Now Updating
In re Edwin Earl Elliott

Summarizing by Clifford Stevens

Kamal Zeeb v. Samuel Farah (In re Zeeb)

Case Type:
Case Status:
BAP No. CC-19-1019-SKuTa (9th Circuit, Aug 09,2019) Not Published
State court jury finding of liability on conversion but award of zero damages established that creditor suffered harm from debtor on conversion claim. Issue preclusion did not prevent bankruptcy court from determining damages on conversion. Evidence sufficiently established debtor willfully injured creditor within meaning of 11 USC 523(a)(6).
Procedural context:
Bankruptcy court (CD Cal.) entered judgment in favor of creditor excepting debt from discharge pursuant to 11 USC 523(a)(6). Debtor appealed to BAP for 9th Circuit.
Farah and Zeeb worked together in two businesses: Storm Distribution, Inc. (“Storm Distribution”) and JSSA Enterprises, Inc. (“JSSA”). Both businesses concerned the importation and sale of hookahs and related accessories. Farah managed the sales and accounts, while Zeeb managed the facilities and employees. When Farah traveled abroad for a vacation in September 2010, he left Zeeb in charge of all aspects of Storm Distribution. According to Farah, while he was traveling Zeeb misappropriated the inventory and cash of both Storm Distribution and JSSA. Farah sued Zeeb and others in the Superior Court for Orange County, California. Farah stated two causes of action for conversion – one pertaining to Storm Distribution and the other to JSSA – and two corresponding causes of action for breach of contract. All four of these causes of action relied on the allegations that Zeeb misappropriated the assets of Storm Distribution and JSSA as the grounds for relief. Jury rendered a special verdict that found Zeeb breached that contract, which caused Farah to suffer $330,514.25 in damages. As for the conversion cause of action pertaining to Storm Distribution, the jury found Zeeb liable, found he intentionally interfered with Farah's property, found Farah was harmed, but found he suffered $0 in damages. Zeeb filed bankruptcy under chapter 7. Farah sued Zeeb to except debt from discharge. Bankruptcy court entered judgment on conversion claim in amount of $431,605.69.
Spraker, Kurtz, Taylor

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