Badalov v. Buzhunashvili — Summary Judgment on Fraud Nondischargeability Claim

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March 27, 2026 Get Citation Alerts Download PDF Add Note

In re: Emin Buzhunashvili and Irene Gelfand

United States Bankruptcy Court, W.D. Wisconsin

• Citations: None known
• Docket Number: 3-24-00054

• Precedential Status: Unknown Status

• Opinion

• Authorities (27)

• Cited By (0)

• Summaries (0)

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Trial Court Document

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THIS ORDER IS SIGNED AND ENTERED. = ee 4
Dated: March 27, 2026 y,." Mm ie
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Hon. Rachel M. Blise
United States Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
In re:
Case No. 24-10209-rmb
Emin Buzhunashvili and
Irene Gelfand, Chapter 7
Debtors.
Seymour Badalov and
Natalia Khlestova,
Plaintiffs,
Adversary No. 24-00054-rmb

Emin Buzhunashvili and
Irene Gelfand,
Defendants.
DECISION AND ORDER GRANTING
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

Plaintiff Seymour Badalov invested in EMIL Corp., a restaurant business
owned by his friend, debtor-defendant Emin Buzhunashvili. Shortly thereafter, the
business floundered, and the parties’ relationship soured. Badalov now claims he
invested in the business based on fraudulent statements made by Buzhunashvili
and his wife, Irene Gelfand (together, “Defendants”). Badalov and his wife, Natalia

Khlestova (together, “Plaintiffs”), seek to have a claim for fraud declared non-
dischargeable under 11 U.S.C. § 523 (a)(2)(A). None of the statements Plaintiffs rely
on are actionable misrepresentations under Wisconsin law, so there is no

underlying debt for the Court to declare nondischargeable. In addition, Plaintiffs
cannot establish required elements of their § 523(a)(2)(A) claim. Defendants are
entitled to judgment as a matter of law dismissing the complaint.
BACKGROUND
The following facts are either undisputed or construed in the light most
favorable to Plaintiffs.
Badalov’s Investment in EMIL Corp.
Buzhunashvili operated a restaurant named Caspian Grill located on

Gammon Road in Madison, Wisconsin. At some point, Buzhunashvili opened
another restaurant and banquet hall named Caspian Grill Banquet (the “Banquet”)
located at 610 Junction Road in Madison, Wisconsin. The Banquet was owned by
E M I L Corp. (“EMIL Corp.”), which was solely owned by Buzhunashvili.
Badalov and Buzhunashvili were long-time personal friends. In or around
2023, Buzhunashvili and Badalov began discussing the idea of Badalov investing in

EMIL Corp. Badalov traveled to Madison, Wisconsin in February 2023 along with
his brother to see the business before investing. (Am. Compl., ECF 24 ¶ 10.) The
parties dispute the scope of information that Badalov and his brother reviewed
during their visit to Madison. Badalov agrees that he “discussed the Banquet with
his brother in [sic] prior to investing in early 2023, who had been present at prior
meetings and reviewed the information provided by the Defendants.” (Richman
Decl., ECF 54-1 at 260-61, Resp. to Interrog. No. 7.) Badalov’s brother advised that
the business “was in poor shape” and “struggling financially,” and he recommended
that Badalov not invest. (Id.; Resp. to PFOF, ECF 58 ¶ 4.) Buzhunashvili also told

Badalov that the business had financial issues. “Whenever Badalov spoke with
[Buzhunashvili], [Buzhunashvili] would tell him that the business was struggling to
pay rent and to pay for operations.” (Richman Decl., ECF 54-1 at 264, Resp. to
Interrog. No. 15.) “Defendants consistently told Badalov that they needed money
and the financial situation of the Banquet was dire.” (Id.) Badalov also saw
firsthand “the financial problems that the business was having.” (Richman Decl.,
ECF 54-1, at 157-58, Trial Trans.) He “saw that . . . one week is good, one week is

not good.” (Id.)
Despite this knowledge regarding the business’s financial issues, Badalov
decided to invest in EMIL Corp. based on his childhood friendship with
Buzhunashvili. (Id. at 158 (“most important for me was that we are friends and we
can help each other and we can find out the -- the way to solve the problems”); Resp.
to PFOF, ECF 58, ¶ 6.) Plaintiffs say Badalov was also persuaded by Defendants’

representations regarding “the potential of the business.” (Id.) Specifically,
Plaintiffs assert that in May 2023, Buzhunashvili and Gelfand came to Cancun,
Mexico while Badalov was on vacation with his family there and during this time,
“Gelfand bragged to Plaintiffs about how successful the Banquet was.” (Am. Compl.,
ECF 24, ¶ 16.) At a June 3, 2023 meeting “Defendants represented that the reason
they needed a partner was to expand the business,” and at a July 2023 meeting
“Defendants represented that the business was growing, and that they were
potentially looking to open a third restaurant.” (Id. ¶¶ 21, 24.) Finally, Plaintiffs
say that “Defendants represented to Badalov that the Banquet was solvent and

financially successful in order to obtain money from Badalov.” (Id. ¶ 67.) Badalov
says he had no prior experience in the restaurant business before investing in the
Banquet, and that he relied entirely on Defendants to provide information about the
business’s financial situation and to provide guidance regarding the restaurant
industry. (Badalov Decl., ECF 57, ¶¶ 5, 9.)
The parties dispute the exact amount of Badalov’s investment in EMIL Corp.
but agree that it was at least $72,269.00. (Resp. to PFOF, ECF 58, ¶ 13.) Plaintiffs’

Amended Complaint alleges that Badalov invested the following amounts: In late
February 2023, Badalov gave Buzhunashvili a check in the amount of $35,000.
(Am. Compl., ECF 24, ¶ 13.) On April 17, 2023, Badalov deposited $2,500 and
$4,500 in cash in a bank account controlled by Buzhunashvili. (Id. ¶ 17.) Also on
April 17, 2023, Badalov used his personal credit card to purchase furniture for the
Banquet in the amount of $7,290. (Id. ¶ 35.) On June 6, 2023, Badalov gave

Defendants another $15,000 in cash. (Id. ¶ 22.) On July 5, July 15, August 5, and
September 8, 2023, Badalov used his personal credit card to make $10,279 in
purchases for the Banquet. (Id. ¶¶ 35, 36.) Badalov also purchased $2,500 in food
and $1,500 in restaurant equipment for the Banquet. (Id. ¶ 26.) Buzhunashvili
represented that funds received from Badalov were investments in EMIL Corp. and
that he “could share in profits and losses” of the business. (Answer, ECF 25, ¶ 62.)
Buzhunashvili and Badalov formalized their investment agreement by
entering into a Business Purchase Agreement on October 31, 2023 (the
“Agreement”). (Resp. to PFOF, ECF 58, ¶ 9; see also Badalov Decl. Ex. A, ECF 57.)

Pursuant to the Agreement, the parties agreed that Badalov, through his company
Remat Enterprises Inc., would purchase 25% of EMIL Corp. for $90,000. (Id.) The
Agreement further provides that “[p]ayment of the Purchase Price is complete by
the agreement date.” (Id.)
In the fall of 2023, Badalov, his wife, and their family moved to Madison,
Wisconsin to work at the Banquet. They both provided services to the Banquet
through the fall of 2023. The parties disagree whether either received any

compensation for their services. The Banquet ceased operating on January 1, 2024.
(Resp. to PFOF, ECF 58, ¶ 15.)
The Forney Lawsuit
Separately, on January 30, 2023, former EMIL Corp. investor David Forney
filed a complaint in the Circuit Court for Dane County, Wisconsin against EMIL
Corp. and Buzhunashvili (the “Forney Lawsuit”). (Buzhunashvili Decl., ECF 55-1,
¶ 4.) Buzhunashvili and Forney settled the claims, and the suit was dismissed on

May 2, 2023. (Resp. PFOF, ECF 58, ¶ 16; Buzhunashvili Decl., ECF 55-1, ¶ 5.)
Payments to Forney pursuant to the settlement agreement were made timely and in
accordance with the settlement terms until November 2023. (Resp. to PFOF, ECF
58, ¶ 17.) In December 2023, the Forney Lawsuit was reopened, and the state court
entered judgment against Buzhunashvili. (Resp. to PFOF, ECF 58, ¶ 18; Richman
Decl., ECF 54-1, at 296-97.)
Badalov asserts neither of Defendants disclosed the existence of the Forney
Lawsuit before he invested in EMIL Corp. (Badalov Decl., ECF 57, ¶3.) Badalov
says he learned about the Forney Lawsuit in November 2023, after he signed the

Agreement. (Resp. to Interrog. 19, ECF 54-1 at 266; Badalov Decl., ECF 57, ¶ 4.)
Badalov says that if he had known about the Forney Lawsuit, including that Forney
was Buzhunashvili’s former business partner, Badalov would not have invested in
EMIL Corp. (Badalov Decl., ECF 57, ¶ 8.)
Procedural History
Defendants filed a chapter 13 bankruptcy petition on February 2, 2024, and
the case was converted to one under chapter 7 on May 14, 2024. The chapter 7

trustee determined that there were no assets to administer for creditors, and the
Court entered an order of discharge on September 19, 2024. In their bankruptcy
schedules, Defendants consistently maintained that Buzhunashvili owned 100% of
EMIL Corp. (See Case No. 24-10209, ECF 1 at 13 (Feb. 2, 2024), ECF 28 at 7 (Apr.
26, 2024), ECF 75 at 8 (July 17, 2024), ECF 99 at 7 (May 7, 2025).)
On January 1, 2025, EMIL Corp. sued both Plaintiffs in Dane County,
Wisconsin Circuit Court seeking return of business assets in Plaintiffs’ possession,

as well as damages for conversion and judicial dissolution of the business.
(Richman Decl., ECF 54-1, ¶ 2.) The state court held a trial on June 30, 2025, and
entered an Order for Judicial Dissolution of E M I L Corp. and Liquidation of
E M I L Corp. Assets on August 1, 2025. (Id. ¶¶ 3, 4; id., Ex. B, at 211-12.) In its
order, the state court declared that “EMIL Corp. is owned 75% by Emin
Buzhunashvili and 25% by Seymour Badalov.” (Id. at 212.) The court also ordered
dissolution of the company and liquidation of the company’s assets. (Id.) The
parties now agree that all funds Badalov gave to Buzhunashvili and all purchases
made by Badalov for the Banquet were capital investments in EMIL Corp. and were

not loans to EMIL Corp. or Defendants. (Resp. to PFOF, ECF 58, ¶ 11.)
Plaintiffs timely filed this adversary proceeding on August 16, 2024 seeking a
declaration that debts owed to them by Defendants are nondischargeable under 11
U.S.C. § 523 (a)(2)(A). Plaintiffs filed the operative Amended Complaint on
February 28, 2025. (ECF 24.)
JURISDICTION
The Court has jurisdiction over this adversary proceeding pursuant to 28

U.S.C. § 1334 and the order of reference from the district court pursuant to 28
U.S.C. § 157 (a). See General Order No. 161 (W.D. Wis. June 12, 1984) (available at
https://www.wiwd.uscourts.gov/administrative-orders) (last visited March 25, 2026).
Determination of the dischargeability of a debt is a core proceeding under 28 U.S.C.
§ 157 (b)(2)(I). To the extent the determination of dischargeability requires
consideration of issues impacted by the Supreme Court’s decision in Stern v.
Marshall, 564 U.S. 462 (2011), Plaintiffs affirmative consented to this Court’s entry

of a final order (ECF 24 ¶ 4), and Defendants consented by their silence. See Fed.
R. Bankr. P. 7008, 7012; see also Wellness Int’l Network, Ltd. v. Sharif, 575 U.S.
665, 683 (2015) (“Nothing in the Constitution requires that consent to adjudication
by a bankruptcy court be express.”).
DISCUSSION
Summary judgment is appropriate if the pleadings and affidavits on file show
there is no genuine dispute as to any material fact and the moving party can
establish it is entitled to judgment as a matter of law. See Fed. R. Bankr. P. 7056;

Fed. R. Civ. P. 56. An issue of material fact is a question that must be answered to
determine the rights of the parties under substantive law and that can properly be
resolved only “by a finder of fact because [it] may reasonably be resolved in favor of
either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The
movant may meet his burden by showing “that there is an absence of evidence to
support the nonmoving party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). “If the movant has failed to make this initial showing, the court is obligated
to deny the motion.” Hotel 71 Mezz Lender LLC v. Nat’l Ret. Fund, 778 F.3d 593,
601 (7th Cir. 2015) (citations omitted). If the moving party meets his burden, the
burden shifts to the nonmoving party to show there is a genuine issue of material
fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). “The evidence of the non-movant is to be believed, and all justifiable
inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255.

Plaintiffs object to the discharge of a debt owed to them under 11 U.S.C.
§ 523 (a)(2)(A), which excepts from discharge debts for money “obtained by . . . false
pretenses, a false representation, or actual fraud . . . .” 11 U.S.C. § 523 (a)(2)(A).
“[E]xceptions to discharge are to be construed strictly against a creditor and
liberally in favor of the debtor.” Goldberg Sec., Inc. v. Scarlata (In re Scarlata), 979
F.2d 521, 524 (7th Cir. 1992).
The existence of a prepetition debt is a threshold issue for a determination of
nondischargeability under § 523(a)(2)(A). The debtor must owe a debt under non-
bankruptcy law before the bankruptcy court can declare that debt to be excepted

from the discharge. E.g., S & L Enters. I, LLC v. Eisaman (In re Eisaman), 387
B.R. 219, 224 (Bankr. N.D. Ind. 2008) (“[T]he first step in determining whether or
not a particular debt is dischargeable is to make certain that there is, indeed, a debt
owing by the debtor to the creditor. Without such an obligation, there is no debt
which could be excepted from the scope of the debtors’ discharge.”).
Plaintiffs claim that Defendants owe them a debt under Wisconsin law for
intentional misrepresentation. To prove a claim of intentional misrepresentation, a

plaintiff must show that:
(1) the defendant made a factual representation; (2) which was
untrue; (3) the defendant either made the representation
knowing it was untrue or made it recklessly without caring
whether it was true or false; (4) the defendant made the
representation with intent to defraud and to induce another to
act upon it; and (5) the plaintiff believed the statement to be
true and relied on it to his/her detriment.
Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶ 12, 283 Wis. 2d 555, 699
N.W.2d 205 (quoting Ramsden v. Farm Credit Servs. of N. Cent. Wis. ACA, 223 Wis.
2d 704, 718-19 (Ct. App. 1998)). An intentional misrepresentation claim may arise
either from a “failure to disclose a material fact” or from a “statement of a material
fact which is untrue.” Kaloti, 2005 WI 111, ¶ 13 (quoting Ramsden, 223 Wis. 2d at
713).
Plaintiffs rely on three alleged misrepresentations:1 (1) Defendants falsely
represented to Badalov that the funds he gave Buzhunashvili were investments in
EMIL Corp. and that Badalov would share in the business’s profits and be a part

owner of EMIL Corp. (the “Partnership Representation”); (2) Defendants
misrepresented the financial state of the business such that Badalov thought he
was investing in a more financially healthy company (the “State of the Business
Representations”); and (3) Defendants failed to disclose the existence of the Forney
Lawsuit before Badalov invested in EMIL Corp. (the “Forney Lawsuit Omission”).
1. The Partnership Representation
Plaintiffs’ first theory is that Defendants falsely represented that Badalov

would receive an ownership interest in EMIL Corp. in exchange for his investments.
Plaintiffs say the representation was false, that Defendants deceived Badalov, and
that Defendants never intended to give Badalov an interest in the business. In
support of their argument, Plaintiffs point to Defendants’ bankruptcy schedules, in
which they asserted that EMIL Corp. was 100% owned by Emin Buzhunashvili.
(See Case No. 24-10209, ECF Nos. 1 at 13, 28 at 7, 75 at 8, 99 at 7; see also Richman
Decl., ECF 54-1 at 267, Resp. to Interrog. 22.) Plaintiffs also rely on the fact that

Defendants maintained that same position in the state court litigation filed by
EMIL Corp. until the state court ruled against them.

1 The Amended Complaint includes allegations related to several other misrepresentations made by
Defendants, but the summary judgment briefing, confirmed by Plaintiffs’ counsel at oral argument,
makes clear that Plaintiffs rely only on the three alleged misrepresentations discussed herein.
Plaintiffs effectively argue that Defendants repudiated the Agreement, under
which Badalov invested in EMIL Corp. The problem with this argument is that
Plaintiffs already sought and obtained an order in state court enforcing the

Agreement and declaring that Badalov owns 25% of EMIL Corp.
Wisconsin law incorporates the “election of remedies” doctrine, which is “an
equitable principle barring one from maintaining inconsistent theories or forms of
relief.” Head & Seemann, Inc. v. Gregg, 104 Wis. 2d 156, 159 (Ct. App. 1981)
(citation omitted), aff’d and remanded, 107 Wis. 2d 126 (1982). The underlying
purpose of the doctrine is “to prevent double recovery for the same wrong.”
Wickenhauser v. Lehtinen, 2007 WI 82, ¶ 17, 302 Wis. 2d 41, 734 N.W.2d 855 (citation omitted).
“The classic application of the election of remedies doctrine is that a
defrauded party has the election of either rescission or affirming the contract and
seeking damages. The choice is forced with respect to alternative theories in a
single lawsuit because of inconsistency of both rescinding and affirming the
contract.” Gregg, 104 Wis. 2d at 159 (citing First Nat’l Bank & Trust Co. v. Notte, 97 Wis. 2d 207, 225 (1980) and Seidling v. Unichem, Inc., 52 Wis. 2d 552, 557 (1971)). That is, “one may not cancel a contract and also sue to enforce compliance
with the contract’s provisions.” Wickenhauser, 2007 WI 82, ¶ 17 (cleaned up). See
also Jolin v. Oster, 55 Wis. 2d 199, 205 (1972) (“While it might well be true that
respondent has an action either in law or in equity, once the plaintiff has elected his
remedy, he is bound thereby and could not bring an action in equity after
proceeding at law.”); Gaugert v. Duve, 217 Wis. 2d 164, 178 (Ct. App. 1998) (holding
that litigant was “bound by his decision to elect one right (to execute the contract)
over an alternative (rescission)”); Harley-Davidson Motor Co. v. PowerSports, Inc., 319 F.3d 973, 988 (7th Cir. 2003) (“[U]nder Wisconsin law, if a party’s assent to a
contract is induced by material or fraudulent misrepresentations, that person can
either seek rescission or damages. But Wisconsin law is quite clear that the
defrauded party cannot seek both[.]”).
Badalov already sought to enforce the Agreement in state court and won.
Thus, Badalov has the partnership interest Plaintiffs say Defendants did not intend
to give him. Plaintiffs cannot now also seek return of their investment (i.e.

recission of the Agreement) based on Defendants’ alleged misrepresentations to
Badalov that he would be an owner of the company. If successful, Plaintiffs would
essentially receive a double recovery—they would get both 25% of the company
(whatever it may be worth) and get the amount of their investment back. The
election of remedies doctrine precludes such a result. Because Plaintiffs have
already elected enforcement of the contract, they cannot seek to recover damages

based on the alleged invalidity of the Agreement due to misrepresentation.
For the same reason, Plaintiffs have no reliance damages for the Partnership
Representation. Badalov says he would not have invested in EMIL Corp. if he had
known that he would not receive an ownership interest in the company. He now
has the ownership interest he was promised. Plaintiffs do not explain how they
relied to their detriment on the Partnership Representation when they received
exactly what they say Defendants promised them.
2. The State of the Business Representations
Plaintiffs next contend that Defendants made various representations

regarding the financial health and prospects of EMIL Corp. They rely on the
following statements:2
• “In May 2023, while Badalov was on vacation with his
family in Cancun, Mexico, Buzhunashvili and Gelfand
came to Cancun, Mexico. During this time Gelfand
bragged to Plaintiffs about how successful the Banquet
was.” (Am. Compl., ECF 24, ¶ 16.)
• “At the June 3, 2023 meeting, the Defendants represented
that the reason they needed a partner was to expand the
business.” (Id. ¶ 21.)
• “At the July 2023 meeting the Defendants represented
that the business was growing, and that they were
potentially looking to open a third restaurant.” (Id. ¶ 24.)
• “[T]he Defendants represented to Badalov that the
Banquet was financially successful and that they needed
money in order to expand the business.” (Id. ¶ 63.)
• “The Defendants represented to Badalov that the Banquet
was solvent and financially successful in order to obtain
money from Badalov.” (Id. ¶ 67.)
Plaintiffs’ claim based on these statements fails for several reasons. The oral
statements regarding EMIL Corp.’s financial condition are not eligible for an

2 Notably, Plaintiffs’ opposition to Defendants’ motion for summary judgment does not identify or
present evidence of any specific statements that Defendants made regarding the business; they say
only that “Defendants misrepresented the condition of their business.” See ECF 56 at 9. Because
the statements identified in the Amended Complaint are not actionable, the Court has assumed that
the Plaintiffs could present evidence of these statements. However, Defendants could be entitled to
summary judgment based solely on the Plaintiffs’ failure to present evidence to support their claim.
exception to discharge under § 523(a)(2), the statements are non-actionable opinion
or puffery, and Plaintiffs cannot prove that they reasonably relied on the
statements.

A. Debts based on oral statements regarding an insider’s
financial condition are dischargeable.
Section 523(a)(2)(A) provides that a debt can be declared nondischargeable to
the extent it was 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). A statement is “‘respecting’ a debtor’s financial
condition” if “it has a direct relation to or impact on the debtor’s [or an insider’s]
overall financial status.” Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. 709,
720 (2018). And an “insider” is defined as a “corporation of which the debtor is a
director, officer or person in control.” 11 U.S.C. § 101 (31); In re Beach, 651 B.R. 359,
375 (Bankr. E.D. Wis. 2023).

A statement “respecting the debtor’s or an insider’s financial condition” can
be non-dischargeable, but only if it is “a statement in writing.” See 11 U.S.C.
§ 523 (a)(2)(B); Beach, 651 B.R. at 374-75 (applying “statement in writing”
requirement); Andringa v. Acker (In re Acker), Adv. No. 19-2089-kmp, 2021 WL
1346575, at *4 (Bankr. E.D. Wis. Mar. 31, 2021) (“If the debtor makes a false
statement respecting the financial condition of an ‘insider’ (i.e. a corporation of
which the debtor is a director, officer or person in control), then the alleged false

representation must also be in writing to be nondischargeable.”). Under the scheme
created by § 523(a)(2)(A) and (B), a debt obtained by an oral statement respecting
the debtor’s or an insider’s financial condition is dischargeable.
EMIL Corp. qualifies as an insider because Buzhunashvili controlled the

company at all times and owned 100% of the company until Badalov invested. Any
claim based on the oral statements made by Defendants as to their and EMIL
Corp.’s financial condition is dischargeable under § 523(a)(2).
Plaintiffs have conceded that none of Defendants’ statements were in writing
as required under § 523(a)(2)(B). When asked at oral argument whether there is
any reason why the above statements do not fall under the “statement in writing”
requirement of § 523(a)(2)(B), counsel for Plaintiffs argued that Defendants’

statements about the company were not just about the company’s financial
condition because they additionally paint a larger picture of the prospect of the
parties’ relationship as friends and as business partners. But even if the Court
were to agree with counsel that these statements fit into a broader narrative from
Defendants about the parties’ relationship, the statements that Plaintiffs allege are
false are statements about the company’s success, solvency, and potential

expansion. An suggestions about the parties’ future relationship are not statements
as to present or existing facts. As explained below, claims based on future
predictions are not actionable representations without proof that Defendants had
information negating the representations.
Plaintiffs’ claimed debt based on the State of the Business Representations
cannot be declared nondischargeable under § 523(a)(2).
B. The statements do not relate to present or existing facts.
Wisconsin law is clear that neither a statement of opinion nor mere puffery
can support an intentional misrepresentation claim. See Tietsworth v. Harley-
Davidson, Inc., 2004 WI 32, ¶¶ 41-44, 270 Wis. 2d 146, 677 N.W.2d 233 (recognizing

that sales “puffery” cannot be an actionable misrepresentation of fact); see also
Toshner v. Goodman, No. 18-CV-2005-bhl, 2024 WL 473616, at *6 (E.D. Wis. Feb. 7,
2024) (holding that statements regarding a “safe” and “low-risk” investment were
“qualitative statements, opinions, or sales puffery” that were “not actionable
misstatements of fact”); Adaptive Micro Sys. LLC v. AdsLED, Inc., No. 11-C-668, 2011 WL 13217958, at *4 (E.D. Wis. Oct. 18, 2011) (holding that descriptors like

“high quality,” “state-of-the-art,” “carefully designed,” and “superior,” are “classic
puffery”).
The State of the Business Representations include statements that the
Banquet, and EMIL Corp., was financially successful (Am. Compl., ECF 24, ¶¶ 16,
63, 67) and that the business was growing or would expand (id. ¶¶ 21, 24, 63).
Vague statements about the “success” or “potential success” of a business are not
statements of fact on which Plaintiffs could rely; they are mere opinion or puffery

without concrete information. Success is in the eye of the beholder. Success for one
company might be considered failure for another.
In addition, an actionable misrepresentation must relate to present or pre-
existing facts; “unfulfilled promises or statements made as to future events” are not
actionable. Hartwig v. Bitter, 29 Wis. 2d 653, 657 (1966). An exception to this rule
exists only where the plaintiff can prove that the defendant was “aware of present
facts incompatible with that opinion.” Id. at 658.
Defendants’ statements that their business would grow or expand in the

future are statements about future events, not statements of existing or present
fact. Plaintiffs presented no evidence on summary judgment that Defendants were
aware of any present facts that would negate their expressed opinion that the
business could or would grow or expand in the future.
C. Plaintiffs could not have justifiably
relied on the State of the Business Representations.
One element of an intentional misrepresentation claim under Wisconsin law
is justifiable reliance. To prove the element of justifiable reliance, a plaintiff must
show that they justifiably relied on the representation to their detriment. See
Kaloti, 2005 WI 111, ¶ 12 (noting that a plaintiff must show that they “believed the
statement to be true and relied on it to his/her detriment”) (citation omitted).

Justifiable reliance requires that the creditor not “‘blindly [rely] upon a
misrepresentation the falsity of which would be patent to him if he had utilized his
opportunity to make a cursory examination or investigation.’”  Ojeda v. Goldberg, 599 F.3d 712, 717 (7th Cir. 2010) (quoting Field v. Mans, 516 U.S. 59, 71 (1995)).
“The recipient of a fraudulent misrepresentation is not justified in relying upon its
truth if he knows that it is false or its falsity is obvious to him.” See Ollerman v.
O’Rourke Co., 94 Wis. 2d 17, 43, n.26 (1980) (quoting 3 Restatement (Second) of

Torts, § 541 (1977)). Consistently, “[a] plaintiff cannot justifiably rely on a
misrepresentation while ignoring contradictory information that he or she knew or
could have discovered.” Osowski v. Howard, 2011 WI App 155, ¶27, 337 Wis. 2d
736, 807 N.W.2d 33 (unpublished opinion) (citing Ritchie v. Clappier, 109 Wis. 2d
399, 404 (Ct. App. 1982)).

Here, Badalov had information that the business was struggling. Badalov’s
brother advised that the business “was in poor shape” and “struggling financially,”
and he recommended that Badalov not invest. (Resp. to Interrog. No. 7, ECF 54-1,
at 260-61; Resp. to PFOF, ECF 58, ¶ 4.) Additionally, “[w]henever Badalov spoke
with [Buzhunashvili], [Buzhunashvili] would tell him that the business was
struggling to pay rent and to pay for operations.” (Resp. to Interrog. No. 15, ECF
54-1, at 263-64.) In fact, “Defendants consistently told Badalov that they needed

money and the financial situation of the Banquet was dire.” (Id.)
Badalov had information that directly contradicted Defendants’ alleged
assertions that the business was or would be financially successful. Therefore,
Badalov could not have justifiably relied on those assertions.
3. The Forney Lawsuit Omission
Finally, Plaintiffs claim that Defendants intentionally concealed the
existence of the Forney Lawsuit. “The general rule is that silence, a failure to

disclose a fact, is not an intentional misrepresentation unless the seller has a duty
to disclose. If there is a duty to disclose a fact, failure to disclose that fact is treated
in the law as equivalent to a representation of the non existence of the fact.”
Ollerman, 94 Wis. 2d at 26; see also Kaloti, 2005 WI 111, ¶ 15 (“The usual rule is
that there is no duty to disclose in an arm’s-length transaction. However, courts
have carved out a number of exceptions to that rule and have refused to apply the
rule when to do so would work an injustice.”) (citations omitted). Whether a duty to
disclose exists is a question of law. Ollerman, 94 Wis. 2d at 27.
A party to a business transaction has a duty to disclose where: “(1) the fact is

material to the transaction; (2) the party with knowledge of that fact knows that the
other party is about to enter into the transaction under a mistake as to the fact; (3)
the fact is peculiarly and exclusively within the knowledge of one party, and the
mistaken party could not reasonably be expected to discover it; and (4) on account of
the objective circumstances, the mistaken party would reasonably expect disclosure
of the fact.” Kaloti, 2005 WI 111, ¶ 20; see also Beuttler v. Marquardt Mgmt. Servs.,
Inc., 2022 WI App 33, ¶ 15, 404 Wis. 2d 116, 978 N.W.2d 237.

Importantly for this case, the defendant must have knowledge that the
omitted fact is material to the plaintiff. See Bakery Bling v. Matrix Packaging
Mach., LLC, 685 F. Supp. 3d 718, 745 (E.D. Wis. 2023). In Bakery Bling, the
plaintiff sought equipment to automate the filling of royal icing into premade bags
for its cookie and gingerbread house kits. Id. at 728. During testing of its
equipment to be sold to the plaintiff, the defendant used watered-down icing and

different bags but did not inform the plaintiff. Id. at 730-33. The court held that
the defendant had a duty to disclose that the machine would not work with the
plaintiff’s specific icing and bags because the defendant knew that was the purpose
of the purchase. Id. at 745 (“Defendant also had every reason to suspect that the
Machine would not, in fact, function properly and as contracted for with Plaintiff’s
non-watered-down icing and its polyethylene bags.”).
Similarly, in Kaloti, the Wisconsin Supreme Court held that the plaintiff
properly pleaded a misrepresentation claim based on failure to disclose. 2005 WI
111, ¶ 22. The plaintiff wholesaler entered into a contract to buy products from the

defendant manufacturer. The defendant knew the plaintiff intended to re-sell the
products to large stores, and the defendant did not disclose that it also intended to
sell the same products directly to large stores, thereby competing with the plaintiff
and largely denying the plaintiff of its customary market. Id. Here, in contrast, Plaintiffs did not submit evidence that Buzhunashvili knew
Badalov was about to enter a transaction under a mistake as to a material fact.
Badalov avers that he would not have invested in EMIL Corp. if he had known

about the Forney Lawsuit. (Badalov Decl., ECF 57, ¶ 8.) This might be sufficient to
establish that the information was material to Badalov. But Plaintiffs also need to
establish that Buzhunashvili knew it was material. On this point, Plaintiffs state
only that “[a] lawsuit of this magnitude absolutely be material to any person
investing in a business of comparable size to the Banquet.” (ECF 56 at 9.) They
cite no evidence for this statement. Reliance on purported truisms is not sufficient

on summary judgment.
For the same reason, Plaintiffs cannot establish a critical element of their
claim under § 523(a)(2)(A). “Scienter, or the intent to deceive, is also a required
element under § 523(a)(2)(A) whether the claim is for a false representation, false
pretenses, or actual fraud.” Gasunas v. Yotis (In re Yotis), 548 B.R. 485, 495 (Bankr. N.D. Ill. 2016). “Intent to deceive is measured by the debtor’s subjective
intention at the time of the representations or other purportedly fraudulent
conduct.” Id. Plaintiffs cite no evidence that would establish Buzhunashvili’s intent.

Based on the summary judgment record, from Buzhunashvili’s perspective, Badalov
had knowledge that the business was in financial trouble but had decided to invest
anyway based on his friendship with Buzhunashvili. One aspect of that financial
trouble was the Forney Lawsuit, but Buzhunashvili would have no reason to know
that this additional information would have led Badalov not to invest given all the
negative financial information Badalov had already received. In addition, Badalov
was making timely payments to Forney based on the parties’ settlement agreement,

and those payments continued until November 2023, after Badalov’s investment
was complete.
Plaintiffs therefore have not carried their burden on summary judgment to
present evidence from which a factfinder could conclude that Buzhunashvili knew
that Badalov entered the transaction under a mistake as to a material fact or that
Buzhunashvili intended to deceive Badalov.

CONCLUSION
The Court concludes that there are no disputed issues of material fact based
on the evidence presented, and that Defendants are entitled to judgment as a
matter of law dismissing Plaintiffs’ adversary complaint. Plaintiffs have not
submitted sufficient evidence to establish that Defendants owe them a prepetition
debt under nonbankruptcy law. Without an underlying debt, there is nothing for
the Court to declare nondischargeable under 11 U.S.C. § 523 (a)(2)(A). Plaintiffs
also cannot establish required elements of their claim under § 523(a)(2)(A).
ORDER
Accordingly, IT IS HEREBY ORDERED that Plaintiffs Seymour Badalov and

Natalia Khlestova are entitled to no relief in this adversary proceeding and
summary judgment shall be granted in favor of Defendants Emin Buzhunashvili
and Irene Gelfand.
IT IS FURTHER ORDERED that the Clerk shall enter judgment consistent
with this order.
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