The Debtor sought to modify the financial reporting requirements of Federal Rule of Bankruptcy Procedure 2015.3 in three ways.  The Debtor contended that the financial reporting should not be required because the Debtor's interests in the entities are not "substantial or controlling" for purposes of Rule 2015.3.  The Debtor requested that even if the reporting requirements are not waived, the Court should modify the Rule 2015.3 requirement to provide that all reports are to be filed under seal and accessible only to those creditors willing to sign a confidentiality agreement. The Debtor also requested an enlargement of time in which to file his first Rule 2015.3 report, with each subsequent report to be filed at six-month intervals.
The Court found that the Debtor failed to rebut the presumption that he has a substantial or controlling interest in six of the seven entities listed in his schedules. With regard to the request for reports to be filed under seal, the Court found that the Debtor did not meet his burden of proving that the information should be protected under 11 U.S.C. § 107(b), noting that the Debtor's statement regarding his desire for confidentiality to protect other investors is not a basis to seal records from public view. The Court granted the Debtor's request to extend the deadline to file his initial Rule 2015.3 report, with subsequent reports due every six months.

Defendants CitiFinancial and Carrington Mortgage Services, two former holders/servicers of the Plaintiffs' mortgage, requested dismissal of the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted, for three separate causes of action. The Plaintiffs alleged that the two Defendants violated § 524(i) with misapplication of payments and an inflated account payoff balance. The Court determined that the Plaintiffs' allegations that CitiFinancial and Carrington both transferred Plaintiffs' mortgage account with an inflated balance due to misapplied payments is sufficient to constitute an act to collect for the purposes of withdtanding a motion to dismiss under Rule 12(b)(6).  Also, the Court found that the Plaintiffs plausibly pleaded the elements required under § 362(k) for violation of the automatic stay. The Plaintiffs' alleged violation of the FDCPA against Carrington is not related to the bankruptcy case and the Court lacks subject matter jurisdiction over that count of the complaint.

The Court granted the Defendant/Debtor's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim for relief that is plausible on its face, and granted the Plaintiffs leave to amend the complaint. The Plaintiffs alleged nondischargeability of a debt pursuant to 11 U.S.C. § 523(a)(6) based on unliquidated state-law causes of action: tortious interference with prospective economic advantage, tortious interference with contract, libel, conspiracy, and violation of California's Unfair Competition Law. The claim for violation of California's Unfair Competition Law was dismissed with prejudice as that cause of action is limited to equitable,injunctive relief, and may not be the basis of a § 523(a)(6) dischargeability complaint.
The basis for the complaint was a series of allegedly defamatory emails sent by the Defendant/Debtor, who was a former member of the board of directors and a current shareholder of the corporate Plaintiff, to other investors and board members. The counts in the complaint related to torious interference with contract and tortious interference with prospective economic advantage were determined by the Court to lack elements necessary to constitute an injury under California law, and therefore did not result in a debt that could be subject to nondischargeability under § 523(a)(6). The counts of the complaint that were plausible under California law, libel, unlawful or unfair business practices, and conspiracy, were analyzed to determine if they constituted claims for willful and malicious injury under the § 523(a)(6) dischargeability exception. The Plaintiffs' allegations that Hunter made his statements "recklessly" and "in knowing disregard for their truth" may be sufficient to obtain a judgment for defamation under California law, but that mental state does not plausibly allege an intent to injure sufficient to render that judgment nondischargeable under § 523(a)(6). As Plaintiffs did not plead a willful and malicious injury for the tort of defamation, their pleading for conspiracy suffers from the same deficiency and is not alleged to be a willful and malicious injury subject to nondischargeability under § 523(a)(6).

The Debtor filed a motion to convert his case from Chapter 7 to Chapter 11 pursuant to section 706(a) of the Bankruptcy Code. Under section 706(d) the case may not be converted unless the debtor may be a debtor under such chapter. The court denied the Debtor's motion to convert his case from Chapter 7 to Chapter 11. The court determined that the objecting parties met their burden of proof by a preponderance of the evidence that the conversion should be denied, based upon cause under section 1112(b) of the Bankruptcy Code, including a substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation under 1112(b)(4)(A) and a lack of good faith.