In re Betts
| Decision Date | 06 April 1994 |
| Docket Number | Bankruptcy No. G92-21325. Adv. No. 92-2065. |
| Citation | 174 BR 636 |
| Parties | In re Gernot R. "Pete" BETTS and Debbie Betts, Debtors. Henry WALTERS, Plaintiff, v. Gernot R. "Pete" BETTS and Debbie Betts, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
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Charles G. Hoey, Lowendick & Speed, P.C., Atlanta, GA, for plaintiff.
Allen Broxton, Stewart, Melvin & House, Gainesville, GA, William L. Auld, Dawsonville, GA, for debtors/defendants.
This adversary proceeding is before the Court on several matters as follows: (1) Plaintiff's motion for summary judgment; (2) Plaintiffs motion to compel discovery; and (3) Plaintiff's request for oral argument.1 After reviewing the record and evidence presented, and after considering the argument presented in the briefs, the Court concludes as follows. Defendants' liability having been finally adjudicated and determined in certain state administrative law proceedings, Plaintiff's motion for summary judgment is granted to the extent of the existence, validity, and amount of Defendants' debt. Summary judgment is denied, however, as to the alleged nondischargeable character of that debt. Further, Plaintiff's request for oral argument is denied and his motion to compel discovery is denied as having been rendered moot.
Plaintiff seeks a determination that a debt arising from a worker's compensation award entered by a state administrative law judge is nondischargeable pursuant to 11 U.S.C. § 523(a)(6). He asserts that Defendants' knowingly disregarded their duty under state law to provide workers' compensation insurance. Further, he contends that they could foresee the potential harm to his rights to collect workers' compensation benefits resulting from their willful failure to provide such insurance. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
First, with respect to Plaintiff's request for oral argument, the Court has reviewed the record and briefs and concludes that oral argument will not aid the Court in resolving this summary judgment motion. Thus, this request is denied.
Next, summary judgment may be granted pursuant to Federal Rule of Civil Procedure 56, applicable herein by and through Federal Rule of Bankruptcy Procedure 7056, if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56. Plaintiff as movant herein has the initial burden of showing that there is no genuine issue of material fact and the Court must view the evidence in the light most favorable to the nonmoving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991); Clark v. Union Mutual Life Insurance Co., 692 F.2d 1370, 1372 (11th Cir. 1982); see also Fed.R.Civ.P. 56(e).
The facts are as follows. Plaintiff suffered certain injuries during an automobile accident while he was employed by Defendants' business. Although Defendants deny that these injuries were compensable under state workers' compensation law, they admit that Plaintiff was subsequently awarded certain disability benefits by the Georgia State Board of Workers' Compensation on July 31, 1992.
A state administrative law judge found and concluded that Defendants were subject to the Workers' Compensation Act in Georgia and that Plaintiff's injuries were compensable. The judge also determined that Defendants did not have a workers' compensation insurance policy in force at the time of the injuries as required by state law. Plaintiff was awarded disability benefits and Defendants were ordered to pay his medical bills and related mileage expenses. In addition, Defendants were ordered to pay penalties and attorney's fees and a $1,000 fine was imposed based on their failure to maintain workers' compensation insurance and explain why they refused to accept Plaintiff's claim as compensable and make timely benefit payments thereon. To date, none of these benefits have been paid and Plaintiff has been unable to collect on his award.
After Defendants filed this bankruptcy case, Plaintiff filed a complaint asserting that Defendants knowingly disregarded their statutory duty and willfully failed to carry workers' compensation insurance thereby placing his right to benefits at risk. He asserts that their failure to maintain proper insurance constituted a willful and malicious injury to him or his property and that his claim is nondischargeable under 11 U.S.C. § 523(a)(6). This subsection provides as follows:
11 U.S.C. § 523(a)(6). A creditor must prove these elements by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
Under this provision, a plaintiff must establish two different mental traits. First, "willful" is defined as intentional or deliberate. The second part of the test, maliciousness, is defined in terms of wrongfulness and without just cause. Although a finding of recklessness or reckless disregard will establish malice, it is not sufficient to show willfulness. See Blashke v. Standard (In re Standard), 123 B.R. 444, 449 (Bankr. N.D.Ga.1991). Further, constructive or implied malice may be established by showing that a debtor proceeded to perform an act with knowledge that it would harm the interest of another. Knowledge may be proven by inference and a specific intent to harm the plaintiff or actual ill-will is not required under this second part of the test under Section 523(a)(6). See Lee v. Ikner (In re Ikner), 883 F.2d 986, 991 (11th Cir.1989); Chrysler Credit Corp. v. Rebhan, 842 F.2d 1257, 1263 (11th Cir.1988).
In support of his motion and to establish the factual basis for his claim, Plaintiff has submitted and relies on the findings and conclusions of the administrative law judge.2 Plaintiff contends that the findings in the award are binding in this action under the doctrine of collateral estoppel and entitle him to summary judgment. Under this doctrine, a party may be barred from relitigating an issue actually and necessarily litigated and decided in a prior action. Defendants argue in response that the factual issues determined by the administrative law judge are not conclusive herein because they did not have the opportunity to litigate such issues before him.
The principal question presented is whether this Court is precluded from reconsidering any fact issues decided by the state administrative law judge and if so, whether such findings establish that Plaintiff's workers' compensation claim is nondischargeable as a matter of law under 11 U.S.C. § 523(a)(6). Generally, the preclusive effect to be accorded state court judgments, verdicts, and records is governed by the principles of full faith and credit set forth in 28 U.S.C. § 1738. Under this provision, federal courts must give preclusive effect to prior state judicial proceedings to the same extent as accorded by the courts in that state. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 381, 105 S.Ct. 1327, 1332, 84 L.Ed.2d 274 (1985).
In accordance with this mandate, federal bankruptcy courts are similarly bound to give preclusive effect to findings of fact as entered by state courts. Kelleran v. Andrijevic, 825 F.2d 692, 694 (2d Cir.1987), cert. denied, 484 U.S. 1007, 108 S.Ct. 701, 98 L.Ed.2d 652 (1988). State court rulings, however, may not be given res judicata or claim preclusive effect in connection with the determination of dischargeability issues relating to fraud because such questions must ultimately be decided by bankruptcy courts. Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). Nevertheless, collateral estoppel or issue preclusion may be applied in reaching conclusions about certain underlying factual issues that are considered as evidence of nondischargeability. Grogan, supra, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755; Halpern v. First Georgia Bank (In re Halpern), 810 F.2d 1061, 1064 (11th Cir.1987).
In Marrese, supra, the Supreme Court held that in applying Section 1738, a federal court must first look to state preclusion law and determine the conclusive effect of the prior state court ruling. 470 U.S. at 381-82, 105 S.Ct. at 1332-33; see also Migra v. Warren City School District Board of Education, 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984); Kremer v. Chemical Construction Corp., 456 U.S. 461, 466, 481-82, 102 S.Ct. 1883, 1889, 1897-98, 72 L.Ed.2d 262, reh'g denied, 458 U.S. 1133, 103 S.Ct. 20, 73 L.Ed.2d 1405 (1982); Wright v. McIntyre (In re Wright), 57 B.R. 961, 964 (Bankr.N.D.Ga.1986). If preclusive effect is appropriate under state law, the court must then decide whether any federally created statutory exception exists to prevent operation of such effect. Marrese, supra, 470 U.S. at 381-82, 105 S.Ct. at 1332-33; Kremer, supra, 456 U.S. at 468, 102 S.Ct. at 1890.
In this case, the ruling on which Plaintiff relies was entered by a state administrative law judge which was not reviewed by the Workers' Compensation Board or a state court. Section 1738 does not apply to unreviewed state administrative agency factfinding. University of Tennessee v. Elliott, 478 U.S. 788, 794, 106 S.Ct. 3220, 3223-24, 92 L.Ed.2d 635 (1986). Preclusive effect, however, may be given to such factfinding as would be given by the courts of that state when the agency is "acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate. . . ." Elliott, supra, 478 U.S. at 799, 106 S.Ct. at...
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