Wiley v. Olson

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 25-1821
___________
In re: PATRICK LEE OLSON,
Debtor
MICHAEL WILEY, successor by assignment to
MCGRATH TECHNICAL STAFFING, INC. d/b/a
MCGRATH SYSTEMS,
v.
PATRICK LEE OLSON,
Appellant
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(B.C. No. 22-ap-00058)
(D.C. No. 2:24-cv-02237)
Bankruptcy Judge: Honorable Derek J. Baker
District Judge: Honorable John F. Murphy
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Submitted Under Third Circuit L.A.R. 34.1(a)
February 9, 2026
Before: CHAGARES, Chief Judge, SCIRICA* and RENDELL, Circuit Judges.
(Filed: August 3, 2026)
* The Honorable Anthony J. Scirica was unavailable to participate in the decision in this
case after submission to the merits panel. This opinion is filed by a quorum of the panel
pursuant to 28 U.S.C. § 46(d) and 3d Cir. I.O.P. 12.1(b).
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____________
OPINION**
____________
PER CURIAM
Appellant Patrick Olson convinced Michael Wiley to provide him with funds for a
business opportunity that never came to fruition. To secure the release of these funds,
Olson fabricated a contract bearing a forged signature. When the deal stalled, Wiley
demanded Olson execute a promissory note guaranteeing repayment of the funds
originally lent, plus Wiley’s expected profits. Olson executed and then defaulted on this
note, resulting in Wiley’s company, McGrath Technical Staffing, securing a nearly $3.7
million default judgment against Olson’s company, Idea IT Solutions.
The scheme drove both parties into bankruptcy. Wiley initially assessed the value
of his ownership stake in McGrath at $1 in part because he and his bank predicted the
default judgment was probably uncollectable. Wiley then had McGrath assign the default
judgment to himself and initiated an adversary proceeding in Olson’s bankruptcy,
contending the default judgment was nondischargeable under 11 U.S.C. §§ 523(a)(2) and
(a)(4) because the underlying funds were procured by fraud. The Bankruptcy Court ruled
for Wiley, and the District Court for the Eastern District of Pennsylvania affirmed.
On appeal, Olson contends his obligation to pay Wiley’s expected profits does not
arise from his initial fraud, and that Wiley’s reliance on Olson’s misrepresentations was
** This disposition is not an opinion of the full Court and pursuant to 3d Cir. I.O.P. 5.7
does not constitute binding precedent.
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not justifiable because Wiley should have discovered Olson’s scheme in the months
between the initial transaction and the execution of the note. He also contends the
District Court should have estopped Wiley from asserting his right to a default judgment
that he previously claimed was worthless. For the reasons discussed, we will affirm.
I.
Patrick Olson owned Idea IT Solutions, LLC (“Idea IT”), a value-added reseller of
enterprise software and provider of data storage and processing hardware. Michael
Wiley owned McGrath Technical Staffing (“McGrath”), a general staffing business.
Olson and Wiley developed a business relationship: Wiley, through McGrath, would
provide funding so that Olson and Idea IT could purchase hardware for his clients; Olson
would then perform the installation, and Olson and Wiley would share in the proceeds.
One such deal was to provide equipment for a company called Common Securitization
Solutions, LLC (“CSS”). Wiley agreed to provide $577,000 for the CSS deal through a
line of credit from McGrath’s bank, Centric Bank.
As a condition of releasing funds for the CSS deal, Centric Bank required a signed
contract to be assigned to it as security. But the contemplated CSS deal never
materialized, so Olson fabricated a contract between Idea IT and CSS, bearing a forged
signature purporting to be that of CSS’s Chief Operating Officer. As the project stalled,
Wiley demanded that Olson execute a promissory note in the amount of $3,687,000,
comprising $577,000 in principal for the CSS deal, a $2,426,000 “premium payment”
representing Wiley’s anticipated profits, and $684,000 in outstanding payments from
prior deals.
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Olson executed the note, which obligated Idea IT (and Olson as guarantor) to pay
monthly installments of $40,000. Idea IT made just one payment before defaulting.
In 2018, McGrath sued Olson and Idea IT in Pennsylvania court and was awarded
a $3,678,122.58 default judgment. During discovery, Wiley uncovered the forged
contract and notified Centric Bank, as well as the local police. Olson was convicted of
criminal forgery and ordered to pay $1,042,258.87 in restitution.
Wiley and McGrath filed for bankruptcy in 2020. Wiley estimated the value of his
100% ownership stake in McGrath at a nominal $1 because McGrath’s liabilities
outstripped its assets by nearly $6 million. In McGrath’s bankruptcy, Wiley assessed the
default judgment’s liquidation value at $0 because he and Centric Bank had deemed it
probably uncollectable. In November 2021, Wiley had McGrath assign the default
judgment to himself.
In 2022, Olson filed for bankruptcy. Wiley initiated the instant adversary
proceeding in Olson’s bankruptcy, seeking a determination that the default judgment is
nondischargeable. The Bankruptcy Court held an evidentiary trial in August of 2023. In
an opinion and order dated May 10, 2024, the Bankruptcy Court held that $3,003,000 of
the default judgment—representing the $577,000 of principal for the CSS deal and
$2,426,000 in premium payments—was nondischargeable. The District Court affirmed.
Olson timely appealed.
II.
This case was properly referred to a bankruptcy judge pursuant to
28 U.S.C. §§ 157(a) and (b)(2)(I). The District Court had jurisdiction under
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28 U.S.C. § 158. We have jurisdiction under 28 U.S.C. § 158(d).
III.
A creditor bears the burden of proving nondischargeability by a preponderance of
the evidence. Grogan v. Garner, 498 U.S. 279, 291 (1991). In a bankruptcy appeal, we
“exercise the same standard of review as the District Court in reviewing the Bankruptcy
Court’s determinations . . . review[ing] a bankruptcy court’s legal determinations de
novo, its factual findings for clear error, and its exercises of discretion for abuse thereof.”
In re Miller, 730 F.3d 198, 203 (3d Cir. 2013) (quotation marks & citation omitted).
The interpretation of 11 U.S.C. § 523(a)(2)(A) is a matter of law and therefore
reviewed de novo. Refusal to apply judicial estoppel is an exercise of discretion, see In
re Kane, 628 F.3d 631, 638 (3d Cir. 2010), and should therefore be upheld unless it was
“founded on an error of law or a misapplication of law to the facts,” Montrose Med. Grp.
Participating Sav. Plan v. Bulger, 243 F.3d 773, 780 (3d Cir. 2001) (quotation marks
omitted).
IV.
A.
Olson first contends the District Court erred in its interpretation of
11 U.S.C. § 523(a)(2)(A), which excepts from discharge “any debt . . . for money,
property, services, or an extension, renewal, or refinancing of credit, to the extent
obtained by . . . false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor’s or an insider’s financial condition.” On appeal, Olson
does not contest that the principal of $577,000 was obtained by fraud. However, he
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contends the premium payments are dischargeable because “[t]here is absolutely no
nexus” between them and the fraudulently obtained principal. Appellant Br. 14. And he
takes exception to the District Court’s reliance on Cohen v. de la Cruz, 523 U.S. 213
(1998), which held that Ҥ 523(a)(2)(A) prevents the discharge of all liability arising from
fraud.” Id. at 215. According to Olson, Cohen is factually distinguishable: it considered
whether § 523(a)(2)(A)’s sweep includes the award of statutorily authorized punitive
damages. The premium payments, by contrast, are a mere contractual obligation. By
concluding that this case is controlled by Cohen, the District Court treated his contractual
commitment as de facto punitive damages, without any statutory authority to do so.
Olson is correct that Cohen addressed the dischargeability of statutorily prescribed
punitive damages, but the rule it pronounces is not limited to those facts. Indeed, Cohen
consciously articulated a broad holding that transcends the case’s factual circumstances:
“We hold that § 523(a)(2)(A) prevents the discharge of all liability arising from fraud,
and that an award of treble damages therefore falls within the scope of the exception.”
Id. at 215 (emphases added). The conjunction “and” signals that both parts of this
bifurcated holding must have independent meaning. Olson’s attempt to confine Cohen to
its facts would effectively erase the first half of the holding which would be incompatible
with the Court’s framing. We give Cohen its most natural reading: § 523(a)(2)(A)
reaches all liability for money, property, services or credit arising from fraud, statutory or
otherwise.
Because Cohen controls this dispute, the only question is whether Olson’s liability
for the premium payments “aris[es] from fraud,” which it does. Id. His fabrication of the
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CSS deal led Wiley to borrow and commit hundreds of thousands of dollars in
anticipation of a significant profit. When the deal stalled, Wiley demanded a guarantee
that those profits would materialize, and Olson gave that guarantee. None of that would
have happened if not for Olson’s initial fraudulent misrepresentation. Therefore,
§ 523(a)(2)(A) plainly reaches the premium payments.
B.
Olson next faults the District Court for its failure to consider whether Wiley was
still acting in justifiable reliance on Olson’s misrepresentations at the time that the
promissory note was struck, an omission he describes as even “[m]ore significant” than
its supposed misinterpretation of Cohen. Appellant Br. 17. He contends Wiley knew, or
would have discovered through the exercise of reasonable diligence, that the venture was
failing by the time the promissory note was executed. Therefore, Wiley could not have
justifiably relied on Olson’s misrepresentations when the note was struck, and Olson’s
liability for the premium payments provided therein should not be imputed to his original
fraud. Rather, in Olson’s telling, the premium payments represented a “speculative
business risk” that Wiley entered into not as a victim, but as an active and clear-eyed
participant. Appellant Br. 19.
True, the District Court did not address this argument, but only because Olson
never presented it, and therefore forfeited it. Olson’s brief in the District Court notes that
justifiable reliance is a prerequisite for invoking § 523(a)(2)(A). See Olson Dist. Ct. Br.
15, Wiley v. Olson, 2:24-cv-2237-JFM, ECF No. 4 (July 22, 2024) (citing In re Ritter,
404 B.R. 811, 822 (Bankr. E.D. Pa. 2009)). But Olson never asserted that Wiley failed to
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satisfy this element. “To preserve a matter for appellate review, a party must
unequivocally put its position before the trial court at a point and in a manner that permits
the court to consider its merits.” Garza v. Citigroup Inc., 881 F.3d 277, 284 (3d Cir.
2018) (quotation marks omitted); see also In re Ins. Brokerage Antitrust Litig., 579 F.3d
241, 262 (3d Cir. 2009) (“A fleeting reference or vague allusion to an issue will not
suffice to preserve it for appeal.”)
“[F]orfeited arguments in civil cases are reviewable—but only in ‘truly
exceptional circumstances.’” Harbor Bus. Compliance Corp. v. Firstbase.io, Inc., 152
F.4th 516, 529 (3d Cir. 2025) (quoting Barna v. Bd. of Sch. Dirs. of Panther Valley Sch.
Dist., 877 F.3d 136, 147 (3d Cir. 2017)). There is nothing “exceptional” here that
warrants the unusual step of reviewing a forfeited argument, so we will not do so.1
C.
Finally, Olson contends both the Bankruptcy Court and District Court erred by
refusing to apply judicial estoppel. Specifically, he takes exception to Wiley previously
1 We note, however, that in determining Wiley’s reliance on Olson’s original
misrepresentations was justified, the Bankruptcy Court found “the Parties had been doing
business together for some time, Mr. Wiley testified that he had been mostly satisfied
with the deals he had done with the Debtor, and Mr. Wiley had no reason to believe the
Debtor would commit criminal forgery in connection with a deal.” App. 42. Against
these strong indicia of justifiable reliance, Olson raises only one factor to distinguish the
parties’ original deal and the promissory note: the passage of time. And, as Wiley
testified, Olson “repeatedly advised” Wiley during those intervening months that
“multiple . . . issues . . . were preventing” the CSS project from closing, creating the
appearance that the deal was merely delayed rather than fabricated. App. 30.
Considering the entire record, this Court would be hard-pressed to reverse on the thin
basis that Olson now belatedly urges, even if the argument were not forfeited.
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claiming that McGrath was worth just $1 and that the default judgment it held was
worthless, only to then assign the judgment to himself and pursue an order of
nondischargeability.
Judicial estoppel is appropriate where a party has taken “irreconcilably
inconsistent” positions and done so in bad faith, i.e. “to play fast and loose with the
court.” Montrose, 243 F.3d at 779 (quotation marks omitted). Olson’s argument for
judicial estoppel falters on the first requirement. Wiley testified at trial that McGrath’s
liabilities exceeded its assets by nearly $6 million, far more than the denomination of the
default judgment. Therefore, even if Wiley and Centric Bank had assessed—
counterfactually—that the judgment was certainly collectible and therefore worth its full
nominal value, it would not have been unreasonable (let alone inconsistent) for Wiley to
value his ownership interest in McGrath at $1. In actual fact, Wiley assessed the value of
the default judgment at $0 based on his belief, backed up by Centric Bank’s
determination, that the judgment was uncollectable. But even so, there is no logical
incompatibility between believing that an asset has no liquidation value and maintaining
that one is nonetheless entitled by law to retain it. Wiley’s pursuit of a
nondischargeability determination is not “irreconcilably inconsistent” with his earlier
valuations either of McGrath or the default judgment. Id.
V.
For the foregoing reasons, we will affirm the District Court’s determination of
nondischargeability.
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