Dynkin v. Alcalay

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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In re: 	MEMORANDUM &
ORDER
BARRY DYNKIN, 	CV 25-2150 (GRB)
Debtor,
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BARRY DYNKIN,
Appellant,
-against-
BEN-ZION ALCALAY,
Appellee.
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GARY R. BROWN, United States District Judge:
The instant case is an appeal of debtor Barry Dynkin (“Dynkin” or “debtor” or
“appellant”) from a Decision and Order entered by the Honorable Alan S. Trust, United States
Bankruptcy Chief Judge for the Eastern District of New York, granting the motion filed by Ben-
Zion Alcalay (“Alcalay” or “appellee”) for summary judgment and excepting Alcalay’s claim
from discharge pursuant to 11 U.S.C. § 523(a) in the debtor’s underlying Chapter 7 bankruptcy
proceeding. For the reasons set forth below, the Court affirms the Bankruptcy Court’s Decision
and Order in all respects.
BACKGROUND
On January 31, 2024, Dynkin filed a voluntary petition pursuant to Chapter 7 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of
New York, captioned In re Barry Dynkin, Case No. 24-70390-ast (the “Bankruptcy Case”).
(Bankr. DE 1.) Allan B. Mendelsohn was appointed the Chapter 7 Trustee. (Id. at DE 2.) On
FILED
CLERK
U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
LONG ISLAND OFFICE
3/10/2026 11:09 am
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March 20, 2024, Alcalay filed a proof of claim in the Bankruptcy Case in the amount of
$345,046.70. (App. 280-96.) The following relevant facts are taken from the record of the
Bankruptcy Court in the underlying bankruptcy proceeding.
(1) Pre-Petition Background
(a) The Florida State Court Proceeding
The debtor Barry Dynkin and his brother Benjamin Dynkin were members of Atlas
Cybersecurity, LLC (“Atlas”) and together with appellee Ben-Zion Alcalay’s sons, Eliahu
Alcalay and Benjamin Alcalay, were members of DACS Cybersecurity Holdings, LLC, which
owned Atlas. (Id. at 63-66.)
On November 23, 2020, the appellee Ben-Zion Alcalay commenced an action against the
debtor Barry Dynkin, Benjamin Dynkin and Atlas (collectively the “Florida Defendants”) in the
Fifteenth Judicial Circuit Court in Palm Beach County, Florida (the “Florida State Court”) for
damages arising out of alleged fraudulent misconduct associated with three agreements entered
into by the parties. (Id. at 128 ¶ 3.) In the Complaint, Alcalay alleged that Barry and Benjamin
Dynkin (the “Dynkins”) fraudulently misrepresented the success and financial condition of Atlas
to induce the appellee to make a loan to Atlas, guarantee rent payments for Atlas’s office and pay
off certain debts that the Dynkins incurred with Atlas.1 (Id., Ex. 1.) In particular, appellee
alleged that to secure a $150,000.00 loan from Alcalay, the Dynkins misrepresented: (i) Atlas’s
ability to pay its expenses out of generated cash flow; (ii) the existence of guaranteed, in hand
orders; (iii) Dynkins’ ability to pay bills from existing profits generated by Atlas; and (iv) the
1 In the Complaint, Alcalay alleged that (i) in late 2018 the Dynkins sought out a commercial real
estate location to utilize as an office for Atlas in Nassau County, New York; (ii) in late 2019, the
Dynkins needed funds to invest in Atlas, approached Alcalay’s sons who declined to invest but
referred the Dynkins to their father; and (iii) in January 2020, the Dynkins met with Alcalay in
his office in Boca Raton, Florida to discuss an investment of funds in Atlas. (DE 4.)
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Dynkins had engaged in, and developed, Atlas’s business for two years prior to Atlas’s formal
creation. (Id.) The Florida Defendants failed to respond to the Complaint. (Id. at 129 ¶ 10.)
On February 4, 2021, Alcalay filed an Amended Complaint against the Florida
Defendants alleging claims for indemnification, prima facie tort, breach of contract, fraud,
fraudulent inducement, a declaratory judgment and a permanent injunction. (Id., Ex. 3.) The
Florida Defendants failed to respond to the Amended Complaint. (Id. at 129 ¶¶ 12-13.)
On May 5, 2021, Alcalay filed a motion for entry of an order of default against the
Florida Defendants (the “default judgment motion”). (Id. at ¶ 14.) The Florida State Court
conducted a hearing on May 20, 2021, and the Florida Defendants appeared with counsel. (Id. at
¶ 15.) The Florida State Court denied the default judgment motion without prejudice because the
affidavits of service did not appear on the court’s docket. (Id.) Appellee cured the docketing
deficiency and filed a renewed default judgment motion. (Id. at 130 ¶¶ 17-18.) The Florida
Defendants did not file a response to the renewed motion. (Id. at ¶ 19.)
On June 23, 2021, the Florida State Court conducted a hearing on the renewed default
judgment motion, however, the Florida Defendants failed to appear and did not submit any
opposition to the motion. (Id.) 	The Florida State Court granted the motion and determined that
(1) the court had personal jurisdiction over the Florida Defendants; (2) the summons, complaint
and amended complaint were properly served on the Florida Defendants; (3) no answer, motion
or other response to the complaint or amended complaint was submitted by the Florida
Defendants; and (4) the Florida Defendants appeared in the Florida State Court Action on May
20, 2021 (“Order of Judicial Default”). (Id. at 128-31.) The Clerk of the Court entered the
Order of Judicial Default on June 30, 2021. (Id.) On July 13, 2021, the Florida State Court
mailed a copy of the Order to the Florida Defendants. (Id. at 191.)
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On July 16, 2021, appellee filed a motion for final judgment after default (the “motion for
final default judgment”). (Id.) The Florida Defendants filed a motion to vacate the default
judgment in the Florida State Court on August 23, 2021 and requested an evidentiary hearing to
determine whether service of process upon the Florida Defendants was proper. (Id. at 192.) The
Florida State Court held a hearing on the motion to vacate on September 14, 2021, and the
Florida Defendants appeared with counsel. (Id.) The Court directed the parties to appear for an
evidentiary hearing on November 1, 2021. (Id.) The Florida State Court conducted an
evidentiary hearing on both the motion to vacate and the motion for final default judgment on
November 1, 2021 and November 24, 2021, and all parties were represented by counsel. (Id.)
On December 5, 2021, the Florida State Court denied the motion to vacate based on its factual
findings that (i) service upon the Florida Defendants was properly effectuated, (ii) the Florida
Defendants failed to establish excusable neglect for their default, and (iii) the Florida Defendants
failed to establish meritorious factual defenses. (Id. at 188-206.) In addition, the Florida State
Court granted Alcalay’s motion for final default judgment. (Id.) On December 7, 2021, the
Florida State Court entered a final default judgment (hereinafter the “Default Judgment”) in
favor of Alcalay and against the Florida Defendants for breach of contract, fraud, and fraudulent
inducement and awarded damages in the amount of $239,291.40 plus interest. (Id. at Ex. 1 at
42.) The Florida Defendants did not properly perfect an appeal of the Default Judgment. (Id.)
(b) The New York State Court Proceeding
Following the entry of the Default Judgment in the Florida State Court, on March 14,
2022, Alcalay commenced an action in the Supreme Court of the State of New York, Nassau
County, captioned Ben-Zion Alcalay v. Atlas Cybersecurity LLC and Barry Dynkin, Index No.
602826/2022, seeking to domesticate the Default Judgment in New York (the “New York State
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Court action”).2 (Id. at 222-23.) 	Appellee initiated the New York State Court action by filing a
summons and motion for summary judgment (in lieu of a complaint). (Id.) Dynkin, on behalf of
himself and Atlas, opposed the motion asserting the same arguments made in support of the
motion to vacate in the Florida Court, including: (i) lack of service of process in both the Florida
State Court action and the New York State Court action; (ii) the Florida State Court’s lack of
personal jurisdiction; and (iii) the existence of meritorious defenses to claims asserted in the
Florida State Court action. (Id. at 225-36.)
On August 25, 2023, the New York State Supreme Court granted Alcalay’s summary
judgment motion and held that the Default Judgment was properly entered in the Florida State
Court and as such, was entitled to full faith and credit in the State of New York. (Id. at 238-41.)
In addition, the Court held that Dynkin and Atlas could not “collaterally attack the Florida
Judgment . . . on the basis of whether the [Florida] default judgment . . . was proper and/or
whether the Florida Court had jurisdiction over them in the first instance.” Id.
Although appellant, as attorney for both himself and Atlas, filed a Notice of Appeal to the
Appellate Division, Second Department, he failed to perfect his appeal within the statutory time
limits. (Id. at 951-62.) The deadlines to do so have expired.
(2) Post-Petition Background
After Dynkin filed for bankruptcy seeking, inter alia, to discharge the debt owed under
the Default Judgment domesticated in New York, Alcalay filed a proof of claim in the
Bankruptcy Case. The appellee then filed a complaint and commenced an adversary proceeding
in the Bankruptcy Court on May 6, 2024, seeking a determination that the debt owed under the
2 The New York State action was not commenced against Benjamin Dynkin because he had filed
a bankruptcy petition on February 14, 2022.
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Default Judgment was nondischargeable. (Adversary Proceeding No.: 8-24-08041-ast, DE 28.)
Specifically, the appellee sought to have the Bankruptcy Court enter judgment against the debtor
excepting Alcalay’s claim from discharge under 11 U.S.C. § 523(a) on the grounds that the debt
Dynkin owed to Alcalay was for money obtained through fraud and false pretenses. (Id.) On
June 6, 2024, the debtor filed an answer to the complaint. (Id. at DE 4.)
Appellee filed a motion for summary judgment on December 20, 2024, requesting that
the Bankruptcy Court deny Dynkin’s discharge of the debt owed to Alcalay and enter judgment
excepting appellee’s claim from discharge as a matter of law. (Id. at DE 14.) Appellee argued
principally that summary judgment was warranted under the doctrine of collateral estoppel. In
addition, Alcalay submitted a Rule 7056-1 statement of undisputed material fact, which Dynkin
failed to timely dispute. (Id. at DE 17.) On January 22, 2025, appellant filed opposition to the
motion, and on January 27, 2025, he filed a Rule 7056 counterstatement of material facts, five
days late. (Id. at DE 24.) Although appellee moved to strike the appellant’s counterstatement of
material fact from the summary judgment record, the Bankruptcy Court denied the application
and stated it would consider the untimely filed counterstatement. (Id. at DE 27.)
On April 3, 2025, Chief Judge Trust granted the motion for summary judgment and
excepted Alcalay’s claims from discharge in the debtor’s Bankruptcy Case. Id. The Bankruptcy
Court determined that because the doctrine of collateral estoppel applied to the pre-petition
Default Judgment (sounding in fraud), the debt Dynkin owed to Alcalay was non-dischargeable
under 11 U.S.C. § 523(a) as a matter of law. Id. On May 20, 2025, Chief Judge Trust entered
judgment in favor of Alcalay and declared that the claim in the amount of $345,046.70 was
exempted and denied from discharge under 11 U.S.C. § 523(a) on the basis of fraud, fraudulent
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misrepresentation and fraudulent inducement. Id. In addition, the Bankruptcy Court directed the
Clerk of the Court to close the adversary proceeding without prejudice. Id.
On April 17, 2025, Dynkin filed a Notice of Appeal of the Decision and Order dated April
3, 2025 in this Court pursuant to 28 U.S.C. § 158. DE 1.
Familiarity with the factual background, procedural history in both the Bankruptcy Court
and this Court, and the parties’ arguments are assumed.
STANDARD OF REVIEW
This Court has jurisdiction to review appeals from decisions of a bankruptcy court
pursuant to 28 U.S.C. § 158(a), which provides in relevant part that “[t]he district courts of the
United States shall have jurisdiction to hear appeals . . . from final judgments, orders, and
decrees; . . . [and] with leave of the court, from other interlocutory orders and decrees . . . of
bankruptcy judges.” 28 U.S.C. § 158(a)(1), (3). “An appeal under subsections (a) and (b) of this
section shall be taken in the same manner as appeals in civil proceedings generally are taken to
the courts of appeals from district courts.” 28 U.S.C. § 158(c)(2). On an appeal the Court may
“affirm, modify, or reverse a bankruptcy court’s judgment, order, or decree” or it may remand
with instructions for further proceedings. Fed. R. Bankr. P. 8013.
A district court reviews a bankruptcy court’s conclusions of law de novo and its findings
of fact under a clearly erroneous standard. See In re Ames Dep’t Stores, Inc., 582 F.3d 422, 426
(2d Cir. 2009). A finding is “clearly erroneous” when the reviewing court is left with the
“definite and firm conviction that a mistake has been made.” District Lodge 26, Int’l Ass’n of
Machinists & Aerospace Workers, AFL-CIO v. United Techs. Corp., 610 F.3d 44, 51 (2d Cir.
2010). The clearly erroneous standard requires “strong deference” to “findings of fact based on
credibility assessments of witnesses [the court] has heard testify.” In re Pisculli, 426 B.R. 52, 59
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(E.D.N.Y. 2010), aff’d, 408 F. App’x 477 (2d Cir. 2011). “An appellate court cannot substitute
its interpretation of the evidence for that of the trial court simply because the reviewing court
might give the facts another construction [and] resolve the ambiguities differently.” Id. at 68.
Discretionary rulings of a bankruptcy court are reviewed for abuse of discretion. In re Tingling,
990 F.3d 304, 307 (2d Cir. 2021). “A bankruptcy court abuses its discretion when its ruling (1)
rests on an error of law . . . or a clearly erroneous factual finding, or (2) cannot be located within
the range of permissible decisions.” In re Fletcher Int’l, Ltd., 661 F. App’x 124, 126 (2d Cir.
2016).
Additionally, “[a] district court reviews a bankruptcy court’s order granting summary
judgment de novo, drawing all factual inferences in favor of the non-moving party.” In re
Double Green Produce, Inc., No. 24-CV-5093 (KMK), 2025 WL 2682692, at *3 (S.D.N.Y. Sept.
18, 2025). Federal Rule of Civil Procedure 56 is made applicable to the Bankruptcy Court
through Federal Rule of Bankruptcy Procedure 7056 and applies in an adversary proceeding.
See Fed. R. Bankr. P. 7056; see also In re Dana Corp., 574 F.3d 129, 146-47 (2d Cir. 2009). In
turn, this Court applies the oft-repeated and well-understood standard of review for summary
judgment motions, as discussed in Bartels v. Inc. Vill. of Lloyd Harbor, 97 F. Supp. 3d 198, 211
(E.D.N.Y. 2015), aff’d sub nom. Bartels v. Schwarz, 643 Fed. App’x. 54 (2d Cir. 2016), which
discussion is incorporated by reference herein.
Finally, “[t]he application of collateral estoppel to a given case is a question of law that
[appellate courts] review de novo.” M.O.C.H.A. Society, Inc. v. City of Buffalo, 689 F.3d 263,
284 (2d Cir. 2012).
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DISCUSSION
Dynkin challenges the Bankruptcy Court’s April 3, 2025 Order arguing that the
Bankruptcy Court erred in denying his alleged debt to Alcalay as nondischargeable pursuant to
Section 523(a) of the Bankruptcy Code on summary judgment. Specifically, the appellant
maintains that the Bankruptcy Court erred in finding that he had committed fraud in obtaining
money from Alcalay when the Court applied the doctrine of collateral estoppel to the Default
Judgment entered in the Florida State Court. According to Dynkin, the Default Judgment was
not entitled to preclusive effect because the Florida State Court lacked personal jurisdiction. As
discussed below, the Court finds the appellant’s arguments on appeal unpersuasive.
A. 	Denying Debt as Non-Dischargeable Pursuant to Section 523(a)
The Bankruptcy Court discharges preexisting debts to give “honest but unfortunate”
debtors a fresh start. Cohen v. de la Cruz, 523 U.S. 213, 217 (1998). “However, the fresh start
policy does not apply to all debts resulting from certain types of undesirable behavior such as
fraud.” Evans v. Ottimo, 469 F.3d 278, 281 (2d Cir. 2006); see 11 U.S.C. § 523(a)(2). Section
523(a)(2)(A) of the Bankruptcy Code provides, in relevant part, that “[a] discharge does not
discharge an individual debtor from any debt . . . for money, property, services, or an extension,
renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false
representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s
financial condition.” 11 U.S.C. § 523(a)(2)(A). To establish false pretenses under Section 523, a
creditor must show “either conduct or an implied misrepresentation by the debtor that was
intended to defraud a creditor into turning over money or property.” In re Delia, No. 12-CV-
2851, 2013 WL 5450456, at *10 (S.D.N.Y. Sept. 30, 2013). Similarly, proving a false
representation under this section “requires evidence of a false or misleading statement with
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intent to defraud, as well as establish[ing] justifiable reliance.” Id. Proof of actual fraud under
Section 523 rests on the five element of common law fraud: “(i) the debtor made a false
representation; (ii) the debtor knew the representation was false at the time it was made; (iii) the
representation was made with the intent to deceive the creditor; (iv) the creditor justifiably relied
on the representation; and (v) the creditor was injured by the representation and suffered
damages as a result.” In re Drummon, No. 24-CV-1668, 2025 WL 1327191, at *4 (S.D.N.Y.
May 7, 2025); see In re Wu, No. 20-44314-jmm, 2024 WL 63886, at *14 (Bankr. E.D.N.Y. Jan.
3, 2024). Under Section 523(a), nondischargeability must be proven by the creditor by a
preponderance of the evidence. See Grogan v. Garner, 498 U.S. 279, 291 (1991); see Heilbron
v. Plaza, No. 20-CV-00312 (CBA), 2021 WL 1062034, at *2 (E.D.N.Y. Mar. 19, 2021).
B. 	Collateral Estoppel
“It is well-settled that preclusion principles apply in bankruptcy proceedings.” Evans,
469 F.3d at 281. Thus, parties may “invoke collateral estoppel to preclude relitigation of the
elements necessary to meet a § 523(a) exception.” Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d
Cir. 2006); see Grogan, 498 U.S. at 284 n.11 (noting “collateral estoppel principles do indeed
apply in discharge exception proceedings pursuant to § 523(a)”); see also In re Ribotsky, No. 23-
70583-ast, 2023 WL 8854187, at *3 (Bankr. E.D.N.Y. Dec. 21, 2023) (observing that “[c]ase law
is clear that [a bankruptcy court] may apply rules of issue preclusion and claim preclusion to
nondischargeability disputes”). Collateral estoppel (or issue preclusion) “bars repetitious suits
involving the same cause of action once a court of competent jurisdiction has entered a final
judgment on the merits.” NML Capital, Ltd. v. Bianco Central de la Republica Argentina, 652
F.3d 172, 184 (2d Cir. 2011); see Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n.5 (1979)
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(holding a “judgment in the prior suit precludes relitigation of issues actually litigated and
necessary to the outcome of the first action”).
Bankruptcy Courts, like all federal courts, are bound to give “preclusive effect to state
court judgments whenever the courts of the state from which the judgments emerged would do
so.” Kelleran v. Andrijevic, 825 F.2d 692, 694 (2d Cir. 1987). That is to say, “bankruptcy
proceedings may not be used to relitigate issues already resolved in a court of competent
jurisdiction.” Id. at 695. Bankruptcy courts are required to accord a state court default judgment
with the same preclusive effect as would be given by that state’s courts. Id. at 694; see, e.g., In
re Bocker, 123 B.R. 164, 165 (E.D.N.Y. 1991) (upholding bankruptcy court’s dismissal of a
claim that had already been subject to a default judgment in state court); In re Lady Liberty
Tavern Corp., 94 B.R. 812, 816 (S.D.N.Y. 1988) (reversing bankruptcy court that failed to give
preclusive effect to a state court’s default judgment). Collateral estoppel is designed to prevent
parties from “contesting matters that they had a full and fair opportunity to litigate, thereby
conserving judicial resources and protecting parties from the expense and vexation of multiple
lawsuits.” Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002).
In giving preclusive effect to a state court judgment, a federal court looks to the law of
the state in which the judgment was entered. See Evans, 469 F.3d at 281; see also In re
Ferrandina, 533 B.R. 11, 22 (Bankr. E.D.N.Y. 2015) (observing state law applied to determine
the preclusive effect a federal court gives a state court judgment); In re Shiver, 396 B.R. 110, 117
(Bankr. S.D.N.Y. 2008) (noting the Full Faith and Credit Act “directs a federal court to refer to
the preclusion law of the State in which judgment was rendered”); see, e.g., In re Appel, 315
B.R. 645, 648 (E.D.N.Y. 2004) (applying Florida law). Here, the Court applies the preclusion
law of Florida.
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Under Florida law, collateral estoppel bars relitigation of an issue when the following
elements are established: “(1) the issue at stake must be identical to the one decided in the prior
litigation; (2) the issue must have been actually litigated in the prior proceeding; (3) the prior
determination of the issue must have been a critical and necessary part of the judgment in that
earlier decision; and (4) the standard of proof in the prior action must have been at least as
stringent as the standard of proof in the later case.” In re St. Laurent, 991 F.2d 672, 676 (11th Cir.
1993) (interpreting doctrine of collateral estoppel under Florida law); see Mobil Oil Corp. v.
Shevin, 354 So.2d 372, 374 (Fla. 1977). In addition, “[u]nder Florida law, a judgment is
deserving of res judicata or collateral estoppel effect only if it qualifies as a final judgment.” In
re Shiver, 396 B.R. at 126 n.9. The finality of a final default judgment occurs “[o]nce the
litigation is terminated and the time to appeal has run.” Miller v. Fortune Ins. Co., 484 So.2d
1221, 1223 (Fla. 1986).
C. 	Analysis
As a preliminary matter, Dynkin’s argument that the Default Judgment was not entitled to
preclusive effect because the Florida State Court lacked personal jurisdiction is unavailing.
Appellant litigated the jurisdictional question in the Florida State Court in the motion to vacate
the default judgment and was bound by the result.
Where a defendant makes makes a special appearance to challenge the jurisdiction of a
court, and the court overrules the objection and determines that it does have jurisdiction,
that decision is res judicata and precludes collateral attack on the judgment, even though
the ruling may have been erroneous on the facts or law. An aggrieved defendant must
seek reversal in an appellate court of the state involved or, if he is unsuccessful there, in
the Supreme Court of the United States. However, he cannot later attack the judgment on
jurisdictional grounds if he does not avail himself of those remedies, or if the judgment is
affirmed, or if the appellate court or the Supreme Court of the United States declines to
consider the case. See Balwin v. Iowa State Traveling Men’s Association, 283 U.S. 522
(1931); see also Sherrer v. Sherrer, 334 U.S. 343 (1948).
Baker v. Bennett, 633 So.2d 91, 92 (Fla. Dist. Ct. App. 1994).
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Dynkin had a full and fair opportunity to assert and litigate the issue of personal
jurisdiction. Appellant filed extensive briefing alleging, inter alia, that the Florida State Court
had no personal jurisdiction over him and participated in a two-day evidentiary hearing wherein
the court considered and rejected Dynkin’s arguments and defenses. The Florida State Court
then entered the Default Judgment, however, appellant failed to properly perfect an appeal of the
decision and judgment. Thereafter, when Alcalay commenced an action in the New York State
Court, Dynkin attempted to relitigate his defenses, including personal jurisdiction, arguing that
the Florida State Court erroneously determined it had personal jurisdiction over him when the
court denied his motion to vacate. Following briefing on appellee’s summary judgment motion,
the New York State Court considered and rejected Dynkin’s arguments holding that appellant
had a full and fair opportunity to litigate his defenses in the Florida State Court, including
personal jurisdiction, and concluding the New York State Court was required to give full faith
and credit to the Default Judgement. Although Dynkin filed a notice of appeal, he failed to
perfect the appeal. Finally, the Bankruptcy Court considered and rejected appellant’s
unsuccessful jurisdictional arguments when it granted appellee’s summary judgment motion,
enforcing principles of res judicata and collateral estoppel based on well-established Supreme
Court precedent. Accordingly, Chief Judge Trust properly determined that appellant was
foreclosed from collaterally attacking the Default Judgement on jurisdictional grounds.
Next, applying the standard of review and the preclusion principles to the discharge
exception proceedings pursuant to Section 523(a), the Court concludes that the Florida State
Court’s default judgment, based on a finding of fraud, bars relitigation of the fraudulent nature of
the debt in Bankruptcy Court. The undersigned considers each of the collateral estoppel
elements in turn.
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(1) Identical Issues
The first element requires that the issue at stake in this adversary proceeding be identical
to the issues involved in the Florida State Court action. To prove fraud under Florida law, a
plaintiff must establish that the defendant made a “deliberate and knowing misrepresentation
designed to cause and actually causing detrimental reliance by the plaintiff.” First Interstate
Dev. Corp. v. Ablanedo, 511 So.2d 536, 539 (Fla. 1987). The Eleventh Circuit has held that the
elements from common law fraud in Florida closely mirror the requirements of 11 U.S.C. §
523(a)(2)(A). In re St. Laurent, 991 F.2d at 676. Therefore, this Court finds that the elements of
common law fraud in Florida and Section 523 are sufficiently identical to meet the first prong of
the test for collateral estoppel.
Nevertheless, Dynkin asserts that there is a lack of identity of issues between the Florida
State Court action and the adversary proceeding in the Bankruptcy Court. The Court disagrees.
Alcalay alleged sufficient facts in the Florida complaints to support a cause of action for
common law fraud under Florida law. In the amended complaint in the Florida State Court
action, Alcalay alleged that (1) appellant provided false information to induce appellee into
loaning money as well as providing a guarantee for a real estate lease, (2) appellant knew the
statements were false, (3) the statements were intended to induce the appellee to loan money,
and (4) the appellee detrimentally relied on these statements. These are the same facts that
Alcalay alleged in the adversary proceeding complaint. Thus, Chief Judge Trust correctly
determined that the issue of appellant’s fraud in the Florida State Court action (underlying the
Default Judgment) was identical to the issue of fraud under Section 523(a)(2)(A) in the
adversary proceeding.
(2) Actual Litigation of Issues in Prior Action
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The second element requires that the issue of fraud was actually litigated in the Florida
State Court action. “An issue is considered actually litigated when the issue is properly raised,
by the pleadings or otherwise, and is submitted for determination, and is determined.” In re
Barreto, 514 B.R. 702, 715 (Bankr. S.D. Fla. 2013). “Actually litigated only contemplates that
the defendant have been given a full opportunity to defend himself.” In re Seifert, 130 B.R. 607,
609 (Bankr. M.D. Fla. 1991). “Under Florida law, a pure default judgment entered when there is
no participation by the defendant can be sufficient to satisfy the actually litigated element of
collateral estoppel.” In re Appel, 315 B.R. at 649; see also In re Seifert, 130 B.R. at 609
(“Debtor/defendant could have reasonably foreseen the consequences of not defending an action
based in part on fraud. It would be undeserved to give debtor/defendant a second bite at the
apple when he knowingly chose not to defend himself in the first instance.”). As a result, a
default judgment obtained in state court should not be discounted because a defendant
voluntarily chose not to participate in the case. Id. As the Second Circuit has made clear, “when
a party defaults by failure to answer . . . the defaulting litigant may not further contest the
liability issues.” Evans, 469 F.3d at 282; see Department of Health Rehabilitative Serv. Office of
Child Support Enforcement v. Wood, 600 So.2d 1298, 1300 (Fla. Dist. Ct. App. 1992) (“When a
fact in issue or cause of action has been finally decided by a court of competent jurisdiction,
neither of the parties shall be allowed to relitigate so long as the judgment or decree stands
unreversed. This principle applies to default judgments, issues raised in defense, and matters
raised by motion.”).
In this case, Dynkin had a full and fair opportunity to respond to the Florida Complaints
and assert meritorious defenses in the Florida State Court but ultimately failed to do so.
Additionally, despite having participated in a two-day evidentiary hearing in the Florida State
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Court while represented by counsel and afforded an opportunity to set forth meritorious
defenses, the Florida State Court denied the motion to vacate and granted the motion for final
default judgment, thus strengthening the determination that the issue was actually litigated. See
In re Shiver, 396 B.R. at 126 n.9 (“Florida law only gives res judicata or collateral estoppel
effect to a final order or judgment.”). Finally, in the New York State Court action, Dynkin again
had a full and fair opportunity to appeal both the Default Judgment and the domesticated New
York Judgment, but despite having appeared as counsel for himself and Atlas and seemingly
knowledgeable of legal procedure, he let the deadlines to appeal expire, rendering the judgments
final under Federal law. Hence, Chief Judge Trust correctly determined that the issue of
appellant’s fraud in the Florida State Court action (underlying the Default Judgment) was
actually litigated in the prior action.
(3) Critical and Necessary to Support Final Judgment
The third element requires that the issue of fraud and fraudulent inducement were critical
and necessary to the Florida State Court’s entry of the Default Judgment. “The necessarily
decided prong of the collateral estoppel test ensures that the prior court actually ruled on the
issue at hand. The issue must have been squarely addressed or directly decided in the former suit
before it can be held as conclusive for subsequent litigation.” Community State Bank v. Strong,
651 F.3d 1241, 1268 (11th Cir. 2011). “The law is clear that a default judgment conclusively
establishes between the parties, so far as subsequent proceedings on a different cause of action
are concerned, the truth of all material allegations contained in the complaint in the first action
and every fact necessary to uphold the default judgment.” In re Vickers, 247 B.R. 530, 536
(Bankr. M.D. Fla. 2000) (finding every allegation in the state court complaint, including the
elements of common law fraud, to be critical and necessary for the state court default judgment).
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Thus, where the face of a default judgment specifically includes a cause of action for fraud, the
critical and necessary requirement is satisfied. See In re Hartman, 274 B.R. 911, 916 (Bankr.
M.D. Fla. 2002): In re Bentor, 514 B.R. 907, 915 (Bankr. S.D. Fla. 2014) (finding that because
the final judgment in the state court included a judgment for fraud in the full amount of damages
that were awarded, “the fraud claims were critical and necessary part” of the state court final
judgment”).
Here, the Default Judgment specifically states that appellee “is entitled to entry of Final
Judgment against the [Florida Defendants] . . . and the recovery of damages resulting from the
breach of contract, fraud, fraudulent inducement, and the other causes of action detailed in the
[Amended Complaint].” In the Forida State Court’s Order denying appellant’s motion to vacate
the default judgment, the court found that Dynkin had no meritorious defense against Alcalay’s
claims of fraud and fraudulent inducement. Accordingly, Chief Judge Trust correctly concluded
that appellee’s fraud and fraudulent inducement causes of action in the Florida Complaints were
critical and necessary to the Default Judgment.
(4) Burden of Persuasion
The final prong concerns the weight of the burdens of persuasion. The Supreme Court
has determined that “the standard of proof for the dischargeability exceptions in 11 U.S.C. §
523(a) is the ordinary preponderance-of-the-evidence standard.” Grogan, 498 U.S. at 281. In
addition, the Eleventh Circuit has determined that the evidentiary burdens for fraud under
Florida law and under § 523(a) of the Bankruptcy Code are identical. In re St. Laurent, II, 991
F.2d at 676; See Wieczoreck v. H & H Builders, Inc., 475 So.2d 227 (Fla. 1985) (finding the
burden of proof for fraud under Florida law is “a preponderance or greater weight of the
evidence”). Thus, the Court finds this issue is satisfied.
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In short, collateral estoppel applies to the pre-petition Default Judgment (sounding in
fraud) in favor of the appellee and renders appellant’s debt nondischargeable under 11 U.S.C. §
523(a).
Accordingly, the Bankruptcy Court did not err in granting appellee’s summary judgment
motion and excepting appellee’s claims from discharge under 11 U.S.C. § 523(a) in appellant’s
Bankruptcy Case. Furthermore, the record clearly reflects that Chief Judge Trust invested
substantial effort and time, applying considerable diligence, thoroughness and fairness to this
matter. Accordingly, the Court affirms the Bankruptcy Court’s Order in all respects.
CONCLUSION
For the foregoing reasons, the Court affirms the rulings of the Bankruptcy Court in all
respects. Appellant’s appeal is denied with prejudice. The Clerk of the Court shall enter
judgment accordingly and close the case.
SO ORDERED.
Dated: Central Islip, New York
March 10, 2026
/s/ Gary R. Brown
GARY R. BROWN
United States District Judge
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