Loos v. Koperski (In re Koperski)

• Decision Date: 05 November 2015
• Docket Number: ADV 15–3033,BKY 14–34936
• Citation: 540 B.R. 394
• Parties: In re: Sarah Beth Koperski, Debtor. Steven Loos, Plaintiff, v. Sarah Beth Koperski, Defendant.
• Court: U.S. Bankruptcy Court — District of Minnesota

540 B.R. 394

In re: Sarah Beth Koperski, Debtor.

Steven Loos, Plaintiff,

v.Sarah Beth Koperski, Defendant.

BKY 14–34936

ADV 15–3033

United States Bankruptcy Court, D. Minnesota.

Signed November 5, 2015

Dominique J. Navarro, Roseville, MN, for Plaintiff.

David L. Friedman, Friedman Iverson, PLLC, Minneapolis, MN, for Defendant.

ORDER OF ABSTENTION AND DISMISSAL WITHOUT PREJUDICE (COUNTS I—VI)

GREGORY F. KISHEL, CHIEF UNITED STATES BANKRUPTCY JUDGE

This adversary proceeding was commenced in the Defendant's bankruptcy case under Chapter 7. Earlier in 2014, the Defendant and the Plaintiff had been in litigation in the Minnesota state courts. The Defendant filed for bankruptcy before that matter went to trial. For her bankruptcy filing, the Defendant scheduled an unsecured debt in favor of the Plaintiff. She recited its amount as “Unknown” and its nature as “Legal Damages.”

Through this adversary proceeding, the Plaintiff seeks two forms of relief. Under federal bankruptcy law, he seeks a determination of nondischargeability—that is, an exception from discharge for the debt that he alleges the Defendant owes him. The Plaintiff also requests that this court fix and liquidate the debt, on the same claims that were in suit in the Minnesota state courts.

The Plaintiff cites 11 U.S.C. § 523(a)(6)for his theory of nondischargeability. In his words, the Defendant owes him “a debt ... as a result of [the] Defendant's willful and malicious conduct and injury to [the] Plaintiff.” Under legislative history and judicial construction, this basis for nondischargeability aligns with the notion of intentional tort.¹Kawaauhau v. Geiger,523 U.S. 57, 64 and 61–62, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998); In re Patch,526 F.3d 1176, 1183 (8th Cir.2008); In re Long,774 F.2d 875, 879 (8th Cir.1985)(citing S.Rep. No. 989, 95th Cong., 2d Sess. 79 (1978); H.R.Rep. No. 595, 95th Cong., 1st Sess. 365 (1977)); In re Duy,484 B.R. 742, 750 (Bankr.D.Minn.2012). Here, the specific torts are identified as defamation; libel; invasion of privacy; and negligent infliction of emotional distress. The Plaintiff also seeks prospective injunctive relief against the Defendant, to restrain certain described conduct.

Two questions jumped out from this matter, as it stands under the pleadings. The first is whether this court should abstain from hearing and determining liability, damages, and right to injunctive relief under non-bankruptcy law, in favor of returning those matters to the Minnesota state court. If abstention is warranted, the next question is the order of suit: is it more appropriate to abstain and remand now, with a later return to the forum of bankruptcy for a determination of nondischargeability if the Plaintiff prevails in the state court? Or should dischargeability be determined first?

The court raised these matters sua sponteat a scheduling conference²and directed briefing. Briefs have been submitted; and so these difficult issues are now addressed. The Plaintiff appears by Dominique J. Navarro. The Defendant appears by David L. Friedman.

MATTERS IN SUIT, HERE AND THERE

These parties' disputes are truly a 21st-century tale. In his complaint for this adversary proceeding, the Plaintiff makes the following allegations, among many others:³

1. The Plaintiff and the Defendant were married for about five years. They got divorced on November 23, 2005. They have one child together. They both reside in Rochester, Minnesota.

2. The Defendant wrote a novel titled The Narcissist's Wife.She published it under a pseudonym in the summer of 2013. The Defendant began to distribute copies of the novel by various means, including a weekly book club and through Amazon.com and other on-line vectors.

3. Recipients of the book have included multiple persons in the Rochester community.

4. The novel “contains several false, misleading, and defamatory statements and assertions of fact regarding [the] Plaintiff, of which facts [the Defendant] knew were false ....” The subject matter includes events, acts, and interpersonal conduct during the parties' marital relationship; the Plaintiff's mental health; the Plaintiff's relationship with the parties' child; and the Plaintiff's lawfulness and moral character.⁴

5. During the fall of 2013, the Defendant posted an untrue statement on her Facebook wall, to the effect that she “[w]as just asked to move to Denver with my ex-husband ....”

6. The “[r]ecipients and readers of the [novel] and [the Facebook] Posting are aware that they each contain assertions about and concerning [the] Plaintiff.”

7. The identified statements are false. The Defendant “intentionally, willfully, and maliciously wrote, published, and distributed” them “with the intent to ruin [the] Plaintiff's reputation in the community,” and “in order to cause injury to [the] Plaintiff ....”

8. The Plaintiff has incurred “great injury to [his] reputation and character,” has undergone “severe emotional and psychological distress,” and has incurred “damage to his business, business reputation, and business prospects.”

In January, 2014, the Plaintiff commenced suit against the Defendant in the Minnesota State District Court for the Third Judicial District, Olmsted County. The pleading of fact for that earlier action was almost identical to that just summarized for this adversary proceeding.⁵Other, non-summarized fact allegations are also common to the two complaints.

In the Olmsted County District Court lawsuit, the parties skirmished through early motions from both sides. The Defendant moved for summary judgment (granted as to the Plaintiff's claim for intentional infliction of emotional distress, denied as to all the rest). The Plaintiff moved for a temporary injunction against any further act to disseminate The Narcissist's Wifein any way (granted, with consideration of a permanent injunction reserved to trial on the merits).⁶The Plaintiff moved for leave to assert a claim for punitive damages.⁷The Defendant did not oppose the motion and the court granted it. After the Plaintiff's counsel served a second round of written discovery on the Defendant and received leave to take her deposition a second time, the Defendant filed her bankruptcy petition on December 16, 2014.

Some six weeks after that, the Plaintiff moved for relief from the automatic stay of 11 U.S.C. § 362(a)(1).

The request was quite anomalous in its content. The Plaintiff sought leave to proceed to a jury trial in his state court lawsuit against the Defendant. He coupled that with a request to “defer the [Defendant's] discharge pending resolution of the state court matter.”⁸

In her response, the Defendant picked up on the anomaly. She argued that dischargeability was “a preliminary bankruptcy issue that should be resolved” before any consideration of allowing the earlier suit to proceed in the state court.

The Plaintiff's motion was denied, because there was no reason to grant it as it was postured. The Defendant was in bankruptcy, after all. The Plaintiff's counsel had not started a proceeding for determination of dischargeability in the bankruptcy case. Thus, had the Plaintiff gotten leave to proceed in the state court as he requested, a heavy gate would have slammed down soon after that: a grant of discharge would have imposed the permanent discharge injunction under 11 U.S.C. § 524(a)(2), against any further prosecution of the lawsuit. SeeIn re Bennett,501 B.R. 93, 95 (8th Cir. BAP2013).⁹There might have been one other bankruptcy-related function for proceeding in a state court after a grant of relief from stay, to fix and liquidate the debt toward allowance of a claim in favor of the Plaintiff for the purposes of administration in bankruptcy—i.e., for the division of the estate by the trustee. But there was no compelling need to do that—it was early in the case, and there was no indication that the trustee would garner assets of a value large enough to justify an early effort toward allowance of disputed claims.

The ruling was not a hint, but the Plaintiff's counsel took one anyway. This adversary proceeding was commenced, timely, about two weeks after that. This proceeding is a close repleading of all of the claims under state law already in suit (in Counts I—VI of the complaint), with the tack-on of a request to have any adjudicated debt determined nondischargeable in bankruptcy (in the lonely Count VII).

After the Defendant filed an answer, a scheduling conference under Fed. R. Bankr. P. 7016was ordered and convened. Both sides' lawyers participated. Their input reflected their tacit assumption that all pleaded issues would be litigated and tried in the federal bankruptcy forum, and to the court.¹⁰When queried about the number of contemplated witnesses and the possible length of trial, the Plaintiff's counsel blithely responded that he “would contemplate [calling] 20 to 25 witnesses” for his client's case alone. He expected a trial of at least five days in length. The Defendant's counsel was not quite so expansive; he anticipated “no more than three or four witnesses” for his client, and “the shortest trial possible.” When posed the same questions for a trial presentation on dischargeability alone, the answer was somewhat more moderate. The Plaintiff's counsel “could back it down to ten [witnesses], to be honest.” The Defendant's counsel did not have a different answer.

The vexing thing was, there was some basis for projecting a lengthy trial for either instance. Arguably, a prima facie case under § 523(a)(6)would require threshold findings on the de facto infliction of an “injury by the [Defendant] to” the Plaintiff or to his property, in addition to findings on an associated intent of the sort identified in the statute. The Plaintiff alleges injury to personal attributes that are mostly intangible—reputation, community standing, privacy, emotional balance. Findings on an “injury” in the bankruptcy-law sense might well require the same broad proof of wide publication and reduction in community standing that the law of...