Tomkow v. Barton (In re Tomkow)
- Summarized by Lars Fuller , BakerHostetler
- 9 years 1 month ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- BAP No. CC-16-1075-TaFMc (9th Circuit, Jan 05,2017) Not Published
- Tag(s):
-
- Ruling:
- The BAP for the 9th Circuit affirmed the bankruptcy court (CD Cal.) ruling granting summary judgment in favor of creditor determining that state court judgment was nondischargeable pursuant to 523(a)(2)(A) and (a)(6) and denying motion for direct certification for appeal to 9th Circuit. Collateral estoppel/issue preclusion precluded relitigation of factual and legal issues determined by state court, including debtors' malice and fraud, or in determination of damages, even though state appellate court affirmed on other grounds. Final judgment of malice was sufficient for 523 summary judgment.
- Procedural context:
- After state court entered judgment against defendants, defendants filed bankruptcy under chapter 13. Creditors sued to except debts from dischargeability, and bankruptcy court entered summary judgment in favor of creditors, and denied debtors' motion for certification of appeal to 9th Circuit. Debtors appealed to BAP for 9th Circuit.
- Facts:
- During the late 1990s, debtors "Tomkow" and "Khan" co-founded start up companies with creditor "Barton." One company, "RIL," owned or controlled various patents relating to authentication and verification of emails and electronic payments. After disagreements, Barton sued Tomkow and Khan. During discovery, Barton discovered that Tomkow and Khan had taken control of Barton's stock in RIL, and Barton commenced second action against them alleging conversion and fraud. The state court (California) ruled in favor of Barton on conversion and fraud causes of action. It determined that Tomkow and Khan had acted with malice, oppression, and fraud, and thus, that Barton was entitled to punitive damages. The state court then conducted a second phase of trial to quantify punitive damages. Tomkow and Khan then filed separate petitions for bankruptcy under chapter 13. The state court then awarded Barton an amended judgment with compensatory damages of $2,840,060, damages for emotional distress, and $880,021.91 in prejudgment interest, plus punitive damages of $250,000 against Khan and $150,000 against Tomkow. Debtors appealed. California court of appeals affirmed liability based on conversion, but did not consider whether debtors were additionally liable for fraud, breach of fiduciary duty, or unfair competition. It affirmed the punitive damages awards based on malice and deceit. Barton commenced nondischargeability adversary proceeding under 523(a)(2) and (a)(6) and filed motion for summary judgment based on collateral estoppel/issue preclusion.
- Judge(s):
- Taylor, Faris, McKittrick
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