Asphalt Prof'ls Inc. v. Davis (In re Davis)

I. INTRODUCTION

In 2005, plaintiff Asphalt Professionals, Inc. ("API") sued defendant Darin Davis ("Davis") and T.O. IX, LLC ("T.O."), among others, for breach of a subcontract agreement and fraud, among other claims, in state court. The subcontract agreement included a reciprocal attorneys' fees provision; Davis was not a signatory to the agreement, but the agreement provided for T.O. to enforce all provisions of the agreement. At all times, API alleged that T.O. is an alter ego of Davis.

After splitting the action into three phases, the state court ruled in API's favor on API's breach of contract claim and API's alter ego allegations, holding that T.O. is an alter ego of Davis. Based on the subcontract agreement, the state court also awarded API attorneys' fees in connection with litigating the breach of contract claim, for which Davis was held liable.

During the parties' state court litigation, Davis filed a chapter 7 petition. Subsequently, API filed a complaint to establish nondischargeability of its debt and denial of Davis's discharge. API's claim under 11 U.S.C. § 523 (a)(2)(A) mirrored API's claim of fraud in state court; before the state court reached the fraud phase,…