Shulman v. Lamphere (In re Lamphere)
- Summarized by Eric Madden , Reid Collins & Tsai LLP
- 13 years 8 months ago
- Citation:
- Schulman v. Lamphere (In re Lamphere), No. 10-6213 (10th Cir. May 4, 2011)
- Tag(s):
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- Ruling:
- The Tenth Circuit affirmed the bankruptcy court’s decision not to apply collateral estoppel to a default judgment entered by a New Jersey state court. Even though the defendant had appeared and initially participated in prior action, the Tenth Circuit concluded that the underlying issues were not actually litigated in that action and, therefore, the “actually litigated” element of collateral estoppel was not satisfied.
- Procedural context:
- A creditor appealed from the district court’s decision affirming the bankruptcy court’s holding that, under New Jersey law, a prior default judgment was not subject to collateral estoppel.
- Facts:
- The creditor initiated an adversary proceeding to have a prior New Jersey default judgment against the debtor declared non-dischargeable under 11 U.S.C. § 523(a)(6). The creditor asked the bankruptcy court to give preclusive effect to the New Jersey court’s finding that the debtor acted with malice. Under New Jersey law, the entry of a default judgment generally means that the underlying issues were not actually litigated for purposes of collateral estoppel. The creditor, however, argued that this case did not involve a default judgment entered in the complete absence of the defendant. Rather, the debtor had filed an answer and counterclaims and participated in the New Jersey action until the discovery phase. The Tenth Circuit rejected this argument, noting that a New Jersey state appellate court and a New Jersey bankruptcy court had declined to apply collateral estoppel under analogous circumstances. Thus, the Tenth Circuit concluded that the New Jersey Supreme Court would be unlikely to apply collateral estoppel here simply because the debtor had initially participated in the prior action.
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