Article

Note: Munir Uwaydah (Broker) arranged for the sale of a CT scanner (Equipment) by General Electric Medical Systems (Seller) to a clinic in Saudi Arabia (Applicant) for US$1,070,000. At the Applicant's request, the National Commercial Bank of Riyadh issued a letter of credit for "at least" $1,000,000 in favor of Broker. Broker told Seller that he would use the LC proceeds to pay for Equipment after it had been delivered to Applicant.

Seller delivered Equipment to Applicant and Broker paid the first 10% of the purchase price as scheduled. Seller received no more payments, but Broker repeatedly promised that the balance of the debt was forthcoming as soon as Broker received the LC proceeds. Seller later learned that Broker had received the LC proceeds and transferred most of the proceeds to a bank account in Lebanon and deposited $50,000 of the proceeds in his personal bank account.

Seller sued Broker for conversion and fraud in the United States District Court for the Northern District of Ohio. At the same time, Broker filed for bankruptcy in Los Angeles, California. After Broker repeatedly failed to cooperate with the discovery process in the Ohio trial, the court issued summary judgment for Seller, and the Court of Appeals for the Sixth Circuit affirmed. The Supreme Court of the United States denied certiorari.

After the Court of Appeals for the Sixth Circuit affirmed the Ohio district court's ruling, Seller sought to apply the court's fraud determination to Broker's bankruptcy in California, and so have Broker's debt declared nondischargeable. The U.S. Bankruptcy Court for the Central District of California, Donovan, J., held that the Ohio district court's findings of fraud had preclusive effect in Broker's bankruptcy case and that Broker's debt to Seller was therefore nondischargeable. Broker appealed and the United States Bankruptcy Appellate Panel for the Ninth Circuit, Markell, Snyder, and Pappas, JJ., affirmed.

[JEB/pbl]

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