Zaretsky v. Berlin (In re Berlin), 513 B.R. 430

Plaintiffs (Elliot, Shirley, Harold Zaretsky and Maxi-Aids, Inc.) obtained a New York State Supreme Court default/summary judgment against Debtor Ahron Berlin for sending numerous defamatory emails; damages were fixed by inquest (totaling $1,290,000).
Plaintiffs sued in bankruptcy court under 11 U.S.C. § 523(a)(6) to except those state-court awards from discharge as arising from "willful and malicious" injury.
The bankruptcy court gave preclusive effect to the state-court judgment on liability and damages but found the state record insufficient to resolve the § 523(a)(6) intent element at summary judgment.
A bench trial was held limited to whether Berlin acted with the specific intent to injure ("willful") and without justification ("malicious"). Plaintiffs presented testimony and the emails; Berlin testified and argued he did not send the emails but offered no evidence to rebut intent.
The court found the emails were extreme, aimed to harm reputation and business, and that Plaintiffs proved by a preponderance that Berlin acted willfully and maliciously; therefore the state-court awards are nondischargeable.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether state-court defamation judgment is preclusive here	State judgment on liability and damages has preclusive effect and may form basis for nondischargeability	Judgment should be disregarded due to alleged procedural/merit defects in state proceeding	Court gave full faith and credit to state judgment as preclusive for liability and damages
Whether § 523(a)(6) requires separate proof of intent beyond defamation finding	Zaretskys: state judgment plus evidence shows Berlin intended to injure and acted maliciously	Berlin: state judgment resolved merits; he denied authorship and urged invalidity of state order	Court: res judicata covers defamation liability but § 523(a)(6) "willful and malicious" intent is a separate element requiring proof; trial limited to intent
Whether Berlin's conduct was "willful" under § 523(a)(6)	Plaintiffs: emails demonstrate deliberate intent to injure reputation and business	Berlin: disputed authorship and criticized state procedure but offered no explanation for statements or rebuttal evidence	Held: Plaintiffs met burden; court found defendant acted with intent to cause injury (willful)
Whether conduct was "malicious" under § 523(a)(6)	Plaintiffs: statements were wrongful, outrageous, false and without justification, showing malice	Berlin: no justification offered; denied responsibility but presented no mitigation	Held: Court found conduct wrongful and without excuse; malice proven; debt nondischargeable

Kelleran v. Andrijevic, 825 F.2d 692 (2d Cir. 1987) (bankruptcy court must give preclusive effect to state default judgment)
Kawaauhau v. Geiger, 523 U.S. 57 (U.S. 1998) ("willful" injury requires deliberate intent to cause injury)
In re Stelluti, 94 F.3d 84 (2d Cir. 1996) (malice may be implied from debtor's conduct and surrounding circumstances)
Ball v. A.O. Smith Corp., 451 F.3d 66 (2d Cir. 2006) ("malicious" means wrongful and without just cause or excuse)
In re Krautheimer, 210 B.R. 37 (Bankr. S.D.N.Y. 1997) (preclusive effect of state judgments in dischargeability actions)
In re Salem, 290 B.R. 479 (S.D.N.Y. 2003) (distinguishing defamation liability from intent required under § 523(a)(6))
In re Goldberg, 487 B.R. 112 (Bankr. E.D.N.Y. 2013) (plaintiff bears burden to prove § 523(a)(6) elements by preponderance)