Plikaytis v. Roth, No. 3:2013cv02954 - Document 37 (S.D. Cal. 2014)
Court Description: OPINION. Court affirms the bankruptcy court. This Opinion terminates the instant action. Clerk shall close the file and terminates all pending matters. Signed by Judge Cynthia Bashant on 9/5/2014. (cc: Bankruptcy Court) (jah)
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1 2 3 4 5 6 7 8 9 10 11 UNITED STATES DISTRICT COURT 12 SOUTHERN DISTRICT OF CALIFORNIA 13 14 In re JAMES MARVIN ROTH, 15 Debtor. 16 Case No. 13-cv-2954 BAS (WVG) Adversary Procedure 10-90359 OPINION Bankr. Case No. 10-7659-MM11 17 18 ANICE M. PLIKAYTIS, Appellee, 19 20 21 22 v. JAMES M. ROTH, Appellant. OPINION 23 24 C. BASHANT, District Judge: 25 On December 9, 2014, Appellant James Marvin Roth appealed a bankruptcy 26 court s determination that a portion of his debt owed to Appellee Anice M. 27 Plikaytis was excepted from discharge. After reviewing the parties briefing and 28 the bankruptcy court s judgment, this Court affirms the bankruptcy court. 1 13-cv-2954 BAS (WVG) 1 2 I. Procedural Background Plikaytis successfully sued Roth in California state court in 2009. She was 3 awarded damages against Roth and other defendants. Roth filed for Chapter 11 4 bankruptcy on May 3, 2010. R. 4. 5 Plikaytis then filed a complaint, with attached exhibits, objecting to the 6 dischargeability of the state court judgment. R. 3 18. Plikaytis alleged the 7 judgment was nondischargeable because it was based on fraud under 11 U.S.C. § 8 523(a)(2), 11 U.S.C. § 523(a)(4), and 11 U.S.C. § 523(a)(6) (counts 1, 2, and 3, 9 respectively). Compl. ¶ 4(a) (c). Plikaytis prayed for the full amount of the 10 11 12 13 judgment, $4,126,844.86, plus interest. R. 4, 18. Her initial complaint was improperly served and failed to state a claim, so the bankruptcy court dismissed it with leave to amend. R 45 50, 55. Plikaytis amended complaint, filed March 3, 2011, set forth six claims for 14 relief. R. 74 94. After an adversary proceeding, the court found a total of 15 $2,997,000 of the debt was not dischargeable. R. 2890. Roth owed (1) a $2.8 16 million debt under 11 U.S.C. § 523(a)(2) because he made a fraudulent promise to 17 convey a 25% interest in the Roth Montezuma Partnership, LLP ( RMP ); (2) a 18 $90,000 debt under both defalcation pursuant to 11 U.S.C. § 523(a)(4) and willful 19 and malicious injury under 11 U.S.C. § 523(a)(6); (3) a $50,000 debt for the willful 20 and malicious intentional infliction of emotional distress under 11 U.S.C. § 21 523(a)(6); and (4) a $57,000 debt for his breach of fiduciary duty by defalcation 22 under 11 U.S.C. § 523(a)(4). 23 Roth appealed the judgment. R. 2897. Roth makes eight claims. First, he 24 argues Plikaytis fraud claim under 11 U.S.C. § 523(a)(2) should have been barred 25 by the statute of limitations because her amended complaint should not have 26 related back to the original complaint. Second, he argues Plikaytis did not prove 27 28 2 13-cv-2954 BAS (WVG) 1 the material element of justifiable reliance required for her § 523(a) 1 claims. Third, 2 he argues that the debt in question arising from his fraud should have been the out- 3 of-pocket injury instead of the breach of contract judgment. Fourth, he again 4 argues that the Amended Complaint does not relate back to the initial complaint. 5 Fifth, he argues Plikaytis was required to prove the $57,000 defalcation was 6 predicated on the same factual allegations underlying the state court judgment. 7 Sixth, he argues his proffered evidence of the money he and his related parties paid 8 into Talmadge East, LLC should have been considered by the bankruptcy court. 9 Seventh, he argues the court improperly found fiduciary capacity in the claims 10 under 11 U.S.C. § 523(a)(4). Eighth and lastly, he argues the intentional infliction 11 of emotional distress claim should have been allocated among dischargeable and 12 nondischargeable claims, and that such allocation evidence was Plikaytis burden 13 to prove. The Court finds no merit in Roth s appeal. Therefore the Court affirms the 14 15 judgment in its entirety. II. 16 Standard of Review 17 On appeal, a bankruptcy court s legal conclusions are reviewed de novo, 18 factual findings are reviewed for clear error, and mixed questions of law and fact 19 are reviewed de novo. See Murray v. Bammer (In re Bammer), 131 F.3d 788, 792 20 (9th Cir.1997). III. 21 22 Discussion A. Relation Back of Plikaytis Amended Complaint 23 In his first and fourth issues on appeal, Roth challenges the relation back of 24 Plikaytis Amended Complaint to her initial complaint. He concedes that the 25 original complaint was timely filed. Appellant s Opening Br., ECF 7, 8:6 8. 26 However, he argues that because the initial complaint only (1) includes the state 27 28 1 All statutory references are to Title 11 of the U.S. Code unless otherwise stated. 3 13-cv-2954 BAS (WVG) 1 court Judgment, an abstract of judgment, and writ of execution, (2) recites that the 2 Judgment includes awards for breach of fiduciary duties and intentional infliction 3 of emotional distress, and (3) alleges without factual support that the judgment 4 was nondischargeable under § 523(a)(2)(A), (a)(4), and (a)(6), that it did not 5 sufficiently allege its claims so that the Amended Complaint could relate back to it. 6 ECF 7, 8:8 19. Accordingly, he argues the Amended Complaint was untimely, and 7 claims under § 523(a)(2)(A), (a)(4), and (a)(6) should be barred. 8 Federal Rule of Civil Procedure 15(c)(1)(B) permits amendments to a 9 complaint to relate back to the time of filing of the original complaint if the 10 amendment asserts a claim or defense that arose out of the conduct, transaction, or 11 occurrence set out or attempted to be set out in the original pleading[.] It is 12 designed to prevent surprising defendants with new charges they believe are no 13 longer alive because the statute of limitations has run. See Hughes v. Colorado 14 Dep't of Corr., 594 F. Supp. 2d 1226, 1236 (D. Colo. 2009). Relation back is 15 liberally construed so long as there is a factual nexus[.] See id. (quoting 16 Grattan v. Burnett, 710 F.2d 160, 163 (4th Cir. 1983)). The relation back of an 17 amended complaint is reviewed de novo. Slayton v. American Express Co., 460 18 F.3d 215 (2nd Cir. 2006); See Krupski v. Costa Crociere S. p. A., 560 U.S. 538, 19 553 (2010). 20 Federal Rule of Civil Procedure 8(a)(2) requires only a short and plain 21 statement of the claim showing that the pleader is entitled to relief. Hughes, 594 22 F. Supp. 2d at 1236 (citing Erickson v. Pardus, 551 U.S. 89 (2007) (per curiam)). 23 Specific facts are not necessary; the statement need only give the defendant fair 24 notice of what the ... claim is and the grounds upon which it rests. Id. (quoting 25 Erickson, 551 U.S. at 89). This standard is not displaced by the Supreme Court s 26 ruling in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 72. Hughes, 594 F. 27 Supp. 2d at 1236. 28 Roth relies on Walsh Securities Inc. v. Cristo Property, 2008 WL 4792544 4 13-cv-2954 BAS (WVG) 1 (D. N.J. October 31, 2008), amended on another point, 2009 WL 1883988 (D. N.J. 2 June 30, 2009), an unpublished case inapplicable here. Unlike Plikaytis initial 3 complaint, the allegations of fraud in Walsh went unpled in the initial complaint. 4 Here, the court can first look to the causes of action alleged in the original 5 and amended complaints. Roth challenges the causes of action under § 6 523(a)(2)(A), (a)(4), and (a)(6). All three were initially pled. It is also clear the 7 amended causes of action arise from the same factual nexus because they are in 8 fact the same causes of action initially pled based on identical material elements. 9 Moreover, Roth was on notice of the underlying factual basis for the state court s 10 11 judgment because he was a party in the state court litigation. Roth relies on Plikaytis failure to plead specific facts of fraud in her initial 12 complaint as grounds for barring relation back. Relation back is construed 13 liberally, and the doctrine prohibiting it is designed to protect defendants from 14 unfair surprise. The initial complaint did actually and adequately put Roth on 15 notice of the claims. The initial complaint included the state court judgment. While 16 the judgment itself did not include the factual basis or causal relationships 17 necessary to properly state a claim, it limited the scope of relevant facts to those 18 relating to Roth s conduct underlying the state court liability. This put Roth on 19 notice of the claims against him and had a sufficient factual nexus to the assertions 20 in the amended pleadings. Accordingly, the bankruptcy court s decision to permit 21 amendment and relation back of the complaint is affirmed. 22 B. Waiver of Justifiable Reliance Under § 523(a)(2)(A) 23 Roth argues Plikaytis failed to prove she justifiably relied on his promise to 24 convey a 25% interest in RMP to her, which is a required element under § 25 523(a)(2)(A). ECF 7, 13:10 25. 26 Federal Rule of Civil Procedure 16 governs the conduct in pretrial 27 conferences and the substance of pretrial orders in bankruptcy adversary 28 proceedings, placing a substantial responsibility for assisting the court in 5 13-cv-2954 BAS (WVG) 1 identifying the factual issues worthy of trial. Fed R. Civ. P. 16 advisory 2 committee note to 1983 amendment; Fed. R. Bankr. P. 7016. At the pretrial 3 conference, the court may take action on (among other things): formulating and 4 simplifying the issues, and eliminating frivolous claims or defenses ... [and] 5 avoiding unnecessary proof and cumulative evidence ¦. Fed R. Civ. P. 16(c)(2). 6 The purpose of a pretrial conference is to sift the discovered and 7 discoverable facts to determine the triable issues, both factual and legal, and to 8 chart the course of the lawsuit accordingly. Lynch v. Call, 261 F.2d 130, 132 9 (10th Cir.1958) (quoted by MacArthur v. San Juan Cnty., 416 F. Supp. 2d 1098, 10 1112-14 (D. Utah 2005)). At the pretrial conference the parties have an 11 unflagging obligation to spell out squarely and distinctly those claims they desire 12 to advance at the trial proper. Good-faith compliance with Civil Rule 16 plays an 13 important role in this process. Veranda Beach Club Limited Partnership v. 14 Western Surety Co., 936 F.2d 1364, 1371 (1st Cir.1991) (citation omitted). 15 Attorneys at a pre-trial conference must make a full and fair disclosure of 16 their views as to what the real issues of the trial will be. MarkHon Industries, Inc., 17 781 F.2d 613, 617 (7th Cir.1986). [C]ounsel bear a substantial responsibility in 18 formulating the triable issues in that they must identify these issues for the court or 19 they waive the right to have them tried. 3 James W. Moore, et al., Moore's 20 Federal Practice ¶ 16.11, at 16 49 (2d ed. Rev.1994) (footnotes omitted). 21 Roth did not object to Plikaytis evidence until after the evidentiary phase of 22 the trial concluded. Id. at 14:7 9; R. 3024. He does not assert that he identified 23 justifiable reliance as a factual issue worthy of trial, as required under Federal 24 Rule of Civil Procedure 16. In fact, Roth concedes that he raised the issue after all 25 the evidence was heard. ECF 7, 10:15 (citing R. 2694 95, 3024). 26 According to the pretrial order, the state court found Plikaytis relied on 27 [Roth s oral promise to grant Plikaytis a 25% interest in RMP in lieu of retirement 28 benefits] by continuing her employment with Roth s companies [and] not 6 13-cv-2954 BAS (WVG) 1 negotiating for other retirement benefits. Pretrial Order II.A.7. Roth was on notice 2 that if he did not believe this adequately satisfied Plikaytis burden to prove 3 justifiable reliance, he was required to raise it as an issue for trial. He did not 4 challenge that this did not sufficiently prove justifiable reliance until after evidence 5 closed. Accordingly, this issue is waived at trial and on appeal. 6 C. Evidence Supporting Justifiable Reliance 7 8 Even if Roth did not waive his challenge, the bankruptcy court s finding that Plikaytis justifiably relied on Roth s promise was not clearly erroneous. 9 Fraud under § 523(a)(2)(A) requires justifiable, but not reasonable, reliance. 10 Field v. Mans, 516 U.S. 59, 74 75 (1995). Justification is a matter of the qualities 11 and characteristics of the particular plaintiff, and the circumstances of the 12 particular case, rather than of the application of a community standard of conduct 13 to all cases. Field v. Mans, 516 U.S. 59, 71, 116 S. Ct. 437, 444, 133 L. Ed. 2d 14 351 (1995) (quoting Restatement (Second) of Torts § 545A (1977)) (internal 15 quotations omitted). Findings of fact, whether based on oral or other evidence, 16 must not be set aside unless clearly erroneous, and the reviewing court must give 17 due regard to the trial court's opportunity to judge the witnesses' credibility. 18 Fed.R.Civ.P. 52. 19 The bankruptcy court found Plikaytis justifiably relied on Roth s promise by 20 continuing to go to work there and foregoing retirement benefits. R. 3028:22 21 29:4. The close and long-term relationship between Roth and Plikaytis, clearly 22 established in the state court proceeding and undisputed in the bankruptcy 23 proceeding, itself justifies Plikaytis reliance on Roth s promise. In sum, even if 24 the issue was not waived, Roth s argument has no merit. The bankruptcy s finding 25 of justifiable reliance is based on substantial evidence and evinces no clear error. 26 27 28 Accordingly, Roth s liability for fraud under § 523(a)(2)(A) is affirmed. D. Measuring Damages Under § 523(a)(2)(A) Roth argues the measure of damages under § 523(a)(2)(A) for fraudulently 7 13-cv-2954 BAS (WVG) 1 entering into a contract with Plikaytis should be based on her out-of-pocket 2 damages, not on the breach of contract debt. ECF 7, 16:22 17:3 3 A fundamental polic[y] of bankruptcy law is to give a fresh start only to the 4 honest but unfortunate debtor. Accordingly, simple breaches of contract are 5 dischargeable. See In re Riso, 978 F.2d 1151, 1154 (9th Cir. 1992). However, if a 6 debt for an intentional breach of contract is accompanied by a tort, it is excepted 7 from discharge. Id (refusing to discharge a debt for a breach of contract 8 accompanied by willful and tortious conduct). This applies equally to breaches of 9 contract accompanied by fraud under the other subdivisions of § 523. See Banks v. 10 Gill Distribution Centers, Inc., 263 F.3d 862, 868 (9th Cir. 2001). The fraud makes 11 nondischargeable a preexisting obligation, it does not itself create a new obligation. 12 In re Jercich, 238 F.3d 1202, 1205 (9th Cir. 2001). As such, the original breach of 13 contract claim is the correct measure of the amount of the debt excepted from 14 discharge. See Banks, 263 F.3d at 868. 15 The bankruptcy court found Plikaytis proved Roth committed fraud by a 16 preponderance of evidence. The alleged fraud accompanied Roth s breach of 17 contract, as Roth entered the contract fraudulently. Therefore the state court 18 judgment is the correct damage measure because it is the debt resulting from the 19 fraud. The bankruptcy court correctly found the breach of contract damages were 20 precluded from discharge based on Roth s accompanying fraud. Accordingly, the 21 bankruptcy court s ruling that the $2.8 million debt is nondischargeable is 22 affirmed. 23 E. Roth s § 523(a)(4) Debt 24 Roth challenges the bankruptcy court s finding that Plikaytis state court 25 judgment of $57,000 was not dischargeable under § 523(a)(4). ECF 7, 22:19 24. 26 He argues that because the bankruptcy court cannot definitively point to the jury s 27 basis for its judgment, the bankruptcy court s finding was in error. Roth s position 28 is that Plikaytis was not entitled to try any and all possible defalcation claims on 8 13-cv-2954 BAS (WVG) 1 her pleadings[.] Id. at 24:6 8. 2 Roth further argues Plikaytis failed to show fiduciary capacity within the 3 meaning of § 523(a)(4), and that any exceptions from discharge based on that 4 section should be reversed. ECF 7, 28:1 4. He argues an LLC does not create an 5 express trust (see ECF 7, 28:8 16) and the court incorrectly conflated state law 6 fiduciary duties with fiduciary capacity (id. at 28:1 2). 7 Section 523(a)(4) makes a debt nondischargeable where 1) an express trust 8 existed, 2) the debt was caused by fraud or defalcation, and 3) the debtor acted as a 9 fiduciary to the creditor at the time the debt was created. Klingman v. Levinson, 10 831 F.2d 1292, 1295 (7th Cir.1987). 11 Section 523(a)(4) excepts from discharge debts for fraud or defalcation 12 while acting in a fiduciary capacity[.] Fiduciary capacity is defined based on 13 federal law, which requires the debtor must have been a trustee before the 14 wrong and without reference to it. Ragsdale v. Haller, 780 F.2d 794, 796 (1986) 15 (citing Davis v. Aetna Acceptance Co., 293 U.S. 328, 333 (1934)). However, the 16 existence of an express trust is defined based on state law. See id. Ragsdale 17 clarified that under California law, partners have fiduciary capacity. Id. at 795 97. 18 In 2009, the then-operative California law stated, The fiduciary duties a manager 19 owes to the limited liability company and to its members are those of a partner to a 20 partnership and to the partners of the partnership. Cal. Corp. Code § 17153 21 (repealed January 1, 2014). Therefore under California law, managers of a limited 22 liability company are fiduciaries for purposes of § 523(a)(4).2 See In re Flores, 11- 23 33156 HLB, 2013 WL 6038978 (Bankr. N.D. Cal. Nov. 13, 2013); In re Hanson, 24 09-13200-B-7, 2010 WL 9477473 (Bankr. E.D. Cal. June 25, 2010). Roth managed Talmadge East, LLC, and Plikaytis was a member. R. 25 26 27 28 2 California Corporations Code § 17704.09 superseded § 17153 after the state court judgment was imposed. It more expressly defines the fiduciary duties members owe to a limited liability company and therefore may limit the fiduciary capacity of an LLC. 9 13-cv-2954 BAS (WVG) 1 2471:3 19. Thus an express trust existed, satisfying the first prong. As manager of 2 the LLC, Roth had fiduciary capacity, satisfying the third prong. The Court then 3 turns to whether the debt was caused by fraud or defalcation: prong three. 4 Defalcation incorporates both an act of defalcation and wrongful intent.3 In 5 re Moore, 12-10802-A-7, 2014 WL 3570600 (Bankr. E.D. Cal. July 18, 2014). 6 Creditors satisfy their burden to prove a defalcation by establishing that their 7 debtor is a fiduciary to whom funds had been entrusted. In re Niles, 106 F.3d 8 1456, 1462 (9th Cir. 1997) abrogated on other grounds, Bullock v. 9 BankChampaign, N.A., 133 S. Ct. 1754 (2013). Thereafter, the burden shifts to the 10 fiduciary to account fully for all funds received [for the creditor s benefit] by 11 persuading the trier of fact that [the fiduciary] complied with [the] fiduciary duties 12 with respect to all questioned transactions. Id. Under the [b]asic principles of the 13 law of fiduciaries[,] the burden to render an accounting [is] on the fiduciary once 14 the principal has shown that funds have been entrusted to the fiduciary and not 15 paid over or otherwise accounted for. Id. Imposing such a burden is consistent 16 with incentivizing the fiduciaries to perform their duties faithfully and with care. 17 Id. Every presumption of fact is against the fiduciary. In re Niles, 106 F.3d at 18 1462 (quoting Landis v. Scott, 32 Pa. (8 Casey) 495 (Pa. 1859)). On appeal, Roth claims he was unable to meet his burden because Plikaytis 19 20 21 22 23 24 25 26 27 28 3 Wrongful intent requires the debtor to be culpable and involves knowledge of, or gross recklessness in respect to, the improper nature of the relevant fiduciary behavior. Bullock, 133 S.Ct. at 1757. Roth does not challenge wrongful intent on appeal, and the bankruptcy court found wrongful intent. R. 3034:11 13 ( Mr. Roth had the intention of injuring Ms. Plikaytis and at least knowledge that he knew his actions, as a sophisticated real estate investor, were going to injure her. ) This satisfied Plikaytis only burden, as an act of defalcation was necessarily decided in the state court proceeding. See In re Maxwell, 509 B.R. 286, 290 92 (Bankr. E.D. Cal. 2014). Because the bankruptcy court found the necessary wrongful intent at trial, the state court found an act of defalcation, and a manager of an LLC has fiduciary capacity, all elements of a § 523(a)(4) claim were satisfied. See R. 3032:17 34:19. The act of defalcation was found in the state court, and therefore it was not time-barred. This is an independent basis for affirming the resulting finding of nondischargeability. 10 13-cv-2954 BAS (WVG) 1 did not respond to his discovery requests. ECF 7, 24:13 18. He also complains that 2 the bankruptcy court found his expenditure of attorneys fees to combat Plikaytis 3 suit a defalcation without citing legal precedent. Id.at 25:7 12. However, 4 evidence of what funds were received by the fiduciary and how they were applied 5 is likely to be more accessible to the fiduciary than to the principal. In re Niles, 6 106 F.3d at 1462. There is thus no prejudice because Plikaytis declined to respond 7 to his requests. Further, it was Roth s duty to show that the expenditure of 8 attorneys fees was undertaken with the utmost good faith toward the principal.... 9 Batson v. Strehlow, 68 Cal.2d 662, 68 Cal.Rptr. 589, 598, 441 P.2d 101, 110 10 (1968) (cited by In re Niles, 106 F.3d at 1461 as consistent with common law 11 generally ). Roth failed to do so. 12 The state court jury found Roth breached his fiduciary duty in the 13 management and/or conducting of the business of Talmadge East, LLC and 14 awarded $57,000 in damages. Jury Verdict, R. 142. The bankruptcy court found a 15 wrongful defalcation based on Roth s mismanagement of Talmadge East, LLC 16 during 2009, which falls within the scope of the pleadings, thus finding the 17 $57,000 nondischargeable. R. 3036:21 38:1. Any evidence outside the state court 18 trial was excluded, except as it related to wrongful intent. R. 2287 88, 2318 20. 19 It was Roth s duty to present rebuttal evidence showing the defalcations 20 were outside the scope of the pleadings. Roth cites no legal precedent supporting 21 his belief that it was Plikaytis burden to show that what she presented at the 22 bankruptcy trial was within the scope [of the pleadings]. Appellant s Reply Br., 23 ECF 36, 13:17 18. 24 Accordingly, the bankruptcy court s exception from discharge of the 25 $57,000 debt under § 523(a)(4) is affirmed. 26 F. The Weight of Roth s Proffered Evidence 27 Roth argues the bankruptcy court should have given more weight to his 28 proffered evidence that Roth and his related parties loaned money to Talmadge 11 13-cv-2954 BAS (WVG) 1 East, LLC in 2008 2009. ECF 7, 26:13 19. The bankruptcy court disregarded the 2 evidence because it was presented by Roth and wasn t clear enough to properly 3 calculate. R. 3046 47; ECF 7, 26:17 19. The bankruptcy court found Plikaytis 4 more credible than Roth. R. 3026. 5 Findings of fact, whether based on oral or other evidence, must not be set 6 aside unless clearly erroneous, and the reviewing court must give due regard to the 7 trial court's opportunity to judge the witnesses' credibility. Fed.R.Civ.P. 52. 8 Credibility determinations receive heightened deference because of the fact 9 finder's unique opportunity to observe the demeanor of the witnesses. Valenzuela 10 v. Michel, 736 F.3d 1173, 1176-77 (9th Cir. 2013) (quoting Newton v. National 11 Broadcasting Co., Inc., 930 F.2d 662, 671 (9th Cir.1990)). A finding of clear 12 error requires a definite and firm conviction that a mistake has been committed. 13 Valenzuela v. Michel, 736 F.3d at 1176 77. (quoting Gonzalez Caballero v. Mena, 14 251 F.3d 789, 792 (9th Cir.2001)). 15 Here, the bankruptcy court could disregard any evidence presented by Roth 16 if it found Roth incredible. In fact, the court made a credibility statement on the 17 record, finding Ms. Plikaytis was more credible. The court could disregard 18 evidence presented by Roth it deemed untrustworthy. There is no evidence of 19 abuse of discretion or clear error. Accordingly, the bankruptcy court s decision to 20 disregard Roth s proffered evidence of other payments to Talmadge East, LLC is 21 affirmed. 22 G. Intentional Infliction of Emotional Distress 23 Roth argues that the state court judgment for intentional infliction of 24 emotional distress should have been allocated among the dischargeable and 25 nondischargeable debts. ECF 7, 29:5 18. 26 To establish a claim for intentional infliction of emotional distress, a 27 plaintiff must prove (1) extreme and outrageous conduct by the defendant with the 28 intention of causing, or reckless disregard of the probability of causing, emotional 12 13-cv-2954 BAS (WVG) 1 distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) 2 actual and proximate causation of the emotional distress by the defendant's 3 outrageous conduct. Doe v. Gangland Prods., Inc., 730 F.3d 946, 960 (9th Cir. 4 2013) (quoting Davidson v. City of Westminster, 32 Cal.3d 197, 209 (1982)) 5 (internal quotation marks and citations omitted). To except a debt from discharge 6 under § 523(a)(6), the debt must be incurred based on willful and malicious 7 injuries. Both willfulness and maliciousness must be supported by substantial 8 evidence. See In re Barboza, 545 F.3d 702, 711 12 (9th Cir. 2008). Bankruptcy 9 courts have found based exclusively on issue preclusion that a debt incurred from 10 intention infliction of emotional distress is not dischargeable. See In re Elder, 262 11 B.R. 799, 807 (C.D. Cal. 2001) aff'd, 40 F. App'x 576 (9th Cir. 2002); In re Davis, 12 486 B.R. 182, 190 (Bankr. N.D. Cal. 2013) decision supplemented, 10-74245 13 MEH, 2013 WL 2304684 (Bankr. N.D. Cal. May 24, 2013). 14 Intentional infliction of emotional distress is an independent cause of action 15 and does not rely on an allocation of damages between dischargeable and 16 nondischargeable debts. The jury found Roth liable for intentional infliction of 17 emotional distress, and the bankruptcy court found [i]t was supported by an intent 18 to inflict emotional distress of the proper, non-dischargeable nature required to find 19 a claim under 523(a)(6). R. 3038:7 10. Roth does not challenge evidence did not 20 support these findings. Accordingly, the nondischargeability of the debt for 21 intentional infliction of emotional distress is affirmed. CONCLUSION 22 23 After reviewing the bankruptcy court s legal conclusions de novo and its 24 factual findings for clear errors, the Court AFFIRMS the bankruptcy court. This 25 Opinion terminates the instant action. The Clerk shall close the file and terminate 26 all pending matters. 27 28 AFFIRMED. 13 13-cv-2954 BAS (WVG) 1 2 DATED: September 5, 2014 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 13-cv-2954 BAS (WVG)
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