In re: David Austin Tolliver, 20-8021

Background

Debtor David A. Tolliver was manager of Ashtin Transport, which entered factoring agreements with WLP Capital and related entities; Tolliver personally guaranteed performance and WLP took perfected UCC security interests.
WLP alleges Tolliver submitted roughly $260k of fraudulent invoices and that Tolliver produced forged bank records and a forged letter during Utah litigation to defeat WLP’s claims.
The Utah district court found forgery and fraud on the court, struck defendants’ pleadings, entered default, and issued a Final Judgment for $1,313,011.75 (≈ $945,417.21 invoice-related damages; $295,490.76 attorneys’ fees; $72,103.78 costs).
Tolliver filed Chapter 7; WLP filed an adversary proceeding seeking nondischargeability under 11 U.S.C. § 523(a)(2)(A) and (a)(6); the bankruptcy court granted WLP summary judgment relying on the Utah findings.
On appeal the BAP held Rooker–Feldman does not bar a bankruptcy court from resolving dischargeability, gave preclusive effect to many Utah findings but not to claims the Utah court dismissed, affirmed nondischargeability of the attorneys’ fees and costs as fraud-on-the-court sanctions under § 523(a)(6), and vacated and remanded as to the invoice-related damages and the § 523(a)(2)(A) claim because the record (e.g., full damages hearing transcript and whether WLP justifiably relied) was inadequate for summary disposition.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Rooker–Feldman bars the bankruptcy court from determining dischargeability	WLP: bankruptcy court may rely on state-court judgment; Rooker–Feldman doesn’t apply to an independent §523 determination	Tolliver: the federal court improperly reviewed/state judgment and should not give it effect	Court: Rooker–Feldman does not strip bankruptcy courts of jurisdiction to determine nondischargeability; it bars relitigation of state-judgment merits but not independent §523 claims
Whether Utah findings are preclusive (collateral estoppel)	WLP: Utah factual findings (forgery/fraud) are binding in bankruptcy	Tolliver: challenges those findings and seeks relitigation	Court: Under Utah law many factual findings are preclusive, but not findings tied to claims the Utah court dismissed (e.g., the fraud count), so only some issues are precluded
Whether entire Final Judgment is nondischargeable as willful and malicious injury under §523(a)(6)	WLP: whole Utah judgment arises from Tolliver’s willful and malicious fraud	Tolliver: damages include contract/liquidated components not shown to flow from intentional tort	Court: Affirmed nondischargeability of attorneys’ fees and costs (fraud on the court) under §523(a)(6); vacated summary judgment as to the $945,417.21 invoice-related damages and remanded to determine what portion arose from willful and malicious conduct
Whether debt is nondischargeable under §523(a)(2)(A) (false pretenses/representations)	WLP: debt (full judgment) was obtained by false pretenses via submission of fraudulent accounts	Tolliver: WLP (a sophisticated factor) may not have justifiably relied; state findings do not resolve reliance/causation for all damages	Court: Vacated summary judgment on §523(a)(2)(A); genuine issues exist about justifiable reliance and causation—remand for further factfinding

Key Cases Cited

Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (limits Rooker–Feldman to cases seeking review of state-court judgments)
D.C. Ct. of Appeals v. Feldman, 460 U.S. 462 (1983) (establishes Rooker–Feldman doctrine)
Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) (original source of Rooker doctrine)
Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75 (1984) (full faith and credit; federal courts give state judgments same preclusive effect as state law)
Grogan v. Garner, 498 U.S. 279 (1991) (preclusion principles apply in bankruptcy dischargeability determinations)
Kawaauhau v. Geiger, 523 U.S. 57 (1998) (§523(a)(6) “willful” requires a deliberate act intending injury)
Husky Int’l Elecs., Inc. v. Ritz, 578 U.S. 356 (2016) (fraud-based injuries can fall within §523(a)(6))
Field v. Mans, 516 U.S. 59 (1995) (§523(a)(2)(A) requires justifiable, not reasonable, reliance)
Cohen v. de la Cruz, 523 U.S. 213 (1998) (all damages arising from fraud are nondischargeable)
In re Bucci, 493 F.3d 635 (6th Cir. 2007) (exceptions to discharge under §523(a) construed narrowly)
In re Hill, 957 F.3d 704 (6th Cir. 2020) (issue preclusion principles in §523 context)
In re Berge, 953 F.3d 907 (6th Cir. 2020) (discusses willful and malicious components under §523(a)(6))
Rembert v. AT&T Universal Card Servs., Inc., 141 F.3d 277 (6th Cir. 1998) (elements required to prove §523(a)(2)(A))