Dampier, Jr. v. Credit Investment, Inc., et al (in re Dampier)

Dampier, Jr. v. Credit Investments, Inc., et al. (In re Dampier, Jr.) Case No. CO-15-006 (BAP 10th Cir. November 5, 2015). Unpublished.
Bankruptcy court has exclusive jurisdiction to determine the dischargeability of a state court judgment but the bankruptcy court and state court have concurrent jurisdiction to determine the validity and amount of a creditor’s claim. In determining whether to grant relief from the automatic stay to permit a state court action to go forward, the bankruptcy court correctly applied the factors enunciated in In re Curtis and the factor enunciated in In re Ghindi that holds that one factor that can be dispositive in granting relief from stay is the likelihood that the movant will prevail in the litigation if the stay was lifted.
Procedural context:
Debtor appealed the bankruptcy court’s granting relief from the automatic stay to allow a state court action to proceed against debtor. Debtor failed to follow Fed. R. Bankr. P. 8005 and thus, the district court denied debtor’s request to have the district court hear the appeal. As a result, the appeal went to the BAP which affirmed the bankruptcy court’s decision to lift the automatic stay. Debtor unsuccessfully argued that the Curtis factors were erroneous because the doctrines of res judicata and collateral estoppel were unavailable to appellees and the state court action would only be a “dry run.” The BAP found that collateral estoppel possibly applied only in a very narrow sense and related only to appellees’ breach of fiduciary duty claim because of the US Supreme Court’s 2013 decision in Bullock v. BankChampaign, N.A. which held that for the purposes of section 523(a)(4), defalcation requires a culpable state of mind involving knowledge of, or gross recklessness in respect to, the improper nature of fiduciary behavior while under Colorado law, a particular mental state is not required. While the BAP agreed that further inquiry into culpability may be required to determine dischargability under 523(a)(4), the bankruptcy court’s decision to allow the breach of fiduciary duty claim to proceed was not error. Legal determinations are reviewed de novo and factual findings reviewed for clear error. Matters of discretion are reviewed for abuse of discretion.
Appellees had terminated debtor’s employment because debtor had embezzled company funds. Debtor also conveyed five real estate parcels to his wife and appellees filed a criminal report. Debtor was arrested and pled guilty to felony theft. Appellees filed a state court action against debtor for fraud, breach of fiduciary duty and civil theft. Less than a month before the state court action was set to be tried to a jury, debtor filed bankruptcy. Appellees were given relief from the automatic stay to proceed with the state court action and debtor appealed but did not request that the bankruptcy court’s decision be stayed. The state court action went to trial and the jury returned verdicts on two counts in favor of appellees and one count in favor of debtor.
Thurman, Jacobvitz, Hall (Thurman)

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