Kerwin v. Donaldson (In re Donaldson)

• Decision Date: 28 March 2019
• Docket Number: Bankruptcy No. 16-15449-MDC,Adversary No. 16-00445-MDC
• Parties: In re: Ofa Kareem Donaldson, Sr., Debtor. Ryan Kerwin and Xtreme Caged Combat, Plaintiffs, v. Ofa Kareem Donaldson, Sr., Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

In re: Ofa Kareem Donaldson, Sr., Debtor.Ryan Kerwin and Xtreme Caged Combat, Plaintiffs, v. Ofa Kareem Donaldson, Sr., Defendant.

Bankruptcy No. 16-15449-MDC

Adversary No. 16-00445-MDC

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

March 28, 2019

Chapter 7

MEMORANDUM

BY: MAGDELINE D. COLEMAN, UNITED STATES BANKRUPTCY JUDGE

I. INTRODUCTION

Plaintiffs Ryan Kerwin ("Kerwin") and Xtreme Caged Combat (together with Kerwin, the "Plaintiffs") seek to have a judgment (the "Judgment") and related contempt sanctions (the "Contempt Sanctions") they obtained in a trademark infringement action (the "Trademark Infringement Action") in the United States District Court for the Eastern District of Pennsylvania (the "District Court")¹ against Ofa Kareem Donaldson, Sr. (the "Debtor") and other non-debtors deemed nondischargeable in the Debtor's bankruptcy case pursuant to various sections of the Bankruptcy Code, 11 U.S.C. §§101 et seq. At the conclusion of the trial on the Plaintiffs' nondischargeability action, this Court ruled in favor of the Debtor on the count of the Complaint that sought to have the Contempt Sanctions deemed nondischargeable pursuant to §523(a)(7) of the Bankruptcy Code, as well as the counts of the Complaint that sought to have the Debtor's discharge denied pursuant to §727(a)(6) of the Bankruptcy Code. TheCourt, however, found in favor of the Plaintiffs on the count of the Complaint seeking to have the Contempt Sanctions deemed nondischargeable pursuant to §523(a)(6) of the Bankruptcy Code because they were for "willful and malicious injury." Remaining for disposition is the count of the Complaint seeking to have the Judgment deemed nondischargeable, again pursuant to §523(a)(6) of the Bankruptcy Code as a debt for "willful and malicious injury." For the reasons set forth herein, the Court finds that the Judgment is nondischargeable because it is a debt the Debtor incurred for willful and malicious injury to the Plaintiffs.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Trademark Infringement Action and Jury Verdict

Kerwin owns and operates Xtreme Caged Combat, a sole proprietorship.² Xtreme Caged Combat is a fitness gym and training facility in the Philadelphia area.³ The Debtor was a partner of another fitness gym and training facility in the Philadelphia area called ECC Fitness, also known as Extreme Cage Combat ("ECC Fitness").⁴ In addition to fitness and training, both Xtreme Caged Combat and ECC Fitness engaged in mixed martial arts fight promotion.⁵ After a review of the record and pleadings in this case, it is unclear to the Court precisely what the relationship was between Kerwin and the Debtor, but Kerwin testified that at some point, estimated to be in 2011, he approached the Debtor to do a collaboration between their businesses which either did not come to fruition or was short-lived.⁶ Whatever their relationship was, it devolved to the point where the Plaintiffs filed the Trademark Infringement Action in the District Court against the Debtor, his partner Steve Rosenblum and ECC Fitness (collectively, the "Trademark Infringement Action Defendants") in July 2012.

In the Trademark Infringement Action the Plaintiffs alleged that the Trademark InfringementAction Defendants infringed on Xtreme Caged Combat's trademark in various ways to promote their business.⁷ The Plaintiffs further alleged that the Trademark Infringement Action Defendants' actions were deliberate, willful and wanton, intended to cause confusion and mistake, and intended to deceive as to their affiliation, connection and association with the Plaintiffs.⁸ On August 13, 2014, the Plaintiffs obtained a jury verdict in the Trademark Infringement Action against the Trademark Infringement Action Defendants. The verdict slip (the "Jury Verdict Slip") completed by the jury in the Trademark Infringement Action reflects that the jury found by a preponderance of the evidence that the Trademark Infringement Action Defendants intentionally infringed upon the Plaintiffs' trademark, and the jury awarded the Plaintiffs statutory damages of $76,800.00.⁹

B. The Plaintiffs' Post-Judgment Discovery Efforts and the Debtor's Contempt

After the judgment was entered in the Trademark Infringement Action, the Plaintiffs proceeded with post-judgment collection efforts and served the Trademark Infringement Action Defendants with post-judgment interrogatories and requests for production of documents.¹⁰ The Trademark Infringement Action Defendants did not respond to those discovery requests, prompting the Plaintiffs to file a motion to compel responses.¹¹ The District Court granted that motion to compel (the "Discovery Order"),¹² and upon the Plaintiffs' subsequent contempt motion, on January 22, 2015 entered an order (the "Sanctions Order") holding the Debtor in contempt of the Discovery Order and providing that his failure to comply with the Discovery Order within 14 days would result in a $1,000.00 penalty that would increase by $50.00 per day until the Debtor complied.¹³

Following the passage of over a year and two additional contempt motions by the Plaintiffs, onJuly 21, 2016, the District Court entered an order again holding the Debtor in contempt of the Discovery Order and directing the clerk of the District Court to issue a bench warrant for the Debtor's arrest and imprisonment until he complied with the Discovery Order by responding to all discovery requests made by the Plaintiffs.¹⁴ The Debtor was arrested on July 25, 2016, and released on the same day.¹⁵ On August 12, 2016, the Debtor provided responses to the Plaintiffs' interrogatories ranging from one word to one sentence, but did not provide any documents in response to the Plaintiffs' request for production of documents.¹⁶ The District Court then issued an order on September 6, 2016, directing the Debtor to supplement his responses to the Plaintiffs' discovery requests under oath by September 16, 2016, and to appear for any deposition the Plaintiffs noticed, the failure of which would result in the Debtor's reincarceration.¹⁷ The Debtor provided supplemental responses to the discovery requests on September 15, 2016, which the District Court, upon another motion to compel by the Plaintiffs, determined did not comply with the District Court's previous orders and on November 17, 2016, ordered the Debtor be reincarcerated (the "Non-Compliance Order").¹⁸ The District Court found, "in light of the [Debtor's] repeated and willful failure to respond to this Court's orders," that imprisonment was the only way to effectuate the Debtor's compliance.¹⁹ As a result, the Debtor was incarcerated for a second time.²⁰ On November 21, 2016, the District Court ordered the Debtor released and directed him to provide full and complete responses to the Plaintiffs' discovery requests.²¹

C. The Nondischargeability Action

On August 1, 2016, while the post-judgment discovery process was continuing, the Debtor filed avoluntary petition under chapter 13 of the Bankruptcy Code.²² The Debtor's case was converted to chapter 7 on September 16, 2016.²³ On December 15, 2016, the Plaintiffs filed an adversary complaint (the "Nondischargeability Complaint") against the Debtor seeking determinations that the Judgment and Contempt Sanctions are nondischargeable debts pursuant to §§523(a)(6) and (a)(7) of the Bankruptcy Code and that the Debtor should not be granted a general discharge pursuant to §727(a)(6) of the Bankruptcy Code.²⁴ Specifically, the Nondischargeability Complaint sets forth five counts. Counts 1, 2, and 3 assert that the Contempt Sanctions are nondischargeable pursuant to §§523(a)(7),²⁵ 523(a)(6),²⁶ and 727(a)(6),²⁷ respectively. Counts 4 and 5 assert that the Judgment is nondischargeable pursuant to §§727(a)(6) and 523(a)(6), respectively. As noted above, the Judgment amount entered against the Debtor was $76,800.00. The Contempt Sanctions the Plaintiffs asserted are nondischargeable total $30,300.00.²⁸

D. The Plaintiffs' Motion for Summary Judgment and Trial

On May 23, 2017, the Plaintiffs moved for summary judgment ("Summary Judgment Motion")on each count of the Nondischargeability Complaint, supported by the Plaintiffs' Statement of Undisputed Facts and an affidavit executed by Kerwin.²⁹ The Debtor did not timely respond to the Summary Judgment Motion, and on July 21, 2017, the Plaintiffs submitted what was designated a Joint Pre-Trial Statement, but in fact was only the Plaintiffs' pre-trial statement because the Debtor failed to engage with the Plaintiffs to prepare a joint pre-trial statement.³⁰ On August 16, 2017, the Court held a pre-trial hearing (the "Pre-Trial Hearing"), at which time it directed the Debtor to file a response to the Summary Judgment Motion ("Summary Judgment Response") by September 5, 2017, with any reply from the Plaintiffs ("Summary Judgment Reply") due by September 19, 2017.³¹ Trial was also scheduled for October 27, 2017. The Debtor filed the Summary Judgment Reply on September 5, 2017, but did not respond to the Plaintiffs' Statement of Undisputed Facts.³² The Plaintiffs filed the Summary Judgment Reply on September 20, 2017. The Plaintiffs filed a second pre-trial memorandum on October 10, 2017, that was substantively largely the same as the Joint Pre-Trial Memorandum the Plaintiffs filed on July 21, 2017.³³ The Debtor did not file a pre-trial statement.

The Court conducted the trial on October 27, 2017. At the outset of the trial, the Court denied the Summary Judgment Motion with respect to Count 1, based on its conclusion that §523(a)(7) was inapplicable to the Judgment and Contempt Sanctions as a matter of law because they were both payable to the Plaintiffs, and not payable "to and for the benefit of a governmental unit" as required under §523(a)(7). Likewise, the Court denied the Summary Judgment Motion with respect to Counts 3 and 4 based on its conclusion that §727(a)(6) was inapplicable to the Judgment and Contempt Sanctions because the Debtor had...