th Cir. 1993), as corrected on reh’g (June 22,
1993) (“[C]ollateral estoppel may bar a bankruptcy court from relitigating factual
issues previously decided in state court, however, the ultimate issue of
dischargeability is a legal question to be addressed by the bankruptcy court in
the exercise of its exclusive jurisdiction to determine dischargeability.”).
More accurately, in order to determine whether the bankruptcy court
properly applied collateral estoppel in this case, the Court must determine
whether the elements of fraud in the state-court judgments are identical to the
elements of “false pretenses, a false representation, or actual fraud” required
under § 523(a)(2)(A). See, e.g., In re Bilzerian, 153 F.3d 1278, 1281 (11th Cir.
1998) (“The question in this case is whether a criminal conviction for securities
fraud, combined with a civil disgorgement judgment in favor of the SEC, satisfies
the requirements of collateral estoppel for determining ‘fraud’ under
§ 523(a)(2)(A).”) (“Bilzerian 2”); Kondapalli v. Demasi, 551 B.R. 653, 658 (M.D. Fla.
2016) (“With respect to the identity of the issues, the Eleventh Circuit has
determined that the issue of fraud under § 523(a)(2) is identical to the issue of
fraud under Florida law.”).
The Supreme Court “has historically construed the terms in § 523(a)(2)(A)
to contain the elements that the common law has defined them to include.”
Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581, 1586 (2016) (internal citation and
quotations omitted). Under the false-pretenses and false-representation
standards, the creditor must prove: “(1) the debtor made a false representation
with the purpose and intention of deceiving the creditor; (2) the creditor relied on

the representation; (3) the creditor’s reliance was reasonably founded; and (4) the
creditor sustained a loss as a result of the representation.” In re Villa, 261 F.3d
1148, 1150 (11th Cir. 2001).
The elements under the actual-fraud standard are less precise. See Husky,
136 S. Ct. at 1586; see also In re Nunnelee, 560 B.R. 277, 284 (Bankr. N.D. Miss.
2016) (“The precise elements of actual fraud are currently in flux.”). As a general
guideline, the creditor must prove “fraud that involves moral turpitude or
intentional wrong,” excluding constructive or implied fraud, where “fraud
connotes deception or trickery.” Husky, 136 S. Ct. at 1586; see also McClellan v.
Cantrell, 217 F.3d 890, 893 (7th Cir. 2000) (“[T]he statute makes clear that actual
fraud is broader than misrepresentation [and includes] ‘any deceit, artifice, trick,
or design involving direct and active operation of the mind, used to circumvent
and cheat another.’” (quoting 4 Collier on Bankruptcy ¶ 523.08[1][e], p. 523-45
(15th ed., Lawrence P. King ed., 2000))).
This Court will not enter into a needless parsing and dissection of the
Illinois Criminal Code under which Rajsic was found both criminally and civilly
liable. In other words, the Court need not resolve whether the Illinois Criminal
Code requires justifiable reliance, the third element of common-law fraud under
the false-pretenses and false-representation standards.5 The record makes
patently clear that Rajsic committed actual fraud. Any other finding would lead to
absurd results and frustrate the Bankruptcy Code. See Bilzerian 2, 153 F.3d at
1282 (“Any other decision would conflict with the general principles behind
§ 523(a)(2)(A). This court has taken an expansive view of ‘debts obtained by fraud’
because the malefic debtor may not hoist the Bankruptcy Code as protection from
the full consequences of fraudulent conduct.”) (internal citation and quotations
omitted).
Rajsic admitted to “knowingly execut[ing] a scheme to defraud” Valley
Forge. (Plea Agreement at 4, DE 48, R. 7-10 at 5.) In granting Valley Forge’s
summary judgment, the Illinois state court found that Rajsic staged the incident,
falsified documents, and used deception in an attempt to obtain money from
Valley Forge on a claim valued at $1.47 million. (Valley Forge’s State-Court Mot.
Summ. J. at 16, DE 103 Ex. 5, R. 7-11 at 83; Am. Compl. Ex. 3, Aff. of Tognarelli
¶ 26, DE 48, R. 7-2 at 27; Partial Summ. J. at 2, R. 7-10 at 14; Final Summ. J.,
R. 7-10 at 16.) These actions indicate “fraud that involves moral turpitude or
intentional wrong” and include knowing “deceit . . . used to circumvent and cheat
The Court notes, however, that Rajsic did concede to the element of justifiable reliance when he
admitted in his plea agreement that the false invoices he submitted to Valley Forge were precisely
the kind of documents on which Valley Forge relies to make payments on a claim. (Am. Compl.
Ex. 4, Plea Agreement, DE 48, R. 7-10 at 5.)
5

another.” Husky, 136 S. Ct. at 1586; McClellan, 217 F.3d at 893 (internal
quotations and citation omitted). Rajsic’s conduct as determined in the statecourt proceedings satisfies the actual-fraud standard of § 523(a)(2)(A). As a result,
the doctrine of collateral estoppel precludes Rajsic from relitigating the Illinois
state-court judgments and their factual underpinnings.
B. Rajsic obtained a benefit, as required for a finding of
nondischargeability pursuant to § 523(a)(2)(A)
Rajsic asserts that he did not receive a benefit from any fraudulent
conduct, as required by § 523(a)(2)(A). (IB 14, 28–29.) Even while claiming that
this fact is “undisputed” (IB at 29), Rajsic claims that whether he received a
benefit remains a disputed issue of fact (IB 5, 10, 19–24). Valley Forge first argues
that after the Supreme Court’s decision in Cohen v. de la Cruz, 523 U.S. 213
(1998), circuit courts have rejected the “receipt of benefits” test. (AB 25–27.) Then,
Valley Forge contends that even though not required for a finding of
nondischargeability, Rajsic did in fact obtain a benefit. (AB 29–31, 35.)
An individual debtor cannot receive a discharge “from any debt . . . for
money [or] property . . . to the extent obtained by false pretenses, a false
representation, or actual fraud . . . .” 11 U.S.C. § 523(a)(2)(A). The “obtained by”
language has been interpreted by many courts, including the Eleventh Circuit, to
mean “that a debtor need not personally obtain the fruits of his fraud.” Kondapalli
v. Demasi, 551 B.R. 653, 660 (M.D. Fla. 2016). Instead, these courts apply the
“receipt of benefits” test, “which requires that a debtor merely receive a benefit—
direct or indirect—from money, property, services, or credit obtained by fraud.”
Id.; see also Bilzerian 1, 100 F.3d at 890 (“The second view . . . is termed the
‘receipt of benefits’ theory. This theory requires that the debtor gain a benefit from
the money that was obtained by fraudulent means.”).
The facts of this case do not require this Court to decide whether Cohen
rejected the “receipt of benefits” test because Rajsic did receive a benefit. First
and foremost, the state-court expressly found that Rajsic “wrongfully
obtained . . . $33,269.94.” (Final Summ. J., R. 7-10 at 16.) This Court already
determined that Rajsic cannot attack or dispute the state-court judgments in
these bankruptcy proceedings.
Next, Rajsic’s contention that he did not receive a benefit rests primarily on
the unfounded and incorrect assumption that the bankruptcy court based its
finding that Rajsic received a benefit on the “disputed” PuroClean payment. (IB
10–12.) The bankruptcy court found, “Rajsic did receive a benefit from his fraud
in Valley Forge analyzing, investigating[,] and assisting in the clean-up and
remediation of the damage on account of Rajsic’s utterly fraudulent claim.” (Order
Granting Mot. Summ. J. at 7, CE 117, ECF No. 7-10 at 125.) In its findings of

fact, the bankruptcy court expressly noted that the amount “wrongfully obtained”
by Rajsic totaled $33,269.94. (Id. at 122.) Taking these two findings together, the
“benefit” received by Rajsic simply does not include the purportedly disputed
$10,000.00 payment to PuroClean. More specifically, the $10,000.00 payment to
PuroClean constitutes only a portion of the total $19,823.45 invoice, which the
Illinois state court included in the total amount that Rajsic “attempted to obtain,”
and not in the amount Rajsic “wrongfully obtained.” (Final Summ. J., R. 7-10 at
16; Am. Compl. Ex. 3, Aff. of Tognarelli ¶ 23, 26, Ex. H, DE 48, R. 7-2 at 26–27;
R.7-9 at 14.) Further, Rajsic has never raised a dispute regarding the line-item
amounts that comprise the $33,2369.94 total relied upon by the state court in
entering final judgment.
Finally, Rajsic appears to misunderstand the “receipt of benefits” test for
which he advocates. As noted above, the debtor need not have received actual
money or property for a court to find that the debtor received a “benefit.” Bilzerian
1, 100 F.3d at 890 n.4 (11th Cir. 1996) (“The better view, however, appears to be
that the debtor need not actually procure the money or property for himself. If the
debtor benefits in some way from the property obtained through his deception,
the debt is nondischargeable.” (quoting Matter of Holwerda), 29 B.R. 486, 489
(Bankr. M.D. Fla. 1983))) (emphasis added).
Here, Rajsic benefited from Valley Forge’s investigation of his fraudulent
claim. As Valley Forge notes, it had a legal obligation as an insurer to investigate
the claim—an obligation intended to benefit and protect the insured. Feijoo v.
Geico Gen. Ins. Co., 137 F. Supp. 3d 1320, 1328 (S.D. Fla. 2015), aff’d, No. 1514947, 2017 WL 429254 (11th Cir. Feb. 1, 2017) (Moore, J.) (“[A]n insurer [has a]
duty and right to fully investigate claims.”); Johnson v. Geico Gen. Ins. Co., 318 F.
App’x 847, 851 (11th Cir. 2009) (“An insurer––acting with diligence and due
regard for its insured––is allowed a reasonable time to investigate a claim . . . part
of [an insurer’s] good faith duty is [the] obligation . . . to investigate the facts.”).
Had Rajsic’s claim been authentic, he would have received the coverage provided
by his policy. Valley Forge acted properly under the policy—for Rajsic’s benefit—
in investigating the claim.
Thus, the bankruptcy court properly found that Rajsic obtained a benefit as
required by § 523(a)(2)(A).6

The Court also notes that regardless of Rajsic’s numerous arguments attacking
nondischargeability pursuant to § 523(a)(2)(A), his debt was also nondischargeable pursuant to §
523(a)(6), which does not require a debtor to have obtained any benefit from the fraud. Grogan v.
Garner, 498 U.S. 279, 282 n.2 (1991) (“[F]raud judgments in cases in which the defendant did not
obtain money, property, or services from the plaintiffs . . . are more appropriately governed by §
523(a)(6).”).
6

C. Valley Forge properly pleaded and proved exceptions to discharge
pursuant to §§ 523(a)(2)(A) and (6)
Rajsic argues that Valley Forge failed to plead and prove both a
§ 523(a)(2)(A) claim and a § 523(a)(6) claim. (IB at 31–32.) This Court already
disposed of Rajsic’s arguments with respect to whether Valley Forge sufficiently
pleaded entitlement to a finding of nondischargeability pursuant to § 523(a)(2)(A).
Additionally, § 523(a)(6) excepts from discharge “any debt . . . for willful and
malicious injury by the debtor to another entity or to the property of another
entity . . . .” As the bankruptcy court noted, “willful” requires “a showing of an
intentional or deliberate act, which is not done merely in reckless disregard of the
rights of another,” and “malicious” means “wrongful and without just cause . . . .”
In re Walker, 48 F.3d 1161, 1163, 1164 (11th Cir. 1995). “Willful injury” occurs
when a debtor “commits an intentional act the purpose of which is to cause
injury or which is substantially certain to cause injury.” Id. at 1165.
As mentioned previously, Rajsic admitted to “knowingly execut[ing] a
scheme to defraud” Valley Forge, “with the intent to defraud . . . .” (Plea
Agreement at 4, DE 48, R. 7-10 at 5.) Such an admission fulfills the “willful and
malicious” element under § 523(a)(6). Rajsic’s assertion that he merely
unsuccessfully “attempted” to injure Valley Forge (IB 32) does not relieve him
from nondischargeabliliy, because the statutory language focuses on the purpose
of the debtor’s conduct, not on the ultimate result. Rajsic admitted that the
purpose of his scheme was to defraud Valley Forge, which is sufficient to except
the debt from discharge pursuant to § 523(a)(6).
D. Entry of summary judgment was not procedurally improper
Rajsic claims that Valley Forge’s motion for summary judgment was
procedurally improper for two reasons: (1) it did not attach certain documents
required by the bankruptcy court’s order setting filing and disclosure
requirements for pretrial and trial; and (2) Valley Forge attached affidavits to its
reply. (IB 33.)
First, Rajsic has failed to include in his designation of items to be included
on appeal the relevant bankruptcy-court order. (Appellant’s Designation, R. 7-2 at
1–4.) The Court cannot review and ensure compliance with an item not in the
record on appeal. See Selman v. Cobb Cty. Sch. Dist., 449 F.3d 1320, 1333 (11th
Cir. 2006) (“[T]he burden is on the appellant to ensure the record on appeal is
complete, and where a failure to discharge that burden prevents us from
reviewing the district court’s decision we ordinarily will affirm the judgment.”);
see also Fed. R. Bankr. P. 8009. Regardless, Rajsic appears to assert that Valley
Forge improperly relied on exhibits attached to the amended complaint. The
Federal Rules of Civil Procedure, however, permit the moving party to support its

factual positions by “citing to particular parts of materials in the record . . . .”
Fed. R. Civ. P. 56; see also Fed. R. Bank. P. 7056. Under the facts available here,
the Court cannot find error in relying on exhibits attached to the amended
complaint to support an argument on summary judgment.
Second, each and every exhibit attached to Valley Forge’s reply directly
rebutted an argument raised by Rajsic in his response.7 No rule prohibits a
moving party from attaching rebuttal evidence to its reply. S. D. Fla. L.R. 7.1(c)
(“All materials in support of any . . . reply, including affidavits and declarations,
shall be served with the filing.”); Giglio Sub s.n.c. v. Carnival Corp., No. 12-21680CIV, 2012 WL 4477504, at *2 (S.D. Fla. Sept. 26, 2012), aff’d, 523 F. App’x 651
(11th Cir. 2013) (Rosenbaum, J.) (“A significant difference exists, however,
between new arguments and evidence, on the one hand, and rebuttal arguments
and evidence, on the other.”); Stewart-Patterson v. Celebrity Cruises, Inc., No. 1220902-CIV, 2012 WL 5997057, at *1 (S.D. Fla. Nov. 30, 2012) (Cohn, J.)
(“[N]othing in the extant authorities, or in the Federal Rules of Civil Procedure,
forbids a movant from making supplemental record submissions in a reply brief
to rebut specific arguments raised by the nonmovant’s opposition brief.”) (internal
citation and quotations omitted).
Rajsic has not identified any procedural defect to undermine the
bankruptcy court’s granting of summary judgment and entry of final judgment.

5. Conclusion
Based on the foregoing reasons, the Court affirms the bankruptcy court’s
order granting Valley Forge’s motion for summary judgment, as well as the
bankruptcy court’s entry of final judgment against Rajsic (DE 117 and DE 126).
The Court directs the Clerk to close the case.
Done and ordered in chambers, at Miami, Florida, on May 15, 2017.
________________________________
Robert N. Scola, Jr.
United States District Judge

The Court recognizes that Valley Forge’s reply both replied to Rajsic’s response in opposition to
the motion for summary judgment and responded to Rajsic’s motion to strike.
7