Bankruptcy Law

James Cole, Esquire

Eighth Circuit refuses to overturn denial of jury trial and denial of attorneys’ fees in establishing proofs of claim and nondischargeability thereof for copyright infringement.  Pearson Education, Inc. v. Almgren (In re Almgren), No. 11-2723 (8th Cir. July 13, 2012).

An MBA students copyright violations for selling unlicensed copies of instructorssolutions manuals warranted $14,250 innondischargeable statutory damages, but the Eighth Circuit affirmed the bankruptcy court’s denial of plaintiffs’ attorneys’ fees.  Under the Copyright Act, fee awards are in the court’s discretion.  In this case, its discretion was not abused when the court found that the publishers’ aggressive litigation, including forgoing a cease-and-desist demand in favor of filing immediate district court litigation hundreds of miles from debtor’s home, was unreasonable in the circumstances.

Nondischargeability of partner’s vicarious liability for fraud by another partner as well as for partner’s own securities law violations is affirmed by Eighth Circuit.  Reuter v. Cutcliff (In re Reuter), No. 11-1339 (8th Cir. July 17, 2012).

Debtors partner defrauded plaintiffs in an investment schemeBefore then, Debtor had stayed in business with the partner even after (i) losing his own money to the partner and (ii) paying a fine forthe partner’s misrepresentation of the partnership’s securities licensure status.  In a dischargeability determination, the Bankruptcy Court found that debtor’s tort liability was proved because he was a partner of the primary fraudfeasor, and as to certain plaintiffs, he was also directly liable for selling unregistered securities in violation of state law.  Both kinds of tort liability were found to be non-dischargeable.  The Eighth Circuit affirmed, as the record did not support debtor’s claims of error.  In its opinion, the Eighth Circuit mentioned that its previous cases requiring recklessness in order to impute vicarious liability for fraud to a partner may not be good law, but in this case, debtor’s reckless indifference to his partner’s acts had been demonstrated, so it was not necessary to hold here that the previous cases were overruled.