509 B.R. 550
Bankr. S.D. Tex.2014Background
- Debtor Marcelo D’Amico filed Chapter 7 on Nov. 1, 2012; casinos Cosmopolitan and Caesars filed proofs of claim for gambling markers totaling $625,000 and $500,000 respectively. Other casinos also filed claims. Orcus Fire Protection, LLC (of which D’Amico is president) had bank accounts referenced in credit applications.
- D’Amico had an eight-year history of gambling on credit; he obtained and increased large casino credit lines in 2011–2012 based on credit bureau data, his credit score, and Orcus account balances provided by third parties.
- In May 2012 D’Amico deposited substantial chips ($1,000,000 at Caesars; $500,000 at Cosmopolitan) and executed markers that were later dishonored when drawn against Orcus accounts.
- Casinos sued in adversary proceedings seeking nondischargeability under 11 U.S.C. § 523(a)(2)(A) and (a)(6); the Bankruptcy Court (Nov. 13, 2013) found Appellants failed to meet their burden as to § 523(a)(6) and entered judgment for the debtor.
- On appeal, appellants argued the evidence established an objective substantial certainty that D’Amico’s conduct would injure the casinos and that the bankruptcy court improperly injected a reliance element into the § 523(a)(6) analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether casinos proved nondischargeability under § 523(a)(6) via objective substantial certainty of harm | Circumstantial evidence (account balances, pattern of obtaining and increasing credit, marker transactions) proves a reasonable actor would be substantially certain casinos would be harmed | Record lacks evidence of D’Amico’s personal knowledge of his inability to pay; casinos relied on third‑party data and failed to prove debtor knew he could not repay | Affirmed: appellants failed to prove by preponderance that debtor acted with objective substantial certainty to cause harm; bankruptcy court’s factual findings not clearly erroneous |
| Whether bankruptcy court imposed an improper reliance requirement for § 523(a)(6) claims | Court focused on what casinos relied upon in granting credit, effectively adding a reliance element to § 523(a)(6) | Court actually stated proper legal standard and considered reliance-related facts only as part of the total factual context bearing on debtor’s knowledge and substantial-certainty inquiry | Affirmed: court did not err; factual findings about casinos’ use of third‑party data were relevant to whether debtor had requisite knowledge |
Key Cases Cited
- Raspanti v. Keaty, 397 F.3d 264 (5th Cir. 2005) (defines willful and malicious injury test: objective substantial certainty or subjective motive)
- Williams v. IBEW Local 520, 337 F.3d 504 (5th Cir. 2003) (applies objective-substantial-certainty inquiry and contrasts with subjective intent)
- Miller v. J.D. Abrams, Inc., 156 F.3d 598 (5th Cir. 1998) (unitary two-prong test framing willful and malicious injury)
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful modifies injury; requires deliberate or intentional injury, not mere negligence)
- Texas v. Walker, 142 F.3d 813 (5th Cir. 1998) (debtor’s knowledge of obligations relevant to substantial-certainty analysis)
- Corley v. Delaney (In re Delaney), 97 F.3d 800 (5th Cir. 1996) (distinguishes foreseeability/high probability from substantial certainty)
- Conte v. Gautam (In re Conte), 33 F.3d 303 (3d Cir. 1994) (explains substantial certainty requires more than high probability)