The Truth Tellers, LLC v. Levine

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

MARTINSBURG

THE TRUTH TELLERS, LLC,

Appellant,

v. CIVIL ACTION NO.: 3:22-CV-66

(GROH)

DAVID A. LEVINE,

Appellee.

MEMORANDUM OPINION AND ORDER AFFIRMING BANKRUPTCY COURT

The Truth Tellers, LLC, appeals from the Memorandum Opinion and Order of the

United States Bankruptcy Court for the Northern District of West Virginia entered on

March 31, 2022, docketed in 3:20-ap-36. ECF No. 1. Therein, the bankruptcy court denied

the relief sought by the Truth Tellers in its adversary complaint, finding that the disputed

transfers were dischargeable in the underlying bankruptcy proceeding. Upon review and

consideration of the parties’ briefs and joint appendix, the record, and pertinent case law,

the Court finds that the facts and legal arguments are adequately presented, and the

decisional process would not be significantly aided by oral argument. Thus, a hearing is

unnecessary in this matter. Fed. R. Bankr. P. 8013(c), 8019(b)(3). For the reasons that

follow, the bankruptcy court’s decision is AFFIRMED.

I. Background1

A. Factual Background

Two individuals lie at the heart of this case: Anne Meador and David Levine. In

1 The facts recited are taken from the parties’ briefs, joint appendix, and the designated record on appeal.

September 2018, the two met at a Jefferson County Development Authority meeting,

which focused on the planned Rockwool factory installation. Ms. Meador and Mr. Levine

remained in touch over the next year, seeing each other at meetings and protests. Nearly

a year later, in the beginning of August 2019, their relationship evolved from platonic and

casual to romantic and intimate.2 Nearly immediately after the blossoming of their physical

relationship, the pair became business partners as well.

Later that month, Ms. Meador and Mr. Levine met with an attorney to form The

Truth Tellers, LLC. During their meeting, Mr. Levine suggested that the attorney create

the LLC in Ms. Meador’s name. Ms. Meador became the President and sole Member of

Truth Tellers, while Mr. Levine became Secretary. Mr. Levine requested that the attorney

draft an operating agreement for the LLC, but the agreement was not completed.

On August 30, 2019, Ms. Meador opened a bank account for Truth Tellers, and

Mr. Levine was a signatory on the account. Both Ms. Meador and Mr. Levine had authority

to open, close, and conduct business on the account. Additionally, both Ms. Meador and

Mr. Levine completed signature cards for the account. They used a building owned by

Mr. Levine as the mailing address for the bank statements, and the pair planned to use

that building as the corporate office for Truth Tellers.

The bank account for Truth Tellers was also linked with two other business

accounts, one for Indeco Union3 and one for Climate Pictures4. As President of Climate

Pictures, Ms. Meador accessed its online bank account regularly. She organized payroll

2 Mr. Levine was married to another woman, Monica Levine, at this time.

3 Indeco Union is another company of Mr. Levine’s. He created the company in 2017 with another individual

as a public benefit corporation hoping to finance solar energy and green infrastructure projects using

security token offerings on blockchain.

4 Climate Pictures is a nonprofit organization created by Mr. Levine in order to film a documentary about

Rockwool. Mr. Levine had previously hired Ms. Meador as President of Climate Pictures.

and health insurance for Climate Pictures and generally reviewed the organization’s

finances to ensure its debits were covered.

Shortly after opening the bank account for Truth Tellers, Ms. Meador deposited

$50,000.00 into the account. First, she deposited $20,000.00 by wire transfer on

September 6, 2019, and then an additional $30,000.00 by wire transfer on September 16,

2019. Around this time, Mr. Levine was in a precarious financial state, so much so that

he was considering filing for bankruptcy protection. Ms. Meador was aware of Mr. Levine’s

financial condition when they established Truth Tellers together and opened its bank

account.

Throughout the month of September, Mr. Levine made repeated withdrawals

(“disputed transfers”) from Truth Tellers’s bank account. First, on September 6, 2019, the

same day that Ms. Meador deposited $20,000.00 into the account, Mr. Levine transferred

$19,000.00 via check to his personal bank account that he shared with his wife, Monica

Levine. Mr. Levine used $16,400.00 of this transfer to pay his mortgage servicer,

Specialized Loan Servicing. He deposited the remaining $2,599.00 into his personal bank

account. A week later, on September 13, 2019, Mr. Levine transferred $700 from Truth

Tellers’s account to the checking account of ThreeSquare, LLC.5 On September 18, 2019,

two days after Ms. Meador deposited an additional $30,000.00 into Truth Tellers’s

account, Mr. Levine transferred $15,000.00 from Truth Tellers’s account into Indeco’s

checking account. Mr. Levine’s final transfer occurred on September 20, 2019, when he

transferred $15,250.00 to Indeco’s checking account.

Mr. and Mrs. Levine filed a Chapter 13 bankruptcy petition just three months later,

5 ThreeSquare is a real estate holding company established by Mr. and Mrs. Levine in 2002.

on December 13, 2019.6 Initially, the Levines did not list Truth Tellers as a creditor in their

bankruptcy schedule. Even so, Truth Tellers still received service of the Levines’s

bankruptcy proceeding and timely filed a proof of claim.

On February 3, 2020, Ms. Meador signed a convertible note, on behalf of Truth

Tellers, from Indeco. The note provided that, on the closing date, Truth Tellers would

invest $161,500.00, with $86,500.00 being new cash, while the remaining $75,000.00

referred to cash invested previously: $20,000.00 on August 30, 20197, $30,000.00 on

September 16, 2019, and $25,000.00 on November 29, 2019. The note provided for

repayment of the money invested with interest at the time of maturity or for conversion

into preferred stock in Indeco upon a qualified financing. At this time, Indeco had no

employees on payroll and was pivoting to a new business focus. However, Indeco had

received money for two offerings, a website named Crypto Launch and consulting

agreements, and possessed the following technology: an application, a “tech stack,” an

analytics engine, code on a block chain, and the Crypto Launch website. Mr. Levine

signed the convertible note on behalf of Indeco.

A month later, March 2020, Mr. Levine ended the romantic relationship between

he and Ms. Meador through email. Around this same time, Ms. Meador realized that she

could not access Truth Tellers’s online banking account, but she could still access the

other linked accounts. Ms. Meador asserted that, although she had made transfers into

Truth Tellers’s account after the $50,000.00 in September 2019, when she reviewed the

account in March 2020, she still expected to see her $50,000.00 in the account because

6 Their case was later converted to a Chapter 7 proceeding.

7 The Court notes that the initial transfer occurred on September 6, 2019. Truth Tellers’s bank account was

opened on August 30, 2019. The date on the convertible note was likely a typographical error.

the funds were intended for the documentary, which had yet to come to fruition. When

she visited the bank in person, she discovered the funds were no longer there. About six

months later, the underlying adversary proceeding ensued.

B. Procedural Background

i. Underlying Bankruptcy Proceeding

Mr. Levine and his wife, Monica Levine, filed a voluntary petition for bankruptcy

pursuant to Chapter 13 of the bankruptcy code on December 13, 2019, which was

docketed as 3:19-bk-1048. The bankruptcy court later converted the Levines’ bankruptcy

to a Chapter 7 proceeding. The Truth Tellers filed an adversary proceeding related to the

Levines’ bankruptcy on September 8, 2020.

In its complaint, Truth Tellers alleged that Mr. Levine improperly withdrew

$49,950.00 from its bank account. Truth Tellers argued that Mr. Levine’s liability to repay

the $49,950.00 was non-dischargeable pursuant to 11 U.S.C. § 523(a)(3), based on Mr.

Levine’s failure to schedule the disputed transfers, and pursuant to 11 U.S.C. § 523(a)(4),

based on Mr. Levine’s alleged fraud or defalcation while acting in a fiduciary capacity,

embezzlement, or larceny. On October 9, 2020, Mr. Levine answered the complaint and

amended his bankruptcy schedules to include Truth Tellers’s claims.

The bankruptcy court held a two-day bench trial to adjudicate the adversary

proceeding between Truth Tellers and Mr. Levine, from September 23, 2021, to

September 24, 2021, in Clarksburg, West Virginia.8 At trial, neither party contested that

Mr. Levine was a fiduciary of Truth Tellers, that he withdrew $49,950.00 from Truth

Tellers’s bank account, or that these funds were not used to advance any legitimate

8 Before trial, the bankruptcy judge granted each party’s motion to permit certain witnesses to testify

remotely.

business purpose of Truth Tellers. The central issue the bankruptcy court needed to

decide at trial was whether Mr. Levine committed defalcation, fraud, or embezzlement

through his execution of the disputed transfers. If so, then the disputed transfers should

be declared nondischargeable in Mr. Levine’s bankruptcy proceeding.

At the heart of this issue is whether Mr. Levine withdrew the disputed transfers and

used the funds with or without Ms. Meador’s knowledge and authorization. Mr. Levine

testified that Ms. Meador both had knowledge of and consented to the disputed transfers.

Mr. Levine alleged that Ms. Meador initially offered to give him a personal loan, but he

claimed he suggested that she deposit the money into a company that she owned instead.

Mr. Levine explained that they structured the deposit in this way to increase Ms. Meador’s

chance of being repaid because both Ms. Meador and Mr. Levine knew it was quite likely

that a bankruptcy loomed in Mr. Levine’s future.

Ms. Meador testified that she did not know of and did not consent to the disputed

transfers. She claimed she did not discover that Mr. Levine had executed the disputed

transfers until March 2020, after their relationship had ended and after she lost online

access to the bank account. Ms. Meador asserted that she only learned about the

disputed transfers after visiting the bank in person. Ms. Meador did not produce any

evidence besides her testimony at trial to support her argument.

Near the conclusion of trial, during its rebuttal argument, Truth Tellers moved to

admit into evidence two deposition transcripts: the transcript of Vladimir Tereshkov’s

deposition held on February 8, 2021, and the transcript of Aparna Sundaram’s deposition

held on February 11, 2021. Mr. Levine objected and argued that the transcripts

constituted hearsay, that Truth Tellers failed to show that the witnesses were more than

one hundred miles from the court, and that the court had discretion to exclude the

transcripts. In response, Truth Tellers asserted that both witnesses resided more than

one hundred miles from the court, a fact reflected in their testimony during the deposition.9

Further, Truth Tellers argued that, because the bankruptcy court admitted an unsworn

transcript of a Zoom meeting submitted by Mr. Levine, it would be categorically unfair to

exclude the depositions of Mr. Tereshkov and Ms. Sundaram.

After a brief recess to consider the parties’ arguments, the bankruptcy judge

returned and denied Truth Tellers’s motion to admit the depositions. First, the bankruptcy

court found that the deposition transcripts are subject to hearsay rules. Second, the court

held that Truth Tellers bears the burden of proving that the depositions are admissible

under Rule 32 of the Federal Rules of Civil Procedure. The bankruptcy court noted that

“the mere fact that a party is more than a hundred miles from the courthouse does not

require the court to automatically admit a party’s deposition.” ECF No. 5-3 at 278. The

court further noted that it made accommodations for the two deposed witness to appear

remotely, by videoconference or telephone, after motion by Truth Tellers. Ultimately, the

Court excluded the deposition transcripts, find that Truth Tellers did not satisfy its burden

of proving that the witnesses were unavailable and the depositions constituted hearsay.

Shortly after trial concluded, Truth Tellers filed a motion to reconsider, asking the

bankruptcy court to reconsider its ruling excluding the deposition transcripts. In its motion,

Truth Tellers reasserted the same arguments initially presented at trial. Truth Tellers

emphasized that the deposed witnesses objectively resided more than one hundred miles

9 Mr. Tereshkov resides in Leesburg, Virginia, and Ms. Sundaram resides in Brooklyn, New York. Leesburg,

Virginia is over two hundred miles from the courthouse, and Brooklyn, New York is over four hundred miles

from the courthouse.

from the court, placing them outside the court’s compulsion authority. Truth Tellers

claimed no procedure or authority existed to compel a witness to appear remotely. Truth

Tellers again focused on the court’s earlier admission of Mr. Levine’s Zoom transcript and

asserted that “[a]t the very least, the even-handed administration of justice requires these

transcripts to be admitted.” ECF No. 5-1 at 4.

On December 9, 2021, the bankruptcy court denied Truth Tellers’s motion for

reconsideration, largely on the same grounds the court applied when excluding the

deposition transcripts at trial. The court again explained that federal courts are not

automatically required to admit deposition testimonies under Rule 32(a)(4)(B) just

because the witness is more than one hundred miles away. Instead, courts may consider

several other factors: the circumstances relating to the witness’s absence, the surprise to

opposing counsel, other evidentiary rules, and the longstanding preference of federal

courts to have live testimony over recorded testimony.

First, regarding evidentiary concerns, the court stated that Truth Tellers requested

to admit the entire deposition transcripts without explaining the relevance of the

testimony. Noting that courts often find it inappropriate to admit entire deposition

transcripts, the bankruptcy court declined to admit the two full transcripts of Mr.

Tereshkov’s and Ms. Sundaram’s depositions upon finding that Truth Tellers failed to

show their relevance under Rules 401 and 402 of the Federal Rules of Evidence.

Next, the bankruptcy court explained that the purpose behind Rule 32 of the

Federal Rules of Civil Procedure is to ease the convenience of the witnesses and parties

at trial. Upon motion of Truth Tellers, the court arranged accommodations to allow Mr.

Tereshkov and Ms. Sundaram to participate in and testify at trial through either

videoconference or telephone. The court provided this accommodation to both parties

and found it unreasonable to allow Truth Tellers to change course on the day of trial

without explaining why its witnesses have become unable to attend or showing that the

witnesses’ failure to attend was not voluntary. The court further found that admitting the

transcripts at the last minute would result in unfair surprise to Mr. Levine and deprive him

of an opportunity to cross-examine the witnesses as they were scheduled to appear.

Lastly, the bankruptcy court was not convinced that “the even-handed

administration of justice” required the admission of the deposition transcripts based on

the earlier admission of a Zoom transcript by Mr. Levine. The bankruptcy court explained

that the Zoom transcript was admitted for a nonhearsay purpose. Indeed, during trial,

when overruling Truth Tellers’s objection, the bankruptcy court specifically stated, “I do

want to say the exhibit is being admitted, but Mr. Campbell, I hope that you trust that the

Court is aware enough of the exhibit and what it’s being offered for to afford it the

necessary relevance when making its opinion . . . or when deciding the outcome of the

case.” ECF No. 5-3 at 110. Moreover, Truth Tellers had previously agreed to admit two

pages of the Zoom transcript as an admission against interest. In denying the motion to

reconsider, the bankruptcy court found the Zoom transcript could not be accurately

analogized to the deposition transcripts because the Zoom transcript was relevant, was

at least partially admitted to by Truth Tellers, and, most notably, was admitted for

purposes other than for the truth of the matter asserted.

On March 31, 2022, the bankruptcy court entered its Memorandum Opinion and

Order, denying the relief sought in Truth Tellers’s Adversary Complaint. The bankruptcy

court ruled that Mr. Levine’s debt arising from the disputed transfers did not qualify as

non-dischargeable pursuant to either 11 U.S.C. § 523(a)(3), for failing to schedule the

Truth Tellers’s debts, or § 523(a)(4), for committing frauds or defalcations while acting in

a fiduciary capacity, embezzling the disputed transfers, or committing larceny with respect

to the disputed transfers. Because neither party disputed Mr. Levine’s fiduciary status,

the bankruptcy court focused its analysis on whether Mr. Levine committed defalcation,

embezzlement, or fraud.

To determine whether Mr. Levine committed defalcations, the dispositive question

for the bankruptcy court to resolve was whether Ms. Meador, as the sole Member and

President of Truth Tellers, knew of and consented to the disputed transfers made by Mr.

Levine from Truth Tellers’s bank account. The bankruptcy court noted glaring

inconsistencies in Ms. Meador’s testimony and ultimately found her testimony far less

credible than Mr. Levine’s. The bankruptcy court detailed how Ms. Meador’s testimony

flip flopped at different times. Piecing together the threads of Ms. Meador’s testimony, the

court found that the only logical result of her statements is that she noticed a change in

the electronic access to the bank account in February 2020 because she had been able

to electronically monitor the account before February 2020, including during the time

when the disputed transfers occurred.

While counsel for Truth Tellers sought to characterize Ms. Meador as a naïve

bystander, someone who was unfamiliar with and unsophisticated in business

transactions and financial matters, the court found that the evidence before it

demonstrated otherwise. Prior to meeting Mr. Levine, Ms. Meador held multiple roles

involving business organization and financial literacy. Once she became intertwined in

business ventures with Mr. Levine, her employment similarly involved financial matters

and decisional oversight. Given her prior experience and subsequent roles in Climate

Pictures and Truth Tellers, the bankruptcy court found that Ms. Meador, as the sole

Member and President of the Truth Tellers, was aware of the disputed transfers.

Additionally, the bankruptcy court noted that at no point did Ms. Meador ever object

to Mr. Levine’s use of the funds from the disputed transfers or demand repayment until

after their romantic relationship ended. Citing the doctrine of ratification, the bankruptcy

court held that even if Ms. Meador did not explicitly approve the disputed transfers, her

silence for over six months ratified the disputed transfers. The bankruptcy court further

concluded that the lack of any evidence showing Ms. Meador’s disapproval of the

disputed transfers supported Mr. Levine’s testimony that the disputed transfers were

made with Ms. Meador’s knowledge and consent during her tenure as Member and

President of Truth Tellers.

Ultimately, the bankruptcy court found that Ms. Meador was indeed aware of the

disputed transfers, and Truth Tellers failed to prove by a preponderance of the evidence

that the disputed transfers constitute defalcation. Because both fraud and embezzlement

have more stringent standards than defalcation, the bankruptcy court found that Mr.

Levine did not execute the disputed transfers through fraud or embezzlement.

Accordingly, the bankruptcy court ruled that the debt incurred from the disputed transfers

was dischargeable in Mr. Levine’s bankruptcy and denied the relief sought in Truth

Tellers’s adversary complaint.

ii. Instant Appeal

Truth Tellers (hereinafter “Appellant”) appeals from the Memorandum Opinion and

Order of the United States Bankruptcy Court for the Northern District of West Virginia

entered on March 31, 2022, which denied the relief sought in their adversary complaint.

The Appellant filed its Brief on June 16, 2022, [ECF No. 7] and Mr. Levine (hereinafter

“Appellee”) submitted his Brief on July 18, 2022, [ECF No. 8]. The Appellant timely

entered its Reply Brief on August 1, 2022. ECF No. 9. Accordingly, this matter is now ripe

for adjudication.

II. Jurisdiction

District courts have jurisdiction to hear appeals “from final judgments, orders, and

decrees . . . of bankruptcy judges entered in cases and proceedings referred to the

bankruptcy judges under section 157.” 28 U.S.C. § 158(a). To be “final,” an order must

“resolve the litigation, decide the merits, settle liability, establish damages, or determine

the rights” of a party to the bankruptcy case. In re Looney, 823 F.2d 788, 790 (4th Cir.

1987). The district court “may affirm, modify, or reverse a bankruptcy judge’s judgment,

order or decree or remand with instructions for further proceedings.” Fed. R. Bankr. P.

8013.

III. Standards of Review

“When reviewing a decision of the bankruptcy court [rendered in a core

proceeding], a district court functions as an appellate court and applies the standards of

review in federal courts of appeal.” Paramount Home Ent. Inc. v. Cir. City Stores, Inc.,

445 B.R. 521, 526-27 (E.D. Va. 2010) (citing In re Webb, 954 F.2d 1102, 1103-04 (5th

Cir. 1992)). A district court sitting as a bankruptcy appellate court reviews “findings of fact

only for clear error, but [the court] consider[s] the relevant legal questions de novo.” In re

Varat Enters., Inc., 81 F.3d 1310, 1314 (4th Cir. 1996). It reviews mixed questions of fact

and law de novo. In re Gordon Properties, LLC, 516 B.R. 323, 327 (E.D. Va.

2014) (citing Canal Corp. v. Finnman, 960 F.2d 396, 399 (4th Cir. 1992)).

Clear error review is a “very deferential standard of review.” United States v.

Horton, 693 F.3d 463, 474 (4th Cir. 2012). A factual finding is clearly erroneous “when

although there is evidence to support it, the reviewing court on the entire evidence is left

with the definite and firm conviction that a mistake has been committed.” HSBC Bank

USA v. F & M Bank N. Va., 246 F.3d 335, 338 (4th Cir. 2001) (quoting Anderson v.

Bessemer City, 470 U.S. 564, 573 (1985)). For clear error review, the inquiry is not

whether the reviewing court would have reached the same result if it were sitting in the

trial court’s shoes.

Rather, the appellate court will determine whether the trial court’s “account of the

evidence is plausible in light of the record viewed in its entirety.” United States v. Thorson,

633 F.3d 312, 317 (4th Cir. 2011) (quoting Anderson, 470 U.S. at 573-74). If the findings

of the court below are plausible, then the reviewing court may not reverse the lower court’s

conclusion—even if it may have weighed the evidence differently. Id. This remains the

rule “even when the district court’s findings do not rest on credibility determinations but

are based instead on physical or documentary evidence or inferences from other facts.”

Id. (internal quotation omitted). Lastly, “due regard shall be given to the opportunity of the

bankruptcy court to judge the credibility of the witnesses.” In re Gordon Properties, LLC,

516 B.R. at 327.

De novo review, on the other hand, by definition, “entails consideration of an issue

as if it had not been decided previously.” Stone v. Instrumentation Lab’y Co., 591 F.3d

239, 246 (4th Cir. 2009). De novo review allows for “a fresh independent determination

of ‘the matter’ at stake.” Doe v. United States, 821 F.2d 697-98 (D.C. Cir. 1987).

Essentially, de novo review results in “a new adjudication.” Betty B Coal Co. v. Dir., Off.

of Workers’ Comp. Programs, U.S. Dep’t of Lab., 194 F.3d 491, 499 (4th Cir.1999).

IV. Analysis

The Appellant presents four issues for this Court on appeal. First, the Appellant

requests a determination on whether the bankruptcy court erred in finding as fact that Ms.

Meador had actual knowledge of the disputed transfers from the Appellant’s bank account

in September 2019.10 Second, the Appellant requests a determination on whether the

bankruptcy court erred in refusing to admit into evidence the deposition transcripts of Mr.

Tereshkov and Ms. Sundaram under Rule 32(a)(4)(B) of the Federal Rules of Civil

Procedure. Third, the Appellant requests a determination on whether the bankruptcy court

erred in admitting into evidence the Appellee’s Exhibit E, an alleged transcription

prepared by the Appellee of a telephone conference, and the Appellee’s Exhibit K, a Trello

board. Lastly, the Appellant requests a determination on whether the bankruptcy court

erred in failing to apply Delaware state law and conclude that the Appellee acted in

“conscious disregard” or “willful blindness” of a substantial and unjustifiable risk, which

involved a gross deviation from the standard of conduct that a law-abiding person would

observe in his situation, and that the Appellee failed to show the entire fairness of the

transactions. The Court will review each issue in turn.

A. Issue 1: Ms. Meador’s Knowledge of the Disputed Transfers

The Appellant appeals the bankruptcy court’s finding of fact that Ms. Meador had

10 The Court notes that the Appellant sometimes refers to disputed transactions occurring in September

2020 in their brief, including in the Statement of Issues Presented section and the heading of the first

subsection of the Argument section of their brief. However, upon review of the Statement of the Case

section of their brief, and the record as a whole, the Court is confident that the Appellant intended to refer

to the disputed transfers that occurred in September 2019, as those are the only transactions that have

ever been at issue in these proceedings.

actual knowledge of the disputed transfers that occurred in September 2019. As a finding

of fact, the Court will review the bankruptcy court’s determination on this issue for clear

error only. In re Varat Enters., Inc., 81 F.3d at 1314. For the reasons explained below, the

Court affirms the bankruptcy court’s finding of fact on this issue.

Upon review of the evidence before the bankruptcy court and the testimony

provided during trial, this Court finds that the bankruptcy court’s finding on this matter was

more than plausible. First, the evidence on the record illustrates that Ms. Meador was a

sophisticated, financially literate individual, not a clueless puppet. Before partnering with

the Appellee, she held multiple positions that involved reviewing financial transactions

and organizational authority. While employed for an environmental foundation, Ms.

Meador essentially audited grantees of the foundation, reviewing whether they used the

foundation’s funds appropriately. While serving as the Director of Development for Earth

Rights International, Ms. Meador raised funds through grants and donations. After

meeting the Appellee, Ms. Meador became President of Climate Pictures, where she

organized payroll and health insurance and generally reviewed the organization’s

finances. Ms. Meador also oversaw Climate Pictures’s online bank account, an account

which would later link with the Appellant’s account.

Second, Ms. Meador was critically involved in establishing the Appellant and

contributing to its finances. Indeed, she opened the bank account for the Appellant and

was present when the Appellee was made a signatory on the account. Upon opening the

account, both Ms. Meador and the Appellee could open, close, and conduct business on

the account.

Next, this Court similarly struggles to reconcile some of Ms. Meador’s testimony

with common sense, and this Court gives due deference to the bankruptcy court’s

judgment on the credibility of witnesses. See In re Gordon Properties, LLC, 516 B.R. at

327. Specifically troubling to the Court is the timeline of events. Ms. Meador first deposited

$20,000.00 into the account on September 6, 2019. The Appellee withdrew nearly all the

funds from this first deposit on that same day; he made a small, additional deposit on

September 13, 2019. Ms. Meador made her second deposit on September 16, 2019,

adding another $30,000.00 to the account. By this point, two of the four disputed transfers

had already occurred. This Court struggles to understand how Ms. Meador would not

know about the two withdrawals when she remains actively involved in the account. Then,

just days after making her second deposit, the Appellee made two more withdrawals, one

for $15,000.00 and another for $15,250.00. By the end of the month, the Appellee had

withdrawn $49,950.00, essentially all the funds deposited by Ms. Meador.

While the disputed transfers at issue end in September 2019, Ms. Meador kept

making deposits into the account, until at least February 2020. Also in February 2020,

Ms. Meador signed a convertible note, on behalf of the Appellant, from Indeco. The

convertible note provided that, on the closing date, the Appellant would invest

$161,500.00, with $86,500.00 being new cash, while the remaining $75,000.00 referred

to cash received previously, including the $50,000.00 Ms. Meador deposited in

September 2019. The note provided for repayment of the money invested with interest at

the time of maturity or conversion into preferred stock in Indeco upon a qualified financing.

When asked about this document at trial, Ms. Meador testified that she did not read it and

only signed it because the Appellee asked her to, even though she admitted to signing

the document while alone in her own home.

The Court finds it difficult to reconcile how someone could regularly deposit funds

into a business account, invest in the business, sign off on the business’s investments,

and hold the highest position of leadership in the business yet know nothing about

withdrawals from the business’s bank account, especially when that same individual has

easy access to the account just at the tip of their fingers. Further, Ms. Meador repeatedly

testified to making these deposits at the request of the Appellee because he needed

money.

Lastly, regarding the specific testimony of Ms. Meador that the bankruptcy court

relied on in its opinion and that the parties present argument on in their briefs on appeal,

this Court finds the inference made by the bankruptcy court more than plausible. During

trial, Ms. Meador stated, “I was denied online access to the bank account.” ECF No. 5-2

at 139. When asked about the circumstances of this discovery, Ms. Meador explained

When we went to the bank to open the account for Truth

Tellers, David also told Summer to link the three accounts, the

Truth Tellers, Climate Pictures, and Indeco. And some time

around the Truth Tellers’ note, he changed the password. I

had to, at that time I was setting up payroll and insurance for

Climate Pictures and I needed to keep an eye on the balance

to make sure that any debits were being covered. I could not,

logging onto the account I could not see the Truth Tellers’

balance or transactions.

ECF No. 5-2 at 139-40. Shortly thereafter, however, Ms. Meador testified that she

previously admitted that she did have access and control of the Appellant’s bank account

since its formation. The Appellant’s argument on this point hinges on the idea that while

Ms. Meador had access and control of the account for six months, she never used that

access to review the account or only ever did so in some manner where she did not

happen upon the disputed transfers. Importantly, throughout this same period, Ms.

Meador was, as she admitted, regularly checking the bank account of Climate Pictures,

an account linked to the Appellant’s account.

Piecing together the threads of Ms. Meador’s testimony, the bankruptcy court

found that the only logical result of her statements is that she noticed a change in the

electronic access to the bank account in February 2020 because she had been able to,

and indeed did, electronically monitor the account before February 2020, including during

the time when the disputed transfers occurred. This Court finds that inference more than

plausible. Notably, upon review of the trial transcript, this Court notes that Ms. Meador

failed to ever plainly say that she never reviewed the Appellant’s bank account.

While her counsel asks her to “[t]ell us why you didn’t access the bank account,”

Ms. Meador never affirmatively stated that she never accessed the account. Her response

to counsel’s request instead diverged into a monologue about how the Appellee

professed his love for her. She also did not explain why she suddenly tried to view the

account for the first time nearly six months after its formation. Ms. Meador also never

elaborated as to how these transfers were concealed from her. This Court similarly finds

Ms. Meador’s narrative rather incredulous.

While the Appellant is correct in its argument that no direct evidence existed to

prove that Ms. Meador knew of and consented to the disputed transfers, more than

enough circumstantial evidence existed for the bankruptcy court to find that Ms. Meador

both knew of and consented to the disputed transfers. Ms. Meador was a sophisticated

professional with experience in financial transactions. At the time of the disputed

transfers, she was the sole Member and President of the business. Since its formation,

Ms. Meador had the ability to access, open, close, and conduct business on the account.

Ms. Meador made several deposits into the account and signed off on investments in

other ventures on behalf of the Appellant. During trial, Ms. Meador’s testimony was

inconsistent, and the bankruptcy court found it less credible than the Appellee’s.

Indeed, this Court further agrees with the bankruptcy court’s analysis on ratification

of the disputed transfers. “[R]atification by silence may be inferred when, despite

obtaining full knowledge of the material facts relating to a transaction, a responsible party

fails to promptly disavow the action.” In re Tara Retail Grp., LLC, No. 17-BK-57, 2017 WL

1788428, at *4 (Bankr. N.D.W. Va. May 4, 2017). As explored above, this Court finds the

timeline of the events at issue rather suspect. Ms. Meador was actively involved in the

account throughout the month of September, when all the disputed transfers were

executed. Her involvement in the account did not end then but continued through at least

February 2020. Then, in February 2020, she signed a convertible note, on behalf of the

Appellant, which detailed the disputed transfers on the second page of the document.

During this time, Ms. Meador was the sole Member and President of the business, and

she participated in the business. Yet, Ms. Meador failed to object to the disputed transfers

for nearly six months, until the Appellee ended their personal relationship.

In sum, upon review, this Court is not left “with the definite and firm conviction that

a mistake has been committed.” HSBC Bank USA, 246 F.3d at 338. Accordingly, the

bankruptcy court’s finding of fact that Ms. Meador knew of the disputed transfers is

affirmed.

B. Issue 2: Excluding Mr. Tereshkov’s and Ms. Sundaram’s Deposition

Transcripts

The Appellant appeals the bankruptcy court’s exclusion of the deposition

transcripts of Aparna Sundaram and Vlad Tereshkov. The Appellant argues that the

bankruptcy court failed to properly apply Rule 32(a)(4)(B) of the Federal Rules of Civil

Procedure. On appeal, the Appellant argues that the witnesses were more than one

hundred miles from the bankruptcy court, that it was immaterial that the bankruptcy court

permitted the witnesses to testify remotely, and that the Appellee had an opportunity to

cross-examine both deposed witnesses as he was present at both depositions. As a legal

issue, this Court will review the bankruptcy court’s decision to admit these exhibits de

novo. See In re Varat Enters., Inc., 81 F.3d at 1314.

Generally, Rule 32 of the Federal Rules of Civil Procedure11 allows a deposition to

be used against a party if “the party was present or represented at the taking of the

deposition or had reasonable notice of it,” “it is used to the extent it would be admissible

under the Federal Rules of Evidence if the deponent were present and testifying,” and

“the use is allowed by Rule 32(a)(2) through (8).” Near the close of trial, the Appellant

moved to admit the entire transcripts12 of the depositions for Ms. Sundaram and Mr.

Tereshkov pursuant to Rule 32(a)(4)(B), which permits a party to use a witness’s

deposition if the court finds “that the witness is more than 100 miles from the place of

hearing or trial or is outside the United States, unless it appears that the witness’s

absence was procured by the party offering the deposition.” Fed. R. Civ. P. 32(a)(4)(B).

During trial, the Appellant justified its motion to admit the depositions solely on the

fact that the two witnesses resided more than one hundred miles from the courthouse,

placing them both outside the bankruptcy court’s subpoena powers. A court’s power to

compel is governed by Federal Rule of Civil Procedure 45.13 Rule 45 allows a court to

11 Rule 32 of the Federal Rules of Civil Procedure applies in adversary proceedings in bankruptcy cases

under Rule 7032 of the Federal Rules of Bankruptcy Procedure.

12 On appeal, the Appellant frames the issue as the court failed to allow them to admit excerpts of the

depositions. However, upon review of the transcript, this Court notes that the Appellant moved to admit

both transcripts in full. ECF No. 5-3 at 273.

13 The subpoena power afforded to district courts by Rule 45 of the Federal Rules of Civil Procedure is

granted to bankrupcty courts by Rule 9016 of the Federal Rules of Bankruptcy Procedure.

command a person to attend a trial if the place of trial is “within 100 miles of where the

person resides, is employed, or regularly transacts business in person.” Fed. R. Civ. P.

45(c)(1)(A). The Appellant did not address whether either witness worked or regularly

engaged in business within one hundred miles of the courthouse when moving to admit

the transcripts. The Appellant also failed to explain the relevance of admitting both

transcripts in full.

Federal courts are not automatically required to admit deposition testimonies under

Rule 32(a)(4)(B) just because the witness is more than one hundred miles away. See,

e.g., Polys v. Trans-Colorado Airlines, Inc., 941 F.2d 1404, 1410 (10th Cir. 1991). Instead,

courts may consider several other factors: the circumstances relating to the witness’s

absence, the surprise to opposing counsel, evidentiary rules, and the longstanding

preference of federal courts to have live testimony over recorded testimony. See, e.g.,

id.; Napier v. Bossard, 102 F.2d 467, 469 (2d Cir. 1939); Garcia-Martinez v. City & Cnty.

of Denver, 392 F.3d 1187, 1191 (10th Cir. 2004); In re Air Crash Disaster at Stapleton

Intern. Airport, Denver, Colo., on Nov. 15, 1987, 720 F. Supp. 1493, 1502 (D. Colo. 1989).

On appeal, the Appellant makes an argument pertaining to relevancy of these

transcripts for the first time. The Appellant argues that these transcripts are relevant

because they would have undermined the Appellee’s testimony, which is critical given

that the bankruptcy court found the Appellee credible. Indeed, in hindsight, the bankruptcy

court finding the Appellee credible was critical to the outcome of the adversary

proceeding. The Appellant attempts to make a relevancy argument now that it should

have made when moving to admit the transcripts. While this Court reviews this issue de

novo, de novo review is not an opportunity for counsel to deploy a new trial strategy with

the guidance of hindsight. Cf. In re Home Comp Care, Inc., 221 B.R. 202, 205 n.1 (N.D.

Ill. 1998) (“Generally, a district court acting as an appellate court in reviewing a bankruptcy

case decision may consider only the evidence that was presented before the bankruptcy

court and made a part of the record.”).

Part of the confines of Rule 32 provide that depositions may be used “to the extent

it would be admissible under the Federal Rules of Evidence if the deponent were present

and testifying,” which includes Federal Rules of Evidence 401 and 402 governing

relevance. Like a district court, the bankruptcy court during trial is “afforded broad

discretion to admit or exclude any deposition testimony by applying the rules of evidence.”

See Tatman v. Collins, 938 F.2d 509, 511 (4th Cir. 1991). Courts often hold that it is

inappropriate to admit entire deposition transcripts. See, e.g., Fenstermacher v.

Philadelphia Nat. Bank, 493 F.2d 333, 338 (3d. Cir. 1974) (affirming district court’s refusal

to admit deposition testimony of a party where counsel’s argument in support was only

“to prove my case,” and the district court found this insufficient to establish relevance); In

re Air Crash Disaster, 720 F. Supp. at 1502 (holding that the deposition was not properly

admitted in lieu of witness testimony where relevancy and foundation for opinion

testimony remained at issue and would need to be reviewed throughout the testimony

and sole basis for unavailability was that witness lived outside one hundred-mile radius

established by rule). Here, counsel similarly failed to provide any argument at trial

establishing the relevance of the transcripts.

Lastly, and of great significance to this Court, is that the Appellant moved to permit

both Mr. Tereshkov and Ms. Sundaram to testify remotely. The bankruptcy court granted

this motion and made accommodations a month before trial to allow both witnesses to

attend and testify at trial via either videoconference or telephone. The guiding purpose of

Rule 32 is to facilitate the convenience of witnesses and parties in trial. With

improvements in technology, and the vastly increased level of comfort and use of

programs like Zoom and Skype, there is a growing body of case law that supports the use

of remote videoconferencing trial appearances under Federal Rule of Civil Procedure

43(a),14 which provides trial courts with discretion to allow witnesses to testify “by

contemporaneous transmission from a different location.” Fed. R. Civ. P. 43(a); see, e.g.,

Sutphin v. Ethicon, Inc., No. 2:14-CV-01379, 2020 WL 5229448, at *2 (S.D.W. Va. Sept.

1, 2020) (allowing testimony via live videoconference and noting that testimony via live

video testimony is preferable to submitting a deposition); In re RFC & ResCap Liquidating

Tr. Action, 444 F. Supp. 3d 967, 970 (D. Minn. 2020) (explaining that the decision to

require testimony by videoconference falls within the court’s discretion and finding that

“the speed and clarity of modern videoconference technology, where good cause and

compelling circumstances are shown, such testimony satisfies the goals of live, in-person

testimony and avoids the short-comings of deposition testimony”).

Indeed, even before 2020, the legal community was trending towards increased

use and acceptance of virtual appearances. The Federal Rules of Civil Procedure

Advisory Committee’s note to the 2013 amendment to Rule 45 states that “[w]hen an

order under Rule 43(a) authorizes testimony from a remote location, the witness can be

commanded to testify from any place described in Rule 45(c)(1).” Therefore, when good

cause exists in compelling circumstances, a court can authorize a witness to testify via a

14 Rule 43 of the Federal Rules of Civil Procedure applies in adversary proceedings in bankruptcy cases

under Rule 9017 of the Federal Rules of Bankruptcy Procedure.

contemporaneous video transmission and can then compel the witness to give the

testimony from a location within one hundred miles of his or her residence.

Here, the bankruptcy court received motions from both parties requesting

permission to allow certain witnesses to testify remotely. A month before trial, the

Appellant moved specifically to allow Mr. Tereshkov and Ms. Sundaram to testify

remotely. Then, at trial, without warning or explanation, the Appellant moved to admit Mr.

Tereshkov’s and Ms. Sundaram’s deposition transcripts in full, surprising both opposing

counsel and the court.

When determining whether to admit depositions under Rule 32(a)(4)(B), courts

may consider the failure of a party to make an effort to procure a witness’s attendance at

trial. VIIV Healthcare Co. v. Mylan Inc., No. 12-CV-1065-RGA, 2014 WL 2195082, at *1

(D. Del. May 23, 2014) (refusing to find two witnesses “unavailable” for purposes of Rule

32(a)(4)(B) just because they reside over one hundred miles from the courthouse when

the plaintiff failed to explain why they could not procure them for trial or that they made

any attempt at doing so). This is especially relevant when a court makes accommodations

upon request of the party to allow for alternative means of attendance, as the bankruptcy

court did here. The Appellant did not provide any information explaining why the

accommodation that it requested and received was no longer a viable option. Indeed, a

witness’s voluntary absence from trial does not fit within the scope of Rule 32(a)(4)(B).

Garcia-Martinez, 392 F.3d at 1191.

Due to the Appellant’s lack of argument at trial explaining the relevancy of the full

transcripts, whether the two witnesses also did not work or regularly engaged in business

within one hundred miles of the courthouse, and why their requested accommodation to

appear virtually was no longer a viable option, this Court finds that the bankruptcy court

did not abuse its discretion when excluding the full deposition transcripts from evidence.

At trial, the Appellant failed to provide a sufficient argument justifying admitting the full

deposition transcripts in lieu of virtual or remote live testimony. Accordingly, the

bankruptcy court’s decision to exclude these transcripts is affirmed.

C. Issue 3: Admitting Appellee’s Exhibit E and Exhibit K into Evidence

On appeal, the Appellant asserts that the bankruptcy court erred when admitting

into evidence the Appellee’s Exhibit E, an alleged transcription prepared by the Appellee

of a Zoom meeting, and the Appellee’s Exhibit K, a Trello board. The Appellant raised

hearsay objections to the exhibits during trial, which the bankruptcy court overruled. The

Appellant contends that the exhibits were not authenticated, were not of any sworn

testimony, and were not offered pursuant to any exception to Rules 803 and 804 of the

Federal Rules of Evidence. As a legal issue, this Court will review the bankruptcy court’s

application of the Federal Rules of Evidence “for abuse of discretion, and its interpretation

of such rules de novo.” In re C.R. Bard, Inc., 810 F.3d 913, 923 (4th Cir. 2016) (citing

Precision Piping & Instruments, Inc. v. E.I. du Pont de Nemours & Co., 951 F.2d 613, 619

(4th Cir. 1991)). Upon review of the trial transcripts, the Court finds that the exhibits were

properly admitted.

The Federal Rules of Evidence define hearsay as “a statement that: (1) the

declarant does not make while testifying at the current trial or hearing; and (2) a party

offers in evidence to prove the truth of the matter asserted in the statement.” Fed. R. Evid.

801 (emphasis added). “Out-of-court statements constitute hearsay only when offered in

evidence to prove the truth of the matter asserted.” Anderson v. United States, 417 U.S.

211, 219 (1974). Rules 803 and 804 of the Federal Rules of Evidence detail the

exceptions to the rule against hearsay.

When evaluating a statement’s authenticity, the trial court’s role “is to serve as

gatekeeper in assessing whether the proponent has offered a satisfactory foundation from

which the jury could reasonably find that the evidence is authentic.” United States v.

Davis, 918 F.3d 397, 402 (4th Cir. 2019) (internal quotation omitted). Further, “the burden

to authenticate under Rule 901 is not high.” United States v. Recio, 884 F.3d 230, 236

(4th Cir. 2018). Indeed, the trial “court must merely be able to conclude that the jury could

reasonably find that the evidence is authentic, not that the jury necessarily would so find.”

Id. at 236-37. Thus, courts require only a prima facie showing that the “true author” is who

the proponent claims it to be. Id. at 237; see also United States v. Zhu, 854 F.3d 247, 257

(4th Cir. 2017); United States v. Cornell, 780 F.3d 616, 629 (4th Cir. 2015); United States

v. Hassan, 742 F.3d 104, 133 (4th Cir. 2014). The prima facie showing “may be

accomplished largely by offering circumstantial evidence that the documents in question

are what they purport to be.” United States v. Vidacak, 553 F.3d 344, 350 (4th Cir. 2009).

During trial, the Appellee explained that he recorded the Zoom meeting and

uploaded the recording to a software that automatically generates transcripts of audio

files. At no point did the Appellant assert that the prepared transcript is inaccurate or

fraudulent. Under the low bar for authenticity, the testimony given at trial presented an

adequate prima facie showing that the transcript is indeed a transcript of the identified

Zoom meeting.

Despite the Appellant’s contention on appeal, neither exhibit was admitted to prove

the truth of the statements in the exhibits. Beginning with the Appellee’s Exhibit E, the

transcript of the Zoom meeting was not admitted for the truth of the statements made

during the meeting but simply to show that a meeting took place of which the Appellant

had knowledge and participated in. For example, during the meeting, the Appellee stated

that Delta will buy tens of billions of dollars in offsets. The transcript was not admitted to

prove that Delta planned to buy tens of billions of dollars in offsets. Instead, the transcript

was admitted simply to show that Indeco was a company engaged in business and not a

fraudulent company that existed in name only. Further, none of the dialogue in the

transcript include statements declaring “Indeco is a legitimate company” or “Indeco is

doing business.”

Notably, when overruling the Appellant’s objection to Exhibit E, the bankruptcy

court explicitly explained to counsel, “I do want to say the exhibit is being admitted, but

Mr. Campbell, I hope that you trust that the Court is aware enough of the exhibit and what

it’s being offered for to afford it the necessary relevance when making its opinion . . . or

when deciding the outcome of the case.” ECF No. 5-3 at 111. Indeed, Exhibit E was

relevant to the issues in contention at trial and was admitted for a purpose other than for

the truth of the matter asserted. Moreover, the Appellant had agreed to admit two pages

of Exhibit E as a statement against interest.

This Court also notes that it does not find the Appellant’s attempt at bargaining for

admission in its brief at all persuasive. As it did when moving for reconsideration before

the bankruptcy court, the Appellant again argues that the deposition transcripts of Mr.

Tereshkov and Ms. Sundaram should have been admitted because Exhibit E was

admitted. The Appellant then goes so far as to allege that the bankruptcy court “did not

apply justice in an impartial and evenhanded manner.” ECF No. 7 at 28. This Court finds

the Appellant’s characterization of the bankruptcy court meritless and inappropriate.

Similarly, Exhibit K, which consisted of screenshots of a Trello board for Indeco,

was admitted for a nonhearsay purpose. A Trello board is an online communication and

organization platform. The Appellee and Ms. Meador both testified to using a Trello board

for business purposes. The exhibit was admitted both as a statement against interest and

to impeach Ms. Meador’s testimony. Ms. Meador had previously testified that she did not

know much about Indeco, but the Trello board illustrated that she had access to

information about Indeco’s business. At no point was there a discussion about the truth

of the statements displayed on the Trello board.

Upon review of the trial transcripts, the Court finds that the exhibits were admitted

for purposes other than for the truth of the matter asserted. As a result, this Court finds

that the bankruptcy court properly admitted Exhibits E and K at trial. Accordingly, the

bankruptcy court’s decision on this matter is affirmed.

D. Issue 4: The Bankruptcy Court’s Failure to Conclude that the Appellee

Acted in Conscious Disregard or with Willful Blindness and that the

Appellee Failed to Show the Entire Fairness of the Transactions

The Appellant’s final issue on appeal broadly and boldly asserts that the

bankruptcy court failed to apply the correct legal principles its in memorandum opinion

and order. Specifically, the Appellant argues that the bankruptcy court should have

applied Delaware law because the Appellant is organized as a Delaware limited liability

company. The Appellant argues that Delaware law places the burden on the Appellee to

show that the disputed transfers were entirely fair to the Appellant. The Appellant asserts

that they brought these issues to the bankruptcy court’s attention in their Proposed

Findings of Fact and Conclusions of Law, but the bankruptcy court ignored them.

The Appellant’s argument on this issue centers around a choice of law analysis

and the presumption that a choice of law analysis applies in these proceedings. In all

events, choice of law questions most often occur when a federal court is sitting in diversity

jurisdiction. Generally, a choice of law issue arises when “the facts underlying a legal

issue implicate multiple jurisdictions.” Price v. Stryker Corp., 270 F. Supp. 3d 226, 230

(D.D.C. 2017).

In filing their complaint, the Appellant brought the adversary proceeding pursuant

to 28 U.S.C. §§ 157 and 1334, seeking an order determining that the debt owed to it by

the Appellee is excepted from discharge under 11 U.S.C. § 523(a)(3)15 and 523(a)(4).

Similarly, this Court has jurisdiction to hear appeals “from final judgments, orders, and

decrees . . . of bankruptcy judges entered in cases and proceedings referred to the

bankruptcy judges under section 157.” 28 U.S.C. § 158(a). Indeed, federal courts have

exclusive jurisdiction over bankruptcy cases. As bankruptcy is a form of federal question

rather than diversity jurisdiction, choice of law analyses are rare. The bankruptcy court

below likely did not engage in the choice of law analysis detailed by the Appellant because

it is simply inapplicable to this case.

There are instances when a bankruptcy court encounters an issue where the

applicable federal law incorporates matters that are the subject of state law, and the

bankruptcy court must apply state law to the substantive state law questions. E.g., In re

Merritt Dredging Co., Inc., 839 F.2d 203, 205 (4th Cir. 1988). This case is not one of

those; there are no underlying substantive state law questions at issue. The Appellant

raised one issue in their complaint in the underlying adversary proceeding: that the

Appellee’s liability to repay the $49,950.00 was non-dischargeable pursuant to 11 U.S.C.

15 After the Appellant filed its complaint, the Appellee amended his bankruptcy schedules to include the

Appellant’s claims, thus rendering the § 523(a)(3) allegation moot.

§ 523(a)(3), based on the Appellee’s failure to schedule the disputed transfers, and

pursuant to 11 U.S.C. § 523(a)(4), based on the Appellee’s alleged fraud or defalcation

while acting in a fiduciary capacity, embezzlement, or larceny. This question raises no

choice of law issues. Instead, federal bankruptcy law determines whether a debtor was

acting as a fiduciary in any fact situation for purposes of finding a debt to be

nondischargeable for breach of fiduciary duty. In re Janssens, 449 B.R. 42, 77 (Bankr. D.

Md. 2010), aff’d sub nom. Janssens v. Freedom Med., Inc., No. CIV. JFM-10-2042, 2011

WL 1642575 (D. Md. Apr. 29, 2011).

Nevertheless, the Appellant now seeks to paint its lawsuit as a simple breach of

fiduciary duty claim. If it were, then perhaps a choice of law analysis would be proper.

However, the adversary proceeding initiated by the Appellant sought to answer one very

specific federal question, which was whether the Appellee’s debt incurred by the disputed

transfers should be nondischargeable in bankruptcy because of fraud or defalcation while

acting in a fiduciary capacity, embezzlement, or larceny. This question is answered

through the application of federal bankruptcy law, not state law.

The Appellant complains that they explored the choice of law analysis in their

Proposed Findings of Fact and Conclusions of Law, but the bankruptcy court ignored it.

This Court finds that the bankruptcy court properly excluded a choice of law analysis from

its decision-making process; the bankruptcy court did not simply overlook an entire facet

of applicable law. Instead, the bankruptcy court appropriately focused both the trial and

its memorandum opinion to the relevant federal law governing defalcation and fraud while

acting in a fiduciary capacity, embezzlement, or larceny. This Court will not further belabor

the point by approving every step of the bankruptcy court’s decision-making process or

all the cases cited to therein. Put simply, the claim alleged by the Appellant in its adversary

complaint does not implicate any choice of law concerns, which is why the bankruptcy

court did not include a choice of law analysis in its decision. Accordingly, the bankruptcy’s

application of its cited legal authorities is affirmed.

V. Conclusion

For the reasons discussed above, this Court AFFIRMS the Memorandum Opinion

and Order of the United States Bankruptcy Court for the Northern District of West Virginia

entered on March 31, 2022, docketed in 3:20-ap-36.

The Clerk of Court is DIRECTED to remove this action from the Court’s active

docket.

The Clerk is FURTHER DIRECTED to transmit copies of this Order to the United

States Bankruptcy Court for the Northern District of West Virginia and all counsel of record

herein.

DATED: March 20, 2023

UNITED STATES DISTRICT JUDGE

31