Automation Support, Inc. v. Wallace (In re Wallace)

• Court: U.S. Bankruptcy Court — Northern District of Alabama
• Writing for the Court: JAMES J. ROBINSON CHIEF UNITED STATES BANKRUPTCY JUDGE
• Decision Date: 16 November 2017
• Docket Number: CASE NO. 15-41554-JJR7,AP NO. 16-40025-JJR
• Citation: Automation Support, Inc. v. Wallace (In re Wallace), AP NO. 16-40025-JJR, CASE NO. 15-41554-JJR7 (Bankr. N.D. Ala. Nov 16, 2017)
• Parties: In re: Tim L. Wallace and Becky A. Wallace, Debtors. Automation Support, Inc. d/b/a Technical Support and Soyokaze, Inc., Plaintiffs, v. Becky A. Wallace, Defendant.

In re: Tim L. Wallace and Becky A. Wallace, Debtors.

Automation Support, Inc. d/b/a Technical Support and Soyokaze, Inc., Plaintiffs, v. Becky A. Wallace, Defendant.

CASE NO. 15-41554-JJR7

AP NO. 16-40025-JJR

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA EASTERN DIVISION

November 16, 2017

MEMORANDUM OPINION

Introduction

Automation Support, Inc. d/b/a Technical Support ("Support") and its sister corporation, Soyokaze, Inc. ("Soyokaze" and together with Support, the "Plaintiffs"), alleged that their former employee and human resources coordinator, Becky Wallace (a co-debtor in the underlying bankruptcy case and herein, "Becky"), willfully and maliciously abused her human resources responsibilities, causing them to suffer substantial damages. Central to the Plaintiffs' allegations were claims that Becky intentionally mishandled a sexual harassment claim against the husband of the Plaintiffs' chief executive officer, and that Becky knowingly provided misinformation to an employee regarding his unused vacation time for which he later sought compensation, albeit unsuccessfully. The Plaintiffs claimed that pursuant to § 523(a)(6) of the Bankruptcy Code,¹ Becky's liability for their damages should not be discharged in her chapter 7 bankruptcy case.

After three days of trial, during which the court heard the testimony of the parties and other witnesses, and reviewed multiple exhibits and deposition testimony, the court has concluded that there was indeed a willful and malicious injury, but not caused by Becky. Contrary to the Plaintiffs' allegations, Becky was the victim of the willful and malicious conduct perpetrated by the Plaintiffs at the hands of their owners and executive officers, Renee McElheney ("Renee") and her husband, Billy McElheney ("Billy" and together with Renee, the "McElheneys"). The McElheneys adhere to the adage that the best defense is a good offense, and their offense, wantonly directed at Becky, was pursued in bad faith. Simply put, the McElheneys were vexatious bullies. They prosecuted this adversary proceeding for oppressive reasons, in a selfish attempt to distract attention away from Billy's aggressive and boorish behavior toward a subordinate female employee. Below is an account of the Plaintiffs' and the McElheneys' sordid scheme to cast blame on Becky for their self-inflected woes.

Jurisdiction

The court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334, and the General Order of Reference, as amended, entered by the United States District Court for the Northern District of Alabama.² Title 28 U.S.C. § 157(b)(2)(I) provides that the "determination asto the dischargeability of particular debts" is a core proceeding. Thus, the court has authority to enter a final order as to all aspects of this adversary proceeding. This opinion shall constitute the court's findings and conclusions³ as required by Rule 7052,⁴ and a separate judgement and order conforming to this opinion will be entered pursuant to Rule 7058.

Findings of Fact

1-Support and the McElheneys

Support was founded in 1997. Its principal and apparently only place of business is located in Midlothian, Texas, a small town about sixty miles south of Dallas. Support provides automation support and systems integration to the food industry for numerous customers throughout the United States and beyond. Many of its customers are Fortune 500 companies. Support has always been owned and controlled by the McElheneys. Renee was the chief executive officer and managed the inter-office affairs, while Billy worked with the engineers—or integrators, as the parties oftenreferred to them—and ran the technical and customer service side of the business. The McElheneys were longtime residents of Midlothian and were extensively involved in its civic and business matters, and were active in a local church.

2-Becky

Becky and her husband, Tim Wallace ("Tim" and together with Becky, the "Wallaces"),⁵ like the McElheneys, were longtime residents of Midlothian, and both families attended the same church. Tim was an associate pastor at the church, and among other duties, was responsible for the youth ministry. He also conducted retreats and counseling sessions in which Billy participated. The McElheneys and the Wallaces were good friends; they frequently socialized, ate together in their homes, vacationed together, and attended the same church functions.

Before her employment with Support, Becky assisted her husband at the church, but in 2004, Support hired her as an administrative assistant to help Renee. When Becky started with Support, it had nine other employees, and her duties were diverse.⁶ Primarily, she was Renee's general assistant and did whatever was needed, including answering the phone, cooking lunch, and later doing laundry. Over time she began handling human resources ("HR") matters, and during March 2008, Support sent her to a one-week HR seminar. (Plaintiffs' Ex. 79.) At the end of the seminar, Becky received a certificate of completion and Support designated her as its HR coordinator. (Plaintiffs' Ex. 50, § 1:2.)

During her testimony, Renee attempted, unsuccessfully, to cast Becky as an HR expert with vast training and experience, when in actuality, Becky's HR responsibilities were limited to keeping track of vacations and paid time off, and assisting a handful of employees in a small office with their employee-benefits matters, although on one occasion Becky was involved in an employee termination, the grounds for which were not sexual harassment. Until the episode involving Billy and a female employee that culminated in the employee's resignation and filing a sexual harassment lawsuit, Becky was never confronted with a sexual harassment complaint, much less such a complaint directed against the husband of Becky's immediate boss—a boss who was a close friend, fellow church member, and the CEO of Becky's employer.⁷

After Becky became Support's HR coordinator, she and the McElheneys prepared an Employee Handbook. (Plaintiffs' Ex. 50; the "Employee Handbook" or "Handbook.") The Employee Handbook was distributed to the employees in early 2009, years before any of the events giving rise to this adversary proceeding occurred; more about the Handbook later.

3-Soyokaze

The building in which Support's offices were located was vacant at one end, and in 2010 the McElheneys filled that vacancy with a massage spa. They incorporated under the name of Soyokaze, which was derived from a Japanese word meaning a breath of air or a gentle, calming breeze. The McElheneys explained their decision to fill the vacant space with a massage spa as an altruistic "endeavor[] to create a place where people could escape from the day to day world, relax, and find peace." (First Amended Complaint, AP Doc. 94, ¶13.) The McElheneys' explanation of why an engineering and technical logistics enterprise would choose to open an adjoining andaffiliated massage business was peculiar, especially in light of the five massage establishments that were already in the small town of Midlothian. Regardless, opening a massage spa turned out not to be such a good idea after all, and at least during the time in question, it certainly did not bring peace to the McElheneys.

In the Support building, the front door dedicated to the Soyokaze space was usually locked so no one could walk in off the street without an appointment. To enter the Soyokaze spa without an appointment, a visitor would need to enter the building through Support's main entrance and lobby. The space occupied by Soyokaze's therapists was easily accessible from Support's end of the building. Support staff could walk down the hall, go through the laundry room and into Soyokaze's lobby and private massage rooms where the therapists worked. Billy, Renee, Becky, and others frequently took advantage of the easy access.

Although Becky was not an employee of Soyokaze, she pitched in where needed, including serving as its de facto HR coordinator. Soyokaze's massage customers would often make appointments by contacting Becky at her Support office; she had both a Support phone and a Soyokaze phone on her desk, and she answered both as part of her job duties.

4-Jayme Rankin

Jayme Rankin ("Jayme"), a young woman fresh out of massage therapy school, began working at Soyokaze in February 2010. Renee and Billy hired Jayme as Soyokaze's only full-time therapist; two or three part-time therapist were also hired. The McElheneys and the Wallaces knew Jayme and her family—they all went to the same church together—and Becky had mentored Jayme at church while Jayme was in high school.

Jayme did not testify in person, but at the end of the trial, the parties stipulated that designated portions of Jayme's deposition ("Jayme's Deposition") testimony would be receivedas evidence in this adversary proceeding. Jayme's Deposition was taken in the lawsuit she filed against Billy, Soyokaze, and Support in the State District Court for Ellis County, Texas (the "State Lawsuit"). The central claim in Jayme's State Lawsuit was for sexual harassment, and the Plaintiffs contended that the expenses they incurred in defending that suit, including their attorney's fees—but not including the monies paid to settle the case following mediation—were the result of Becky's intentional and malicious acts, not Billy's iniquitous behavior. Thus, it is necessary to review Billy's, Becky's, and even Renee's contributions to the events that provoked Jayme to file suit, and determine who was to blame for causing those damages. But first, to put matters in perspective, it is worthwhile to mention one missing piece in the evidentiary puzzle that was readily available to the Plaintiffs, but conspicuously never appeared.

Most of the designated portions of Jayme's Deposition testimony pertained to what occurred between Billy and her while she worked at Soyokaze, and in particular, the happenings during the last few months before she resigned. It...