In re Campbell

• Decision Date: 30 September 2021
• Docket Number: Case No. 19-00042-ELG
• Citation: 634 B.R. 647
• Parties: IN RE Tanner Scott CAMPBELL, Debtor.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

634 B.R. 647

IN RE Tanner Scott CAMPBELL, Debtor.

Case No. 19-00042-ELG

United States Bankruptcy Court, District of Columbia.

Signed September 30, 2021

Kristen S. Eustis, Office of the United States Trustee, Alexandria, VA, for U.S. Trustee.

Kermit A. Rosenberg, Washington Global Law Group, PLLC, Washington, DC, for Debtor.

William Douglas White, McCarthy & White PLLC, Mclean, VA, Trustee, Pro Se.

MEMORANDUM OPINION AND ORDER DISMISSING CASE

Elizabeth L. Gunn, United States Bankruptcy Judge

On February 8, 2021, the Court conducted a trial on the contested motion of MoSex Exhibit 1, LLC ("MoSex") seeking dismissal of this chapter 7 case filed by Tanner Scott Campbell (the "Debtor") for cause, specifically bad faith, under 11 U.S.C. § 707(a).¹ At the conclusion of the trial, the Court took the matter under advisement. For the reasons outlined below, the Court finds that the Debtor's actions, as well as his failure to submit truthful documents, demonstrate his bad faith in filing his petition and therefore grants MoSex's Motion to Dismiss.

This Memorandum Opinion sets forth the Court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.² The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 157(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) in which final orders or judgments may be entered by a bankruptcy judge. Venue is appropriate in this Court pursuant to 28 U.S.C. § 1409(a).

I. Procedural History

On January 16, 2019 (the "Petition Date"), after a prolonged period of litigation with MoSex regarding debts owed by the Debtor on a guaranty as more fully described herein, the Debtor filed a petition for relief under chapter 7. See Debtor's Pet., ECF No. 1. The Debtor's primary purpose of this case was to discharge a sizable non-consumer judgment owed to MoSex, his only major creditor. See id. (declaring the Debtor's debts to be primarily non-consumer debts and disclosing his only prepetition debts as the large debt owed to MoSex, a small credit card balance, a moderate loan balance due to his parents, and a non-dischargeable student loan obligation).

On April 19, 2019, MoSex filed a Motion to Dismiss Chapter 7 Petition and on May 31, 2019, filed its Amended Motion to Dismiss Chapter 7 Petition. ECF No. 18, 50 (together, the "Motion to Dismiss"). The Motion to Dismiss argues that the Debtor's pre- and post-petition conduct, when combined with incomplete disclosures in his petition and other filings, establish that cause exists to dismiss this case. See generally Mot. to Dismiss, ECF No. 50. MoSex contends that before and after the filing of the Petition, the Debtor squandered his wealth and lived an extravagant lifestyle rather than paying, at least in part, his sizeable debt to MoSex. In support of this contention, MoSex points to the Debtor's $16,000 in preferential payments made to his family in the year prior to filing his Petition, his continued and unchanged spending habits to support what it characterizes as a "lifestyle of indulgence," and his failure to truthfully account for his income and expenses in his schedules. Id. at ¶ 1. For these reasons, Mosex asserts that the Debtor's bankruptcy case should be dismissed under § 707(a) for cause, specifically bad faith. Id.

Prior to the COVID-19 pandemic, trial on the Motion to Dismiss was set for June 2020. However, the COVID-19 pandemic combined with health issues of the Debtor resulted in a number consensual of continuances of the trial, which was finally held on February 8, 2021. Upon conclusion of the trial, the Court took the matter under advisement.

II. Facts

A. The MoSex Judgment

On or about July 31, 2015, Swimmers New York, LLC ("Swimmers") entered into a commercial lease with MoSex for a restaurant space in New York City (the "Lease"), which the Debtor signed on behalf of MoSex as a "Partner". See Pl.’s Ex. 28, at 3, 68.³ Concurrently, the Debtor signed a personal guaranty of the Lease (the "Guaranty"). See Pl.’s Ex. 29. Under the terms of the Lease, Swimmers’ first rental payment was due in December 2015, but the payment was never made. See generally Pl.’s Exs. 13-15 (MoSex's various eviction complaints). Though the Debtor at various times stated under oath and penalty of perjury that this rent was paid via wire transfer to MoSex, the Debtor acknowledged at trial the payment was not made. See e.g. , Pl.’s Ex. 2 ¶ 6. Accordingly, MoSex began proceedings to terminate and enforce the terms of the Lease and the Guaranty in the Supreme Court of the State of New York, County of New York (the "New York Court") in early 2016. See generally Pl.’s Exs. 13-15.⁴

On September 8, 2016, the New York Court entered summary judgment against the Debtor with respect to liability under the Lease and Guaranty, and on May 11, 2017, a judgment in the amount of $431,127.00, plus $165,000.00 in attorneys’ fees and $49,431.96 of pre-judgment interest on the principal amount from February 1, 2016, for a total of $645,558.96 (the "Judgment"). Pl.’s Ex. 6, 9. In November 2017, after the Debtor relocated from New York to Washington, D.C., MoSex registered the Judgment in the District of Columbia Superior Court (the "Domestication") and began collection efforts.⁵ Pl.’s Ex. 10. Shortly thereafter, the Debtor filed his Petition.

B. The Debtor's Background & Extravagant Lifestyle

Mr. Campbell is not a "stereotypical" chapter 7 debtor. He earned a bachelor's degree from Cornell University and a master's degree from Columbia University. See Pl.’s Ex. 31. Since completing his education, the Debtor has held multiple executive-level positions with six-figure salaries.⁶ See Pl.’s Ex. 31; accord Pl.’s Ex. 52 (Debtor's Production). For the two years prior to the Petition Date, his combined scheduled income was $524,318.69. ECF No. 33. Mr. Campbell has no dependents to support and lives (at a minimum) an upper-middle class lifestyle in downtown Washington, D.C. See Schedule J, ECF No. 1. Prior to living in Washington, D.C., the Debtor resided in New York City. Pl.’s Ex. 53 at 39:9, ECF No. 121.

The Debtor resides in an apartment in the downtown metropolitan D.C. area with a monthly rent of $2,995.00, does not own a vehicle but incurs monthly scheduled transportation costs (i.e. Uber, Lyft, Metro) of $1,200.00,⁷ owns a dog with scheduled monthly expenses of $600.00, reported scheduled "food and housekeeping" of $1,200.00, and scheduled an additional $1,200.00 of "Business entertainment" as part of his overall scheduled monthly expenses of $9,550.00.⁸ In addition, the Debtor belongs to The Metropolitan Club, a private club, with monthly dues of $300.00 and additional meal costs, although it is not clear from the record whether the $1,200.00 food costs included such expenses. See Pl.’s Ex. 26, ECF No. 121 (detailing the Debtor's monthly dues to The Metropolitan Club). Based upon the evidence introduced at trial and the testimony of the Debtor, it is clear that the Court cannot rely on the Debtor's schedules as an accurate representation of his actual spending or monthly expenses. Even discounting the inability to account for a significant portion of the Debtor's income due to cash expenditures, as discussed below, a cursory review of the Debtor's bank statements provides evidence of the Debtor's profligate spending habits. For example, one month prior to filing for bankruptcy, the Debtor spent over the course of one day $489.20 at a restaurant, $118.23 in Uber trips, and $483.00 at a liquor store. Pl.’s Ex. 18 at 204-5, ECF No. 121. In addition to dining out and transportation, other days reflect multiple large purchases at high-end clothing and accessory stores.

In addition, notwithstanding the evidence introduced as to his actual spending, the Debtor's scheduled expenses include $1,000 monthly for student loan repayment, but at trial the Debtor admitted that he did not, and had not for many years, make payments on his loans. The Debtor argued that the un-paid payments were still a valid expense to be included in his schedules because they were due.⁹ The Debtor's failure to make the student loan payments either pre- or post-petition while scheduling the same results in another $1,000 of unaccounted for actual spending by Debtor.

Even with the Debtor's higher than average monthly living expenses (including the $1,000 attributed to student loan payments), the Debtor's Schedule J lists a monthly budget surplus of $3,157.¹⁰ See Debtor's Pet., at 24-27 of 46 (Schedule I & J), ECF No. 1. However, neither the Debtor's schedules, monthly bank statements, or testimony at trial provide any accounting of the spending of the surplus. At the same time, the Debtor does not have a steadily growing bank account balance reflecting any savings thereof. See generally Pl.’s Exs. 18A & B (Aspect LLC's Monthly Bank Statements). The Debtor testified at trial that despite the lack of disclosure in his official Schedules, he spent and continued to spend the scheduled surplus on what he vaguely described "business-related expenses" (in addition to those actually scheduled) and "daily" on his girlfriend. Much of the Debtor's additional spending of any surplus is untraceable as the Debtor's spending is primarily through cash withdrawn from the bank and for which receipts or other records were not maintained. Thus, all of the Debtor's disclosures (filed under penalty of perjury) indicate a monthly surplus, meaning the disclosures filed in this case were, and remain, inaccurate.

In arguing that this case should be dismissed for cause, MoSex points heavily to the Debtor's continued inability or refusal to explain the usage of the money obtained from his large and frequent ATM cash withdrawals despite the requirements for full and complete disclosures of income and expenses. Even after a review of all of the evidence and testimony in this case, the Court is unable to determine whether the use of the cash (i) is consistent with an honest, but...