Virovlyanskiy v. Virovlyanskaya

Filing 13

MEMORANDUM AND ORDER: The Court affirms the judgment of the bankruptcy court. The Clerk of Court is directed to close the case. C/M. Forwarded for judgment. Ordered by Judge Raymond J. Dearie on 5/2/2014. (Chee, Alvin)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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In re:
ALEKSANDR VIROVL YANSKIY,

Chapter 7 Bankruptcy
Case No. 11-45486 (CEC)

Debtor-Appellant.

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JULIYA VIROVLYANSKAYA

Plaintiff-Appellee,

Bankruptcy Adversary Proceeding
Case No. 11-01469 (CEC)

MEMORANDUM AND ORDER
13 CV 1511 (RJD)

- against -

ALEKSANDR VIROVL Y ANSKIY,
Appellant-Defendant.
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Aleksandr Virovlanskiy ("Aleksandr") appeals from the judgment of the bankruptcy
court (Craig, Ch. J.) denying his Chapter 7 petition for discharge in bankruptcy. Aleksandr both
challenges the bankruptcy court's findings and argues that the matter was non-justiciable because
no creditor with Article III standing challenged his entitlement to a discharge. We affirm.
Aleksandr filed his Chapter 7 petition on June 25, 2011, seeking to discharge debts
consisting primarily of credit card debt and child support arrears owed to his estranged wife, pro
se plaintiff-appellee Juliya Virovlanskaya ("Juliya"). 1 (Decision I, ECF No. I). However, in his
petition, Aleksandr did not disclose compensation he earned in Russia during 2009 and 20 I 0,
despite the requirement that he do so in his Statement of Financial Affairs. (Id.). He also falsely
stated in Schedule I that he had been unemployed since 2008. (Id.) Juliya commenced an
1

The parties dispute whether they have been properly divorced.

adversary proceeding on September 29, 2011, objecting to Aleksandr's general discharge under
11 U.S.C. § 727(a) and objecting to the dischargeability of his individual debts under 11 U.S.C. §
523. (Comp!. and Adversary Cover Sheet, ECF No. 1-1 ). In that adversary proceeding,
Aleksandr did not dispute that he had omitted work income and did not contest the falsity of his
claim to have been unemployed since 2008. (Decision 5). Rather, Aleksandr maintained that he
did not make these misrepresentations with fraudulent intent, asserting that he initially relied on
his attorney's mistaken advice that he need not disclose compensation earned in Russia, and
pointing out that he immediately amended the petition once he learned otherwise. (Appellant Br.
2, ECF No. 7); (Answer, ECF No. 1-5); (Trial Tr. 9-10, ECF No. 1-13).
The adversary proceeding eventually went to trial and the bankruptcy court denied
discharge. (Decision 9). Before that, however, the court held a conference in which Judge Craig
expressed concern that Juliya had no direct interest in pressing the adversary proceeding.
(Conference Tr. 4-7, 18-19, Jan. 19, 2012, ECFNo. 1-6). As Judge Craig explained to Juliya,
Aleksandr's child support obligations and arrears are not dischargeable in bankruptcy. (Id. at 5).
Accordingly, the court further explained, Juliya's interests might be poorly served if Aleksandr
did not receive a discharge, because Juliya would then have to compete with his other creditors.
(Id. at 22-23).
Juliya responded that she did have an interest in bringing the adversary proceeding,
because Aleksandr had in the past convinced the Family Court of the State of New York to
diminish his support order. (Id. at 18); (Family Ct. Findings of Fact, Apr. 30, 2010, ECF No. 1-8
Ex. 21; Family Ct. Findings of Fact, Feb. 18, 2011, ECF No. 1-8 Ex. 22). Juliya suspected he
would find a way to leverage his discharge to do so again (Jan. 19, 2012 Tr. 6), possibly by using
the discharge to misrepresent his financial situation in the Family Court. (Conference Tr. 3, Mar.

2

8, 2012, ECF No. 1-7). Juli ya also responded that she wanted to ensure that Aleksandr did not
perpetrate a fraud on the court. (Jan. 19, 2012 Tr. 19). Less graciously, Juliya hinted that she
might herself wish to leverage the bankruptcy proceedings to press fraud charges against
Aleksandr. (Id. at 23-24); (Comp!. 1). A representative of the United States Trustee's Office
also attended the conference, but explained that the Office would not join Juliya's adversary
proceeding. (Jan. 19, 2012 Tr. 9-10). The bankruptcy court scheduled further proceedings. (Id.
at 27). 2 Aleksandr, also prose at that time, sat silently.
The bankruptcy court held trial on July 31, 2012. The court rightfully closed down
certain lines of inquiry pursued by Juli ya, such as her examination of Aleksandr on whether he
purposely accumulated his credit card debts with no intent to repay those debts (Trial Tr. 13, 1719), and her related examination of Aleksandr's immigration status and travel habits on the
theory that he intended to move to Germany to avoid his creditors. (Id. at 16-17, 19-20). But,
after a difficult start, Juliya's examination bore fruit. For instance, Juliya resumed her
examination of Aleksandr's travel habits, not on the theory that he was trying to hide from his
creditors, but on the more appropriate theory that he may have received more wages or acquired
more assets in Russia than he had disclosed in his amended petition. (Id. at 22, 29-31).
Substantively, those questions were not particularly damaging. But, by referencing a potential
piece of impeaching evidence, Juliya prompted Aleksandr to abruptly reverse his answer on the
otherwise minor question of whether Aleksandr had visited France. (Id. at 31)3 ; (Decision 6).
That exchange damaged his credibility in the eyes of the bankruptcy court. (Id.)

2

The court held a second conference on March 8, 2012 in which Judge Craig reiterated her
earlier concerns and Juliya stood by her decision to press the adversary action. (Conference Tr.
2-3, ECF No. 1-7). The United States Trustee never reconsidered its position.
3

We emphasize just how abrupt by quoting and paraphrasing that brief colloquy: "Q: [W]ere
you traveling over the period of time? A: No .... Q: You didn't visit any country? A: No. Q:

3

Another damaging exchange - again, .not substantively, but in terms of credibility '

occurred when Juli ya asked Aleksandr at length about a notarized filing he made in Family Court
(Trial Tr. 65-85), in which Aleksandr asserted that he could not appear telephonically before that
court because of work responsibilities. (Id. at 78) (Letter, Sep. 10, 2010, ECF No. 1-8 Ex. 21).
Aleksandr had confirmed that he lived in St. Petersburg. (Trial Tr. at 66). Yet he notarized the
Family Court filing in Vladivostok (Id. at 72), clear across the enormity of Russia. That is
certainly an odd fact, almost as if Aleksandr had claimed that he could not appear by phone in
New York because of his work responsibilities in Los Angeles, in a letter dispatched from
Fairbanks. But it is a fact that could have a reasonable explanation. However, when Juliya
pressed Aleksandr to explain why he went from St. Petersburg to Vladivostok to notarize a
document, he admitted that he had used work responsibilities as an "easy" excuse not to appear
in Family Court, when in fact he could not appear because of other court hearings. (Id. at 76).
Even so, that candor might have rehabilitated him somewhat, except Aleksandr shifted tack
again, explaining that he could not appear because he was trying to find a job (Id. at 80-81 ), and
then claiming he had no recollection of why he could not appear at all. (Id. at 81 ). These
equivocations further undermined his credibility with the bankruptcy court. (Id. at 82);
(Decision 6). At one point during the exchange, Aleksandr's then-attorney objected that Juliya
was pursuing a "personal vendetta[.]" (Trial Tr. 70). But counsel conceded (correctly) that
Juliya met the statutory definition of a "creditor" and the court moved on with the trial. (Trial
Tr. 70-71); See 11U.S.C.§727(c)(l).
In its decision, the bankruptcy court noted other instances in which Juliya uncovered
apparent misrepresentations, or in which Aleksandr made misstatements on the stand. (IQ, at 6-

How about France? A: No. Q: [What about that picture of you on Facebook in front of the
Eiffel Tower? Objection overruled.] Did you go to France or not? A: Yes, I did." (Id. at 30-31 ).
4

7). The court therefore determined that it could not credit Aleksandr and thus rejected his claim
to have relied on his attorney (as well as the more outlandish claim that he omitted his overseas
earnings because he could not convert rubles into dollars). (Id. at 7). The court further reasoned
that Aleksandr only amended his petition after Juliya informed the Trustee of his omissions at
the meeting of creditors, explaining that: "in this case, it appears that the income was disclosed
only after his misrepresentation was exposed by [Juliya.]" (Id.) The court denied discharge
under 11 U.S.C. § 727(a)(4)(A), which authorizes the court to deny discharge to a debtor who
"knowingly and fraudulently" makes a "false oath" "in or in connection with" the bankruptcy
proceedings.
Aleksandr challenges these findings on appeal, conceding as he must that we review them
for clear error. (Appellant Br. l); See, e.g., Drawbridge Special Opportunities Fund LP v. Barnet
(In re Barnet), 737 F.3d 238, 246 (2d Cir. 2013). But, before reaching that issue, he argues for
the first time that, although Juliya may have had statutory standing as a "creditor" under 11
U.S.C. § 727(c), she lacked standing under Article III§ 2 of the United States Constitution.
Pivoting off Judge Craig's wise observation that Juliya's interests are probably ill-served by
denial of discharge, Aleksandr argues that Juli ya has no interest - in the constitutional sense - to
vindicate in the first place. Aleksandr claims that the bankruptcy court should therefore have
dismissed the adversary proceeding sua sponte and granted Aleksandr his Chapter 7 discharge.
The Court reviews that issue de novo. See, e.g., Field Day, LLC v. Cnty. of Suffolk, 463 F.3d
167, 175 (2d Cir. 2006) (citing Shain v. Ellison, 356 F.3d 211, 214 (2d Cir. 2004)).
Article III § 2 of the Constitution states that the "power" of the federal courts extends
only to "cases" or "controversies." Of course, no observer would contend that the bitter dispute
between Aleksandr and Juliya is not a "controversy" in the ordinary sense of the word. But, in

5

the constitutional sense, the words "case" or "controversy" carry a highly specialized meaning,
encompassing technical doctrines such as standing, mootness, and ripeness, all under the rubric
ofjusticiability. See In re Davis 191 B.R. 577, 582 (Bankr. S.D.N.Y. 1996) (citing Flast v.
Cohen, 392 U.S. 83, 94-97 (1968)). Bankruptcy courts are constituted pursuant to Article I. See
Mt. McKinley Ins. Co. v. Corning Inc., 399 F.3d 436, 447 (2d Cir. 2005). Yet they are subject to
these same constitutional limits, and so the requirement of a justiciable "case" or "controversy"
applies in the bankruptcy court. See. e.g., Gimbi v. Beck (In re ContiFinancial Com.), 336 F.
App'x 29, 30 (2d Cir. 2009).
Standing refers to the requirement that a plaintiff in federal court suffer a non-speculative
injury-in-fact, traceable to the conduct of the defendant, and-most importantly, in this caseredressable by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61
( 1992). In other words, a court has no power to decide a case in favor of a plaintiff unless the
defendant's conduct harmed the plaintiff and the court has the power to remedy that harm. See
Id. Mootness, a closely related doctrine, forecloses the court's continued jurisdiction over a case
when the plaintiff has received all the remedy it is entitled to, because a plaintiff must maintain a
"personal stake" in the case at all times. See United States Parole Comm'n v. Geraghty, 445
U.S. 388, 397 (1980).
Aleksandr argues that Juliya's only redressable injury in the bankruptcy proceedings is
the imminent discharge of the ongoing child support debt he owes Juliya pursuant to the Family
Court's support order. However, says Aleksandr, because neither his ongoing obligations under
the child support orders nor his arrears cannot possibly be discharged in the Chapter 7
proceeding, the court's denial of Aleksandr's general discharge affords no additional relief to
Juliya. Accordingly, says Aleksandr, Juliya had no standing to object to discharge. Or perhaps

6

she had standing to object, but her objection became moot once Aleksdandr correctly conceded
that the child support order and arrears cannot be discharged. Whether couched in terms of
standing or mootness, the argument is the same: Juli ya had already won, and thus had no broader
stake in the outcome of Aleksandr's Chapter 7 petition.
In support of this argument, Aleksandr first directs our attention to G&G Card & Gifts,
Inc. v. Berman (In re Berman), I 00 B.R. 658, 660 (Bankr. E.D.N.Y. 1988), which held that a
secured creditor (whose debts are nondischargeable) lacked standing to challenge a general
discharge because such a creditor would not be affected in any way from the grant or denial of
discharge. Aleksandr then points the Court to extra-circuit authority applying the doctrines of
standing and mootness to dismiss adversary proceedings brought by former spouses: Neal v.
Neal (In re Neal), 302 B.R. 275 (8th Cir. B.A.P. 2003); Matthers v. Matthers (In re Matthers),
2011 WL 1789981 (Bankr. N.D. Ga. 2011); Mapley v. Mapley (In re Mapley), 437 B.R. 225
(Bankr. E.D. Mich. 2010). These three cases in turn derive from the court's decision in Day v.
Klingler (In re Klingler), 301 B.R. 519 (Bankr. N.D. Ill. 2003), which we discuss in some detail.
In In re Klingler, the debtor, Klingler, had tricked the plaintiff, Day, into giving him a
$1850.00 loan. Id. at 521. Day proved very persistent in trying to get that money back, first
bringing proceedings in state court all the way to judgment and then bringing an adversary
proceeding when Klingler filed for bankruptcy under Chapter 7. Id. at 521-22. That adversary
proceeding sought an order declaring Day's judgment nondischargeable under 11 U.S.C. §
523(a)(2) (that is, because Klingler used false pretenses to obtain the underlying loan). Id. at
522. While that adversary proceeding moved forward, Klingler received his general Chapter 7
discharge. Id. Incensed, Day commenced a second adversary proceeding seeking to revoke
Klingler's general discharge. Id. In support, Day claimed that Klingler, in a bid to conceal

7

assets, had falsely represented that he participated in a mandatory pension plan when he actually
participated in a voluntary 401 (k) plan. Id. But, before that second adversary proceeding
progressed very far, Day won his first adversary proceeding, obtaining his order declaring his
judgment against Klingler nondischargeable. Id. at 523.
The bankruptcy court held that this victory rendered Day's objection to Klingler's general
discharge moot. Id. The court explained:
As a result of the first adversary, the debt Klingler owes Day will not be
discharged. Having prevailed in that proceeding, Day no longer has any personal
stake in any other discharge decision. He stands to gain nothing in the second
adversary if he prevails. At most, he is litigating now to vindicate the rights of any
remaining creditors, which he cannot do. Powers v. Ohio. 499 U.S. 400, 410, 111
S.Ct. 1364, 113 L.Ed.2d 411 (1991) (plaintiff in federal court "must assert his or
her own legal rights and interests, and cannot rest a claim for relief on the legal
rights or interests of third parties"). Or else he is simply litigating out of distaste
for Klingler, which he also cannot do. Foster v. Center Two. of LaPorte
County, 798 F.2d 237, 244 (7th Cir.1986) (mere indignation at the defendant or
disapproval of his conduct will not create a case or controversy).
Because Day received in the first adversary all the relief he was entitled to obtain
in the second, there is no further relief the court can grant him, and the second
adversary proceeding is moot.
Id. at 524 (footnotes omitted).
The decisions in In re Neal, In re Matthers, and In re Mapley extend this reasoning to
proceedings in which the debtor's former spouse brought an adversary proceeding objecting to
discharge. In all three cases, the former spouse asserted nondischargeable domestic support
orders and were therefore creditors within the meaning of 11 U.S.C. § 727(c). Yet the courts
concluded that the plaintiffs had no standing to object to discharge (or concluded that the case
had become moot) because discharge would not provide plaintiffs any additional relief. See In re
Neal, 302 B.R. at 279 ("An appeal is moot if we can grant no effective relief because the plaintiff
has already received all the relief the trial court can offer."); In re Matthers, 2011WL1789981 at

8

*2 ("The Complaint fails to assert any claim against Debtor that would not already be
nondischargeable[.]"); In re Mapley, 437 B.R. at 228-29 ("[I]t is clear that none of the debt in
question will be discharged even if the Debtor obtains a discharge in his Chapter 7 case ....
Plaintiff can gain nothing for herself by blocking the Debtor's discharge under§ 727.")
Naturally it would have been helpful for Aleksandr to have expressly contended that the
constitutional limits set forth in Article III barred Juliya's adversary proceeding (although trial
counsel did raise the possibility of insufficient standing in inchoate terms when he characterized
Juliya's that proceeding as a "vendetta" during the trial). Nevertheless, because justiciability
goes to the heart of the court's power to decide the case, it cannot be waived. See, e.g., Cooper
v. United States Postal Serv., 577 F.3d 479, 489 (2d Cir. 2009). The Court must therefore
consider Juliya's standing. And we see a good deal of merit in Aleksandr's argument that a
creditor asserting only nondischargeable debts has no Article III standing to commence a
separate adversary proceeding objecting to discharge, as well as the cases Aleksandr cites in
support. 4 Yet we do not reach that question because, in the Court's view, Aleksandr's delay is
still fatal - not because he has waived the issue of Juliya's standing, but because part of the
entire "case" (his own Chapter 7 non-adversary proceeding) remains justiciable, and the
bankruptcy court has now made findings that disqualify him from relief in that proceeding.
After all, Aleksandr does not simply ask us to dismiss Juliya's adversary proceeding, he
asks that we remand with instructions to enter judgment in his favor in the non-adversary
proceeding, even though the bankruptcy court has adjudged him a fraudulent litigant. What he

4

The Court has not been directed to any controlling Second Circuit authority on the question.
We note that at least one unpublished disposition affirmed denial of discharge in a case brought
by a debtor's former spouse who asserted child support debts. Nash v. Yablon, 189 F.3d 461,
1999 WL 568037, at *l (2d Cir. 1999). But that disposition did not consider Article III
justiciability.
9

ultimately wants us to do, then, is order the bankruptcy court to ignore its earlier fact findings in
disposing of the Chapter 7 petition. There is an unexamined premise in that contention: that,
once the bankruptcy court terminates the adversary proceeding, the court has no residual
authority under 11 U.S.C. § 727(a) to deny discharge. We think the bankruptcy court does have
that authority (at least in this unusual procedural setting, in which the court has held a full trial)
and thus will not require the court at this late juncture to throw out half the case as nonjusticiable while deciding the justiciable half in appellant's favor.
In reaching this conclusion, we rely primarily on the language of the statute, which in our
view indicates that the bankruptcy court may itself determine the debtor's suitability for
discharge under the false oath provision of 11 U.S.C. § 727(a)(4)(A), even ifthe adversary
proceeding in which the court made its findings was not itself justiciable. Section 727(a) states
that "[t]he court shall grant the debtor a discharge, unless" one of twelve statutory exceptions
applies. That phrasing suggests that Section 727(a) sets forth a rule of decision applicable in any
given Chapter 7 case, including the non-adversary proceeding itself. On the other hand, Section
727(c) states that "[t]he trustee, a creditor, or the United States trustee may object to the granting
of a discharge under subsection (a)[,]" while Bankruptcy Rule 7001 states that "[t]he following
are adversary proceedings ... a proceeding to object to or revoke a discharge." That phrasing
suggests that Section 727(a) sets forth a list of statutory rights to be invoked only by an
adversary and applied solely in an adversary proceeding. See Canganelli v. Lake Cntv. Ind.
Dep't of Pub. Welfare (In re Canganelli), 132 B.R. 369, 382-84 (Bankr. N.D. Ind. 1991).
But we think the latter reading is too narrow. For one, the applicability of certain Section
727(a) exceptions is so clear- such as the requirement in Section 727(a)(l) that the debtor be an
individual, or the requirement in Section 727(a)(l l) that the debtor complete a financial

10

management course - that it seems strange to hold as a general rule that a bankruptcy court may
never apply the Section 727(a) exceptions in the absence of an adversary proceeding. See also In
re Asay, 364 B.R. 423, 426-27 (Bankr. D.N.M. 2007) (concluding that the mandatory language
of 11 U.S.C. § 727(a)(8) and general grant of authority to "prevent an abuse of process" in 11
U.S.C. § 105(a) authorizes the bankruptcy court to close a case without granting discharge when
debtors had obtained discharge within the previous six years). Second, although the false oath
provision at Section 727(a)( 4)(A) is not as capable of ready application as these other provisions,
there is good reason to conclude that it too may be applied absent an objection: the provision is
designed to protect not only the interests of creditors, but the integrity of the court's own
proceedings; it is punitive in nature, not merely remedial. State Bank of Graymont v. Rich (In re
Rich), 202 B.R. I 07, I 08 (Bankr. C.D. Ill. 1996). It follows that, once the bankruptcy court has
determined that the debtor has committed fraud in his Chapter 7 petition, it need not (and,
arguably, must not) grant a discharge, even ifthe court reached this determination in the context
of an adversary proceeding that was non-justiciable. Id.; See also In re Melendez, 235 B.R. 173,
18 8 (Bankr. D. Mass. 1999) (concluding that the court may examine whether proposed
reaffirmation agreements between debtor and creditor satisfied the requirements of 11 U.S.C. §
254, even though court arguably lacked jurisdiction under Article III because no party objected
to the agreements). In that limited sense, the debtor delays at his peril. He may have good
reason to complain that the court should never have moved forward with the adversary
proceeding, but he cannot force the court to blind itself to fraudulent conduct once it has been
shown at trial. 5

5

We do not think this narrow conclusion invites the bankruptcy courts to ignore the
constitutional and statutory limitations on their jurisdiction.
11

As we have said, Article III justiciability cannot be waived. But fraud in the proceedings
cannot be ignored. Our holding is that, as long as Aleksandr seeks the protection of the
bankruptcy court, the non-adversary part of the case remains justiciable, and because the
bankruptcy court must enforce a statutory mandate in resolving that part, its previous findings of
fraud cannot be discarded, even if those findings derived from an adversary proceeding that
should not have moved forward (as we have assumed, but not decided).
One final point on Article III: even if we are wrong, and the bankruptcy court cannot
deny discharge under 11 U.S.C. § 727(a)(4)(A) on the basis of findings made during a nonjusticiable adversary proceeding, reversal and remand for granting of discharge would not be an
appropriate outcome in this case. Juliya's Complaint makes allegations, as yet undeveloped, that
Aleksandr was "opening many credit card accounts which I was not aware of[,]" that he "took
... my personal money (more than $10,000)" in October 2007, which he then used to buy a
Nissan Pathfinder, that he "took around $17,000 from our joint account[,]" and that he "refused
to pay for our apartment even though his name was on the lease." These allegations, if they have
any substance, would seemingly give rise to unliquidated claims and debts within the meaning of
11 U.S.C. § 101(5). Some of these claims might, like the child support order and arrears, clearly
fall within the discharge exceptions set forth in 11 U.S.C. § 523, and therefore would not confer
standing because they "cannot be made any more nondischargeable" than they already are. In re
Klingler, 301 B.R. at 524. Others seemingly would not fall within the Section 523 exceptions,
and so a discharge injunction could effectively put those claims beyond Juliya's reach. See 11
U.S.C. § 524(a); Green v. Welsh, 956 F.2d 30, 36 (2d Cir. 1992) (reiterating that discharge
prevents plaintiff from pursuing state tort action to establish personal liability of debtor, but
allowing action to proceed on the condition that recovery would be permitted only from debtor's

12

insurer). Similarly, Juliya's allegations regarding the apartment lease raise the possibility that
discharge would leave her primarily liable for debts incurred by both parties.
In our view, either of these injuries - Juliya's potential loss of remedies for Aleksandr's
alleged torts and her primary obligation to satisfy debts that would otherwise be borne by both would confer not just statutory standing, but also Article III standing, even under the theory of
adversary standing set forth in In Re Klingler. 6 Cf. Brundege v. Brundege (In re Brundege), 359
B.R. 22, 29 (Bankr. E.D.N.Y. 2007) (inchoate interest in marital property and joint liability on
credit cards confer statutory standing); Hunn v. Hunn (In re Hunn), 49 B.R. 430, 430 (Bankr.
M.D. Fla. 1985) (contingent marital debts confer statutory standing). Indeed, the courts in both
In Re Berman and In Re Mathers, rather than dismiss outright, gave plaintiff the opportunity to
demonstrate the existence of unliquidated claims or dischargeable debts that would confer
standing. See In re Matthers, 2011 WL 1789981, at *2 ("[T]he Court must dismiss the
Complaint unless the Complaint is amended to include additional facts to support the finding that
Plaintiff holds claims against Debtor that arose prior to the petition date and would not be
nondischargeable under section 523(a)(5) or (a)(l 5)."); In re Berman, 100 B.R. at 660
(permitting leave to amend to allege "the existence of an unsecured claim, if one exists, or some
other right which would be substantially affected by the Debtor's discharge."). A similar
approach would seem appropriate here, though the Court notes that, at this point in the litigation,
6

In contrast, we do not think the allegation that Aleksandr would somehow leverage the
bankruptcy proceedings to trick the Family Court into diminishing his arrears or monthly
payments states a threatened injury that would confer standing. First, at present that injury is far
too speculative. See Clapper v. Amnesty Int'! USA, 133 S. Ct. 1138, 1147 (2013)
("' [T]hreatened injury must be certainly impending to constitute injury in fact"' (quoting
Whitmore v. Arkansas, 495 U.S. 149, 158 (1990))). Second, even ifthe Court believed
Aleksandr would make such a bid, we suspect the Family Court would easily see through the
ruse. See, e.g., Ross v. Sperow, 871 N.Y.S.2d 736, 738 (App. Div. 2008) (rejecting spouse's
contention that discharge in bankruptcy terminated his obligation to comply with Family Court's
order directing him to pay attorney fees, because that order was in the nature of support).
13

Juliya could not rest solely on the allegations of her Complaint. See Defenders of Wildlife, 504
U.S. at 561 (allegations of complaint are sufficient to establish standing at the pleading stage, but
not at summary judgment or at trial).
Our disposition of the Article III issue leaves us with the question of whether the
bankruptcy court's findings were clearly erroneous. Without doubt (and as the court detailed)
Aleksandr offered much testimony at the trial that undermined his credibility in asserting the
advice of counsel defense. Aleksandr argues that these apparent misstatements were actually the
product of mistranslation and confusion, from which the court should not have "inferred [that
Aleksandr was] lying on the stand" and which were, in any event, "insufficient to prove actual
intent." (Appellant Br. 19). In support, Aleksandr cites cases with similar facts in which the
reviewing court either credited the debtor's advice of counsel defense, concluded that issues of
material fact remained on summary judgment, or determined that any fraud was insufficient to
justify denial of discharge. This convinces the Court only that some hypothetical bankruptcy
court might have found Aleksandr credible or stopped short of denying discharge; it does not
convince us that the bankruptcy court erred here. On the contrary, as Aleksandr notes, the
transcript is in many places a "bundle of confusion" (Id.), which marks this case as a prime
example of why appellate courts must defer to the credibility determinations of trial courts. See,
~,Phoenix

Global Ventures, LLC v. Phoenix Hotel Assocs., Ltd., 422 F.3d 72, 76 (2d Cir.

2005) (citing Joseph Brenner Assocs., Inc. v. Starmaker Entm't, Inc., 82 F.3d 55, 57 (2d
Cir.1996)).
Aleksandr also objects that "the court never conducted an inquiry into the merits of
[Aleksandr's] defense that he was following the advice of his counsel." (Appellant Br. 20).
But, once he conceded that he made misrepresentations, it was Aleksandr's burden to provide a

14

credible explanation. See Carlucci & Legum v. Murray (In re Murray), 249 B.R. 223, 228
(E.D.N.Y. 2000) (explaining that, when debtor makes false statement, burden is "upon the debtor
to come forward with evidence to prove that it was not an intentional misrepresentation. If the
debtor fails to provide such evidence or a credible explanation for his failure to do so, a court
may infer fraudulent intent." (quoting In re Gollomp, 198 B.R. 433, 437 (S.D.N.Y.1996))). He
offered one, but the court found it not credible - which, again, is a determination we owe
substantial deference.
Aleksandr also challenges the materiality of his failure to disclose work income,
purporting to distinguish Moreo v. Rossi (In Re Moreo), 437 B.R. 40 (E.D.N.Y. 2010), relied
upon by the bankruptcy court, on the grounds that full disclosure would not have affected the
ultimate disposition of Aleksandr's estate. (Appellant Br. 24). Yet, even assuming arguendo
that in re Moreo is distinguishable on that basis, we think Aleksandr's omission easily meets the
relatively low threshold of materiality in Section 727(a) cases. See, e.g., New World Rest. Gm.,
Inc. v. Abramov (In re Abramov), 329 B.R. 125, 134 (Bankr. E.D.N.Y. 2005) (citations omitted)
("Materiality [under Section 727(a)(4)(A)] does not depend upon whether the falsehood or
omission contained in the debtors' petition turns out to be detrimental to creditors. Even
worthless assets and unprofitable business transactions must be disclosed[.]"). The court was
under no obligation to apply the more forgiving view of materiality set forth in, inter alia, Coccia
v. Fischer (In re Fischer), 4 B.R. 517, 518 (Bankr. S.D. Fla. 1980). (See Appellant Br. 23).
There is no clear error in the bankruptcy court's findings and consequently no error in its denial
of discharge.
Finally, we note that Aleksandr has objected to Juliya's attachment of material to her
briefthat was not presented to the court below. (Appellant ReplyBr. 1, ECF No. 9). The Court

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has not considered these materials because they are not properly part of the appellate record. See
Fed. R. Bankr. P. 8006. Juliya also attached supplemental materials in two letters filed with the
Court after the close of briefing; we have not considered those materials either. (ECF Nos. 11
and 12). In addition, Juliya has issued Rule 45 subpoenas to third-parties and asks the Court to
issue an order directing them to comply. (ECF No. 12). Because the Court exercises appellate
jurisdiction in this matter, 28 U.S.C. § 158(a), we deny that request.
The Court affirms. The Clerk of Court is directed to close the case.
SO ORDERED.

/s/ Judge Raymond J. Dearie

Dated: Brooklyn, New York
May2, 2014

istrict Judge

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