                                                                 FILED
                                                                  JAN 29 2014
 1
                                                             SUSAN M. SPRAUL, CLERK
                                                                U.S. BKCY. APP. PANEL
 2                                                              OF THE NINTH CIRCUIT


 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                             )   BAP No.    CC-13-1137-PaKuBa
                                        )
 6   JORDAN WANK,                       )   Bk. No.    SV 12-11628-MT
                                        )
 7                  Debtor.             )   Adv. No. SV 12-01156-MT
     ___________________________________)
 8                                      )
                                        )
 9   JORDAN WANK; BRUCE WANK,           )
                                        )
10                  Appellants,         )
                                        )
11   v.                                 )   O P I N I O N
                                        )
12   DANIEL GORDON; BASIL SIMONA; A&S   )
     INVESTMENT, LLC; ATHAR SIDDIQI;    )
13   MARK FERGUSON; GEORGE TSOUPAKIS,   )
                                        )
14                  Appellees.          )
     ___________________________________)
15
16                  Argued and Submitted on November 21, 2013
                             at Pasadena, California
17
                            Filed - January 29, 2014
18
                 Appeal from the United States Bankruptcy Court
19                   for the Central District of California
20            Hon. Maureen Tighe, U.S. Bankruptcy Judge, Presiding
21
22   Appearances:    Lincoln Browning Quintana argued for appellants
                     Jordan Wank and Bruce Wank. David Paul Bleistein
23                   argued for appellees Daniel Gordon, Basil Simona,
                     A&S Investment, LLC, Athar Siddiqi, Mark Ferguson
24                   and George Tsoupakis.
25
26   Before: PAPPAS, KURTZ and BALLINGER1, Bankruptcy Judges.
27
28
          1
             The Honorable Eddward Ballinger, Jr., United States
     Bankruptcy Judge for the District of Arizona, sitting by
     designation.
 1   PAPPAS, Bankruptcy Judge:
 2
 3        Chapter 72 debtor Jordan Wank (“Wank”)3 appeals the summary
 4   judgment of the bankruptcy court determining that a portion of a
 5   judgment debt owed by Wank to appellees Daniel Gordon, Basil
 6   Simona, A&S Investment, LLC, Athar Siddiq, Mark Ferguson and
 7   George Tsoupakis (together, “the Appellees”) is excepted from
 8   discharge under § 523(a)(2)(A).    We VACATE the summary judgment
 9   and REMAND this matter to the bankruptcy court for further
10   proceedings.
11                                  FACTS4
12        Wank is a California attorney who filed a chapter 7
13   bankruptcy petition.   The Appellees are creditors who assert that
14   their claim against Wank should be excepted from discharge under
15   various provisions of § 523(a).    They assert that Wank induced
16   each of them to invest in a fraudulent currency speculation scheme
17
18        2
             Unless otherwise indicated, all chapter, section and rule
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
19   to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
     Civil Rule references are to the Federal Rules of Civil Procedure
20   1-86.
21        3
             Bruce Wank, who is apparently a creditor in the bankruptcy
     case and son of the debtor Jordan Wank, joined in the notice of
22   appeal, and appears in the caption of the parties’ briefs.
     However, it is not clear in the record what his interest in this
23   litigation and the appeal may be. As near as we can tell, he was
     not a plaintiff or defendant in the adversary proceeding in the
24   bankruptcy court. Therefore, in this decision we refer only to
     the principal appellant, the debtor Wank.
25
          4
             This dispute ultimately concerns two declarations executed
26   by Wank, one signed in 2009 in connection with state court
     proceedings, and a second, later declaration filed in this
27   litigation in 2013 in which Wank either repudiates the earlier
     factual assertions, or attempts to explain them in context. We
28   discuss here only those facts we believe to be uncontroverted by
     either party.

                                       -2-
 1   known as the European Investment Structure (“EIS”).5   Basil Simona
 2   resides in Michigan and is the managing member of A&S Investments,
 3   LLC, an entity that invested $125,000.   Althar Siddiqui resides in
 4   Michigan and invested $400,000.    Mark Ferguson resides in Los
 5   Angeles and invested $150,000.    George Tsoupokis and Daniel Gordon
 6   reside in Colorado, and they invested $100,000 and $50,000
 7   respectively.
 8       Jerry Neidich (“Neidich”) is a friend and neighbor of Wank.
 9   Neidich, along with Daniele Romer (“Romer”), solicited the
10   Appellees to invest in EIS.   There is no evidence in the record,
11   nor any contention by the Appellees, that Wank knew, or
12   communicated with, any of the Appellees before the first contact
13   was made with them regarding the investments.   Wank concedes,
14   however, that he received funds by wire transfer from each of the
15   Appellees, and that he in turn transmitted all $825,000 of the
16   money they sent him, plus $25,000 of his own funds, to UNIFICO
17   Holdings, LLC, and its principal, Kurshid Shah (“Shah”), in care
18   of a bank account in London, United Kingdom, to invest that money
19   in currency speculation.   Wank entered into written contracts (the
20   “EIS Agreements”) with each of the Appellees regarding the
21   investments, although these contracts have not been included in
22   either the appellate record or the docket of the bankruptcy court
23   adversary proceeding.   The parties agree that there is no evidence
24   that UNIFICO Holdings, LLC, or Shah made any trade with the funds;
25   they also agree that the Appellees and Wank never received the
26
          5
             EIS is the descriptive name for the investment scheme; it
27   does not appear to be a formal organization or entity. Wank
     alleges, and Appellees do not dispute, that he sent all of the
28   funds he received from Appellees to the bank account of UNIFICO
     Holdings, LLC, in London, United Kingdom, to be invested in EIS.

                                       -3-
 1   anticipated profits from their investment nor, indeed, any return
 2   of their invested funds.
 3        Having lost their investments, in May 2007 the Appellees sued
 4   Wank, Neidich, Romer, Shah, EIS, UNIFICO Holdings, LLC, and
 5   UNIFICO Trading, Ltd. (apparently a d/b/a of UNIFICO Holdings,
 6   LLC) in Los Angeles Superior Court.    Gordon v. Wank, case no.
 7   BC 371 999 (the “State Court Action”).   A First Amended Complaint,
 8   filed on September 11, 2009, in the State Court Action, contained
 9   twenty causes of action, including false promise, fraud and
10   conspiracy to defraud, against all defendants.
11        On December 28, 2009, Wank, Neidich and Romer entered into a
12   settlement agreement and stipulated judgment with the Appellees
13   (collectively, the “Settlement Agreement”) concerning the state
14   court action.   Under the terms of the Settlement Agreement,
15   Neidich, Romer and the Appellees mutually released each other from
16   all claims on condition that Wank pay the Appellees the total sum
17   of $750,000.    If Wank failed to pay the Appellees by March 15,
18   2010, he stipulated that a judgment could be entered against him
19   by the state court for the full amount of the Appellees’ claim of
20   $1,100,000.    Of critical interest in this appeal, however, was the
21   following provision in the Settlement Agreement:
22        THIS JUDGMENT SHALL BE EXEMPT FROM DISCHARGE IN
          BANKRUPTCY
23
          The Parties agree that the obligations arising from this
24        Settlement Agreement shall be non-dischargeable under
          the provisions of the Bankruptcy Code. Mr. Wank has
25        also executed his attached Declaration in Support of the
          factual basis of why his obligation under this Agreement
26        should not be discharged in Bankruptcy (Exhibit E).
27        As part of the settlement, the Appellees required Wank to
28   sign a declaration under penalty of perjury on December 30, 2009,

                                      -4-
 1   a copy of which was attached to the Settlement Agreement (the
 2   “First Declaration”).   It included the following statements:
 3        The purpose of this Declaration is to provide a factual
          basis to further the intention of the Plaintiffs and
 4        Defendants in this litigation to ensure that if I do not
          pay any or all of the Judgment on a timely basis and
 5        declare bankruptcy that the amounts due Plaintiffs for
          their investment in the [EIS], plus interest, of
 6        $1,100,000 shall not be discharged in bankruptcy. First
          Declaration at ¶ 1.
 7
          In later Summer and Fall of 2004, I entered into written
 8        agreements with [the Appellees] in which I agreed to act
          as a “primary investor” to invest their moneys that I
 9        received from each of them in the [EIS] which was
          operated by Mr. Kurshid Shah. Id. at ¶ 2.
10
          I advised each of the [Appellees] (and set forth in the
11        EIS Agreements) that before any trade was made, the
          trading group in England would have an “exit buyer” in
12        place, with a built in profit for each transaction, and
          that the profits from each trade would be deposited into
13        the account for distribution on a monthly basis. In
          fact, there was no such “exit buyer” and, as mentioned,
14        all of the [Appellees] and others who invested lost
          their entire investments. Id. at ¶ 3(e).
15
          I communicated to the [Appellees] that they could expect
16        monthly returns of 30 to 50 percent. Id. at ¶ 3(f).
17        I made representations to the [Appellees], which were
          false, to induce them to place their funds in my trust
18        account, and to permit me to act as their “primary
          investor,” and to permit me to transfer [Appellees’]
19        funds to EIS. Id. at ¶ 4.
20        I communicated to the [Appellees] that investing in the
          [EIS] would be a safe investment, and that I was an
21        attorney with expertise in such matters. Under the
          terms of the EIS Agreements, the [Appellees’] funds were
22        to be returned to the [Appellees] in 45 days if no
          foreign currency trades were executed. However, I knew
23        at the time I executed the contracts and accepted the
          wire transfers for the [Appellees’] funds that there was
24        a possibility that the funds could be lost. I did not
          so inform the [Appellees]. Id. at ¶ 5.
25
          By entering into the EIS Agreements with the Plaintiffs,
26        I did not comply with the following [California Rules of
          Professional Conduct]: (a) [Rule] 3-110 by failing to
27        act competently; (b) Rule 3-500, keeping clients
          informed of a situation in which I was acting for them;
28        and (c) Rule 4-100 failing to preserve identity of
          client funds. Id. at ¶ 14.

                                     -5-
 1           The Settlement Agreement provided that the signed, original

 2   First Declaration would be kept in a sealed envelope by an escrow

 3   agent.      If Wank failed to make the $750,000 payment as provided in

 4   the Settlement Agreement, and later filed for bankruptcy

 5   protection, the Settlement Agreement provided that the First

 6   Declaration would be unsealed and submitted to the bankruptcy

 7   court.      The parties also executed a Stipulation to Judgment

 8   providing that, if Wank failed to pay the required $750,000 by

 9   March 15, 2010, the state court would be requested to enter

10   judgment in the amount of the full claim of $1,100,00.

11           Wank did not pay the required $750,000 by the March 15, 2010

12   deadline and, at the Appellees’ request, the state court, on June

13   18, 2010, entered the stipulated judgment against Wank and in

14   favor of the Appellees in the total amount of $1,100,000.

15           Wank filed a chapter 7 bankruptcy petition on February 20,

16   2012.       On Schedule F, Wank listed a noncontingent, liquidated,

17   undisputed unsecured nonpriority claim of $1,250,000 for the five

18   Appellees.

19           On May 5, 2012, Appellees filed an adversary complaint

20   against Wank and his former spouse, Toby Wank, in the bankruptcy

21   court.6      Thereafter, the complaint was amended, seeking a

22   declaration by the bankruptcy court that the $1,100,000 judgment

23   debt owed to the Appellees by Wank was excepted from discharge

24   under §§ 523(a)(2), (4), (6) and (19).7      The Appellees’ first

25
             6
26           Although Toby Wank was named as a co-defendant in the
     complaint initiating this adversary proceeding, the requested
27   relief was only directed against Wank.
          7
28           We need not, and do not, discuss the parties’ arguments
     regarding the Appellees’ claims for an exception to discharge
                                                          (continued...)

                                         -6-
 1   claim, the one at issue in this appeal, sought an exception to
 2   discharge for fraud under § 523(a)(2)(A), and alleged that
 3   (1) Wank “stole” $825,000 from Appellees and did so “deliberately
 4   and stipulated as much in the Settlement Agreement,” (2) Wank lied
 5   to the Appellees when asked about the “stolen funds,” (3) Wank
 6   lied to the Appellees when he sent their invested funds to EIS,
 7   and (4) Wank stipulated that he committed fraud against the
 8   Appellees in the First Declaration and Settlement Agreement.
 9        Although Wank’s answer to the Appellees’ amended complaint
10   contained a general denial of the allegations, he admitted the
11   paragraph which quoted the text of the First Declaration noted
12   above, and the paragraph acknowledging that he signed the First
13   Declaration under penalty of perjury.
14        During the pendency of the litigation, Appellees filed a
15   Motion for Summary Judgment on December 31, 2012.   After
16   discussing the general requirements for an exception to discharge
17   under § 523(a)(2)(A), the motion summarized the Appellees’
18   argument in a single paragraph:
19        Here, the admissions of Mr. Wank in his prejudgment
          declaration meet these standards. He admitted that the
20        EIS was a fraud. He admitted that the [Appellees] lost
          all of the $825,000 they invested in the EIS. Mr. Wank
21        admitted to making false statements to induce the
          [Appellees] to invest in the EIS.
22
23   Notably, the Appellees did not argue that Wank knew at the time of
24   making any representations to them that they were false, nor that
25   the Appellees justifiably relied on those representations.
26
27        7
           (...continued)
28   under § 523(a)(4), (6) and (19) because the bankruptcy court’s
     summary judgment on appeal was based solely on § 523(a)(2)(A), and
     the Appellees did not cross-appeal the court’s judgment.

                                       -7-
 1        Wank opposed the summary judgment motion, stating that the
 2   the First Declaration, and the statements he made in it, were
 3   inherently unreliable and inadmissible as evidence in the
 4   adversary proceeding because the First Declaration was intended to
 5   defeat his right to obtain the protections of a discharge in
 6   bankruptcy.    Further, Wank pointed out, the Appellees failed to
 7   either argue or provide any evidence that they justifiably relied
 8   on any alleged misrepresentations of Wank to their detriment, and
 9   thus they failed to establish an essential element of exception to
10   discharge under § 523(a)(2)(A).
11        Attached to Wank’s opposition to the summary judgment motion
12   was the Declaration of Jordan Wank (the “Second Declaration”).      In
13   the Second Declaration, in addition to explaining his position and
14   certain arguments in the opposition, Wank addressed the
15   circumstances giving rise to his execution of the First
16   Declaration.   Wank insisted that he had signed the First
17   Declaration under duress and while he was under the influence of
18   anxiety medication.   Wank alleged that he had objected to the
19   Appellees’ counsel at the time he executed the First Declaration
20   that some of its content was “false and untrue.”   While Wank
21   acknowledged that he made false statements to the Appellees that
22   he knew to be untrue, he noted that his sole incentive in signing
23   the First Declaration was because “[the Appellees’] counsel agreed
24   to a settlement satisfaction in the amount of $750,000, a large
25   discount from the damages alleged in the suit, and the settlement
26   allowed me negotiated terms and time to pay.”   He also stated that
27   he believed that his statements in the First Declaration could not
28


                                       -8-
 1   be enforced against him.8
 2        In the Second Declaration, Wank also specifically addressed
 3   several of the statements he made in the First Declaration.    As
 4   noted above, the First Declaration provided:
 5        In later Summer and Fall of 2004, I entered into written
          agreements with [Appellees] in which I agreed to act as
 6        a ‘primary investor’ to invest their moneys that I
          received from each of them in the [EIS] which was
 7        operated by Mr. Kurshid Shah.
 8   First Declaration at ¶ 2.    In the Second Declaration, Wank
 9   confirms this statement is true, but explains it:
10        I advised each of the [Appellees] (and set forth in the
          EIS Agreements) that before any trade was made, the
11        trading group in England would have an “exit buyer” in
          place, with a built in profit for each transaction, and
12        that the profits from each trade would be deposited into
          the account for distribution on a monthly basis. In
13        fact, there was no such “exit buyer” and, as mentioned,
          all of the [Appellees] and others who invested lost
14        their entire investments.
15   Second Declaration at ¶ 3(e).
16        In the Second Declaration, Wank also charged that the
17   Appellees had “paraphrased” the EIS Agreements in the First
18   Declaration to suggest that he had made representations to
19   Appellees that he had not:
20        Specifically, the [First Declaration] says: “I advised
          each of the Plaintiffs that . . .” However, the EIS
21        Agreements presented to each Appellee state, “The
          trading group has advised us that . . . .” The last
22        sentence is sheer speculation and conjecture as no one,
          including the Plaintiffs or me had any knowledge of the
23        existence or non-existence of any such “exit buyer.”
24        As to the representations in paragraphs 4 and 5 of the First
25   Declaration, quoted above, Wank repudiated them, labeling them
26
27        8
             In particular, Wank averred in the Second Declaration that
28   “I believed the [First Declaration] was illegal and unenforceable
     in any case as Plaintiffs’ counsel and I both knew the content of
     the declaration was false.” Second Declaration at ¶ 13.

                                      -9-
 1   “false and untrue.”
 2        In response to Wank’s contention that some of the statements
 3   he made in the First Declaration were false and untrue, the
 4   Appellees simply noted that he made those statements under penalty
 5   of perjury.   However, the Appellees did not address Wank’s
 6   argument that they had not submitted evidence to satisfy the
 7   justifiable reliance prong for an exception to discharge under
 8   § 523(a)(2)(A).   Before the hearing on the summary judgment
 9   motion, the bankruptcy court issued a Tentative Ruling, stating,
10   in part, that:
11        In the Settlement Agreement, Debtor admits that he
          agreed to act as a primary investor to invest
12        Plaintiff’s monies, that the funds were wired to
          Defendant’s trust account to be wired to EIS, that the
13        EIS was a fraud, that Defendant advised Plaintiffs that
          EIS would have an exit buyer in place, but that there
14        was no such exit buyer, that he made representations to
          Plaintiffs that were false to induce them to place their
15        funds into his trust account and to permit him to act as
          Plaintiff’s primary investor. These stipulated facts
16        are probative and credible evidence of fraud and
          conversion. Defendant maintains that he signed the
17        Settlement Declaration under duress and undue influence
          because it was required for purposes of resolution of
18        the State Court Action on the eve of trial wherein
          Defendant had no legal representation other than
19        himself. Defendant then admits, however, that he
          believed the document was illegal and unenforceable. He
20        also believed that he would be able to obtain a personal
          loan to pay the stipulated judgment amount so the
21        Settlement Declaration would never be unsealed.
22        Defendant’s reasons for admitting the key facts of the
          fraud do nothing to deny the admissions previously made.
23        They are excuses that do not suffice to raise any doubt
          as to the admissions previously made. Thus, plaintiffs
24        have demonstrated that there is no disputed material
          fact as to the elements of the dischargeability actions.
25
26   The bankruptcy court made no comment in the Tentative Ruling
27   regarding whether the Appellees had justifiably relied on Wank’s
28   statements.


                                     -10-
 1        After hearing and considering the summary judgment motion,
 2   the bankruptcy court stated that it would not consider the
 3   Appellees’ arguments for an exception to discharge under either
 4   §§ 523(a)(6) or (19) because the court had not been given
 5   sufficient facts to make a ruling concerning those claims.    Hr’g
 6   Tr. 20:8-21, February 20, 2013.9    Additionally, the court noted
 7   that, in making its decisions, it had disregarded the “bankruptcy
 8   defeating” clauses in the Settlement Agreement and the First
 9   Declaration, and had only considered the factual admissions made
10   by Wank in the First Declaration.    Hr’g Tr. 19: 4-9.   However,
11   even without considering the bankruptcy defeating provisions, the
12   court determined that Wank’s admissions in the First Declaration
13   were sufficient to establish an exception to discharge under
14   § 523(a)(2)(A), and that his explanations and repudiations of
15   those admissions in the Second Declaration did not negate those
16   admissions:
17        The statements [in the Second Declaration] do not
          dispute the key statements made [in the First
18        Declaration]. They simply try to explain them away or
          justify them or rationalize them. But the statements
19        that go to the fact that false representations were
          made, they were made, according to paragraph 4, to
20        induce the Plaintiffs to place funds in Mr. Wank’s
          account, and that there were communications made, and
21        that there was an intent for them to rely on those
          statements because they were made to induce them and the
22        fact that there was fraud really ha[s] not been disputed
          with a careful reading of the [Second Declaration].
23
24   Hr’g Tr. 19:19-20:4.
25        The bankruptcy court granted the Appellees’ motion, and on
26   March 13, 2013, the court entered a summary judgment determining
27
          9
28           It is not clear what disposition was made by the
     bankruptcy court as to the Appellees’ § 523(a)(4) claim. Neither
     the court’s Tentative Ruling, nor the order or judgment, refer to
     that claim.

                                    -11-
 1   that $825,00010 of the debt owed by Wank to the Appellees was
 2   excepted from discharge under § 523(a)(2)(A).   Wank filed a timely
 3   appeal on March 22, 2013.
 4                               JURISDICTION
 5        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
 6   and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C. § 158.
 7                                    ISSUE
 8        Whether the bankruptcy court erred in granting a summary
 9   judgment determining that Wank’s debt to the Appellees was
10   excepted from discharge under § 523(a)(2)(A).
11                           STANDARDS OF REVIEW
12        We review de novo the bankruptcy court’s grant of summary
13   judgment.   SNTL Corp. v. Ctr. Ins. Co. (In re SNTL Corp.), 571
14   F.3d 826, 834 (9th Cir. 2009).    We also review de novo whether a
15   debt is excepted from discharge under § 523(a)(2)(A).   Tsurukawa
16   v. Nikon Precision, Inc. (In re Tsurukawa), 258 B.R. 192, 195 (9th
17   Cir. BAP 2001).
18                                DISCUSSION
19        Summary judgment may be granted “if the movant shows that
20   there is no genuine issue as to any material fact and the movant
21   is entitled to judgment as a matter of law.”    Civil Rule 56(a),
22   incorporated by Rule 7056; Barboza v. New Form, Inc. (In re
23   Barboza), 545 F.3d 702, 707 (9th Cir. 2008).    The trial court may
24   not weigh evidence in resolving such motions, but rather
25   determines only whether a material factual dispute remains for
26
          10
27           Although requested to do so by the Appellees, the
     bankruptcy court declined to declare the entire amount due under
28   the state court stipulated judgment was excepted from discharge,
     limiting its ruling to the actual amounts invested by the
     Appellees. The Appellees did not cross-appeal any aspect of the
     court’s judgment.

                                      -12-
 1   trial.   Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834
 2   (9th Cir. 1997).   A dispute is genuine if there is sufficient
 3   evidence for a reasonable fact finder to hold in favor of the
 4   non-moving party, and a fact is “material” if it might affect the
 5   outcome of the case.   Far Out Prods., Inc. v. Oskar, 247 F.3d 986,
 6   992 (9th Cir. 2001) (citing Anderson v. Liberty Lobby, Inc., 477
 7   U.S. 242, 248-49 (1986)).   The initial burden of showing there is
 8   no genuine issue of material fact rests on the moving party.
 9   Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998).
10        Under § 523(a)(2)(A), a debt for money obtained by the debtor
11   under “false pretenses, a false representation, or actual fraud”
12   may be excepted from discharge.    The Ninth Circuit has held that
13   summary judgment is proper in considering an exception to
14   discharge under § 523(a)(2)(A) if the proponent is able to show
15   that there is no genuine issue of material fact as to each of the
16   five elements of exception to discharge under that provision: (1)
17   misrepresentation, fraudulent omission or deceptive conduct by the
18   debtor; (2) knowledge of the falsity or deceptiveness of his
19   statement or conduct; (3) an intent to deceive; (4) justifiable
20   reliance by the creditor on the debtor’s statement or conduct; and
21   (5) damage to the creditor proximately caused by its reliance on
22   the debtor’s statement or conduct.       Turtle Rock Homeowners Ass’n
23   v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000).
24        Based upon our de novo review of the record, we conclude that
25   the Appellees have not shown that there are no genuine issues of
26   material fact such that they are entitled to an exception to
27   discharge under § 523(a)(2)(A) as a matter of law.      Before
28   examining the deficiencies in the Appellees’ attempt to establish

                                       -13-
 1   the elements required for a fraud exception to discharge, we first
 2   address Wank’s argument that the bankruptcy court erred in
 3   granting the summary judgment based solely11 on the First
 4   Declaration for reasons of public policy.
 5                                    I.
 6         The bankruptcy court should not have relied so on Wank’s
           statements made in the First Declaration as the sole
 7         basis for granting summary judgment to the Appellees.
 8         In Bank of China v. Huang (In re Huang), 275 F.3d 1173 (9th
 9   Cir. 2002), in a detailed prepetition settlement agreement, the
10   debtor agreed he would not file for bankruptcy protection, and
11   that, if he did, the debt in favor of the bank evidenced by the
12   settlement agreement would not be dischargeable.   Id. at 1176-77.
13   In refusing to enforce the terms of the agreement when the debtor
14   nonetheless sought bankruptcy protection, the Ninth Circuit held
15   that “it is against public policy for a debtor to waive the
16   prepetition protection of the Bankruptcy Code.”    Id. at 1177
17   (quoting Hayhoe v. Cole (In re Cole), 226 B.R. 647, 651-54 (9th
18   Cir. BAP 1998)).   As the Ninth Circuit explained: “This
19   prohibition of prepetition waiver has to be the law; otherwise,
20   astute creditors would routinely require their debtors to waive.”
21   Id.
22         This Panel’s opinion in In re Cole, cited in In re Huang,
23
           11
24           The bankruptcy court made it clear that it was ruling
     solely on the basis of the First Declaration. In its Tentative
25   Ruling, it stated, “The Stipulated Facts within the [First]
     Declaration are probative evidence of nondischargeability under
26   §§ 523(a)(2) and (a)(6) for fraud and conversion.” Tentative
     Ruling at 5, February 20, 2013. At the hearing on February 20,
27   2013, the court observed, “I’ve just looked at the material
     disputed facts. And the material disputed facts in this [First
28   Declaration] are sufficient to prove up a [§] 523(a)(2) fraud
     nondischargeability judgment for $825,000.” Hr’g Tr. 19:14-17.

                                     -14-
 1   provides further explanation of the reasons for this policy:
 2        First, pursuant to § 523(c), bankruptcy courts have
          exclusive jurisdiction to determine the dischargeability
 3        of claims arising under § 523(a)(2). See Seven Elves,
          Inc. v. Eskenazi (In re Eskenazi), 6 B.R. 366, 368-69
 4        (9th Cir. BAP 1980) [citing Brown v. Felsen, 442 U.S.
          127, 138 (1979)]. . . . Second, there is no recognized
 5        exception to discharge for prepetition waivers of
          discharge or dischargeability. Section 727(b) states
 6        that all debts are dischargeable in bankruptcy unless
          specifically excepted under § 523. Section 523
 7        enumerates the exceptions to discharge, but does not
          except from discharge those debts that the debtor has
 8        agreed prepetition not to be discharged in bankruptcy
          (citations omitted). If bankruptcy courts enforced
 9        prepetition waivers of discharge, they would effectively
          be creating an exception to discharge that Congress had
10        not enumerated (citations omitted). . . .   Finally, an
          exception to discharge impairs the debtor’s fresh start
11        and should not be read more broadly than necessary to
          effectuate policy[.] (citations omitted).
12
13   In re Cole, 226 B.R. at 653-54.
14        In re Huang and In re Cole continue to be good law.
15   Continental Ins. Co. v. Thorpe Insulation Co. (In re Thorpe
16   Insulation Co.), 671 F.3d 1011, 1026 (9th Cir. 2012) (in
17   reaffirming its holding in In re Huang, and again citing with
18   approval to In re Cole, the Ninth Circuit observes “it is against
19   public policy for a debtor to waive the prepetition protection of
20   the bankruptcy code.”).   Bankruptcy courts in this circuit have
21   acknowledged the prohibition against prepetition waivers of
22   bankruptcy discharge rights announced in In re Huang and In re
23   Cole.   In re Ashworth, 2012 WL 4596217, at *15 (Bankr. C.D. Cal.
24   Oct. 1, 2012) (citing In re Cole for the proposition that
25   “prepetition waivers of a discharge are contrary to public policy
26   and unenforceable”);   In re Jennings, 306 B.R. 672, 675 (Bankr. D.
27   Or. 2004) (“As a matter of public policy, an agreement in advance
28   of a bankruptcy case that a particular claim is not subject to

                                       -15-
 1   discharge is not enforceable.”).   And courts in other circuits
 2   have also declined to enforce prepetition discharge waivers.
 3   Lichtenstein v. Barbanel (In re Lichtenstein), 161 Fed. Appx. 461,
 4   467-68 (6th Cir. 2005) (agreeing with In re Cole, the Sixth
 5   Circuit held that “waiving a debtor’s right to obtain a discharge
 6   of a specific debt in a future bankruptcy case is void because it
 7   offends the public policy of promoting a fresh start for
 8   individual debtors”)12;   Klingman v. Levinson, 831 F.2d 1292, 1296
 9   n.3 (7th Cir. 1987) (“For public policy reasons, a debtor may not
10   contract away the right to a discharge in bankruptcy.”); First Ga.
11   Bank v. Halpern (In re Halpern), 50 B.R. 260, 262 (Bankr. N.D. Ga.
12   1985), aff’d, 810 F.2d 1061 (11th Cir. 1987) (“Policy
13   considerations dictate that dischargeability questions cannot be
14   predetermined either by a state court or by agreement of the
15   parties prior to or in anticipation of the possible filing of a
16   bankruptcy case.”).   Hillmeyer v. Deller (In re Deller), 2009
17   Bankr. Lexis 5556, at *24 (Bankr. W.D. Pa. 2009) (citing both In
18   re Huang and In re Cole for their holding that “A prepetition
19   waiver of the dischargeable debt is contrary to public policy.”).
20        The prohibition on prepetition waivers of discharge for
21   public policy reasons predates the Bankruptcy Code.   Fallick v.
22   Kehr, 369 F.2d 899, 904 (2d Cir. 1966) ([A]n advance agreement to
23   waive the benefits of the [Bankruptcy] Act would be void.”);     In
24   re Weitzen, 3 F. Supp. 698 (S.D.N.Y. 1933) (same).    One bankruptcy
25   court recently explained the basis for this policy:
26
27
          12
             6th Cir. R. 28(g), in effect at the time of the
28   Lichtenstein opinion, permitted citation to unpublished opinions
     as persuasive authority.

                                     -16-
 1        Congress . . . provided in the Bankruptcy Code just two
          methods through which a debtor could effectuate a waiver
 2        on matters concerning discharge. First, § 727(a)(10)
          permits debtors to waive their discharge entirely by
 3        executing a postpetition written agreement and having
          that agreement approved by the bankruptcy court. Second,
 4        after the commencement of the bankruptcy case, a debtor
          may waive the dischargeability of a particular debt by
 5        complying with the requirements for reaffirmation
          agreements as set forth in § 524(c). In either case,
 6        however, a debtor is under the protection of the
          bankruptcy court, an important commonality which is
 7        lacking when a debtor executes a prepetition waiver of
          their discharge.
 8
 9   Double v. Cole (In re Cole), 428 B.R. 747, 753 (Bankr. N.D.
10   Ohio 2009).
11        In light of the strong public policy declining to enforce
12   prebankruptcy discharge waivers, Wank contends that the bankruptcy
13   court erred when it elected to ignore the bankruptcy-defeating
14   clause in the Settlement Agreement, but then considered his
15   apparent admissions in the First Declaration as evidence that he
16   committed fraud, and as the sole basis for granting summary
17   judgment in favor of the Appellees.   In response, the Appellees
18   argue that while agreements that a debt will not be dischargeable
19   in bankruptcy are unenforceable, parties are free to stipulate to
20   the facts giving rise a debt, which facts can then be considered
21   by the bankruptcy court in a later dischargeability action.   In
22   this position, the Appellees quoted a passage from this Panel’s
23   decision in In re Cole:
24        We have already concluded that the portion of the
          Stipulated Judgment that purported to waive Appellee’s
25        right to obtain a discharge of the Debt was
          unenforceable as against public policy. However, if the
26        parties stipulated to the underlying facts that support
          a finding of nondischargeability, the Stipulated
27        Judgment would then be entitled to collateral estoppel
          application.
28

                                    -17-
 1   226 B.R. at 653.13
 2        While we do not here attempt to address all possible
 3   scenarios, we agree with Wank that, given the circumstances
 4   surrounding his execution of the First Declaration in this case,
 5   and when viewed in light of the strong public policy prohibiting
 6   debtors from contracting with creditors to forego the protections
 7   of a bankruptcy filing, Wank’s statements in the First Declaration
 8   must, at a minimum, be viewed with great skepticism.   As a result,
 9   and considering the other facts in the record, we believe it was
10   inappropriate for the bankruptcy court to grant a summary judgment
11   to the Appellees based solely on Wank’s statements made in the
12   First Declaration.
13        There can be no doubt about the purpose for the First
14   Declaration; it was drafted by the Appellees’ counsel with a
15   singular goal in mind.14   The First Declaration not intended to
16   evidence that Wank was indebted to the Appellees – that goal was
17   effectively accomplished by the terms of the Settlement Agreement.
18   The First Declaration was also not designed to be effective for
19   use by the Appellees in state court.15   Instead, the introductory
20
          13
21           Of course, unlike in In re Cole, Wank’s admissions in the
     First Declaration were not “stipulated,” nor were they referenced
22   in the state court’s stipulated judgment. Instead, as discussed
     below, the First Declaration was a standalone document, executed
23   only by Wank, not submitted for consideration by the state court,
     and then sealed, to be used by the Appellees only in a bankruptcy
24   proceeding.
          14
25           Counsel for the Appellees, at oral argument, confirmed
     that his law firm drafted the First Declaration.
26        15
             In the Second Declaration, Wank states, and the Appellees
27   have not sought to dispute, that: “In approximately May or June
     2010, the Superior Court held hearings to enter the stipulated
28   judgment. Plaintiffs’ counsel had attempted to introduce the
                                                         (continued...)

                                     -18-
 1   paragraph of the First Declaration reveals the true intention of
 2   the drafters regarding Wank’s statements:
 3        The purpose of this Declaration is to provide a factual
          basis to further the intention of the Plaintiffs and
 4        Defendants in this litigation to ensure that if I do not
          pay any or all of the Judgment on a timely basis and
 5        declare bankruptcy that the amounts due Plaintiffs for
          their investment in the [EIS], plus interest, of
 6        $1,100,000 shall not be discharged in bankruptcy.
 7   First Declaration at ¶ 1.
 8        Given the reasons for Wank’s execution of the First
 9   Declaration, we think the reliability of the factual statements
10   that follow are potentially tainted by the Appellees’ motives.
11   The document was solely intended to ensure that Wank could not
12   obtain effective relief in bankruptcy.16    While, perhaps, some of
13   Wank’s factual statements could be trusted, to do so would require
14   the bankruptcy court to weigh the credibility of those statements
15   against the circumstances under which the First Declaration was
16   executed.   And while the bankruptcy court could properly evaluate
17   the First Declaration in the context of a trial, it is a far
18   different matter for the court to rely exclusively on Wank’s
19   “admissions” in the First Declaration as the sole basis for
20   granting Appellees a summary judgment that Wank committed fraud.
21
22        15
           (...continued)
23   [First Declaration]. In personal, in-court testimony to Judge
     Rosenfield of the Superior Court and with Plaintiffs’ counsel
24   present, I specifically recanted the truth of the contents of the
     [First Declaration] and objected to its use. Plaintiffs’ counsel
25   then withdrew the document.” Second Declaration at ¶ 20.
          16
26           Of course, the First Declaration was intended to support
     an exception to discharge of only the Appellees’ debt. But even
27   without knowing the details of Wank’s other debts, it is doubtful
     that, if he emerged from bankruptcy burdened by the Appellees’
28   $825,000 judgment, Wank would enjoy much of a “fresh start” via
     his discharge of other debts.

                                     -19-
 1   In our view, to grant a summary judgment in this fashion, and
 2   without a trial, undermines the Ninth Circuit’s concern about
 3   giving effect to agreements motivated by a creditor’s desire to
 4   insulate debts from discharge in bankruptcy, and encourages the
 5   sort of routine inclusion of such factual statements in settlement
 6   agreements the court was attempting to discourage.17
 7          Besides the bankruptcy-defeating clauses, there are other red
 8   flags suggesting that Wank’s statements in the First Declaration
 9   were untrustworthy.   Wank stated later, in the Second Declaration,
10   and without contradiction by the Appellees, that he executed the
11   First Declaration because he felt compelled to do so, at a time
12   when he was taking prescription medications, and because he did
13   not believe he could physically withstand the rigors of a trial.
14   Wank, a lawyer, also stated that he believed his factual
15   statements in the First Declaration would be unenforceable against
16   him.    While the bankruptcy court was understandably reluctant to
17   allow Wank to create fact issues by arguing with himself, Wank’s
18   later observations, considered in context with the other
19   circumstances surrounding his execution of the First Declaration,
20   were entitled to some consideration, and should have given the
21
            17
22           There is evidence in the First Declaration that there may
     have been another, ulterior motive for the document. As noted
23   above, in it, Wank concedes that, in his dealings with the
     Appellees, he failed to abide by several provisions of the
24   California Rules of Professional Conduct. If Wank’s statements
     are indeed true, avoiding the consequences of bar discipline would
25   also constitute a strong incentive for him to sign the declaration
     and perform the Settlement Agreement. Of course, as the parties
26   agreed in their settlement, the information about Wank’s
     transgressions as a California attorney would be held in
27   confidence unless he filed a bankruptcy petition. We are also
     uncomfortable with this strategy, adding to our reluctance to
28   endorse the “facts” recited in the First Declaration via a
     summary judgment.

                                      -20-
 1   bankruptcy court pause before adopting the First Declaration as
 2   the sole basis for determining the material facts in this action.
 3        We acknowledge that the bankruptcy court attempted to clarify
 4   that it would not consider the bankruptcy-defeating provisions of
 5   the Settlement Agreement and the First Declaration, and would rely
 6   solely on the factual matters addressed in Wank’s declaration:
 7        THE COURT: The fact that there was a stipulation that
          it would not be dischargeable in bankruptcy is to be
 8        excised out of the declaration and is — cannot be
          considered and is not the law. Therefore, I’ve only
 9        considered actual statements and whether or not there’s
          a reasonable disputed facts as to the statements made.
10
11   Hr’g Tr.19:4-9, December 19, 2012.     However, in this statement,
12   the court incorrectly described the provenance of the First
13   Declaration.   The First Declaration was never part of the
14   stipulated judgment.   The First Declaration was attached to the
15   Settlement Agreement, and sealed by the parties and deposited with
16   an escrow company, only to be opened if Wank filed a bankruptcy
17   petition, then to be submitted to the bankruptcy court.    As
18   discussed above, in our view, the First Declaration does not fall
19   under the exception to prohibition of waivers articulated in In re
20   Cole, where a court may sever from a stipulation for judgment a
21   bankruptcy-defeating clause, while giving effect to the other
22   facts included in the stipulated judgment.    226 B.R. at 655.   By
23   its terms, the First Declaration was a standalone document that
24   was sealed by the parties and only to be used in the event of a
25   bankruptcy filing to provide grounds for an exception to
26   discharge.
27        All things considered, we think the First Declaration falls
28   within the public policy prohibition on waivers of bankruptcy

                                     -21-
 1   protection articulated in In re Huang.    The bankruptcy court,
 2   under these unique circumstances, should not have relied
 3   exclusively on Wank’s statements in the First Declaration in
 4   awarding the Appellees a summary judgment.
 5                                     II.
 6        The bankruptcy court made credibility determinations,
          weighed evidence and drew inferences in favor of the
 7        moving party, which are inappropriate in considering a
          motion for summary judgment.
 8
 9        Even assuming the bankruptcy court’s reliance upon the First
10   Declaration in granting summary judgment to the Appellees did not
11   transgress the public policy against enforcing prepetition
12   agreements to waive bankruptcy protections, the court’s decision
13   must nonetheless be vacated.
14        It is a basic tenet that “‘[c]redibility determinations, the
15   weighing of the evidence, and the drawing of legitimate inferences
16   from the facts’ are inappropriate at the summary judgment stage.”
17   Oswalt v. Resolute Indus., 642 F.3d 856, 861 (9th Cir. 2011)
18   (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
19   (1986)).    Contrary to this admonition, an analysis of the
20   bankruptcy court’s ruling demonstrates that it necessarily made
21   credibility findings, weighed Wank’s various sworn statements, and
22   drew inferences in favor of the Appellees in granting them a
23   summary judgment.
24        It is important to note that the bankruptcy court did not
25   strike the Second Declaration as a “sham,” nor otherwise discount
26   it as patently unreliable.18   Indeed, we agree that the Second
27
          18
28              In Yeager v. Bowlin, 693 F.3d 1076, 1081 (9th Cir. 2012),
                                                            (continued...)

                                      -22-
 1   Declaration was properly before the court for its consideration in
 2   resolving the summary judgment motion.   We disagree with the
 3   court, however, that it was free to credit the contents of the
 4   First Declaration when the Second Declaration clearly called those
 5   statements into question.
 6        In its Tentative Ruling, the bankruptcy court explained,
 7        In the [First] Declaration, [Wank] admits that he agreed
          to act as a primary investor to invest [Appellees’]
 8        monies, that the funds were wired to the EIS, that the
          EIS was a fraud, that [Wank] advised [the Appellees]
 9        that EIS would have an exit buyer in place, but that
          there was no such exit buyer, that he made
10        representations to Plaintiffs which were false, to
          induce them to place their funds in his trust account
11        and to permit him to act as [Appellees’] primary
          investor. These stipulated facts[19] are probative and
12        credible evidence of fraud and conversion.
13   Tentative Ruling at 6.
14        Then, at the hearing, the bankruptcy court continued,
15        The statements that are disputed or the additional
          statements [in the Second Declaration] do not dispute
16        the key statements made. They simply try to explain
17
          18
18         (...continued)
     the Ninth Circuit examined the “sham affidavit” rule, which allows
19   a trial court to make a credibility determination on summary
     judgment by rejecting a second sworn statement from a witness that
20   conflicts with his or her earlier deposition testimony. The
     rationale for the rule is that depositions are adversarial in
21   nature where the witness is subject to examination and cross-
     examination and, therefore, deposition testimony may be deemed
22   inherently more reliable than self-serving affidavits. Id.;
     Darnell v. Target Stores, 16 F.3d 174, 179 (7th Cir. 1994).
23   However, the Yeager court noted that the sham affidavit rule must
     be applied with caution, because evaluating two conflicting
24   statements from the same party necessarily involves determining
     credibility, and “the [trial] court is not to make credibility
25   determinations when making or denying summary judgment.” Yeager,
     693 F.3d at 1080. Of course, this appeal presents a conflict
26   between Wank’s two declarations, not a deposition, so the sham
     affidavit exception to the prohibition on credibility
27   determinations in summary judgment does not apply.
          19
28           Again, these were not “stipulated facts”; they were Wank’s
     statements in the First Declaration.

                                    -23-
 1        them away or rationalize them. But the statements that
          go to the fact that false statements were made, they
 2        were made, according to paragraph four, to induce the
          [Appellees] to place funds in Mr. Wank’s account, and
 3        that there were communications made, and that there was
          an intent for them to rely on those statements because
 4        they were made to induce them, and the fact that there
          was fraud really have not been disputed with a careful
 5        reading of the subsequent declarations. They’re sort of
          explained further, and they’re supplemented, and they’re
 6        rationalized, but they’re just not materially disputed.
 7   Hr’g Tr. 19:18–20:7.
 8        As can be seen, in evaluating Wank’s statements in the First
 9   Declaration, the bankruptcy court made a credibility
10   determination.   Indeed, the bankruptcy court describes Wank’s
11   statements in the First Declaration as constituting    “credible
12   evidence.”   To measure the value of the statements in the First
13   Declaration against Wank’s statements in the Second Declaration
14   required the bankruptcy court to assign them weight.   This cannot
15   be done in the context of summary judgment.   Dominguez-Curry v.
16   Nevada Transp. Dep’t, 424 F.3d 1027, 1036 (9th Cir. 2005) (At
17   summary judgment, “the judge does not weigh disputed evidence with
18   respect to a disputed material fact.    Nor does the judge make
19   credibility determinations with respect to statements made in
20   affidavits, answers to interrogatories, admissions, or
21   depositions.”); SEC v. M&A W., Inc., 538 F.3d 1043, 1054-55 (9th
22   Cir. 2008) (“This Court, and others, have long recognized that
23   summary judgment is singularly inappropriate where credibility is
24   at issue.    Only after an evidentiary hearing or a full trial can
25   these credibility issues be appropriately resolved . . . .   The
26   district court’s assessment of [] credibility may ultimately be
27   correct, but such an assessment may only be made after a full
28   evidentiary hearing, and is inappropriate at the summary judgment

                                      -24-
 1   stage.”) (citations and internal quotation marks omitted).   While
 2   the bankruptcy court characterized Wank’s statements in the Second
 3   Declaration as explaining away, supplementing or rationalizing the
 4   statements he made in the First Declaration, in doing so, the
 5   court was necessarily required to weigh the value of those later
 6   statements, to credit some of them, and to reject others.    This
 7   process was not appropriate without a trial.
 8        Moreover, we disagree with the bankruptcy court’s
 9   characterization of the statements in Wank’s Second Declaration as
10   merely explaining or rationalizing the statements in the First
11   Declaration.   As to key elements of exception to discharge under
12   § 523(a)(2)(A), the Second Declaration flatly contradicts, not
13   explains or rationalizes, the statements in the First Declaration.
14        For example, the Appellees were required to prove that Wank
15   made representations to them.   In the Second Declaration, Wank
16   flatly denies that he made any representations to the Appellees.
17   Second Declaration at ¶ 4.   Instead, Wank reminds the court that
18   his “representations” were made via the EIS Agreements, documents
19   which were not submitted to the bankruptcy court.   Wank’s denial
20   that he made “statements” to the Appellees therefore raises an
21   issue of material fact sufficient to require a trial.
22         In addition, neither of Wank’s declarations contain an
23   admission that he knew that the representations he made to the
24   Appellees were false when he made them, another element for a
25   § 523(a)(2)(A) fraud exception to discharge.   Wank acknowledges he
26   knew that the Appellees’ funds were potentially at risk at the
27   time he signed the EIS Agreements and transferred the funds.
28   However, the bankruptcy court then inferred knowledge of the

                                     -25-
 1   falsity of his representations at the time they were made from
 2   Wank’s admission in the Second Declaration that, at a later date,
 3   he came to know the representations were false.   Drawing such an
 4   inference against Wank and in favor of the Appellees was
 5   inappropriate in this context of a summary judgment motion.
 6        The Appellees were also required to prove that Wank intended
 7   to deceive Appellees.   To satisfy this requirement, the bankruptcy
 8   court relied on Wank’s statement in the First Declaration, but
 9   apparently discounted his statement in the Second Declaration that
10   not only did he not intend to deceive the Appellees by
11   facilitating their investments, that he in fact invested $25,000
12   of his own money in the venture.   Again, the conflicting
13   statements raise a trial issue of material fact as to Wank’s
14   intention to deceive.
15        In sum, while there were obviously aspects of Wank’s First
16   Declaration that tended to establish that he intentionally induced
17   the Appellees to invest in a risky scheme, whether he committed
18   the sort of knowing fraud contemplated in § 523(a)(2)(A) was
19   called into legitimate question by the contents of the Second
20   Declaration.   Since Wank’s two competing statements were the only
21   factual record the bankruptcy court could consider, in granting a
22   summary judgment to the Appellees, it assigned weight to his
23   various admissions and statements, and drew inferences against
24   Wank from those statements.   This was error.
25   //
26   //
27   //
28   //

                                     -26-
 1                                     III.
 2        The Appellees did not establish that they justifiably
          relied on on Wank’s representations.
 3
 4        Even if the First Declaration could be used against Wank, and
 5   even if the bankruptcy court did not inappropriately weight the
 6   evidence in the record, there remained a glaring hole in the
 7   Appellees’ proof that compels us to vacate the summary judgment.
 8        In considering a request for an exception to discharge under
 9   § 523(a)(2)(A),
10        [A] creditor must prove justifiable reliance upon the
          representations of the debtor. In determining that
11        issue, the court must look to all of the circumstances
          surrounding the particular transaction, and must
12        particularly consider the subjective effect of those
          circumstances upon the creditor.
13
14   In re Kirsh, 973 F.2d 1454, 1460 (9th Cir. 1992); see also
15   Citibank (S.D.) N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1090
16   (9th Cir. 1996) (noting that whether a creditor’s reliance on a
17   debtor’s representations is justified requires the application of
18   a subjective standard.)   As the Supreme Court explained this
19   standard, “[j]ustification is a matter of the qualities and
20   characteristics of the particular plaintiff, and the circumstances
21   of the particular case . . . .”    Field v. Mans, 516 U.S. 59, 71
22   (1995), citing the Restatement (Second) of Torts § 545A, comment
23   b. (1976).
24        In this case, to be entitled to an exception from discharge
25   under § 523(a)(2)(A), each of the Appellees must show that they,
26   individually, were justified in relying on any false
27   representations made to them by Wank.    In his arguments to the
28   bankruptcy court that there were disputed material facts regarding

                                       -27-
 1   whether the Appellees each justifiably relied on his alleged false
 2   statements, Wank repeatedly insisted that “[Appellees] had already
 3   made up their minds to invest in the EIS, and, therefore did not
 4   rely on his statements.”    Second Declaration at 9.   Instead of
 5   relying upon his statements, Wank argued that the Appellees had
 6   each arrived at their decision to invest after speaking with
 7   Neidich, and after conducting their own chosen due diligence.       Id.
 8        Wank’s uncontradicted statements about the Appellees’ lack of
 9   reliance depict a plausible scenario which finds other support in
10   the parties’ submissions.   For example, the Appellees attached as
11   an exhibit to their Motion for Summary Judgment a certified copy
12   of the First Amended Complaint they filed in the State Court
13   Action.   Although the Appellees never discussed in the bankruptcy
14   court whether they justifiably relied (or relied at all, for that
15   matter) on Wank’s representations, they alleged in the state court
16   complaint that (1) Neidich made the first contact with Sidiqqi “by
17   telephone and extolled the virtues of the [EIS].” ¶ 24; (2)
18   Neidich and Romer had a meeting with Ferguson in June of 2004 in
19   which they “extolled the virtues of the [EIS], which Defendants
20   Neidich and Romer claimed, among other things, paid its investors
21   8% per month, which purported to yield returns of 155% per year,
22   or words to that effect.” ¶ 25; (3) in March 2004, Neidich and
23   Romer sent Gordon “an email or emails in which they extolled the
24   virtues of the [EIS].   They also made the same representations
25   regarding an 8% monthly yield and 155% annual yield on the
26   investment.”   ¶ 26(a); (4) In early 2004, Neidich “solicited Mr.
27   Tsoupakis’s investment in the [EIS], which he claimed paid
28   extraordinarily high rates of return.” ¶ 27; and (5) in September

                                      -28-
 1   2004, Neidich contacted A&S Investment and “extolled the virtues
 2   of the [EIS].” ¶ 28.20   Collectively, these allegations in the
 3   Appellees’ state court complaint tend to show that they each were
 4   first contacted by either Neidich or Romer, not Wank, and that
 5   Neidich and/or Rohmer made glowing and unfounded representations
 6   to them concerning the EIS.   In short, Appellees’ own pleading in
 7   state court plausibly support Wank’s contention that: “Plaintiffs
 8   had already made up their minds to invest in the EIS, and,
 9   therefore did not rely on his statements.”   And as Wank observes,
10   the Appellees have submitted no declarations, nor any documentary
11   evidence (such as the EIS Agreements that they admit they signed
12   in connection with their investments) to show their justifiable
13   reliance on his representations.
14        Moreover, even if they did actually rely upon Wank’s
15   statements in investing in the EIS, each of the Appellees must
16   establish that it was justifiable for them to do so, based upon
17   their background, training and experience as investors.   The
18   record contains no facts to demonstrate that, assuming they in
19   fact took his word, they lacked other reasons not to appreciate
20   the risks associated with the currency investment.   As Wank points
21   out, whether the Appellees could show justifiable reliance was in
22   doubt because at least some of them were arguably sophisticated,
23   educated investors: a mortgage banker, a CPA, an insurance broker,
24   a Porsche dealer, and a medical doctor.
25
          20
             At oral argument before the Panel, counsel for the
26   Appellees was invited to explain whether the Appellees may have
     relied on the representations of Neidich and Romer, which they
27   entered into the bankruptcy court’s record, rather than the
     alleged representations of Wank. Counsel simply stated, “They
28   relied on Wank.”

                                     -29-
 1        At best, whether the Appellees each justifiably relied on
 2   Wank’s representations was disputed; at worst, the record contains
 3   no evidence to show such reliance.     Because of this, the
 4   bankruptcy court erred by determining that the debt Wank owed to
 5   Appellees was excepted from discharge under § 523(a)(2)(A).
 6                                CONCLUSION
 7        In granting summary judgment to the Appellees, the bankruptcy
 8   court should not have relied solely upon a declaration expressly
 9   designed to defeat Wank’s ability to obtain effective relief under
10   the bankruptcy laws.   In light of a contradictory declaration,
11   the bankruptcy court should not have weighed the value of his
12   various statements, determined Wank’s credibility, or drawn
13   inferences in favor of the Appellees.     Finally, there was nothing
14   in the record to show that the Appellees justifiably relied upon
15   any of Wank’s alleged false representations in making their
16   investments.   Because genuine issues of material fact remain
17   requiring a trial, we VACATE the bankruptcy court’s summary
18   judgment and REMAND this matter for further proceedings.
19
20
21   Ballinger Jr., Bankruptcy Judge, concurring:
22
23        I agree that the bankruptcy court’s ruling in this case must
24   be reversed, but not for the reasons announced by the majority.
25   Reversal is warranted only because the bankruptcy court failed to
26   justify its decision to disregard Wank’s sworn disavowal of the
27   First Declaration and, therefore, improperly weighed the evidence
28   when considering plaintiffs’ request for summary judgment.    Had

                                     -30-
 1   the bankruptcy court found Wank’s Second Declaration the self-
 2   serving product of a shammer, I would vote to affirm.   I
 3   respectfully disagree with the panel that the First Declaration,
 4   coupled with undisputed material facts, did not establish all the
 5   elements requisite to granting relief under Bankruptcy Code
 6   section 523(a)(2)(A).
 7        A bankruptcy court has the power to disregard sworn avowals
 8   meant to defeat summary judgment if it finds them to be conclusor-
 9   y, self-serving or to constitute a sham.   See F.T.C. v. Pub.
10   Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997)
11   (conclusory and self-serving affidavits lacking detailed facts and
12   any supporting evidence are insufficient to create a genuine issue
13   of material fact); Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262,
14   267 (9th Cir. 1991) (to disregard an affidavit as one conjured to
15   avoid summary judgment, the district court must make a factual
16   finding that the contradiction was a sham).
17        In this case, Wank’s Second Declaration is clearly self-
18   serving, but not conclusory.1   Instead of declaring Wank’s more
19   recent declaration a sham not to be considered, the bankruptcy
20   court reviewed the Second Declaration and essentially balanced its
21   credibility against the admitted facts contained in the First
22   Declaration.   Statements in the Second Declaration contradicted
23   facts essential to plaintiffs’ case and created genuine disputes
24   regarding material issues. These disputed issues preclude granting
25   summary disposition and compel us to reverse the bankruptcy
26
          1
             The Second Declaration is ten pages long and contains
27   details of Wank’s version of the circumstances surrounding creation
     of each paragraph of the First Declaration.
28

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 1   court’s order.   But, I respectfully disagree that this result
 2   flows from any inherent unreliability with Wank’s initial sworn
 3   admissions or a public policy concern.    I believe there was
 4   evidence at the trial court supporting a finding that Wank’s debt
 5   to plaintiffs should be excepted from his bankruptcy discharge.
 6   Section 523(a)(2)(A) excepts from discharge any debt for money,
 7   property or credit obtained by false pretenses, false
 8   representations or actual fraud.   To obtain relief a creditor must
 9   establish five elements: 1) the debtor made a representation; 2)
10   the debtor knew at the time the representation was false; 3) the
11   representation was made with the intent and purpose of deceiving
12   the creditor; 4) the creditor justifiably relied on the
13   representation; and 5) the creditor was damaged as a proximate
14   cause of the representation.   Ghomeshi v. Sabban (In re Sabban),
15   600 F.3d 1219, 1222 (9th Cir. 2010); Turtle Rock Meadows
16   Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d 1081, 1085
17   (9th Cir. 2000).
18        In this case, the last element is not disputed; Wank
19   acknowledges that plaintiffs suffered substantial damage as a
20   result of the scheme in which he encouraged them to invest. And
21   the First Declaration, standing alone, provides sufficient
22   evidence that a court could conclude satisfies a number of the
23   other elements of section 523(a)(2)(A).   The majority disagrees
24   and finds the First Declaration inherently unreliable.     It also
25   concludes the bankruptcy court erred because the record shows
26   plaintiffs did not establish justifiable reliance.   With respect
27   to the reliability of admissions found in the First Declaration,
28   the majority discusses the long recognized public policy

                                     -32-
 1   prohibition against prepetition waivers of Bankruptcy Code
 2   discharge rights and finds that this policy dictates that Wank’s
 3   admissions in the First Declaration be viewed with great
 4   skepticism.
 5        I disagree that this policy consideration is relevant to this
 6   case.2 As the panel notes, the bankruptcy judge correctly ruled
 7   that she would not consider the “bankruptcy defeating” language
 8   found both in the First Declaration and the agreement settling the
 9   parties’ state court case.   The question here is whether the
10   bankruptcy judge incorrectly found that sworn admissions contained
11   in the First (and disavowed in the Second) Declaration established
12
13        2
             There is no dispute that the First Declaration contains an
     improper “bankruptcy-proofing” provision. The bankruptcy court
14   properly held that this term was void and would not be considered.
     But, case law clearly provides that the bankruptcy court can
15   consider underlying facts contained in materials that include a
     bankruptcy defeating clause. Hayhoe v. Cole (In re Cole), 226
16   B.R. 647, 651 (9th Cir. BAP 1998), citing Klingman v. Levinson,
     831 F.2d 1292, 1296 n.3 (7th Cir. 1987). The majority
17   acknowledged, citing Cole, that the Bankruptcy Appellate Panel has
     drawn a distinction between the public policy against de facto
18   bankruptcy discharge waivers and determinations or stipulations
     regarding facts that may be relevant to determining if a debt is
19   dischargeable. In Cole, the bankruptcy court ignored a bankruptcy
     defeating clause contained in a state court judgment, but
20   considered stipulated facts contained therein to determine if
     collateral estoppel applied. The majority points out that there
21   are no stipulated facts and judgment in this case. But, Cole and
     Levinson do not require that the underlying facts be stipulated
22   to, nor do those cases require the facts be taken from a judgment.
     Here, we have admitted facts in a declaration signed under penalty
23   of perjury. Whether the facts were stipulated to or are a single
     party admission, and whether they were contained in a judgment or
24   a declaration, should make no difference to a bankruptcy court
     tasked with determining if those facts support a claim of non-
25   dischargeability for purposes of summary judgment. The majority’s
     conclusion that the public policy against bankruptcy defeating
26   clauses creates a general skepticism of the admitted facts goes
     too far. Cole and Levinson simply allow the court to disregard
27   the improper language and examine, without a presumption of
     suspicion, the underlying facts.
28

                                     -33-
 1   elements justifying relief under section 523(a)(2)(A).    Reversal
 2   is required not because the bankruptcy judge could not give
 3   credence to the First Declaration’s admissions, but rather because
 4   the record lacks a factual finding that the judge deemed the
 5   factual contradictions in the Second Declaration unworthy of
 6   consideration. Had the bankruptcy court found the Second
 7   Declaration a sham,   no public policy concern would have prevented
 8   it from holding that the admissions contained in the First
 9   Declaration conclusively established the following three elements
10   required for relief under section 523(a)(2)(A):
11        ! That Wank made false representations to plaintiffs to
          convince them to transfer hundreds of thousands of dollars to
12        him;
13        ! That Wank was aware that most, if not all, of the
          relevant representations were false when he made them;
14        and
15        ! That the false representations constituted deceit.
          Wank made them to create false impressions in
16        plaintiffs’ minds (e.g. that Wank had expertise in the
          financial scheme they were to invest in and that their
17        money would never be put at risk of loss).
18        The majority also rests its decision on the belief that
19   plaintiffs failed to establish the justifiable reliance needed
20   to obtain a judgment because the Second Declaration contains
21   Wank’s assertions that plaintiffs had already decided to
22   invest in the EIS currency speculation scheme prior to meeting
23   with him. This conclusion supports the view that if the
24   bankruptcy judge had memorialized her belief that the Second
25   Declaration was contrived and bogus, the decision at the trial
26   court would have to be affirmed.   More important are Wank’s
27   sworn acknowledgments in the First Declaration that he made
28   representations to the Plaintiffs that were false to induce

                                     -34-
 1   them to place their funds in his trust account, permit him to
 2   act as their “primary investor” and transfer their money to
 3   EIS.   Coupled with the undisputed fact that subsequent to
 4   these representations plaintiffs provided large sums to Wank,
 5   the bankruptcy court could appropriately decide that
 6   plaintiffs established justifiable reliance.
 7          Although I respectfully disagree with the majority’s
 8   reasoning, I concur in the decision to set aside the
 9   bankruptcy court’s grant of summary judgment.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

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