Palmetto Surety Corporation v. Sobota

UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
HARTFORD DIVISION
In re:
William John Sobota,
Debtor.
Chapter 7
Case No. 25-21346 (JJT)
Palmetto Surety Corporation,
Plaintiff,
v.
William John Sobota,
Defendant.
Adv. P. No. 26-02003 (JJT)
Re: ECF No. 5
MEMORANDUM OF DECISION AND ORDER
GRANTING MOTION TO DISMISS COUNT ONE
Before the Court is the Motion to Dismiss Count One (Motion, ECF No. 5)
filed by Debtor–Defendant William John Sobota. In the Motion, the Debtor seeks
dismissal of Count One of the April 15, 2026 Complaint (ECF No. 1) filed by
Palmetto Surety Corporation. For the reasons stated below, the Court grants the
Motion without prejudice to repleading.1
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, as applied by
Rule 7012(b) of the Federal Rules of Bankruptcy Procedure, a party may move to
dismiss where the complaint “fail[s] to state a claim upon which relief can be
1 The Court assumes the parties’ familiarity with the Complaint and its allegations.
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granted[.]” “To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted).
Count One seeks a determination Palmetto’s claims against the Debtor are
nondischargeable under 11 U.S.C. § 523(a)(2)(A) because, Palmetto alleges, of the
Debtor’s false pretenses, false representation, or actual fraud. Under Rule 9(b) of
the Federal Rules of Civil Procedure, as applied by Rule 7009 of the Federal Rules
of Bankruptcy Procedure, “[i]n alleging fraud . . . , a party must state with
particularity the circumstances constituting fraud[.]” “Under Rule 9(b)’s
particularity requirement, the plaintiff must (1) detail the statements (or omissions)
that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where
and when the statements (or omissions) were made, and (4) explain why the
statements (or omissions) are fraudulent.” Olson v. Major League Baseball, 29 F.4th
59, 71 (2d Cir. 2022) (internal quotation marks omitted). Thus, not only must
Palmetto allege a plausible claim, it must do so with particularity.
Count One fails to meet this standard. Palmetto alleges that the Debtor
guaranteed surety bonds for 24/7 Bailbonds, LLC, allowed numerous bonds to into
default, and that the Debtor “gave an affidavit to [Palmetto] to convince [Palmetto]
that [the Debtor] had sufficient assets to pledge as collateral in order to satisfy any
liabilities to [Palmetto.]” Palmetto also alleges that the Debtor’s fraud includes
selling unspecified questionable bonds, not satisfying the forfeiture of those bonds,
and not assisting Palmetto with satisfaction of the forfeitures. The Complaint gives
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no information about which specific bonds were suspect, nor the what, where, when,
or how of the Debtor’s statements that were supposedly fraudulent.
In Palmetto’s opposition papers (ECF No. 17), it does little more than
reiterate what the Complaint says. Palmetto argues, however, that “[a] more liberal
standard has been applied to fraud allegations in bankruptcy cases.” Silverman v.
H.I.L Assocs. Ltd. (In re Allou Distribs.), 387 B.R. 365, 385 (Bankr. E.D.N.Y. 2008).
As noted in the very next sentence of that cited case, however, “[t]his is because in
such cases, it is often the trustee, a third party, who is pleading fraud on
secondhand information.” Id. (internal quotation marks omitted). Palmetto is not a
trustee operating on secondhand information; it is the counterparty to the
Agreement. The liberal standard afforded to trustees does not apply here, where
Palmetto has dominion over the material facts and has so demonstrated that in
state court proceedings.
Palmetto also argues that “where the transactions are numerous and take
place over an extended period of time, less specificity is required.” Nisselson v. Ford
Motor Co. (In re Monahan Ford Corp. of Flushing), 340 B.R. 1, 21 (Bankr. E.D.N.Y.
2006). The Complaint alleges that numerous bonds went into default in 2020, with
the Debtor giving Palmetto an affidavit around the same time. But the Complaint
later alleges that it was from January 2024 onward that the Debtor sold bonds that
went into forfeiture. There is no context for what the Debtor said or did at the
various times alleged in the Complaint that is supposed to be false or fraudulent,
nor is there any information about what the falsity or fraud even was. More
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importantly, Palmetto alleges nothing about the number of transactions that it
claims were false or fraudulent—or even what percentage of transactions it claims
are suspect2—so it can hardly rely on (questionable) case law about a lightening of
specificity where the volume is high when it doesn’t say how high it was.
The Motion is granted without prejudice to Palmetto filing an amended
complaint within 28 days of this Order.3
IT IS SO ORDERED at Hartford, Connecticut this 1st day of September
2026.
2 In other words, were all of the bonds suspect? Most? Some? Moreover, what were the dollar
amounts associated with these bonds? Palmetto doesn’t say anything here. Although Palmetto
includes some (but not all) of this information in various entries in its Superior Court action, see note
3, infra, such information—which could provide some of the particularity needed here—is absent
from the Complaint.
3 At the August 27, 2026 hearing on the Motion, the Court discussed with the parties whether this
Adversary Proceeding should include the underlying 10-count complaint pending in the Connecticut
Superior Court against the Debtor and his companies. See Palmetto Surety Corp. v. Sobota, Case No.
NNI-CV-24-5017007-S (Conn. Super. Ct.). Prior to the bankruptcy filing, Palmetto had obtained a
prejudgment remedy (PJR) against the Debtor and his companies. The complaint in the Superior
Court action sounds in breach of contract, breach of the duty of good faith and fair dealing, fraud,
theft, conversion, statutory theft, breach of fiduciary duty, breach of the duty of loyalty, violation of
the Connecticut Unfair Trade Practices Act, and unjust enrichment. None of these counts arises
under the Bankruptcy Code or in a case under the Bankruptcy Code. Such may be “related to”
claims, but every count also implicates at least one nondebtor party. Wary of upsetting the status
quo vis-à-vis the PJR and concerned about the implications of citing in nondebtor parties, the Court,
upon reflection, is not inclined to encourage the combination of the counts in the Superior Court
action with this adversary proceeding. After Palmetto files its amended complaint, Palmetto and the
Debtor are directed to meet and confer to discuss a pretrial order that anticipates staying this
Adversary Proceeding so that the parties may return to state court to first try the underlying case
before returning to this Court should Palmetto then desire a nondischargeability determination. The
Court notes that, because the Debtor has received his discharge, there is no automatic stay in place.
11 U.S.C. § 362(c)(2)(C). Assuming that Palmetto makes no attempt outside of this Court to enforce
any judgment obtained in the Superior Court against the Debtor in his individual capacity, the Court
is not inclined to find a violation of the discharge injunction of 11 U.S.C. § 524 if the Superior Court
action is pursued to adjudicate the aforesaid claims and to perfect the PJR and/or any judgment lien
upon the land records or recorded with the Secretary of the State should Palmetto prevail.
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