In Re: William M. Mattei and Tracy Mattei

Background

William M. Mattei and Tracy Mattei appealed a June 16, 2023 judgment of the United States Bankruptcy Court for the Southern District of New York. That judgment denied them a bankruptcy discharge under 11 U.S.C. § 727(a)(4)(A), which requires denial of a discharge when a debtor knowingly and fraudulently makes a false oath or account in connection with the bankruptcy case.

The dispute arose after Brenda Wiley, administrator of the Estate of Jeffrey Keahon, pursued claims in the New York Surrogate’s Court involving funds allegedly connected to the Estate of Angela Mattei. The Surrogate’s Court had entered a decree directing payment of $120,825.69 by the Estate of Angela Mattei to the Estate of Jeffrey Keahon. Later, several claims against William and Tracy Mattei survived dismissal proceedings in the Surrogate’s Court.

The Matteis filed for bankruptcy on March 2, 2021. Their original bankruptcy filings did not disclose all income received under an agreement involving educational services provided by Tracy Mattei through Mattei Mastery LLC. After the bankruptcy trustee investigated and questioned the matter, the Matteis filed several amended schedules and statements, but still disclosed only part of the income. Wiley then filed an adversary proceeding seeking, among other relief, denial of the Matteis’ discharge under Section 727(a)(4)(A).

Bankruptcy Court Proceedings

The Bankruptcy Court granted the Matteis’ summary-judgment motion on several claims, including claims under 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4), and 727(a)(3). Summary judgment is a decision without a trial when the court determines that the material facts do not require one. The Bankruptcy Court denied both sides’ summary-judgment motions as to the Section 727(a)(4)(A) claim and later held an evidentiary hearing.

After the hearing, the Bankruptcy Court found that the Matteis had made statements under oath in their bankruptcy schedules, statements of financial affairs, amended filings, and testimony at a creditors’ meeting. It found that they omitted part of the income received under the Mattei Mastery agreement, continued omitting part of that income after the trustee raised the issue, knew the statements were false, and gave an explanation that was not credible. The Bankruptcy Court concluded that the omissions were material to the bankruptcy case and showed fraudulent intent.

District Court’s Analysis

The Matteis raised two principal arguments on appeal. First, they argued that Wiley was not a creditor and therefore lacked standing—the legal right to bring the objection—because the Bankruptcy Court’s summary-judgment rulings had eliminated any debt owed to her. Second, they argued that their incomplete disclosures were unintentional mistakes caused by limited business experience and that the Bankruptcy Court improperly relied on their educational backgrounds.

The district court rejected the standing argument. It explained that a bankruptcy “claim” can include a disputed or contingent right to payment, including a right that has not yet been finally established. Although the Bankruptcy Court had found no debt for purposes of certain claims under Section 523, that ruling did not eliminate Wiley’s unresolved state-court claims or establish that she had no possible right to payment. The Matteis had also listed Wiley as holding a contingent, disputed claim when they filed for bankruptcy. The district court therefore concluded that Wiley was a creditor with standing to object to the discharge.

The district court also upheld the denial of discharge. Under Section 727(a)(4)(A), an objecting creditor must prove that the debtor made a sworn statement, that it was false, that the debtor knew it was false, that it was made with fraudulent intent, and that it was material to the bankruptcy case. The district court deferred to the Bankruptcy Court’s factual and credibility findings and held that the Matteis’ repeated failure to disclose part of the income, including after the trustee raised the issue, supported a finding of reckless disregard for the truth and fraudulent intent. The court found that the Bankruptcy Court did not err in denying the discharge.

Disposition

The district court denied the Matteis’ appeal of the Bankruptcy Court’s denial of discharge under Section 727(a)(4)(A). It affirmed the Bankruptcy Court’s rulings in all respects, directed the Clerk to enter judgment, and closed the case.