Ditto v. McCurdy

• Decision Date: 14 December 2007
• Docket Number: No. 02-16252.,02-16252.
• Citation: 510 F.3d 1070
• Parties: Janie DITTO, Plaintiff-Appellant, v. John A. McCURDY, Jr., M.D., Defendant-Appellee, and Paul S. Sakuda, Trustee, Trustee.
• Court: U.S. Court of Appeals — Ninth Circuit

510 F.3d 1070

Janie DITTO, Plaintiff-Appellant, v. John A. McCURDY, Jr., M.D., Defendant-Appellee, and Paul S. Sakuda, Trustee, Trustee.

No. 02-16252.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 6, 2007.

Filed December 14, 2007.

Christopher A. Dias, Schutter Dias & Smith, Honolulu, HI, for the plaintiff-appellant.

Richard H. Grover, Honolulu, HI, for the defendant-appellee.

Appeal from the United States District Court for the District of Hawaii; Helen Gillmor, District Judge, Presiding. D.C. No. CV-01-00602-HG.

Before: DIARMUID F. O'SCANNLAIN, A. WALLACE TASHIMA, and MILAN D. SMITH, JR., Circuit Judges.

MILAN D. SMITH, JR., Circuit Judge:

Plaintiff-Appellant Janie Ditto appeals the decision of the district court affirming the bankruptcy court's grant of Defendant-Appellee John McCurdy's motion for summary judgment and denying Ditto's motion for leave to amend the pleadings.

Ditto seeks a judgment of non-dischargeability of McCurdy's debt under 11 U.S.C. § 523(a)(6), which grants an exception to discharge for any debt "for willful and malicious injury by the debtor." She argues that the malpractice judgment she previously secured against McCurdy, based in part on a theory of informed consent, constitutes a debt for "willful and malicious injury." She also argues, in the alternative, that she should be permitted to amend her complaint to object to granting McCurdy a discharge in bankruptcy, even though McCurdy was granted a discharge more than a year before her motion to amend.

We reject both arguments and affirm the district court's decision.

I

Janie Ditto is a Korean immigrant who came to the United States in 1976. She suffers from several chronic illnesses, including diabetes and hyperthyroidism. The drug treatment for her hyperthyroidism caused her breasts to flatten, and in 1986 she went to John McCurdy for breast augmentation surgery.¹ The surgery was unsuccessful, and resulted in complications requiring six additional surgical procedures over eleven months, during which Ditto suffered significant physical and psychological trauma.

In 1989, she filed suit against McCurdy, alleging negligence and fraud. The negligence component of her claim alleged both that McCurdy exercised inadequate care in his treatment of Ditto and that he failed to obtain informed consent by inadequately disclosing the risks of surgery. The fraud claim was based on a theory that McCurdy was under an affirmative obligation to disclose his qualifications (or lack thereof) to perform plastic surgery and failed to do so. In 1992, Ditto won a judgment of $2,788,988.31, including punitive damages, pre-judgment interest, and costs. Shortly thereafter, McCurdy both appealed to the Hawai`i Intermediate Court of Appeals and filed for bankruptcy in the bankruptcy court.

In January 1993, Ditto initiated the present adversary proceeding in the bankruptcy court, seeking a judgment of nondischargeability of McCurdy's debt arising out of the malpractice judgment under 11 U.S.C. § 523(a)(2), (4), and (6), and objecting to discharge of the debtor under 11 U.S.C. § 727(a)(4) and (a)(7).² In 1996 the bankruptcy court granted Ditto's motion for summary judgment, holding the debt nondischargeable under 11 U.S.C. § 523(a)(6), which grants an exception to discharge for any debt "for willful and malicious injury by the debtor." At the time, the application of § 523(a)(6) was governed in this circuit by Impulsora Del Territorio Sur. S.A. v. Cecchini (In re Cecchini), 780 F.2d 1440 (9th Cir.1986). Under Cecchini, the plaintiff was "not required to prove that the debtor acted with intent to injure"; rather, he needed only show that the debtor committed "a wrongful act ..., done intentionally, necessarily produc[ing] harm and ... without just cause or excuse, ... even absent proof of a specific intent to injure." Id. at 1442.

In 1997, however, the Hawai`i Supreme Court reversed the underlying malpractice judgment with respect to liability for fraud, holding that McCurdy had no affirmative duty to disclose his qualifications. Ditto v. McCurdy, 86 Hawai`i 84, 947 P.2d 952, 958 (1997). The court affirmed the finding of gross negligence and ordered the case remanded for a redetermination of punitive damages. Id. at 961. With the fraud count reversed, and only a judgment for negligence remaining, McCurdy made a Rule 60(b) motion before the bankruptcy court, asking it to set aside its judgment of non-dischargeability.³ Although this motion was rejected by both the bankruptcy court and district court, this court remanded the case with instructions to grant the motion in 2000. Ditto v. McCurdy (In re McCurdy), 2000 WL 1206003 (9th Cir. 2000) (unpublished memorandum).

In the interim, after McCurdy filed the 60(b) motion but before it was ultimately granted by this court, the United States Supreme Court, in Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998), clarified the meaning of 11 U.S.C. § 523(a)(6)'s exemption from discharge. It held that "debts arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523(a)(6)." Id. at 62, 118 S.Ct. 974.

On rehearing in the bankruptcy court, McCurdy moved for summary judgment and Ditto moved to amend her complaint to restore the § 727 objection to discharge. The bankruptcy court granted the motion for summary judgment and denied the motion to amend. Ditto appealed to the district court, which affirmed the bankruptcy court's decision. Ditto then appealed to this court.

II

We have jurisdiction to review the decisions of the district court generally under 28 U.S.C. § 1291, and to review the decisions of the district court hearing appeals from the bankruptcy court specifically under 28 U.S.C. § 158(d). We review the district court's decision on appeal from a bankruptcy court de novo, giving no deference to the district judge's determinations. Metcalf v. Golden (In re Adbox, Inc.), 488 F.3d 836, 839 (9th Cir.2007); First Ave. West Bldg., LLC v. James (In re Onecast Media, Inc.), 439 F.3d 558, 561 (9th Cir.2006). We review a grant of a summary judgment de novo. Metcalf, 488 F.3d at 840; Am. Broad. Sys., Inc. v. Nugent (In re Betacom of Phoenix, Inc.), 240 F.3d 823, 827-28 (9th Cir.2001).

III

Section 523(a)(6) of the Bankruptcy Code excepts from discharge any debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." Before 1998, there was some doubt as to the exact mental state required of the debtor in order for a debt to fall into this exception. Some circuits, including this circuit, interpreted § 523(a)(6) to include unintended injuries, so long as the acts themselves were deliberate, wrongful, and necessarily caused injury. Cecchini, 780 F.2d at 1443; see also Perkins v. Scharffe, 817 F.2d 392, 394 (6th Cir.1987); First Nat'l Bank v. Franklin (In re Franklin), 726 F.2d 606, 610 (10th Cir.1984) ("Appellant intended the acts that he did perform, which acts performed in the manner and under the conditions present in this particular situation necessarily resulted in the injury. That is sufficient to support a finding of willful and malicious conduct.").

In 1998, however, the Supreme Court clarified that the § 523(a)(6) exception "is confined to debts `based on what the law has for generations called an intentional tort.'" Geiger, 523 U.S. at 60, 118 S.Ct. 974 (quoting Geiger v. Kawaauhau (In re Geiger), 113 F.3d 848, 852 (8th Cir.1997) (en banc)). Drawing on the Second Restatement of Torts, the Supreme Court noted that "[i]ntentional torts generally require that the actor intend `the consequences of an act,' not simply `the act itself,'" id. at 61-62, 118 S.Ct. 974 (quoting Restatement (Second) of Torts § 8A cmt. a (1964)), and stated definitively that "debts arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523(a)(6)," id. at 64, 118 S.Ct. 974. This court noted Geiger's abrogation of Cecchini in Peklar v. Ikerd (In re Peklar), 260 F.3d 1035, 1038 (9th Cir.2001).

Ditto contends, first, that the Geiger standard, decided well after her 1997 judgment of non-dischargeability became final, should not be retroactively applied to her case now. Second, she contends that her claim meets even the Geiger standard because McCurdy's disclosure was so inadequate as to vitiate any consent, rendering his actions a battery.

A

Ditto asks this court to review the grant of McCurdy's motion for summary judgment under the more liberal Cecchini standard, rather than retroactively imposing that established in Geiger. The general rule is that, when the Supreme Court:

applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or post-date our announcement of the rule.

Harper v. Va. Dep't of Taxation, 509 U.S. 86, 96, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993). "So long as a case is sub judice, a federal court must apply a new and supervening rule of federal law when applicable to the issues in the case." Wasserman v. Mun. Ct. of Alhambra Jud. Dist., 543 F.2d 723, 725 (9th Cir.1976). Moreover, this circuit has applied Geiger itself retroactively in numerous cases. See, e.g., Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1207-08 (9th Cir.2001); Banks v. Gill Distrib. Ctrs., Inc. (In re Banks), 263 F.3d 862, 869 (9th Cir.2001); Bino v. Bailey (In re Bailey), 197 F.3d 997, 1000 (9th Cir. 1999). The posture of this case differs from the cases cited above, however, because Ditto had already obtained a final judgment in 1996, which became non-appealable as of January 19, 1997 — more than a year before Geiger was decided. Ditto maintains that the law as of that date ought to apply to this case, even after the former judgment was vacated following McCurdy's...