MEMORANDUM OPINION
This matter comes before the Court on Plaintiff’s Motion for Summary Judgment on a Complaint to Determine the Dis-chargeability of Debt. The Court, having reviewed the record, the memoranda of law submitted by the parties, and the applicable law, now rules as follows.
PROCEDURAL BACKGROUND AND FINDINGS OF FACT
Susanne Littlefield [Littlefield], the Plaintiff in this adversary proceeding, is a judgment creditor of the Debtor/defendant Malcolm McGuffey, a/k/a Wally Mack [McGuffey]. McGuffey’s debt to Littlefield
The facts underlying Littlefield’s district court lawsuit against McGuffey are set forth in the opinion of District Judge Ann C. Williams, denying McGuffey’s motions for judgment notwithstanding the verdict and a new trial.
Littlefield v. Mack,
Approximately two weeks after agreeing to rent the apartment to Littlefield, McGuffey learned that Littlefield’s boyfriend, who is also the father of Littlefield’s child, is black. McGuffey then informed Little-field that she could not rent the apartment. McGuffey removed Littlefield’s belongings from the apartment and changed the locks. In addition, according to the testimony of Littlefield and at least seven other witnesses, McGuffey began a campaign of harassment and intimidation against Littlefield. He reportedly telephoned Littlefield at home and spewed racial invectives at her. He made similarly harassing and racially abusive telephone calls to Littlefield’s sister, Kathleen Gutierrez, and even visited Gutierrez’s home on one occasion. Finally, McGuffey discovered the location of Little-field’s new apartment and pinned a note containing a death threat against her boyfriend to her door.
Littlefield’s lawsuit in federal district court alleged that McGuffey’s conduct violated 42 U.S.C. §§ 1982, 3604, 3613, and 3617, as well as constituting intentional infliction of emotional distress under Illinois common law. Section 1982, which was enacted as part of the Civil Rights Act of 1866, provides that “[a]ll citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property.” 42 U.S.C.A. § 1982 (West 1981). Sections 3604, 3613, and 3617 are part of the Fair Housing Act, which was enacted as Title VIII of the Civil Rights Act of 1968. Section 3604 prohibits various forms of discrimination in the sale or lease of residential property, while § 3617 prohibits coercion or intimidation of any person attempting to exercise or enjoy fair housing rights. Section 3613 provides a private right of action for Fair Housing Act violations. 42 U.S.C.A. §§ 3640, 3613, 3617 (West Supp.1991).
The jury found in favor of Littlefield and awarded her compensatory damages in the amount of $50,000 and punitive or exemplary damages in the amount of $100,000. In addition, after denying McGuffey’s motions for judgment notwithstanding the verdict and a new trial, Judge Williams awarded attorneys’ fees and costs in the amount of $174,002.36 to Littlefield as the prevailing party on her federal claims.
Littlefield filed a Complaint to Determine the Dischargeability of Debt, requesting this Court to find the entire judgment debt of $324,002.36 nondischargeable under § 523(a)(6). Littlefield asserts that the jury verdict and district court judgment collaterally estop McGuffey from disputing that the judgment debt is a debt for a “willful and malicious injury” within the meaning of § 523(a)(6). Littlefield therefore moves for the entry of summary judgment on her Complaint. McGuffey denies that the district court judgment has collateral estoppel effect in this proceeding and opposes the summary judgment motion.
CONCLUSIONS OF LAW
I. Nondischargeability Under § 523(a)(6)
Rule 56(c) of the Federal Rules of Civil Procedure, which applies to bankruptcy adversary proceedings pursuant to Bankruptcy Rule 7056, states that a motion for summary judgment should be granted “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” The primary purpose of summary judgment is to avoid unnecessary trials in cases where no material factual issues are in dispute.
Wainwright Bank & Trust Co. v. Railroadmens Fed. Saving and Loan Ass’n,
Littlefield argues that summary judgment is appropriate in this case because the district court judgment conclusively resolved all of the factual issues necessary to establish that the judgment debt is nondis-chargeable under § 523(a)(6). She asserts that McGuffey is collaterally estopped from denying that the judgment debt is a debt for a “willful and malicious injury” to Littlefield. She therefore concludes that no material factual issues are in dispute, and that she is entitled to judgment as a matter of law.
In order to evaluate Littlefield’s arguments, the Court must first examine the elements of a nondischargeability claim under § 523(a)(6), as well as the applicability of collateral estoppel doctrine to bankruptcy dischargeability proceedings. The Court may then apply the law to the facts of this case.
A. Section 523(a)(6)
Section 523(a)(6) of the Bankruptcy Code provides that a general discharge of debts in bankruptcy does not discharge a debtor from any debt “for willful and malicious injury by the debtor to another entity or the property of another entity.” 11 U.S.C. § 523(a)(6). The policy behind § 523(a)(6) is to preserve the benefits of bankruptcy’s “fresh start” for the honest debtor, not the malicious wrongdoer.
United Bank of Southgate v. Nelson,
The legislative history of § 523(a)(6) defines the term “willful” as “deliberate or intentional.” H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 365 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6320
(cited in In re Scotella,
Courts have been less consistent, however, in defining the term “malicious” for § 523(a)(6) purposes. Some courts have held that a debtor acts maliciously within the meaning of § 523(a)(6) only when he or she acts with
actual
malice, or with the specific intent to harm a creditor or a creditor’s property.
See, e.g., Ohio Grain Co. v. Gentis,
The Seventh Circuit has not yet defined the term “malicious” for § 523(a)(6) purposes. This Court is persuaded, however, that the more liberal definition of “malicious,” which includes implied or constructive malice as well as actual malice, is the better definition. As the District Court for the Northern District of Illinois pointed out in
United Bank of Southgate v. Nelson,
this liberal definition is consistent with legislative history and judicial precedent. The court in
Southgate
discussed the United States Supreme Court case of
Tinker v. Colwell,
... we think a wilful [sic] disregard of what one knows to be his duty, an act which is against good morals, and wrongful in and of itself, and which necessarily causes injury and is done intentionally, may be said to be done willfully and maliciously, so as to come within the exception.
Tinker,
The official Congressional comments accompanying § 523(a)(6) of the current Bankruptcy Code indicate that Congress intended to statutorily overrule the Tinker holding to a certain extent. The House and Senate reports on § 523(a)(6) state:
[§ 523(a)(6)] excepts debts for willful and malicious injury by the debtor to another person or to the property of another person. Under this paragraph, willful means deliberate or intentional. To the extent that Tinker v. Colwell [citation omitted] held that a looser standard is intended, and to the extent that other cases have relied on Tinker to apply a reckless disregard standard, they are overruled.
Sen.Rep. No. 95-989, 95th Cong., 2d Sess. 79 (1978); H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 365 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5865, 6320, 6321
(quoted in Southgate,
Policy considerations also indicate that the term “malicious” should encompass implied or constructive malice for purposes of § 523(a)(6). An overly-narrow definition of the term “malicious” under § 523(a)(6) would hinder the policy underlying exceptions to discharge. Requiring proof that a debtor subjectively intended to harm a creditor’s interests would impose a nearly
Accordingly, this Court holds that a debt- or need not subjectively intend to harm a creditor in order to commit a “willful and malicious” act within the meaning of § 523(a)(6). Implied or constructive malice is sufficient to support a finding of nondis-chargeability under § 523(a)(6).
B. Collateral estoppel
The doctrine of collateral estoppel provides that a factual issue which has been actually and necessarily litigated and finally determined in a prior lawsuit may not be relitigated in a subsequent lawsuit.
Klingman v. Levinson,
There are four requirements which must be met before collateral estop-pel will preclude relitigation of a factual issue in a subsequent bankruptcy proceeding. First, the issue which is sought to be precluded from relitigation must be the same as the issue involved in the prior proceeding. Second, the issue sought to be precluded must have been actually litigated in the prior proceeding. Third, determination of the issue must have been essential to the final judgment in the prior proceeding. Finally, the party against whom estoppel is sought must have been fully represented in the prior action.
Klingman,
C. Application of collateral estoppel doctrine to the instant case
McGuffey argues that he is not collaterally estopped from denying that his judgment debt to Littlefield is a debt for “willful and malicious injury” within the meaning of § 523(a)(6) for two reasons. First, McGuffey claims that the elements necessary for application of the collateral estop-pel doctrine have not been fully met in this case. McGuffey concedes that the parties had a full trial in federal district court at which McGuffey was adequately represented. He argues, however, that the issue of whether McGuffey behaved “willfully and maliciously” as defined in § 523(a)(6) of the Bankruptcy Code was not involved in the district court case and was neither actually litigated nor essential to the final judgment in that case.
The first step in determining what issue were actually and necessarily litigated in the district court proceeding is to establish the legal basis on which McGuffey was found liable to Littlefield in the district court. McGuffey correctly notes that the district court jury verdict leaves some uncertainty regarding the grounds on which judgment was entered in Littlefield’s favor. Although Littlefield sued McGuffey in district court on four separate legal grounds — federal civil rights law, two provisions of federal fair housing law, and common law intentional infliction of emotional distress — the district court judgment awards Littlefield aggregated damages without specifying whether Littlefield pre
In spite of its lack of specificity, however, the district court judgment does contain enough information to allow this Court to determine the legal basis for McGuffey’s liability to Littlefield, at least in part. Under Illinois common law, punitive damages are not available in actions for intentional infliction of emotional distress.
Littlefield v. Mack,
Having found that Littlefield prevailed in the district court on at least one of her federal claims, this Court concludes that the issue of whether McGuffey acted “willfully” was actually and necessarily litigated in the district court proceeding. McGuffey therefore is collaterally estopped from denying that his liability to Littlefield arose from willful conduct within the meaning of § 523(a)(6). As noted above, “willful conduct” under § 523(a)(6) consists of conduct which is “deliberate or intentional.” Intentional discrimination was an essential element of each of the three federal claims which Littlefield raised against McGuffey in her district court lawsuit. Thus, in order to find in Littlefield’s favor on any one of her federal claims, the district court jury must have determined that McGuffey behaved willfully.
First, Littlefield could not have prevailed on her Section 1982 claim without proving that McGuffey intentionally or willfully discriminated against her because of the race of her daughter and her boyfriend. The United States Supreme Court decision in
General Bldg. Contractors Ass’n, Inc. v. Pennsylvania,
Second, Littlefield’s claims under the Fair Housing Act were also based on McGuffey’s alleged intent to discriminate against her because of the race of her daughter and her boyfriend. Admittedly, it is possible to establish a violation of the Fair Housing Act without proving discriminatory intent or purpose. Federal courts have recognized two distinct types of Fair Housing Act claims: “discriminatory intent” claims and “disparate impact” claims.
See Phillips,
Littlefield’s claims against McGuffey under the Fair Housing Act, however, were not “disparate impact” challenges to a facially neutral policy. They were instead “discriminatory intent” claims based on a discrete real estate transaction in which McGuffey refused to rent to Littlefield for allegedly racial reasons. An essential ele
In addition to determining that McGuffey’s conduct was “willful” within the meaning of § 523(a)(6) of the Bankruptcy Code, the district court jury also determined that McGuffey’s conduct was “malicious” within the meaning of that statute. As discussed above, this Court holds that an act is “malicious” for purposes of § 523(a)(6) if the act is done with either actual or constructive malice i.e. if the act is done with the intent to harm another, or if the nature of the act is such that it will necessarily harm another. In order to award Littlefield punitive damages, the district court jury must have found that McGuffey’s conduct toward Littlefield exhibited either actual or constructive malice. McGuffey is therefore collaterally estopped from denying that his debt to Littlefield arose from “malicious” conduct under § 523(a)(6).
The district court judge instructed the jury that it could award Littlefield punitive damages only if it found that McGuffey’s conduct was “maliciously or wantonly or oppressively done.” Jury Instruction, “Racial Discrimination Under Sections 1982, 3604, 3613 and 3617 — Compensatory and Punitive Damages.” The district court defined the terms “maliciously,” “wantonly,” and “oppressively” for the jury as follows:
An act or failure to act is maliciously done if prompted or accompanied by ill will or spite or grudge either toward the injured person individually or toward all persons in one or more groups or categories of which the injured person is a member.
An act or failure to act is wantonly done if [done] in reckless or callous disregard of or indifference to the rights of one or more persons including the injured person.
An act or failure to act is oppressively done if done in a manner which injures or damages or otherwise violates the rights of another person with unnecessary harshness or severity as by misuse or abuse of authority or power or by taking advantage of some weakness or disability of [sic] the misfortunes of another person.
Id. (emphasis added). Under the district court’s definitions, “malicious” conduct, “wanton” conduct, and “oppressive” conduct all constitute conduct which is “malicious” for purposes of § 523(a)(6). An act “prompted or accompanied by ill will or spite or grudge,” which the district court defined as “malicious” conduct, is an act done with the specific intent to cause harm to another, or actual malice. An act done “in reckless or callous disregard of or indifference to the rights” of another, which the district court defined as “wanton” conduct, is an act done in the face of knowledge that harm to another is likely to result, or an unjustified act which necessarily and predictably harms another, i.e. an act done with constructive malice. Similarly, an act done “with unnecessary harshness or severity,” which the district court defined as “oppressive” conduct, is also an unjustified act which necessarily and predictably harms another, or a constructively malicious act.
McGuffey argues that this Court cannot use the district court’s jury instructions as a basis for finding that the district court judgment has collateral estoppel effect in this case because the language of the jury instructions is not identical to the language used in cases interpreting
The facts in Smith, for example, are quite similar to the facts in the instant case. In Smith, a claimant sought to have the bankruptcy court declare a judgment debt owed by the debtor to the claimant nondischargeable under § 523(a)(6) of the Bankruptcy Code. The claimant also filed a motion for summary judgment on its complaint to determine nondischargeability, arguing that the state court judgment giving rise to the debt collaterally estopped the debtor from denying that the debt was for “willful and malicious injury.” The bankruptcy court agreed with the claimant and granted the motion for summary judgment.
In determining that the debtor was collaterally estopped from disputing that the conduct giving rise to the judgment debt was “malicious” for purposes of § 523(a)(6), the bankruptcy court relied on the fact that the state court jury had awarded the claimant punitive damages. The state court judge had instructed the jury that it could award punitive damages only if it found that the debtor had acted “willfully and maliciously under circumstances of rudeness or oppression or in a manner which shows wanton or reckless disregard for the plaintiffs rights.” Id. at 1000. The bankruptcy court held that either a jury finding that the debtor had behaved “willfully and maliciously under circumstances of rudeness or oppression” or a jury finding that the debtor had behaved “in a manner which shows wanton or reckless disregard for the plaintiffs rights” was equivalent to a finding that the debtor had behaved “maliciously” within the meaning of § 523(a)(6). Id.
McGuffey directs this Court’s attention to the cases of
Matter of Martin,
The decisions in
Martin
and
Schwenn
can be distinguished, however, from the decision in
Smith.
In both
Martin
and
Schwenn,
the claimant argued that the punitive damage award established conclusively that the conduct giving rise to the debtor’s liability was
both
willful
and
malicious within the meaning of § 523(a)(6). The
Martin
and
Schwenn
courts noted that the disjunctive nature of the punitive damage instruction allowed the jury to award punitive damages if it found that the debtor’s conduct was malicious
or
wanton
or
willful
or
reckless. Thus, under the jury instruction, the jury might have awarded punitive damages based on a finding that the debtor had behaved either willfully
or
maliciously, rather than both willfully
and
maliciously, as required by § 523(a)(6).
Martin,
In
Smith,
on the other hand, the bankruptcy court examined the punitive damage jury instruction solely for the purpose of determining whether the jury in the prior proceeding had found the debtor’s conduct to be “malicious” within the meaning of § 523(a)(6).
Smith,
The
Smith
court noted that although the definition of “willfulness” set forth in
Tinker v. Colwell
had been modified by the enactment of § 523(a)(6) of the Bankruptcy Code, the definition of “maliciousness” set forth in that opinion had not been affected by the enactment of the Code.
Smith,
The Martin and Schwenn opinions therefore are not inconsistent with the Smith opinion. The Martin and Schwenn courts correctly held that conduct which is merely reckless is not sufficient to support nondischargeability under § 523(a)(6). In contrast, the Smith court held, also correctly, that conduct which is both deliberate or intentional and shows a reckless disregard for the rights of others is sufficient to support nondischargeability under § 523(a)(6).
The instant case parallels the Smith case rather than the Martin and Schwenn eases. This Court has already determined, based on the elements of the federal claims which Littlefield raised in her district court action, that the district court jury must have found McGuffey’s conduct toward Lit-tlefield to have been willful and intentional. This Court therefore is examining the punitive damage jury instruction administered in the district court case solely for the purpose of determining whether the jury could have awarded Littlefield punitive damages without finding that McGuffey's conduct was also “malicious” within the meaning of § 523(a)(6). Admittedly, under the jury instruction administered in the district court, the jury could have awarded Littlefield punitive damages based on a finding that McGuffey acted “in reckless disregard ... of or indifference to the rights of one or more persons.” Jury Instructions, “Racial Discrimination Under Sections 1982, 3604, 3613 and 3617 — Compensatory and Punitive Damages.” As the Smith court held, however, such a finding is sufficient to support nondischargeability under § 523(a)(6) when coupled with a finding that McGuffey’s conduct was deliberate or intentional.
In summary, the district court judgment in this case meets each of the four requirements for collateral estoppel with respect to the issue of whether McGuffey’s liability to Littlefield arose from “willful and malicious” conduct. McGuffey concedes that he was fully represented in the district court proceeding. In addition, the issue of
As his second argument in opposition to Littlefield’s Motion for Summary Judgment, McGuffey asserts that he is not collaterally estopped from denying that his debt to Littlefield is nondischargeable as a debt for “willful and malicious injury” because the record of the district court proceeding contains no evidence that Little-field suffered actual damages as a result of McGuffey's conduct. McGuffey notes in particular that the jury made no specific finding regarding the actual damages sustained by Littlefield, and that the jury was instructed that it need not find that McGuffey’s conduct caused any physical injury or threat of physical injury to Littlefield or her property. McGuffey’s argument is completely without merit.
Admittedly, McGuffey is correct in contending that a debt may not be declared nondischargeable under § 523(a)(6) unless the debtor's willful and malicious conduct caused some injury to the creditor seeking discharge. McGuffey is incorrect in suggesting, however, that physical injury is required to support a finding of nondis-chargeability under § 523(a)(6). Case law establishes that § 523(a)(6) imposes no requirement of bodily injury or physical abuse.
See Caldwell,
In addition, McGuffey’s claim that the record contains no evidence that Littlefield suffered actual damages is preposterous. By awarding Littlefield $50,000 in compensatory damages on her claims, the district court jury clearly found that McGuffey’s conduct had caused Littlefield actual injury. The district court instructed the jury that if it found in Littlefield’s favor on any of her federal claims, it was to award her “such actual or compensatory damages as you find from a preponderance of the evidence were proximately caused by the acts of the defendants.” Jury Instruction, “Racial Discrimination Under Sections 1982, 3604, 3613 and 3617 — Compensatory and Punitive Damages.” The court further instructed the jury, “If you do not find that plaintiff suffered any actual damages, then you may award her some nominal sum, such as one dollar, as damages.” Id. Similarly, the jury was instructed:
If you find in favor of the plaintiff on her claim of intentional infliction of emotional distress, you should award plaintiff such sum as you believe will fairly and justly compensate plaintiff for any damages you believe she sustained and is reasonably certain to sustain in the future as a direct result of the defendants’ conduct.
If you find that she did not suffer any actual damages, then you may award her some nominal sum, such as one dollar, as damages.
Jury Instruction, “Actual Damages for Intentional Infliction of Emotional Distress.” An award of $50,000' hardly constitutes nominal damages. The jury therefore must have found that Littlefield suffered actual damages. Furthermore, the Seventh Circuit Court of Appeals upheld the jury’s compensatory damage award on review over McGuffey’s claim that the award was not supported by the evidence.
Littlefield v. McGuffey,
Because the question of whether McGuffey’s liability to Littlefield arose from “willful and malicious” conduct was conclusively determined in the district court proceeding, there is no genuine issue of material fact in this case regarding whether McGuffey’s debt to Littlefield is nondischargeable pursuant to § 523(a)(6) of the Bankruptcy
II. Amount of Nondischargeability
The only issue which remains to be settled is the amount of McGuffey’s $324,-002.36 judgment debt which is nondis-chargeable under § 523(a)(6). McGuffey argues that only that portion of the judgment which represents actual damages is nondischargeable. He maintains that those portions of the judgment representing attorneys’ fees and punitive damages are subject to discharge. Littlefield, on the other hand, asserts that the entire judgment debt, including the amounts representing attorneys’ fees and punitive damages, is nondischargeable.
A. Nondischargeability of punitive damages under § 523(a)(6)
Courts are sharply divided regarding the nondischargeability of punitive damage awards under § 523(a)(6). Some courts have held that if a judgment debt consisting of both actual damages and punitive damages is deemed to have arisen from willful and malicious conduct on the part of the debtor, only the portion of the judgment debt representing actual damages may be held nondischargeable under § 523(a)(6).
See In re Alwan Bros. Co., Inc.,
The courts which have refused to declare punitive damage awards nondischargeable under § 523(a)(6) have advanced a number of reasons for their refusal. Several of these courts focus on the fact that § 523(a)(6) provides an exception to discharge for debts “for willful and malicious
injury”
caused by the debtor to the person or property of another. 11 U.S.C. § 523(a)(6) (emphasis added). These courts assert that discharge under § 523(a)(6) is limited by the extent of the injury resulting from the debtor’s willful and malicious conduct. Because punitive damages “are not compensation for injury,” but are “imposed to punish a wrongdoer and deter others from committing like offenses in the future,” punitive damages “are not a debt for injury caused by a debtor’s willful and malicious acts.”
Alwan Bros.,
In addition, some courts assert that refusing to hold punitive damage awards nondischargeable under § 523(a)(6) is consistent not only with the language of § 523(a)(6), but also with the language of other sections of the Bankruptcy Code. These courts point in particular to § 523(a)(7), which explicitly provides an exception to discharge for punitive damages owed to a governmental unit. Section 523(a)(7) excepts from discharge any debt “to the extent such debt is for a fine, penalty, or forfeiture payable to .md for the benefit of a governmental unit, and is
not compensation for actual pecuniary loss.”
11 U.S.C. § 523(a)(7) (emphasis added). According to some courts, the difference between the language of § 523(a)(6) and the language of § 523(a)(7) indicates that Congress did not intend for punitive damages owed to private litigants, as opposed to governmental units, to be nondis-chargeable.
See, e.g., Alwan Bros.,
A third basis on which some courts refuse to hold punitive damage awards non-dischargeable under § 523(a)(6) is the
[t]he Bankruptcy Court is not a forum for deterring misconduct. A dishonest debtor is penalized under [§ 523(a)(6) ] by not being absolved of his obligation to compensate certain creditors for the harm he has caused. But there is no punishment for punishment’s sake in bankruptcy.
Alwan Bros.,
Courts which do permit punitive damage awards to be excepted from discharge under § 523(a)(6) also advance a number of justifications in support of their position. Most of these courts assert that nothing in the language of § 523(a)(6) requires courts to treat compensatory and punitive damages differently under that section. They note that § 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.” 11 U.S.C. § 523(a)(6) (emphasis added). They further note that the Bankruptcy Code’s definition of the term “debt” is quite broad. The Code defines a “debt” as a “liability on a claim.” 11 U.S.C. § 101(12). The term “claim,” in turn, is defined as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidat-ed, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.” 11 U.S.C. § 101(5)(a). In light of these definitions, courts often find that the term “debt” is more than broad enough to encompass punitive damage awards as well as compensatory damage awards for purposes of nondischargeability under § 523(a)(6).
See Dahlstrom,
In fact, a number of courts have suggested that the language of § 523(a)(6) affirmatively favors holding punitive damages nondischargeable when the punitive damages were awarded in connection with a judgment debt arising from willful and malicious conduct. Many courts hold that nondischargeability under § 523(a)(6) turns on the nature of the act giving rise to the debt rather than on the nature of the debt itself.
See Miera,
Several courts also have concluded that the language and structure of § 523(a) as a whole indicate that Congress
did
intend to allow punitive damages awarded to private litigants to be excepted from discharge under certain circumstances. Some courts note that nothing in the text or history of § 523(a) indicates that Congress intended § 523(a)(7) to preclude non-governmental creditors from seeking to have debts declared nondischargeable under
other
subsections of § 523(a), such as § 523(a)(6).
In re Levy,
Furthermore, several courts state that excepting punitive damage awards from discharge under § 523(a)(6) does not contravene the Bankruptcy Code’s “fresh start” policy. These courts point out that the “fresh start” provided by the Bankruptcy Code is reserved for the “honest but unfortunate debtor.”
Dahlstrom,
Finally, a few courts have supported the holding that punitive damage awards may be nondischargeable under § 523(a)(6) by referring to the United States Supreme Court case of
Grogan v. Garner,
Arguably, fraud judgments in cases in which the defendant did not obtain money, property, or services from the plaintiffs and those judgments that include ■punitive damages awards are more appropriately governed by § 523(a)(6).
Grogan,
498 U.S. at - n. 2,
This Court now holds that when a judgment debt is deemed to have arisen from willful and malicious conduct on the part of a debtor, the entire judgment debt, including both compensatory and punitive damages, is nondischargeable under § 523(a)(6). This Court is persuaded that the language of § 523(a)(6) provides for the nondis-chargeability of all debts arising from a debtor’s willful and malicious act which causes injury to the person or property of another. In addition, this Court finds that excepting punitive damages from discharge under § 523(a)(6) is not inconsistent with the Bankruptcy Code’s “fresh start” policy because § 523 of the Bankruptcy Code sets forth explicit exceptions to that policy. Finally, this Court does not interpret § 523(a)(7) as providing that only punitive damages owed to governmental units may be excepted from discharge under § 523(a).
B. Nondischargeability of attorneys’ fees under § 523(a)(6)
There is also mixed authority regarding whether court-awarded attorneys’ fees are subject to discharge when the judgment debt to which the fees attach is held nondischargeable under one of the provisions of § 523(a).
2
A few cases hold that an award of attorneys’ fees is dis-chargeable in bankruptcy, even if the underlying judgment debt is nondischargeable, unless there is some statutory or contractual authority for exempting the fee award from discharge.
See Cheatham,
The
Beard
court noted that the essence of an action under § 17(a)(2) of the Bankruptcy Act was the common law tort of misrepresentation or fraud. The court asserted that the nondischargeability of the debtor’s judgment debt therefore was not based on the fact that the debtor had violated the federal odometer fraud statute, but instead was based on the fact that in violating that statute, the debtor had committed the elements of common-law fraud.
Id.
at 682 (“The odometer fraud statute did not amend the Bankruptcy Act. The basis for relief under § 17(a)(2) remains un
The majority of courts hold, however, that if a judgment debt is found to be nondischargeable under § 523(a) of the Bankruptcy Code, any attorneys’ fees awarded in the judgment are also nondis-chargeable. Some courts favor the nondis-chargeability of attorneys’ fees because they believe the fees are part of the actual damages suffered by the creditor as a result of the wrongful conduct which gave rise to the debt’s nondischargeability.
See, e.g., In re Kwiat,
The Seventh Circuit Court of Appeals apparently has sided with the courts which hold that attorneys’ fees awarded in connection with a judgment debt found to be nondischargeable under § 523(a) are likewise nondischargeable. In
Klingman v. Levinson,
the Seventh Circuit affirmed a district court holding that court-awarded attorneys’ fees were nondischargeable under § 523(a)(4) of the Bankruptcy Code because the judgment to which the fee award attached was found to be nondischargeable under that section.
Klingman v. Levinson,
Although the Klingman case involved a complaint for nondischargeability brought under § 523(a)(4), there is nothing in the Klingman opinion to suggest that the court’s holding on the dischargeability of attorneys’ fees is restricted to that section of the Code. Accordingly, in light of the Klingman opinion, and in light of the fact that the judgment debt at issue in this case is found to be nondischargeable under § 523(a)(6) of the Bankruptcy Code, this Court holds that the attorneys’ fees awarded by the federal district court in connection with the primary judgment are also nondischargeable under § 523(a)(6).
In summary, this Court finds that the entire judgment debt which McGuffey owes to Littlefield, including those portions of the judgment which represent punitive damages and attorneys’ fees, are nondis-chargeable pursuant to § 523(a)(6) of the Bankruptcy Code. An appropriate order will follow.
Notes
. At least one court has held that excepting punitive damage awards from discharge is also inappropriate because it would effectively "punish the innocent unsecured creditors by virtue of a substantial depletion of the estate for a wrong committed by the debtor."
Cheatham,
. Some of the most common exceptions to discharge are found in §§ 523(a)(2), 523(a)(4), and 523(a)(6) of the Bankruptcy Code. As noted above, § 523(a)(2) excepts from discharge debts obtained by "false pretenses, a false representation, or actual fraud” or by use of a statement which materially misrepresents the debtor’s financial condition. 11 U.S.C. § 523(a)(2). Section 523(a)(4) excepts from discharge a debt for "fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” 11 U.S.C. § 523(a)(4). In analyzing the dischargeability or nondischargeability of attorneys' fees awarded in connection with a judgment debt which has been held nondischargeable under § 523(a), courts rarely, if ever, draw distinctions based on whether the judgment debt was found nondis-chargeable under § 523(a)(2), (a)(4), or (a)(6).