Cutcliff v. Reuter

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Plaintiffs claimed they were lured into making investments from which their money was “appropriated” and sued Nathan and Vertical Group. The district court entered an order of default against Vertical, but did not award damages at that time. Nathan filed for Chapter 11 bankruptcy. The district court closed the matter during the bankruptcy. Nathan proposed a Chapter 11 plan. The plaintiffs objected and brought an adversary proceeding, restating their allegations and asserting that their claims were non-dischargeable. The bankruptcy court agreed, rejected Nathan’s plan, awarded actual and punitive damages, and determined that Nathan’s bankruptcy estate acquired his interest in the Kathleen Trust, into which Nathan and his wife had transferred assets before his bankruptcy, but did not identify a specific value of Nathan’s interest. The court converted Nathan’s bankruptcy to a Chapter 7 bankruptcy. The trustee tried to reach Trust assets. The court concluded that Nathan’s powers as a co-trustee were property of his bankruptcy estate, but Nathan lacked authority to act as trustee without Kathleen’s consent and only Kathleen could revoke the trust. Plaintiffs reopened the original action to determine damages and to collect the Vertical judgment from Trust assets. The district court referred the matter to the bankruptcy court, which recommended awarding actual damages, punitive damages, and attorneys’ fees in the amount awarded in the bankruptcy adversary proceeding. The district court adopted the findings and entered a default judgment against Vertical. The Eighth Circuit dismissed Nathan’s appeal for lack of standing and affirmed as to Kathleen. View "Cutcliff v. Reuter" on Justia Law