Harris v. Kamps (In re Kamps), Bankruptcy No. 15–17261–AMC

• Decision Date: 31 August 2017
• Docket Number: Bankruptcy No. 15–17261–AMC,Adv. Proc. No. 16–14–AMC
• Citation: 575 B.R. 62
• Parties: IN RE Charles Lewis KAMPS, III, Debtor Douglas Harris, Plaintiff v. Charles Lewis Kamps, III, Defendant
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

575 B.R. 62

IN RE Charles Lewis KAMPS, III, Debtor

Douglas Harris, Plaintiff

v.Charles Lewis Kamps, III, Defendant

Bankruptcy No. 15–17261–AMC

Adv. Proc. No. 16–14–AMC

United States Bankruptcy Court, E.D. Pennsylvania.

August 31, 2017

Sarah Ennis, Margolis Edelstein, Wilmington, DE, for Plaintiff.

OPINION

Ashely M. Chan, United States Bankruptcy Judge

CONTENTS

I. Introduction...69

II. Facts and Procedural History...69

A. Independence Pointe Development Project...69

B. Anonymous Text Messages...69

C. Defamatory Statements in Northeast Times Article...70

D. Defamatory Statements to Former Employers of Harris...70

E. State Court Litigation...71

1. Seller Litigation...71

2. Harris Litigation...71

F. The Debtor's Bankruptcy...72

III. Discussion...72

A. Rooker–Feldman Doctrine...74

B. Collateral Estoppel...75

1. The Legal Standards Applied in the Harris Litigation Are Distinguishable from Those That This Court Must Apply to Determine Whether the Judgment Constitutes a Willful and Malicious Injury Under § 523(a)(6) 15...77

2. Collateral Estoppel Applies to the Jury's Factual Findings with Respect to Whether the Debtor Sent the Texts and Made False and Defamatory Statements...80

C. The Compensatory Damages Awarded to Harris in Connection with His Claim for Intentional Infliction of Emotional Distress and the Related Punitive Damages Award Are Nondischargeable Under § 523(a)(6) as Willful and Malicious Injuries...81

1. Intentional Infliction of Emotional Distress...81

2. Defamation...82

3. Breach of Contract...84

4. Punitive Damages...84

IV. Conclusion...87

I. INTRODUCTION

Prior to the Debtor's bankruptcy filing, a judgment in excess of $1 million was awarded by a jury in state court in favor of the plaintiff Douglas Harris ("Harris") and against the debtor/defendant Charles Lewis Kamps, III ("Debtor"), based upon certain claims sounding in tort and contract. Harris now seeks a determination under § 523(a)(6) that the judgment should be deemed nondischargeable.

As discussed below, the Court has determined that the only part of the judgment that constitutes a nondischargeable obligation under § 523(a)(6) relates to damages awarded for Harris' intentional infliction of emotional distress claim and the portion of punitive damages related to such claim. The remaining amount of the judgment will be discharged in the Debtor's bankruptcy.

II. FACTS AND PROCEDURAL HISTORY

A. Independence Pointe Development Project

In 2005, the Debtor was a limited partner in, and a principal of, Philadelphia Waterfront Partners, LP ("LP"), and a member of Philadelphia Waterfront Development LLC ("LLC"), which was the general partner of the LP. In October 2005, Harris, a lawyer, was retained by the LP to find investors for the development of a residential real estate project titled Independence Pointe ("Project") on real property located at 7777 State Road, Philadelphia, Pennsylvania ("Property").

Harris subsequently introduced Joseph Logue, Jr. ("Logue"), and Churchill Development Group, LLC ("Churchill"), a limited liability company owned by Logue, to the LP as potential investors for the Project. Tr. 153:1–154:8, ECF No. 34. On August 18, 2006, the Debtor, the other members in the LLC, and the other partners of the LP (collectively, the "Sellers") entered into a purchase agreement ("Agreement") with Logue and Churchill ("Buyers") whereby: (1) the members of the LLC agreed to transfer 100% of their membership interests to the Buyers; (2) the limited partners of the LP agreed to transfer 75% of their Class–C limited partnership interests to the Buyers; and (3) Churchill ultimately would become the manager of the LLC and the general partner of the LP. In exchange, the Buyers agreed to make certain payouts over time to the three classes of investors in the LP. The Agreement also established various deadlines by which the parties were required to accomplish certain goals in connection with the development of the Project.

On September 8, 2006, Harris tendered his resignation to the Sellers pursuant to a retainer agreement that he previously signed with the Sellers. Def's Post–Trial Mem. Ex. J, ECF No. 35. Thereafter, Harris represented the Buyers in all of their transactions with the Sellers in connection with the Project. Def.'s Post–Trial Mem. 15.

By the end of 2006, there was a dispute between the Buyers and Sellers under the Agreement regarding whether the goals set forth in the Agreement had been timely met.

B. Anonymous Text Messages

Between January 2007 and March 2007, Harris received a series of anonymous text messages ("Texts") on his phone through an anonymous text messaging service called AnonTxt. Pl.'s Proposed Findings of Fact and Conclusions of Law 7, ECF No. 32. The Texts were crude, offensive, harassing, threatening, violent, homophobic, anti-Semitic, and included death wishes to Harris and his family.¹ Id. They also threatened Harris with disbarment and professional ethics violations.² Id.

After receiving the Texts, "Harris felt compelled to install a security system in his home, fearing for the safety of his family .... sought therapy and was diagnosed with post-traumatic stress disorder

.... [and] suffered weight loss and migraines." Id. Harris initially did not tell his wife about the Texts because he did not want her to "share his fear and anxiety." Id. At trial, Harris credibly testified that he was incredibly distraught and anxious after receiving these Texts and feared for the safety of his family and himself.

Harris went to the police and showed them the first twenty Texts that he received. Tr. 49:18–50:21. Thereafter, the police permitted him to transcribe and fax subsequent Texts to them. Id. at 50:15–21. Harris ultimately reported at least thirty-two Texts to the police and received possibly as many as fifty. Id. at 51:24–52:11.

C. Defamatory Statements in Northeast Times Article

After the dispute arose under the Agreement, the Debtor was interviewed by a reporter from the Northeast Times about the status of the Project. Def's Post–Trial Mem. 9. An article subsequently was published in the Northeast Times on February 15, 2007 ("Article"), wherein the Debtor was quoted as saying: "Our lawyer, Harris, got everyone comfortable with the deal as structured, encouraged [the LP] to sign the contract documents, then after the deal was signed, quit, went to work for Logue and then only processed the legal documents that protected his new partner ...." Debtor's Trial Ex. 6. Paraphrasing the Debtor, the Article also stated that Harris "failed to deliver key documents to an escrow agent that would have prevented Logue from pulling off the alleged scam," and that the LP was "considering filing criminal charges for fraud and related charges." Id. The Article was later republished on a website maintained by the Debtor's son, Todd Kamps ("Todd"). Def.'s Post–Trial Mem. 12.

D. Defamatory Statements to Former Employers of Harris

In March 2007, the Debtor also spoke to Harris' former employers, Michael Kaplan ("Kaplan") and Ronald Blumstein ("Blumstein"), who he knew through prior dealings in a separate real estate development project, about the status of the Project. Id. at 17. During the conversation, the Debtor told Kaplan and Blumstein that Harris stole client funds, worked on "both sides of the fence" in connection with the Project, and was disloyal to him and the other partners of the LP. Tr. 83:5–10. He also disparaged Harris' abilities as an attorney and intimated that Harris was going to be disbarred. Pl.'s Findings 8.

E. State Court Litigation

1. Seller Litigation

In April 2007, the Sellers filed a complaint in the Philadelphia County Court of Common Pleas ("CCP") against Harris and the Buyers in connection with the Project and the Agreement ("Seller Litigation"). Id. at 2. The Sellers asserted claims of fraudulent conveyance; fraudulent inducement; breach of fiduciary duty; breach of contract; unjust enrichment; constructive trust; and conspiracy. Id. In response, the Buyers filed counterclaims against the Sellers. Id.

On January 21, 2009, most of the Sellers' claims in the Seller Litigation were dismissed on summary judgment, including their claims against Harris for fraudulent conveyance, fraudulent inducement, and breach of fiduciary duty. Id. The Sellers later voluntarily withdrew all of their remaining claims in the Seller Litigation. Id. On April 15, 2010, the CCP entered judgment in favor of the Buyers in the Seller Litigation on their counterclaims. Id.

2. Harris Litigation

On June 21, 2007, Harris filed a complaint in the CCP against the LP, the Sellers, and Todd ("Harris Litigation"). Id. at 3. Harris asserted claims of, inter alia, intentional infliction of emotional distress; libel; slander; conspiracy; and breach of contract. Id. He alleged that he suffered severe emotional distress as a result of the Texts; that the Debtor's statements in the Article and the Debtor's statements to Kaplan and Blumstein were false and defamatory; and that the Sellers owed Harris unpaid attorney's fees.

In response, the Sellers filed counterclaims against Harris that were largely duplicative of the claims that they had raised against him in the Seller Litigation. On January 26, 2009, those counterclaims were dismissed on summary judgment for essentially the same reasons that they were dismissed in the Seller Litigation. Harris v. Philadelphia Waterfront Partners, L.P., Civ. A. No. 02576, 2009 WL 8151572 (Pa. C.P. Jan. 26, 2009).

On July 16, 2010, after a trial on the merits, a jury issued a verdict in favor of Harris in the Harris Litigation. See generally Compl. Ex. A, ECF No. 1 (setting forth the jury's determinations). The jury found, inter alia, that: (1) the Debtor and Todd "intentionally or recklessly" sent the Texts to Harris and that the Texts were extreme or outrageous; (2) Harris suffered "severe emotional distress" as a result of receiving the Texts; (3) the Debtor made false and defamatory statements about Harris which were published in the Article; (4) the Debtor and...