McCurdie v. Strozewski (In Re Strozewski), 458 B.R. 397

Background

Plaintiff McCurdie obtained a state-court judgment against Debtor Strozewski for actions related to Plaintiff's termination from Days Inn in Kalamazoo, Michigan.
Debtor filed for Chapter 7 bankruptcy; Plaintiff commenced this nondischargeability adversary under § 523(a)(6).
State court judgment was entered by default after Debtor failed to appear at a settlement conference, but Debtor engaged in state court defense beforehand.
State court damages were awarded without identifying the specific grounds (counts) supporting the judgment.
Plaintiff seeks collateral estoppel to bind the issues decided in state court for the § 523(a)(6) analysis; Debtor contests whether those issues are actually litigated and necessarily determined.
Court addresses whether the state court judgment can have collateral estoppel effect and, if so, whether it supports nondischargeability under § 523(a)(6).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the state court judgment has collateral estoppel effect here.	McCurdie asserts the state court judgment precludes relitigation of the same issues.	Strozewski argues the judgment may be a true default with no actually litigated issues.	Yes; collateral estoppel applies.
Whether the judgment was actually litigated despite default.	Plaintiff contends substantial participation by Debtor in state court satisfies actual litigation.	Debtor claims true default did not involve trial on merits.	Debtor participated sufficiently; not a true default.
Which issues were necessarily determined by the state court judgment?	All three asserted grounds (intentional infliction of emotional distress, tortious interference, civil conspiracy) were decided.	Grounds may be alternative and not all essential to the judgment.	All three grounds were necessarily decided under Michigan law.
Whether the state court findings establish willful and malicious injury under § 523(a)(6).	Intentional infliction of emotional distress supports willful and malicious injury.	Debtor contends the findings do not necessarily demonstrate willfulness/malice.	Yes; the intentional infliction finding supports willful and malicious injury under § 523(a)(6).
Whether collateral estoppel warrants nondischargeability of the debt.	State court findings meet elements of § 523(a)(6).	Dischargeability must be determined anew without reweighing facts.	State court judgment is nondischargeable under § 523(a)(6).

Key Cases Cited

Brown v. Felsen, 442 U.S. 127 (1979) (preclusion basics; final judgment rules)
Grogan v. Garner, 498 U.S. 279 (1991) (burden of proof for nondischargeability; collateral estoppel scope)
Spilman v. Harley, 656 F.2d 224 (6th Cir. 1981) (estoppel in dischargeability actions; issue preclusion retained)
Gates v. People, 452 N.W.2d 627 (Mich. 1990) (state-law prerequisites for collateral estoppel in Michigan)
In re Kalita, 202 B.R. 913 (Bankr. W.D. Mich. 1997) (true default judgments and collateral estoppel limitations under Michigan law)
In re Frank, 425 B.R. 435 (Bankr. W.D. Mich. 2010) (analysis of alternative grounds and collateral estoppel under Michigan law)
In re Phillips, 434 B.R. 475 (6th Cir. BAP 2010) (collateral estoppel when prior state court decision used same standards as bankruptcy court)
Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful injury requires intentional or practically certain consequences)
Markowitz v. Campbell (In re Markowitz), 190 F.3d 455 (6th Cir. 1999) (definition of willful injury for § 523(a)(6))
Wheeler v. Laudani, 783 F.2d 610 (6th Cir. 1986) (malicious conduct standard in § 523(a)(6))
Roberts v. Auto-Owners Ins. Co., 422 Mich. 594 (1985) (intentional infliction elements under Michigan law)
Hayley v. Allstate Ins. Co., 262 Mich.App. 571 (2004) (conceptual alignment of IIED elements with willfulness)
Gonzalez v. Moffitt (In re Moffitt), 252 B.R. 916 (6th Cir. BAP 2000) (extreme and outrageous conduct as conscious disregard)