Kane v. Stewart Tilghman Fox & Bianchi, P.A.
485 B.R. 460
S.D. Fla.2013Background
- Appellants Harley Kane and Charles Kane were partners in Kane & Kane and led a group of PIP Lawyers suing Progressive on PIP Claims and Bad Faith Claims.
- The PIP Lawyers engaged Appellees to pursue Bad Faith Claims under a contingency fee of 60% to Appellees and 40% to PIP Lawyers, with the PIP Claims and Bad Faith Claims intertwined.
- In 2004–2009, Settlement negotiations occurred; the PIP Lawyers planned to settle all claims with Progressive, reallocating fees toward PIP Claims, and drafting an Amended Memorandum of Understanding that allocated a small portion to Bad Faith Claims.
- PIP Lawyers settled with Progressive without notifying Appellees, causing a conflict, and the Settlement documents obscured the allocations, including an indemnification provision for Progressive’s fees.
- Appellees later sued in Florida state court; the state court rendered a Judgment in favor of Appellees for unjust enrichment and related theories; bankruptcy petitions followed in 2008–2009, and the court dismissed the petitions as filed in bad faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the debt is excepted from discharge under 523(a)(6). | Kane contends the State Court Judgment was not willful/malicious. | Appellees argue willful/malicious injury evidenced by intentional acts to injure Appellees. | Yes; State Court Judgment was excepted under 523(a)(6) for willful and malicious injury. |
| Whether collateral estoppel applied to the State Court Action and Chapter 11 findings. | Appellants contend findings were not identical or necessary. | Bankruptcy Court correctly applied collateral estoppel to shared facts; it independently found willful/malicious injury. | Collateral estoppel applied to common factual findings; independent findings support dischargeability ruling. |
| Whether Harley Kane’s discharge was barred under 727(a)(7) (and related 727(a)(2)). | Kane argues lack of personal conduct and improper reliance on insider status. | Discharge denied due to insider conduct in a prior Chapter 11 and transfer of Partnership property to delay creditors. | Yes; Harley Kane’s discharge barred under 727(a)(7) and 727(a)(2). |
Key Cases Cited
- In re Englander, 95 F.3d 1028 (11th Cir. 1996) (standard of review in bankruptcy appeals: factual findings reviewed for clear error; legal conclusions de novo)
- Kawaauhau v. Geiger, 523 U.S. 57 (U.S. 1998) (willful and malicious injury requires intent to injure; mere recklessness not enough)
- In re Jennings, 670 F.3d 1329 (11th Cir. 2012) (fraudulent transfer by co-conspirator can be willful/malicious under 523(a)(6))
- In re St. Laurent, 991 F.2d 672 (11th Cir. 1993) (collateral estoppel principles in bankruptcy discharge cases)