Bankruptcy – Fraud

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U.S. Court of Appeals For the Seventh Circuit  

Civil

Bankruptcy – Fraud

A debt that a bankrupt incurs after his debts have been discharged in bankruptcy, but that he wouldn’t have incurred had it not been for a prepetition claim, is not dischargeable if the underlying claim is not.

“What dooms (but not the only thing that dooms) Ruben’s effort to escape the arbitrators’ assessment of expenses is that the assessment was a result of his freely chosen decision to participate in the arbitration. Had he not participated, Bell would instead have pressed her fraud claims against him in her adversary proceeding, and it is inconceivable that the bankruptcy court—the host as it were of the adversary proceeding—would have assessed substantial costs against him. The bulk of the $171,504.54 in costs assessed against Ruben by the arbitration panel—$150,304.54 (87.6 percent)—was for the expenses and compensation of the arbitrators. Courts don’t make litigants pay judges’ salaries. But arbitrators, being secretive, wielding very broad discretion, being far less rule-bound than courts—and not being paid for their work by the government—charge their salaries to the parties to the arbitration. By asking to be allowed into the arbitration, Ruben voluntarily exposed himself to assessments the amount of which he could not have calculated in advance. It is odd to think that because Ruben chose to roll the dice, Bell should be deprived of the costs that the arbitrators awarded her.”

Affirmed.

14-1475 In re: Ruben

Appeal from the United States District Court for the Northern District of Illinois, Durkin, J., Posner, J.

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