Case Summary:
Plaintiff Katherine Hebl brought this action to have her arbitration award of $310,000 declared nondischargeable under 11 U.S.C. § 523(a)(2)(A) or, in the alternative, section 523(a)(4). Plaintiff alleged her business partner Bradley Windeshausen over the course of three and one-half years embezzled funds from a bar in which they operated as equal partners. At a continued hearing, the Court granted in part and denied in part Defendant’s motion to dismiss, finding Plaintiff failed to established section 523(a)(2)(A)’s intent element, but made a prima facie case for liability under section 523(a)(4). The Court found the debt dischargeable because the Plaintiff failed to establish a fiduciary relationship under section 523(a)(4), and failed to establish the element of intent. In addition, the Court found Plaintiff did not establish the existence of a “debt.”

Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability - Embezzlement
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud or Defalcation in Fiduciary Capacity
11 U.S.C. § 523(a)(4) -- Nondischargeability - Larceny
Wis. Stat. § 183.0402 -- Duties of Managers and Members

Key Terms:
Embezzlement
Fiduciary Capacity
Fraud - Fiduciary Capacity
Larceny