In re Elias

• Decision Date: 19 December 2003
• Docket Number: Adversary No. 03-6058.,Bankruptcy No. 02-41640.
• Citation: 302 B.R. 900
• Parties: In re Allan ELIAS, Debtor. Scott K. Dominguez, by and through his guardian and conservator, Jackie Hamp, Plaintiff, v. Allan Elias, Defendant.
• Court: U.S. Bankruptcy Court — District of Idaho

Page 900

302 B.R. 900

In re Allan ELIAS, Debtor Scott K. Dominguez, by and through his guardian and conservator, Jackie Hamp, Plaintiff, v. Allan Elias, Defendant.

Bankruptcy No. 02-41640.

Adversary No. 03-6058.

United States Bankruptcy Court, D. Idaho.

December 19, 2003.

COPYRIGHT MATERIAL OMITTED

Brent O. Roche and Daniel C. Green, Racine, Olson, Nye, Budge & Bailey, Pocatello, ID, for Plaintiff.

Craig R. Jorgensen, Pocatello, ID, for Defendant.

MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

JIM D. PAPPAS, Chief Judge.

In this adversary proceeding, Plaintiff Scott Dominguez, acting through his conservator and legal guardian Jackie Hamp, requests that the Court determine that certain debts owed to him by Defendant Allan Elias are excepted from discharge in Defendant's Chapter 7 bankruptcy case. Plaintiff alleges that the debts resulted from Defendant's willful and malicious conduct in injuring him, and therefore, that his damage claims against Defendant are nondischargeable under 11 U.S.C. § 523(a)(6).

Plaintiff filed a motion for summary judgment, arguing that the Court should conclude that both Defendant's conviction on federal criminal charges stemming from Plaintiff's injuries, and a $23,400,000 state court money judgment entered in favor of Plaintiff against Defendant, preclusively establish that the debts are nondischargeable.¹ Defendant argues the judgments are not entitled to preclusive effect in this action. The Court concludes that while the federal criminal conviction fails to establish all the necessary elements of Plaintiff's claim, the state court money judgment does satisfy all the elements of § 523(a)(6).

I. Background and Undisputed Facts.

A. The Incident.

On August 27, 1996, Plaintiff, a twenty-seven year old father of one child, worked for Evergreen Resources, Inc. at that company's fertilizer operation in Soda Springs, Idaho. Defendant owned and operated Evergreen Resources and was Plaintiff's supervisor. On that day, Plaintiff suffered severe and permanent injuries on the job.

The day before, at Defendant's direction, Plaintiff had been inside a railroad tank car cleaning out a form of "sludge" that contained significant levels of cyanide. Defendant was aware that the tank car contained harmful chemicals, but did not provide Plaintiff with any safety equipment. By the end of the day, Plaintiff was experiencing a sore throat and irritated nasal passages.

On August 27, Plaintiff was again instructed to enter the tank car to continue removing the sludge. After about an hour inside the car, Plaintiff collapsed. Plaintiff's co-workers tried to rescue him from the tank car, but they were unable to do so. After a considerable time, emergency personnel arrived and were finally able to remove Plaintiff from the tank car and transport him to a local hospital.

The doctor that cared for Plaintiff initiated treatment for cyanide poisoning, to which Plaintiff initially responded favorably. Despite his initial response to early treatments, Plaintiff ultimately sustained significant brain damage, which substantially impaired both his cognitive abilities and motor skills. As a result of his injuries, Plaintiff was rendered unable to provide or care for his young daughter, yet alone himself. He has difficulty speaking, walking, and feeding himself, and his body frequently "locks up," requiring someone to help him move again.

B. The Legal Proceedings.

1. The civil action.

On July 13, 1998, Plaintiff, through his legal guardian, filed a civil action against Defendant in Idaho state court. Aff. of Roche, Ex. 6, Docket No. 9. Plaintiff's complaint sought money damages from Defendant. By that time, the Idaho Industrial Commission had made an award to Plaintiff under Idaho's Worker Compensation Law, Idaho Code § 72-101 et seq. While the Worker Compensation Law is generally intended to provide the exclusive remedy for an injured worker, see Idaho Code §§ 72-211; 72-209(1), in the civil action, Plaintiff argued that an exception to those statutes allowed him to seek compensation from Defendant in addition to the award made by the Industrial Commission because, as an employee, Plaintiff had allegedly been injured by the "wilful or unprovoked physical aggression of the employer ...." Idaho Code § 72-209(3). Defendant, through counsel, filed an answer to Plaintiff's complaint, denying most of the allegations. Aff. of Roche, Ex. 7, Docket No. 9.

Plaintiff's original complaint reserved the right to add a claim for punitive damages. Aff. of Roche, Ex. 6 at ¶ 20, Docket No. 9. Although the exact date is unclear, during the course of litigation, Plaintiff filed a motion to amend his complaint to add a claim for punitive damages. Defendant opposed Plaintiff's motion, but on July 20, 2000, the state court granted Plaintiff's motion to amend. Aff. of Roche, Ex. 14, Docket No. 9. In granting Plaintiff's motion, the state court acknowledged that punitive damages are only available under Idaho law when a plaintiff proves "that the defendant acted in a manner that was `an extreme deviation from reasonable standards of conduct, and that the act was performed by the defendant with an understanding of or disregard for its likely consequences.'" Aff. of Roche, Ex. 14 at 3, Docket No. 9 (quoting Magic Valley Radiology Assocs., P.A. v. Prof'l Bus. Servs., Inc., 119 Idaho 558, 808 P.2d 1303, 1306 (1991) (citing Cheney v. Palos Verdes Inv. Corp., 104 Idaho 897, 665 P.2d 661, 669 (1983))). The state court also recognized that "[t]he justification for punitive damages must be that the defendant acted with an extremely harmful state of mind, whether that state be termed `malice, oppression, fraud or gross negligence ....'" Aff. of Roche, Ex. 14 at 3, Docket No. 9 (quoting from Magic Valley Radiology, 808 P.2d at 1306; Cheney, 665 P.2d at 669). See also Payne v. Wallace, 136 Idaho 303, 32 P.3d 695, 699 (2001) (citing the same language). Based upon the record before it, the state court allowed Plaintiff to amend his complaint to include a prayer for punitive damages because there was evidence that Defendant had engaged in the kind of "oppressive, fraudulent, wanton, malicious or outrageous conduct ..." required by Idaho Code § 6-1604(1) (2000) (amended 2003).

While the litigation was apparently contentious, Plaintiff's claim against Defendant was realized when, on March 4, 2003, the state court entered a default judgment against Defendant in the amount of $23,400,000, consisting of $16,900,000 in compensatory damages and $6,500,000 in punitive damages. Aff. of Roche, Ex. 5, Docket No. 9. The court entered a default judgment because Defendant's counsel had withdrawn,² and Defendant failed to appoint new counsel or appear on his own. See I.R.C.P. 11(b)(3); Aff. of Roche, Ex. 25, Docket No. 9.

2. The criminal proceedings.

As noted above, the Federal Government also prosecuted Defendant in U.S. District Court for his conduct in connection with Plaintiff's injuries and Defendant's fertilizer operations. On May 7 1999, after a three week trial, a jury convicted Defendant on four separate criminal counts. In particular, Defendant was found guilty of violating a federal statute dealing with solid waste disposal,³ which provides:

Knowing endangerment

Any person who knowingly transports, treats, stores, disposes of, or exports any hazardous waste identified or listed under this subchapter or used oil not identified or listed as a hazardous waste under this subchapter in violation of paragraph (1), (2), (3), (4), (5), (6), or (7) of subsection (d) of this section who knows at that time that he thereby places another person in imminent danger of death or serious bodily injury, shall upon conviction, be subject to a fine of not more than $250,000 or imprisonment for not more than fifteen years, or both. A defendant that is an organization shall, upon conviction of violating this subsection, be subject to a fine of not more than $1,000,000.

42 U.S.C. § 6928(e).

At trial, the district court instructed the jury concerning the elements of this offense. It explained to the jury that in order to find Defendant guilty under this statute, the jury must unanimously agree that, among other things, "the Defendant at the time of the violation knowingly placed another person in imminent danger of death or serious bodily injury." Supp. Aff. of Roche, Ex. 1, Docket No. 11. However, the court also gave the jury the following instruction:

In determining whether the defendant knew that his conduct placed another person in imminent danger of death or serious bodily injury, you are instructed that a person's state of mind is knowing with respect to (A) his conduct, if he is aware of the nature of his conduct; (B) an existing circumstance, if he is aware or believes that the circumstance exists; or (C) a result of his conduct, if he is aware or believes that his conduct is substantially certain to cause danger of death or serious bodily injury.

....

The government does not need to show that the defendant actually intended to harm or endanger any person.

Id. (emphasis added).

Defendant appealed his conviction. The Ninth Circuit Court of Appeals upheld the jury's verdict on all counts, but remanded the action to the district court to correct an error in sentencing.⁴ United States v. Elias, 269 F.3d 1003, 1022 (9th Cir.2001), cert. denied, 537 U.S. 812, 123 S.Ct. 72, 154 L.Ed.2d 14 (2002). In affirming Defendant's conviction, the court rejected Defendant's challenge to the jury instruction quoted above, and found that the instruction properly restated the law. The court explained that:

The first part [of the instruction] set the bar. The jury had to find that Elias believed his conduct was "substantially certain to cause danger or death or serious bodily injury." The second part told the jury that Elias didn't have to have ordered his workers into the tank for the "design or purpose" of hurting them. In other words,...