Joe Whitcomb
On May 3, 2023, the United States Bankruptcy Court for the Southern District of Florida granted summary judgment in favor of defendants Theodora Foufas, Carlton R. Marcyan, and Schiller DuCanto & Fleck LLP, who were accused of violating an automatic stay imposed by the bankruptcy case of Plato Chris Foufas. The court determined that the defendants’ actions were protected under an exception to the automatic stay for collecting domestic support obligations from non-estate property.
Background of the Case
Plato Chris Foufas, the debtor in this Chapter 7 bankruptcy case, filed an adversary complaint against his former spouse, Theodora Foufas (Teddy), and her legal counsel. The case originated from the aftermath of the Foufas' divorce in 1995 and a series of proceedings in the Circuit Court of Cook County, Illinois, concerning equitable distribution and domestic support obligations.
In 1996, the Illinois court found that Teddy required financial support due to serious medical conditions and awarded her monthly maintenance payments, initially set at $20,000. This was later increased to $22,000 in 1999, with a lump sum payment of $252,086.50. During this time, Plato was found to have transferred assets to an offshore trust, the KM Trust, in an effort to avoid paying the required sums. The Illinois court held him in contempt for these actions.
Plato ceased making payments in 2006, prompting Teddy to file motions for contempt. The court held hearings over the years, and by 2019, the Illinois court found that Plato had deliberately avoided his obligations. As a result, the court ordered Plato to be incarcerated until he paid $5,183,621.78. This order was stayed until November 2019 to allow Plato time to post bond.
In September 2020, the Illinois court issued a Body Attachment Order for Plato’s incarceration due to his continued non-compliance. Shortly thereafter, in November 2020, Plato filed for Chapter 7 bankruptcy in Florida.
Key Issues Presented
Plato was eventually arrested in August 2021, based on the Illinois court’s Body Attachment Order. He argued that his arrest violated the automatic stay triggered by his bankruptcy filing. The defendants countered, citing an exception under 11 U.S.C. § 362(b)(2)(B), which allows the collection of domestic support obligations from non-estate assets, such as those held in the KM Trust.
The Bankruptcy Court in Florida was tasked with determining whether the automatic stay applied to the defendants' efforts to collect from the KM Trust, which Plato had claimed was not part of his bankruptcy estate. According to his bankruptcy filings, Plato declared no ownership interest in the KM Trust assets, while also attempting to use the trust as part of his argument that the defendants had violated the stay.
The Court’s Findings
The court found that the defendants’ actions did not violate the automatic stay because they sought collection from non-estate property, specifically the KM Trust. Since Plato had claimed under oath that the trust's assets were not part of his bankruptcy estate, the defendants were within their rights to pursue collection from those assets.
The court rejected Plato’s argument that the exception did not apply, ruling that judicial estoppel barred him from taking inconsistent positions. On one hand, Plato claimed in his bankruptcy case that the trust assets were not part of his estate, while in his adversary proceeding, he alleged that the defendants were trying to collect estate property.
Conclusion
Ultimately, the Bankruptcy Court granted summary judgment in favor of the defendants, affirming that the automatic stay exception for domestic support obligations applied. The court concluded that the defendants were entitled to collect from non-estate assets such as the KM Trust and that judicial estoppel prevented Plato from asserting otherwise.
This decision highlights the clear limitations of the automatic stay in bankruptcy cases, particularly in relation to domestic support obligations. The exception in § 362(b)(2)(B) ensures that debtors cannot use the bankruptcy process to avoid legally mandated support payments, especially when assets outside of the bankruptcy estate are available for collection.