Charles Schrader v. Narinder Sangha
678 F. App'x 561
| 9th Cir. | 2017Background
- Creditor Charles Schrader obtained a California state court default judgment against debtor Narinder Sangha that included punitive damages based on a finding of "malice in fact."
- Sangha filed bankruptcy; Schrader sought a determination that the state-court judgment was nondischargeable under 11 U.S.C. § 523(a)(6) (willful and malicious injury).
- The bankruptcy court granted Schrader summary judgment on issue preclusion grounds, concluding the punitive damage award alone established the § 523(a)(6) "willful and malicious" elements.
- On appeal, the Bankruptcy Appellate Panel (BAP) vacated that ruling, relying on intervening BAP authority (In re Plyam) which limited the preclusive effect of a punitive damage award as to § 523(a)(6)’s "willful" element.
- The Ninth Circuit affirmed the BAP: it held that a punitive-damage award by itself does not preclude relitigation of § 523(a)(6)’s "willful" requirement and remanded for the bankruptcy court to reassess preclusion by considering the state-court default judgment together with the allegations in Schrader’s second amended complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a state-court punitive damage award alone precludes relitigation of § 523(a)(6)’s "willful" intent | Schrader: punitive award (malice finding) satisfies § 523(a)(6) willful/malicious requirement | Sangha: punitive award alone insufficient to establish § 523(a)(6) willful intent | Punitive award alone does not preclude relitigation of the "willful" element; court must review the complaint allegations with the award (remand) |
| Standard for issue preclusion under California law vs. § 523(a)(6) | Schrader: state-law malice finding equates to federal willfulness | Sangha: California "malice" can encompass states of mind below § 523(a)(6) willfulness | Court follows In re Plyam: California malice may be broader than § 523(a)(6) willfulness; comparison required |
| Procedural question: scope of remand | Schrader: bankruptcy court correctly decided preclusion | Sangha: BAP and bankruptcy court should re-evaluate in light of Plyam | Ninth Circuit affirmed BAP and remanded for re-evaluation under Plyam |
| Jurisdiction to decide legal issue on appeal of bankruptcy preclusion ruling | Schrader: appeal is final for this legal issue | Sangha: implied opposition not controlling | Court exercised jurisdiction under liberal bankruptcy finality standard |
Key Cases Cited
- Bonner Mall P’ship v. U.S. Bancorp Mortg. Co., 2 F.3d 899 (9th Cir. 1993) (liberal finality standard for bankruptcy appeals)
- Carrillo v. Su (In re Su), 290 F.3d 1140 (9th Cir. 2002) (willful and malicious are conjunctive elements under § 523(a)(6))
- Thiara v. Spycher Bros. (In re Thiara), 285 B.R. 420 (9th Cir. BAP 2002) (must establish willfulness before concluding malice)
- Plyam v. Precision Development, LLC (In re Plyam), 530 B.R. 456 (9th Cir. BAP 2014) (California punitive damage award alone does not necessarily satisfy § 523(a)(6) willful intent requirement)