Filed: Apr. 15, 2020
Latest Update: Apr. 15, 2020
Summary: FILED APR 15 2020 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT ORDERED PUBLISHED UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT In re: BAP No. NC-19-1094-FBTa JOHN G. MOSER, Bk. No. 09-11945 Debtor. Adv. Pro. 18-01037 STERLING-PACIFIC LENDING, INC., dba STERLING PACIFIC FINANCIAL, Appellant, v. OPINION JOHN G. MOSER, Appellee. Argued and submitted on March 26, 2020 Filed – April 15, 2020 Appeal from the United States Bankruptcy Court for the Northern District
Summary: FILED APR 15 2020 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT ORDERED PUBLISHED UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT In re: BAP No. NC-19-1094-FBTa JOHN G. MOSER, Bk. No. 09-11945 Debtor. Adv. Pro. 18-01037 STERLING-PACIFIC LENDING, INC., dba STERLING PACIFIC FINANCIAL, Appellant, v. OPINION JOHN G. MOSER, Appellee. Argued and submitted on March 26, 2020 Filed – April 15, 2020 Appeal from the United States Bankruptcy Court for the Northern District o..
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FILED
APR 15 2020
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
ORDERED PUBLISHED
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NC-19-1094-FBTa
JOHN G. MOSER, Bk. No. 09-11945
Debtor. Adv. Pro. 18-01037
STERLING-PACIFIC LENDING, INC.,
dba STERLING PACIFIC FINANCIAL,
Appellant,
v. OPINION
JOHN G. MOSER,
Appellee.
Argued and submitted on March 26, 2020
Filed – April 15, 2020
Appeal from the United States Bankruptcy Court
for the Northern District of California
Honorable Roger L. Efremsky, Bankruptcy Judge, Presiding
Appearances: Peter L. Fear of Fear Waddell, P.C. argued on behalf of
appellant; Michael C. Fallon on the brief for appellee.
Before: FARIS, BRAND, and TAYLOR, Bankruptcy Judges.
FARIS, Bankruptcy Judge:
INTRODUCTION
Creditor Sterling-Pacific Lending, Inc., dba Sterling Pacific Financial
(“Sterling”) asked the bankruptcy court whether the discharge injunction
barred it from prosecuting certain claims against chapter 71 debtor Dr. John
G. Moser in state court. The court decided that it could not rule without
inappropriately speculating about the state court’s decisions. It therefore
dismissed Sterling’s complaint and cautioned Sterling that it proceeded in
state court “at its own peril.”
We agree with Sterling that the bankruptcy court should have ruled
on the complaint’s request for declaratory relief. We therefore REVERSE
the court’s orders and judgment dismissing the adversary proceeding.
Because Dr. Moser has repeatedly conceded that the discharge injunction
does not apply to Sterling’s claims, we REMAND for entry of judgment in
favor of Sterling.
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532.
2
FACTUAL BACKGROUND
A. Prepetition events
Dr. Moser and another individual formed four California limited
liability companies (the “LLCs”) with the stated purpose of owning and
developing real estate. Sterling made secured loans to Dr. Moser and the
LLCs. Dr. Moser guaranteed the loans made to the LLCs.
In 2008, Dr. Moser and the individual LLCs each filed lawsuits in
state court against Sterling, alleging misrepresentation regarding the loans.
B. Dr. Moser’s bankruptcy case
Dr. Moser filed a chapter 7 petition in 2009 and scheduled his
interests in the LLCs. He received a discharge later that year.
During the bankruptcy case, Sterling removed the five state court
lawsuits to the bankruptcy court. The effort failed: the chapter 7 trustee
abandoned the estate’s interests in the LLCs, and the bankruptcy court
remanded the cases.
In January 2010, Sterling and Dr. Moser’s bankruptcy trustee agreed
to settle Dr. Moser’s lawsuit against Sterling for $20,000. The bankruptcy
court approved the compromise, and the chapter 7 trustee dismissed
Dr. Moser’s state court action. Dr. Moser’s bankruptcy case closed in
September 2011.
C. The LLCs’ state court actions
The LLCs amended their state court complaints to add new claims.
3
Sterling believed that the amended claims asserted by the LLCs were really
Dr. Moser’s individual claims that the chapter 7 trustee had released.
Sterling also believed that Dr. Moser had engineered this as an end-run
around the settlement.
At Sterling’s request, the bankruptcy court reopened Dr. Moser’s
bankruptcy case in 2013 to allow Sterling to file an adversary complaint
seeking a determination that the compromise with Dr. Moser’s estate also
encompassed the LLCs’ claims in their state court cases. But the
bankruptcy court denied Sterling’s motion for summary judgment and
dismissed the adversary proceeding, holding that the state court should
decide whether the claims asserted in state court belonged to the LLCs or
to Dr. Moser. The court observed that, if the claims really belonged to
Dr. Moser, the settlement agreement between Sterling and Dr. Moser’s
trustee extinguished them, but, if they belonged to the LLCs, the LLCs
would be free to assert them.
Meanwhile, between 2011 and 2015, Sterling prevailed in the LLCs’
four state court actions. In sum, the LLCs were held liable to Sterling for a
total of $1,067,950.23, including over $164,000 in attorneys’ fees and over
$844,000 in damages.
Sterling then attempted to collect the fees and costs from Dr. Moser.
In 2016, it filed a complaint (“Alter Ego Complaint”) in state court against
Dr. Moser and the LLCs, seeking to hold Dr. Moser liable for the LLCs’
4
debts on an alter ego theory.
D. Second reopening of the bankruptcy case and the motion for
sanctions
In 2018, Dr. Moser successfully reopened his bankruptcy case and
sought sanctions against Sterling.2 He argued that Sterling violated the
discharge injunction when it filed the Alter Ego Complaint in state court.
He contended that the discharge injunction barred it from recovering the
$844,000 damages award from him or asserting a fraud claim against him.
He also claimed that both the discharge and the settlement between the
trustee and Sterling barred Sterling from recovering the fees and costs from
him.
E. Sterling’s adversary complaint
Sterling filed an adversary complaint in the bankruptcy court against
Dr. Moser for declaratory relief. It offered a proposed second amended
Alter Ego Complaint (“Second Amended Alter Ego Complaint”), in which
it clarified that it only sought to hold Dr. Moser liable for the fees and costs
it incurred after Dr. Moser filed his bankruptcy petition. The Second
Amended Alter Ego Complaint, in effect, conceded that Dr. Moser’s
discharge protected him from the $844,000 damage award and the claim
2
The motion for sanctions was subsequently stayed when Sterling filed its
adversary complaint; Dr. Moser’s counsel later withdrew the motion after the court
granted his motion for summary judgment and dismissed the adversary proceeding.
5
that Dr. Moser fraudulently induced Sterling to make the loans to the
LLCs. Sterling requested: (1) a declaration that the Second Amended Alter
Ego Complaint “did not seek to impose liability on Moser for any debt
discharged in the Case;” and (2) a declaration that prosecution of the
Second Amended Alter Ego Complaint, “including obtaining a judgment
based on the allegations made therein and collecting on that judgment,
does not violate the discharge injunction.”
Dr. Moser’s answer to the adversary complaint was curious in at least
two respects. First, its form was odd: he did not respond specifically to the
allegations of the complaint, but instead generally stated his position.
Second, it contradicted his assertion, made only a few months earlier, that
Sterling violated his discharge injunction. Now, he expressly stated that
“Moser does not contend the obligations arising out of the Alter Ego
Complaint, the claim for costs awarded to Sterling and against the Limited
Liability Companies in the litigation brought by those entities against
Sterling, were discharged in the chapter 7 filing.” Instead, he claimed that
the LLCs were not his alter egos, but if they were, the releases contained in
the settlement agreement between the bankruptcy trustee and Sterling
protected him. In short, he foreswore the protection of the discharge and
instead argued that he was not liable to Sterling on the merits.
1. Dr. Moser’s motion for summary judgment
Dr. Moser filed a motion for summary judgment. Curiously, the
6
motion did not take issue with the only claim asserted in Sterling’s
complaint (a request for a declaratory judgment about the effect of the
discharge injunction). It waved that question aside: “The issue from
Moser’s perspective has nothing to do with the discharge. From Moser’s
perspective the issue is one of the ownership of the claims prosecuted in
the state court by related limited liability companies.” (Emphasis added.)
Instead, he pointed out that the settlement between Dr. Moser’s trustee and
Sterling extinguished all of his claims against Sterling and all of Sterling’s
claims against him. He appeared to argue that, if he and the LLCs were
alter egos as Sterling contends, then both the claims and the liabilities of the
LLCs belonged to him, and the settlement extinguished all of his claims
and the LLCs’ claims against Sterling, as well as all claims of Sterling
against him and the LLCs.
Sterling argued that the motion for summary judgment was
improper because it addressed claims that were not asserted in any
pleading; Sterling’s complaint did not present those claims and Dr. Moser
did not file a counterclaim that presented the merits of the Alter Ego
Complaint. It also argued that there were genuine disputes of material fact
that precluded summary judgment.
2. Sterling’s motion for judgment on the pleadings
Around the same time, Sterling moved for judgment on the
pleadings. It argued that Dr. Moser had failed to specifically deny the
7
allegations in the complaint, so all allegations were deemed admitted,
including the allegation that Dr. Moser’s discharge did not apply to the
claims Sterling asserted in the Second Amended Alter Ego Complaint. It
requested that the bankruptcy court determine that the Second Amended
Alter Ego Complaint did not violate the discharge injunction.
In response, Dr. Moser again acknowledged that the discharge did
not protect him from Sterling’s claims. He stated that he “no longer
contends the chapter 7 discharge order bars [Sterling] from pursuing the
alter ego claims. Rather, . . . [Sterling] is barred from pursuing the alter ego
claims because the course of events in [Dr. Moser’s] chapter 7 case
precludes [Sterling] from now contending that [Dr. Moser] is the alter ego
of the LLCs.”
3. The hearing on the motions and the bankruptcy court’s ruling
The bankruptcy court held a hearing on the motion for summary
judgment and motion for judgment on the pleadings. It noted that it was at
a disadvantage because neither party had provided it with the filings and
decisions in the underlying state court cases. It summarized the long
history of Dr. Moser’s bankruptcy proceedings and stated, “this is a state
court issue that has to be resolved in state court because . . . you’re asking
me to give you a declaratory judgment saying . . . what you want to do
won’t violate the postdischarge injunction and you’re really asking me to
speculate what the [state court] may or may not do.” The court stated that,
8
if the state court ruled against Sterling, Dr. Moser would be entitled to
damages for a violation of the discharge injunction to the extent he
personally incurred fees and costs. It warned Sterling that “if you can
proceeding in state court, and I’m not saying you can’t, you would just be
doing so at your own peril that if you don’t prevail across the board, you
may be faced with a contempt proceeding.”
The court declined to give Sterling “a green light to litigate in the
state court.” It denied the motion for judgment on the pleadings, stating
that “there is no [way] that I can give you a decision on the dec. relief
action that you have filed here, because . . . it’s a state court proceeding . . . .
I am not going to speculate how a state court judge is going to rule, given
the limited information.” It stated that it was granting Dr. Moser’s motion
for summary judgment without prejudice.
The bankruptcy court issued an order and judgment granting
summary judgment in favor of Dr. Moser and dismissing the case without
prejudice. The court separately denied the motion for judgment on the
pleadings.
Sterling timely filed its notice of appeal from both orders.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(A).
The bankruptcy court dismissed the adversary proceeding without
9
prejudice. Normally, the dismissal of an adversary proceeding without
prejudice is an interlocutory order. Barnes v. Belice (In re Belice), 461 B.R.
564, 571-72 (9th Cir. BAP 2011). But in this instance, the court’s ruling was
final inasmuch as it conclusively denied Sterling’s requested relief and
ended the litigation. It stated that its dismissal was “without prejudice that
if you choose to proceed in state court, . . . Sterling does so at its own peril.”
Thus, the court was not inviting Sterling to amend its complaint but simply
telling Sterling that, if it proceeded in state court, there might be
consequences in the bankruptcy court. This ruling is sufficiently final for
the purpose of this appeal. Even if it were interlocutory, we would grant
leave to appeal. See Silver Sage Partners, Ltd. v. City of Desert Hot Springs (In
re City of Desert Hot Springs),
339 F.3d 782, 787-88 (9th Cir. 2003) (“It is
within the discretion of the district court and the BAP, however, to hear
interlocutory appeals.”).
Therefore, we have jurisdiction under 28 U.S.C. § 158.
ISSUE
Whether the bankruptcy court erred in refusing the determine
whether the Second Amended Alter Ego Complaint violated the discharge
injunction.
STANDARDS OF REVIEW
“We review the bankruptcy court’s grant of summary judgment de
novo.” Johnson v. Nielson (In re Slatkin), 525 F.3d 805, 810 (9th Cir. 2008)
10
(citation omitted). “De novo review requires that we consider a matter
anew, as if no decision had been made previously.” Francis v. Wallace (In re
Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014) (citations omitted).
“We review the court’s denial of a motion for judgment on the
pleadings for an abuse of discretion.” Valley Oak Credit Union v. Villegas (In
re Villegas), 132 B.R. 742, 744 (9th Cir. BAP 1991) (citing Flora v. Home Fed.
Sav. & Loan Ass’n,
685 F.2d 209, 212 (7th Cir. 1982)). To determine whether
the bankruptcy court has abused its discretion, we conduct a two-step
inquiry: (1) we review de novo whether the bankruptcy court “identified
the correct legal rule to apply to the relief requested” and (2) if it did, we
consider whether the bankruptcy court’s application of the legal standard
was illogical, implausible, or without support in inferences that may be
drawn from the facts in the record. United States v. Hinkson,
585 F.3d 1247,
1262-63 & n.21 (9th Cir. 2009) (en banc).
DISCUSSION
A. The bankruptcy court abused its discretion in refusing to clarify the
scope of the discharge injunction.
The bankruptcy court dismissed Sterling’s adversary proceeding
because it thought it could not determine whether the Second Amended
Alter Ego Complaint violated the discharge injunction without speculating
about the outcome of the state court proceedings. We hold that declining to
clarify the scope of the discharge for this reason was an abuse of discretion.
11
“A chapter 7 discharge releases the debtor from personal liability for
debts arising ‘before the date of the order for relief under this chapter’ and
enjoins creditors from enforcing or collecting upon those debts.” Bechtold v.
Gillespie (In re Gillespie), 516 B.R. 586, 590-91 (9th Cir. BAP 2014) (citing
§ 727(b)). Similarly, § 524(a)(2) provides that a bankruptcy discharge
“operates as an injunction against the commencement or continuation of an
action, the employment of process, or an act, to collect, recover or offset any
such debt as a personal liability of the debtor . . . .” § 524(a)(2).
But the discharge has limits. For example, if the debtor is engaged in
litigation, gets a discharge in bankruptcy, voluntarily resumes the
litigation, and loses, the debtor’s liability for attorneys’ fees that arose
postpetition may not be discharged. See, e.g., Boeing N. Am., Inc. v. Ybarra
(In re Ybarra), 424 F.3d 1018, 1026 (9th Cir. 2005) (“[C]laims for attorney fees
and costs incurred post-petition are not discharged where post-petition, the
debtor voluntarily commences litigation or otherwise voluntarily ‘return[s]
to the fray.’” (citation omitted)).
Creditors are often well advised to seek the bankruptcy court’s
guidance in order to avoid an inadvertent violation of the discharge
injunction. See Emmert v. Taggart (In re Taggart), 548 B.R. 275, 289 (9th Cir.
BAP 2016), aff’d,
888 F.3d 438 (9th Cir. 2018), vacated on other grounds and
remanded sub nom. Taggart v. Lorenzen,
139 S. Ct. 1795 (2019) (“We have
previously said that a party seeking a bankruptcy court determination
12
regarding the scope of the discharge should file an adversary complaint
seeking declaratory relief.”); In re Bahary, 528 B.R. 763, 773 (Bankr. N.D. Ill.
2015) (“When questions arise as to the application of the automatic stay or
discharge injunction to a transaction, it is best for a creditor to seek relief
from the bankruptcy court.”). This is particularly apt where the creditor
believes that the debtor has “returned to the fray.” Because that doctrine
depends on the facts and circumstances of each case, the creditor who relies
on it without obtaining a prior bankruptcy court order is taking a risk.
Outside of the bankruptcy context, courts have similarly recognized
that, if presented with a concrete question about the scope of an injunction,
they should provide the parties with appropriate guidance:
As courts have recognized, “[t]he Supreme Court teaches
that when questions arise as to the interpretation or
application of an injunction order, a party should seek
clarification or modification from the issuing court, rather
than risk disobedience and contempt.”Although the decision
whether to clarify an injunction is entrusted “to the sound
discretion of the court,” the Supreme Court has suggested that
courts should not “withhold a clarification in the light of a
concrete situation that le[aves] parties or ‘successors and
assigns’ in the dark as to their duty toward the court.
Kuang v. U.S. Dep’t of Def., Case No. 18-CV-03698-JST, 2019 WL 718632, at
*2 (N.D. Cal. Feb. 20, 2019) (citations omitted) (emphases added). Such a
determination is always within the court’s discretion:
13
A party “subject to an injunction always has the right to
ask the court that is administering it whether it applies to
conduct in which the person proposes to engage.” To the
extent that such a motion for clarification “looks like a
request for an ‘advisory opinion,’ it is one that even a federal
court can grant.” It is within the “sound discretion of the court”
whether to grant such a clarification or modification of an
injunction if a party “enter[s] upon transactions which raise
doubts as to the applicability of the injunction.” [C]ourts are
always free, within their sound discretion, to clarify inexplicit
injunctions in order to avoid unwitting contempts.
Cornucopia Prods., LLC v. Dyson, Inc., Case No. CV12-0234-PHX-NVW, 2013
WL 12098786, at *1 (D. Ariz. June 20, 2013) (citations omitted) (emphasis
added).3
In the present case, the bankruptcy court declined to rule on
Sterling’s request for an advance determination whether the Second
Amended Alter Ego Complaint violated the discharge injunction, because
the court thought that doing so would require it to speculate about the
state court’s ruling. The court evidently thought that the state court’s
decision might make it unnecessary to determine whether the discharge
applied. This was error.
The basic question before the state court was whether Dr. Moser and
3
This is not to say, however, that a creditor should or must always seek an
advance determination. The Supreme Court noted the undesirability of such a rule in
Taggart v. Lorenzen, 139 S. Ct. 1795, 1803 (2019), and crafted a standard for violation of
the discharge injunction accordingly.
14
the LLCs were alter egos, such that Dr. Moser should be held liable for the
attorneys’ fees and costs awarded against the LLCs. Logically, this question
has only two possible answers, neither of which would eliminate the
question of the discharge’s applicability. If the state court holds that
Dr. Moser is liable for the fees and costs, the question of whether that
liability was discharged would remain. If the state court holds that
Dr. Moser is not liable, the question of whether Sterling violated the
discharge injunction in asserting those claims would remain. In other
words, no possible result of the state court case could moot the discharge
issue.
While bankruptcy courts have discretion to make advance
determinations about the discharge, see Sunburst Prods., Inc. v. Derrick Law
Co., 922 F.2d 845,
1991 WL 1523, at *6 (9th Cir. 1991) (table) (stating that
“[t]he modification or clarification of an injunction lies within the ‘sound
discretion’ of the district court”), they should exercise that discretion with
caution. In this case, the bankruptcy court entered an order (the discharge),
the application of which was uncertain (due to the “return to the fray”
doctrine of Ybarra) in a concrete, actual circumstance, yet declined to clarify
the effect of its order. This left Sterling in an impossible position: it could
either blindly proceed in state court and risk severe consequences in the
bankruptcy court or play it safe and walk away from the potential recovery
of large state court judgments.
15
The risk to Sterling is real and concrete. Although Dr. Moser agrees
that the discharge does not apply to the postdischarge fees and costs, he
has reversed ground before and might do so again if it suited his interest.
Therefore, the bankruptcy court erred as a matter of law when it held
that it could not rule on Sterling’s request for a declaratory judgment.4
B. Dr. Moser concedes that the discharge injunction does not apply to
the Second Amended Alter Ego Complaint.
The last question is the scope of our remand. Because of the unusual
posture of the parties, a narrow remand is appropriate. Dr. Moser has
repeatedly conceded that the discharge injunction does not apply to the
Second Amended Alter Ego Complaint. Therefore, we simply direct the
bankruptcy court to enter judgment in favor of Sterling on its adversary
complaint.
A party is bound by its admissions in its pleadings. As the Ninth
Circuit has stated:
The Ninth Circuit has acknowledged the doctrine of judicial
4
Sterling raises three additional arguments. First, Sterling argues that Dr. Moser
admitted the facts alleged in the adversary complaint because he did not properly
answer the individual allegations. Second, Sterling argues that the bankruptcy court
improperly decided the summary judgment motion for its own reasons, rather than on
the grounds raised by Dr. Moser, and that the court failed to give Sterling an
opportunity to respond to the court’s reasoning. Third, Sterling requests that we decide
whether alter ego liability is a theory of recovery, rather than a claim that can be
discharged. We need not address these arguments because we reverse on the grounds
stated above.
16
admissions. “Judicial admissions are formal admissions in the
pleadings which have the effect of withdrawing a fact from
issue and dispensing wholly with the need for proof of the
fact.” Judicial admissions are “conclusively binding on the
party who made them.”
Spokane Law Enforcement Fed. Credit Union v. Barker (In re Barker), 839 F.3d
1189, 1195 (9th Cir. 2016) (quoting Am. Title Ins. Co. v. Lacelaw Corp.,
861
F.2d 224, 226 (9th Cir. 1988)); see Beal Bank v. Crystal Props., Ltd. (In re Crystal
Props., Ltd.),
268 F.3d 743, 752 (9th Cir. 2001) (“Because a judicial admission
made at the district court is binding on this court, [appellant] is bound by
its admission.” (citing United States v. Bentson,
947 F.2d 1353, 1356 (9th Cir.
1991))).
Sterling’s adversary complaint in the bankruptcy court sought a
declaratory judgment that it could prosecute the Second Amended Alter
Ego Complaint in state court without violating the discharge injunction. In
his answer to the complaint, Dr. Moser stated that he “does not contend
the obligations arising out of the Alter Ego Complaint, the claim for costs
awarded to Sterling and against the Limited Liability Companies in the
litigation brought by those entities against Sterling, were discharged in the
chapter 7 filing.” (Emphasis added.) Similarly, in opposition to the motion
for judgment on the pleadings, he asserted that he “no longer contends the
chapter 7 discharge order bars [Sterling] from pursuing the alter ego
claims.” At the hearing on the motion for summary judgment and the
17
motion for judgment on the pleadings, Dr. Moser’s counsel explicitly
abandoned any argument for a discharge violation: “What they’re looking
for now is they’re looking just for a finding of alter ego so that they can
obtain the cost award against the LLCs, against Dr. Moser, and . . . I am not
suggesting that that is a violation of the discharge.” (Emphasis added.)
Furthermore, on appeal, he makes no effort to defend the bankruptcy
court’s ruling. Rather, he concedes, although in opaque language, that the
bankruptcy court erred in granting him summary judgment:
[Sterling] argues the lower court erred in granting [Dr. Moser’s]
summary judgment motion. Perhaps, but regardless of how the
court ruled the case was nevertheless dismissed without
prejudice. . . . If the lower court denied [Dr. Moser’s] summary
judgment motion, there would not have been a change in
outcome, [Sterling] would still be free to pursue its alter ego
claim in the state court.
Based on Dr. Moser’s admissions, there is no dispute that the
discharge injunction does not apply to the claims in the Second Amended
Alter Ego Complaint. Therefore, we direct the bankruptcy court to enter
judgment in favor of Sterling on its adversary proceeding. We make no
determination as to the viability of the claims asserted in the Second
Amended Alter Ego Complaint but only hold that, based on Dr. Moser’s
judicial admissions, Sterling’s prosecution of those claims does not violate
the discharge injunction.
18
CONCLUSION
The bankruptcy court should have advised Sterling whether its
prosecution of the Second Amended Alter Ego Complaint would violate
the discharge injunction. We therefore REVERSE the court’s orders and
judgment and REMAND this case for entry of a judgment in favor of
Sterling declaring that the discharge injunction does not apply to the claims
in the Second Amended Alter Ego Complaint.
19
