The opinion of the court was delivered by: Scullin, Senior Judge
MEMORANDUM-DECISION AND ORDER
In an August 2, 2007 Memorandum-Decision and Order, this Court remanded this action to the bankruptcy court to evaluate the impact, if any, of this Court's rulings in Corvetti v. Hudson and Hudson v. Corvetti on the bankruptcy court's decision to deny Paul S. Hudson, debtor-defendant, a discharge in bankruptcy. On November 17, 2009, the bankruptcy court issued a Memorandum-Decision and Order in which it determined that (1) this Court's subsequent rulings in Corvetti v. Hudson and Hudson v. Corvetti did not impact the denial of Mr. Hudson's discharge, and (2) Mr. Hudson was not entitled to vacatur of the bankruptcy court's 2001 decision denying his discharge. See generally In re Hudson, 420 B.R. 73 (Bankr.N.D.N.Y. 2009)
Currently before the Court is Mr. Hudson's appeal of the bankruptcy court's November 17, 2009 Memorandum-Decision and Order denying him discharge from bankruptcy.
Mr. Hudson, an attorney licensed to practice in New York, commenced
the instant bankruptcy case by filing a Chapter 7 petition on November
12, 1999, in Maryland (the "Main Case"). Mr. Hudson testified that he
decided to file for bankruptcy because of several lawsuits pending in
New York that Richard Corvetti had filed on his own behalf or on
behalf of Washington 1993, Inc. ("Washington 1993").*fn1
This included a lawsuit for fraudulent conveyance of the
settlement money that Mr. Hudson received in an Ohio wrongful death
lawsuit against Pan Am Airlines in connection with the death of his
daughter in the Lockerbie, Scotland terrorist attacks (the "wrongful
death case"). By filing for bankruptcy, Mr. Hudson effectively stayed
all proceedings in the New York courts. Mr. Hudson, however, did not
list these lawsuits on his Statement of Financial Affairs when he
filed for bankruptcy.
On January 12, 2000, Mr. Corvetti filed several motions in the Maryland bankruptcy court, including a motion for change of venue and three motions seeking relief from the automatic stay. In the venue motion, Mr. Corvetti alleged that Mr. Hudson failed to disclose settlement proceeds to which Mr. Hudson was allegedly entitled in the wrongful death case and that Mr. Hudson had conveyed this suit to his sons.
Meanwhile, Washington 1993 brought this adversary proceeding against Mr. Hudson objecting to his discharge pursuant to 11 U.S.C. § 727(a)(4)(A),*fn2 relying primarily on Mr. Hudson's failure to schedule the transfer of $102,902.76 and $37,000 to his sons as assets/revocable transfers in his petition and objecting to certain debts pursuant to section 523.*fn3
Washington 1993 also alleged that Mr. Hudson's wrongful death claim was worth more than the zero value that he had assigned to it.
On March 14, 2000, the Maryland court granted Mr. Corvetti's change of venue motion and transferred the Chapter 7 case and the adversary proceeding to the Northern District of New York. On the same day that Mr. Hudson's bankruptcy filing was transferred from the Maryland court, more than one month after the instant adversary proceeding was filed and served, more than two months after the filing and service of the change of venue motion, and more than four months after the petition date, Mr. Hudson filed his Second Amended Statement of Financial Affairs.*fn4 In this statement, Mr. Hudson listed the lawsuits involving him and either Mr. Corvetti or Washington 1993, including the fraudulent conveyance action, which were pending when he filed his bankruptcy petition.
After transfer of the case and adversary proceeding to this District, Washington 1993 filed a motion for partial summary judgment in the adversary proceeding. Washington 1993 alleged that Mr. Hudson's failure to list any pending litigation he had involving either Washington 1993 or Mr. Corvetti in his original Statement of Financial Affairs amounted to fraud under section 727(a)(4)(A). In opposition to the partial summary judgment motion, Mr. Hudson pointed out that the section 727(a)(4)(A) cause of action stated in the complaint did not allege a failure to list lawsuits on the Statement of Financial Affairs. As a result, Mr. Hudson argued that, because the complaint did not allege that particular failure, he lacked notice and that, therefore, the court could not grant section 727(a)(4)(A) relief on those grounds. Mr. Hudson further argued that any failure to list the lawsuits on his Statement of Financial Affairs was a clerical error, and he attached the affidavit of his former bankruptcy counsel, James Greenan, Esq., explaining the omission of the lawsuits. The bankruptcy court ultimately denied summary judgment, finding that questions of fact existed and informed both parties that it wanted to hear Mr. Hudson's explanation regarding his failure to list the lawsuits that Washington 1993 and Mr. Corvetti had pending against him.
At trial, Mr. Greenan testified that he had advised Mr. Hudson that Maryland was a proper venue for his case and subsequently filed a "bare bones" petition on November 12, 1999. Mr. Greenan explained that a bare bones petition provided the debtor's name, address, and a list of creditors, but not lawsuits, and that he and Mr. Hudson decided to file in such a manner to stay a trial on the following Monday involving Washington 1993. Mr. Hudson faxed Mr. Greenan information for his bankruptcy filing, including a two-page list of lawsuits, which included the lawsuits involving Mr. Corvetti and Washington 1993. Mr. Greenan did not need the list for filing the bare bones petition and, thus, did not use it.
After he filed the bare bones petition, Mr. Greenan sent Mr. Hudson a questionnaire that his firm required its bankruptcy clients to fill out with all the information necessary for filing their petition and Statement of Financial Affairs. Mr. Greenan did not use the list of lawsuits that Mr. Hudson faxed to him to prepare the Statement of Financial Affairs because he had requested that Mr. Hudson provide the information on the questionnaire. Mr. Greenan further testified that Mr. Hudson provided him with a "less complete" list of pending lawsuits in his responses to the questionnaire, omitting all the suits involving Mr. Corvetti and Washington 1993. As a result, Mr. Greenan did not include those lawsuits in the Statement of Financial Affairs; and Mr. Hudson did not add them after he spent several hours reviewing it. Mr. Hudson later testified that he had provided an additional page with his questionnaire that listed the missing lawsuits.
A. The 2001 bankruptcy court decision
After considering the voluminous pre-trial submissions, trial testimony, documentary evidence, and post-trial memoranda, the bankruptcy court denied Mr. Hudson a discharge pursuant to section 727(a)(4)(A). See Washington 1993, Inc. v. Hudson (In re Hudson), No. 00-11683, Adv. Pro. No. 00-90091 (Bankr. N.D.N.Y. Aug. 21, 2001). Specifically, the bankruptcy court found that [Mr. Hudson] had intentionally failed to include the information regarding the wrongful conveyance lawsuit on his bankruptcy schedules in order to prevent the Trustee, and thus [Mr. Hudson's] creditors, from realizing any of the potential money from that lawsuit. The Bankruptcy Judge based his decision primarily on: 1) Hudson's knowledge of the filing requirements for a bankruptcy petition as shown by his previous bankruptcy filings; 2) Hudson's failure to include the lawsuit in his Statement of Financial Affairs and schedules; 3) Hudson's failure to amend his Statement of Financial Affairs following the motion for change of venue which included a specific allegation regarding his failure to include the statement; 4) Hudson's failure to amend his financial statement following three "stay relief motions" by Corvetti which included specific allegations regarding the unlawful conveyance lawsuit; and 5) Hudson's failure to amend his financial statement after Corvetti began an adversary proceeding in February 2000 which included various allegations regarding Hudson's failure to schedule the transfers as assets, including a claim under 11 U.S.C. § 727(A)(4) which again specifically referenced the lawsuit.
Hudson v. Washington 1993, Inc., No. 3:01-CV-1474, Dkt. No. 64, at 2-3 (N.D.N.Y. Sept. 27, 2002) (order affirming bankruptcy court's decision).*fn5 Since the bankruptcy court ultimately denied Mr. Hudson's discharge, the section 523 causes of action were rendered moot.
B. The 2002 district court (McAvoy, J.) affirmance
Mr. Hudson appealed the 2001 bankruptcy court decision denying his discharge to the district court; the district court affirmed that decision. See id. In his appeal, Mr. Hudson argued that the bankruptcy court had made three discernable errors: (1) the court impermissibly denied his discharge based on grounds not pled in the complaint; (2) the court rendered its decision after improperly taking judicial notice of documents outside of the record; and (3) the decision was not based on the record and amounted to clear error. See id. at 1-2. The district court rejected all three arguments.
C. Settlement negotiations with the Trustee
After the district court affirmed the 2001 bankruptcy court decision denying Mr. Hudson's discharge, Mr. Hudson, the Trustee, and members of Mr. Hudson's family entered into settlement negotiations to resolve all outstanding litigation, controversies and claims against Mr. Hudson and/or his family. The Stipulation of Settlement specifically provided for the Trustee's release of Mr. Hudson and members of his family in exchange for payment of $36,500 to the estate and one-fifth of any recovery received from the wrongful death action. Mr. Hudson filed a motion seeking the bankruptcy court's approval of the proposed settlement, and Mr. Corvetti opposed and sought various forms of relief. At the March 27, 2003 hearing on Mr. Hudson's motion, it was apparent that the Trustee and Mr. Hudson were not in complete agreement, despite the fact that both had signed the Stipulation of Settlement. On May 20, 2003, the bankruptcy court denied both parties' motions without prejudice.
D. The 2003 district court (McAvoy, J.) remand
Mr. Hudson filed a motion for reconsideration of the district court's September 22, 2002 Order, affirming the denial of his discharge, and informed the district court of the settlement negotiations between him and the Trustee. Hudson, No. 3:01-CV-1474, Dkt. No. 125 at 3. As a result, the district court granted Mr. Hudson's motion for reconsideration and remanded the matter with the following specific instructions to the bankruptcy court:
This "new evidence" [of potential settlement] was not, however, available to the bankruptcy court in making its decision to deny Hudson a discharge. The parties have represented that the bankruptcy court is currently deciding w[h]ether to approve settlement of the section 727 claims. Settlement and discharge often go hand in hand. The Court finds that the bankruptcy court should be given the opportunity, in the first instance, to determine whether the settlement involving the Wrongful Death lawsuit affects the determination that the debtor should not be given a discharge. See In re Maynard, 269 B.R. 535, 541-42 (D. Vt. 2001) (discussing unique position of bankruptcy courts in settlement and discharge proceedings).
Consequently, on reconsideration, the Court determines that the matter should be remanded to the bankruptcy ...