Custom Kilns, Inc. v. Pierron (In Re Pierron), 448 B.R. 228

Custom Kilns, Inc. sued James P. Pierron and Craftco Hardwood Floors, Inc. on contract, fraud, conversion, civil conspiracy, and tortious interference claims related to four Fork Loaded-All Aluminum Dry Kilns and one All Aluminum Steamer.
Craftco had previously sold substantially all assets to Manufacturing Ventures, LLC, an entity formed by Pierron and others.
A 2008 District Court judgment awarded Custom Kilns damages against Craftco and Pierron on several theories, including breach and fraud, with a final amount of damages and fees.
Pierron filed Chapter 7 bankruptcy in May 2009; Custom Kilns filed this adversary proceeding seeking non-dischargeability under 11 U.S.C. § 523(a)(2), (4), and (6).
The District Court judgment is final but does not specify which claims support nondischargeability, listing causes of action with an ‘and/or’ qualifier.
The Bankruptcy Court must determine whether collateral estoppel applies and whether any § 523(a) nondischargeability theories are satisfied based on the District Court judgment.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether collateral estoppel bars re-litigation.	Plaintiff asserts the District Court judgment, including veil-piercing findings, precludes re-litigation.	Defendant argues the judgment is ambiguous and does not specify which theory supports liability, so estoppel does not apply.	Collateral estoppel does not apply; the judgment is ambiguous as to which claims support nondischargeability.
Whether § 523(a)(2)(A) nondischargeability is established.	District Court could pierce Craftco’s veil, implying defendant’s actual fraud; debt non-dischargeable under § 523(a)(2)(A).	No explicit finding of personal fraud; judgment is ambiguous; liability could be for other theories.	Summary judgment on § 523(a)(2)(A) is inappropriate due to ambiguity in the District Court Judgment.
Whether § 523(a)(4) nondischargeability is established.	Jury findings could support larceny or defalcation in a fiduciary capacity as § 523(a)(4) grounds.	Punitive damages data do not prove willful fraud; summary judgment on § 523(a)(4) should be granted.	Summary judgment on § 523(a)(4) is denied; plaintiff has not shown entitled to relief as a matter of law.
Whether § 523(a)(6) nondischargeability is established.	Willful and malicious injury supports § 523(a)(6).	Punitive damages reference does not resolve willfulness; must prove willful injury by preponderance.	Summary judgment on § 523(a)(6) is denied.

Grogan v. Garner, 498 F.3d 279 (Supreme Court 1991) (preponderance standard for nondischargeability generally applies)
Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277 (6th Cir.1998) (strict construction of discharge exceptions; collateral estoppel framework)
In re Bachinski, 393 B.R. 522 (Bankr.S.D. Ohio 2008) (disjunctive judgments cannot support issue preclusion if a necessary alternative supports nondischargeability)
Southeast Texas Inns, Inc. v. Prime Hospitality Corp., 462 F.3d 666 (6th Cir. 2006) (veil piercing requires fraud or fraud-like injustice under Tennessee law)
Pamperin v. Streamline Mfg., Inc., 276 S.W.3d 428 (Tenn.Ct.App. 2008) (veil piercing does not require actual fraud in Tennessee)
Beaty v. McGraw, 15 S.W.3d 819 (Tenn.Ct.App.1998) (Beaty test for collateral estoppel elements)
In re Century Offshore Mgmt. Corp., 119 F.3d 409 (6th Cir.1997) (summary judgment and evidentiary standards in bankruptcy)