Case Type:
Case Status:
BAP No. AZ-21-1203-FLS, BAP N0. AZ-22-1104-FLS (9th Circuit, Mar 14,2023) Not Published
The bankruptcy court properly held that the debtors' obligation to plaintiff was not dischargeable under 11 U.S.C. § 523(a)(6) because the evidence showed that the male debtor had intentionally directed his business to withhold compensation from the plaintiff without just cause or excuse. The bankruptcy court also properly ruled that, under Arizona law, the plaintiff's judgment was enforceable against the debtors' community property.
Procedural context:
The plaintiff sued the debtors for a determination that his state-court judgment against the male debtor and his business was nondischargeable under subsections (a)(2)(A), (a)(4), and (a)(6) of 11 U.S.C. § 523 and to deny the debtors a discharge under 11 U.S.C. § 727(a). The bankruptcy court ruled that the debt was nondischargeable under § 523(a)(6) and that the judgment could be enforced against the debtors' community property. The bankruptcy court denied plaintiff's request for attorney's fees. Both parties appealed.
The male debtor, Neal Jones, owned an Illinois orthodontic practice, Sauk Valley Orthodontics, P.C. (SVO). SVO employed the plaintiff, Ruchir Patel, and agreed to pay him a monthly salary. At around the time that SVO hired Dr. Patel, Dr. Jones and his wife relocated to Arizona and set up an orthodontic practice there. About a year and a half into Dr. Patel’s employment, SVO fell behind on Dr. Patel’s monthly compensation. Dr. Jones directed SVO’s accountant to withhold payment to Dr. Patel and instead pay SVO’s other debts and obligations. Dr. Jones emailed SVO's accountant stating that SVO would not pay Dr. Patel in full before the end of his employment term, so Dr. Patel was “trapped into playing along [with] us.” Dr. Neal's emails also stated, "You [SVO's accountant] must be paid, I [Dr. Neal] must be paid, the [office staff] must be paid, the suppliers must be paid, and the creditors must be paid.” As to plaintiff, Dr. Neal emailed, “I’ve learned that [Dr. Patel] unless [sic] has to fear something (generates motivation) or he’ll continue being apathetic.” SVO defaulted in making payments under a mediated resolution. Dr. Patel obtained an arbitration award against Dr. Jones and SVO for $68,455. The Illinois state court confirmed the award and entered a judgment against Dr. Jones and SVO for $73,254. Shortly after that, SVO ceased operations.
FARIS, LAFFERTY, and SPRAKER, Bankruptcy Judges

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