Race the Cresting Curl, LLC et al v. Papermaster

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
In re:
STEVEN GERALD
PAPERMASTER,
Debtor.
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Case No. 25-11564-CGB
Chapter 11
RACE THE CRESTING CURL, LLC
AND LEAP OF RULESET, LLC,
Plaintiffs,
v.
STEVEN GERALD
PAPERMASTER,
Defendant.
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Adv. No. 25-01067-CGB
ORDER GRANTING PLAINTIFFS’ MOTION FOR
SUMMARY JUDGMENT [ECF No. 15]
Dated: May 08, 2026.
__________________________________
CHRISTOPHER G. BRADLEY
UNITED STATES BANKRUPTCY JUDGE
________________________________________________________________
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Introduction
In this case, the Court once again considers whether a state court judgment
that awards judgment to a creditor “on its claims asserted in this cause against” the
debtor had, in fact, the effect of awarding judgment on the claims asserted in the
cause against the debtor. The Court once again determines that the plain text of the
order says what it says. In this case, that means that the debtor’s more-than-ten-
million-dollar debt to the creditors is nondischargeable.
Background
Debtor, Steven Gerald Papermaster, filed his individual chapter 11 case on
October 7, 2025.1 Creditors Race the Cresting Curl, LLC (“Race”) and Leap of
Ruleset, LLC (“Leap”) timely commenced this adversary proceeding objecting to
the discharge of the debts owed to them by Mr. Papermaster.2 Race and Leap assert
that their claims against Mr. Papermaster are nondischargeable under 11 U.S.C.
§§ 523(a)(2)(A), (a)(2)(B), and (a)(19).
On March 12, 2026, Race and Leap filed their Motion for Summary Judgment
[ECF No. 15], seeking summary judgment on their § 523(a)(19) claim. Mr.
Papermaster timely filed a response [ECF No. 18], and Race and Leap timely filed
a reply [ECF No. 19].
Legal Standard
Summary judgment is appropriate when “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.”3 “When seeking summary judgment, the movant bears the initial
responsibility of demonstrating the absence of an issue of material fact with respect
to those issues on which the movant bears the burden of proof at trial.”4 The burden
then shifts to the non-moving party to “present evidence that there is a genuine issue
for trial.”5 When evaluating a motion for summary judgment, courts must view the
1 Case No. 25-11564.
2 Pls.’ Compl., ECF No. 1.
3 Fed. R. Civ. P. 56(a), made applicable to this adversary proceeding through Fed. R. Bankr.
P. 7056.
4 Lindsey v. Sears Roebuck and Co., 16 F.3d 616, 618 (5th Cir. 1994) (citing Celotex Corp. v.
Catrett, 477 U.S. 317 (1986)).
5 Jenkins v. Jones (In re Jones), 600 B.R. 561, 565 (Bankr. W.D. Tex. 2019) (citing Celotex Corp.,
477 U.S. at 323)).
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evidence in the light most favorable to the non-moving party.6 “Unsubstantiated
assertions, improbable inferences, and unsupported speculation are not sufficient to
defeat a motion for summary judgment.”7
Jurisdiction and Authority
The Court has jurisdiction to hear this matter and authority to enter a final
judgment. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and is a part of
the claims allowance process.8 In addition, both parties have consented to this Court
entering a final judgment in this case.9
Analysis
The Bankruptcy Code prohibits debtors from receiving a discharge of certain
types of debt, including those emerging from the violation of securities laws. The
provision is broadly drafted. Section 523(a)(19) of the Bankruptcy Code denies the
discharge to any debt that “is for the violation of any of the Federal securities
laws[,] . . . any of the State securities laws, or any regulation or order issued under
such Federal or State securities laws; or common law fraud, deceit, or manipulation
in connection with the purchase or sale of any security.” This provision was passed
in the wake of the Enron scandal and was then expanded somewhat in the 2005
Bankruptcy Code amendments.10
Most items in § 523’s list of nondischargeable debts need not be liquidated
before they are held to be nondischargeable, and the bankruptcy court may itself
liquidate the amount of the claims as well as determining their eligibility for
discharge.11 That said, if the debt has been liquidated elsewhere—for instance in a
state court judgment or an arbitration award—the court will engage in a familiar
collateral estoppel analysis to determine what sort of preclusive effect it should be
6 Brown v. City of Houston, Tex., 337 F.3d 539, 541 (5th Cir. 2003) (citing Daniels v. City of
Arlington, 246 F.3d 500, 502 (5th Cir. 2001)).
7 Id. (collecting cases); see also Jones, 600 B.R. at 565 (quoting Davis v. Fort Bend Cnty., 765 F.3d
480, 484 (5th Cir. 2014)).
8 Stern v. Marshall, 564 U.S. 462, 499 (2011).
9 ECF Nos. 6 and 11.
10 See generally Faris v. Jafari (In re Jafari), 401 B.R. 494 (Bankr. D. Colo. 2009).
11 See generally, e.g., Morrison v. W. Builders of Amarillo, Inc. (In re Morrison), 555 F.3d 473,
478–80 (5th Cir. 2009).
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given, usually based on whether the relevant issues were fully and fairly litigated
below.12
Section 523(a)(19) is somewhat different. On the one hand, although courts
are divided on this, the provision seems to suggest that the debt must be liquidated
elsewhere, not in the bankruptcy court.13 This requirement can make it somewhat
harder for creditors to obtain the nondischargeable judgment because they may have
to go litigate in another venue first. On the other hand, the creditor is aided by the
fact that the nondischargeable debt can arise from a wide variety of sources: “any
judgment, order, consent order, or decree entered in any Federal or State judicial or
administrative proceeding.”14 And this language does not seem to require a full
preclusion analysis (as confirmed by various decisions cited below, including the
widely cited Minardi case15). This may ease creditors’ way, at times, giving force to
default judgments, settlement agreements, and other writings that might not always
pass a full preclusion analysis.
12 See, e.g., Wong v. Bergan (In re Bergan), No. 25-3431, 2026 WL 200775, at *3 (Bankr. S.D.
Tex. Jan. 26, 2026) (“Generally, when a creditor relies on a state court judgment to show that a
debt is non-dischargeable, the bankruptcy court may give preclusive effect to the state court
judgment only if the elements of collateral estoppel are met.” (citing Gober v. Terra+Corp. (In re
Gober), 100 F.3d 1195, 1201 (5th Cir. 1996)).
13 There is a split of authority as to whether this provision allows a bankruptcy court to liquidate a
claim of this type, then deem it nondischargeable. See J. Thompson Invs., LLC v. Soderstrom (In
re Soderstrom), 524 B.R. 835, 844 n.52 (Bankr. M.D. Fla. 2015) (collecting cases). Here, as the
Court will detail below, Race and Leap present a valid state court judgment in their favor; this
claim has already been liquidated by the state court. Therefore, the issue of whether this Court
could determine liability for underlying claims under § 523(a)(19) is not raised here. However,
had that issue been raised, the Court notes that the text of the Code appears to align with the
authorities that require liquidation of these claims outside of bankruptcy court. E.g., Wright v.
Minardi (In re Minardi), 536 B.R. 171, 192 (Bankr. E.D. Tex. 2015) (“The proper interpretation
of § 523(a)(19), even as amended, requires that a tribunal other than the bankruptcy court
determine the liability aspect–e.g., whether a federal or state securities violation or some type of
related fraud has occurred.” (first citing McGraw v. Collier (In re Collier), 496 B.R. 877, 902–03
(Bankr. E.D. Ark. 2013), and then citing Voss v. Pujdak (In re Pujdak), 462 B.R. 560, 576 (Bankr.
D.S.C. 2011))); Terek v. Bundy (In re Bundy), 468 B.R. 916, 921 (Bankr. E.D. Wash. 2012)
(“Should the bankruptcy court be the appropriate forum to conclude that the requiremen[t]s of
subpart (A) have been met, subpart (B) is superfluous. The existence of subsection (B) to
§ 523(a)(19) leads to the conclusion that the bankruptcy court, once some regulatory or other
judicial tribunal has determine[d] a violation of securities laws exists, may determine whether the
debt at issue resulted from the violation and is thus not subject to discharge.”).
14 11 U.S.C. § 523(a)(19)(B)(i).
15 536 B.R. 171.
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Here, Race and Leap sued Mr. Papermaster in state court for claims arising
out of alleged securities fraud, including (1) violations of the Texas Securities Act,16
(2) fraud, (3) statutory fraud, and (4) unjust enrichment.17 Race and Leap obtained
and the state court entered a consent judgment in their favor, awarding each party
“judgment on its claims asserted in this cause against Defendant Steven G.
Papermaster.”18
In Mr. Papermaster’s main case, this Court previously opined about the
applicability of § 522(q)(1)(B)(i), a provision of the Bankruptcy Code that limits a
debtor’s homestead exemption if the debtor owes a debt arising out of certain
securities laws violations.19 Mr. Papermaster timely filed a notice of appeal of that
ruling.20 While the analysis under § 523(a)(19) is similar in many ways to § 522(q),
the two provisions are not identical. 21 For these reasons, the Court will
independently analyze the parties’ arguments under § 523(a)(19) and does not
merely regurgitate the reasoning in its previous ruling.
A. A consent decree can serve as the basis for a nondischargeable debt, and it
can do so without the necessity of a full preclusion analysis.
For most nondischargeability actions, a state court order is subject to a
collateral estoppel analysis before it can be used preclusively.22 But the situation is
somewhat altered in the context of § 523(a)(19). As cases cited by both parties
confirm, 23 the typical preclusion analysis is not required. 24 Because the statute
16 The Texas Securities Act has since been recodified into Title 12 of the Texas Government Code,
effective January 1, 2022.
17 ECF No. 1-1 at 12–18. Race and Leap also sued Mr. Papermaster’s company for suit on a
promissory note, but that claim is not relevant to this analysis.
18 ECF No. 1-3 at 1.
19 See In re Papermaster, No. 25-11564, ___ B.R. ___, 2026 WL 641095 (Bankr. W.D. Tex. Mar.
2, 2026).
20 Notice of Appeal, Case No. 25-11564, ECF No. 79.
21 For a comparison, see Papermaster, 2026 WL 641095, at*4–6. In many ways, as the Court will
explain below, the analysis under § 523(a)(19) is perhaps easier for Race and Leap to satisfy.
22 See, e.g., Bergan, 2026 WL 200775, at *3 (citing Gober, 100 F.3d at 1201).
23 Def.’s Resp, ECF No. 18 ¶ 16 (citing Minardi, 536 B.R. 171); Pls.’ Mot. for Summ. J., ECF No.
15 ¶ 26 (citing Minardi, 536 B.R. at 192–93).
24 Minardi, 536 B.R. at 192–93; see also Bergan, 2026 WL 200775, at *3–4; Jones, 660 B.R. at
568–70; Kokas v. Osborne (In re Osborne), No. 16-4068, 2017 WL 1232407, at *4 (Bankr. E.D.
Tex. Apr. 3, 2017) (“[O]nce a determination of a securities violation or related fraud has been
made by a non-bankruptcy tribunal, and proof of the entry of the order or existence of a settlement
of such charges is tendered to the bankruptcy court, the debt is rendered nondischargeable under
§ 523(a)(19) without proof of any additional element in a manner outside the traditional analysis
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explicitly contemplates a finding of nondischargeability for a qualifying debt arising
from “any judgment, order, consent order, or decree entered in any Federal or State
judicial or administrative proceeding,” there is no need for the Court to consider the
underlying circumstances of the order. So long as the judgment, order, consent order,
or decree reflects a debt deriving from any one of the enumerated predicates, the
inquiry ends there.25 The debt is not discharged.
B. Two of the claims resolved against Mr. Papermaster in the state court order
are each qualifying predicates for nondischargeability under § 523(a)(19).
The state court judgment awards Race and Leap each “judgment on its claims
asserted in this cause against Defendant Steven G. Papermaster.”26 To determine to
which claims the state court judgment refers, the Court looks to the live pleading in
the state court case.27 The claims asserted in the cause against Defendant Steven G.
Papermaster were (1) violations of the Texas Securities Act, (2) fraud, (3) statutory
of issue preclusion principles.” (citing Minardi, 536 B.R. at 192)); Hardwick v. Anderson
[hereinafter Hardwick II], 658 B.R. 123, 129–30 (E.D. Tex. 2024). Although Mr. Papermaster’s
response cites Minardi for this principle, he nonetheless attempts to make a “backdoor” preclusion
argument, arguing, for example, that there was never “any determination of the merits of the claims
brought by Leap or Race.” Def.’s Resp. ¶¶ 16, 26. Under the prevailing case law, this analysis is
simply not required for the purposes of 11 U.S.C. § 523(a)(19), so the Court rejects this argument.
See, e.g., Osborne, 2017 WL 1232407, at *5 (“Thus, any lack of particularized findings in this
context is of no consequence.”).
25 11 U.S.C. § 523(a)(19)(B)(i). See, e.g., Osborne, 2017 WL 1232407, at *4–5 (“Congress
intended the underlying non-bankruptcy decisions or settlements to have preclusive effect in
nondischargeability actions before the bankruptcy court.” (quoting Pujdak, 462 B.R. at 575–76
(alterations in original)). See generally Jafari, 401 B.R. 494 (contemplating legislative intent of
several subsections of 11 U.S.C. §523 and discussing pre-bankruptcy determination of liability
under § 523(a)(19)).
Mr. Papermaster argues that the state court judgment was part of a settlement agreement
and was not intended to be, as it says, a judgment on the “claims asserted in this cause against
Defendant Steven G. Papermaster.” See Def.’s Resp. ¶¶ 4, 11, 13, 24, 26. But principles of contract
interpretation govern the interpretation of Texas judgments. Argonaut Ins. Co. v. Allstate Ins. Co.,
869 S.W.2d 537, 540 (Tex. App.—Corpus Christi 1993, writ denied (citing Barrientes v. Bd. of
Trs., Harlandale Indep. School Dist., 764 S.W.2d 28, 29 (Tex. App.—San Antonio 1989, writ
denied)). This judgment is unambiguous, and thus it would be improper to consider evidence of
the parties’ “real” intent in contradiction. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 422
(Tex. 2000). Even if the Court could consider the circumstances under which the judgment was
entered (which it cannot), the statute explicitly contemplates a debt for securities fraud resulting
from “any settlement agreement entered into by the debtor.” 11 U.S.C. § 523(a)(19)(B)(ii).
26 ECF No. 1-3 at 1.
27 See Hardwick II, 658 B.R. at 131–132 (looking to the underlying state court record).
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fraud, and (4) unjust enrichment.28 The violations of the Texas Securities Act qualify
as predicates for nondischargeability under § 523(a)(19)(A)(i), which contemplates
a debt for the violation of “any of the State securities laws.”29 The fraud claim
qualifies as a debt for “common law fraud . . . in connection with the purchase or
sale of any security.” 30 This leaves the claims for statutory fraud and unjust
enrichment, which do not qualify under the plain language of the text of § 523(a)(19).
Mr. Papermaster’s response contends that the state court order “recites that it
disposes of all claims and all parties, but makes no finding or conclusion with respect
to any particular claim.”31 However, this is not true: the state court order explicitly
awards judgment to Race and Leap on their “claims asserted in this cause against”
Mr. Papermaster. This judgment obviously includes, therefore, the two claims that
are statutory predicates for nondischargeability under § 523(a)(19).
The clarity of this judgment can be illustrated by contrasting it with the state
court order in Hardwick32 (a case that Mr. Papermaster denies controls, but makes
no attempt to distinguish33). In Hardwick, the state court order did not enter judgment
on any claims, but merely entered judgment “in favor of the Plaintiff” and “finally
dispos[ed] of all claims against” the defendant.”34 Because the state court order in
Hardwick did not enter judgment on any particular claim (or on all claims), the
bankruptcy court had to investigate the causes of action in the state court case to
determine what the judgment could have been for.35 Because all of the causes of
28 ECF No. 1-1 at 12–18. Race and Leap also sued Mr. Papermaster’s company, Nano Global Corp.,
for suit on a promissory note, but that claim was resolved by a separate order and is not relevant
to this analysis. That consent judgment is filed on the record at ECF No. 1-2.
29 Prior case law in this district has confirmed that the Texas Securities Act is, indeed, a State
securities law. See, e.g., In re Bounds, 491 B.R. 440, 449–50 (Bankr. W.D. Tex. 2013). (As the
Court already noted, this law has since been recodified. See supra note 16.)
30 11 U.S.C. § 523(a)(19)(A)(ii). The Court notes the statutory distinctions from § 522(q)(B)(ii),
which contemplates a debt arising from fraud (not just common law fraud, as in § 523(a)(19)) “in
connection with the purchase or sale of any security registered under section 12 or 15(d) of the
Securities Exchange Act of 1934 or under section 6 of the Securities Act of 1933” (not just any
security). As the Court already discussed in its § 522(q) opinion, the fraud claims here did not
qualify for § 522(q) purposes. Papermaster, 2026 WL 641095, at*6.
31 ECF No. 18 at 3.
32 The bankruptcy court case is Anderson v. Hardwick (In re Hardwick) [hereinafter Hardwick I],
648 B.R. 175 (Bankr. E.D. Tex. 2023). The bankruptcy court’s ruling was affirmed by the district
court. Hardwick II, 658 B.R. 123. The state court order in Hardwick I is available on the docket in
the bankruptcy case, Case No. 21-04065 (Bankr. E.D. Tex. May 19, 2021), ECF No. 13-5.
33 Def.’s Resp., ¶¶ 2, 13, 17.
34 Anderson v. Hardwick (In re Hardwick), Case No. 21-04065 (Bankr. E.D. Tex. May 19, 2021),
ECF No. 13-5.
35 Hardwick I, 648 B.R. at 181.
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action were predicate offenses for purposes of § 523(a)(19), the bankruptcy court
was able to hold that the judgment was “for” those predicate offenses.36 The district
court affirmed.37
Here, not all of the claims asserted against Mr. Papermaster are within the
scope of § 523(a)(19).38 So, superficially, this looks like a more difficult case than
Hardwick. But because judgment here was explicitly awarded to each of Race and
Leap on “its claims asserted in this cause against Defendant Steven G. Papermaster,”
there is no ambiguity or room to argue that the judgment was only awarded on certain
claims (i.e., the ones that do not trigger § 523(a)(19) liability). In other words, unlike
the state court judgment in Hardwick, the judgment here is not unclear on the
grounds on which it was entered.39 It is not necessary for every claim in this case to
be a predicate offense for the purposes of § 523(a)(19). Judgment was awarded for
state securities laws violations and fraud arising out of the sale of securities to Race
and to Leap.
C. Mr. Papermaster’s cited cases do little to support his position.
Mr. Papermaster cites several § 523(a)(19) cases purportedly in support of his
position.40 However, each of these cases are distinguishable, especially upon review
of the state court order at issue in each case. Notably, Mr. Papermaster has not
pointed to a single case where a debt based on a state court order that explicitly
awarded judgment against the debtor for securities law violations was found to be
dischargeable by a bankruptcy court.
In Mollasgo v. Tills, the creditor attempted to use a settlement agreement to
establish nondischargeability.41 The court considered Congress’s intent in allowing
36 Id. at 182 (“No claims alleged in the state court case are attributable to any theories other than
violations of securities law, or fraud in connection with the sale or purchase of securities. It follows
that by knowingly consenting to a judgment in the state court case, Defendant consented to a
judgment ‘for’ violations of securities law, or for fraud in connection with the sale or purchase of
securities. No other claims were alleged which could possibly give rise to any other basis for the
entry or existence of the judgment to which Defendant consented.”).
37 Hardwick II, 658 B.R. at 133 (“After careful review of the Plaintiffs’ Second Amended Original
Petition, the Court finds that all of its claims lie within the scope of 11 U.S.C. § 523(a)(19)(A).”).
38 Race and Leap describe all of the claims in the state court action as “arising from the same core
conduct involving securities transactions.” Pls.’ Mot. for Summ. J., ECF No. 15 ¶ 19. However,
while they do appear to arise from the same core facts, the claims for statutory fraud and unjust
enrichment are not predicates for nondischargeability, based on the plain language of § 523(a)(19),
regardless of their relation to the other claims.
39 Cf. Hardwick II, 658 B.R. at 131–32.
40 See Def.’s Resp., ECF No. 18, ¶¶ 18–23.
41 Mollasgo v. Tills (In re Tills), 419 B.R. 444, 452–53 (Bankr. S.D. Cal. 2009).
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a settlement agreement to satisfy § 523(a)(19), observing that even “a settlement
agreement that settles allegations of securities violations and is silent to fault may
be sufficient.”42 But because the settlement agreement expressly stated that “fault
and liability are not conceded,” the agreement was insufficient.43
Here, unlike Tills, Race and Leap attempt to use a state court judgment, not a
settlement agreement, to establish nondischargeability of Mr. Papermaster’s debts to
them. And, unlike Tills, where “fault and liability” were not conceded, this judgment
enters judgment on the claims against Mr. Papermaster, which under Texas law is a
finding of liability on those claims.
The facts of Barton v. Stalter44 are similar to Tills. In Stalter, the parties
resolved a state court lawsuit with a settlement agreement that expressly “reserved
any admission of liability.”45 The related, stipulated state court judgment, which is
available on the docket in that case, only enters a judgment amount and does not
enter judgment on any claims against the defendants.46
Likewise, in McKinny v. Allison,47 the district court upheld the bankruptcy
court’s decision to deny summary judgment on a similar federal court order because
“The stipulated judgment did not reference any of the underlying asserted claims; it
only referenced the settlement agreement, which expressly stated the parties
admitted no liability.”48 Plainly, Stalter and Allison are both distinguishable from
Mr. Papermaster’s case where there is no reservation language.49
42 Id. at 452.
43 Id. at 452–53; see also id. at 455 (“There is no evidence, however, that Congress intended to
preclude litigation over securities violations where the Debtor bargained for and obtained the right
to contest fault in the very settlement agreement at issue.”).
44 Barton v. Stalter (In re Stalter), No. 11-06058, 2012 WL 4482958 (Bankr. E.D. Mich. Sept. 25,
2012).
45 Id. at *2.
46 Barton v. Stalter (In re Stalter), Case No. 11-06058, ECF No. 1, at 41–42 (Bankr. E.D. Mich.
July 18, 2011).
47McKinny v. Allison (In re Allison), No. 5:13-CV-00176-FL, 2013 U.S. Dist. LEXIS 155245
(E.D.N.C. Oct. 29, 2013).
48 Id. at *25. The underlying order, which does not enter judgment on any claims, is available on
the docket in the bankruptcy case. McKinny v. Allison (In re Allison), Case No. 11-00312-8-SWH,
ECF No. 23-7 (Bankr. E.D.N.C. Apr. 30, 2012).
49 Pidcock v. McCune is also distinguishable because the underlying judgment in that case only
awarded judgment “as repayment for the stock purchases” and for a breach of contract, not for any
claim of securities fraud. Pidcock v. McCune (In re McCune), No. 21-1013-j, 2023 WL 2879278,
at *10 (Bankr. D.N.M. Apr. 10, 2023); Pidcock v. McCune (In re McCune), Case No. 21-1013-j,
ECF No. 151-1, at 1 (Bankr. D.N.M. Sept. 7, 2022).
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Mr. Papermaster also brings forward Lyndon v. SEC,50 in which a consent
judgment was entered against the debtor in a federal securities action specifically
“without admitting or denying the allegations of the Complaint (except as to
jurisdiction).” 51 However, the consent judgment also explained that “the facts
alleged in the SEC’s complaint would be deemed true” for the purpose of
determining damages.52 The facts alleged in the SEC’s complaint included federal
securities laws violations.53 Thus the court determined: “Preclusion analysis is not
necessary here; the terms of the [judgment] make it crystal clear that [the debtor’s]
debt is ‘for’ securities law violations.”54 Mr. Papermaster is correct that the consent
judgment here, unlike in Lyndon, does not explicitly state that the facts in the
complaint were to be deemed true. But, also unlike in Lyndon, there was no “without
admitting or denying” language here—to the contrary, judgment was entered against
Mr. Papermaster on the claims alleged in the case, without any reservations. There
is nothing inconsistent about this Court’s ruling and the Lyndon case.
Finally, Mr. Papermaster cites Wong v. Bergan,55 a 2026 case out of the
Southern District of Texas in which the court granted summary judgment on
§ 523(a)(19).56 The underlying state court judgment in that case explicitly found
violations of state securities laws.57 However, it was a default judgment, which was
not preclusive under the applicable state law.58 The court affirmed that traditional
issue preclusion did not apply, and that the default judgment could still serve as a
basis of nondischargeability for § 523(a)(19).59 Although the judgment in Bergan
was more explicit than the judgment against Mr. Papermaster here, the legal
principle is the same: no preclusion analysis is required.
D. Even if a preclusion analysis were required, this judgment would pass it.
As established above, no preclusion analysis is required for this Court to find
that the state court judgment establishes a nondischargeable debt under § 523(a)(19).
That said, under Texas law, as the Court has already found in its related opinion
50 Lyndon v. SEC (In re Lyndon), No. 18-90005, 2018 WL 3004588 (Bankr. D. Haw. June 13,
2018).
51 Lyndon v. SEC (In re Lyndon), Case No. 18-90005, ECF No. 2, at 12 (Bankr. D. Haw. Feb. 7,
2018).
52 Lyndon, 2018 WL 3004588, at *3.
53 Id.
54 Id. at *4.
55 Bergan, 2026 WL 200775.
56 Id. at *5.
57 Id. at *4.
58 Id. at *3.
59 Id. at *4.
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under § 522(q), the opinion here would pass the collateral estoppel test under
governing Texas law.60 The judgment is final, unambiguous, and was never appealed.
It stands as a matter of law.
Conclusion
Regardless of the circumstances or intent of the order, a judgment was entered
by the state court, which awarded Race and Leap “judgment on [their] claims
asserted in this cause against Defendant Steven G. Papermaster.” Upon review of
the live pleading in that case, the claims asserted in that cause against Mr.
Papermaster included violations of state securities laws and fraud in connection with
the sale of securities. Therefore, Mr. Papermaster owes a debt for “the violation
of . . . any of the State securities laws and “common law fraud . . . in connection with
the sale of any security,”61 and this debt results from a “judgment, order, consent
order, or decree entered in any Federal or State judicial or administrative
proceeding.”62
These facts are subject to no real dispute and are not eligible to be relitigated
by Mr. Papermaster in this Court. Therefore, summary judgment is entered on
11 U.S.C. § 523(a)(19). Mr. Papermaster’s debts to Race and Leap are
nondischargeable.
IT IS SO ORDERED that Plaintiffs’ Motion for Summary Judgment
[ECF No. 15] is granted.
# # #
60 Papermaster, 2026 WL 641095, at *4 (“Ultimately, the plain language of the agreed judgment
governs. The agreed judgment explicitly awards judgment against Mr. Papermaster on each claim
including the securities fraud claim. For this Court to refuse to give due legal effect to that
judgment would be to disrespect the Texas laws and courts under which that judgment was
entered.”).
61 11 U.S.C. § 523(a)(19).
62 See 11 U.S.C. § 523(a)(19)(B)(i).
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