In re Milton, Bankruptcy No. 02-16363.
| Decision Date | 03 April 2006 |
| Docket Number | Adversary No. 03-1029.,Bankruptcy No. 02-16363. |
| Citation | 355 B.R. 575 |
| Parties | In re: Robert A. MILTON, Debtor. Rain Bird Corporation Plaintiff v. Robert A. Milton Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
Leroy D. Percy, Oxford, MS, for Rain Bird Corporation, Creditor.
Robert A. Talley, Memphis, TN, for Robert A. Milton, Debtor.
On consideration before the court is a motion for summary judgment filed by the plaintiff, Rain Bird Corporation, ("Rain Bird"), and a motion for partial summary judgment filed by the defendant/debtor, Robert A. Milton, ("Milton"); responses thereto and memoranda of law having been filed by the opposing parties; and the court, having heard and considered same, hereby finds as follows, to-wit:
I.
The court has jurisdiction of the parties to and the subject matter of this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(I).
II.
Rain Bird filed a complaint on February 1, 2002, in the United States District Court for the Northern District of Mississippi against National Pump Company, LLC, ("NPC"), Robert Milton, and Gregory I. Salisbury, (Salisbury), Cause No. 2:02CV018-M-D. The complaint sought damages from the defendants under the following causes of action: tortious interference with contract, tortious interference with business relations, misappropriation of trade secrets, breach of fiduciary duty, and civil conspiracy.
During the pendency of the district court litigation, Milton filed a voluntary petition seeking relief under Chapter 7 of the Bankruptcy Code. Thereafter, Rain Bird initiated the above captioned adversary proceeding against Milton requesting this court to find that any debts, owed to Rain Bird as determined by the district court, to be non-dischargeable pursuant to § 523(a)(4) and (6) of the Bankruptcy Code. As a result of a separate motion, this court stayed the bankruptcy adversary proceeding, but lifted the automatic stay so that the district court litigation could be tried to a conclusion.
As an analysis of the factual events pertinent to this proceeding, the court incorporates by reference the Memorandum Opinion ("Mem.Op.") issued on December 23, 2003, by United States District Judge Michael P. Mills in that cause of action styled Rain Bird Corporation v. National Pump Company, LLC; Robert Milton, and Gregory Salisbury, Cause No. 2:01CV018-M-D, United States District Court for the Northern District of Mississippi. The "final judgement" entered in that lawsuit provides as follows:
Pursuant to the memorandum opinion issued this day, the court hereby finds for the plaintiff in the above-styled case and awards damages as follows:
1. $1,200,000.00 in actual damages, for which all defendants are jointly and severally liable 2. $1,537,947.00 in actual damages for which Milton and NPC are jointly liable;
3. $131,220.00 in actual damages for which Milton is solely liable;
4. $94,256.00 in actual damages for which Salisbury is solely liable;
5. $5,000,000.00 in punitive damages for which NPC is solely liable; and
6. $500,000.00 in punitive damages for which Milton is solely liable.
It is also hereby ORDERED that NPC provide Rain Bird with the original production materials related to Rain Bird pump stations and to cause the Pump Monitor source code still in its counsel's possession to be deleted or destroyed.
Milton appealed the district court's judgment against him, which was affirmed by the United States Court of Appeals for the Fifth Circuit. After the amounts awarded became final, Milton filed his answer in this adversary proceeding, denying that the judgment debts were non-dischargeable.
Rain Bird filed its motion for partial summary judgment contending that Milton is collaterally estopped from challenging or relitigating in this adversary proceeding the factual issues determined by the district court. In his response, Milton concurs that collateral estoppel is applicable, acknowledging that preclusive effect should be given to the district court's opinion. A brief comment on collateral estoppel is set forth as follows:
"[W]hen an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit." RecoverEdge, L.P. v. Pentecost, 44 F.3d 1284, 1290 (5th Cir. 1995) (quoting Ache v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 1194, 25 L.Ed.2d 469 (1970)).
In Grogan v. Garner, 498 U.S. 279, 284, n. 11, 111 S.Ct. 654, 658, n. 11, 112 L.Ed.2d 755 (1991), the United States Supreme Court held that collateral estoppel principles "apply in discharge exception proceedings pursuant to § 523(a)."
The Fifth Circuit has held that for collateral estoppel to apply, the following three requirements must be met, to-wit:
(1) The issue to be precluded must be identical to that involved in the prior action; (2) in the prior action the issue must have been actually litigated; and (3) the determination made of the issue in the prior action must have been necessary to the resulting judgment. Matter of Davis, 3 F.3d 113, 114 (5th Cir. 1993) (citing In re Shuler, 722 F.2d 1253, 1256, n. 2 (5th Cir.1984)).
Bringing unanimity to the applicability of collateral estoppel, this court agrees that preclusive effect should be given to the factual issues decided by the district court. Those issues will be discussed in more depth as they relate to each non-dischargeability claim.
III.
Rain Bird asserted that Milton, along with the other defendants, tortiously interfered with confidentiality obligations that Golf Course Irrigation Services, Inc., ("GCIS"), had conveyed to Rain Bird through contracts that had been individually executed on behalf of GCIS by Salisbury and Milton. The factual underpinnings of these allegations center on confidential information about Rain Bird's products and prospective customers, in the possession of GCIS, which was disclosed by Milton and Salisbury to NPC. Rain Bird also contended that these disclosures constituted misappropriation of its trade secrets. Because the district court concluded that Milton participated in these acts, he was found to be jointly and severally liable with the other defendants for damages caused to Rain Bird in the sum of $1,200,000.00.
In the case of Raspanti v. Keaty (Matter of Keaty), 397 F.3d 264 (5th Cir.2005), Chief Judge Carolyn King discussed the Fifth Circuit standard for maintaining a cause of action under § 523(a)(6) of the Bankruptcy Code, as follows:
Section 523(a)(6) of the Bankruptcy Code excepts from discharge any debt incurred for willful and malicious injury by the debtor to another entity. 11 U.S.C. § 523(a)(6)(2004). Section 523(a)(6) of the Bankruptcy Code specifically provides:
§ 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt ...
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity ....
Id. The Supreme Court, in Kawaauhau v. Geiger, 523 U.S. 57, 61, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998), stated that "[t]he word `willful' in (a)(6) modifies the word `injury,' indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." The Fifth Circuit extended Kawaauhau's reasoning in Miller v. J.D. Abrams, Inc. (In re Miller), 156 F.3d 598, 603 (5th Cir.1998), and stated that "either objective substantial certainty [of injury] or subjective motive [to injure] meets the Supreme Court's definition of `willful . injury' in § 523(a)(6)." (third alteration in original). The court in Miller went on to define the word "malicious" and specifically rejected that it meant an act without just cause or excuse. Id. at 605. Instead, the court defined "malicious" as an act done with the actual intent to cause injury. Id. at 606. The court noted that this definition is synonymous with the definition of "willful" and thus aggregated "willful and malicious" into a unitary concept. Thus, the court held that "an injury is `willful and malicious' where there is either an objective substantial certainty of harm or a subjective motive to cause harm." Id. at 606; see also Williams v. IBEW Local 520 (In re Williams), 337 F.3d 504, 509 (5th Cir. 2003).
This court has applied the objective substantial certainty of harm standard in the case of In re Smith, 302 B.R. 530 (Bankr. N.D.Miss.2003), a proceeding involving the debtor's wrongful conversion of annuity payments which had been pledged to a creditor.
In its opinion, the district court set forth the requirements under Mississippi law to establish a claim of tortious interference with contract, to-wit:
The four elements for this tort are: (1) That the acts were intentional and willful; (2) that they were calculated to cause damage to the plaintiffs in their lawful business; (3) that they were done with the unlawful purpose of causing damage and loss, without right or justifiable cause on the part of the defendant (which constitutes malice); and (4) that actual damage or loss resulted.
The opinion continues as follows: .
The element of willfulness and calculation does not require a showing on the part of the plaintiff that defendant had a specific intent to deprive plaintiff of contractual rights. Rather, the requisite intent is inferred when defendant knows of the existence of a contract...
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