In Re: Markowitz v. Campbell, 97-2075

• Decision Date: 29 October 1998
• Docket Number: No. 97-2075,97-2075
• Citation: 190 F.3d 455
• Parties: (6th Cir. 1999) In Re: Seymour Markowitz, Debtor. Seymour Markowitz, Appellant, v. Carolyn Campbell, Appellee. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 455

190 F.3d 455 (6th Cir. 1999)

In Re: Seymour Markowitz, Debtor.

Seymour Markowitz, Appellant, v. Carolyn Campbell, Appellee.

No. 97-2075

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: October 29, 1998

Decided and Filed: September 23, 1999

Appeal from the United States District Court for the Eastern District of Michigan at Detroit, No. 97-73042--Anna Diggs Taylor, District Judge. [Copyrighted Material Omitted] John C. Lange, GOLD, LANGE & MAJOROS, P.C., Southfield, Michigan, for Appellant.

Lawrence J. Acker, Bloomfield Hills, Michigan, Clay E. Ottoni, CLAY E. OTTONI, P.C., Farmington Hills, Michigan, for Appellee.

Before: BOGGS, SUHRHEINRICH, and SILER, Circuit Judges.

SUHRHEINRICH, J., delivered the opinion of the court, in which SILER, J., joined. BOGGS, J. (pp. 466-68), delivered a separate dissenting opinion.

OPINION

SUHRHEINRICH, Circuit Judge.

Section 523(a)(6) of the Bankruptcy Code provides that a debt "for willful and malicious injury by the debtor to another" is non-dischargeable. 11 U.S.C. § 523(a)(6). The principal question before us is whether a debt arising from the legal malpractice judgment against Appellant, Seymour Markowitz, falls within this statutory exception. Finding jurisdiction proper in the district court and in this appeal, we AFFIRM the judgment below on the issue of collateral estoppel. However, we VACATE the judgment of the district court on the issue of dischargeability and REMAND the case for further proceedings consistent with this opinion and the recent decision of the Supreme Court in Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974 (1998).

I.

Seymour Markowitz is a licensed attorney practicing in Michigan. On May 17, 1991, Markowitz filed a divorce action in Wayne County Circuit Court on Carolyn Campbell's behalf. On May 20, 1991, Campbell's husband filed an annulment action in the Oakland County Circuit Court. Also on May 20, Carolyn Campbell personally delivered papers served upon her for the Oakland County action to Markowitz. Markowitz did not file a response to the Oakland County action and a default judgment was entered against Carolyn Campbell on August 23, 1991. On September 20, 1991, Markowitz prevailed on a motion to dismiss the Oakland County action. Afterward, Campbell's husband gave Markowitz a proposed order dismissing the action along with notice that the dismissal order would be entered within seven days. Markowitz did not file objections and neither approved nor contested it. As a result, the dismissal of the action failed to vacate the default judgment and the dismissal order did not correct the record, i.e., it was not entered nunc pro tunc, and the default judgment remained despite the dismissal. Carolyn Campbell continued to be garnished and her husband began attempting to collect on the default judgment. (J.A. at 99-100). Markowitz testified that he believed the dismissal order effectively vacated the default judgment and that no specific language other than that granting the dismissal of the cause was required in the order. (J.A. at 98-101). Therefore, he felt that no further action was necessary and that the default judgment could not be enforced, despite the fact that the dismissal order did not expressly vacate the default judgment or enter the dismissal nunc pro tunc. (J.A. at 98-101). Thereafter, Markowitz withdrew as Campbell's counsel on November 27, 1991, at which time the dismissal of the Oakland County action remained in effect.

Upon appeal by Campbell's husband, the Michigan Court of Appeals reversed the Oakland County dismissal -- reinstating the case in Oakland County and reinstating the default judgment of annulment. Markowitz was no longer Carolyn Campbell's attorney. Subsequent efforts by Carolyn Campbell to have the default judgment set aside were denied by the Oakland County Circuit Court. And, ultimately, the Wayne County Circuit Court dismissed the action pending in that court because jurisdiction had been obtained in the matter by the Oakland County Circuit Court.

Although Campbell had often requested that Markowitz take action and file responses and pleadings in the two courts, Markowitz failed to do so. Markowitz admitted that he knew Campbell could suffer a default from his actions. (J.A. at 93-94). He admitted that he filed no papers on her behalf in Oakland County prior to the default, and he admitted that this was a conscious decision. (J.A. at 96). Markowitz believed that the Wayne County action was pending and had precedence, (J.A. at 95), and that the dismissal of the Oakland County judgment effectively vacated the default. When Carolyn Campbell was issued a show cause order for failure to pay child support, Markowitz informed someone from the friend of the court, while in Oakland County Circuit Court on another matter, that there was a prior action in Wayne County and that the show cause order should therefore not proceed. While he was apparently instructed to bring in some proof of the same, he failed to do so. (J.A. at 77, 112). Markowitz's testimony also indicates that some of his actions or inactions were motivated by legal strategy. He claimed he never spoke with Mr. Campbell because it was his policy never to speak to defendants, despite the fact that Mr. Campbell was representing himself. (J.A. at 77, 111). He also believed that antagonizing Mr. Campbell would be antithetical to Carolyn Campbell's bargaining in pursuit of the law practice as an asset in the divorce. (J.A. at 77, 114). Finally, Markowitz testified that his actions were motivated by the best interests of his client. (J.A. at 77, 95, 96, 118).

On June 11, 1993, Campbell filed a civil action against Markowitz in the Wayne County Michigan Circuit Court alleging legal malpractice. On May 23, 1995, a jury found Markowitz liable for legal malpractice -- finding Markowitz was negligent and that his negligence was the proximate cause of Carolyn Campbell's injuries or damages. The jury awarded Campbell $300,000 in damages as a result of the entry of the default judgment. ¹ On June 12, 1995, Markowitz filed for relief under Chapter 7 of the Bankruptcy Code. On October 10, 1995, Campbell commenced an adversarial proceeding against Markowitz alleging in Count I that her claim to the $300,000 judgment should be declared non-dischargeable under 11 U.S.C. § 523(a)(6) because it was a judgment resulting from willful and malicious injury.

Markowitz and Campbell filed cross-motions for summary judgment in the Bankruptcy Court as to Count I. On June 12, 1997, the Bankruptcy Court ruled in favor of Campbell, holding that the debt was non-dischargeable. (J.A. at 285-300). Judgment was entered on July 3, 1997. (J.A. at 26-27). The court relied on the record from the malpractice case and stipulations by the parties as to specific facts, including the stipulation that there were no genuine issues as to any material fact. (J.A. at 282) The district court affirmed the bankruptcy court's order -- granting Campbell's motion for partial summary judgment and denying Markowitz's cross-motion for summary judgment. (J.A. at 29). Markowitz then appealed to this court. (J.A. at 54).

Markowitz presents three issues on appeal. First, he argues that the malpractice suit decided the issue of willful and malicious injury and that litigation on that issue in the bankruptcy court was barred by collateral estoppel. Second, he contends that his conduct did not cause "willful and malicious injury." Finally, he argues that even if the debt was non-dischargeable, the damages attributable to the willful and malicious injury were unsupported by the record or excessive under the circumstances.

II.

Initially, we must consider Campbell's challenge to our jurisdiction. See Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, ___, 118 S.Ct. 1003, 1012-13 (1998). Campbell contends that we lack jurisdiction because the notice of appeal from the bankruptcy court to the district court was invalid.

On June 12, 1997, the bankruptcy court entered an order granting Campbell's motion for summary judgment and denying Markowitz's motion for summary judgment. Markowitz filed a notice of appeal to the district court on June 23, 1997. The same day he also filed a motion for rehearing (the "F.R.B.P. 9023 motion") in the bankruptcy court. On July 3, 1997, the bankruptcy court entered final judgment, without ruling on the motion for reconsideration. On July 15, 1997, the parties filed a stipulation of appellate rights with the district court. This stipulation was entered on August 11, 1997. On August 8, 1997, the bankruptcy court denied the motion for reconsideration.

The first issue is whether Federal Rule of Bankruptcy Procedure 9023 -- governing motions to amend or appeal a judgment, reconsideration, and rehearing -- divested the district court of jurisdiction pursuant to F.R.B.P. 8002(b). Bankruptcy Rule 8002(b) states, in part:

A notice of appeal filed after announcement or entry of the judgment, order, or decree but before disposition of any of the above motions is ineffective to appeal from the judgment, order, or decree, or part thereof, specified in the notice of appeal, until the entry of the order disposing of the last such motion outstanding.

F.R.B.P. 8002(b). According to F.R.B.P. 8002(b), the notice of appeal -- filed after the order but before disposition of the F.R.B.P. 9023 motion -- was ineffective to perfect an appeal from the judgment until the entry of the order of the motion for reconsideration. As a result, the notice of appeal was not effective until entry of the August 8 order denying the motion to reconsider. Contrary to Campbell's contention, F.R.B.P. 8002 does not nullify the original notice and require refiling. ² F.R.B.P. 8002 requires a new notice of appeal to be filed only if the motion to reconsider is itself appealed or if the disposition of that motion alters or amends the previous judgment. Thus, the notice of appeal was...