Sangha v. Schrader (In re Sangha)

Summarized by Lars Fuller , BakerHostetler
10 years 8 months ago

Citation:

Sangha v. Schrader (In re Sangha), BAP No. CC-14-1397-PaKiTa (BAP 9th Cir. June 11, 2015)

Tag(s):

Ruling:

The BAP for the 9th Circuit reversed and remanded the bankruptcy court (C.D. Cal.), which had granted summary judgment on a creditor's 523(a)(6) nondischargeability claim after applying collateral estoppel to a state court judgment. Because the state court judgment did not establish that the debtor/defendant acted willfully, the necessary element for 523(a)(6) had not been actually litigated in the state court proceedings. State court award of punitive damages on plaintiff's defamation claim was not equivalent to finding of willfulness necessary under 523(a)(6). State court default judgment, entered after plaintiff made uncontested offers of proof on defamation claim and "prove up" hearing, otherwise satisfied necessary and actually litigated requirements to apply collateral estoppel under California law. However, bankruptcy court erred in inferring that defendant committed willful injury based solely on award of punitive damages. Award of punitive damages on defamation claim was equivalent to finding of "slander with malice." However, state court elements of "slander with malice" could have included "ill will," or "willingness to injure," which was not equivalent to "intent to injure."

Procedural context:

Creditor sued debtor to except debt from discharge under 523(a)(6). Bankruptcy court granted creditor's motion for summary judgment. Debtor/defendant appealed to BAP for 9th Circuit.

Facts:

Plaintiff sued defendant for defamation in state court, based on claim of false statements made during background check for employment. Defendant engaged in discovery abuses, and court granted plaintiff's motion for terminating sanctions, striking defendant's answer. After defendant failed to respond to court orders, state court entered default against defendant, and conducted a "prove-up hearing" on plaintiff's motion for default judgment. Following hearing, court entered judgment in the amount of $1 million for general damages, $362,535.40 for "special damages," $6,000 for punitive damages, and $1,098 for costs. Debtor filed bankruptcy under chapter 7. Creditor commenced adversary to except debt from discharge.

Judge(s):

Pappas, Kirscher, Taylor

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