Case Type:
Case Status:
BAP No. CC-21-1202-FSG (9th Circuit, Aug 17,2022) Not Published
The Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's order granting summary judgment in favor of the plaintiff creditor on his section 523(a)(6) claim against the defendant debtor (an attorney) for willful and malicious injury stemming from the debtor's filing of false declarations on behalf of his clients in a pre-petition state court defamation action.
Procedural context:
Prior to the debtor's bankruptcy, debtor represented two defendants in a defamation action in which he filed an anti-SLAPP motion. The state court denied the motion and then sanctioned the debtor and his two clients for submitting false declarations in support of the anti-SLAPP motion. The debtor filed chapter 7 bankruptcy and the plaintiff filed an adversary proceeding asserting non-dischargeability claims, including for willful and malicious injury under section 523(a)(6). The bankruptcy court granted the plaintiff's motion for summary judgment on section 523(a)(6) based on the preclusive effect of the state court sanctions order. The Bankruptcy Appellate Panel affirmed.
Debtor, an attorney, represented two clients who had been sued by the plaintiff doctor for defamation after the clients had posted Yelp reviews claiming that the doctor had sexually assaulted and sexually harassed them. The debtor filed an anti-SLAPP motion to dismiss the defamation action and filed supporting client declarations which stated that the clients had consulted with counsel before making the allegedly defamatory Yelp reviews such that the statements were protected under the litigation privilege because the clients had allegedly consulted with the attorney before posting the Yelp reviews. Plaintiff took the deposition of the debtor's clients and they testified that they had not contacted counsel when they posted their Yelp reviews, contradicting the declarations. After the state court denied the anti-SLAPP motion, the court granted plaintiff's motion for sanctions against debtor and his two clients based on findings that the anti-SLAPP motion was frivolous and filed in bad faith. In debtor's chapter 7 bankruptcy, the court held that issue preclusion applied such that both the willful and malicious elements of section 523(a)(6) were met based on the findings in the state court. There was willfulness--an intent to cause injury (a subjective intent)--because the sanctions statute necessarily required a finding of bad faith (also a subjective intent) and the state court had made such a finding. There was also malice based on the state court had found that the anti-SLAPP motion was frivolous such that there was an intentional, wrongful act that caused injury and was done without justification. Further, there was an underlying tortious act--abuse of process--to support a claim under section 523(a)(6).

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