Citizens Bank Wins Judgment on Partial Findings on ADTPA Claims

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March 30, 2026 Get Citation Alerts Download PDF Add Note

In re: David J. Rofkahr and Stephanie L. Rofkahr v. Citizens Bank & Trust Co.

United States Bankruptcy Court, W.D. Arkansas

• Citations: None known
• Docket Number: 2:24-ap-07047

• Precedential Status: Unknown Status

• Opinion

• Authorities (18)

• Cited By (0)

• Summaries (0)

• Similar Cases (48.2K)

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Trial Court Document

IN THE UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION

In re: DAVID J. ROFKAHR and No. 2:23-bk-71703
STEPHANIE L. ROFKAHR, Debtors Chapter 13

DAVID J. ROFKAHR and
STEPHANIE L. ROFKAHR PLAINTIFFS

v. 2:24-ap-07047

CITIZENS BANK & TRUST CO. DEFENDANT

ORDER AND OPINION GRANTING
MOTION FOR JUDGMENT ON PARTIAL FINDINGS

On November 14, 2023, David and Stephanie Rofkahr [plaintiffs or debtors] filed their
chapter 13 case. On September 11, 2024, the debtors commenced the instant adversary
proceeding against Citizens Bank & Trust Company [Citizens or the bank]. In Counts I
through III of their complaint, the debtors alleged that the bank violated the Arkansas
Deceptive Trade Practices Act [ADTPA]; in Count IV, they alleged that the bank
committed fraud or constructive fraud; and, in Count V, they alleged that the bank was
negligent. On October 11, 2024, Citizens filed its answer. The Court held a trial on
February 25, 2026. William Marshall Hubbard appeared on behalf of the debtors. M.
Sean Brister appeared on behalf of Citizens. At the outset of the trial, Mr. Hubbard
announced that the debtors wished to dismiss the fraud and negligence claims alleged in
Counts IV and V of the complaint, leaving for trial only the ADTPA claims alleged in
Counts I through III. Mr. Hubbard also requested during his opening statement that the
Court determine the amount of the bank’s secured claim. In his opening statement, Mr.
Brister essentially objected to the Court determining the amount of the bank’s claim,
stating that such a determination was inappropriate based on the pleadings before the
Court. At the conclusion of the trial, the Court took the matter under advisement. For the
reasons stated below, the Court grants judgment on partial findings in favor of the bank
on the debtors’ ADTPA claims.

Jurisdiction
Pursuant to 28 U.S.C. § 1334 (a) and (b), “the district court shall have original and exclusive
jurisdiction of all cases under title 11 . . . [and] original but not exclusive jurisdiction of all
civil proceedings arising under title 11, or arising in or related to cases under title 11.” Under 28 U.S.C. §§ 157 (a) and (b)(1), the district court may provide that any such cases “be
referred to the bankruptcy judges for the district[,]” and the bankruptcy court “may hear and
determine [such] cases . . . and may enter appropriate orders and judgments, subject to review
under section 158 of this title.” The United States District Court for the Western District of
Arkansas has provided for such referrals by local rule. E.D. & W.D. Ark. R. 83.1. Sections
157(b)(1) and (c) further specify the types of cases and matters that may be heard by
bankruptcy judges, and these include “cases under title 11 and all core proceedings arising
under title 11, or arising in a case under title 11” as well as non-core proceedings that are
“otherwise related to a case under title 11.” Under § 157(b)(3), “[t]he bankruptcy judge shall
determine, on the judge’s own motion or on timely motion of a party, whether a proceeding is
a core proceeding . . . or is a proceeding that is otherwise related to a case under title 11.”

Based on a review of the complaint, the Court finds that the debtors alleged no causes of
action arising in or under title 11; therefore, this is not a core proceeding. The test to
determine if a matter is “related to” is “whether the outcome of that proceeding could
conceivably have any effect on the estate being administered in bankruptcy.” Moffitt v.
Am.’s Servicing Co. (In re Moffitt), 406 B.R. 825, 831 (Bankr. E.D. Ark. 2009) (quoting
Dogpatch Props., Inc. v. Dogpatch U.S.A., Inc. (In re Dogpatch U.S.A., Inc.), 810 F.2d
782, 786 (8th Cir. 1987) (emphasis omitted); see also Beskrone v. Int’l Educ. Corp. (In re
PennySaver USA Publ’g, LLC), 587 B.R. 43, 48-49 (Bankr. D. Del. 2018). Here, the
debtors alleged causes of action arising under Arkansas law; specifically, the Arkansas
Deceptive Trade Practices Act,1 and the Court finds that the resolution of these causes of
action could conceivably affect the administration of the bankruptcy estate. Should the

1 As stated above, the debtors dismissed their fraud and negligence claims and proceeded
only on the ADTPA claims stated in Counts I through III of their complaint.
debtors prevail on one or more of their ADTPA claims, the amount of the bank’s secured
claim could be affected, which, in turn, could impact the distribution available to other
creditors under the debtors’ chapter 13 plan.2 Therefore, the Court finds that it has
jurisdiction over this matter as a non-core proceeding related to the bankruptcy case. In
non-core proceedings, without the consent of the parties to the bankruptcy court’s entry
of final judgment, “the bankruptcy judge shall submit proposed findings of fact and
conclusions of law to the district court, and any final order or judgment shall be entered
by the district judge after considering the bankruptcy judge's proposed findings and
conclusions and after reviewing de novo those matters to which any party has timely and
specifically objected.” 28 U.S.C. § 157 (c)(1). However, in this proceeding, the parties
entered into an agreed order on February 20, 2026, in which they expressly consented to
this Court’s entry of a final order. (Dkt. No. 22.) Therefore, the Court may enter a final
judgment in this non-core proceeding.

Facts
The debtors hold majority ownership interests in at least four business entities: Rentco,
Incorporated [Rentco]; Rentco Investment Properties, LLC [RIP]; Rentco Oklahoma
Properties, LLC [Rentco Oklahoma]; and ZSR Enterprises, LLC [ZSR]. In 2004,
Citizens extended a line of credit to Rentco, the corporation through which the debtors
opened a construction rental business in Van Buren, Arkansas. The debtors personally
guaranteed Rentco’s line of credit, which was secured by the debtors’ home and Rentco’s
furniture fixtures, equipment, inventory and accounts [equipment]. In the following
years, the debtors obtained and personally guaranteed several additional commercial
loans from Citizens on behalf of their multiple business entities. However, unlike
Rentco’s line of credit, which was partially secured by the debtors’ home, the subsequent
business loans were secured by real and personal property owned solely by the debtors’
various business entities.

2 The debtors’ plan has not yet been confirmed and may require further amendment based
on the outcome of this adversary proceeding and the resolution of the objections to
confirmation filed by the bank and the chapter 13 trustee, both of which are scheduled for
hearing on April 23, 2026.
The debtors and Citizens regularly executed modifications and renewals of the debtors’
business loans. David Rofkahr [Rofkahr] testified that he gave Citizens financial
statements, but he did not do so every year. (Trial Tr. 75-76, Feb. 25, 2026.) In regard to
Rentco’s line of credit, Rofkahr testified that he disclosed everything he was supposed to
disclose to the bank and gave Citizens accurate copies of Rentco’s accounts receivables.
(Tr. 82-83.) Lance Lanier [Lanier], Executive Vice President of Citizens, testified that
most of the debtors’ business loans were reviewed by a committee and had to go though a
formal approval process. (Trial Tr. 85.) Lanier testified that, for each loan, the bank
looked for “debt coverage of at least of one to one, that you've got enough money to pay
what your payments are going to be.” (Tr. 133.) He said that every year including 2018,
Rofkahr “still showed that he had a debt coverage good enough for us to continue to loan
him money.” (Tr. 133.)

Rofkahr testified that he wanted the bank to release the debtors’ home as security for the
line of credit and that it was his understanding that the house would be removed from the
loan. Darla Brown [Brown], the primary loan officer that worked with the debtors,
testified that Rofkahr did often request that the bank release the debtors’ home as
collateral for Rentco’s line of credit. However, according to Brown, the bank never
planned to remove the house as collateral, which she testified was not unusual because
the bank’s standard practice is to keep real estate as collateral for lines of credit. (Tr.
138-39.) Lanier testified that the bank considered the debtors’ home to be the main
collateral for Rentco’s line of credit. (Tr. 104.) According to Lanier, “if handled
correctly, [a line of credit] could go on for many, many years. And we usually have real
estate as collateral, so that we can have a line of credit that can go on for years.” (Tr.
124.)

Several years after opening Rentco in Van Buren, the debtors bought an existing
construction rental business in Poteau, Oklahoma, the purchase of which they financed
with Citizens through a separate entity, Rentco Oklahoma. Rofkahr testified that Rentco
Oklahoma’s loan was secured by equipment and real estate owned by Rentco Oklahoma.
(Tr. 34.) For several years, the debtors’ businesses operated successfully, earning in
excess of $1,000,000 per year. (Tr. 82.) Rofkahr testified that sometime in 2016, the
debtors closed the Poteau location because industry had generally moved out of the
Poteau area and the economy had declined. (Tr. 60.) When the Poteau location closed,
the debtors moved that location’s equipment to Rentco’s still-operating Van Buren
location without notifying Citizens. (Tr. 35, 88, 100.) The Van Buren location remained
financially viable for a period of time after Poteau closed but its financial situation
ultimately deteriorated as well, which Rofkahr primarily attributed to Covid. (Tr. 61.)
The record reflects that other factors may have also contributed to Rentco’s demise,
including two of Rentco’s employees embezzling a total of roughly $100,000 from the
business and Rofkahr allowing his father-in-law to “rent” $600,000 to $700,000 worth of
equipment at no charge.3 (Tr. 61, 77-78, 81.) Whether caused by a single event or the
convergence of several, each of the debtors’ businesses, including Rentco’s construction
rental business, ZSR’s convenience store, and a trash business,4 met with financial
difficulties. Lanier testified that the bank and Rofkahr had a good relationship, and the
parties had discussed a workout plan. (Tr. 102, 128-30.) Citizens drafted the documents
for the workout, but the debtors did not sign them. (Tr. 130.) After the debtors’ business
loans became delinquent, the bank placed the loans in “nonaccrual” status, the regulatory
ramifications of which are discussed below.

Lanier testified that Citizens is a state-chartered bank that is regulated by the Arkansas
State Banking Commission [State or Commission]. (Tr. 125.) Specifically, Lanier
testified that “they alternate between the state and fed, as far as our examinations. So,

3 Rofkahr also testified that he often went to casinos to play poker and the debtors’ tax
returns from 2011 through 2017 showed substantial gambling winnings, often between
$200,000 to over $400,000 per year. Citizens essentially argued that Rofkahr’s gambling
winnings mean that he also suffered gambling losses and such losses would have harmed
the debtors financially. However, despite the somewhat tempting logic of the bank’s
argument in this regard, there is no evidence in the record to prove the amount of the
losses as Rofkahr’s testified that he did not recall how much money he lost gambling
during those years.

4 Rofkahr testified that the debtors had a trash business but did not say whether the
debtors ran the trash business as a d/b/a or through a corporate entity.
every two to three years, we get an exam. Safety and soundness is the main one that
deals with lending. And then, you've also got your compliance exam that you have.”
(Tr. 125.) Lanier testified that the bank is required to abide by the State’s guidelines
regarding loans and “there’s certain parameters that we have [to] stay within.” (Tr. 125-
26.) He also testified that the bank has its “own loan policy. But if there’s anything in
that loan policy that doesn’t agree with the way the State thinks we should be doing our
banking business, then they require us to change our policy accordingly.” (Tr. 126.) In
addition, Lanier testified that “there are different regulations when we have a problem
credit on exactly how we have to handle that, exactly how the money has to be applied.
They give us direction on how we have to grade the loan . . . whether it’s a two or three
graded credit, which is good credit, or if it is a five or six graded credit, which ends up
being on the watch list. And then, at five, six, seven—seven’s doubtful—but five, six,
seven, there is also an opportunity that the loan would have to be placed on nonaccrual.”
(Tr. 126.) According to Lanier, once a loan has been placed in nonaccrual status—which,
pursuant to both Lanier’s testimony and Plaintiffs’ Exhibit 12, the subject loans had been
placed in—the Commission regulates how the bank applies subsequent payments made
on the loan. Specifically, the regulations require the bank to apply all payments made on
a nonaccrual loan to the principal balance of the loan and prohibit the bank from applying
any portion of such payments to interest. (Tr. 92-93.)

In 2018, the bank began foreclosing on the debtors’ loans. Rofkahr testified that the
foreclosures impacted every aspect of his life, causing the debtors to lose their businesses
and sources of income, harming their credit scores, and leading to their bankruptcy filing.
(Tr. 30-31.) By the time the debtors filed the instant adversary proceeding, all collateral
for their various loans had been sold except for their home, which remains collateral for
Rentco’s line of credit. The debtors allege in their complaint that Citizens engaged in
predatory lending practices because the bank extended loans to the debtors without the
use of borrower applications or any consideration of the debtors’ ability to repay the
loans. The debtors also allege that Citizens intentionally misapplied the proceeds of
certain foreclosure sales to increase its profits. In particular, the debtors argue that all of
the proceeds from the March 2021 auction of Rentco’s equipment should have been used
to pay down Rentco’s line of credit, which was secured by both Rentco’s equipment and
the debtors’ home.

Lanier testified that the bank split the auction proceeds between two other loans that were
also secured by the equipment: Loan 7504 taken out by Rentco and Loan 2768 taken out
by Rentco Oklahoma.5 Lanier explained that because the debtors had moved Rentco
Oklahoma’s equipment from Poteau to Rentco’s Van Buren location without notifying
the bank, the bank could not accurately track the proceeds from the auction of the
commingled equipment and the proceeds were applied to the two loans on a percentage

5 At trial, counsel for the bank offered into evidence as Defendant’s Exhibit D [Exhibit
D] the documents associated with Rentco Oklahoma’s loan [Loan 2768], which,
according to Exhibit D and Rofkahr’s testimony, was secured by Rentco Oklahoma’s real
property and both Rentco Oklahoma’s and Rentco’s equipment. Counsel for the debtors
objected to Exhibit D because the loan documents for Loan 2768 had not been produced
by the bank in response to the debtors’ discovery requests—specifically, in response to
Interrogatory 8—but were instead provided the day before trial when the parties
exchanged exhibits. See Fed. R. Civ. P. 37(c)(1) (providing for the automatic exclusion
of evidence not produced in discovery unless the failure to produce was substantially
justified or harmless). The Court provisionally admitted Exhibit D during the trial, and
now fully admits Exhibit D into evidence. “[D]espite the ‘automatic nature of Rule
37(c)(1) . . . ‘[p]reclusion of evidence is generally a disfavored action.’” Engler v. MTD
Prod., Inc., 304 F.R.D. 349, 355 (N.D.N.Y. 2015) (citation omitted). “[P]reclusion of
evidence is a ‘harsh remedy,’ it should be imposed only in rare situations.” Engler, 304
F.R.D. at 355 (citing Ritchie Risk–Linked Strategies Trading v. Coventry First LLC, 280
F.R.D. 147, 156–57 (S.D.N.Y. 2012) (internal citations omitted)). The Court finds that
the bank’s failure to provide the documents for Loan 2768 was not substantially justified
despite the bank having objected to Interrogatory 8 because the interrogatory was
allegedly not specific enough. However, the Court finds that the bank’s failure to
produce the loan documents was harmless. See Smith v. Tenet Healthsystem SL, Inc., 436
F.3d 879, 889 (8th Cir. 2006) (“[a] harmless violation [] does not mandate exclusion of
the evidence.”); see also Engler, 304 F.R.D. at 355 (“[h]armlessness means an ‘absence
of prejudice.”’) (citation omitted). Here, debtors’ counsel received an accounting for
Loan 2768 in the bank’s discovery responses, debtors’ counsel could have provided more
specificity in response to the bank’s objection to Interrogatory 8, the debtors would have
received a copy of the documents when they executed Loan 2768, debtors’ counsel was
not entirely surprised at trial because the bank’s counsel produced Exhibit D the day
before trial, and Rofkahr testified to the pertinent portions of Exhibit D—namely, that
Rentco’s equipment partially secured Loan 2768. For these reasons, the Court finds that
the bank’s failure to produce the loan documents for Loan 2768 in its discovery responses
did not prejudice the debtors and is therefore harmless.
basis. (Tr. 88, 101.) Lanier further explained that
those two loans were secured by that equipment. The Poteau store, for
sure, it was used to buy it. And then, the other store, I mean, when we had
that original equipment filing with his house, that was from a long time
ago. And, you know, you've got your current loans, that have the majority
of the debt, that are secured by that equipment, and we had the equipment
auction, so, to me, it makes sense to go apply those funds to the two
equipment loans.

(Tr. 101-02.) Regarding why the bank did not apply the auction proceeds to Rentco’s
line of credit, Lanier testified, “[t]he other one was a line of credit that is basically—if
you handle your line of credit like you're supposed to, it can go on forever, it just gets
renewed each year. You come in and sign a renewal for it and it goes on for another year.
You get to continue to use that line of credit.” (Tr. 102.) Despite the bank’s reasoning
for applying the auction proceeds in the manner it did, the debtors maintain that, as a
result of the bank’s misapplication of the proceeds, they still owe $288,974.60 on
Rentco’s line of credit, which places their home in danger of foreclosure.

Judgment on Partial Findings
Immediately before closing arguments,6 counsel for the bank moved for judgment on
partial findings under Federal Rule of Civil Procedure 52(c), made applicable to this
proceeding by Federal Rule of Bankruptcy Procedure 7052, asserting for the first time
that, because Citizens is regulated by the Arkansas State Banking Commission, it is not
subject to the debtors’ ADTPA claims under the act’s “safe-harbor” provision. The bank
also argued in its motion that the debtors failed to meet the requirements necessary to
prevail under ADTPA because they did not prove the bank engaged in any false or
deceptive act and introduced no evidence or testimony to prove they suffered a specific,
actual financial loss caused by the bank’s actions as required under ADTPA.

In response to the bank’s motion for judgment on partial findings, debtors’ counsel did
not contradict—or even address—the bank’s contention that ADTPA does not apply to

6 With opposing counsel’s agreement and the Court’s permission, the bank put on its
case-in-chief during cross-examination of the debtors’ witnesses.
Citizens under the safe-harbor provision.7 Debtors’ counsel argued that the debtors had
met all the requirements under ADTPA, stating that the bank “engaged in a false or
unconscionable or deceptive act in [the] practice of business, and, mainly, that has to do
with taking funds that are to be applied to a certain loan and then moved to a separate
loan” and the bank “intended that others rely on the concealment that would have been
necessary for this to occur. And then it was proximate cause—financial loss was
proximate cause.” (Tr. 143.) Debtors’ counsel argued that the debtors met ADTPA’s
financial loss requirement because David Rofkahr “discussed the loss of his three
businesses, the loss of operating income . . . had to file personal bankruptcy, damage to
his credit score. There has been ample evidence on the financial loss[.]” (Tr. 142-43.)

Because the bank’s legal argument regarding the applicability of ADTPA is potentially
dispositive, the Court must address this issue before moving, if necessary, to the bank’s
argument that it is entitled to judgment on partial findings because the debtors failed to
prove the elements required under ADTPA. The safe-harbor provision cited by the bank
is contained in Arkansas Code Annotated section 4-88-101, and states in relevant part:
This chapter does not apply to:
. . .
(3) Actions or transactions specifically permitted under laws administered
by the Insurance Commissioner, the Securities Commissioner, the State
Highway Commission, the Bank Commissioner, or other regulatory body
or officer acting under statutory authority of this state or the United States,
unless a director of these divisions specifically requests the Attorney
General to implement the powers of this chapter[.] Ark. Code Ann. § 4-88-101 (3).

7 Because the bank did not raise its safe harbor argument in its answer or by filing a
pretrial motion, but instead opted to wait until the adversary proceeding had been pending
for more than two years and the trial had been concluded except for closing statements,
the Court would have considered a request from debtors’ counsel for leave to file a post-
trial brief in response to the bank’s newly-raised argument, had such a request been
made.
Lanier testified, and the debtors did not dispute, that Citizens is a state-chartered bank
regulated by the Arkansas State Banking Commission. The Arkansas Supreme Court
recently addressed ADTPA’s applicability to a bank in Tilley v. Malvern National Bank, 709 S.W.3d 31 (Ark. 2025).8 In Tilley, Malvern National Bank [MNB], a federally
regulated bank, moved for summary judgment on plaintiff Tilley’s ADTPA claim,
arguing that “because [the bank’s] lending regime is authorized and regulated by the
Officer of the Comptroller of Currency and the Federal Depository Insurance
Commission, the challenged actions/transactions are permitted under the laws of the
United States.” Tilley, 709 S.W.3d at 41. In granting summary judgment in the bank’s
favor, the court stated:
Tilley tries to couch this as a question of fact—essentially, that a jury must
resolve whether MNB’s actions were consistent with relevant federal law.
But as we explained in Arloe Designs, LLC v. Arkansas Capital
Corporation, [431 S.W.3d 277 (Ark. 2014)] “a national bank”—which
MNB is—“is regulated by the Office of the Comptroller of Currency and
the Federal Deposit Insurance Commission,” and therefore, MNB’s
“actions and transactions are not subject to claims that can be brought
under the ADTPA unless a specific request has been made to the Attorney
General.” Put another way, because MNB’s general lending regime is
permitted and governed by the OCC and FDIC, the safe harbor applies.
As a result, MNB is entitled to summary judgment on Tilley’s ADTPA
claim as a matter of law. Id. In Tilley, the Arkansas Supreme Court cited Arloe with approval and expressly rejected
the plaintiff’s argument that, in order to determine whether ADTPA’s safe harbor
provision applied to MNB, a trier of fact had to resolve whether the bank’s actions were
consistent with the relevant federal law. Id. In so holding, the court appears to have
implicitly overruled Air Evac EMS, Incorporated v. USAble Mutual Insurance Company, 533 S.W.3d 572 (Ark. 2017).9 In Air Evac, the Arkansas Supreme Court departed from

8 Although the debtors filed this adversary proceeding prior to Tilley, the Court must
apply the law as it exists at the time the matter is decided. Flemens v. Harris, 915
S.W.2d 685, 689-90 (Ark.1996) (“[t]he trial court correctly applied the decisional law of
the [c]ourt as it existed when it decided [the] case.”)

9 The Arkansas Supreme Court’s decision in Air Evac EMS, Inc. v. USAble Mut. Ins. Co.,
the general-activity rule under which the Arloe court had found that the safe-harbor
provision furnished a blanket exemption from ADTPA to entities regulated by state or
federal bodies, and held that “ADTPA’s safe-harbor provision should be applied
according to the specific-conduct rule, meaning that it precludes claims only when the
actions or transactions at issue have been specifically permitted or authorized under laws
administered by a state or federal regulatory body or officer.” Air Evac, 533 S.W.3d at
575-76.

Without reference to Air Evac, the Tilley court cited Arloe as the precedent governing its
determination of whether ADTPA applied to the bank before finding as a matter of law
that, absent a request to the Attorney General pursuant to Arkansas Code Annotated
section 4-88-101(3), the bank was exempt from ADTPA claims under the safe-harbor
provision, irrespective of whether the bank had acted consistently with the laws
administered by the federal regulatory bodies. Tilley, 709 S.W.3d at 41 (emphasis
added). Because Tilley cited Arloe with approval and followed Arloe’s application of the
general-activity rule—an apparent reversal of Air Evac’s holding that the specific-
conduct rule should apply—the Court finds that Arloe was not overruled by Air Evac.
See Goodwin v. Harrison, 780 S.W.2d 518, 521 (Ark. 1989) (finding that a case had not
been expressly or implicitly overruled because, despite an intervening and apparently
contradictory decision, the court thereafter cited the earlier case with approval and
followed its holding); Oldner v. Villines, 943 S.W.2d 574, 578-79 (Ark. 1997) (finding 533 S.W.3d 572 (Ark. 2017) was issued in response to the United States District Court
for the Eastern District of Arkansas’s certification of two questions: first, “[a]re the
rulings in DePriest v. AstraZeneca Pharmaceuticals, L.P, 351 S.W.3d 168 [(Ark. 2009)]
and Arloe Designs, LLC v. Arkansas Capital Corp., 2014 Ark. 21, 431 S.W.3d 277 (2014) in conflict with one another, and if so, should that conflict be resolved?”; and,
second, “[d]oes the safe harbor provision of the Arkansas Deceptive Trade Practices Act,
which exempts ‘[a]ctions or transactions permitted under laws administered by’ state and
federal regulators, Ark. Code Ann. § 4-88-101 (3), apply to actions or transactions
prohibited under laws administered by the state and federal regulators?” Air Evac, 533
S.W.3d at 573. The court reformulated and answered the question “[s]hould the
ADTPA’s safe-harbor provision, Ark. Code Ann. § 4-88-101 (3), be applied according to
the specific-conduct rule or the general-activity rule?” Id. that a prior case had been implicitly overruled because subsequent cases held to the
contrary). Therefore, applying the general-activity rule pursuant to Tilley, and absent any
evidence that the Bank Commissioner requested that the Attorney General implement
ADTPA’s powers in regard to the bank, the Court finds that ADTPA does not apply to
Citizens pursuant to the safe-harbor provision contained in Arkansas Code Annotated
section 4-88-101(3).

However, even if the specific-conduct rule applies, and assuming—without finding—that
the bank did not act in accordance with the laws administered by the Commission in its
transactions with the debtors and, as a result, the bank is not protected by ADTPA’s safe
harbor, the Court finds that the debtors did not prove their claims under ADTPA.
“ADTPA prohibits any ‘unconscionable, false, or deceptive act or practice in business,
commerce, or trade.”’ Apprentice Info. Sys. Inc. v. DataScout, LLC, 544 S.W.3d 536, 539 (Ark. 2018) (quoting Ark. Code Ann. § 4–88–107(a)(10)). “The elements of such a cause
of action are (1) a deceptive consumer-oriented act or practice which is misleading in a
material respect and (2) injury resulting from such act.” Id. Even if other potentially
applicable Arkansas law required the bank to apply the proceeds from the March 2021
auction to the line of credit secured by the debtors’ home before applying any proceeds to
other loans,10 the debtors did not introduce evidence sufficient to prove that the bank
engaged in a deceptive act or practice when it applied the proceeds to the loans it did or
that the bank mislead the debtors in any material respect.

Although Rofkahr repeatedly requested that the bank release the debtors’ home as
security for Rentco’s line of credit and he testified that it was his understanding that the
house would be removed from the loan, he offered no evidence to connect his belief to

10 Although the Court makes no finding here regarding whether the debtors would
prevail under non-ADPTA Arkansas law on their claim that the bank should have first
applied the foreclosure proceeds from the March 2021 auction to Rentco’s line of credit
because it was the only debt secured by their home, there is some support for such an
argument. See Lee v. Mercantile First Nat’l Bank, 765 S.W.2d 17 (Ark. Ct. App. 1989)
(finding that the debtors were entitled to have proceeds from the bank’s sale of
commercial collateral applied first to the debt that was secured by their home).
any act or representation by the bank. He referenced no bank-drafted document stating
Citizens had agreed to release the house nor recounted any conversation during which a
bank employee expressly told him, or even implied, that the bank agreed to release the
house or intended to do so. Brown acknowledged that Rofkahr often asked that the bank
release the home, but she specifically testified that the bank never agreed to do so.
Similarly, the record does not reflect that the bank led the debtors to believe that it would
apply the proceeds from the March 2021 auction of Rentco’s equipment to Rentco’s line
of credit before directing the proceeds to any other loan. Additionally, debtors’ counsel
stated in response to the Court’s questions that there is no provision in ADTPA that
requires sale proceeds to be applied to loans in a certain order and he knew of no such
requirement in the loan documents. (Tr. 149-50.) Lanier offered a reasonable basis for
the bank to apply the auction proceeds in the manner it did, testifying that the proceeds
were split on a percentage basis between two loans that were also secured by the
equipment that was sold.

Even if the bank applied the auction proceeds to the wrong loans or, alternatively, applied
the auction proceeds to loans that were secured by the auctioned equipment but should
have first applied them to Rentco’s line of credit, there is insufficient evidence upon
which the Court could find that any misapplication occurred in the context of a deceptive
act or practice on the part of the bank that mislead the debtors in a material respect.
Therefore, the Court finds that the debtors did not meet ADTPA’s first requirement in
regard to their claim that the bank misapplied foreclosure proceeds; as a result, the Court
need not address the second requirement. See Parker v. Parker, 520 S.W.3d 693, 699 (Ark. Ct. App. 2017) (“[a] private cause of action [under ADTPA] does not arise absent a
showing of both a violation and resultant damages.”) (emphasis in original).

The Court also finds insufficient evidence in the record to prove that the bank engaged in
predatory lending. In Gulfco of Louisiana, Inc. v. Brantley, 430 S.W.3d 7, 14 (Ark.
2013),11 the Arkansas Supreme Court affirmed a lower court’s finding that a lender had

11 The Court located few Arkansas predatory lending cases.
acted unconscionably and engaged in predatory lending. Gulfco, the lender in Brantley,
had loaned the borrowers funds secured by a mortgage on their home knowing that
neither borrower had full-time employment and one of them had been ill:
Despite the Brantley[s’] demonstrated inability to pay, Gulfco continued
to loan them money. Each loan, that included built-in fees and high
interest rates, placed the Brantleys in a position of ever-increasing debt,
such that it was all but inevitable that they would end up in default. While
the Brantleys’ debt situation became more dire with each loan, Gulfco's
risk was minimal, because with the mortgage, it was assured of receiving
full payment on the loan. Considering the totality of the circumstances,
the circuit court found that the evidence revealed an intolerable pattern of
reprehensible and unconscionable conduct on the part of Gulfco that
offended its sense of decency and justice. We cannot conclude that the
circuit court's findings of unconscionability and predatory lending
practices are clearly erroneous.

Brantley, 430 S.W.3d at 14.

The facts in the instant case bear little resemblance to those in Brantley. Here, the
debtors have not alleged that the bank charged them excessive fees or high interest rates.
In contrast to the Brantley borrowers, who were both employed only part-time, the
debtors here operated profitable businesses for a number of years that, at least for a time,
earned $1,000,000 annually. Rofkahr also testified that he provided accurate financial
information to the bank. Lanier testified that the bank reviewed the debtors’ debt
coverage ratio for each loan and most of the debtors’ business loans were reviewed by a
committee and went through a formal approval process. There is no evidence that the
bank made loans to the debtors or their businesses with the knowledge that the loans
could not be repaid. Rather, the record reflects that the debtors and the bank had a long-
standing relationship that remained on good terms for many years. When the debtors
began experiencing financial problems, the bank discussed a potential workout with
Rofkahr and drafted the paperwork but the debtors never signed it. Under these
circumstances, the Court cannot find that the bank was predatory in its lending to the
debtors.
Conclusion
For the above-stated reasons, the Court grants judgment on partial findings in favor of the
bank on the debtors’ ADTPA claims. However, because the bank objected to the Court
determining the amount of its secured claim in the context of this adversary proceeding,
the Court will reserve such a determination for claims litigation.!” If the debtors wish to
object to the bank’s amended proof of claim filed on December 1, 2025, they are ordered
to do so within thirty days from the date of the entry of this order. If the debtors do not
object to the bank’s claim withing thirty days, the claim may constitute prima facie
evidence of the validity and amount of the claim. See Jn re Muller, 479 B.R. 508, 512 (Bankr. W.D. Ark. 2012); Fed. R. Bankr. P. 3001(f).

IT IS SO ORDERED. -_oE i
Honorable Bianca M. Rucker
United States Bankruptcy Judge
Dated: 03/30/2026

ce: William Marshall Hubbard, attorney for debtors
M. Sean Brister, attorney for Citizens Bank
Joyce Bradley Babin, chapter 13 trustee
United States Trustee

Tn both his opening statement and closing argument, counsel for the bank urged the
Court to confine its ruling to the debtors’ ADTPA claims and reserve a determination of
the amount of the bank’s secured claim for claims litigation. Although it would have
been appropriate for the Court to determine the amount of the bank’s secured claim in
this adversary proceeding, the Court grants the bank’s request and will permit the debtors
to object to the bank’s amended claim under applicable non-ADTPA law. However,
because it is the bank that has sought to continue this dispute with the debtors via claims
litigation, the Court will be disinclined to entertain a defense to the debtors’ objection to
claim that is premised upon any preclusive doctrine. See Baptist Health v. Murphy, 373
S.W.3d 269, 278 (Ark. 2010) (finding that res judicata may be waived); Turcios v.
Carter, 678 S.W.3d 802, 811 (Ark. Ct. App. 2023) (discussing waiver of collateral
estoppel).
15