Dottore v. Scheibal et al

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
In re: 	: 	Case No. 24-55161
Mary Ann Scheibal 	: 	Chapter 13
and 	: 	Judge Mina Nami Khorrami
Heather F. Scheibal, 	:
Debtors. 	:
:
:
Mark E. Dottore, Receiver, 	: 	Adv. Pro No. 25-02012
:
Plaintiff, 	:
:
v. 	:
:
Mary Ann Scheibal, et al., 	:
:
Defendants. 	:
OPINION AND ORDER GRANTING IN PART DEFENDANTS’ MOTION
TO DISMISS THE AMENDED COMPLAINT (DOC. 24) AS TO COUNT V OF THE
AMENDED COMPLAINT (DOC. NO. 22)
________________________________________________________________
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: May 14, 2026
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I. 	Introduction
This case presents the Court with questions regarding the reach of the recent Supreme
Court decision in Bartenwerfer v. Buckley, 598 U.S. 69, 143 S. Ct. 665, 214 L. Ed. 2d 434 (2023)
and its interplay with the Supreme Court’s prior decisions in Husky Int'l Elecs., Inc. v. Ritz, 578
U.S. 355, 136 S. Ct. 1581, 194 L. Ed. 2d 655 (2016), Bullock v. BankChampaign, N.A., 569 U.S.
267, 276, 133 S. Ct. 1754, 185 L. Ed. 2d 922 (2013), and Neal v. Clark, 95 U.S. 704, 709, 24 L.
Ed. 586 (1878). 	Here, Plaintiff, Mark E. Dottore (the “Receiver”) asserts that Bartenwerfer
permits a debtor’s liability for receiving fraudulent transfers from an alleged Ponzi scheme to be
excepted from discharge under 11 U.S.C. § 523(a)(2)(A) even if the debtors knew nothing of the
fraud and had no intent to defraud anyone. Indeed, the Receiver is not alleging that the debtors in
this case created the fraudulent scheme or that they knew they were receiving money because of
it. Instead, the Receiver claims that he is not required to plead and prove scienter of the debtors
because Bartenwerfer fundamentally changed the interpretation of § 523(a)(2)(A), so that he does
not need to allege the debtors’ knowledge of the fraud in order to state a claim.
The issue before the Court arises in the context of a motion to dismiss for failure to state a
claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure (“Civil Rules”), made applicable
to this adversary proceeding by Rule 7012(b) of the Federal Rules of Bankruptcy Procedure
(“Bankruptcy Rules”).1 On January 13, 2026, a hearing (the “Hearing”) was held on the Motion
and Response where counsel presented oral argument.2 After the Hearing, the parties were allowed
1 Motion of Defendants Mary Ann Scheibal, Heather F. Scheibal, and Scheibal Property Development, LLC to Dismiss
Amended Complaint (Doc. No. 22) (the “Motion”), Dkt. No. 24, together with the Receiver’s Response to the Motion
of Defendants Mary Ann Scheibal, Heather F. Scheibal and Scheibal Property Development, LLC to Dismiss Amended
Complaint (Doc. No. 24) (the “Response”), Dkt. No. 26, and Defendants’ Memorandum in Reply to the Response of
the Receiver to the Defendants’ Motion to Dismiss (Doc. Nos. 24 and 26) (the “Reply”), Dkt. No. 2.
2 Scott R. Belhorn and James W. Ehrman appeared on behalf of the Receiver, who was also present. 	John C.
Cannizzaro and Michael A. Cox appeared on behalf of Defendants Mary Ann Scheibal (“Mary”), Heather F. Scheibal
(“Heather”), and Scheibal Property Development, LLC (“Scheibal Property”). Mary and Heather will collectively be
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to file supplemental briefings of the issue raised by the Court. Supplemental briefing concluded
on February 12, 2026, when the Court took the matter under advisement.3
For the reasons which follow, the Motion is granted in part with respect to Count V of the
Amended Complaint, Dkt. No. 22 (the “Amended Complaint”). As to Count V, the Receiver may
file a motion for leave to amend within fourteen days of the entry of this Opinion and Order. As
to the other counts of the Amended Complaint, the Court is deferring any ruling pending
clarification by the Receiver as to whether he is still pursuing any of those claims.
II. 	Jurisdiction and Venue
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334 and the Amended
General Order 05-02 entered by the United States District Court for the Southern District of Ohio,
referring all bankruptcy matters to this Court. 	Proceedings to determine the dischargeability of
particular debts are core proceedings under 28 U.S.C. § 157(b)(2)(B) and (I).4 Venue properly lies
in this Court under 28 U.S.C. §§ 1408 and 1409.
referred to as the “Debtors,” and Mary, Heather, and Scheibal Property will collectively be referred to as the
“Defendants.” The references to Mary and Heather by their first names are intended for ease of reference and clarity
since they have the same last name. No disrespect is intended.
3 Defendants’ Supplemental Memorandum Regarding Defendants’ Motion To Dismiss Amended Complaint (Doc. No.
24) (the “Defendants’ Supplemental Memorandum”), Dkt. No. 33; Receiver’s Supplemental Brief Pursuant To Agreed
Scheduling Order Of January 26, 2026 [Doc. No. 31] (the “Receiver’s Supplemental Brief”), Dkt. No. 34. As the
Court had requested at the Hearing, the Receiver attached a Proposed Second Amended Complaint (the “PSAC”) to
the Receiver’s Supplemental Brief. Receiver’s Supp. Br. Ex. A., Dkt. No. 34.
4 To the extent that any claim asserted in the Amended Complaint could be construed as noncore, all parties have
consented to this Court’s entry of a final judgment. Pl.’s Pretrial Statement 2-3, Dkt. No. 19; Defs.’ Supp. Mem. 1,
Dkt. No. 33.
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III. 	Facts5
The Receiver was appointed in 20226 by an Ohio state court as a receiver over numerous
related entities owned and operated by Mark Dente.7 	Am. Compl. 1 n.1, Dkt. No. 22. 	The
Receivership Order granted the Receiver the authority to pursue property fraudulently transferred
from the AEM Entities. 	Am. Compl. ¶ 3. One such action filed by the Receiver was a lawsuit
against the Defendants here, an action styled Mark E. Dottore, Receiver v. Scheibal Property
Development, LLC, et al, Case No. CV-2024-08-3519. Am. Compl. ¶ 14 and Ex. 4.8 The Receiver
alleged that the Defendants had received fraudulent transfers avoidable under Ohio law and sought
to recover them. The State Court Action remained pending when the Debtors filed their chapter
13 petition on December 20, 2024 (the “Petition Date”). Am. Compl. ¶ 115.9
The Defendants invested money into, and received money from, the AEM Entities. 	In
particular, Mary received a total of $1,842,819.43 in transfers from the AEM Entities, $1,500 from
Landmark Property Development, and $134,000.00 from Mark and Sharon Dente between July
12, 2017, and January 19, 2021. Am. Compl. ¶ 22.10 Between August 30, 2018, and March 26,
2021, the AEM Entities transferred a total of $662,195.00 to Heather. Am Compl. ¶ 68. Between
5 “As this matter comes before the Court on a motion to dismiss, the Court must accept the well-pleaded allegations
in the Complaint as true. Bassett v. Nat'l Collegiate Ath. Ass'n, 528 F.3d 426, 430 (6th Cir. 2008). But in reporting the
background here based on those allegations, the Court reminds the reader that they are just that—allegations.”
Shanghai Weston Trading Co. v. Tedia Co., LLC, 707 F. Supp. 3d 737, 741 n.1 (S.D. Ohio 2023).
6 The Receiver was appointed on June 22, 2022, by the Court of Common Pleas for Summit County, Ohio in an action
styled Christopher Longo v. The AEM Services, LLC, et al., Case No. CV-2022-05-1754 (the “Receivership Action”).
Am. Compl. ¶ 1, Dkt. No. 22. A copy of the Second Amended Order Appointing Receiver (the “Receivership Order”)
was attached to the Amended Complaint. Am. Compl. Ex. 1.
7 These entities are The AEM Services, LLC, AEM Investments, LLC, AEM Wholesale, LLC, AEM Productions,
LLC, AEM Real Estate Group, LLC, AEM Capital Fund, Ltd., A&J RE Holdings, LLC, and Landmark Property
Development. These entities will collectively be referred to as the “AEM Entities.”
8 This action will be referred to as the “State Court Action” and the complaint in that case (which is attached to the
Amended Complaint as Exhibit 4) will be referred to as the “State Court Complaint.”
9 The State Court Complaint was attached to and forms the basis for the Receiver’s proof of claim filed in the Debtors’
main bankruptcy case. Am. Compl. ¶ 117
10 The Amended Complaint identifies each individual transfer by recipient, means of payment, and the account from
which the payment originated. Am. Compl. ¶¶ 23-66 (Transfers to Mary), ¶¶ 69-89 (Transfers to Heather), and ¶¶ 92-
110 (Transfers to Scheibal Property). These transfers will collectively be referred to as the “Transfers.”
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February 22, 2018, and March 9, 2022, the AEM Entities transferred a total of $628,900.68 to
Scheibal Development. Am. Compl. ¶ 91. The total amount of the Transfers was $3,133,925.11.
Am. Compl. ¶ 137. 	Further, each of the Transfers was made to or for the benefit of Mary and
Heather individually, such that each of them is liable for the full amount of the Transfers,
regardless of who received them. Am. Compl. ¶¶ 128-133. The Defendants invested money into
the AEM Entities, but no other allegations regarding the dates, amounts, or number of payments
are provided. Am. Compl. ¶¶ 20-21.
The Receiver concedes that he “has not alleged that the Defendants created the Dente/AEM
Ponzi Scheme or that they knew they was [sic] receiving money as a result of the obvious fraud of
it.” Resp. 21, Dkt. No. 26. Further, the “Receiver does not impute scienter to the Defendants, nor
must he do so, since the actual words of section 523(a)(2)(A) nowhere require it.” 	Id.. 	The
Receiver’s counsel stated at the Hearing that the Receiver had been unable to identify any
relationship between the Debtors and Mr. Dente and/or the AEM Entities beyond that of passive
investor. ECRO at 1:36:00 – 1:37:00.11
The allegations of the Receiver are that at the time of each of the Transfers, Mark Dente
was operating the AEM Entities as a Ponzi scheme and therefore made each Transfer with the
actual intent to hinder, delay, or defraud its creditors. Am. Compl. ¶ 111-12. The Ohio Department
of Commerce had alleged that the AEM Entities were operated as a Ponzi scheme. Am. Compl.
11 When citing to statements of counsel from the Hearing, the Court will cite the times provided in its Electronic Court
Reporting System (“ECRO”). On a motion to dismiss, the Court can consider and rely upon concessions by counsel
that clarify the allegations made by the plaintiff. NicSand, Inc. v. 3M Co., 507 F.3d 442, 458 (6th Cir. 2007) (en banc)
(“When a party concedes that it is not bringing a claim, however, no purpose of Rule 12(b)(6) is served by overlooking
the concession . . . The plaintiff remains the master of its complaint, and when it says that it is not bringing a predatory-
pricing claim, we should take it at its word.”). Further, although the statements of counsel are generally not evidence,
they can nonetheless be binding on that attorney’s client as concessions if made in a hearing or in a brief. JDC Mgmt.,
LLC v. Reich, 644 F. Supp. 2d 905, 929 (W.D. Mich. 2009) (citation omitted); In re Haney, 284 B.R. 841, 844 (Bankr.
N.D. Ohio 2002) (“concessions of counsel in open court are binding judicial admissions”) (citing In re Menell, 160
B.R. 524, 525 n.3 (Bankr. D.N.J. 1993)).
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¶ 10.7. David Linscott (“Mr. Linscott”), an expert witness for the Receiver, concluded in another
state court case that the AEM Entities were operated as a Ponzi scheme. Am. Compl. ¶ 12. Mr.
Linscott’s report from that case (the “Linscott Report”) is attached to the Amended Complaint.
Am. Compl. Ex. 3.
The Amended Complaint asserts six claims for relief: Count I seeks to avoid the Transfers
as fraudulent transfers under the Ohio Uniform Fraudulent Transfers Act (“OUFTA”), Ohio Rev.
Code Chapter 1336. Am. Compl. ¶¶ 121-154, Dkt. No. 22. The Amended Complaint asserts that
the transfers were made with the actual intent to hinder, delay, or defraud creditors and was
therefore fraudulent under Ohio Rev. Code § 1336.04(A)(1), and avoidable under Ohio Rev. Code
§ 1336.07(A)(1). 	Am. Compl. ¶ 122. 	The Receiver further asserts that the Transfers were
constructively fraudulent under Ohio Rev. Code § 1336.04(A)(2) and avoidable under Ohio Rev.
Code § 1336.07(A)(1). 	Am. Compl. ¶ 123. 	Count II seeks as a remedy for Count I a money
judgment for the value of the avoided Transfers under Ohio Rev. Code § 1336.08(B)(1). 	Am.
Compl. ¶¶ 125-135. 	Count III of the Amended Complaint asserts a claim that each of the
Defendants is liable to the Receiver on a theory of unjust enrichment in the amount of
$3,133,925.11. 	Am. Compl. ¶¶ 137-140. 	Count IV seeks to impose a constructive trust on the
Transfers to the extent that they remain in the possession of the Defendants. Am. Compl. ¶¶ 142-
145. Count V seeks a determination that the Debtors’ liability for the Transfers should be excepted
from the Debtors’ discharge under 11 U.S.C. § 523(a)(2)(A). Am. Compl. ¶¶ 147-151. And Count
VI seeks declaratory judgment that “(a) neither Mary nor Heather nor Scheibal Development ever
had an equitable interest in the Transfers to the Scheibals and (b) that the equitable interest in the
Transfers to the Scheibals is not “property of the estate” as that term is used in 11 U.S.C. § 541.”
Am. Compl. ¶154.
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IV. 	Procedural Background and Posture
On December 20, 2024 (the “Petition Date”), the Debtors filed a joint petition under
chapter 13 of the United States Bankruptcy Code, which was assigned case no. 24-55161. Am.
Compl. ¶¶ 19, 115. On February 5, 2025, the Receiver filed a proof of claim asserting a debt of
$3,163,918.00 based on the State Court Complaint. Am. Compl. ¶ 117. The Debtors have objected
to the Receiver’s proof of claim, disputing both liability and the amount of the claim. 2nd Am.
Obj. to Proof of Claim (the “Claim Objection”), Case No. 24-55161, Dkt. No. 61.12 On April 15,
2025, the Debtors filed an amended Chapter 13 Plan (the “Plan”). 	Chapter 13 Plan, Case No. 24-
55161, Dkt. No. 36. On July 23, 2025, the Court confirmed the Plan. Order Confirming Chapter
13 Plan and Awarding Attorney Fees, Case No. 24-55161, Dkt. No. 55.
The Motion represents the second full round of briefing on the adequacy of the Receiver’s
allegations. 	On May 7, 2025, the Defendants filed a motion to dismiss the original complaint
under Civil Rule 12(b)(6). Defs.’ Mot. to Dismiss, Dkt. No. 8. After that motion was fully briefed
but before a hearing could be held or any ruling issued, the parties agreed that the Receiver could
amend the complaint. The Amended Complaint was filed on September 5, 2025. Am. Compl.,
Dkt. No. 22. The Amended Complaint mooted the original motion to dismiss, but the Defendants
timely filed the Motion on October 3, 2025. Mot., Dkt. No. 24.
After the Hearing, the Receiver filed a Supplemental Brief as noted above. The Receiver’s
Supplemental Brief contains 	the PSAC. Receiver’s Supp. Br. Ex. A, Dkt. No. 34. 	The
Supplemental Brief explains that the PSAC “removed those claims contained in the Amended
12 At the Hearing, the Court indicated that it would hold the Claim Objection in abeyance pending the Court’s decision
on the Motion.
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Complaint filed on September 5, 2025 that the Receiver did not intend to pursue.” 	Receiver’s
Supp. Br. 1 n.1, Dkt. No. 34. 13
The PSAC would significantly modify the Amended Complaint. The PSAC asserts only a
single claim for relief under § 523(a)(2)(A). Counts I and II, seeking avoidance of the Transfers
and a money judgment for their value under the OUFTA, 	would be eliminated as standalone
claims; their substantive allegations would be incorporated into the § 523(a)(2)(A) claim to
establish the debt that the Receiver alleges is nondischargeable. Counts III (unjust enrichment),
IV (constructive trust), and VI (declaratory judgment) would be eliminated, as well as the request
for attorney’s fees in the demand for relief. Scheibal Property would no longer be a defendant in
the adversary complaint. 	The Receiver has implied that he no longer intends to pursue any of the
claims removed in the PSAC. Receiver’s Supp. Br. 1-2, Dkt. No. 34. Since the Receiver has not
explicitly stated that he is abandoning or withdrawing these claims, and he has not formally sought
leave to file the PSAC, the Amended Complaint remains the operative pleading in this proceeding
and the Court cannot consider the PSAC. But the impact of this filing will be addressed below.
The Court now turns to whether Count V states a claim for relief.
V. 	Contentions of the Parties
The Defendants assert that the Amended Complaint does not state a valid claim for relief.
As to Count V, the Debtors assert that, in the fraudulent transfer setting, nondischargeability under
§ 523(a)(2)(A) is governed not by Bartenwerfer but rather by Husky. Mot. ¶¶ 40-47, Dkt. No. 24.
And since Husky stated that liability for receiving a fraudulent transfer can only be excepted from
13 At the Hearing, when the Court requested supplemental briefing, it recommended that the Receiver consider
preparing a second amended complaint to be submitted as an attachment to the Receiver’s Supplemental Brief that
would reflect which claims the Receiver did not intend to pursue and would also reflect how he proposed to address
the Court’s concerns about the Amended Complaint with respect to those claims he did wish to pursue. ECRO 2:15:00
to 2:21:10.
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discharge if the debtor acted with fraudulent intent, the Debtors argue that Count V fails because
the Receiver does not allege that the Debtors had any intent to defraud. Id.
As to Count V, the Receiver argues that Bartenwerfer represents a fundamental change in the
interpretation of § 523(a)(2)(A). 	Resp. 4, Dkt. No. 26. 	In the Receiver’s view, Bartenwerfer
establishes a bright-line rule that the exception from discharge found in § 523(a)(2)(A) only
requires that someone must have committed actual fraud, but it need not have been the debtor, if
the debtor received money or property as a result. Resp. 4, 19-21. Finally, the Receiver requested
at the Hearing that the Court allow leave to file an amended complaint if the Court grants the
Motion.
VI. 	Legal Analysis
A. Civil Rule 12(b)(6) Standard Under Civil Rules 8 and 9(b)
A motion to dismiss under Civil Rule 12(b)(6) tests the facial sufficiency of the complaint
under Civil Rules 8 and 9(b).14 Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505,
512 (6th Cir. 2010). Two primary principles guide the Court’s review. Ashcroft v. Iqbal, 556 U.S.
662, 679, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). 	First, although the allegations of the
complaint are generally assumed to be true for purposes of a motion to dismiss, allegations that
“are no more than conclusions” are not. Id. 	Further, “a legal conclusion couched as a factual
allegation” should not be accepted as true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). 	Second, “only a complaint that states a plausible claim for
relief survives a motion to dismiss.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S.
14 Civil Rules 8 and 9 are made applicable to this adversary proceeding by Bankruptcy Rules 7008 and 7009,
respectively.
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at 678 (citation omitted). To survive a motion to dismiss, a complaint must contain “either direct
or inferential allegations” plausibly asserting “all material elements to sustain a recovery under
some viable legal theory.” Terry v. Tyson Farms, Inc., 604 F.3d 272, 275-76 (6th Cir. 2010).
In addition, since Count V asserts a § 523(a)(2)(A) claim based on actual fraud, it “must
state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
“Rule 9(b) requires that the plaintiff specify the who, what, when, where, and how of the alleged
fraud.” 	New London Tobacco Mkt., Inc. v. Ky. Fuel Corp., 44 F.4th 393, 411 (6th Cir. 2022)
(citation modified). Civil Rule 9(b) applies to § 523(a)(2)(A) complaints. Fabian v. Goss (In re
Goss), 605 B.R. 189, 198 (Bankr. S.D. Ohio 2019) (citing Bennett v. Lindsey (In re Lindsey), 733
F. App'x 190, 192 (5th Cir. 2018)).
B. Count V Fails Because The Receiver Does Not Allege That the Debtors Acted
With Intent to Defraud
“The principal purpose of the Bankruptcy Code is to grant a fresh start to the honest but
unfortunate debtor.” Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367, 127 S. Ct. 1105, 166
L. Ed. 2d 956 (2007) (citation modified). 	“Chapter 13 of the Code permit[s] an insolvent
individual to discharge certain unpaid debts toward that end.” Id.15 	But the discharge is not
unlimited. 	Section 523(a) sets forth several exceptions to the discharge. 	These discharge
exceptions apply “to circumstances where strong, special policy considerations, such as the
presence of fault, argue for preserving the debt, thereby benefiting, for example, a typically more
honest creditor.” Bullock v. BankChampaign, N.A., 569 U.S. 267, 276, 133 S. Ct. 1754, 185 L. Ed.
2d 922 (2013). 	Exceptions to discharge are “disfavored.” MarketGraphics Rsch. Grp., Inc. v.
15 In chapter 13, the discharge is not granted until the debtor completes the chapter 13 plan, unless the Court finds that
there is cause to issue a hardship discharge before plan completion. 11 U.S.C. § 1328(a), (b). Neither the regular
discharge nor the hardship discharge will discharge a debt of the kind specified in § 523(a)(2). 	See 11 U.S.C.
§ 1328(a), (c)(2).
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Berge (In re Berge), 953 F.3d 907, 920 (6th Cir. 2020). And they are “strictly construed against
the creditor.” Pazdzierz v. First Amer. Title Ins. Co. (In re Pazdzierz), 718 F.3d 582, 586 (6th Cir.
2013) (quoting Rembert v. AT&T Universal Card Servs. (In re Rembert), 141 F.3d 277, 281 (6th
Cir. 1998)). One such exception to the discharge is at issue here – the exception in § 523(a)(2)(A)
for “false pretenses, a false representation or actual fraud.”
1. 	The “Actual Fraud” Exception to Discharge under § 523(a)(2)(A)
Section 523(a)(2)(A) excepts from the discharge a debt “(2) for money, property, services,
or an extension, renewal, or refinancing of credit, to the extent obtained by—(A) false pretenses,
a false representation, or actual fraud . . . .” 11 U.S.C. § 523(a)(2)(A). The Receiver appears to be
asserting liability under the “actual fraud” portion of § 523(a)(2)(A). The Supreme Court has held
that “actual fraud” includes frauds that can be accomplished without a false representation that
induced reliance by the creditor. 	Husky Int'l Elecs., Inc. v. Ritz, 578 U.S. 355, 360, 136 S. Ct.
1581, 1586, 194 L. Ed. 2d 655, 662 (2016). “The word ‘actual’ has a simple meaning in the context
of common-law fraud: It denotes any fraud ‘that involves moral turpitude or intentional wrong.’”
Id. (quoting Neal v. Clark, 95 U.S. 704, 709, 24 L.Ed. 586 (1878) (citation modified)). 	“Thus,
anything that counts as ‘fraud’ and is done with wrongful intent is ‘actual fraud.’” 	Husky, 578
U.S. at 360.
2. 	Husky Requires That the Debtors Themselves Had Intent to Defraud
One type of “actual fraud” that can be accomplished without a misrepresentation is a
fraudulent transfer. 	Husky, 578 U.S. at 364. 	Under fraudulent transfer law in Ohio, only the
transferor’s intent determines whether a transfer is fraudulent. Ohio Rev. Code § 1336.04(A)(1);
Profeta v. Lombardo, 600 N.E. 2d 360, 363 (Ohio Ct. App. 1991); Bash v. Textron Fin. Corp., 524
B.R. 745, 756 (N.D. Ohio 2015). 	But Husky holds that if the recipient of a fraudulent transfer
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subsequently files for bankruptcy, the dischargeability of the debtor’s liability for receiving the
transfer is determined by whether the debtor received the transfer with fraudulent intent:
It is of course true that the transferor does not “obtain” debts in a fraudulent
conveyance. But the recipient of the transfer—who, with the requisite intent, also
commits fraud —can “obtain” assets “by” his or her participation in the fraud. See,
e.g., McClellan v. Cantrell, 217 F.3d 890 (C.A.7 2000); see also supra, at 1587 –
1588. If that recipient later files for bankruptcy, any debts “traceable to” the
fraudulent conveyance . . . will be nondischargeable under § 523(a)(2)(A). Thus, at
least sometimes a debt “obtained by” a fraudulent conveyance scheme could be
nondischargeable under § 523(a)(2)(A). Such circumstances may be rare because a
person who receives fraudulently conveyed assets is not necessarily (or even likely
to be) a debtor on the verge of bankruptcy, but they make clear that fraudulent
conveyances are not wholly incompatible with the “obtained by” requirement.
578 U.S. at 365 (citation modified). 	That Husky requires that the debtor act with the intent to
defraud is confirmed by the two cases on which it relied. See Husky, 578 U.S. at 364-65 (citing
Neal, 95 U.S. at 549, and McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000)).
Neal established the general rule that the fraud exception to discharge requires that the
debtor committed “positive fraud, or fraud in fact, involving moral turpitude or intentional wrong.”
Neal, 95 U.S. at 709. Although Neal was decided in 1878, its principles have continued to apply
even after the adoption of the Bankruptcy Code in 1978. See, e.g., Tower Credit, Inc. v. Gauthier
(In re Gauthier), 349 F. App’x 943, 945 (5th Cir. 2009); Turney v. Vulaj (In re Vulaj), 651 B.R.
310, 315 (Bankr. S.D. Cal. 2023); McGrath v. McGrath (In re McGrath), 166 B.R. 795, 798
(Bankr. E.D.N.Y. 1994). Indeed, in 2013, the Supreme Court unanimously reaffirmed and relied
upon Neal as the basis for holding that “defalcation” in § 523(a)(4) also requires that the debtor
act with a culpable state of mind:
We base our approach and our answer upon one of this Court’s precedents.
In 1878, this Court interpreted the related statutory term “fraud” in the portion of
the Bankruptcy Code laying out exceptions to discharge. Justice Harlan wrote for
the Court:
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“[D]ebts created by ‘fraud’ are associated directly with debts created by
‘embezzlement.’ Such association justifies, if it does not imperatively require, the
conclusion that the ‘fraud’ referred to in that section means positive fraud, or fraud
in fact, involving moral turpitude or intentional wrong, as does embezzlement; and
not implied fraud, or fraud in law, which may exist without the imputation of bad
faith or immorality.”
Bullock v. BankChampaign, N.A., 569 U.S. 267, 276, 133 S. Ct. 1754, 185 L. Ed. 2d 922 (2013)
(quoting Neal, 95 U.S. at 709).
In Strang v. Bradner, 114 U.S. 555, 561, 5 S. Ct. 1038, 29 L. Ed. 248 (1885), the court
ruled that an exception to Neal existed when the fraud was committed by a partner of the debtor.
Strang held that principles of partnership and agency law required the fraud of one partner to be
treated as the fraud of all, regardless of whether the debtor had engaged in any wrongdoing. Id.
Thus, over the following decades, the rule evolved that “a debt may be nondischargeable when the
debtor personally commits fraud or when actual fraud is imputed to the debtor under agency
principles.” Owens v. Miller (In re Miller), 276 F.3d 424, 429 (8th Cir. 2002); Hoffend v. Villa (In
re Villa), 261 F.3d 1148, 1152 (11th Cir. 2001); Tower Credit, Inc. v. Gauthier (In re Gauthier),
349 F. App'x 943, 945 (5th Cir. 2009).
In McClellan, the other case relied upon by Husky, the Seventh Circuit explicitly stated
that if the debtor is “innocent—if she had no intention of hindering any creditor,” her debt for
receiving a fraudulent transfer “would not have been obtained by her by actual fraud” and would
therefore be dischargeable. 	217 F.3d at 894. 	Conversely, where the debtor has the intent to
defraud, such that she was “a full and equal participant in her brother's fraud” when receiving
fraudulent transfers, her debt is nondischargeable. 	Id. at 894-95. 	This point was critical in
McClellan – it recognized that if the debtor was innocent, the debt was dischargeable. But if the
debtor had fraudulent intent, then allowing the debtor to discharge the resulting debt for receiving
a fraudulent conveyance would turn “bankruptcy into an engine for fraud.” Id. at 893. Given that
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McClellan placed critical importance on the debtor’s own intent to defraud, Husky’s approving
citation to McClellan demonstrates that Husky requires that the debtor herself had to act with intent
to defraud.
Consistent with Neal and McClellan, in the wake of Husky, courts have overwhelmingly
found that a § 523(a)(2)(A) action against a debtor who received a fraudulent transfer requires
proof that the debtor acted with intent to defraud. 	One example that is closely on point comes
from this district. Nationwide Judgment Recovery, Inc. v. Holtz (In re Holtz), Adv. Pro. No. 20-
01043, 2021 WL 5596413, at *7 (Bankr. S.D. Ohio Nov. 17, 2021). Like this case, Holtz involved
a debtor who was alleged to have received fraudulent transfers from a Ponzi scheme. Holtz held
that “the Court in Husky reiterated that the ‘actual fraud’ prong of § 523(a)(2)(A) retains the
requirement that the debtor act with intent to effectuate the fraud.” 2021 WL 5596413, at *7 (citing
Husky, 578 U.S. at 360). Therefore, in order to prove a § 523(a)(2)(A) claim, “Plaintiff must show
more than that Defendant was the recipient of a fraudulent transfer. 	As clarified in Husky, the
Plaintiff must also show that the Defendant committed fraud in receiving the transfer, and did so
with the requisite fraudulent intent.” Holtz, 2021 WL 5596413, at *7 (citing Husky, 578 U.S. at
360).
Many other courts have reached the same conclusion. In addition to the Seventh Circuit in
McLellan, this includes the First, Eighth, and Ninth Circuits. Dewitt v. Stewart (In re Stewart),
948 F.3d 509, 527 (1st Cir. 2020) (“the claimant must demonstrate that the debtor’s underlying
conduct involved moral turpitude or intentional wrong”) (citation modified); Lariat Cos. v. Wigley
(In re Wigley), 15 F.4th 1208, 1212-13 (8th Cir. 2021) (“The transferee's intent must involve moral
turpitude or intentional wrong.”) (citation modified); Bonnett v. Moirbia Scottsdale, LLC, 860 F.
App’x 473, 475 (9th Cir. 2021) (“The issue in this proceeding is whether Bonnett received the
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conveyances with the intent required to commit actual fraud herself.”). It Likewise, at least half a
dozen other bankruptcy courts considering the same Ponzi scheme as was before the court in Holtz
have reached the same conclusion.16 The Receiver has not cited, and the Court could not locate,
even a single case holding that Husky does not require that the debtor received an avoidable transfer
with fraudulent intent when determining the dischargeability of a debt.
Thus, before Bartenwerfer, this would have been an easy case: given the Receiver’s
concession that he does not allege the Debtors had any knowledge of the fraudulent scheme or
intent to defraud, and the absence of any allegation of a partnership or agency, Count V does not
allege a plausible § 523(a)(2)(A) claim under Husky, Bullock, Neal, and their progeny. The Court
now considers the impact of Bartenwerfer.
3. 	Bartenwerfer Does Not Alter The Outcome
The Receiver asserts that Bartenwerfer “represents a sea change in how courts are required
to interpret section 523(a)(2)(A).” Resp. 4, Dkt. No. 26. 	In the Receiver’s view, Bartenwerfer
“overturned decades of lower court holdings that narrowly construed section 523(a)(2)(A).” Resp.
4, Dkt. No. 26. 	The Court, however, is not convinced and concludes that the Receiver has
overstated Bartenwerfer’s impact.
16 Holtz was one of numerous § 523(a)(2)(A) actions brought around the country against investors in what was known
as the ZeekRewards Ponzi scheme, where the court overseeing the liquidation of the Ponzi scheme had ruled in a
consolidated proceeding that ZeekRewards was a Ponzi scheme, and that all of those who received more than they
had invested into the scheme had received fraudulent transfers. Bell v. Disner, No. 3:14CV91, 2016 WL 7007522
(W.D.N.C. Nov. 29, 2016), aff'd, 731 F. App'x 239 (4th Cir. 2018). Some of the defendants eventually filed for
bankruptcy and numerous cases were decided regarding whether the liability under Bell was dischargeable under §
523(a)(2)(A). All of them hold that Husky requires that it must be proven that the debtor had fraudulent intent. Holtz,
2021 WL 5596413, at *7; Nationwide Judgment Recovery, Inc. v. Sheppard (In re Sheppard), Adv. Pro. No. 20-00135-
5-DMW, 2022 WL 598323, at *4 (Bankr. E.D.N.C. Feb. 28, 2022); Nationwide Judgment Recovery, Inc. v. Tyndall
(In re Tyndall), Nos. 23-02014-5-JNC, 23-00094-5-JNC, 2024 WL 973469, at *11 (Bankr. E.D.N.C. Mar. 6, 2024);
Nationwide Judgment Recovery, Inc. v. Grimaldo (In re Grimaldo), Adv. No. 20-1076-t, 2021 WL 3716393, at *4
(Bankr. D.N.M. Aug. 20, 2021); Nationwide Judgement Recovery, Inc. v. Sorrells (In re Sorrells), 644 B.R. 158, 168-
69 (Bankr. E.D. Tex. 2022); Nationwide Judgment Recovery, Inc. v. Reefe (In re Reefe), 638 B.R. 834, 844 (Bankr.
S.D. Fla. 2022); Nationwide Judgment Recovery, Inc. v. Geredine (In re Geredine), 632 B.R. 502, 506 (Bankr. E.D.
Mich. 2021).
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Bartenwerfer involved a couple who had formed a legal partnership for the renovation and
resale of their home. Prior to the wife’s bankruptcy, a state court had found that the husband had
defrauded the buyer by concealing known defects, and that the wife was liable for that fraud under
principles of partnership law. When the wife filed for bankruptcy, she argued that her debt was
dischargeable because she had no intent to defraud and in fact was unaware of the fraud. But the
Supreme Court held that since California’s law of partnership and agency imputes the fraud of one
partner to the other partners, the husband’s fraud was sufficient to trigger § 523(a)(2)(A).
Bartenwerfer noted that Strang had clarified the imputation question in 1885. “The fraud
of one partner, we explained, is the fraud of all because ‘[e]ach partner was the agent and
representative of the firm with reference to all business within the scope of the partnership.’”
Bartenwerfer, 598 U.S. at 80 (quoting Strang, 114 U.S. at 561). 	Although the debtor in
Bartenwerfer argued that subsequent evolution of the fraud discharge exception through the
Bankruptcy Act of 1898 and the current Bankruptcy Code, adopted in 1978 meant that Strang
should be discarded, the Supreme Court disagreed. In fact, Bartenwerfer stated that the “linchpin”
of its analysis was that changes to the fraud discharge provision after Strang indicated that
Congress approved of Strang. 598 U.S. at 80-81.
Bartenwerfer used certain broad statements in the course of rejecting the debtor’s
arguments. For example, Bartenwerfer stated that Ҥ 523(a)(2)(A) turns on how the money was
obtained, not who committed fraud to obtain it.” 598 U.S. at 72. And it stated that the “passive
voice pulls the actor off the stage.” 	Id. at 76. 	Taken out of context and in isolation, these
statements do lend some support to the Receiver’s position. 	The Receiver relies on these
statements to support his argument that Bartenwerfer “overturns decades of lower court holdings
that narrowly construed section 523(a)(2)(A).” Resp. 4, Dkt. No. 26. Viewed in context, however,
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these statements do not extend Bartenwerfer beyond the issue before the Supreme Court, which
was to consider the Ninth Circuit’s holding that “a debtor who is liable for her partner’s fraud
cannot discharge that debt in bankruptcy, regardless of her own culpability.” Bartenwerfer, 598
U.S. at 74. As the Supreme Court noted, the lower courts disagreed that § 523(a)(2)(A) permits
fraud to be imputed under principles of agency and partnership. 	598 U.S. at 74 n.1 (collecting
cases).
Several principles support this conclusion. 	For one thing, the Supreme Court’s “usual
practice of deciding no more than is necessary to dispose of the case before us” suggests that
Bartenwerfer’s scope is limited to the partnership and agency context. United States v. Stauffer
Chem. Co., 464 U.S. 165, 174, 104 S. Ct. 575, 78 L.Ed.2d 388 (1984). And the Supreme Court
“has often cautioned that general language in judicial opinions should be read as referring in
context to circumstances similar to the circumstances then before the Court and not referring to
quite different circumstances that the Court was not then considering.” Olivier v. City of Brandon,
607 U.S. ___, 146 S. Ct. 916, 925-26, 224 L. Ed. 2d 387 (2026). Nothing in Bartenwerfer suggests
that the Supreme Court was considering anything other than the ongoing validity of Strang’s
imputation of fraud to an innocent partner under partnership and agency principles.
Moreover, other courts considering the scope of Bartenwerfer have widely ruled that
Bartenwerfer applies only where the law of partnership or agency would impute the fraud of one
actor to the debtor. Auction Credit Enters., LLC v. Desouza (In re Desouza), 659 B.R. 288, 297-
98 (Bankr. E.D. Tex. 2024) (“This Court therefore understands Bartenwerfer to require the Court
to find some form of partnership or agency under state law in order to hold Defendant responsible
for the nondischargeable fraud of another under § 523(a)(2)(A).”); Kuns Northcoast Sec. Ctr. LLC
v. Sharp (In re Sharp), Adv. Pro. No. 22-03039, 2024 WL 2819674, at *10-12 (Bankr. N.D. Ohio
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June 3, 2024) (“The Kuns Affidavit shows no facts that would make Defendant and Mrs. Sharp
partners or agents of one another under Ohio law to bring this case within the rationale of
Bartenwerfer with respect to Plaintiff's claim under § 523(a)(2)(A).”); Turney v. Vulaj (In re
Vulaj), 651 B.R 310, 315 (Bankr. S.D. Cal. 2023).17
This limitation on Bartenwerfer’s scope is consistent with how Strang was interpreted
before Bartenwerfer. Courts interpreting Neal and Strang found that they were readily compatible:
Neal stated the general rule that the debtor’s own fraud is required, but Strang provided an
exception. “[A] debt may be nondischargeable when the debtor personally commits fraud or when
actual fraud is imputed to the debtor under agency principles.” Owens v. Miller (In re Miller), 276
F.3d 424, 429 (8th Cir. 2002); see also Hoffend v. Villa (In re Villa), 261 F.3d 1148, 1152 (11th
Cir. 2001); Tower Credit, Inc. v. Gauthier (In re Gauthier), 349 F. App'x 943, 945 (5th Cir. 2009).
But courts steadfastly resisted expanding this principle beyond the formal partnership or agency
context. Id. at 945-46 (collecting cases).; see also First Am. Title Ins. Co v. Gaskill (In re Gaskill),
480 B.R. 291, 304 n.13 (Bankr. W.D. Mich. 2012).
In addition, interpreting Bartenwerfer to apply outside the partnership and agency context
here would bring it into conflict with Husky. Applying Bartenwerfer here would require the Court
to conclude that Bartenwerfer overruled Husky by implication, but the Supreme Court did not
overturn Husky in Bartenwerfer. 	Only the Supreme Court may overrule its own decisions.
Mallory v. Norfolk S. Ry., 600 U.S. 122, 136, 143 S. Ct. 2028, 216 L.Ed.2d 815 (2023).
Bartenwerfer did not expressly overrule, limit, or modify Husky, and lower courts are not to
17 There are many more decisions. See, e.g., Indus. Dev. Auth. of the Town of Front Royal and the Cnty. of Warren,
Va. v. Poe (In re Poe), AP No. 21-01032-KHK, 2023 WL 4359972, at *5 (Bankr. E.D. Va. July 5, 2023); Lavender
v. Bortz (In re Bortz), Adversary No. 23-3052, 2025 WL 1428161, at *13 (Bankr. S.D. Tex. May 16, 2025); Mercer
v. Lee (In re Lee), Nos. 22-70367-reg, 22-08045-reg, 2024 WL 1261790, at *12 (Bankr. E.D.N.Y. Mar. 25, 2024);
Commercial Bank v. Colquitt (In re Colquitt), Adv. Pro. No. 21-3010-JPS, 2023 WL 2361103, at *8 (Bankr. M.D.
Ga. Mar. 2, 2023). These cases undermine the Receiver’s assertion at the Hearing that Bartenwerfer is such a new
decision that there has not been time for decisions supporting his view. ECRO 2:05:00 to 2:06:00.
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determine that the Supreme Court overruled a prior precedent by implication. Agostini v. Felton,
521 U.S. 203, 207, 117 S. Ct. 1997, 138 L. Ed. 2d 391 (1997). “As this Court has explained: ‘If a
precedent of this Court has direct application in a case,’ . . . a lower court ‘should follow the case
which directly controls, leaving to this Court the prerogative of overruling its own decisions.’”
Mallory, 600 U.S. at 136 (quoting Rodriguez de Quijas v. Shearson/American Express, Inc., 490
U.S. 477, 484, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989)). “This is true even if the lower court
thinks the precedent is in tension with some other line of decisions.” Mallory, 600 U.S. at 136
(citation modified). Interpreting this guidance, the Sixth Circuit has made clear how lower courts
are to proceed in this situation. “Happily, the Supreme Court has told us what to do in a case like
this. We are to leave to that Court the task of ironing out any doctrinal tensions we might perceive
and ‘follow the case which directly controls.’” United States v. Sharp, 40 F.4th 749, 757 (6th Cir.
2022) (quoting Agostini, 521 U.S. at 207).
Thus, the Court considers Husky to apply. 	Husky tells the Court how to analyze a
§ 523(a)(2)(A) claim arising out of a debtor’s receipt of a fraudulent transfer from a third party –
the exact claim asserted in Count V of the Amended Complaint. Bartenwerfer, in contrast, tells
the Court how to analyze a § 523(a)(2)(A) claim arising in the context of the fraud of a partner or
agent of the debtor. Bartenwerfer did not overrule, limit, modify, or even mention Husky. Since
the Amended Complaint presents a § 523(a)(2)(A) claim arising out of the Debtors’ receipt of
allegedly fraudulent transfers, Husky is the case which directly controls here. Thus, the Court must
follow Husky. And as set forth above, Husky requires that the Debtors here had fraudulent intent.
As a fallback argument, the Receiver suggests that Bartenwerfer should be viewed as
establishing a broad rule that § 523(a)(2)(A) applies anytime nonbankruptcy law would impose
liability upon the debtor that is related in some manner to someone else’s fraud. 598 U.S. at 82
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(“It also bears emphasis . . . that § 523(a)(2)(A) does not define the scope of one person’s liability
for another’s fraud. That is the function of the underlying law—here, the law of California.”).
Thus, the Receiver argues that the OUFTA operates by imputing the transferor’s fraud to the
transferee just as did California’s partnership law in Bartenwerfer. The Receiver, however, does
not point to anything in the OUFTA that suggests that transferee liability is based upon imputation
of the transferor’s fraud in the manner of partnership and agency law. The mere fact that a state
law imposes liability upon the debtor does not mean that the debt is automatically excepted from
discharge. Rather, the debt must fall within the “actual fraud” requirement of § 523(a)(2)(A) for
the Receiver to prevail. And only this Court can make that determination. Long v. Piercy (In re
Piercy), 21 F.4th 909, 918 (6th Cir. 2021) (“dischargeability is a legal conclusion within the
exclusive jurisdiction of the bankruptcy courts.”) (citation omitted).
Principles of imputation and vicarious liability act by deeming the conduct of one partner
to be the conduct of all partners. “The fraud of one partner . . . is the fraud of all” because each
partner is the agent of the other, and therefore each partner is treated as though they had personally
committed the fraud. Bartenwerfer, 598 U.S. at 82. The same is true under Ohio law. See, e.g.,
State ex rel. Sawicki v. Lucas Cnty. Court of Common Pleas, 931 N.E.2d 1082, 1088 (Ohio 2010)
(“the doctrine of respondeat superior operates by imputing to the employer the acts of the
tortfeasor, not the tortfeasor's liability.”) (emphasis added) (citations omitted). 	The OUFTA
contains no suggestion that the liability of a transferee for an avoided transfer works this way. The
OUFTA’s operative provision, Ohio Rev. Code § 1336.08(B), simply provides that if a transfer is
avoided, the court may award a money judgment against the transferee.18 It says nothing about
18 Ohio cases interpreting OUFTA have made clear that it is distinct from the common law of fraud. City of Springfield
v. Palco Inv. Co., 992 N.E.2d 1194, 1203 (Ohio Ct. App. 2013) (“The Ohio Supreme Court, however, has recognized
that claims of fraudulent conveyance and common law fraud are not the same.” (citing Wagner v. Galipo, 553 N.E.2d
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the fraud of the transferor being deemed to be the fraud of the transferee, nor does it create anything
like an implied agency or partnership relationship.
Turney v. Vulaj (In re Vulaj), 651 B.R. 310, 314-15 (Bankr. S.D. Cal. 2023), confirms this
analysis. It rejected imputation between transferor and transferee under California’s version of the
Uniform Fraudulent Transfer Act, which is substantially similar to the OUFTA.19 In Vulaj, the
610, 613 (Ohio 1990))); Carter-Jones Lumber Co. v. Denune, 725 N.E.2d 330, 333 (Ohio Ct. App. 1999) (“Comparing
the elements of common law fraud with the statutory action of fraudulent transfer, it is immediately apparent that the
causes bear very little relation to one another.”).
19 Despite some minor differences in phrasing, the statute imposing liability in Vulaj, Cal. Civ. Code § 3439.08(b),
does not differ in any material way from Ohio Rev. Code § 1336.08(B). Each provision states that where an avoidable
transfer is demonstrated, one remedy available to the plaintiff is a money judgment against the recipient for the value
of the property transferred.
Cal. Civ. Code § 3439.08 provides as follows:
(b) To the extent a transfer is avoidable in an action by a creditor under paragraph (1) of subdivision
(a) of Section 3439.07, the following rules apply:
(1) Except as otherwise provided in this section, the creditor may recover judgment for the
value of the asset transferred, as adjusted under subdivision (c), or the amount necessary to
satisfy the creditor’s claim, whichever is less. The judgment may be entered against the
following:
(A) The first transferee of the asset or the person for whose benefit the transfer was made.
(B) An immediate or mediate transferee of the first transferee, other than either of the
following:
(i) A good faith transferee that took for value.
(ii) An immediate or mediate good faith transferee of a person described in clause (i).
(2) Recovery pursuant to paragraph (1) of subdivision (a), or subdivision (b), or subdivision (c)
of Section 3439.07 of or from the asset transferred or its proceeds, or other property of the
transferee, as applicable, by levy or otherwise, is available only against a person described in
subparagraph (A) or (B) of paragraph (1).
(c) If the judgment under subdivision (b) is based upon the value of the asset transferred, the
judgment shall be for an amount equal to the value of the asset at the time of the transfer, subject to
adjustment as the equities may require.
Ohio Rev. Code § 1336.08 provides as follows:
(B)(1) Except as otherwise provided in this section, to the extent a transfer is voidable in an action
by a creditor or a child support enforcement agency under division (A)(1) of section 1336.07 of the
Revised Code, the creditor or agency may recover a judgment for the value of the asset transferred,
as adjusted under division (B)(2) of this section, or the amount necessary to satisfy the claim of the
creditor or agency, whichever is less. The judgment may be entered against either of the following:
(a) The first transferee of the asset or the person for whose benefit the transfer was made;
(b) Any subsequent transferee other than a good faith transferee who took for value or from
any subsequent transferee.
(2) If the judgment under division (B)(1) of this section is based upon the value of the asset
transferred, the judgment shall be in an amount equal to the value of the asset at the time of the
transfer, subject to adjustment as the equities may require.
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debtor’s husband had transferred significant funds to the debtor. The husband’s first wife, who
was owed a substantial debt for child support, alleged that this was a fraudulent transfer, and a
state court had agreed and entered judgment against the debtor. When the debtor filed chapter 7,
the creditor asserted that the debtor’s liability for receiving the fraudulent transfer was
nondischargeable under § 523(a)(2)(A). The creditor argued that Bartenwerfer eliminated the need
for the creditor to show that the debtor received the transfer with the intent to defraud. The court
held that Bartenwerfer did not apply, because the fraudulent transfer liability of the transferee is a
distinct and independent liability from the debt of the transferor and is not based upon imputation.
“Vulaj is not being held liable for Josh's debt, which was obtained by fraud, but for her own
different role in the transfers.” Vulaj, 651 B.R. at 315. The court concluded that, under California
fraudulent transfer law, “Vulaj's liability to Eva is different from that of Josh's liability, regarding
both the critical intent element and their different roles in the transaction.” Id. (citing Cal. Civ.
Code § 3439.08(b)). Since the debtor’s debt was a “different” debt, the plaintiff had to prove the
debtor’s wrongful intent to prevent the debt from being discharged. 651 B.R. at 315 (citing Husky,
578 U.S. at 365).
Courts considering other statutes imposing liability related to the fraud of another have
refused to apply imputation under § 523(a)(2)(A) even when considering statutes that imposed
liability “akin to agency liability in some respects.” Hoffend v. Villa (In re Villa), 261 F.3d 1148,
1152-53 (11th Cir. 2001); Owens v. Miller (In re Miller), 276 F.3d 424, 429 (8th Cir. 2002). These
courts considered whether liability under § 20(a) of the Securities Exchange Act of 1934, 15
U.S.C. § 78t(a), which imposes liability upon a “control person” for securities fraud committed by
a corporate employee, could be imputed to a debtor under § 523(a)(2)(A). The courts concluded
that the statute reached beyond situations where partnership or agency law would apply and
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therefore declined to apply imputation under Strang. Villa, 261 F.3d at 1152-53; Miller, 276 F.3d
at 429 (“We agree with the Eleventh Circuit that Strang should not be extended beyond its basis
in agency law to include the much broader sweep of § 20(a) liability.”). Miller and Villa involved
a statute with a much stronger basis for imputation than the OUFTA, because a transferee’s liability
under the OUFTA is not “akin to” agency liability. If that statutory liability for the fraud of another
was not imputed in Villa and Owens, there is even less basis to impute fraud here.
As a last resort, the Receiver makes an appeal to equity, asserting that the “real victims”
are those who lost money investing in the Dente/AEM Ponzi scheme. Receiver’s Supp. Br. 12,
Dkt. No. 34 (“Permitting the Debtors to discharge their obligation to repay their net winnings
would be inequitable to the Defrauded Losing Investors.”). The Court is sympathetic to the victims
of the Dente/AEM Ponzi scheme, but the Court does not have the “equitable power to disregard
the Code's provisions when they lead to results that seem unfair.” Smith v. U.S. Bank, N.A. (In re
Smith), 999 F.3d 452, 456 (6th Cir. 2021) (citing Law v. Siegel, 571 U.S. 415, 421, 134 S. Ct.
1188, 188 L. Ed. 2d 146 (2014)). Because § 523(a)(2)(A) does not apply here unless the Debtors
committed fraud, and the Receiver disclaims any allegation that the Debtors committed fraud, that
is the end of the inquiry.
Therefore, to assert a § 523(a)(2)(A) claim, the Receiver must plausibly allege either that
the Debtors received the Transfers with the intent to defraud, or that they were in a partnership or
agency relationship with Mr. Dente and/or the AEM Entities such that his intent to defraud could
be imputed to them. The Receiver concedes that he “has not alleged that the Defendants created
the Dente/AEM Ponzi Scheme or that they knew they was [sic] receiving money as a result of the
obvious fraud of it.” Resp. 21, Dkt. No. 34. And the Amended Complaint does not allege that the
Defendants were in a partnership or agency relationship with Mr. Dente or the AEM Entities such
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that Mr. Dente’s alleged intent to defraud could be imputed to them. 	Therefore, the Amended
Complaint does not plausibly allege a material element under § 523(a)(2)(A), and therefore Count
V must be dismissed.
4. 	The Receiver’s Request for Leave to Amend and Proposed Second Amended
Complaint
At the Hearing, the Receiver requested that if the Court grants the Motion, that he be
allowed leave to amend. The Defendants opposed that request, pointing to the fact that they filed
and fully briefed a motion to dismiss the original complaint, such that the Receiver has already
had one opportunity to amend in light of the Defendants’ arguments. The Receiver attached the
PSAC to his Supplemental Brief to allow the Court and the Defendants to evaluate his request for
leave to amend. Receiver’s Supp. Br. Ex. A, Dkt. No. 34.
Leave to amend after a motion to dismiss is granted should be freely given. 	Greer v.
Strange Honey Farm, LLC, 114 F.4th 605, 617 (6th Cir. 2024). Indeed, as the Court stated at the
Hearing, its general inclination is to allow leave to amend, although it noted that, given the prior
amendment of the complaint, any further amendment would be the last. ECRO 2:15:00 – 2:17:00.
But leave to amend may be denied for reasons “such as undue delay, bad faith or dilatory motive
on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of allowance of the amendment, futility of
amendment, etc.” Skatemore, Inc. v. Whitmer, 40 F.4th 727, 737 (6th Cir. 2022) (citation
modified). The Court has the discretion to require a motion for leave together with the proposed
amendment. Islamic Ctr. of Nashville v. Tenn., 872 F.3d 377, 387 n.7 (6th Cir. 2017). This is so
the Court does not have to “engage in a guessing game” as to how the amendment salvages the
dismissed claim. 	Id. (citation modified). 	Accordingly, should the Receiver still wish to pursue
leave to amend regarding Count V of the Amended Complaint, he shall file a motion for leave to
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file the PSAC as the operative complaint. The Receiver shall address the considerations set forth
in Skatemore, 40 F.4th at 737 – including, but not limited to, whether the proposed amendment
would be futile considering the Court’s rulings on the Motion.
And, as noted above, the Receiver’s Supplemental Brief suggests that the Receiver has
decided not to pursue Counts I and II as standalone claims, and that he has decided not to pursue
Counts III, IV, and VI at all. Receiver’s Supp. Br. 1-2 and Ex. A. Normally the Court may treat
a claim omitted from an amended complaint as abandoned. 	Kolling v. Am. Power Conversion
Corp., 347 F.3d 11, 16 (1st Cir. 2003). But the PSAC is not an operative pleading. The Court is
reluctant to treat Counts I-IV and VI of the Amended Complaint as formally abandoned without a
definitive statement from the Receiver to that effect. This is particularly true where it is unclear
whether those claims would be withdrawn with or without prejudice. Accordingly, to the extent
that the Receiver believes that any of the remaining counts of the Complaint remain for
adjudication by the Court, he may raise that issue in any motion for leave to amend that he may
file (or, if he determines not to file a motion for leave to amend, he may file a motion setting forth
what issues he believes are still ripe for the Court to consider). Any such motions shall be filed
within the time set forth below.
VII. 	Conclusion
For all these reasons, the Motion is granted in part with respect to Count V of the Amended
Complaint and is otherwise held in abeyance. 	As to Count V of the Amended Complaint, the
Receiver may file a motion for leave to amend to show how the PSAC attached to his Supplemental
Brief states a claim for relief. As to Counts I-IV and VI, the Receiver may include in his motion
for leave to amend a request for the Court to address the Motion as it pertains to any of those
counts which the Receiver still intends to pursue.
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Any motions filed under the preceding paragraph shall be filed within fourteen (14)
days of the entry of this Opinion and Order.20 If no such motions are timely filed, the Court
may enter a final judgment of dismissal without further notice or hearing.
IT IS SO ORDERED.
Copies to:
John C. Cannizzaro
Matthew L. Fornshell
Erica Lynn Arras
Michael A. Cox
Scott R. Belhorn
James Ehrman
Rachel L Steinlage
20 If any such motions are filed, the Defendants may respond under the briefing schedule set forth in LBR 9013-1(b).
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