Francis v. McLaughlin (In re Francis)
- Summarized by Lars Fuller , BakerHostetler
- 11 years 6 months ago
- Citation:
- Francis v. McLaughlin et al. (In re Francis), Case No. AZ-12-1281 (BAP 9th Cir. July 12, 2013)
- Tag(s):
-
- Ruling:
- 9th Circuit BAP affirmed in part, also vacating and remanding in part. In reviewing the grant of a motion for summary judgment on a dischargeability suit based upon the preclusive effect of an Arizona default judgment, the BAP concluded that although Arizona's law of preclusion did not generally give preclusive effect to default judgments, default judgments did have preclusive effect where issues had been actually adjudicated, i.e., the same issue was litigated, a final judgment entered, defendant had an opportunity to and actually litigated the matter, and the issue was essential to the judgment. The BAP concluded that these elements applied to Andrew, in particular because of the extensive litigation that had occurred prior to the entry of default judgment and the state court's express findings related to fraud against debtor Andrew Francis. Consequently, the BAP affirmed the banrkuptcy court's entry of summary judgment against Mr. Francis. With respect to Anne Francis, however, the BAP concluded that the state court did not make any findings of fraud against her, notwithstanding the entry of judgment against her. Althrough debtors/appellants had not raised the issue in their notice of appeal or briefs, first raising it at oral argument, the BAP found that it was necessary to review the issue to prevent a manifest injustice against Ms. Francis. The BAP vacated the entry of summary judgment against Ms. Francis, and remanded for further proceedings.
- Procedural context:
- 9th Circuit BAP reviewed decision of U.S. Bankruptcy Court (Arizona) entering summary judgment against debtors on dischargeability claim after giving preclusive effect to Arizona state court default judgment.
- Facts:
- Creditor United (United Food and Commercial Workers & Employers Arizona Health & Welfare Trust) sued Andrew and Anne Francis in Arizona state court, asserting that the Francises had improperly obtained and cashed insurance reimbursement checks in excess of $100k. After approximately three years of litigation, on the eve of trial, and with Andrew concerned with the impact of trial testimony on pending criminal charges against him, Andrew and Anne withdrew their answers and allowed default judgment to enter against them. The Arizona state court entered default judgment on fraud and conversion against both Andrew and Anne, with specific findings of fraud and conversion only against Andrew. The Andrews filed a chapter 7 voluntary petition shortly thereafter. United filed a complaint under 523(a)(2)(fraud) and (a)(19)(fraud related to the purchase of a security), and filed a motion for summary judgment asserting based on the state court default judgment.
- Judge(s):
- Judges Ahart, Jury, and Taylor
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