In re Ellerbee, Bankruptcy No. 93-69789. Adv. No. 93-6541.

• Decision Date: 06 January 1995
• Docket Number: Bankruptcy No. 93-69789. Adv. No. 93-6541.
• Citation: 177 BR 731
• Parties: In re Dexter ELLERBEE, Debtor. Dexter MILLS, Plaintiff, v. Dexter ELLERBEE, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

177 B.R. 731 (1995)

In re Dexter ELLERBEE, Debtor Dexter MILLS, Plaintiff, v. Dexter ELLERBEE, Defendant.

Bankruptcy No. 93-69789. Adv. No. 93-6541.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

January 6, 1995.

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Clayton O. Carmack of Moore & Rogers, Marietta, GA, for plaintiff.

Glenn Loewenthal of Loewenthal, Jackson & Brown, Atlanta, GA, for defendant/debtor.

DECISION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT

JAMES E. MASSEY, Bankruptcy Judge.

In 1987 and 1988, Dexter Ellerbee repeatedly libeled Dexter Mills. Mills sued in state court and won a judgment for punitive damages and attorney's fees, so Ellerbee filed a bankruptcy petition. Mills seeks a ruling from this court that the judgment is for a willful and malicious injury and thus is not dischargeable.

The trial court charged the jury that it could find actual malice so as to award punitive damages if it found that Ellerbee recklessly disregarded the truth. On this basis, Mills contends that the doctrine of collateral estoppel bars further litigation about the willful and malicious nature of the injury. Ellerbee argues, however, that the court should come precisely to the opposite conclusion because, he contends, if he acted recklessly, his conduct could not have been willful.

An Eleventh Circuit case in this area holds that a state court finding of actual malice based on a reckless disregard for the truth renders a debt for defamation nondischargeable. A Sixth Circuit case, on the other hand, holds that reckless disregard for the truth can never be the basis for determining that a debt for defamation is nondischargeable. The split of authority on the meaning of section 523(a)(6) of the Bankruptcy Code springs partly from interpretation of somewhat ambiguous legislative history published in 1977 and 1978. That commentary stated that the drafters intended the enactment of that section to overrule cases that had applied a "reckless disregard standard" in determining the dischargeability of a debt for an allegedly willful and malicious injury.

Confusion has also resulted from the use of the words "malice" or "malicious" in the context of tort law as a guidepost that points in the direction of a "willful and malicious injury" or from the use of the word "reckless" as a guidepost to navigate in the opposite direction. That methodology is like using a compass too close to a magnet. The arrow may or may not point in the right direction. The reason is that in areas of law other than bankruptcy, these words do work, often in a foggy way, that may or may not be true to what section 523(a)(6) is getting at. The potential for wandering in the wrong direction increases when the underlying tort is defamation, because that law has its own peculiar and sometimes confusing or conflicting meanings for these words.

After considering the arguments of the parties and the evidence submitted in connection with the motions, the court denies Ellerbee's motion for summary judgment because reckless disregard of the truth does not preclude a willful and malicious injury. It grants Mills' motion for summary judgment, in spite of the fact that the state court finding of actual malice is not entitled to collateral estoppel effect, because he presented uncontroverted evidence that proves the debt is for a willful and malicious injury.

FINDINGS OF FACT

The material facts are not in dispute. Mills was the Principal of North Cobb High School in Cobb County, Georgia from 1986 through 1990. He gave Ellerbee, a teacher at the high school during the 1987 school year, an unfavorable evaluation: Thereafter, Ellerbee resigned his teaching position. In his answer to the complaint in this adversary proceeding, Ellerbee admitted that after he resigned, he made numerous written and oral statements in which he implicitly or expressly alleged that Mills had engaged in immoral, unethical, fraudulent, harassing, terroristic and other improper conduct. He accused the Plaintiff of having committed crimes. Ellerbee made the allegations in letters to teachers, local officials, community leaders and the Cobb County School Board, in advertisements published in the local paper, and on signs posted near the high school. The excerpts of the transcript of the trial in the Superior Court submitted by Mills show that Ellerbee repeatedly and obsessively published statements impugning Mills' character and integrity.

In January, 1989, Mills sued Ellerbee for libel and slander in the Superior Court of Cobb County, Georgia. At the trial, Ellerbee admitted that the allegations he made against Mills would tend to injure one's reputation. He admitted that he had published a letter to teachers calling for Mills' resignation or transfer and the placement of a written reprimand in Mills' personnel file for "fraudulent actions." The letter further stated, "Alone there is really not much any of us could do, but in unity, we strike back at the man that has done so much harm to so many." (Trial Tr. 59).

Ellerbee received a letter from counsel for Mills in early November, 1988 requesting him to retract and to stop making false statements about Mills, but he continued to do so. (Trial Tr. 76-77). Ellerbee made no investigation of the statements that he published: ". . . I believed them to be true, but I had no way of investigating the allegations made." (Trial Tr. 139). He also testified, ". . . It was not my—I didn't think it was my role to investigate because I didn't have the tools, to investigate, as I've testified." (Trial Tr. 151).

The state court charged the jury as follows:

. . . the jury may give additional damages either to deter the wrongdoer from repeating the trespass or as compensation to the wounded feelings of the plaintiff.

Punitive, that is, aggravated, damages may be authorized when the circumstances of the wrong are such as to show an entire want of care and an indifference to the consequences.

The measure of such damages is your enlightened conscience as an impartial jury.

Now, ladies and gentlemen, I charge you that the speech and statements complained of by the plaintiff are of a public concern. Therefore, for in order for the plaintiff to be entitled to an award of punitive damages, he must demonstrate that the statements complained of were made with actual malice, as I will define that for you.

Reckless disregard of the truth is equivalent to malice. I charge you that a statement is made with actual malice, as the term is used in this charge, if it is made with knowledge that it is false or with reckless disregard of whether it is false or not.

In order to establish recklessness, the plaintiff must prove that the defendant had a high degree of awareness of the probable falsity of the statements published.

I charge you, ladies and gentlemen, that ill-will, hatred or hostility or even spite do not necessarily constitute actual malice as I had described the term to you.

It is never expected that a publisher will admit his own malice. The circumstances, all of the circumstances must be considered. And from the circumstances, despite the publisher\'s sworn testimony to the contrary, a jury may properly conclude that the publisher was motivated by malice.

The expenses of litigation are generally not allowed as part of damages, but if the defendant has acted in bad faith or has been stubbornly litigious or has caused the plaintiff unnecessary trouble and expense, you may allow them.

The jury returned a verdict on May 24, 1991, awarding Mills $1.00 in compensatory damages, $1.00 in nominal damages, $26,920.00 in punitive damages and $26,920.00 in attorney's fees. The Superior Court entered a judgment against Ellerbee that embodied the jury award and a separate order enjoining Ellerbee from making any further false statement against Mills.

The Debtor appealed the judgment and the injunction to the Georgia Supreme Court. The Supreme Court affirmed the judgment, but reversed the injunction as overly broad. Ellerbee v. Mills, 262 Ga. 516, 422 S.E.2d 539 (1992), cert. den. ___ U.S. ___, 113 S.Ct. 1833, 123 L.Ed.2d 460 (1993).

Ellerbee then filed a Chapter 7 petition and scheduled the judgment in favor of Mills as an unsecured claim. Mills responded with this adversary proceeding. In his answer, the Debtor denies that the statements he made concerning the Plaintiff were false or were made with malice.

JURISDICTION

The court has jurisdiction in this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(a) and 157(b)(2)(I).

ISSUES

This case presents the following related and overlapping issues:

1. Does a finding by a jury that the Defendant published defamatory statements with "actual malice" preclude litigation concerning whether the debt embodied in the judgment is for a "malicious injury" within the meaning of section 523(a)(6)?

2. May affidavits of jurors be considered in deciding whether to give collateral estoppel effect to a judgment of another court?

3. If collateral estoppel does not bar further litigation of the willful and malicious nature of the injury for which the Plaintiff obtained a judgment for damages and attorney's fees, has the Plaintiff proved by a preponderance of undisputed evidence that the debt for compensatory and punitive damages is for a "willful and malicious injury"? In that connection, must the Plaintiff prove that the Debtor knew that the statements he made were false? Can a reckless disregard for the truth ever result in a willful or malicious injury?

4. Are attorney's fees nondischargeable merely because damages are? Must the Plaintiff show that the Defendant's bad faith or stubborn litigiousness was the infliction of a willful and malicious injury in order to show that the debt for fees is nondischargeable?

DISCUSSION AND CONCLUSIONS OF LAW

I. Summary Judgment Standard.

The evidence submitted by Mills included excerpts of Ellerbee's testimony at the trial and the instructions to the jury. He also...