Opposition Brief — Bilzerian v. HSSM 7 Ltd. Partnership, 118 S. Ct. 1559 (1998) (No. 97-928)

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Supreme Court, U.S.

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(4) JAN 5 1998

CLERK

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No. 97-928

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1997

PAUL A. BILZERIAN,

Petitioner,

Ve

HSSM #7 LIMITED PARTNERSHIP,

Respondent.

On Petition for a Writ of Certiorari to

The United States Court of Appeal

For the Eleventh Circuit

RESPONDENT'S BRIEF IN OPPOSITION

ANDREW M. BRUMBY

Counsel of Record

MARY RUTH HOUSTON

SHUTTS & BOWEN LLP

20 N. Orange Ave., Suite 1000

Orlando, Florida 32801

(407) 423-3200

Counsel for Respondent

a eaaaaal

ii

LIST OF PARTIES

All parties appear in the caption of the case on the cover

page.

TABLE OF CONTENTS

CRI RAE «6 icine cuts wtbannsceads ee 1

STARE ee ED nd ee win seve ccsvesparsanes l

A. The Proceedings Below ................... 2

De, Te EE 6. on k vets cuedbcbaws osc = 5

C. The Texas Judgment and its Affirmance ...... 6

REASONS WHY THE PETITION SHOULD

BS EG? a «bn 0k sped naan Reeiieaiees os ane cis * 7

L. This Court Should Deny the Petition With

Respect to the Dischargeability of

ee 7

I. The Court Should Deny the Petition

With Respect to Whether a Creditor Must

Prove Actual Loss and Whether a Debtor

Must Have Actually Obtained Money from

GG vw Sks co chnt en thas ie 8

iv

TABLE OF AUTHORITIES

CASES | PAGE NUMBER

ne Se are 1

Inre Am, 175 B.R. 349 (9th Cir. BAP 1994),

affd, 87 F.3d 1046 (9th Cir. 1996) ............ 13

Inre Ashley, 903 F.2d 599 (9th Cir. 1990) ......... 10, 13

Inre Benson, 36 B.R. 537 (Bankr. M.D. Fla. 1983) ..... 12

Bilzerian v. United States, 502 U.S. 813 (1991) ......... 3

Inre Brady, 101 F.3d 1165 (6th Cir. 1996) ........... 13

7 ee ee Saaaee tee: Fla. 1983) 10

Cohen v. De La Cruz, No. 96-1923 .................. 8

In re Colodner, 147 B.R. 90 (Bankr. S.D.N.Y. 1992) .... 11

Ince Cunningham, 163 B.R. 657

(Bankr. D. Mass. 1994) .............0000.0- 13

Vv

In re Dunstan, 117 B.R. 632 (Bankr. D. Col. 1990),

modified on other grounds, 146 B.R. 269

Aa BE ae Pata OAS 45 55S So dances es 11

In re Fallon, 29 B.R. 491 (Bankr. M.D. Fla. 1983) ...... 12

Field v. Mans, 116 S. Ct. 437 (1995) ................. 8

In re Galbreath, 112 B.R. 892 (Bankr. S.D. Ohio 1990) .. 14

In re Holwerda, 29 B.R. 486 (Bankr. M.D. Fla. 1983) ... 12

Inre Jones, 176 B.R. 629 (Bankr. M.D. Fla. 1995) ..... 12

In re Kudla, 105 B.R. 985 (Bankr. D. Col 1989) ....... 11

In re Langworthy, 121 B.R. 903 (Bankr. M.D. Fla. 1990) 12

In re Ledford, 970 F.2d 1556 (6th Cir. 1992),

cert, denied, 507 U.S. 916 (1993) .......... 10, 14

In re Luce, 960 F.2d 1277 (Sth Cir. 1992) ............. 9

In re Mann, 40 B.R. 496 (Bankr. D. Mass. 1984) ....... 12

In re Mones, 169 B.R. 246 (Bankr. D.D.C. 1994) ...... 11

In re Naimo, 175 B.R. 878 (Bankr. E.D. Pa. 1994),

affd, 1995 WL 163598 (E.D. Pa) ............. 11

In re O'Connor, 145 B.R. 883 (Bankr. W.D. Mich. 1992) 11

In re Pauley, 205 B.R. 501 (Bankr. W.D. Mich. 1997) .. 13

vi

In re Rubenstein, 101 B.R. 769 (Bankr. M.D. Fla. 1989) . 12

In re Sobel, 37 B.R. 780 (Bankr. E.D.N.Y. 1984) ...... 12

In re Vermont, 98 B.R. 581 (Bankr. M.D. Fla. 1989) .... 12

In re Winfree, 34 B.R. 879 (Bankr. M.D. Tenn. 1983) ... 12

STATUTES

11 U.S.C. § 523 passim

1

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

RESPONSE TO

PETITION FOR WRIT OF CERTIORARI

Respondent respectfully prays that a writ of certiorari be

denied with respect to the judgment below.

OPINION BELOW

The Respondent, HSSM #7 Limited Partnership

("HSSM") respectfully requests that this Court deny the

petition for writ of certiorari, which seeks review of the

Eleventh Circuit’s opinion in this case. That opinion is

reported at 100 F.3d 886 (11th Cir. 1996).

STATEMENT OF FACTS

Petitioner Paul A. Bilzerian ("Biizerian") accurately

describes the Opinions Below, Jurisdiction and the Statute

Involved. However, as set forth below, and pursuant to Rule

15 of the Supreme Court Rules, HSSM disagrees with the

Statement of Facts set forth by Bilzerian. The Statement of

Facts as presented by Bilzerian is largely inaccurate and

immaterial to the questions presented. What is relevant to this

2

Petition are the proceedings below and the facts found in those

A. The Proceedings Below.

This matter originally arose out of a judgment entered

on April 2, 1991 by the United States District Court for the

Nan District of Texas in ‘HSSM #7 Limited Partnership v.

as ancial Corporation, No. CA3-89-

0963-R (ND. Tex. 1991), aff'd, No. 92-1261 (Sth Cir. March

9, 1993), in favor of HSSM and against Bilzerian and Bicoastal

Financial Corporation ("BFC"), jointly and severally. The

judgment awarded HSSM over $20 million in compensatory

damages and $1,224,000 in punitive damages (the "Texas

judgment") (the "Texas Case"). The Fifth Circuit affirmed the

Texas judgment in a per curiam opinion dated March 9, 1993.

The Texas judgment was based on a finding that

Bilzerian committed "actual fraud" when he induced HSSM to

invest over $20 million in Suncoast Partners Limited

Partnership ("Suncoast"), one of several interrelated, Bilzerian-

controlled entities. Suncoast existed solely to be a limited

partner in Bilzerian Partners Limited Partnership I ("BPLP-I"),

a partnership established by Bilzerian that ultimately acquired

The Singer Company ("Singer"), now known as Bicoastal

Corporation. BFC, the other defendant in the Texas Case, is

the general partner of Suncoast.

The record in the Texas Case, filed in toto in the United

States Bankruptcy Court for the Middle District of Florida (the

"Bankruptcy Court"), established that Bilzerian individually

controlled, among other entities, Suncoast, BFC and BPLP-I.

(BPLP-B, referred to in Bilzerian’s Statement of Facts

[Bilzerian Partners Limited Partnership Series B], was

3

essentially a predecessor to BPLP-I.) Bilzerian was, and is, the

controlling principal and President of BFC (the general partner

of Suncoast), and also owns all of its stock. Before his

bankruptcy, Bilzerian individually was also a general partner of

BPLP-I; the other general partner of BPLP-I, Bicoastal

Acquisition Corporation ("BAC"), was an entity which, like

BFC, had Bilzerian as its president and sole shareholder.

BPLP-I was the sole owner of the common stock of Bicoastal

Corporation (prior to confirmation of its plan of reorganization

in its own Chapter 11 bankruptcy).”

Following the entry of the Texas judgment, HSSM

instituted post-judgment discovery, including a document

request directed to discovery of Bilzerian's assets. After

Bilzerian refused to respond, the Texas court entered an order

requiring Bilzerian and BFC to produce all requested

documents by August 5, 1991. Rather than comply with that

order, on August 5, 1991, both Bilzerian and BFC filed

voluntary Chapter 11 bankruptcy cases in the Bankruptcy

Court. Following this Court's denial of certiorari in Bilzerian's

related, criminal securities fraud case, Bilzerian's Chapter 11

case was converted to Chapter 7. Bilzerian v. United States,

502 U.S. 813 (1991). BFC’s bankruptcy case was ultimately

dismissed; and it has not satisfied the Texas judgment.

HSSM brought an adversary proceeding in the

Bankruptcy Court to determine the dischargeability of the over

$20 million judgment owed by Bilzerian individually to

HSSM. It is this proceeding that led to the instant petition.

HSSM filed a motion for summary judgment as to the Section

y The BAC and BFC stock was actually owned either by

Bilzerian, individually, or by Bilzerian and his wife as tenants

by the entirety.

4

523(a)(2)(A) count, in which it asserted that, under the

principle of collateral estoppel, the debt arising out of the final

judgment in the Texas Case was nondischargeable "for

obtaining money, property, services, or an extension, renewal

or refinance of credit, by -- (A) false pretenses, a false

representation, or actual fraud." Bilzerian also cross-moved for

summary judgment on that count.

On November 1, 1993, the Bankruptcy Court entered an

order which, in relevant part, denied HSSM's motion for

summary judgment, granted Bilzerian's, and held the debt to be

dischargeable under Section 523(a)(2)(A). The Bankruptcy

Court based its ruling on a conclusion that Bilzerian himself

must have obtained money or property from HSSM for

Section 523 to apply.

HSSM appealed the Bankruptcy Court's order to the

United States District Court for the Middle District of Florida

(the "District Court"). In a Memorandum Opinion dated July

31, 1995, the District Court reversed, holding that the

Bankruptcy Court had applied an incorrect legal construction

of Section 523(a)(2)(A). The District Court adopted the so-

called "receipt of benefits" analysis of Section 523(a)(2)(A),

and, accordingly, held that a debtor need not "individually"

receive the money obtained by fraud, but need only receive

some benefit. Any other result would permit "the sophisticated

debtor to circumvent § 523 by creating a ‘corporate shell to

receive the fruits of his or her misdeeds’." After determining

that the Bankruptcy Court based its grant of summary judgment

to Bilzerian on an erroneous conclusion of law, the District

Court found that the Bankruptcy Court should have entered

summary judgment in favor of HSSM because the Texas Court

had already ruled upon the fraud issue and collateral estoppel

prevented those matters from being re-litigated. The District

5

Court, therefore, reversed the Bankruptcy Court's order, and

remanded the case with a direction that the Bankruptcy Court

enter judgment in favor of HSSM.

On December 3, 1996, the United States Court of

Appeal for the Eleventh Circuit affirmed the District Court and

joined several other circuit courts in adopting the "receipt of

benefits” analysis. The Court specifically "conclude[d] that

Bilzerian received a benefit from his fraud."

B. The Facts Below.

Much of Bilzerian's Statement of Facts concerns his

relationship and past dealings with Craig Hall (a principal of

HSSM’s corporate general partner), Bilzerian’s perceptions of

Hall’s financial difficulties, and Bilzerian’s purported success

in dealing with notable investors in "highly publicized

transactions." All of these facts are immaterial and irrelevant,

and their recital does nothing more than rehash arguments that

Bilzerian made and lost in the Texas Case. HSSM will not

burden this Court by addressing the specifics of these alleged

facts; however, HSSM's response should not be construed as

agreement with, or acquiescence to, Bilzerian's version.

What is relevant to the questions presented is that in the

Texas Case, HSSM alleged that Bilzerian made a series of

misrepresentations to HSSM to induce it to invest $20,400,000

as a limited partner in Suncoast. In particular, HSSM alleged

that Bilzerian (and BFC) obtained HSSM's investment in

Suncoast and its entry into the Suncoast Limited Partnership

Agreement by a series of falsehoods, which, among others,

included misrepresentations as to Bilzerian's skill and expertise

in legitimate securities transactions and his intentions regarding

6

a repurchase agreement (the "Put") contained in the Suncoast

Agreement. The Complaint also alleged that Bilzerian made

the misrepresentations as president of BFC and "for Bilzerian's

own personal benefit as shareholder of [BFC]."

Bilzerian's misrepresentations to HSSM provided him

with direct and discernable benefits. The record in the Texas

Case established that in connection with the takeover of Singer,

Bilzerian individually received a 25 percent "override" on any

profit. Bilzerian testified at trial that the override

"[represented] the amount of profit that I would receive, first in

the event profits were realized in [BPLP-I]." The federal judge

who tried the Texas Case, in his Findings and Conclusions,

specifically found that Bilzerian personally had a 25% override

on profits derived from the Suncoast partnership investment in

BPLP-I. Thus, HSSM's investment in Suncoast, which enabled

Bilzerian to purchase Singer, resulted in direct, individual

financial benefit to Bilzerian, just as Bilzerian designed it to do.

Moreover, once the takeover occurred, Bilzerian acknowledged

that he received, at least as of the date of the Texas trial, a

$1.25 million bonus from Bicoastal, in addition to salary.

C. The Texas Judgment and its Affirmance.

On July 30, 1990, the jury returned a unanimous special

verdict in favor of HSSM and against Bilzerian and BFC,

jointly and severally. On or about April 2, 1991, the court

entered judgment on the verdict.

In the Texas judgment, the court refused either to award

HSSM specific performance on its contract claim or to allow

HSSM to elect between its remedies for its breach of contract

claim or fraudulent inducement. Instead, the court adjudicated

ew J

‘

Bilzerian "guilty of actual fraud," rescinded the Suncoast

agreement for fraud in the inducement (effective upon the

payment of the judgment amount), and ordered BFC and

’ Bilzerian, jointly and severally, to pay HSSM over $20 million

in compensatory damages and $1,224,000.00 in punitive

damages.”

On February 24, 1992, the district court filed Findings

of Fact and Conclusions of Law. The district court specifically

found that HSSM would not have invested in Suncoast without

the Put contained in the Suncoast Agreement, and adopted all

but one of the findings of the jury. The court refused to adopt

the jury's answer to Question No. 5, in which the jury

determined that a market value existed for HSSM's interest as

of December 31, 1988. Bilzerian’s Siatement of Facts ignores

i ee

On March 9, 1993, ‘the United States Court of Appeals

for the Fifth Circuit affirmed the district court's decision.

REASONS WHY THE PETITION SHOULD BE DENIED

I. Tats Court Should ne the — With

od The April 2, 1991 judgment was amended by Order

dated April 11, 1991, which corrected a clerical error in the

calculation of the prejudgment interest. The Texas judgment

is for $26,861,312.78 in compensatory damages and

prejudgment interest, and $1,224,000.00 in punitive damages.

Post-judgment interest accrues at the rate of 6.46%. By order

dated February 24, 1992, the court awarded HSSM $20,006.75

in costs as well.

Bilzerian’s initial basis for requesting this Court to grant

his petition for certiorari was that a conflict existed between the

circuit courts on the issue of whether punitive damages and

prejudgment interest should be dischargeable under Section

523(aX(2)A). This Court should note that the punitive

damages aspect of this case was a minor point below; in fact,

that portion of the award was less than 5% of the total amount.

Indeed, the Eleventh Circuit’s opinion does not even address

this topic. As acknowledged in his Supplemental Petition,

however, this Court has already granted a petition for certiorari

in the case of Cohen v. De La Cruz, No. 96-1923.

Consequently, because this Court already has this issue before

it, the petition, as to that issue, should either be denied or held

pending a decision in that matter.

Il. The Court Should Deny the Petition With Respect

to Whether a Creditor Must Prove Actual Loss and

Money from the Creditor

Bilzerian sets forth two other reasons for granting the

petition. First, he suggests that the Eleventh Circuit’s decision

is inconsistent with Field v. Mans, 116 S. Ct. 437 (1995).

Second, he contends that the Court should determine whether

a creditor must prove that a debtor actually obtained some

benefit in order to prevail under Section 523(a)(2)(A).

With respect to Field v. Mans, Bilzerian seizes on one

phrase in the opinion -- the "general common law of torts" -- to

attempt to discern an inconsistency with the Eleventh Circuit’s

opinion in this case. Field concerned the level of reliance a

creditor must prove under Section 523(a)(2)(A). Nowhere in

the opinion does the Court discuss the general common law of

torts to determine what "loss" is required under Section 523.

9

Consequently, the perceived conflict with the "fundamental

premise” of Field v. Mans is simply an invention. Furthermore,

Bilzerian’s position regarding loss is met by the Eleventh

Circuit’s statement that "Bilzerian’s argument that HSSM did

not sustain a loss is meritless in light of the money judgment

entered in favor of HSSM in the Texas case."

With respect to requiring that a debtor "actually" obtain

some benefit, Bilzerian bases his petition on an alleged conflict

between the circuits as to whether the "receipt of benefits" is

the appropriate analysis under Section 523(a)(2)(A).

However, the circuit courts are not split on this issue:

rather, they are unified, and under these circumstances, no

reason exists for granting the petition. In the opinion below,

the Eleventh Circuit joined the majority of courts which regard

a debt for obtaining money or property derived by fraud as

nondischargeable as long as the debtor receives some benefit.

Thus, for example, if a debtor fraudulently induces someone to

invest in a corporate entity controlled or owned by the debtor,

the debt is nondischargeable because the debtor necessarily

benefits from the investment.

The Fifth, Ninth and Sixth Circuits, the only other

circuit courts to have directly confronted this issue, have

adopted the so-called "receipt of benefits" analysis. In In re

Luce, 960 F.2d 1277 (Sth Cir. 1992), the debtor, like Bilzerian,

argued that her debt was dischargeable despite

Section 523(a)(2)(A) because "she never actually obtained any

money, property, services or credit for herself by fraud." Id. at

1283. The Fifth Circuit, however, held:

The test under section 523(a)(2)(A),

however, is not whether the debtor actually

Holwerda (In re Holwerda), 29 B.R. 486,

489 (Bankr. M.D. Fla. 1983)(Paskay, J.)

(holding that debtor who was a principal of

a corporation "obtained money’ within the

meaning of § 523(a)(2)" when the creditor

approved a loan to the corporation).

Id. In Luce, although the funds obtained went to a partnership,

the debtor -- as a partner -- obtained direct benefit.

Similarly, in In re Ashley, 903 F.2d 599, 604 (9th Cir.

1990), the plaintiffs loaned money to a corporation in which the —

debtor, an accountant, was not even an officer or director.

Rather, the debtor merely helped obtain the loans as part of his

“business plan to gain a foothold in the machine shop

industry" with the owners of the corporation. The Ninth

Circuit held that the debt was nondischargeable since the

debtor's "link with AMM [the corporation] placed him in a

position to benefit from any infusion of capital to that

enterprise. Under these circumstances, inducing the [plaintiff]

to invest in AMM was indeed obtaining something for

himself." Id.

Also, in In re Ledford, 970 F.2d 1556 (6th Cir. 1992),

cert. denied, 507 U.S. 916 (1993), the Sixth Circuit held that

the fraud of one partner should be imputed to a second partner

(who had no knowledge of the fraud), rendering the debt of the

li

second partner non-dischargeable. The funds there were used

for partnership purposes and financed a condominium project

from which the second partner would profit.

The conclusions reached by the Fifth, Sixth, Ninth and

Eleventh Circuits have been almost universally accepted by

bankruptcy and district courts in a wide variety of factual

situations.” Indeed, prior to the stark change in view expressed

y See, e.g., Inre Naimo, 175 B.R. 878, 880-81 (Bankr.

E.D. Pa. 1994), aff'd, 1995 WL 163598 (E.D. Pa.) (criticizing

Bankruptcy Court in this case and holding that no language

states the debtor must personally obtain property; rather the

word "obtained" relates to the fact the property must be

obtained from the debtor); In re Mones, 169 B.R. 246, 251

(Bankr. D.D.C. 1994) ("Requiring that the debtor obtain money

for himself limits the meaning of the term ‘obtain’ when no

provision’s language); In re Colodner, 147 B.R. 90 (Bankr.

S.D.N.Y. 1992) (claim for nondischargeability stated where

fees for patent services obtained through misrepresentations

went not to debtor but to his wholly owned corporation); In re

O'Connor, 145 B.R. 883 (Bankr. W.D. Mich. 1992) (where

debtor was the sole shareholder and president of corporation

which obtained lease, debt arising from lease was

nondischargeable because debtor's future income depended on

profitability of corporation); In re Dunstan, 117 B.R. 632, 637

(Bankr. D. Col. 1990), modified on other grounds, 146 B.R.

269 (D. Col. 1992) ("To meet the requirements of [§ 523(a)(2)]

the debtor needs to receive some benefit from the property, but

not necessarily the property itself"); In re Kudla, 105 B.R. 985,

989 (Bankr. D. Col 1989) (same); In re Delano, 50 B.R. 613,

617 (Bankr. D. Mass. 1985) ("It is well-settled that whether the

(continued...)

12

in Bilzerian's bankruptcy case, the Bankruptcy Court in this

case, like these other courts, had repeatedly relied upon the

receipt of benefits analysis. See, ¢.g., In re Holwerda, 29 B.R.

486, 489 (Bankr. M.D. Fla. 1983); In re Langworthy, 121 B.R.

903, 907 (Bankr. M.D. Fla. 1990) (Paskay, J.); In.re Jones, 176

B.R. 629, 635 (Bankr. M.D. Fla. 1995); In re Rubenstein, 101

B.R. 769, 772 (Bankr. M.D. Fla. 1989); In. re Vermont, 98 B.R.

581, 584 (Bankr. M_D. Fla. 1989) (Paskay, J.); Inre Benson, 36

B.R. 537, 538 (Bankr. M.D. Fla. 1983) (Paskay, J.); In_re

Fallon, 29 B.R. 491, 494 (Bankr. M.D. Fla. 1983) (Paskay, J.).

Moreover, from a statutory construction perceptive, it

is noteworthy that the statute nowhere indicates that the debtor

alone must receive the fruits of the fraudulent conduct. Of

equal importance, such a requirement makes no sense as a

matter of public policy. Why should the more sophisticated

uses a false financial statement to induce a creditor to extend

credit to the corporation, the individual debtor is considered to

have obtained money within the meaning of § 523(a)(2)(B)");

Inre Mann, 40 B.R. 496, 499 (Bankr. D. Mass. 1984) (same);

In re Sobel, 37 B.R. 780 (Bankr. E.D.N.Y. 1984) ("It is of no

consequence that the money ostensibly went to Sobel, Inc.

rather than to the [debtors] personally. Nothing is more

commonplace than for the owners of a small closely-held

corporation, like Sobel, Inc., to engage in fraud for the benefit

of the corporation rather than for themselves directly. That a

corporation is the beneficiary does not make the fraud any

less"); In re Winfree, 34 B.R. 879, 882 (Bankr. M.D. Tenn.

1983) (finding that the debtor has received a benefit when a

loan is made to a corporation of which he is a shareholder,

officer and director).

13

offender -- Bilzerian being the quintessential example -- be

rewarded for creating an entity into which he receives the

money or property, while the "average" debtor, lacking the

sophistication or resources necessary to create such a structure,

is not? See, ¢.g., Inre Cunningham, 163 B.R. 657 (Bankr. D.

Mass. 1994) (loan received by joint venture conferred benefit

on debtor who was part of joint venture); In re Arm, 175 B.R.

349, 353 (9th Cir. BAP 1994), aff'd, 87 F.3d 1046 (9th Cir.

1996) (benefit to debtor through entity that was affiliated with

borrower sufficed for §523(a)(2)).

Finally, however described by the Bankruptcy Court for

the Western District of Michigan in In re Pauley, 205 B.R. 501

(Bankr. W.D. Mich. 1997) (and that court does not even

suggest a split), the Sixth Circuit’s opinion in In re Brady, 101

F.3d 1165 (6th Cir. 1996) is consistent with this case. There,

the court specifically followed the Ninth Circuit’s ruling in In

re Ashley, 903 F.2d at 599, to hold that where the creditor

invested in a company of which the debtor was president he

had directly or indirectly obtained a benefit.

As a subsidiary point, Bilzerian suggests that he must

have received an "actual" benefit. He ignores the fact that this

is precisely what the Eleventh Circuit found happened: the

Eleventh Circuit specifically found that Bilzerian did receive a

benefit. Although Bilzerian characterizes this benefit as

"contingent" and "indirect", the findings by the Eleventh

Circuit are otherwise. Indeed, despite Bilzerian’s contention,

the undisputed record establishes that, as found by the Texas

Court, Bilzerian controlled Suncoast (as the principal and

owner of Bicoastal Financial Corporation, its general partner),

and also, as a general partner, controlled Bilzerian Partners

Limited Partnership I ("BPLP-I"), the company in which

Suncoast was a limited partner. Furthermore, not only does the

14

intimate relationship between Suncoast and Bilzerian

necessarily create a benefit, the record below and the Findings

of Fact and Conclusions of Law in the Texas Case establish

that Bilzerian himself intended to profit handsomely from

HSSM's investment in Suncoast through the 25% override on

profits. Bilzerian also received a substantial salary and bonus

once the takeover occurred. Furthermore, the fraudulent

to pay HSSM for its interest in Suncoast, directly benefitted

Bilzerian because Bilzerian intended not to pay HSSM on his

individual obligation when called to do so. Cf, In-re

Galbreath, 112 B.R. 892, 900 n.10 (Bankr. S$.D. Ohio 1990)

(release of personal liability on loan is benefit). Finally,

Bilzerian's dominant and controlling role in Suncoast, BFC and

BPLP-I is alone sufficient to establish that he benefitted from

HSSM's investment in Suncoast. See In re Ledford. 970 F.2d

1556, 1561 (6th Cir. 1992), cert. denied 507 U.S. 916 (1993).

Bilzerian repeatedly indicates that the "benefit" was

merely "potential" because of the Chapter 11 case of The

Bicoastal Corporation f/k/a The Singer Company filed after his

orchestrated takeover. While the merits of that statement are

capital to acquire The Singer Company (not to mention the

receipt of the $1.25 million bonus), the policy behind such a

view is equally dubious. Because there is no dispute that

Bilzerian had a 25% override on the Suncoast profits from its

investment in BPLP-1, Bilzerian basically argues that because

he did not ultimately receive all of the fruits of his fraud (or at

least some of those fruits), Section 523(a)(2)(A) should not

apply. A dishonest debtor’s failure to succeed in a fraudulent

endeavor hardly seems a valid basis for reward: the creditor’s

loss, and the debtor’s dishonest course of conduct, remain the

same regardless. Indeed, in In re Ledford, 970 F.2d at 1556, it

15

appears that the project from which the debtor would profit was

a failure; nonetheless, the debt was nondischargeable.

As set forth above, aside from the punitive damage

question, the other questions presented need no resolution by

this Court. The circuits are not split; the Eleventh Circuit’s

opinion is consistent with this Court’s precedent; and the facts

support the decision. For these reasons, the petition for

certiorari should be denied.

Respectfully submitted,

SHUTTS & BOWEN LLP

Attorneys for HSSM #7

20 N. Orange Avenue, Suite 1000

Orlando, Florida 32801

(407) 423-3200

(407) 425-8316 Facsimile

By:_/s/ Andrew M, Brumby _

Andrew M. Brumby

Fla. Bar No. 0650080

Mary Ruth Houston

Fla. Bar No. 834448

Dated: January 5, 1998.

ORL9S 69176.1- TLR