In re Keaty

• Decision Date: 12 January 2005
• Docket Number: No. 04-30184.,04-30184.
• Citation: 397 F.3d 264
• Parties: In the Matter of: Robert Burke KEATY, Sr.; Erin Kenny Keaty, Debtors. Roy A. Raspanti, Appellant, v. Robert Burke Keaty, Sr., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

397 F.3d 264

In the Matter of: Robert Burke KEATY, Sr.; Erin Kenny Keaty, Debtors Roy A. Raspanti, Appellant, v. Robert Burke Keaty, Sr., Appellee.

No. 04-30184.

United States Court of Appeals, Fifth Circuit.

January 12, 2005.

COPYRIGHT MATERIAL OMITTED

Roy A. Raspanti (argued), Metairie, LA, pro se.

David Patrick Keating (argued), Opelousas, LA, for Appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before KING, Chief Judge, and HIGGINBOTHAM and DAVIS, Circuit Judges.

KING, Chief Judge:

This appeal arises from the bankruptcy court's refusal to give preclusive effect to findings made by the Louisiana Fourth Circuit Court of Appeal. Appellant Roy A. Raspanti brought an adversary proceeding against Appellee Robert Burke Keaty, Sr. in bankruptcy court seeking a determination that a state court judgment against Keaty was not dischargeable under § 523(a)(6) of the Bankruptcy Code. Raspanti asked the bankruptcy court to apply principles of collateral estoppel to the Louisiana appellate court's findings on the issue of whether the debt arose from a willful and malicious injury as required under § 523(a)(6) of the Bankruptcy Code. The bankruptcy court did not give preclusive effect to the state appellate court's findings, reasoning that the issue had not been "actually litigated" at the state court level. Instead, the bankruptcy court held a trial to determine if the debt owed by Keaty was for a willful and malicious injury. After that trial, the bankruptcy court concluded that the debt owed to Raspanti was not for a willful and malicious injury, and the court thus held that the debt was dischargeable. The district court affirmed. We conclude that the bankruptcy court erred in not giving preclusive effect to the state appellate court's findings. We therefore REVERSE the judgment of the district court.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1985, Connie Byrd employed Robert Burke Keaty, Sr., Thomas S. Keaty, and Keaty & Keaty (collectively "the Keatys") to represent her son, Gregory Byrd, as a plaintiff in a Louisiana state court lawsuit. In that suit, the Byrds sued two defendants for injuries that Gregory sustained at school. In 1987, one of the defendants settled with the Byrds. Following a fee dispute, the Byrds and the Keatys executed a compromise agreement by which the Keatys received $586,200 in fees and costs. The Keatys continued to represent the Byrds at trial against the other defendant, the school board, in the 26th Judicial District Court for the Parish of Bossier (the "Bossier Parish proceeding"). In January 1988, the trial court ruled in favor of the school board, and the Keatys subsequently filed a notice of appeal on behalf of the Byrds. Immediately thereafter, however, the Byrds discharged the Keatys, and in March 1988, Roy A. Raspanti was substituted as counsel.

Raspanti represented the Byrds in their appeal against the school board. While the appeal was pending, the Keatys filed an intervention in the suit seeking additional attorney's fees should the appeal against the school board be successful. The appellate court ultimately reversed the judgment in favor of the school board and remanded the case. The school board subsequently agreed to settle the claim, and Raspanti was paid $588,750 in attorney's fees. Meanwhile, the trial court dismissed on summary judgment the Keatys' claim for additional fees, reasoning that the compromise agreement executed between the Byrds and the Keatys settled all of their fee disputes. The Keatys appealed the judgment, but the Louisiana Second Circuit Court of Appeal dismissed the appeal as untimely.

In November 1991, the Keatys sued Raspanti in the Civil District Court for the Parish of Orleans, alleging tortious interference of contract and unjust enrichment and seeking a portion of the attorney's fees collected by Raspanti. In February 1992, the Keatys filed a second suit against Raspanti seeking an apportionment of the attorney's fees on a quantum meruit basis. The two suits were consolidated. In response, Raspanti filed exceptions of prescription, no cause of action, and res judicata, as well as a motion for summary judgment and a motion for sanctions. All of these exceptions and motions were denied. Raspanti then requested several admissions from the Keatys: first, that there was no contract between Raspanti and Robert B. Keaty, Thomas S. Keaty and/or Keaty and Keaty, and second, that there had never been a contract between any of those parties. Keaty v. Raspanti, 781 So.2d 607, 609 (La.Ct.App.2001). The Keatys denied Raspanti's request for admissions and responded that their claims "encompass[ed] contractual claims and a claim for apportionment of attorney's fees." Id. However, the Keatys later admitted, in a written opposition to a motion for summary judgment filed by Raspanti, that they had no contract with Raspanti. Id. In light of this, Raspanti reurged his motion for summary judgment, making the additional argument that because the Keatys already had been denied additional fees from the Byrds by the state court in Bossier Parish, they could not recover additional fees from him. In support, Raspanti pointed to prior admissions made by the Keatys that the source of their claim was the contract with the Byrds and that they had no contract with Raspanti.

On August 13, 1996, the trial court rendered summary judgment in favor of Raspanti. Keaty v. Raspanti, 695 So.2d 1085 (La.Ct.App.1997). On May 28, 1997, the Louisiana Fourth Circuit Court of Appeal affirmed. See id. The appellate court reasoned that the Bossier Parish proceeding had resulted in a final judgment that the Keatys could not recover additional fees from the Byrds because the compromise agreement encompassed claims for both past and future fees. Id. at 1087. Thus, the court concluded that since the Keatys' claim was based on their contract with the Byrds, the Keatys were precluded from seeking additional fees from Raspanti. Id. The court also made the observation that the Keatys had acknowledged that their tortious interference claim was prescribed. Id.

On June 27, 1997, Raspanti filed a motion for sanctions against the Keatys on the basis that the Keatys' tortious interference claim was frivolous. In response, the Keatys filed exceptions of prescription and res judicata. The trial court granted the Keatys' exceptions without written reasons, and Raspanti appealed to the Louisiana Fourth Circuit Court of Appeal.

On February 7, 2001, the appellate court reversed the decision of the trial court and held that the Keatys' exceptions of res judicata and prescription had no merit. The court then went on to assess Raspanti's sanctions claim de novo. The court, referred to its 1997 decision and noted that Keaty had no claim for attorney's fees against Raspanti. The Louisiana appellate court then made particular findings regarding the Keatys' claims. Specifically, the court found that the Keatys knew their claims had prescribed, that their answers to Raspanti's request for admissions were disingenuous, and that the proceedings by the Keatys were knowingly without foundation, crafted for the purposes of harassment, and designed to prolong the proceedings deliberately and needlessly. Id. at 612. Accordingly, the appellate court concluded that the Keatys' conduct was sanctionable under Louisiana law¹ and remanded the case for an evidentiary hearing to set the amount of sanctions to be awarded. The state trial court awarded Raspanti $34,605.08, which the appellate court increased to $107,605.95 on appeal. Keaty v. Raspanti, 866 So.2d 1045 (La.Ct.App.2004).

Meanwhile, on December 9, 1999, before the Louisiana appellate court's reversal, Robert Burke Keaty, Sr. ("Keaty") and Erin Kenny Keaty filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Western District of Louisiana. On April 6, 2001, Keaty added Raspanti as a creditor. Thereafter, on June 14, 2001, Raspanti filed a complaint to determine the dischargeability of his debt pursuant to 11 U.S.C. § 523(a)(6).² Specifically, Raspanti contended that Keaty's debt (i.e., the sanctions assessed by the Louisiana Fourth Circuit Court of Appeal) should not be discharged under § 523(a)(6) because it was a debt for a willful and malicious injury (i.e., bringing a frivolous lawsuit against Raspanti).

On October 1, 2001, Raspanti filed a motion for summary judgment, arguing that the findings of the Louisiana Fourth Circuit Court of Appeal amounted to a finding that the debt owed by Keaty to Raspanti resulted from a willful and malicious injury, and thus, under the doctrine of issue preclusion, Keaty was barred from relitigating the issue. The bankruptcy court denied Raspanti's motion on March 19, 2002. The court reasoned that the issue of willful and malicious injury was not "actually litigated" as required under issue preclusion because "neither the [Louisiana] trial court nor the appellate court ever conducted an actual evidentiary hearing regarding [Keaty's] conduct." On April 16, 2002, Raspanti filed a second motion for summary judgment and attached a copy of the entire state court record. On July 30, 2002, the bankruptcy court again denied Raspanti's motion. The court again reasoned that the sanctions issue had not been "actually litigated" so as to support a finding of willful and malicious injury under § 523(a)(6) because the sanctions issue was decided "without the introduction of exhibits, testimony or any other evidence" and "without any hearing."

Thereafter, the bankruptcy court held a trial on Raspanti's complaint on November 4, 2002. At trial, Raspanti relied solely on the state court record. On August 26, 2003, the bankruptcy court issued an order dismissing Raspanti's complaint with prejudice. In its Reasons for Decision, the bankruptcy court held that Raspanti failed to satisfy his burden of proving each element of § 523(...