United States District Court, N.D. Illinois, Eastern Division
November 15, 2004.
VIP SPORTS MARKETING, INC., Appellant,
STEVEN BUZIL, Appellee.
The opinion of the court was delivered by: JOHN W. DARRAH, District Judge
MEMORANDUM OPINION AND ORDER
Appellee, Steven Buzil, filed a voluntary petition under
Chapter 7 of Title 11 of the United States Code. Appellant, VIP
Sports Marketing ("VIP"), is a judgment creditor of Buzil.
Buzil's debt to VIP would generally be dischargeable in the
bankruptcy proceeding, but VIP alleged in an adversary complaint,
pursuant to 11 U.S.C. § 523(a)(2)(A), that the debt was not
dischargeable because the debt was fraudulently obtained by
Buzil. Specifically, VIP alleged that Buzil obtained money from
VIP by misrepresenting his ability to procure a number of passes
for the 2000 Masters Professional Golf Tournament.
Thereafter, Buzil filed a motion to dismiss the adversary
complaint because VIP's promissory fraud claime did not meet the
requirements of the fraud exception to an otherwise dischargeable
debt. Buzil also contended that the adversary complaint did not
satisfy the pleading requirements of Bankruptcy Rule 7009(b).
This motion was granted, and VIP was granted leave to file an
amended adversary complaint. The amended complaint filed by VIP
was similar to the original complaint, and Buzil filed another
motion to dismiss that alleged the amended adversary complaint
did not satisfy the pleading requirements of Bankruptcy Rule
7009(b). This time, the amended adversary complaint was dismissed
with prejudice, and the adversary proceeding was closed.
Presently before the Court is an appeal of an order of the
bankruptcy court dismissing VIP's amended adversary complaint
against Buzil with prejudice. For the following reasons, the
decision of the bankruptcy court is affirmed.
On an appeal, a bankruptcy court's decisions concerning
questions of law are reviewed de novo. Hoseman v.
Weinschneider, 322 F.3d 468, 473 (7th Cir. 2003). In reviewing a
motion to dismiss, the court reviews all facts alleged in the
complaint and any reasonable inferences drawn therefrom in the
light most favorable to the plaintiff. See Marshall-Mosby v.
Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000).
A plaintiff is not required to plead the facts or elements of a
claim, with the exceptions found in Federal Rule of Civil
Procedure 9. See Swierkiewicz v. Sorema, 534 U.S. 506, 511
(2002); Walker v. Thompson, 288 F.3d 1005, 1007 (7th Cir.
2002). Dismissal is warranted only if "it appears beyond a doubt
that the plaintiff can prove no set of facts in support of his
claim which would entitle him to relief." Conley v. Gibson,
355 U.S. 41, 45-46 (1957). The "suit should not be dismissed if it is
possible to hypothesize facts, consistent with the complaint,
that would make out a claim." Graehling v. Village of Lombard,
Ill., 58 F.3d 295, 297 (7th Cir. 1995).
The facts, for the purposes of this appeal, are taken as true
from VIP's Amended Complaint. Buzil was involved in the ticket
broker business, whereby he would enter into agreements to
provide tickets to entertainment and sporting events that were
generally unavailable to the public. Buzil entered into one such
agreement with VIP. On March 27, 2000, Buzil, in a written contract, agreed to
provide VIP with thirty tickets for the 2000 Masters Professional
Golf Tournament (the "Masters"), which was set to begin on April
6, 2000. VIP agreed to pay Buzil $83,250.00 upon execution of the
agreement, and then pay $27,750.00 upon delivery of the tickets.
On March 29, 2000, VIP further provided Buzil with $5,000.00 to
be held as a deposit.
Unbeknownst to VIP, Buzil did not have the tickets needed to
fulfill VIP's needs at the time of the agreement. Knowing that he
would receive money from VIP, Buzil represented that he would
provide the thirty tickets. However, Buzil knew that he did not
have access to thirty tickets at the time of the agreement.
After Buzil entered into the agreement with VIP, Buzil obtained
a release from another party for a prior commitment Buzil had to
provide Masters tickets. Buzil was thus able to obtain twenty
tickets for the Masters. Buzil, however, was cognizant of the
increasing price for Masters tickets and believed he could
purchase tickets at a lower price than currently available.
Therefore, Buzil did not purchase tickets with the funds provided
On April 4, 2000, VIP paid the remaining $27,750.00 due to
Buzil. Buzil was only able to deliver eighteen tickets for the
Masters to VIP, even though there were tickets available for
Buzil to purchase prior to the start of the Masters.
Throughout VIP and Buzil's dealings, Buzil continuously
represented that he would be able to provide the required tickets
in time for the beginning of the Masters. These representations
were false. Furthermore, Buzil had an undisclosed scheme not to
pay any amounts for tickets in excess of a certain profit he was secretly
seeking to obtain. Instead, Buzil either procured tickets for
other customers at his acceptable profit level or refused to
procure the remaining tickets for VIP with the funds VIP
Buzil knowingly made some of these misrepresentations to VIP at
the time of entering into the agreement. VIP reasonably relied on
these representations and provided Buzil with the full agreement
price and the $5,000.00 deposit. However, VIP was injured because
it paid the full amount yet only received eighteen of the
requested thirty tickets.
VIP seeks to assert a claim under 11 U.S.C. § 523(a)(2)(A),
which provides that a debtor is not discharged from a debt for
money obtained under false pretenses. For VIP to state a claim
under this provision, it must allege that: (1) Buzil obtained the
money by making representations he knew to be false, (2) Buzil
acted with an intent to deceive VIP, and (3) VIP justifiably
relied on Buzil's representations. See In re Sheridan,
57 F.3d 627, 635 (7th Cir. 1995).
With regard to the first requirement to plead a claim for false
pretenses, Federal Rule of Bankruptcy Procedure 7009, the
applicable pleading standard in the bankruptcy court, is
identical to Federal Rule of Civil Procedure 9(b). "In all
averments of fraud or mistake, the circumstances constituting
fraud or mistake shall be stated with particularity."
Fed.R.Civ. P. 9(b). "While this does not require a plaintiff to plead
facts that if true would show that the defendant's alleged
misrepresentations were indeed false, it does require the
plaintiff to state `the identity of the person making the
misrepresentation, the time, place and content of the
misrepresentation, and the method by which the misrepresentation was communicated to the
plaintiff.'" Uni*Quality, Inc. v. Infotronx, Inc.,
974 F.2d 918, 923 (7th Cir. 1992) (quoting Bankers Trust Co. v. Old
Republic Ins. Co., 959 F.2d 677, 683 (7th Cir. 1992) (Bankers
"The allegations must be specific enough to provide the
defendants with a general outline of how the alleged fraud scheme
operated and of their purported role in the scheme." Rohlfing v.
Manor Care, Inc., 172 F.R.D. 330, 347 (N.D. Ill. 1997)
(citations omitted). To determine whether counts are sufficiently
pled, a court will bear in mind the purposes of Rule 9(b): "(1)
protecting the defendants' reputations; (2) preventing fishing
expeditions; and (3) providing adequate notice to the
defendants." Rohlfing, 172 F.R.D. at 347 (citing Vicom, Inc.
v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir.
"[A] promise to perform a contract when there is no actual
intent to do so" may be an actionable misrepresentation. Houben
v. Telular Corp., 231 F.3d 1066, 1074 (7th Cir. 2000)
(Houben). The promise must be part of a scheme to defraud.
Houben, 231 F.3d at 1074.
In this case, VIP alleges that Buzil promised to provide the
tickets although Buzil knew he did not have access to or the
ability to obtain the tickets. However, VIP later specifically
alleges to the contrary: that tickets were available to Buzil.
VIP also alleges that Buzil was able to obtain tickets by being
released from other commitments he had made for the tickets.
These contradictory allegations result in a failure by VIP to
sufficiently plead a necessary element of fraud. See, e.g.,
McCormick v. City of Chicago, 230 F.3d 319, 325 (7th Cir. 2000)
(explaining that a plaintiff can plead facts demonstrating a
defendant is entitled to prevail on a motion to dismiss). VIP also alleges that Buzil never intended to deliver the
tickets to VIP at the time Buzil entered into the agreement. VIP,
again to the contary, elsewhere alleges that Buzil actually
delivered eighteen tickets to VIP. VIP further alleges that Buzil
was attempting to free up tickets from other commitments and that
Buzil was attempting to find tickets at a lower price than
available on the market. Once again, these contradictory
allegations result in a failure by VIP to sufficiently plead a
claim for fraud.
Based on the above, the amended complaint, considered as a
whole, including the material contradictions, does not state a
claim for fraud; and no possible set of facts could be pled to do
so. Accordingly, the bankruptcy court did not err in dismissing
VIP's amended complaint with prejudice.
For the foregoing reasons, the decision of the bankruptcy court
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