Barry et al v. Bishop

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re:
BRENNON TY BISHOP
and MICHELLE BISHOP,
Debtors.
Case No. 2:12-bk-16000-RK
Chapter 7
Adv. No. 2:12-ap-01300-RK
ELECTRONIC FUNDS SOLUTIONS, LLC,
and MICHAEL BARRY,
Plaintiffs,
v.
TY BRENNON BISHOP,
Defendant.
MEMORANDUM DECISION ON
PLAINTIFFS’ MOTION FOR SUMMARY
JUDGMENT, OR IN THE ALTERNATIVE,
SUMMARY ADJUDICATION OF ISSUES
On February 24, 2003, Electronic Funds Solutions, LLC (“EFS”) and Michael Barry
(“Barry”) (collectively, the “Plaintiffs”), commenced this adversary proceeding by filing a
complaint seeking a determination of dischargeability of debt pursuant to 11 U.S.C
§ 523(a)(4) and (6). The defendant in this adversary proceeding is debtor Ty Brennon
Bishop (“Defendant”).
FILED & ENTERED
SEP 25 2013
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	tatum
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On April 25, 2003, Defendant filed and served a motion to dismiss the complaint or
for more definite statement. By order entered on June 10, 2003, the court granted the
motion to dismiss with 20 days leave to amend. On June 17, 2003, Plaintiffs filed and
served their first amended complaint. The first amended complaint in this adversary
action alleged the following causes of action: (1) fraudulent breach of fiduciary duty under
11 U.S.C § 523(a)(4); (2) conversion under 11 U.S.C. § 523(a)(6); (3) intentional
interference with economic relations under 11 U.S.C. § 523(a)(6); (4) intentional
interference with prospective economic relations under 11 U.S.C. § 523(a)(6);
(5) misappropriation of trade secrets under 11 U.S.C. § 523(a)(6); (6) unfair competition
and untrue and misleading advertising under 11 U.S.C. § 523(a)(6); and (7) trespass as
to real and personal property under 11 U.S.C. § 523(a)(6). Plaintiffs also requested post-
judgment interest.
On July 9, 2003, Defendant filed and served a motion to dismiss the first amended
complaint or for more definite statement. By order entered on September 10, 2003, the
court granted in part and denied in part the motion to dismiss or for more definite
statement by dismissing the first cause of action with prejudice as to both Plaintiffs,
dismissing Plaintiff Barry from the remaining causes of action with prejudice, and denying
the motion as to Plaintiff EFS as to the remaining causes of action and ordering
Defendant to answer the first amended complaint. On September 17, 2003, Defendant
filed and served an answer to the first amended complaint. Because the court dismissed
Plaintiff Barry from all the causes of action of the first amended complaint with prejudice,
technically speaking, the only proper party plaintiff is EFS.
Plaintiffs filed a motion for summary judgment, or in the alternative summary
adjudication of issues, on January 4, 2010 (the “Motion”).1 Plaintiffs also submitted a
1 The Motion was originally noticed for hearing on February 9, 2009, which was for an incorrect year. Motion at 1.
Subsequent notices of hearing had the correct date and year. The Motion states that the movants are both Plaintiffs,
but due to the court’s ruling on the motion to dismiss the first amended complaint and/or for more definite statement,
the only proper party plaintiff is EFS.
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request for judicial notice in support of the Motion on January 4, 2010. Specifically, in the
Motion, Plaintiffs contend that there is no genuine issue of material fact the subject debt
owed by Defendant to them is non-dischargeable under 11 U.S.C. § 523(a)(6). Plaintiffs
argue that the state court judgment, and the uncontested proof of claim, are preclusive on
the issue of whether the debt for “willful and malicious injury” acts by Defendant is within
the meaning of § 523(a)(6). The Motion came on for hearing before the undersigned
United States Bankruptcy Judge on May 6, 2010 and January 5, 2011. The court
permitted Plaintiffs to submit supplemental briefing, and they filed a supplemental brief on
July 15, 2010. In the supplemental brief, Plaintiffs argue that California law makes the
state court default judgment preclusive as to whether the debt was for “willful and
malicious” injury under 11 U.S.C. § 523(a)(6). Plaintiffs alternatively argue that the
evidence in support of the motion establishes that the debt is non-dischargeable under
§ 523(a)(4) through the res judicata effect of the unobjected-to proof of claim. However,
as discussed earlier, only EFS is the proper party plaintiff which may properly bring the
motion for summary judgment.
Having considered the moving papers and supplemental brief, the court concludes
the Motion should be granted under 11 U.S.C. § 523(a)(6) for the reasons stated herein
as well as for lack of timely written opposition.2 Fed. R. Bankr. P. 7056; Fed. R. Civ. P.
56; Local Bankruptcy Rule 9013-1(h).
DISCUSSION
A party is entitled to summary judgment when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any,
2 Defendant appeared by filing and serving an answer in this adversary proceeding. The certificate of service of the
notice of motion and motion for summary judgment or summary adjudication of issues shows that Plaintiffs served
Defendant through his counsel of record, R. Gibson Pagter, Jr., on December 30, 2009. On January 26, 2010,
Defendant filed a substitution of attorney substituting himself for Mr. Pagter as attorney of record in this adversary
proceeding. Although Defendant has been served with copies of the moving papers, he has not filed any opposition to
the Motion before the hearing on May 6, 2010 and January 5, 2011. Defendant’s failure to timely file and serve an
opposition to the Motion may be deemed by the court to be consent to the granting of the motion. Local Bankruptcy
Rule 9013-1(h).
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show that there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.” Fed, R. Civ. P. 56(c); Fed. R. Bankr. P. 7056. A
fact is “material” if it might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A dispute over such facts is “genuine” if the evidence is such
that a reasonable trier of fact could find in favor of the nonmoving party. Id. Thus, to the
extent that there is a “mixed question of fact and law and the only disputes relate to the
legal significance of undisputed facts, the controversy collapses into a question of law
suitable to a disposition on summary judgment.” Thrifty Oil Co. v. Bank of Am. Nat’l Trust
& Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2002).
The moving party must show from the record that there is an absence of evidence
to support the non-moving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325
(1986). In determining whether genuine issues of material fact exist, the evidence must
be viewed in the light most favorable to the non-moving party. Tarin v. County of Los
Angeles, 123 F.3d 1259, 1263 (9th Cir. 1997). Once the moving party has demonstrated
that no genuine issue of material fact exists, the nonmoving party “must go beyond the
pleadings and . . . designate specific facts showing that there is a genuine issue for trial.”
Celotex, 477 U.S. at 324.
An individual debtor may not discharge a debt to the extent that such debt was
obtained “for willful and malicious injury by the debtor to another” or “to the property of
another.” 11 U.S.C. § 523(a)(6). Plaintiff EFS as the remaining plaintiff which seeks a
determination that the debt is excepted from discharge under 11 U.S.C. § 523(a) bears
the burden of proving its claims by a preponderance of the evidence. Grogan v. Garner,
498 U.S. 279, 289 (1991).
An injury is “willful” “when it is shown that either the debtor had a subjective motive
to inflict injury or that the debtor believed that injury was substantially certain to occur as
a result of his conduct.” Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1208 (9th Cir.
2001). “Willful” intent does not require that the debtor have had the specific intent to
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injure the creditor, if the act was intentional and the debtor knew that it would necessarily
cause injury. Id. at 1207. “Willful” means “voluntary” or “intentional,” Kawaahau v.
Geiger, 523 U.S. 56, 61 n.3 (1998), and so recklessness or negligence is insufficient; the
debtor must not only have acted willfully, but also inflicted the injury willfully. 523 U.S. 56,
61-62 (1998) (citing Restatement (Second) of Torts, § 8A, cmt. A (1964)). This standard
focuses on the debtor’s subjective intent, and not “whether an objective, reasonable
person would have known that the actions in question were substantially certain to injure
the creditor.” Carrillo v. Su (In re Su), 290 F.3d 1140, 1145-1146 (9th Cir. 2002).
The “malicious” injury requirement is separate from the “willful” requirement. In re
Su, 290 F.3d at 1146. An injury is “malicious” if it involves “(1) a wrongful act, (2) done
intentionally, (3) which necessarily causes injury, and (4) is done without just cause or
excuse.” In re Jercich, 238 F.3d at 1209 (citing Kawaahau v. Geiger, 523 U.S. 57
(1998)). This definition “does not require a showing of biblical malice, i.e., personal
hatred, spite, or ill-will.” Murray v. Bammer (In re Bammer), 131 F.3d 788, 791 (9th Cir.
1997). The intent required is the intent to do the act at issue, not the intent to injure the
victim. Id.
The doctrine of collateral estoppel applies in non-dischargeability proceedings in
bankruptcy courts. Grogan v. Garner, 498 U.S. at 284 and n. 11. “In determining the
collateral estoppel effect of a state court judgment, federal courts must, as a matter of full
faith and credit, apply that state’s law of collateral estoppel.” Bugna v. McArthur (In re
Bugna), 33 F.3d 1054, 1057 (9th Cir. 1994) (citing 28 U.S.C. § 1738). Bankruptcy courts
must, therefore, give the same preclusive effect to a state court judgment that it would
receive in the courts of that state. Gayden v. Nourbakhsh (In re Nourbakhsh), 67 F.3d
798, 800-802 (9th Cir. 1995).
Under California law, there are five threshold requirements: (1) the issue sought to
be precluded from relitigation must be identical to that decided in a former proceeding; (2)
this issue must have been actually litigated in the former proceeding; (3) it must have
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been necessarily decided in the former proceeding; (4) the decision in the former
proceeding must be final and on the merits; (5) the party against whom preclusion is
sought must be the same as, or in privity with, the party to the former proceeding. In re
Harmon, 250 F.3d 1240, 1245 (9th Cir. 2001) (citing Lucido v. Superior Court, 51 Cal. 3d
335, 795 P.2d 1223, 1225 (1990)).
As discussed herein, the court determines that Plaintiff EFS has met its ultimate
burden of persuasion on the motion for summary judgment to show that there are no
genuine issues of material fact arising from their claim under 11 U.S.C. § 523(a)(6) and
that it is entitled to judgment as a matter of law under 11 U.S.C. § 523(a)(6) on the
second through seventh causes of action of the first amended complaint.
ANALYSIS
1. The State Court Default Judgment Has Preclusive Effect as to whether the Debt
to the Plaintiffs was “Willful and Malicious” under 11 U.S.C. § 523(a)(6).
A. The Issues Are Identical
In its final judgment modified post-remittur on or about September 21, 2009, the
Superior Court of California, County of Orange (the “state court”) held in a civil action
brought by EFS and Barry against Defendant and others that the Defendant’s acts in
converting and misappropriating the business and assets of EFS constituted tortious acts,
establishing the elements of various tort claims alleged in the first amended complaint
filed in that action, including conversion, intentional interference with economic relations,
intentional interference with prospective economic relations, misappropriation of trade
secrets, unfair and untrue and misleading advertising, trespass as to real and personal
property and money had and received. Exhibit K to Request for Judicial Notice, filed on
January 4, 2010 (Judgment, Electronic Funds Solutions, LLC, et al. v. Michael Murphy, et
al., No. 01CVC02447 (Superior Court of California, County of Orange, judgment modified
post-remittur dated September 21, 2009)); see also, Exhibit F to Request for Judicial
Notice (First Amended Complaint, Electronic Funds Solutions, LLC, et al. v. Michael
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Murphy, et al., No. 01CVC02447 (Superior Court of California, County of Orange, dated
May 3, 2006)). The state court judgment was entered on default after remand after a
second appeal before the California Court of Appeal in the state court case. See Exhibit J
to Request for Judicial Notice (Opinion of California Court of Appeal, Electronic Funds
Solutions, LLC, et al. v. Michael Murphy, et al., No. G040161 (California Court of Appeal,
Fourth Appellate District, Third Division, unpublished opinion, filed on or about June 19,
2009)).
The state court also specifically held that the Defendant, Michael Murphy and
Electronic Payment Technologies, LLC (“EPT”) engaged in a conspiracy and committed
those acts “wilfully, wantonly, fraudulently, maliciously, and with callous disregard and
indifference to the rights of EFS and BARRY” (emphasis added). Exhibit K to Request for
Judicial Notice. The state court’s specific holding on conspiracy and willfulness and
malice is stated as follows:
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that MURPHY,
BISHOP, and EPT engaged in a conspiracy to take the business of EFS, including
all of its assets, prospective clientele, clientele, documents, facility, supplier and
other contracts, trade secrets, and methods of operation (the Court finds that
MURPHY, BISHOP and EPT are responsible for the acts of one another by reason
of the conspiracy and the relationships between them), BARRY became the sole
member of EFS as of January 15, 2002 providing him with an economic interest in
EFS and its pass through cash flow, and that said Defendants, and each of them,
pursuant to said conspiracy, willfully, wantonly, fraudulently, maliciously, and with
callous disregard and indifference to the rights of EFS and BARRY, engaged in
acts of unfair competition (including, but not limited to, unfair, false and misleading
advertising by causing members of the public, including EFS’ clients and
prospective clients, to believe that EPT was EFS operating under a different name
and/or that BARRY had consented to EPT’s solicitation of, and entry of contracts
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with, EFS’ clients, prospective clients, service providers, and marketing
contractors, the conversion of the assets of the business of EFS and the exclusion
of EFS from its own property, including its office, business records, phone lines,
website, and mail, the wilful and malicious misappropriation of EFS’ trade secrets
for their own gain and benefit, the improper use of EFS’ name for their own gain,
and the misappropriation of EFS’ mail and website, misappropriation of funds
belonging to EFS, and misappropriation of email of BARRY), intentional
interference with the economic relations and prospective economic relations of
EFS, trespass as to real property (leasehold) and personal property of EFS, and
wilful and malicious appropriation of EFS’ trade secrets, . . . .
Exhibit K to Request for Judicial Notice at 2-3. The court awarded damages to Plaintiffs
on the conversion claim of $72,193.14 together with prejudgment interest of $50,535.20
against Defendant and others. Id. The court also awarded to Plaintiffs damages of $10
million on the tort claims against Defendant and the other parties determined to be his co-
conspirators, Bishop and EPT, plus prejudgment interest of $7 million. Id. The court also
awarded to Plaintiffs attorneys’ fees in the amount of $224,675.97 on their claim for
conversion pursuant to California Business & Professions Code, § 17082 and California
Civil Code, § 3426.4. These liabilities were upheld on appeal. Exhibit J to Request for
Judicial Notice. However, Plaintiffs’ award of $50 million in punitive damages was
reversed on appeal for failure of Plaintiffs to offer evidence of the net worth of the
defendants. Id.
Because the common, accepted definitions of “willful” and “malicious” are roughly
synonymous with the federal requirements of 11 U.S.C. § 523(a)(6), the court concludes
that the issues are identical. See Kawaauhau v. Geiger, 523 U.S. at 61-62 (defining
“willful” as synonymous with the Restatement definition of the intent required for an
intentional tort and with the Black’s Law Dictionary definition of “willful” as “voluntary and
intentional”); Garner ed., Black’s Law Dictionary at 857 (9th ed. 2009) (defining, “willful
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and malicious injury” as, “damage to another entity (such as a creditor) caused by a
debtor intentionally performing a wrongful act – without just cause or excuse – that the
debtor knew was certain or substantially certain to cause injury”). Furthermore, this court
has found that a state court’s specific finding that an intentional tort was committed with
“willful” intent is preclusive in determining whether a debt arose from “willful” injury under
§ 523(a)(6); see also, In re Hibbs, 161 B.R. 259, 261-262 (Bankr. C.D. Cal. 1993)
(granting summary judgment to the plaintiff in non-dischargeability proceeding based on a
state court jury’s special verdict finding that a debtor’s infringement of the plaintiff’s
copyright was “willful”).
The state court in its default judgment made it clear that it was holding that
Defendant’s acts were wrongful, done intentionally, necessarily causing injury and without
just cause or excuse, which reflect the elements for malice under 11 U.S.C. § 523(a)(6)
when it held that Defendant conspired to convert and misappropriate the assets of EFS
and Barry, including trade secrets, trade name, funds, mail, website and email, and real
and personal property. Exhibit K to Request for Judicial Notice; see also, In re Jercich,
238 F.3d at 1209 (citation omitted).
B. The Issues of “Willfulness” and “Malice” Were Actually Litigated
In California, a default judgment satisfies the “actually litigated” requirement for the
application of collateral estoppel. Younie v. Gonya (In re Younie), 211 B.R. 367, 375 (9th
Cir. BAP 1997). In Younie, the court stated:
In California, it is well settled that a default judgment is: conclusive to the issues
tendered by the complaint as if it had been rendered after answer filed and trial
had on the allegations denied by the answer.... Such a judgment is res judicata as
to all issues aptly pleaded in the complaint and defendant is estopped from
denying in a subsequent action any allegations contained in the former complaint.
Id. (citing In re Moore, 186 B.R. 962, 971 (Bankr. N.D. Cal. 1995)) (quoting Fitzgerald v.
Herzer, 177 P.2d 364, 366 (1947)). Thus, all issues raised in the Plaintiffs’ state court
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complaint are deemed, by the default judgment, therefore, to have been “actually
litigated” for purposes of collateral estoppel. Id. After the default prove-up hearing at
which the Plaintiffs submitted evidence in the state court action, the state court
specifically held the Defendants:
engaged in a conspiracy to convert the business of EFS . . . [and] . . . pursuant to
said conspiracy, wilfully, wantonly, fraudulently, maliciously, and with callous
disregard and indifference to the rights of EFS and BARRY, engaged in acts in
breach of the fiduciary duties owed by MURPHY to EFS and BARRY, acts of unfair
competition, intentional interference with the economic relations and the
prospective economic relations of EFS, trespass as to real property (leasehold)
and personal property of EFS, and wilful and malicious misappropriation of EFS’
trade secrets . . . .
Exhibit K to Request for Judicial Notice (emphasis added); see also, Exhibit H to Request
for Judicial Notice (Request for Default Judgment by the Court; Declarations of Michael
Barry and Einar Wm. Johnson, Electronic Funds Solutions, LLC, et al. v. Michael Murphy,
et al., No. 01CVC02447 (Superior Court of California, County of Orange, dated February
21, 2008). Thus, the issues of “willfulness” and “malice” were actually litigated in
determining Defendant’s intent with respect to the intentional torts of conversion,
misappropriation and intentional infliction with actual and prospective economic relations
in the default prove-up in the state court action. Id.
C. The Issues Were Necessarily Decided
An issue is necessarily determined in a default judgment only if it appears upon the
face of the judgment to have been so decided, or, if not expressly mentioned in the
judgment, if determined by necessary implication from the judgment. In re Younie, 211
B.R. at 374, citing, California Civil Code, § 1911 (West 1983)(“That is only deemed to
have been adjudged in a former judgment which appears on its face to have been so
adjudged, or which was actually and necessarily included therein or necessary thereto.”).
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In Younie, the BAP held that the issue of fraud was “necessarily determined” in state
court, because the factual findings in the default judgment specifically related to the fraud
cause of action in the complaint, and not to the breach of contract claim. Id. at 374.
The court determines that the issues of “willfulness” and “malice” were necessarily
determined because they appear upon the face of the judgment to have been so decided
in the determination of intent. Exhibit K to Request for Judicial Notice; see also, In re
Younie, 211 B.R. at 374, citing, California Civil Code, § 1911. As noted previously, the
state court specifically held in its judgment that the Defendants engaged in acts that were.
. . willfully, wantonly, fraudulently, maliciously, and with callous disregard and indifference
to the rights of EFS and BARRY, and this holding supported a finding of intent in
determining Defendant’s liability to Plaintiffs for various intentional torts, including
conversion and misappropriation of their assets. Id. (emphasis added). Thus, the issues
were necessarily decided.
D. The Default Judgment Was On the Merits
The judgment was appealed twice. Both times, the Court of Appeal did not disturb
the state court’s findings that the Defendant’s conduct was “willful” and “malicious” with
respect to liability for various intentional torts, reversing only because some of the
compensatory and punitive damages awards were incorrectly calculated and/or were not
allowable, and otherwise affirming the state court’s judgment as to the Defendant’s
liability for other compensatory damages for intentional torts. Exhibits J and K to Request
for Judicial Notice. The state court judgment is now final and is on the merits.
E. The Parties Are the Same Parties
The parties are the same parties as in the underlying state court action, i.e., EFS
and Barry were the plaintiffs in the state court action and in this adversary proceeding,
and Murphy was a defendant in the state court action and in this adversary proceeding.
Thus, Plaintiff EFS has established a prima facie case that the elements of
collateral estoppel or issue preclusion are met, and the court determines that the state
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court default judgment has preclusive effect as to whether the debt was for “willful and
malicious” injury by Defendant to Plaintiff EFS under 11 U.S.C. § 523(a)(6). As reflected
in the state court judgment, Plaintiffs had valid claims against Defendant for conversion,
intentional interference with economic relations, intentional interference with prospective
economic relations, misappropriation of trade secrets, unfair and untrue and misleading
advertising, trespass as to real and personal property, which support the Motion as to the
second through seventh causes of action in the first amended complaint in this adversary
proceeding.
2. There Is No Genuine Issue of Material Fact as to whether the Debt to the
Plaintiffs Is Non-dischargeable under 11 U.S.C. § 523(a)(6).
Because Plaintiff EFS has established a prima facie case with respect to the
second through seventh causes of action of the first amended complaint based on the
preclusive effect of the state court judgment that the debt was for willful and malicious
injury by Defendant to Plaintiff EFS, the burden shifts to Defendant to come forward with
evidence to show that there is a genuine issue of material fact for trial.
Defendant, however, has submitted no evidence in response to the Motion or
otherwise opposed it. In Hibbs, this court granted summary adjudication that the debt
arose from “willful” injury because, “[e]ven without the application of collateral estoppel,
[the debtor] has submitted no evidence to show that he did not intend to do the acts,” and,
therefore, “he has not shown the existence of a genuine dispute.” In re Hibbs, 161 B.R. at
267. As in Hibbs, Defendant has not shown any evidence that his acts were not “willful
and malicious.” Thus, Defendant has not met his burden in showing the existence of a
genuine issue of fact in response to Plaintiffs’ motion for summary judgment.
Based on the foregoing, the state court judgment has preclusive effect as to
whether the debt to Plaintiff EFS was for “willful and malicious injury” under 11 U.S.C.
§ 523(a)(6). Plaintiff EFS met its burden of showing that no genuine issue of material fact
exists. The burden then shifted to the Defendant to come forward with evidence to show
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that there is a genuine issue of material fact. Defendant has submitted no evidence in
response to the Motion. Therefore, even without the application of collateral estoppel,
Defendant has not met his burden in showing the existence of a genuine issue of fact.
In showing that the debt was for willful and malicious injury by Defendant by
uncontroverted evidence, Plaintiff EFS has also shown that it is entitled to judgment as a
matter of law that the debt owed by Defendant to it based on the state court judgment
should be excepted from discharge under 11 U.S.C. § 523(a)(6), and therefore, Plaintiff
EFS is entitled to summary judgment under that statute.
3. Plaintiff EFS Is Not Entitled to Summary Judgment Because the Only Claim
under 11 U.S.C. § 523(a)(4) Was Previously Dismissed and the Unobjected-to Proof
of Claim Does Not Have Preclusive Effect under 11 U.S.C. § 523(a)(4).
Plaintiff EFS alternatively argues that the evidence in support of the Motion
establishes that the debt is non-dischargeable under 11 U.S.C. § 523(a)(4).
Supplemental Brief, filed on July 15, 2010, at 15-16. Specifically, Plaintiff EFS argues
the requirements of a claim under § 523(a)(4) are satisfied through the res judicata effect
of the unobjected-to proof of claim. Id., citing Siegal v. Federal Home Loan Mortgage
Corp., 143 F.3d 525 (9th Cir. 1998). The proof of claim is based on the state court default
judgment discussed above, and as acknowledged by Plaintiffs, the state court judgment
was partially reversed on appeal as to their claim against Defendant and others for
breach of fiduciary duty, which is alleged to be the basis of the claim under 11 U.S.C. §
523(a)(4).
The claim under 11 U.S.C. § 523(a)(4) should be denied. First, it should be denied
because the only claim in the first amended complaint under 11 U.S.C. § 523(a)(4) was
dismissed by prior order of the court. Second, the claim should be denied because
Plaintiff EFS cannot establish collateral estoppel against Defendant under § 523(a)(4) for
breach of fiduciary duty based on the unobjected-to proof of claim as it is based on the
state court default judgment which does not incorporate a valid and final judgment as to a
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claim for breach of fiduciary duty. . . . In re Harmon, 250 F.3d at 1245 (citation omitted).
Thus, Plaintiff EFS has not met its burden of persuasion on summary judgment as to the
claim under § 523(a)(4), and the Motion is denied as to this claim.
CONCLUSION
Accordingly, the court determines that the state court default judgment in favor of
Plaintiffs against Defendant is entitled to preclusive effect, and Plaintiff EFS has met its
ultimate burden of persuasion on summary judgment to show that there are no genuine
issues of material fact arising from its claims under 11 U.S.C. § 523(a)(6) and that
Plaintiff EFS is entitled to judgment as a matter of law as to the claims under 11 U.S.C.
§ 523(a)(6).
The Motion is granted as to the claims under 11 U.S.C. § 523(a)(6) on the second
through seventh causes of action of the first amended complaint as discussed herein, but
is otherwise denied on all other claims.
Plaintiff EFS is ordered to submit a proposed judgment consistent with this
memorandum decision within 30 days of entry of this decision.
IT IS SO ORDERED.
###
Date: September 25, 2013
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central
District of California
January 2009 F 9021.1
NOTICE OF ENTERED ORDER AND SERVICE LIST
Notice is given by the court that a judgment or order entitled (specify): MEMORANDUM DECISION
ON PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE,
SUMMARY ADJUDICATION OF ISSUES was entered on the date indicated as “Entered” on the
first page of this judgment or order and will be served in the manner stated below:
1. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to
controlling General Orders and LBRs, the foregoing document was served on the following persons
by the court via NEF and hyperlink to the judgment or order. As of (date) 9/25/13, the following
persons are currently on the Electronic Mail Notice List for this bankruptcy case or adversary
proceeding to receive NEF transmission at the email addresses stated below.
David R Haberbush dhaberbush@lbinsolvency.com,
ahaberbush@lbinsolvency.com,julrich@lbinsolvency.com,abostic@lbinsolvency.com
Richard A Marshack (TR) pkraus@marshackhays.com,
rmarshack@ecf.epiqsystems.com
R G Pagter gibson@pagterandmiller.com,
pandm@pagterandmiller.com;pagterandmiller@yahoo.com
United States Trustee (SA) ustpregion16.sa.ecf@usdoj.gov
2. SERVED BY THE COURT VIA UNITED STATES MAIL: A copy of this notice and a true copy
of this judgment or order was sent by United States mail, first class, postage prepaid, to the
following persons and/or entities at the addresses stated below:
Einar W Johnson
24445 Hawthorne Blvd Ste 104
Torrance, CA 90505
Brennon Ty Bishop
613 Joan Way
Placentia, CA 92870-2310
3. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this
judgment or order which bears an “Entered” stamp, the party lodging the judgment or order will
serve a complete copy bearing an “Entered” stamp by United States mail, overnight mail, facsimile
transmission or email and file a proof of service of the entered order on the following persons
and/or entities at the addresses, facsimile transmission numbers, and/or email addresses stated
below:
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