In re Meece
| Decision Date | 09 March 2001 |
| Docket Number | Bankruptcy No. 00-33982-SAF-7. Adversary No. 00-3499. |
| Citation | 261 BR 403 |
| Parties | In re Robert G. MEECE, Debtor. Rolex Watch U.S.A., Inc., Plaintiff, v. Robert G. Meece, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
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David F. Staber, Akin, Gump, et al., Dallas, TX, for Plaintiff.
Jeffrey P. Prostok, Forshey & Prostok, Ft. Worth, TX, for Defendant.
Robert G. Meece, the defendant, moves the court for summary judgment dismissing the complaint of Rolex Watch U.S.A., Inc. Rolex moves the court to strike and deny Meece's motion. In addition, Rolex opposes Meece's motion and cross moves for summary judgment. Meece opposes the cross-motion. The court conducted a hearing on the motions on February 1, 2001.
Rolex obtained a judgment against Meece from the United States District Court for, among other things, $245,648.49 under 15 U.S.C. §§ 1114 and 1117(b) plus attorney's fees of $160,000. In this adversary proceeding, Rolex contends that the judgment may not be discharged pursuant to 11 U.S.C. §§ 523(a)(6). In addition, Rolex objects to the discharge of Meece pursuant to 11 U.S.C. § 727(a)(2) and (a)(4)(A).
In his motion, Meece argues that Rolex is precluded from contending that the judgment may not be discharged under § 523(a)(6) and that there are no genuine issues of material fact to support an objection to discharge. Meece filed his motion on December 12, 2000. Meece did not file a brief with the motion as required by District Court Local Rule 56.1, made applicable by Local Bankruptcy Rule 7056.1. On January 12, 2001, Rolex filed its objection to Meece's motion with its cross-motion and brief. Meece filed his brief in support of his motion on January 12, 2001. Because Meece did not comply with the local rule, Rolex could not address in its brief the points raised by Meece in his brief. Then, on January 25, 2001, Meece filed additional affidavits in support of his motion. On January 29, 2001, Rolex moved to strike the late filed briefs and affidavits. At the hearing, Rolex contended that as a consequence the court should deny Meece's motion for non-compliance with the rule. The court grants that motion.1
In its cross-motion for summary judgment, Rolex contends that under the doctrine of collateral estoppel, the judgment debt is excepted from discharge under § 523(a)(6). Meece opposes that motion, contending, in turn, that the district court's judgment precludes Rolex from now litigating that the debt is excepted from discharge. Even though the court has struck Meece's motion for summary judgment, the court may grant judgment for Meece if he is entitled to a judgment as a matter of law. See Apex Oil Co. v. Archem Co., 770 F.2d 1353, 1356 n. 3 (5th Cir.1985).
Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, and other matters presented to the court show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Washington v. Armstrong World Indus., 839 F.2d 1121, 1122 (5th Cir.1988). On a summary judgment motion the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. A factual dispute bars summary judgment only when the disputed fact is determinative under governing law. Anderson, 477 U.S. at 250, 106 S.Ct. 2505.
The movant bears the initial burden of articulating the basis for its motion and identifying evidence which shows that there is no genuine issue of material fact. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. The respondent may not rest on the mere allegations or denials in its pleadings but must set forth specific facts showing that there is a genuine issue for trial. Matsushita Electric Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Section 523(a)(6) excepts from an individual debtor's discharge a debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6). A "willful" injury requires "a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." Kawaauhau v. Geiger, 523 U.S. 57, 61, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998) (emphasis in original). To establish an intentional injury, the creditor must establish "either an objective substantial certainty of harm or a subjective motive to cause harm." In re Miller, 156 F.3d 598, 606 (5th Cir.1995), cert. denied, 526 U.S. 1016, 119 S.Ct. 1249, 1250, 143 L.Ed.2d 347 (1999). In addition to being willful, the injury must be "malicious." 11 U.S.C. § 523(a)(6). Malicious means "without just cause or excuse." In re Garner, 56 F.3d 677, 681 (5th Cir.1995). The Supreme Court in Kawaauhau did not collapse the malicious definition into the willful injury definition nor otherwise read the words "and malicious" out of the statute. In re Grisham, 245 B.R. 65, 71 (Bankr.N.D.Tex.2000). Accordingly, "a debtor may act deliberately or intentionally but have just cause or excuse to do so." Id. Thus, a debt arising from the debtor's infliction of an intentional injury is dischargeable if the debtor had just cause or excuse for inflicting the intentional injury.
Both parties contend that the district court judgment precludes relitigation of willful and malicious injury under § 523(a)(6). Issue preclusion, formerly known as collateral estoppel, applies when the following elements are met:
(1) the issue at stake must be identical to the one involved in the prior action; (2) the issue must have been actually litigated in the prior action; and (3) the determination of the issue in the prior action must have been a part of the judgment in that earlier action.
Southmark Corp. v. Coopers & Lybrand (In re Southmark), 163 F.3d 925, 932 (5th Cir.1999). Both parties maintain that all three elements have been established, but they draw opposite conclusions of law.
The United States District Court found that Meece did not intentionally infringe the Rolex trademarks, see Rolex Watch U.S.A., Inc. v. Meece, No. 3:95-CV-1058-T, slip op. at 9 (N.D.Tex. Aug. 11, 1997) hereinafter Dist. Ct. Op., but that Meece intentionally used marks on enhanced watches, converted used watches and non-genuine bracelets with genuine Rolex clasps that caused them to be counterfeit within the statutory definition of the Lanham Act, 15 U.S.C. § 1114. See Rolex Watch U.S.A., Inc. v. Meece, No. 3:95-CV-1058-T, slip op. at 11 (N.D.Tex. Jan. 25, 2000) hereinafter Dist. Ct. Op. on Remand. As a result, the court did not award damages under 15 U.S.C. § 1117(a) for trademark infringement but awarded damages under § 1117(b) for trademark counterfeiting. Simply put, Rolex argues that trademark counterfeiting necessarily includes an intent to injure within the meaning of § 523(a)(6). Meece argues, to the contrary, that the finding of a lack of intent for trademark infringement precludes a finding of an intent to injure.
Under 15 U.S.C. § 1117(a), a court may award the holder of a trademark the defendant's profits, the holder's damages and the costs of the action for a violation of 15 U.S.C. § 1114(1)(a) if the defendant had an intent to confuse or deceive. Rolex Watch U.S.A., Inc. v. Meece, 158 F.3d 816, 823-24 (5th Cir.1998), cert. denied, 526 U.S. 1133, 119 S.Ct. 1808, 143 L.Ed.2d 1011 (1999) hereinafter Fifth Circuit Op.. For recovery by the holder of the trademark under § 1117(a), the defendant must have acted with willful deception and in bad faith. Id. Willful infringement carries a connotation of deliberate intent to deceive. Id. at 823. In addition, § 1117(a) permits an award of attorney's fees in exceptional circumstances, which requires that a defendant's trademark infringement be malicious, fraudulent, deliberate or willful. Id. at 824.
The district court found that Meece did not engage in deliberate infringement for a recovery under § 1117(a). To the contrary, the district court found that Meece attempted to "ride the line" but "did not intend to cross" the line between the legitimate sale of replacement parts and the complete conversion of a watch into an infringing product. Dist. Ct. Op. at 8. The Fifth Circuit affirmed that finding. Fifth Circuit Op. at 827-28. Since Meece was found to lack an intent to deliberately infringe the Rolex trademark, he could not have intended to injure Rolex.
However, under 15 U.S.C. § 1117(b), the court shall, unless extenuating circumstances exist, award the holder of a trademark treble damages or profits plus attorneys fees for a violation of § 1114(1)(a) that "consists of intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark" in connection with the sale or distribution of goods or services. 15 U.S.C. § 1117(b). The Fifth Circuit remanded the action to the district court to determine whether Meece's use of marks on enhanced new watches, converted used watches and non-genuine bracelets with genuine Rolex clasps caused them to be "counterfeit" within the meaning of 15 U.S.C. §§ 1116(d) and 1127, and, if so, to determine the recovery for Rolex under § 1117(b). Fifth Circuit Op. at 827.
On remand, the district court found that Meece used marks on goods covered by the Rolex registration, and his use was unauthorized by Rolex. Dist. Ct. Op. on Remand at 7. The court found that Meece's use of these marks on enhanced new watches and converted used watches constituted trademark counterfeiting and that Meece's placement of original Rolex clasps on non-genuine bracelets increased the likelihood of...
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