Now Updating

Summarizing by Lars Fuller

In re Derek Luebbert

Case Type:
Case Status:
19–2751 (8th Circuit, Feb 09,2021) Published
The facts were sufficient to show that the debtor willfully and maliciously harmed his former employer, supporting the bankruptcy court's determination that a judgment debt was nondischargeable under 11 U.S.C. § 523(a)(6). Collateral estoppel applied to the injury component of § 523(a)(6) because the breach of contract case resolved the issue of whether the former employer's legal rights were violated. With respect to the willful and malicious injury component of § 523(a)(6), the injury satisfied the willfulness prong because the debtor's conduct "amounted to an intentional tort."
Procedural context:
The bankruptcy court held a trial on whether the debtor's pre-petition judgment debt to his former employer was nondischargeable under 11 U.S.C. § 523(a)(6). The judgment debt was entered by a federal district court. The bankruptcy court held that the judgment debt satisfied all criteria for nondischargeability. The debtor appealed to the district court, and then to the Court of Appeals, asserting that the bankruptcy court erred (1) when it applied the doctrine of collateral estoppel to the issue of whether he injured his former employer and (2) by finding that inflicted a willful and malicious injury.
The debtor, Derek Luebbert, was an engineer for Global Control Systems (GCS). His employment contract included a non-compete agreement that lasted for three years after he quit working for GCS. Luebbert developed software for one of GCS's clients, Alliant Techsystems, and eventually worked exclusively with Alliant. Luebbert decided he was underpaid, formed his own company (Atlas Industrial Solutions), and bid on Alliant's projects while still working for GCS. Using GCS's own bidding form, Luebbert won an Alliant contract. Upon learning that he had won the contract, Luebbert sent GCS a letter of resignation, but did not inform GCS that he was competing against GCS. Luebbert nonetheless stole information from GCS and wiped GCS computer hard drives. GCS discovered Luebbert's violation of his non-compete and settled with Luebbert. Most of the proceeds from Luebbert's work went to GCS, with Alliant making checks jointly payable to GCS and Luebbert's company, Atlas. The original project that Atlas won expanded, and Luebbert and GCS amended their settlement agreement. The arrangement worked for over a year, until Luebbert decided it was unfair and schemed to keep more money for himself. Luebbert got Alliant to agree to his scheme, and then informed GCS that he would not comply with the settlement agreement, as amended. Alliant then sued Luebbert for breach of contract in state court, and Luebbert removed the case to federal court based on diversity jurisdiction.
SMITH, Chief Judge, BENTON and KOBES

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