Burse v. State of Wisconsin

Filing 28

ORDER RE BANKRUPTCY APPEAL that the bankruptcy courts opinion is AFFIRMED signed by Judge Lynn Adelman on 10/31/14. (cc: all counsel)(lls)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
_____________________________________________________________________
THOMAS L. BURSE,
Appellant,
v.

Case No. 13-cv-1200

STATE OF WISCONSIN,
Appellee.
_____________________________________________________________________
DECISION AND ORDER
Thomas Burse, pro se, appeals several decisions of the United States Bankruptcy
Court in his Chapter 7 bankruptcy.
I. Background
Appellant was the sole owner of Buveck Consultants LLC (“Buveck”), a construction
company in Milwaukee. Buveck participated in the Disadvantaged Business Enterprise
(“DBE”) certification program, administered by the Wisconsin Department of Transportation
(“WisDOT”). The DBE program requires states to award a certain percentage of federal
highway road contracts to DBE-certified companies. In order to be DBE certified, a
company must be at least 51% owned or operated by individuals who are socially and
economically disadvantaged and must be qualified. Buveck participated in the DBE
program as both a prime consultant and as a sub-contractor for other prime consultants.
Appellant filed for Chapter 7 bankruptcy, and appellee, the state of Wisconsin, filed
an adversary proceeding on behalf of WisDOT. Appellee alleged that appellant owed
WisDOT money for misrepresenting his educational credentials on his DBE certification
application and for fraudulently overbilling, and that this debt should not be discharged
because it was obtained by false pretenses, misrepresentation, or actual fraud under 11

U.S.C. § 523(a)(2)(A).1
The bankruptcy court denied appellant’s motion to dismiss for failure to state a claim
upon which relief may be granted, and the case proceeded to trial. The bankruptcy court
found that appellant had fraudulently obtained money from appellee within the meaning of
§ 523(a)(2)(A) and determined the debt was non-dischargeable.
II. Discussion
Burse questions the bankruptcy court’s denial of his motion to dismiss, denial of his
motions in limine, and determination that the debt is non-dischargeable. He also raises
other miscellaneous issues.
A. Denial of Motion to Dismiss
Appellant filed a motion to dismiss, arguing that appellee’s amended complaint did
not satisfy the pleading standards of Rules (12)(b(6) and (9)(b) of the Federal Rules of Civil
Procedure. The bankruptcy court denied the motion in a minute order, finding that the
amended complaint, together with its attachments, clearly set forth the allegations and pled
fraud with sufficient particularity. The court added that appellant’s motion focused more on
his disagreement with appellee’s factual and legal arguments, which is better resolved
through summary judgment or trial. R. at 159, ECF No. 1-1.
The decision to deny a motion to dismiss under Rule 12(b)(6) is a question of law
that I review de novo. Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 763 (7th Cir.
2010). To survive, “a complaint must contain sufficient factual matter, accepted as true, to

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Appellee also asked the bankruptcy court the enter a money judgment, but the
court declined to do so based on Ortiz v. Aurora Health Care, 665 F.3d 906 (7th Cir.
2011). The decision to not enter a money judgment is not an issue on appeal.
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state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (internal quotation omitted). Although a plaintiff may not merely recite the elements
of a cause of action, a complaint must only provide enough detail to give the defendant fair
notice of what the claim is. Reger Dev., LLC, 592 F.3d at 764. In other words, the complaint
must show that a claim is plausible rather than merely speculative. Id. Fraud claims
however, must be pled with more particularity, specifying the “who, what, when, where, and
how” of the alleged fraudulent act. Arazie v. Mullane, 2 F.3d 1456, 1465 (7th Cir. 1993)
(internal quotation omitted); accord Fed. R. Civ. P. 9(b);
Section 523(a)(2)(A) states that a debtor is not entitled to discharge from any debt
that is obtained by “false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor’s or an insider’s financial condition.” Under § 523(a)(2)(A),
a creditor must show that: “(1) the debtor made a false representation or omission, (2) that
the debtor (a) knew was false or made with reckless disregard for the truth and (b) was
made with the intent to deceive, (3) upon which the creditor justifiably relied.” Ojeda v.
Goldberg, 599 F.3d 712, 716–17 (7th Cir. 2010). The amended complaint goes beyond
simply reciting the elements needed to allege a claim under § 523(a)(2)(A). The complaint
alleges facts supporting the first Ojeda element by outlining specific incidents when
appellant allegedly falsely represented his educational background and specific incidents
when he allegedly intentionally overbilled. R. at 93–95, ECF No. 1-1 The complaint also
alleges facts supporting the remaining Ojeda elements. Related to the misrepresentation
of educational credentials, the factual allegation that appellant submitted false diplomas
and letters from a university supports the assertion that he knew and intended to deceive
and that appellee justifiably relied on this information. Id. at 93. Regarding the fraudulent
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billing, the factual allegation that appellant agreed to specific rates and then billed for
wages exceeding those rates supports the assertion that appellant knew and intended to
deceive and that the appellee reasonably relied on his agreement. Id. at 94. Thus, I find
that the complaint meets the general pleading standard of Rule 12(b)(6).
The complaint also meets the more particular pleading standard of Rule 9(b). In
alleging fraud, the complaint gives the particular details required. It alleges who allegedly
committed fraud–appellant; what the fraud was–providing false information about education
credentials and fraudulent, inflated invoices; when the fraud occurred–regarding the false
education information, in 2003 and 2009, regarding the fraudulent billing, 2005 through
2011; where the fraud occurred–in Milwaukee; and how appellant committed the fraud–by
submitting false diplomas and letters from a university and by inflating invoices, overbilling,
and charging excessive rates. Thus, I conclude that the amended complaint states a claim
upon which relief may be granted, and I affirm the bankruptcy court’s denial of the motion
to dismiss.
B. Denial of Motions in Limine
Appellant brought two motions in limine. I review motions in limine for an abuse of
discretion. Aldridge v. Forest River, Inc., 635 F.3d 870, 874 (7th Cir. 2011). I will only
reverse the trial court’s decision if it is clear that the decision was unreasonable. Griffin v.
Foley, 542 F.3d 209, 217 (7th Cir. 2008). In his first motion, appellant sought to exclude all
evidence of time sheets, invoices, tax returns, bankruptcy schedules, payroll registers,
invoices, and check registers. The bankruptcy court denied the first motion, stating:
The first piece of the motion has to do with Mr. Burse’s credentials, and I’ll
just leave it at that. And basically Mr. Burse’s argument is that he has made an
admission with regard to that issue, and therefore that any further evidence on that
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issue is inadmissible. That in fact is not a correct statement of the law. In particular,
it’s not a correct statement under the Federal Rules of Evidence. Federal Rule of
Evidence 4:03B - - 4:03 indicates that any evidence that tends to make a fact more
or less likely is in fact relevant. Rule 6:11 of the Federal Rules of Evidence indicates
that the court, me, has the ability and the discretion to decide whether evidence is
cumulative or repetitive. And if I hear any evidence in the trial that I feel is
cumulative or repetitive, that we’re saying the same thing over and over again, that
we don’t need any additional evidence on that topic, I can make that determination.
But as I sit here right now, there has been no evidence put in at all. We
haven’t started the trial. So I don’t know what the State is going to put in with regard
to the issue that you’ve alleged here. I’ll wait and find out. It may be testimony. It
may be an admission. It may be something else. If I determine at the time that I hear
it that it is cumulative, I’ll make that decision at that point in time. But I’m not in a
position to make that decision here. So I will deny that motion at this point.
The second issue is that Mr. Burse argues that with regard to time sheets and
expense reports, that the evidence should be excluded. . . . his argument is that the
- - there are no witnesses through whom to be able to put in that evidence. Again,
I have no earthly idea if that’s true. I haven’t heard the witness yet. Neither have
you. So until we hear the witness, we won’t know whether or not that evidence is
supported by any witness testimony. I will listen to any testimony that gets presented
today and I’ll make that determination when I hear it.
Supplemental R. at 22–24, ECF No. 19.
The court did not abuse its discretion in denying this motion. The trial court has the
discretion to exclude relevant evidence if it is cumulative, see Fed. R. Evid. 4:03, and it was
within the trial court’s discretion to wait until evidence was presented to determine whether
evidence was, in fact, cumulative. It was also within the trial court’s discretion to wait until
it heard witness testimony to determine whether the witness was an appropriate person
through whom evidence to admit evidence. See Aldridge, 635 F.3d at 874.
During trial, appellant did object to the admission of evidence, arguing it was
cumulative and repetitive because he had already admitted to misstating his educational
credentials. Supplemental R. at 65–66, ECF No. 19. The court overruled this objection,
stating that the information was relevant to whether the misrepresentation was intentional
and made with intent to defraud, other elements of appellee’s claim. Id. Relevance
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determinations are within the trial court’s discretion, and this decision was reasonable.
Appellant also objected to the admission of several pieces of evidence during trial,
arguing that the witness was not an appropriate person through whom to introduce the
evidence. Federal Rule of Evidence 602 requires that a witness have personal knowledge
of matters about which she is testifying. The trial court found that for each of appellant’s
objections, the witness did have appropriate personal knowledge to offer the testimony the
appellee was eliciting. Id. at 68–69 (finding witness’ role as department records’ custodian
was sufficient); id. at 92–93 (finding witness’ role as time sheet approver was sufficient).
I cannot say that any of these rulings were unreasonable.
Appellant’s second motion in limine sought to preclude appellee from calling
appellant as a witness. The bankruptcy court denied this motion as well, stating:
The second motion that Mr. Burse filed on August 28th is a motion in limine
to . . . prohibit the plaintiff from calling Mr. Burse as a witness . . . . The motion . . .
is based on Rule 17 - - 702 and 703, Rule 702 and 703 of the Federal Rules of
Evidence. Those rules are inapplicable to this motion.
Rule 702 is the rule that governs the admission of expert testimony. . . . Rule
703 talks about the bases that an expert can use to base his or her testimony on.
You’ve not been called as an expert, Mr. Burse. You’re simply being called as the
defendant. . . . In addition, because this is a civil proceeding, the State has the right,
as do you, to call any witness that they think may be relevant. Of course any party
has the right to object and say this witness’s testimony is not relevant. And that
applies not only to you but to any other witnesses. But the State has a right to call
you as a witness, just as they do to call anyone else.
Supplemental R. at 25–26, ECF No. 19. The court went on to explain appellant’s Fifth
Amendment right against self-incrimination and how he could invoke that right while
testifying.
The bankruptcy court was correct is stating that Federal Rules of Evidence 702 and
703, which apply to expert witnesses, did not apply to appellant, and that because this is
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a civil case, appellant could be called to the witness stand. Thus, the court did not abuse
its discretion in denying appellant’s motion.
C. Determination that debt is non-dischargeable
Appellant also challenges the bankruptcy court’s finding that his debt to appellee is
non-dischargeable under § 523(a)(2)(A). The court applied the elements outlined in Ojeda,
599 F.2d 712, which the parties agree is the correct legal standard. Appellant however
challenges the court’s factual findings based on the evidence presented. I may only reverse
the trial court’s factual findings if they are clearly erroneous. Tidwell v. Smith, 582 F.3d 767,
777 (7th Cir. 2009). “A finding is ‘clearly erroneous’ when although there is evidence to
support it, the reviewing court on the entire evidence is left with the definite and firm
conviction that a mistake has been committed.” Id.
First, the bankruptcy court concluded that appellant misrepresented his educational
credentials on his resume and submitted fraudulent documentation supporting those
credentials. The bankruptcy court found that a diploma is not required for DBE certification,
but that it was a factor WisDOT used to determine whether appellant was qualified for DBE
certification. Supplemental R. at 227–29, ECF No. 19. The court found the fact that the
state withdrew appellant’s DBE certification when it found out about the misrepresentations
to be circumstantial evidence that WisDOT would not have certified him had he not had the
educational background he originally claimed to have. Id. at 230. The court also concluded
that appellant made these misrepresentations knowingly and with the intent to deceive
WisDOT. Id. at 232. As support, the court cited the extraordinary lengths to which appellant
went to perpetuate his initial misrepresentations by falsifying university documents. Finally,
the court concluded that the appellee was justified in relying upon the false information
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appellant provided and that appellant directly benefitted from the misrepresentation by
obtaining DBE certification and receiving subsequent WisDOT contracts. Because the court
found that appellee had proven all Ojeda elements by a preponderance of the evidence,
the court concluded that appellant’s misrepresentations regarding his educational credential
alone was enough to render the debt non-dischargeable. Id. at 232.
Appellant raises several issues regarding this part of the court’s conclusion. First,
appellant asks me to reverse this finding because a diploma is not required for DBE
certification, thus the fact that he lied about having a diploma does not matter. I find that
the trial court did not clearly err on this issue. The court agreed with appellant that DBE
certification does not require a diploma; however it disagreed that this rendered his
misrepresentation irrelevant. The court’s finding that despite not being required, an
applicant’s educational background is a factor WisDOT considers is not clearly erroneous.
Experts from WisDOT testified that while a diploma is not required, it is important
information used to show expertise and something WisDOT considers in determining
whether someone is qualified. I also agree with the court that the fact that appellee revoked
appellant’s certification when it found out about the falsified educational credentials tends
to support a finding that it was at least a factor in their original certification decision.
Second, appellant argues that appellee did not lose any money by certifying
appellant. The trial found that appellant’s misrepresentation about his educational
credentials benefitted him because it enabled him to obtain DBE certification, through which
he received government contracts. Combined with the trial court’s finding that appellant
fraudulently overbilled the government under these contracts, the conclusion that the
misrepresentation of educational credentials led to a monetary injury is not clearly
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erroneous.
The court then moved on to the billing issues and concluded that appellant submitted
fraudulent invoices. The court acknowledged that there was no direct evidence that
appellant himself changed time sheets or invoices, but cited other circumstantial evidence
to support its findings, including testimony by a forensic accountant that the number and
pattern of errors tend to indicate fraud not mistake, bills and time sheets with different
signatures and evidence of changes, and testimony of an employee that the signature on
his time sheet was not his and he never authorized anyone to change his time sheet.
Supplemental R. at 234–35. Further, the court found that appellant himself was responsible
for these actions, citing his signature on various time sheets, invoices, and other
documents; the fact that appellant was the sole owner and operator of Buveck; and
testimony that appellant was responsible for billing practices and “had his fingers in every
pie.” Id. at 233. The pattern of errors, evidence of changes to time sheets, and other
circumstantial evidence also supports a finding that appellant knew he was committing
fraud, intended to deceive appellee, and that appellee relied on the fraudulent invoices.
Additionally, the evidence supports a causal connection between the fraudulent billings and
the monetary injury to appellee; had appellant not overbilled, appellee would not have
overpaid. Based on these two fraudulent acts, the court concluded that the debt is nondischargeable.
Appellant raises several issues with this conclusion. First, appellant argues that the
bankruptcy court erred in concluding that he committed fraud through his billing practices.
Specifically, he argues that he subcontracted for prime consultants, and because the prime
consultants submitted the billing invoices to WisDOT, the court should not have found him
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liable. I find this argument to be without merit. Although the prime consultants were
contractually liable to WisDOT, this does not diminish appellant’s responsibility. According
to the court, the evidence showed that appellant, not other prime consultants, was
responsible for intentionally falsifying time sheets and billing invoices with the intent to
deceive. It did not clearly err in making these findings.
Second, appellant argues that the court erred in concluding that he was individually
responsible for the fraudulent acts when it was the company that applied for DBE
certification and issued the bills. Specifically, appellant argues that appellee was required
and failed to prove the elements required to “pierce the corporate veil.” Appellee argues
that while the theory of piercing the corporate veil was involved, it was not its only theory
of personal liability. It also alleged that appellant was individually responsible because he
personally committed the fraudulent acts and because he was a direct recipient of the
fraudulently obtained funds.
Corporate veil-piercing claims, also known as alter-ego claims, are state law claims
over which the bankruptcy court does not have Article III authority to enter final judgment.
See Wellness Int’l Network, Ltd. v. Sharif, 727 F.3d 751, 775–76 (7th Cir. 2013) (“[The
bankruptcy court] lacked constitutional authority to enter final judgment on [plaintiff’s] alterego claim.”). However, bankruptcy courts can make decisions “related to” the bankruptcy
case. 28 U.S.C. § 1334(b); Norton Bankruptcy Law & Practice § 57:68 (3d ed. 2014). In its
oral ruling, the bankruptcy judge did not specifically address the issue of corporate veilpiercing. Rather, the court made factual findings that it was appellant himself who
committed fraud in the context of § 523(a)(2). The court found it was appellant himself who
lied on his resume, submitted false university documents, and changed billing information.
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Further, the court found it was appellant himself who benefitted from these fraudulent acts.
The issue of who committed fraudulent acts alleged under § 523(a)(2)(A) is an issue related
to the claim. Thus, I find that the bankruptcy court did not make a final determination
regarding the alter-ego claim, but rather that it decided an issue related to the § 523(a)(2)
claim that a debt appellant owed should not be dischargeable. Further, I conclude that
these findings were not clearly erroneous in light of the evidence presented.
Because the bankruptcy court’s factual findings regarding the dischargeability of the
debt were not clearly erroneous, I affirm.
D. Miscellaneous issues
Appellant also brings up several miscellaneous issues. First, appellant argues that
the bankruptcy court did not have jurisdiction over this particular debt because there is no
court-ordered judgment declaring that appellant owes this money. 28 U.S.C. § 157(b)(2)(I)
gives the bankruptcy court authority to enter appropriate judgments regarding
“determinations as to the dischargeability of particular debts” in all Title 11 core
proceedings. 11 U.S.C. § 101 defines “debt” as “liability on a claim,” and defines “claim” as
“right to payment, whether or not such right is reduced to judgment.” Thus, appellant’s
argument that appellee’s claim must be reduced to a judgment before seeking relief in the
bankruptcy court is incorrect.
Second, appellant argues that appellee should have been required to exhaust its
administrative remedies before bringing this adversarial complaint in bankruptcy court.
Appellant seems to argue that the United States Department of Transportation has
authority to decide DBE certification disputes. However, the issue that appellee raised in
bankruptcy court was dischargeability of the claim, over which the bankruptcy court has
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jurisdiction. See § 523(a)(2); Fed. R. Bankr. P. 4007, Advisory Committee Notes (“The
bankruptcy court has exclusive jurisdiction to determine dischargeability of these debts.”).
Thus, I conclude that the bankruptcy court appropriately exercised jurisdiction.
Third, appellant seems to argue that the bankruptcy court’s decision should be
reversed because appellee’s forensic accountant, Mary Braaksma, lied in her testimony.
Credibility determinations are left to the fact-finder, in this case the bankruptcy judge.
Marshall Joint School Dist. No. 2 v. C.D. ex rel. Brian D., 616 F.3d 632, 638 (7th Cir. 2010)
(“[W]e rarely reverse on a credibility determination . . . we overturn it only if patently
wrong.”). Appellant had an opportunity to cross-examine Braaksma and to present
evidence that contradicted Braaksma’s testimony. Appellee presented other evidence
which supported Braaksma’s testimony, thus I cannot say the court was patently wrong in
giving weight to Braaksma’s testimony.
Fourth, appellant argues that the court should have deferred to a forum with more
specialized knowledge in determining whether a diploma was required for DBE certification.
However, I find nowhere in the record where appellant made this request at the trial level.
Thus, appellant has waived this issue. Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th
Cir. 2012).
Finally, appellant argues that certain evidence should not have been admitted
because the exhibits produced were not originals and also because certain documents
contained hearsay. Appellant did not raise these issues at trial and therefore waived his
right to challenge them on appeal. Id.
III. Conclusion
THEREFORE, IT IS ORDERED that the bankruptcy court’s opinion is AFFIRMED.
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Dated at Milwaukee, Wisconsin, this 31st day of October, 2014.

/s Lynn Adelman
_____________________
LYNN ADELMAN
District Judge

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