Stern v. Dubian (In Re Dubian)

77 B.R. 332, 17 Collier Bankr. Cas. 2d 516, 1987 Bankr. LEXIS 1370, 16 Bankr. Ct. Dec. (CRR) 428
CourtUnited States Bankruptcy Court, D. Massachusetts
DecidedSeptember 1, 1987
Docket19-10860
StatusPublished
Cited by21 cases

This text of 77 B.R. 332 (Stern v. Dubian (In Re Dubian)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Stern v. Dubian (In Re Dubian), 77 B.R. 332, 17 Collier Bankr. Cas. 2d 516, 1987 Bankr. LEXIS 1370, 16 Bankr. Ct. Dec. (CRR) 428 (Mass. 1987).

Opinion

OPINION

JAMES F. QUEENAN, Jr., Bankruptcy Judge.

The plaintiff moves for summary judgment declaring a state court judgment non-dischargeable under § 523(a)(6) of the Bankruptcy Code (11 U.S.C. § 523(a)(6)). The plaintiff obtained the judgment against the debtor for damages caused by the debt- or’s intentional interference with the plaintiff’s contractual relations. He asserts that this state court determination establishes “willful and malicious injury by the debtor” within the meaning of § 523(a)(6) under principles of collateral estoppel, also known as issue preclusion. This presents a case of first impression in this district. The motion also raises the question under traditional summary judgment law of whether there exists a “genuine” issue of material fact in view of the affidavits and counter-affidavits filed in connection with it.

We recite the undisputed facts as disclosed by the pleadings and affidavits. The plaintiff, Mark Stern, is a practicing lawyer. In 1979 he was retained by a few individual members of Teamsters Local 559 (the “Union”) who had formed an organization called Teamsters for a Democratic Union (“T.D.U.”). The debtor, Robert Win-gate Dubian, was a member of T.D.U., but not an officer thereof. The purpose of the plaintiff’s retention was to bring suit against the Union in order to secure the right for its members to nominate and vote for candidates of their choice as its officers. The debtor joined in the plaintiff’s retention, but stipulated in writing that he was not individually obligated to pay the plaintiff’s fee. Other members of T.D.U. agreed to pay up to an aggregate of $3,000 to the plaintiff, plus expenses. They also agreed that the plaintiff would seek payment for all of his services from the Union when and if he was successful in the law suit and obtained a court order against the Union for his fee.

The plaintiff failed to obtain an injunction against a pending Union election at the trial level, and T.D.U. decided to appeal. The parties increased the aggregate fee which members of T.D.U. (excluding the debtor) would be obligated to pay to $6,000 plus expenses, with the additional amount being payable only if the appeal was sue- *334 cessful. The plaintiff continued his understanding with T.D.U. that he would seek payment for all his services by the Union if he was successful in the suit and obtained a court order against the Union for his fee. An appeal to the Second Circuit achieved a reversal of the district court’s denial of a preliminary injunction. T.D.U. informed the plaintiff, however, that it did not wish to pursue the matter any further, and that it was unwilling to post the filing fee necessary to obtain the injunction. This change of heart was caused by the debtor, who convinced T.D.U. to drop the matter. As a result, the plaintiff could not obtain an order against the Union for his fee. It was disclosed at the hearing in this Court that the debtor was later elected president of the Union.

The plaintiff then brought suit in a Massachusetts state court against the debtor and the other members of T.D.U. who had employed him. His claim included counts against all the defendants in both contract and quantum meruit. An amended complaint added two counts against the debtor only, one for intentional interference with contractual relations and the other for intentional interference with advantageous relations. After a jury trial, judgment was entered against the debtor on the counts for contract, quantum meruit and intentional interference with contractual relations. The debtor then obtained an order for relief in this Court under Chapter 7 of the Bankruptcy Code, and the present adversary proceeding followed. The plaintiff seeks to have declared nondischargeable only the indebtedness represented by the judgment entered on the count for intentional interference with contractual relations.

The plaintiff argues that the state court judgment not only establishes the amount of the indebtedness under principles of res judicata, or claim preclusion, but also establishes under principles of collateral es-toppel, or issue preclusion, that it is a debt for “willful and malicious injury by the debtor ... to the property” of the plaintiff within the meaning of § 523(a)(6). The judgment is clearly res judicata as to the debtor concerning the existence of the indebtedness, because the debtor was a party to the prior proceeding. Restatement (Second) of Judgments § 17 (1982). 1 The debtor does not argue otherwise, having scheduled the claim as an admitted debt in the expectation of its discharge. He contends that the judgment has no preclusive effect concerning the nature of the indebtedness, so that it is still open to him to contest the application of § 523(a)(6). The plaintiff, on the other hand, concedes, as he must, that the judgment is not res judicata as to the nature of the indebtedness for dischargeability purposes. The Supreme Court established this principle in Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979), where it held that a prior judgment is not res judicata in bankruptcy on the question of dischargeability. The Court reasoned that considerations concerning discharge are foreign to the prior proceeding, that there is often little incentive in such proceedings for the parties to litigate factors relevant to bankruptcy discharge, and that giving finality to the prior judgment would undercut Congress’s intention under the 1970 amendments to the former Bankruptcy Act to commit dischargeability issues exclusively to the bankruptcy courts. The Court expressly left open, however, the question of whether the prior judgment could have issue preclusive effect in the later bankruptcy dischargeability proceeding. 442 U.S. at 139 n. 10, 99 S.Ct. at 2213 n. 10.

I. ISSUE PRECLUSIVE EFFECT OF JUDGMENT

A. Appropriateness of Issue Preclusion in Bankruptcy

This Circuit has not yet decided the question of whether a prior judgment can be issue preclusive in bankruptcy dischargeability proceedings. See Commonwealth v. Hale, 618 F.2d 143 (1st Cir.1980). *335 Most, but not all, of the circuits who have considered the matter have concluded that the prior judgment is issue preclusive on dischargeability provided that traditional tests for preclusion are met. See Wheeler v. Laudani, 783 F.2d 610 (6th Cir.1986); Lombard v. Axtens (In re Lombard), 739 F.2d 499 (10th Cir.1984); Smith v. Pitner (In re Pitner), 696 F.2d 447 (6th Cir.1982); Spilman v. Harley, 656 F.2d 224 (6th Cir.1981); In re Ross,

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Cite This Page — Counsel Stack

Bluebook (online)
77 B.R. 332, 17 Collier Bankr. Cas. 2d 516, 1987 Bankr. LEXIS 1370, 16 Bankr. Ct. Dec. (CRR) 428, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stern-v-dubian-in-re-dubian-mab-1987.