OPINION
I. INTRODUCTION
This adversary proceeding arises from an altercation between John Carmelo (“Carmelo”), and Anthony Mickletz (“the Debtor”) in March 2006. At the time of the altercation, Carmelo was an employee of Famous Fat Freddie’s Pizza, LLC (“the Restaurant”), a pizza restaurant owned and operated by the Debtor. Carmelo claims that the Debtor pushed him, causing him to fall and suffer injuries that have left him unable to work. The Restaurant did not have worker’s compensation insurance coverage on the day of the altercation. The Debtor denies that he pushed Carmelo.
Three (3) separate legal proceedings resulted from the incident in 2006:
(1) a worker’s compensation proceeding brought by Carmelo, that resulted in both:
(a) an administrative award of compensatory benefits and monetary penalties; and
(b) a judicial money judgment against the Restaurant (reassessed on June 7, 2011 in the amount of $279,723.98);
(2) a criminal proceeding against the Debtor in state court for operating a business without maintaining worker’s compensation insurance, which resulted in the entry of a criminal restitution order against the Debtor in the amount of $45,200.88; and
(3) a civil action in state court, in which Carmelo sought to pierce the Restaurant’s corporate veil and hold the Debtor personally liable for the Restaurant’s worker’s compensation liability, resulting in a settlement inwhich the Debtor accepted personal liability for that debt.
The Debtor has conceded that the debt attributable to the criminal restitution order is nondischargeable.
At issue is whether the debts arising from the worker’s compensation proceeding are nondischargeable.
The parties have filed cross motions for summary judgment. The outcome of those motions turns largely on three (3) issues:
(1) whether issue preclusion applies to the factual findings made by the administrative law judge in the contested worker’s compensation proceedings and precludes the Debtor from relitigating whether he injured Carmelo by pushing him to ground;
(2) if so, whether those findings support the entry of summary judgment in Carmelo’s favor under 11 U.S.C. § 523(a)(6), which renders nondischargeable a debt that is for a willful and malicious injury; and
(3) even if issue preclusion applies and the prior factual findings support Carmelo’s § 523(a)(6) claim, whether the Debtor’s personal liability on the worker’s compensation debt is nonetheless dischargeable because the debt is merely contractual in nature and not one for willful and malicious injury.
For the reasons set forth below, I conclude that;
1.the administrative law judge’s material findings of fact in the worker’s compensation proceeding are entitled to preclusive effect;
2. those findings support the entry of summary judgment ■ under § 523(a)(6) with respect to most, but not all, of the worker’s compensation debt;
3. the Debtor’s assumption of the Restaurant’s liability in settlement of the state court civil action does not alter the debt’s nondischargeable status insofar as the compensatory component of worker’s compensation award is concerned; and
4. the penalty component of the worker’s compensation award is dis-chargeable under § 523(a)(6).
Therefore, each party’s motion for summary judgment will be granted in part and denied in part.
II. FACTS
A. The March 12, 2006 Incident
1.
In March 2006, the Debtor owned and operated the Restaurant. Carmelo began working for the Restaurant in either 2003 or 2004 (FOF #7a),
On March 12, 2006, Carmelo was working as a delivery driver. (FOF #7c). Carmelo finished his shift and went home for the day but the Debtor called him and asked him to return to the Restaurant. (FOF #7c). The Debtor questioned Car
Carmelo sought medical attention at Pottstown Hospital and later with his family physician. (FOF # 7d). Carmelo presented the testimony of his treating physician, Dr. Jeffery T. Lumley, D.O. (“Dr.Lumley”) as to the extent of his injuries. Dr. Lumley treated Carmelo for approximately three (3) months. Upon his initial examination, Dr. Lumley concluded that Carmelo had strained his right hand, wrist, and lower back as a result of the fall, and had chronic cervical disc degeneration with a possible acute exacerbation. (Id. # 12b). Dr. Lumley again saw Carmelo on April 3, 2006. Carmelo complained of shooting pain in his neck and lower back and needed a cane to walk. (Id. # 12c). Two weeks later, Carmelo complained of worsening of his left-sided numbness and weakness. (Id. # 12e).
The Debtor admitted that his conversation with Carmelo was heated and that he was yelling at Carmelo. (Id. # 8c). However, the Debtor testified that he did not push Carmelo and Carmelo did not fall. (Id. # 9b). According to the Debtor, he terminated Carmelo’s employment, walked him out to his car and retrieved some pizza delivery bags. , (Ex. 1-D, Mickletz Testimony at 46). Two (2) witnesses, both Restaurant employees, testified at the worker’s compensation hearing. One (1) witness corroborated the Debtor’s version of the events and the other witness initially did so as well, but later recanted his testimony and gave subsequent testimony that supported Carmelo’s version of the events.
At the conclusion of the worker’s compensation hearing, which was held on four (4) separate days between June 22, 2006 and January 11, 2007, (see Ex. 1-A), the administrative law judge (“the ALJ”) resolved the conflicting testimony in favor of Carmelo.
The ALJ awarded Carmelo total disability benefits; reasonable, necessary and related medical expenses resulting from the injury; reasonable litigation costs; counsel fees; and statutory interest. The ALJ further ordered the Restaurant to pay a penalty of 50% of the indemnity plus interest
On August 24, 2007, the Comp. Award was entered as a judgment in the amount of $85,484.44 in the C.P. Court at No. 2006-16219 (“the Judgment”). Subsequently, the Judgment was reassessed upward, most recently on June 7, 2011 to the amount of $279,723.98.
B. The Restitution Order
77 P.S. 501(b) provides that an employer who fails to comply with his obligation to provide worker’s compensation insurance coverage:
shall, upon conviction in the court of common pleas, be guilty of a misdemeanor of the third degree. If the failure to comply with this section is found by the court to be intentional, the employer shall be guilty of a felony of the third degree. Every day’s violation shall constitute a separate offense. A judge of the court of common pleas may, in addition to imposing fines and imprisonment, include restitution in his order: Provided, That there is an injured employe who has obtained an award of compensation. The amount of restitution shall be limited to that specified in the award of compensation.
On March 13, 2007, the Debtor was charged criminally in the C.P. Court for operating a business without the required worker’s compensation insurance coverage.
C. The Civil Action and the Forbearance Agreement
In March 2008, Carmelo filed a civil lawsuit in the C.P. Court, at No. 08-06290 (“the Civil Action”), seeking to pierce the veil of the Debtor and his wife’s companies, and to hold the Debtor and his wife (Susan' Mickletz) individually liable for the Comp. Award and related Judgment.
The Forbearance Agreement provided, inter alia that:
• the Debtor, Mrs. Mickletz and the Restaurant acknowledged their liability for the Judgment;
• the amount due on the Judgment was $229,390.00;
• Carmelo would limit his recovery on the Judgment to $175,000.00;
• the Debtors would execute a judgment note (“the Judgment Note”) in favor of Carmelo in the amount of $175,000.00
• Carmelo would forbear from collecting on the Judgment or exercising his rights under the Judgment Note, provided the Debtors made an initial payment of $3,000.00 followed by monthly payments of $350.00.
III. PROCEDURAL HISTORY
On November 26,2014, the Debtors filed a voluntary joint chapter 7 bankruptcy case. The Debtors were granted a chapter 7 discharge on April 2,2015.
On March 10, 2015, Carmelo filed this adversary proceeding seeking a determination that his claim against the Debtor, Anthony Mickletz, is nondischargeable pursuant to 11 U.S.C. §§ 523(a)(6) and (a)(13). The Debtor filed his Answer to the Complaint on April 10, 2015. (Doc. #4).
Carmelo filed a motion for summary judgment (“Carmelo’s Motion”) on August 4, 2015. (Doc. #’s 9, 10). Carmelo’s Motion is limited to his claim of nondischargeability under § 523(a)(6).
In his response to Carmelo’s Motion, the Debtor acknowledged that he has continued to make instalment payments on the Criminal Restitution Debt and conceded its nondischargeability. (Debtor’s Brief in Opposition to Carmelo’s Motion at 4, 9) (Doc. # 19).
Thus, the only remaining issue is whether either party is entitled to summary judgment on Carmelo’s claim that the Comp. Award and related Judgment are nondischargeable under 11 U.S.C, § 523(a)(6).
IV. SUMMARY JUDGMENT STANDARD
Summary judgment should be granted when the moving party demonstrates
Under Rule 56, the moving party is entitled to judgment as a matter of law if the court finds that the motion alleges facts which, if proven at trial, would require a directed verdict in favor of the movant. Fitzpatrick v. City of Atlanta,
The court’s role is not to weigh the evidence, but to determine whether there is a disputed, material fact for resolution at trial. Anderson,
In this proceeding, one of the main points of contention is the Debtor’s state of mind. “Issues such as intent and credibility are rarely suitable for summary judgment.” Wishkin v. Potter,
[wjhile a person’s motivation or intent is generally considered to be a question of fact which is not ordinarily subject to resolution on a motion for summary judgment, intent may be inferred when the evidence is so one sided that reasonable minds could not differ as to the only rational outcome. Under circumstances such as these the factual issue of intent can be decided by the court as a matter of law.
In re Okan’s Foods,
Y. DISCHARGEABILITY UNDER 11 U.S.C. § 523(a)(6)
One of the Bankruptcy Code’s central purposes is to permit honest debtors to reorder their financial affairs with their creditors and obtain a “fresh start,” unburdened by the weight of preexisting debt. See In re Cohn,
Exceptions to discharge are construed strictly against creditors and liberally in favor of debtors. In re Cohn,
Section 523(a)(6) excepts from discharge any debt for “willful and malicious injury by the debtor to another entity or to the property of another entity.”
Willful means deliberate or intentional injury, not just a deliberate or intentional act that leads to injury. In re Coley,
“Malice” means wrongful and without just cause or excuse, even in the absence of personal hatred, spite or ill-will. 4 Collier on Bankruptcy ¶ 523.12[2] (Alan N. Resnick, Henry J. Sommer eds., 16th ed. 2009) (“Collier”).
Malice does not mean the same thing for nondischargeability purposes under § 523(a)(6) as it does in contexts outside of bankruptcy. In bankruptcy, debtor may act with malice without bearing any subjective ill will toward plaintiff creditor or any specific intent to injure same.
In re Wooten,
Therefore, in this proceeding, Carmelo must prove that:
(1) the subject debt arose from an injury that was willful (ie., involving the Debtor’s deliberate and intentional conduct);
(2) the conduct was intended or substantially certain to cause injury; and
(3) the' conduct was malicious (ie., wrongful).
See, e.g., In re Jacobs,
VI. ISSUE PRECLUSION APPLIES
The parties’ dispute largely centers on the issue whether the Debtor is precluded from relitigating the ALJ’s findings regarding the cause and nature of the conduct that led to Carmelo’s injuries in March 2006. For the reasons set out below, I conclude that Carmelo is entitled to invoke the doctrine of issue preclusion and preclude the Debtor from relitigating the facts found by the ALJ as to how Carmelo’s work-related injuries occurred.
A. Issue Preclusion: General Legal Principles 1.
The doctrine of issue preclusion (also known as collateral estoppel), is based upon the principle that “a losing litigant deserves no rematch after a defeat fairly suffered, in adversarial proceedings, on an issue identical in substance to the one he subsequently seeks to raise.” Dici v. Commw. of Pa.,
The application of issue preclusion in a federal court action based on a prior state court judgment typically is grounded in the federal full faith and credit statute, 28 U.S.C. § 1738, which provides that state judicial proceedings “shall have the same full faith and credit in every
This adversary proceeding involves facts previously determined by a state agency, not a state court. In University of Tennessee v. Elliott,
2.
As a general principle, under Pennsylvania law, a court may apply issue preclusion to the findings made in a prior adjudicative administrative proceeding; the doctrine is not limited to the findings of a prior judicial proceeding. See, e.g., Grant v. GAF Corp.,
Therefore, I must consider whether, in the particular circumstances presented, a Pennsylvania court would apply the doctrine of issue preclusion.
3.
Under Pennsylvania law, in order for issue preclusion to apply, five (5) elements must be satisfied:
1. the issue is identical to one that was presented in a prior case;
2. there has been a final judgment on the merits of the issue in the prior case;
3. the party against whom the doctrine is asserted was a party in, or in privity with a party in, the prior action;
4. the party against whom the doctrine is asserted, or one in privity with the party, had a full and fair opportunity to litigate the issue in the prior proceeding; and
5. the determination in the prior proceeding was essential to the judgment.
E.g., Dici,
In considering the above requirements, a Pennsylvania court also must con
Thus, to the extent that the ALJ made findings of “pure fact” in the worker’s compensation proceeding, I need not engage in a comparative policy analysis of the Pennsylvania Worker’s Compensation Law and the federal Bankruptcy Code.
A court also must consider the respective burdens of proof in the two (2) proceedings. Disparate burdens of proof may foreclose application of the issue preclusion doctrine. See In re Braen,
Here, the burdens of proof in the two (2) proceedings are the same, rendering the burden of proof a non-issue with respect to the application of issue preclusion. As stated earlier, the burden of proof under 11 U.S.C. § 523(a)(6) is preponderance of the evidence. The burden of proof in a worker’s compensation claim also is preponderance of the evidence. E.g., Rossa v. Workers’ Comp. Appeal Bd. (City of Philadelphia),
B. The Parties’ Contentions
Carmelo contends that he prevailed on his worker’s compensation claim and that the Debtor is precluded from relitigating the ALJ’s factual findings. More specifically, he asserts that the ALJ’s findings of fact in the worker’s compensation proceeding establish that the Debtor intentionally pushed Carmelo, causing an injury and these findings satisfy the elements under § 523(a)(6).
The Debtor disputes that issue preclusion applies on several grounds. He argues that the following elements necessary for the application of the doctrine are lacking:
• privity;
• identity of the issues; and
• the essentiality of the ALJ’s findings.
The Debtor argues that the element of privity is absent because the Restaurant was the respondent party in the worker’s compensation proceeding and not the Debtor individually. (Debtor Response at ¶ 30) (Doc. # 17). Respectfully, I disagree.
The concept of privity is a well-established 'exception to the general rule that limits the application of issue preclusion to those who were parties to the prior litigation. Nationwide Mut. Fire Ins. Co. v. George V. Hamilton, Inc.,
Courts have found privity to exist: “(1) where the nonparty has succeeded to, or shares a concurrent right to the party’s interest in, property, (2) where the nonparty controlled the prior litigation, and (3) where the party adequately represented the nonparties’ interests in the prior proceeding.” First Options v. Kaplan,
Strictly speaking, the Debtor was not a party to the worker’s compensation proceedings. However, the nominal party (the Restaurant) was a closely held business entity in which the Debtor is the sole principal. (Ex. 1-D, Mickletz Testimony at 52; Ex. 1-E, Mickeltz Testimony at 7). The Debtor retained counsel and appeared in the worker’s compensation proceedings, testifying on behalf the Restaurant. In these circumstances, he undoubtedly controlled the litigation. Further, the Debtor and the Restaurant’s interests were aligned. The Debtor and the Restaurant were essentially one and the same. As the owner, the Debtor had every reason to avoid an adverse decision, especially one that determined he physically assaulted and injured Carmelo.
Based on these undisputed facts, I conclude, as a matter of law, that the Debtor was in privity with the Restaurant for purposes of issue preclusion. See Sicalides v. Hartford Cas. Ins. Co.,
D. Identity of Issues
As the moving party, Carmelo has the burden of proof to demonstrate that issues actually litigated in the Worker’s Compensation proceeding are identical to issues currently before this court. Hitchens,
The Debtor contends that the issues decided in the Worker’s Compensation proceedings are not identical to the issue presented here, ie., whether a willful and malicious injury occurred. The Debtor is correct that his state of mind is a distinct element of the claims in this § 523(a)(6) proceeding and that issue was not litigated in the worker’s compensation proceedings. However, in making this argument, the Debtor confuses issue preclusion with claim preclusion. Of course there are differences between the elements of a worker’s compensation claim and a nondischargeability claim under 11 U.S.C. § 523(a)(6). That is why claim preclusion is inapplicable. But, if factual issues decided in the course of the worker’s compensation proceeding also are material issues in the subsequent nondischargeability proceeding, issue preclusion is at play. This is particularly true with respect to any historical facts necessarily decided in the course of the worker’s compensation proceeding. See e.g., In re Weidner,
The worker’s compensation proceeding and this adversary proceeding arise out of the same set of events that occurred on March 12, 2006, when Carmelo was injured. In the prior proceeding, the ALJ was required to decide whether a work related injury occurred. In doing so, it is axiomatic that the ALJ had to determine the historical facts, ie., what occurred.
Those historical facts are likewise at issue in this proceeding. The ALJ determined what happened on March 12, 2006 and those findings are identical to the issue before this court. See Capobianchi v. BIC Corp.,
D. The ALJ’s Findings Were Essential to the Prior Decision
The Pennsylvania Worker’s Compensation Act is designed to establish an efficient and inexpensive structure and procedure that allowed a worker a right to compensation from one’s employer without regard to negligence. See 54 P.L.E. Workers’ Compensation § 2 & 3 (Matthew Bender 2013); accord 21 Summ. Pa. Jur.M Employment and Labor Relations § 13:3 (2d ed. West 2016) (the statute “substitute^] a method of accident insurance in place of common-law rights and liabilities for substantially all employees who suffer work-related injuries”).
To establish a worker’s compensation claim, the claimant must prove that an injury occurred during the course of employment and the injury resulted in loss of earning power. E.g., Cruz v. Workers Comp. Appeal Bd. (Kennett Square Specialties),
The Debtor argues the factual finding that he pushed Carmelo to the ground during the course of an argument was not an essential determination in the worker’s compensation proceeding. He posits that the ALJ needed to find only that an injury during the course of employment occurred, without regard to the precise cause (i.e., that the Debtor pushed Carmelo to the ground). The Debtor reasons that because, (in his view), the finding was not necessary, he is not precluded from relitigating the issue whether he pushed Carmelo to the ground thereby causing a willful and malicious injury.
Considering the narrow elements necessary to establish a worker’s compensation
Carmelo’s only factual theory in support of his claim of a work-related injury was that the Debtor pushed him to the ground. (He had no alternative theory, such as an accidental slip and fall). The Debtor defended against Carmelo’s worker’s compensation claim by asserting that he did not push Carmelo, Carmelo did not fall to the ground and Carmelo was not injured during the course of his employment. Given the manner in which the parties presented the factual dispute to the worker’s compensation tribunal, the only way the ALJ could find that Carmelo had suffered a work-related injury and was entitled to benefits was if he found that the Debtor pushed Carmelo to the ground. Indeed, this was the central litigation issue in the proceeding, with multiple witnesses lining up on both sides of the question. In these circumstances, the ALJ’s factual findings were essential to the award of benefits to Carmelo.
VIL THE UNDISPUTED FACTS ESTABLISH THAT THE DEBT FOR THE COMPENSATORY COMPONENT OF THE WORKER’S COMPENSATION AWARD IS NONDISCHARGEABLE UNDER 11 U.S.C. § 523(a)(6)
As mentioned earlier, Carmelo was awarded worker’s compensation benefits for the injuries suffered during the course of his employment. With respect to the compensatory aspect of the worker’s compensation award,
As explained above, the Debtor cannot relitigate the fact that Carmelo’s injury occurred because the Debtor pushed Carmelo to the ground. However, the preclusive effect of that finding advances the Plaintiffs nondischargeability claim only so far. The ALJ’s findings of fact do not address directly the scienter element under § 523(a)(6).
Ordinarily, the issue of intent is not suitable for disposition on summary judgment. In re Kilmartin,
As explained in Part VI.D, supra, the Debtor chose to defend the Worker’s Compensation Claim on the ground that the injury never occurred. Once that issue was determined adversely to the Debtor by the ALJ (with the accompanying, necessary finding that the injury occurred when the Debtor pushed Carmelo to the ground), the Debtor cannot offer evidence of any different version of events.
Thus, the binding facts are as follows.
On the day in question, the Debtor and Carmelo had a conversation regarding missing sales receipts and the Debtor accused Carmelo of stealing money. The conversation escalated into a heated argument. The Debtor was angry because he felt betrayed by Carmelo’s alleged theft. He lost his temper and pushed Carmelo with both hands on the dead center of his chest. Absent from the record is any evidence that Carmelo instigated the physical altercation or struck first, which may have justified a defensive reaction from the Debtor. And, because the Debtor claims that he never pushed Carmelo, he of course, has not produced any evidence that his actions were justified or unintentional or accidental. Judging by the extent and severity of Carmelo’s injuries, the Debtor pushed Carmelo forcefully. The Debtor had been described as bigger or more stocky than Carmelo.
These facts support the conclusion that the compensatory portion of the worker’s compensation award is a nondischargeable debt for willful and malicious injury. The Debtor’s intentional push of Carmelo, in a moment of anger and with enough force to knock him to the ground and cause a significant injury is sufficient to establish that the Debtor was subjectively aware that his action was substantially certain to cause injury. Accord Conte,
VIII. THE ORIGINATION OF THE SUBJECT DEBT AS A WORKER’S COMPENSATION CLAIM AGAINST THE RESTAURANT DOES NOT INSULATE THE DEBTOR FROM A NONDIS-CHARGEABILITY DETERMINATION UNDER § 523(a)(6).
In support of his Cross-Motion, the Debtor makes two (2) related arguments.
First, he argues that the Comp. Award is grounded in a statutory cause of action that imposes liability without any scienter requirement; a claimant need establish only (1) a work-related physical or mental injury and (2) some disability. E.g., Brubacher Excavating, Inc. v. W.C.A.B. (Bridges),
Based on existing § 523(a) jurisprudence, I conclude that both arguments are without merit,
A. The Compensatory Component of the Comp. Award Is a Debt for a Willful and Malicious Injury
In evaluating the Debtor’s first argument, I begin with the text of § 523(a)(6), which excepts from discharge a “debt ... for willful and malicious injury by the debtor to another entity or to the property of another entity.”
The Debtor’s argument requires a determination as to what Congress meant when it used the word “debt for willful and malicious injury” in this context. Was Congress limiting the discharge exception to those debts in which applicable non-bankruptcy law that created the ci-editor’s right to payment
As stated earlier, exceptions to discharge are construed strictly against creditors and liberally in favor of debtors. Nevertheless, in the circumstances presented here, a competing policy is paramount: “[a]s a matter of social policy, section 523(a)(6) of the Bankruptcy Code prevents a debtor from using a Chapter 7 bankruptcy case to discharge debts for injuries to persons or property resulting from intentional torts committed by the debtor.” In re McCarthy,
A debtor should not be able to escape the policy limitations on the bankruptcy discharge simply because, prior to the bankruptcy filing, the injured person employed a remedial mechanism under non-bankruptcy law with less onerous elements than those set forth in 11 U.S.C. § 523(a)(6). Nor, as a matter of bankruptcy policy, should an otherwise nondis
For these reasons, I conclude that in evaluating the dischargeability of a debt under § 523(a)(6), a bankruptcy court can and should look behind the formalities of the pre-bankruptcy proceedings and determine whether a creditor’s injury was caused by the debtor’s willful and malicious conduct.
B. The Forbearance Agreement Did Not Alter the Debt’s Character as a Debt for Willful and Malicious Injury
The Debtor’s conduct created a debt for willful and malicious injury, which was memorialized in the compensatory component of the Comp. Award. However, prior to the Forbearance Agreement, the Debtor was not personally liable for that debt. In the Civil Action, Carmelo sought to extend liability for that debt to the Debtor by piercing the Restaurant’s corporate veil. As a practical matter, he succeeded in that effort when the parties entered into the Forbearance Agreement.
Based on this history, the Debtor characterizes his liability as a mere, contractual, dischargeable debt. Largely on the strength of the Supreme Court’s decision in Archer v. Warner,
In Archer, the plaintiffs alleged that the debtors had committed fraud in the purchase of a business. They filed suit and settled the action. The settlement agreement provided for a complete release of the claims and no admission of any fraud. The debtors later defaulted on the obligation and filed bankruptcy.
The plaintiffs as creditors then sought to have the debt determined nondischargeable. The lower courts, including the Fourth Circuit Court of Appeals, found that the settlement agreement, releases, and the promissory note “had worked a kind of ‘novation.’ ”
The Supreme Court reversed on the ground that the outcome was controlled by its earlier decision in Brown v. Felsen,
As summarized in Archer, the factual scenario in Brown was as follows:
(1) Brown sued Felsen in state court seeking money that (Brown said) Felsen had obtained through fraud;
(2) the state court entered a consent decree embodying a stipulation providing that Felsen would pay Brown a certain amount;
(3) neither the decree nor the stipulation indicated the payment was for fraud;
(4) Felsen did not pay;
(5) Felsen entered bankruptcy; and
(6) Brown asked the Bankruptcy Court to look behind the decree and stipulation and to hold that the debt was nondischargeable because it was a debt for money obtained by fraud.
Archer,
In Brown, the Court unanimously held that “[c]laim preclusion did not prevent the Bankruptcy Court from looking beyond the record of the state-court proceeding and the documents that terminated that proceeding (the stipulation and consent judgment) in order to decide whether the
In Brown and Archer, the Supreme Court has instructed that a debt retains its underlying initial character even though it may change its form. “[T]he mere fact that a conscientious creditor has previously reduced his claim to judgment should not bar further inquiry into the true nature of the debt.” Archer,
In Part VIII.A., supra, I determined that the compensatory component of the Comp. Award was a debt for willful and malicious injury under 11 U.S.C. § 523(a)(6). In the Civil Action, Carmelo asserted that the Restaurant and the Debtor were one and the same. The purpose of the Civil Action was to obtain a judicial determination that the Debtor was personally liable for the Comp. Award— just as if, from the start, he had been named individually as the employer-respondent in the worker’s compensation proceeding. Indeed, had the Debtor been the respondent in the worker’s compensation proceeding (either because the Restaurant was a sole proprietorship or due to a piercing of the corporate veil), it would be indisputable, based on my conclusions earlier in this Opinion, that the compensatory component of the Comp, Award would be a nondischargeable debt under § 523(a)(6). The mere fact that the Debt- or’s personal liability for that nondischargeable debt was effected through the Civil Action and by a settlement agreement rather than completion of litigation, should not change the result. Brown and Archer both instruct that, in these circumstances, the nondischargeable nature of the debt is unaltered. Consequently, the Forbearance Agreement provides no defense to Carmelo’s § 523(a)(6) nondischargeability claim against the Debtor.
IX. THE DEBTOR IS ENTITLED TO SUMMARY JUDGMENT UNDER 11 U.S.C. § 523(a)(6) WITH RESPECT TO THE PENALTY COMPONENT OF THE COMP. AWARD
The ALJ found that the Restaurant had not carried Worker’s Compensation insurance since June 17, 2005 and did not have insurance at the time of Carmelo’s injury on March 12, 2006. (FOF # 6). The Restaurant was without insurance for many months without just cause or excuse. (Id. # 19). In these circumstances, the ALJ assessed a penalty of 50% of all outstanding compensation benefits. (Id. # 21).
With respect to the penalty component of the Comp. Award, the issue under 11 U.S.C. § 523(a)(6) is whether a monetary penalty imposed for the failure to carry worker’s compensation insurance is a debt for willful and malicious injury.
The case law is divided on the issue of whether the failure to obtain or maintain worker’s compensation is a willful and malicious injury. Compare In re Lashley, 2000 Bankr.LEXIS 2036 (Bankr.D.Neb. Oct. 16, 2000); In re Strauss,
I agree with the majority of cases that hold that the failure to obtain or maintain worker’s compensation insurance
[W]e cannot locate, any persuasive or binding authority to convince us that statutorily required workers’ compensation benefits are property, distinguishable from the rights of any other creditor against a debtor.
More importantly, this type of “injury” is nothing more than a recasting of the “reckless disregard” standard expressly rejected by Congress and by this court. American Cast Iron Pipe Co. v. Wrenn (In re Wrenn),791 F.2d 1542 , 1544 (11th Cir.1986) (per curiam) (“An act in reckless disregard of the rights of others is insufficient to constitute ‘willful and malicious’ conduct for purposes of 11 U.S.C. § 523(a)(6).”); Chrysler Credit Corp. v. Rebhan,842 F.2d 1257 , 1263 (11th Cir.1988); S.Rep. No. 989, at 79, 1978 U.S.C.C.A.N. at 5865; H.R.Rep. No. 595, at 365, 1978 U.S.C.C.A.N. at 6320-21. Operating without insurance is a clear example of recklessness: the failure to insure does not guarantee that an employee will suffer a physical or economic injury while on the job. The employer’s failure to secure workers’ compensation coverage mandated by the state legislature may subject him to criminal penalties including imprisonment, see O.C.G.A. §§ 34-9-126(b), 17-10-3(a), but it does not follow that his discharge in bankruptcy is to be denied as an additional penalty. Moreover, we reject the argument that a loss of workers’ compensation insurance per se is an injury under section 523(a)(6).
Walker,
Accordingly, I find that the penalty portion of the Comp. Award is a dischargeable debt.
VII. CONCLUSION
The motions for summary judgment are granted in part and denied in part. Pursuant to 11 U.S.C. § 523(a)(6), the compensatory component of the Comp. Award is nondischargeable, the penalty component of the Comp. Award is dischargeable and the debt attributable to the Criminal Restitution Debt is nondischargeable.
An appropriate order will be entered.
ORDER
AND NOW, upon consideration of the Plaintiffs Motion for Summary Judgment and the Debtor’s Cross Motion for Sum
It is hereby ORDERED that:
1. The Plaintiff’s Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART.
2. The Debtor’s Cross Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART.
3. The debt attributable compensatory benefits component of the worker’s compensation award and related judgment referenced in the Opinion is NONDISCHARGEABLE under 11 U.S.C. § 523(a)(6).
4. The debt attributable to the penalty component of the worker’s compensation award and related judgment referenced in the Opinion is DIS-CHARGEABLE.
5. The debt attributable to the criminal restitution order referenced in the Opinion is NONDISCHARGEABLE.
Notes
. This court has jurisdiction under 28 U.S.C, § 1334(b). This is a core proceeding. See 28 U.S.C. § 157(b)(2)(I), Therefore, the bankruptcy court may enter a final order.
. In his decision dated June 14, 2007, attached to .Carmelo’s motion for summary judgment as Ex. A, the ALJ made detailed findings of fact and conclusions of law. I will cite to those findings as "FOF #,” to the éxtent those findings are either undisputed or, as discussed infra, entitled to preclusive effect.
. Carmelo denied stealing the money and throwing away the receipts to cover up his theft. However, he paid the $40.00 at issue to the Debtor. (FOF # 9b; Ex. B, Camelo Testimony at 57).
. Carmelo attached seven (8) exhibits to his motion for summary judgment, labeled Exs. A through H. (Doc. # 11). Carmelo filed two (2) additional exhibits with his reply to the Debtor’s response to his summary judgment motion, also designating those exhibits as Exs. A, B and C. (Doc. # 23), To make matters worse, the Debtor submitted two (2) exhibits with his response to Carmelo's motion, also designating them as Exs. A and B. (Doc. #17).
In this Opinion, I will not cite to any of the Debtor’s exhibits. I will cite to the exhibits attached to Carmelo's Motion as "Ex. 1-A” etc. and the exhibits attached to Carmelo’s reply to the Debtor’s response to the Motion ' as "Ex. 2-A” etc.
.Edward Coffey ("Coffey”) was a delivery driver for the Restaurant and was working as such the night of the argument. Coffey testified that only three (3) delivery slips had been attributed to Carmelo for that day and that he found several delivery slips in the garbage dumpster located outside, behind the Restaurant. (Ex. 1-D, Coffey Testimony at 8-9). He informed the Debtor of his discovery, and after Carmelo returned to the Restaurant, the Debtor confronted him. Coffey testified that he did not see the Debtor push Carmelo and Carmelo did not fall. (FOF # 9b; Ex. 1-D, Coffey Testimony at 14).
Edward Brosky ("Brosky”) was a cook for the Restaurant. He was first called to testify for the Restaurant on December 5, 2006. Brosky described the argument over the deliv
Brosky testified again at a later hearing on January 11, 2007 and changed his testimony dramatically. At the later hearing, he testified that he saw the Debtor push Carmelo in the chest and Carmelo fell back and landed on his back. (Id. # 11c).
.By statute, Pennsylvania requires requires employers to maintain worker’s compensation insurance to protect its employees. 77 P.S. § 501(a)(1). A violation under this section, subjects noncompliant employers to civil penalties and criminal sanctions. See 77 P.S. §§ 501(b) and 991(d)(i).
. The criminal docket is a public record and is available at https://ujsportal.pacourts.us/ DocketSheets/CPReport.ashx?docket Number=CP-46-CR-0001820-2007 ("the Criminal Docket"). The first docket entry is dated March 13, 2007. See Criminal Docket atp. 253.
. Criminal Docket at p. 254. The docket states that, as of December 31, 2015, the remaining balance due on the Criminal Restitution Debt is $36,724.96. Id. at p. 264.
. The Debtor does not dispute the authenticity of the Forbearance Agreement. The Forbearance Agreement also includes S.A.K.A.T., LLC as a party, referring to that entity as an operator of the Restaurant.
. Carmelo’s brief in support of his motion refers to and analyzes the applicability of § 523(a)(6) but does not address the merits of his claim under subsection § 523(a)(13). Section 523(a)(13) renders nondischargeable debts for restitution under the U.S. Criminal Code. Nothing in the record suggests that the Debtor has been subject to any federal criminal restitution order. Carmelo probably meant to invoke 11 U.S.C. § 523(a)(7). See generally Kelly v. Robinson,
. Rule 56 is made applicable to this adversary proceeding pursuant to Fed. R. Bankr.P. 7056.
. Pennsylvania preclusion and privity law is generally consistent with federal preclusion and privity law in this circuit. See Hitchens,
. As stated in Part II.A.2, supra, the Comp. Award also included a civil penalty.
. Generally, bankruptcy courts in this circuit have employed a subjective standard, i.e., that a debtor must be subjectively aware that his or her conduct are substantially certain to cause injury, in evaluating willfulness under 11 U.S.C. § 523(a)(6). See In re Gotwald,
. For instance, if this case proceeded to trial, the Debtor would not be able to testify that he did not push Carmelo. Further, in light of his consistent position that he never pushed Carmelo, the Debtor could not with any credibility, concede that he pushed Carmelo but claim that it was an unintended or defensive action.
. The Debtor testified that at the time of the incident, he was between 5’7” and 5’8” inches tall and weighted between 240 and 250 pounds. (Ex. E, Mickletz Dep. at 32-33). Carmelo is similar in height but weighs less. (Ex. 1-B, Carmelo Testimony at 77-78).
. The Restaurant, not the Debtor, was Carmelo's employer. Whether Carmelo was free to bring a tort action against the Debtor individually turns on whether altercation occurred for personal reasons unrelated to employment. See 77 P.S. §§ 411(1),481(b); McErlean v. Borough of Darby,
. See 11 U.S.C. § 101(5) (definition of bankruptcy “claim” as a "right to payment”).
. I have determined that the penalty is not nondischargeable under 11 U.S.C. § 523(a)(6). Carmelo raised no claims, in either the Complaint or his Motion, that the penalty is nondischargeable under any Code section other than § 523(a)(6). I have not considered or analyzed whether the penalty component of the Comp. Award is nondischargeable under any other provision, including § 523(a)(7). On this record, I will determine that component of the debt to be dischargeable, even though nondischargeability claims under § 523(a)(7) are not subject to the sixty (60) day deadline set forth in Fed. R. Bankr.P. 4007(c) and, generally speaking, may be asserted at any time, see Fed. R. Bankr.P. 4007(b). See generally 4 Collier ¶ 523.04 (for "discharge exceptions other than those arising under subsections 523(a)(2), (4) and (6), state courts have concurrent jurisdiction with the bankruptcy court to determine the dischargeability of a debt ... [and there] are no specific time deadlines imposed by the Code or the Federal Rules of Bankruptcy Procedure for the determination of the dischargeability”). In this proceeding, Carmelo put the dischargeability of the debt at issue. At this point, simply leaving the issue open and available to be determined at a later date (perhaps in another forum) effectively would allow Carmelo to split his claims. This would violate basic principles of res judicata. See, e.g., Churchill v. Star Enterprises,