Consumers Weren’t Discharged Under Section 1141(d)(6)(A)

Reversing the bankruptcy court while expounding and expanding on the Supreme Court’s Cohen decision, District Judge Paul A. Engelmayer of New York ruled that a civil penalty imposed by the Federal Communications Commission for defrauding consumers is not discharged in a corporate debtor’s chapter 11 case under Section 1141(d)(6)(A).

In Cohen v. de la Cruz, 523 U.S. 213 (1998), the Supreme Court held that treble damages and attorneys’ fees imposed against a bankrupt landlord in favor of tenants under state law for actual fraud in charging excess rent were not dischargeable under Section 523(a)(2)(A), even though the treble damages were in excess of the actual damages sustained by the tenants.

The case before Judge Engelmayer was different from Cohen in that the government had not been defrauded, whereas the tenants in Cohen had been.

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