In re: GLENN LEE THOMPSON, HEIKE BIRGIT THOMPSON, Debtors.
NANCY J. GARGULA, United States Trustee, Defendant-Appellee. LEE THOMPSON, HEIKE BIRGIT THOMPSON, Plaintiffs - Appellants,
from the United States District Court Nos. 3:17-cv-00130-TCB;
11-bkc-11192-WHD for the Northern District of Georgia
MARCUS, WILSON and BRANCH, Circuit Judges.
BRANCH, CIRCUIT JUDGE:
Thompson and Heike Thompson challenge a bankruptcy court
order revoking the discharge of their debt. Their case turns
on their allegation that the United States Trustee had
pre-discharge knowledge of the alleged conduct that resulted
in the revocation. The legal question on appeal boils down to
whether a "lack-of-knowledge" requirement that is
explicitly contained in one subsection of the bankruptcy
statute, 11 U.S.C. § 727(d)(1), can be read into the
adjacent subsection of the same statute, 11 U.S.C. §
727(d)(2), thereby barring revocation. The question presents
an issue of first impression in this Circuit. We decline to
rewrite the statute and thus affirm the district court.
April 3, 2011, the Thompsons filed a voluntary Chapter 13
bankruptcy petition. At their request, the bankruptcy court
converted the case to Chapter 11 on September 1, 2011; on
July 10, 2013 it converted it, again at their request, to
Chapter 7. The Thompsons owned two businesses: Nattco, LLC
("Nattco"), where Heike Thompson served as
president, and GHT United, LLC ("GHT"). On the same
day that the Thompsons' individual case was converted to
Chapter 11, Nattco filed a voluntary bankruptcy petition
under Chapter 11.
meantime, during the pendency of the individual and corporate
bankruptcy cases, a former employee of Nattco submitted a
fraud referral to the Trustee, alleging misconduct by the
Thompsons, including "stockpiling cash,"
"taking trips to Hawaii, Puerto Rico, and Florida,"
and undergoing plastic surgery. The Trustee received the
referral and additional communications about alleged fraud
between October 2013 and January 2014, and consequently
initiated an investigation into the allegations.
February 26, 2014, the bankruptcy court granted the Thompsons
a discharge. See 11 U.S.C. § 727(a). On
February 25, 2015, the Trustee filed an adversary complaint
requesting revocation of the Thompsons' discharge in
light of the apparent fraudulent activity and alleging that
the financial reports the Thompsons submitted in the
individual and Nattco bankruptcy cases were "incomplete,
inaccurate, or erroneous." On September 12, 2016, the
Thompsons filed a motion for summary judgment, alleging in
relevant part that the Trustee was on notice of the alleged
fraud before the bankruptcy court entered the discharge,
barring the Trustee's claim for revocation.
November 16, 2016, the bankruptcy court denied in part and
granted in part the Thompsons' motion for summary
judgment. The bankruptcy court applied 11 U.S.C. §
727(d), which reads in relevant part as follows:
(d) On request of the trustee, a creditor, or the United
States trustee, and after notice and a hearing, the court
shall revoke a discharge granted under subsection (a) of this
(1) such discharge was obtained through the fraud of the
debtor, and the requesting party did not know of such fraud
until after the granting of such discharge; [or]
(2) the debtor acquired property that is property of the
estate, or became entitled to acquire property that would be
property of the estate, and knowingly and fraudulently failed
to report the acquisition of or entitlement to such property,
or to deliver or surrender such property to the trustee[.]
bankruptcy court noted that § 727(d)(1) allows for the
revocation of a discharge if the requesting party (in this
case, the Trustee) "did not know of such fraud until
after the granting of such discharge." Because the
Trustee was informed of the fraudulent activity before the
discharge was granted, no revocation was appropriate under
§ 727(d)(1), and the bankruptcy court granted in part
the motion for summary judgment on that ground.
bankruptcy court, noted, however, that § 727(d)(2)
contains no such lack-of-knowledge requirement, and that the
Thompsons had engaged in the proscribed debtor conduct that
§ 727(d)(2) designates as sufficient support for a
revocation. On that ground, the ...