Fuller v. Rea (In re Rea)

• Decision Date: 29 July 2019
• Docket Number: Adv. Pro. 19-09009 (CGM),Case No. 18-37081 (CGM)
• Citation: 606 B.R. 531
• Parties: IN RE: Mark REA, Debtor. Erin Fuller, Plaintiff. v. Mark Rea, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

606 B.R. 531

IN RE: Mark REA, Debtor.Erin Fuller, Plaintiff.

v.Mark Rea, Defendant.

Case No. 18-37081 (CGM)

Adv. Pro. 19-09009 (CGM)

United States Bankruptcy Court, S.D. New York.

Signed July 29, 2019

BERGSTEIN & ULLRICH, LLP, Stephen Bergstein, 5 Paradies Lane, New Paltz, New York 12561, (845) 469-1277, Attorney for Plaintiff, Erin Fuller

ORSECK LAW OFFICES PLLC, Gerald O. Orseck, P.O. Box 469, Liberty, New York 12754, (845) 292-5800, Attorney for Defendant, Mark Rea

MEMORANDUM DECISION GRANTING SUMMARY JUDGMENT AND FINDING THE EMPLOYMENT DISCRIMINATION JUDGMENT NON-DISCHARGEABLE UNDER § 523(A)(6) FOR "WILLFUL AND MALICIOUS INJURY"

CECELIA G. MORRIS, CHIEF UNITED STATES BANKRUPTCY JUDGE

Erin Fuller ("Plaintiff") brings this adversary proceeding against Mark Rea ("Defendant" or "Debtor") to have Plaintiff's gender and disability discrimination judgment and damages in the amount of $30,000.00 for pain and suffering and $14,560.00 in lost wages excepted from discharge as a willful and malicious injury pursuant to 11 U.S.C. § 523(a)(6). This Court holds that the debt resulting from the state court judgment for employment discrimination against Defendant is excepted from discharge under § 523(a)(6), as it was incurred as the result of the Debtor willfully and maliciously causing injury to Plaintiff.

Jurisdiction

This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a), and the Standing Order of Reference signed by Chief Judge Loretta A. Preska dated January 31, 2012. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(I) (determinations as to the dischargeability of particular debts).

Background

In October 2010, following the termination of her employment, Plaintiff, a transgender woman, filed a charge with the New York State Division of Human Rights ("NYSDHR") against her former employer, Advanced Recovery and its President and Chief Operating Officer, Defendant. Fuller v. Advanced Recovery, Inc. , No. 10144572, slip op. at ¶ 3 (N.Y. Div. Human Rights Apr. 14, 2015), aff'd , Advanced Recovery, Inc. v. Fuller , 162 A.D.3d. 659, 661, 77 N.Y.S.3d 151 (N.Y. App. Div. 2018). Plaintiff alleged that her termination was discriminatory against her on the basis of gender and disability. Id. at 1.

The NYSDHR found probable cause for gender and disability discrimination, and public hearings were held before an Administrative Law judge ("ALJ") in December 2013 and February 2014. Id. at 2. The ALJ ultimately recommended that the NYSDHR commissioner find Plaintiff was, in fact, discriminated against based on gender and disability by Advanced Recovery and Defendant under New York State Human Rights Law ("NYSHRL") § 296(1)(a). N.Y. Exec. Law § 296(1)(a) (Consol. 2019), Fuller v. Advanced Recovery, Inc. , No. 10144572, slip op. at *15-16, aff'd , Advanced Recovery, Inc. v. Fuller , 162 A.D.3d. at 659, 77 N.Y.S.3d 151. In April 2015, the NYSDHR commissioner adopted the recommendations of the ALJ in their entirety and ordered the Defendant pay damages for lost wages in the amount of $14,560.00 and pain and suffering in the amount of $30,000.00. Id. at 20, 1. The ALJ also imposed a civil penalty in the amount of $20,000.00, stating that the Defendant's "decision to terminate [Plaintiff's] employment was direct and deliberate, and it resulted in humiliation." Id. at 22.

The employer and Defendant challenged the decision and the case was transferred to the New York State Appellate Division ("Appellate Division"). In June 2018, the Appellate Division affirmed the factual and legal conclusions found by the ALJ and adopted by the NYSDHR, stating that the evidence in the record established a prima facie case of discrimination. Id. at 16. The Appellate Division also dismissed the Defendant's proffered alternative reasons for terminating Plaintiff's employment, calling them a "pretext for unlawful discrimination." Advanced Recovery, Inc. v. Fuller , 162 A.D.3d. at 661, 77 N.Y.S.3d 151.

On December 17, 2018, Defendant filed for chapter 7 and named Plaintiff as one of his creditors. See In re Rea , Case No. 18-37081(CGM) (Bankr. S.D.N.Y. filed Dec. 17, 2018). Upon notification of Defendant's bankruptcy, Plaintiff filed this adversary proceeding and now seeks to have her judgment excepted from Defendant's chapter 7 discharge pursuant to § 523(a)(6) of the Bankruptcy Code. Compl., ECF No.

1.¹ Plaintiff now moves for summary judgment. Mot. Summ. J., ECF No. 8.

Motion for Summary Judgment

The matter presently before the Court is the motion for summary judgment filed by Plaintiff to except her claim against Defendant from chapter 7 discharge. Id. Plaintiff argues that she is entitled to summary judgment on her claim that the debt owed to her is not dischargeable as her termination was willful and malicious pursuant to § 523(a)(6) of the Bankruptcy Code. Mem. Supp. Summ. J. at 16, ECF No. 13. Plaintiff argues that the findings of fact, opinion, and order of the ALJ, adopted by the NYSDHR, and affirmed by the Appellate Division show as a matter of law that Defendant's termination of Plaintiff was willful and malicious. Id. at 13. Plaintiff contends that the matters at issue here are entitled to collateral estoppel effect and may not be re-litigated in this Court. Id. at 9.

In opposition, Defendant argues that the court must engage in "careful inquiry" when determining whether the application of collateral estoppel is appropriate in dischargeability actions. Def.'s Mem. Opp'n. Summ. J. at 6, ECF. No. 16. Defendant contends that even if collateral estoppel is applied, the record only shows that Plaintiff's termination constituted unlawful discrimination rather than a "willful and malicious" injury. Id. at 7. Defendant argues that "careful inquiry" of the evidence will reveal the absence of willfulness and malice. Id. at 9. Defendant points to three cases recently granted certiorari by the Supreme Court, Altitude Express v. Zarda , Bostock v. Clayton County, GA, and R.G. & G.R. Harris Funeral Homes v. Equal Employment Opportunity Commission , in arguing that a split among circuits regarding whether termination due to transgender status constitutes a civil rights violation may negate malice in such a termination.² Sur-Reply to Mot., ECF No. 21. Defendant also argues that the language of the statute that empowers the ALJ to impose higher fines when there is an explicit finding of malice is proof that malice did not exist in the instant case. Sur-Reply to Mot., ECF No. 24.

The Court must determine whether Defendant's discriminatory termination of Plaintiff was "willful and malicious" for the purposes of dischargeability under 11 U.S.C § 523(a)(6) and whether Defendant is collaterally estopped from challenging the factual and legal findings adopted by the NYSDHR in imposing liability under New York law.

Discussion

I. Summary Judgment

Summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court's role in deciding summary judgment is to determine whether any issues of material fact exist, not to resolve issues of fact. See Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). While the moving party has the initial burden of establishing the absence of issues of material fact, the non-moving party is permitted to "oppose the motion for summary judgment with evidence that is admissible at trial" and the court is to "resolve[ ] all ambiguities and draw[ ] all permissible factual inferences against the movant." Basile v. Spagnola (In re Spagnola ), 473 B.R. 518, 521 (Bankr. S.D.N.Y. 2012) (citing Jacobowitz v. Cadle Co. (In re Jacobowitz ), 309 B.R. 429, 435 (Bankr. S.D.N.Y. 2004) ). For dischargeability exceptions, Plaintiff must show by a preponderance of the evidence that she is entitled to relief. Grogan v. Garner , 498 U.S. 279, 287, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).

A. Exceptions to Discharge

Section 523 of the Bankruptcy Code governs exceptions to discharge and provides, in relevant part, "[a] discharge ... does not discharge an individual debtor from any debt ... for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C § 523(a)(6). While the court must separately examine whether Defendant caused the injury "willfully" and "maliciously," the finding of malice informs whether the intentional act of termination was performed for the purposes of causing injury. Rocco v. Goldberg (In re Goldberg) , 487 B.R. 112, 127 (Bankr. E.D.N.Y. 2013) (requiring an unlawful discriminatory animus to act as a nexus between deliberate discrimination and the intent to cause injury).

B. Collateral Estoppel

It is well established that evoking the doctrine of collateral estoppel, also known as issue preclusion, is within the powers of the bankruptcy court and may apply to dischargeability actions. Grogan v. Garner , 498 U.S. 279, 284, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). In determining whether that state court judgment has a preclusive effect in a federal proceeding, federal courts turn to state preclusion laws. See Migra v. Warren City Sch. Dist. Bd. of Educ. , 465 U.S. 75, 81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984) (stating that "a federal court must give to a state-court judgement the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered."); see also Allen v. McCurry , 449 U.S. 90, 96, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980) (stating that "though federal courts may look to the common law or to the policies supporting res judicata and collateral estoppel in assessing the preclusive effect of decisions of other federal courts, Congress has specifically required all federal courts to give preclusive effect to state-court judgements whenever the courts of the State from which the judgments emerged would do so[.]").

In New York, courts employ a two-part test:...