Twin Falls Staffing, LLC v. Visser (In Re Visser)
660 F. App'x 535
| 9th Cir. | 2016Background
- Twin Falls Staffing (TFS) obtained a state-court injunction against Joseph Visser and incurred $128,151.55 in attorney’s fees before a state-court trial could occur.
- Visser filed for bankruptcy, forcing TFS to litigate in bankruptcy court and seek damages there, including the earlier state-court attorney’s fees.
- Visser had been an employee who signed a contract containing a non‑compete; his father, Stanley, removed the non‑compete from the standard form and Joseph executed the new form in 2009.
- While still employed, Joseph formed Magic Valley Staffing, abruptly left TFS in October 2009, recruited permanent employees, and Magic Valley allegedly captured major clients and temporary workers.
- The bankruptcy court found Visser’s actions willful and malicious under 11 U.S.C. § 523(a)(6), held certain damages nondischargeable, awarded $230,000 in lost net revenue, and (erroneously) awarded the earlier state‑court attorney’s fees as damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state‑court attorney fees could be recovered as damages in bankruptcy | TFS sought to recover $128,151.55 state‑court fees as part of its damages award | Visser opposed (argued dischargeability/insufficiency) | Court: award of those fees as damages was erroneous because Idaho follows the American Rule and no statute/contract authorized recovery of those fees as damages |
| Whether Visser’s conduct was "willful and malicious" under § 523(a)(6) | TFS argued Visser intentionally breached and caused harm by setting up competitor, recruiting employees/clients | Visser disputed intent/causation | Court: affirmed bankruptcy court’s finding that Visser acted willfully and maliciously; resulting damages nondischargeable |
| Appropriate standard/deference for damages award review | TFS sought affirmation of damages award | Visser challenged amount | Court: whether abuse of discretion or clear‑error standard, applying either, affirmed $230,000 lost net revenue award |
| Sufficiency of proof for lost profits | TFS relied on profit‑and‑loss statements showing ~ $470,000 net loss year after departure | Visser contended losses not fully attributable or proven with certainty | Court: TFS proved lost profits with reasonable certainty; bankruptcy court permissibly attributed only $230,000 to Visser’s breach |
Key Cases Cited
- Hellar v. Cenarrusa, 682 P.2d 524 (Idaho 1984) (explaining American Rule—attorney fees recoverable only by statute or contract)
- Barboza v. New Form, Inc., 545 F.3d 702 (9th Cir. 2008) (interpreting § 523(a)(6) willful and malicious standard in bankruptcy)
- Husain v. Olympic Airways, 316 F.3d 829 (9th Cir. 2002) (appellate review requires plausibility of factual findings in light of the record)
- Trilogy Network Sys., Inc. v. Johnson, 172 P.3d 1119 (Idaho 2007) (measure of damages for breach of non‑compete is plaintiff’s losses; lost profits need only reasonable certainty)