Mills v. Ellerbee (In Re Ellerbee)Mills v. Ellerbee (In Re Ellerbee)
DECISION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT
In 1987 and 1988, Dexter Ellerbee repeatedly libeled Dexter Mills. Mills sued in state court and won a judgment for punitive damages and attorney’s fees, so Ellerbee filed a bankruptcy petition. Mills seeks a ruling from this court that the judgment is for a willful and malicious injury and thus is not dischargeable.
An Eleventh Circuit ease in this area holds that a state court finding of actual malice based on a reckless disregard for the truth renders a debt for defamation nondischargeable. A Sixth Circuit case, on the other hand, holds that reckless disregard for the truth can never be the basis for determining that a debt for defamation is nondischargeable. The split of authority on the meaning of section 523(a)(6) of the Bankruptcy Code springs partly from interpretation of somewhat ambiguous legislative history published in 1977 and 1978. That commentary stated that the drafters intended the enactment of that section to overrule cases that had applied a “reckless disregard standard” in determining the dischargeability of a debt for an allegedly willful and malicious injury.
Confusion has also resulted from the use of the words “malice” or “malicious” in the context of tort law as a guidepost that points in the direction of a “willful and malicious injury” or from the use of the word “reckless” as a guidepost to navigate in the opposite direction. That methodology is like using a compass too close to a magnet. The arrow may or may not point in the right direction. The reason is that in areas of law other than bankruptcy, these words do work, often in a foggy way, that may or may not be true to what section 523(a)(6) is getting at. The potential for wandering in the wrong direction increases when the underlying tort is defamation, because that law has its own peculiar and sometimes confusing or conflicting meanings for these words.
After considering the arguments of the parties and the evidence submitted in connection with the motions, the court denies Ellerbee’s motion for summary judgment because reckless disregard of the truth does not preclude a willful and malicious injury. It grants Mills’ motion for summary judgment, in spite of the fact that the state court finding of actual malice is not entitled to collateral estoppel effect, because he presented uncontroverted evidence that proves the debt is for a willful and malicious injury.
FINDINGS OF FACT
The material facts are not in dispute. Mills was the Principal of North Cobb High School in Cobb County, Georgia from 1986 through 1990. He gave Ellerbee, a teacher at the high school during the 1987 school year, an unfavorable evaluation: Thereafter, Ellerbee resigned his teaching position. In his answer to the complaint in this adversary proceeding, Ellerbee admitted that after he resigned, he made numerous written and oral statements in which he implicitly or expressly alleged that Mills had engaged in immoral, unethical, fraudulent, harassing, terroristic and other improper conduct. He accused the Plaintiff of having committed crimes. Eller-bee made the allegations in letters to teachers, local officials, community leaders and the Cobb County School Board, in advertisements published in the local paper, and on signs posted near the high school. The excerpts of the transcript of the trial in the Superior Court submitted by Mills show that Ellerbee repeatedly and obsessively published statements impugning Mills’ character and integrity.
In January, 1989, Mills sued Ellerbee for libel and slander in the Superior Court of Cobb County, Georgia. At the trial, Ellerbee admitted that the allegations he made against Mills would tend to injure one’s reputation. He admitted that he had published a letter to teachers calling for Mills’ resignation or transfer and the placement of a written reprimand in Mills’ personnel file for “fraudulent actions.” The letter further stated, “Alone there is really not much any of us could do, but in unity, we strike back at the man that has done so much harm to so many.” (Trial Tr. 59).
Ellerbee received a letter from counsel for Mills in early November, 1988 requesting him to retract and to stop making false state
The state court charged the jury as follows:
... the jury may give additional damages either to deter the wrongdoer from repeating the trespass or as compensation to the wounded feelings of the plaintiff.
Punitive, that is, aggravated, damages may be authorized when the circumstances of the wrong are such as to show an entire want of care and an indifference to the consequences.
The measure of such damages is your enlightened conscience as an impartial jury.
Now, ladies and gentlemen, I charge you that the speech and statements complained of by the plaintiff are of a public concern. Therefore, for in order for the plaintiff to be entitled to an award of punitive damages, he must demonstrate that the statements complained of were made with actual malice, as I will define that for you.
Reckless disregard of the truth is equivalent to malice. I charge you that a statement is made with actual malice, as the term is used in this charge, if it is made with knowledge that it is false or with reckless disregard of whether it is false or not.
In order to establish recklessness, the plaintiff must prove that the defendant had a high degree of awareness of the probable falsity of the statements published.
I charge you, ladies and gentlemen, that ill-will, hatred or hostility or even spite do not necessarily constitute actual malice as I had described the term to you.
It is never expected that a publisher will admit his own malice. The circumstances, all of the circumstances must be considered. And from the circumstances, despite the publisher’s sworn testimony to the contrary, a jury may properly conclude that the publisher was motivated by malice.
The expenses of litigation are generally not allowed as part of damages, but if the defendant has acted in bad faith or has been stubbornly litigious or has caused the plaintiff unnecessary trouble and expense, you may allow them.
The jury returned a verdict on May 24, 1991, awarding Mills $1.00 in compensatory damages, $1.00 in nominal damages, $26,-920.00 in punitive damages and $26,920.00 in attorney’s fees. The Superior Court entered a judgment against Ellerbee that embodied the jury award and a separate order enjoining Ellerbee from making any further false statement against Mills.
The Debtor appealed the judgment and the injunction to the Georgia Supreme Court. The Supreme Court affirmed the judgment, but reversed the injunction as overly broad.
Ellerbee v. Mills,
Ellerbee then filed a Chapter 7 petition and scheduled the judgment in favor of Mills as an unsecured claim. Mills responded with this adversary proceeding. In his answer, the Debtor denies that the statements he made concerning the Plaintiff were false or were made with malice.
JURISDICTION
The court has jurisdiction in this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(a) and 157(b)(2)(I).
ISSUES
This case presents the following related and overlapping issues:
1. Does a finding by a jury that the Defendant published defamatory statements with “actual malice” preclude litigation concerning whether the debt embodied in the judgment is for a “malicious injury” within the meaning of section 523(a)(6)?
2. May affidavits of jurors be considered in deciding whether to give collateral estoppel effect to a judgment of another court?
4. Are attorney’s fees nondischargeable merely because damages are? Must the Plaintiff show that the Defendant’s bad faith or stubborn litigiousness was the infliction of a willful and malicious injury in order to show that the debt for fees is nondischargeable?
DISCUSSION AND CONCLUSIONS OF LAW
I. Summary Judgment Standard.
The evidence submitted by Mills included excerpts of Ellerbee’s testimony at the trial and the instructions to the jury. He also submitted affidavits of three jurors, who stated that the jury awarded punitive damages and attorney’s fees because Ellerbee “acted in bad faith by repeatedly publishing derogatory statements about Plaintiff Mills even though he knew many of the statements were not true.” The Debtor submitted no evidence in support of his own motion or in opposition to the motion of the Plaintiff.
Pursuant to Fed.R.Civ.P. 56(c), incorporated in Fed.R.Bankr.P. 7056, a party moving for summary judgment is entitled to prevail 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.”
Celotex Corp. v. Catrett, 477
U.S. 317, 322,
Unless the moving party shows that there is no genuine issue of material fact, the opposing party has no burden to show that a genuine issue of material fact exists.
Clark,
The Plaintiff arg-ues that there is no genuine issue as to any material fact, all material facts having already been litigated and determined by the state court.
II. Applicability of Collateral Estoppel.
A. The Applicable Law.
The doctrine of collateral estoppel is applicable to dischargeability eases in bankruptcy.
Grogan v. Garner,
(1) the issue at stake had to be identical to the one involved in the prior litigation;
(2) the issue must have been actually litigated in the prior litigation;
(3) the determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in that earlier action; and
(4) the standard of proof in the prior litigation must have been at least as stringent as the standard of proof in the present action.
In Georgia, collateral estoppel will preclude further litigation of facts determined in a prior proceeding when these three requirements are met:
(1) the issue determined in the prior proceeding is the same as that in the subsequent proceeding, Firestone Tire & Rubber Co. v. Pinyan,155 Ga.App. 343 ,270 S.E.2d 883 (1980);
(2) the issue was actually litigated and determined, Blakely v. Couch,129 Ga. App. 625 ,200 S.E.2d 493 (1973); and
(3) the issue was necessary to the adjudication of the prior proceeding, Blakely v. Couch, supra.
Thus, the standards argued by the parties and those applicable under Georgia law are, at least on their face, virtually identical.
B. The Reach of Collateral Estoppel in This Case.
To have awarded punitive damages under the instructions given, the jury must have found that Ellerbee defamed Mills with actual malice, as that term was defined by the state court. Mills contends that the issue of malice was therefore actually litigated and was necessary to the determination reached in the state court. He further contends that the issue of malice is the same in both cases.
Ellerbee argues that the jury may have implied actual malice by finding a reckless disregard of the truth, rather than by finding that he knew the statements were false. He contends that a court may find malice under section 523(a)(6) in a defamation case only if it finds the speaker knew his statements were false. He contends that if the statements were false, he did not act willfully because he was only reckless.
A Georgia court would apply the doctrine of collateral estoppel only where the issue previously determined in litigation between the same parties is the same issue in the current case. The issue decided by the state court—that Ellerbee acted with actual malice because at the very least he recklessly disregarded the truth—is not the issue before this court. Because the jury’s verdict that Ellerbee acted with “actual malice” does not rule out the possibility that he recklessly disregarded the truth, the finding of “actual malice” does not prove that Ellerbee intended to injure Mills or knew that injury to Mills would necessarily follow from his conduct. The instructions apparently did not permit the jury to consider whether Ellerbee had a “just cause” for his action. Intent to injure and just cause for otherwise wrongful conduct are elements intimately involved in a determination of whether a debt is for a willful and malicious injury, however. The definition of “actual malice” is not the mirror image of the definition of “willful and malicious” in section 523(a)(6). See Part III A below. Consequently, collateral estoppel is no bar to further litigation concerning whether the debt is for a willful and malicious injury.
The doctrine of collateral estoppel does apply to two factual issues that the Debtor may not now contest: whether he defamed Mills by making false statements about Mills and whether he had a high degree of awareness of the probable falsity of his statements. Affirmative resolution of these issues was implicit in the verdict. They were actually litigated in the state
In an effort to sidestep collateral estoppel, Ellerbee argues that this court cannot determine precisely what facts the jury decided in awarding fees. The jury charge on attorney’s fees did not define the terms “bad faith” or “stubbornly litigious” or causing “unnecessary trouble and expense,” and the jury’s verdict did not state which of these acts it found. The doctrine of collateral es-toppel, however, plays no part in the analysis of the dischargeability of the attorney’s fees.
C. The Use of Affidavits.
Mills asks the court to refer to affidavits of jurors so that he might prove that the jury found actual malice because Ellerbee knew some of his statements were false. O.C.G.A. § 17-9-41 provides that “affidavits of jurors may be taken to sustain but not to impeach their verdict.” The affidavits submitted by Mills do not sustain the verdict; indeed, it is not under attack. Rather, they seek to reveal the jurors’ thoughts on what the instructions meant or on what facts they found that allegedly support the ultimate finding of actual malice.
Rule 606(b) of the Federal Rules of Evidence bars the testimony of a juror concerning a juror’s mental processes during deliberations to attack the validity of a verdict. This rule in no way implies the converse— that a juror’s affidavit may always be used to reveal the jury’s mental process so long as the inquiry is about something other than the validity of the verdict.
Affidavits of jurors, offered to raise a collateral estoppel argument, are not admissible to explain what they say the jury decided, when the verdict, read with the charge, is silent on the point. Jurors’ affidavits may not be used by a plaintiff in a civil suit to “embellish the general jury verdict” for the purpose of invoking the doctrine of collateral estoppel.
Ohio-Sealy Mattress Mfg. Co. v. Kaplan,
III. Dischargeability of Debts Under Section 523(a)(6).
A. The Definitions of “Willful” and “Malicious”.
Outside of bankruptcy, the basic policy underlying debtor/creditor law is that legally incurred debt should be paid. A different policy receives the primary emphasis in bankruptcy cases. In most instances, the policy of the fresh start for the honest debtor excuses the debtor from paying his debts, unless a debt is one of the kind described in section 523(a). The most immediate rationale in excluding such a debt from discharge is that the creditor’s interest in collecting the debt outweighs the debtor’s interest in not having to pay it.
Grogan v. Garner,
Section 523(a)(6) provides:
A discharge under section 727, 1141, 1128(b) or 1328(b) of this title does not discharge an individual debtor from any debt—
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity.
Courts have used the terms “willful” and “malicious” and “willful and malicious” in so many confusing ways in bankruptcy cases that it is sometimes difficult to say what they mean.
See
2 David G. Epstein, Steve H. Niekles & James J. White,
Bankruptcy
§ 7-30 (1992). Circuit courts of appeal have struggled with their meaning and in particular with the degree to which an intent to harm or the inevitability of harm is a part of one or both words.
Conte v. Gautam (In re Conte),
Difficulty with the definitions of these words is not confined to a bankruptcy context. Judge Learned Hand eloquently observed about the word “willful” in
Rex Wine Corp. v. Dunigan,
The Eleventh Circuit has settled on the following definitions of willful and malicious. “Willful means intentional or deliberate and can not be established merely by applying a recklessness standard.”
Lee v. Ikner (In re Ikner),
1. Willful.
When considering the meaning of section 523(a)(6), a reader focusing solely on the definition of “willful” as intentional might conclude that “willful” refers only to whether the debtor acted of his or her own volition, rather than unconsciously or as a result of an outside force over which the debtor had no control. The question is whether the word “willful” also denotes the debtor's knowledge of the substantial certainty of injury. In
Lee v. Ikner (In re Ikner),
The standard of ‘willful and malicious injury’ under the discharge provision requires, as we have noted, a showing of an intentional and deliberate act, which is not done merely in reckless disregard of the rights of another....
The bankruptcy court applied the proper standard of willfulness. Furthermore, in finding that the appellants did not prove by inference or innuendo that Ikner intended to cause the accident or resulting injury, the court applied the correct standard of maliciousness, i.e., either special malice or implied or constructive malice. (Emphasis in original.)
Thus, the court squarely held that the malicious prong of the phrase contains an element of intent to injure.
Yet, the Ikner court also said that an intentional act that falls within the meaning of “willful” in section 523(a)(6) must not be one “done merely in reckless disregard of the rights of another.” Recklessness implies indifference to the consequences, which in turn presumes that the actor knows or is charged with knowing the possible consequences to which he is indifferent. Thus, a debtor who knows of danger but continues to act indifferently to the increased possibility of injury is reckless. Being indifferent to another’s rights while performing an act does not affect whether the act itself is intentional. It follows that intentional or deliberate acts not done in the reckless disregard of the rights of others are acts as to which the debtor desired injury or knew that injury was substantially certain to occur. Thus, identifying acts that resulted in a willful injury involves a similar, but not the same, kind of analysis that courts apply in finding implied malice, an implied intent to harm.
If intent to act is all that matters, then it would be necessary to show only that the Defendant meant to publish. If intent to act in the face of danger is what is required to show a “willful” injury, Mills showed that Ellerbee knew his words tended to harm Mills’ reputation and also knew that there was a high probability the statements were false. Hence, in the broad sense of an intentional act, even Ellerbee cannot deny that he acted willfully.
The word “willful” modifies the word “injury.” Other courts and commentators have opined that the focus should be on the narrower question of whether the injury was a function of the debtor’s will.
See, e.g., Bailey v. Chatham (Matter of Bailey),
2. Malicious.
In
Chrysler Credit Corp. v. Rebhan,
In
Hoskins v. Yanks (In re Yanks),
[t]he state court verdict does not make a finding of “willful and malicious” conduct on the part of the debtor, therefore, the state court judgment may have been based on a finding of reckless disregard for the truth. Reckless acts are insufficient to satisfy the test under 11 U.S.C. § 523(a)(6).
Yanks,
On appeal, the district court affirmed, but the Eleventh Circuit reversed. It held that “[t]he collateral effect of the judgment is not affected by the fact that the jury could have premised its award on either theory because ‘malice for purposes of section 523(a)(6) can be established by a finding of implied or constructive malice.’”
Yanks,
Nonetheless, implied malice is a slippery concept in section 523(a)(6) cases and particularly in cases involving defamation. In
Lee v. Ikner (In re Ikner),
B. The Problem of Malice in a Defamation Case.
This case is about defamation. In Georgia, libel is defined as “a false and malicious defamation of another, expressed in print, writing, pictures, or signs, tending to injure the reputation of the person and exposing him to public hatred, contempt, or ridicule.” O.C.G.A. § 51-5-1. Slander or “oral defamation” is defined as:
(1) Imputing to another a crime punishable by law;
(2) Charging a person with having some contagious disorder or with being-guilty of some debasing act which may exclude him from society;
(3) Making charges against another in reference to his trade, office, or profession, calculated to injure him therein; or
(4) Uttering any disparaging words productive of special damage which flows naturally therefrom.
O.C.G.A. § 51-5-1.
O.C.G.A. § 51-5-5 provides in part that “[i]n all actions for printed or spoken defamation, malice is inferred from the character of the charge. However, the existence of malice may be rebutted by proof.” Thus, the statutes use both the word “malicious” and the word “malice” but do not define those words.
“The word ‘malice’ ... has plagued the law of defamation from the beginning.” W. Page Keeton et al.,
Prosser and Keeton on the Law of Torts
§ 115, at 833-34 (5th ed.1984). Georgia’s law on the subject is no exception. In
Straw v. Chase Revel, Inc.,
... Confusion often enters the defamation arena because the word “malice” has two distinct meanings. In order to prevail in a suit for liable, Georgia law requires that the plaintiff show the statement was false and “malicious.” O.C.G.A. § 51-5-1. In this context, “malice” means ill will, and “malicious” denotes statements deliberately calculated to injure. Georgia courts refer to this as “common law malice,” and distinguishes it from actual or “constitutional” malice. See Williams v. Trust Co. of Georgia,140 Ga.App. 49 , 56,230 S.E.2d 45 (1976). As noted above, the latter term deals only with the speaker’s knowledge of the truth or falsity of the allegedly defamatory statements.
Straw,
If “ ‘malicious’ denotes statements deliberately calculated to injure,” it would seem to be inconsistent to hold that negligent or reckless conduct could support a libel verdict. Yet, a person may negligently commit the tort of defamation.
Triangle Publications, Inc. v. Chumley,
It does seem incongruous common law to state that a defamation action may be based on common law malice and negligence. “Malicious,” meaning full of malice, connotes an act of intentional hostility which seems to contradict the possibility of negligence. To avoid confusion, one must remember that malice and negligence support different essential elements of the tort. A statement may be brutally malicious but will not support an action of defamation unless it is also false. Negligence measures only the defendant’s degree of care in verifying the truthfulness of the statement.
Straw,
C. Analysis of “Willful ... Injury”.
The jury made no specific finding concerning the willful nature of Ellerbee’s conduct. He denies the statements that he made were false and that he knew they were false. The jury verdict fails to establish that he knew they were false. Because the jury could have found that Ellerbee acted in reckless disregard of the truth, does that mean, as Ellerbee contends, his actions, if reckless, were not willful? Or, as Ellerbee also contends, must Mills prove that Ellerbee knew the statements were false in order to establish a section 523(a)(6) case?
Ellerbee contends that the fiction of implied malice overlooks the legislative history that a “reckless disregard” standard should not be the basis for denying a discharge under section 523(a)(6). He relies on
Wheeler v. Laudani,
The juxtaposition of “willful” and “reckless” permits the easy assumption that what is reckless cannot be willful. That analysis, however, fails to take into account the words modified by these terms or the ideas which the phrases as a whole are meant to convey. Ironically, as demonstrated below, in the case of the tort of defamation, an injury may be willful even though the speaker’s attitude toward the truth is merely reckless.
Mills has shown an absence of any genuine issue of material fact regarding the element of willfulness. There is no dispute that El-lerbee acted willfully in the broadest sense of the word. The letters were not mailed by mistake or thorough inadvertence. The signs did not erect themselves. In his answers to the complaint and in his testimony at trial, Ellerbee admitted that he intentionally published the statements about the Plaintiff.
There is likewise no disputed material fact concerning the object of Ellerbee’s will — the infliction of injury on Mills. The statements impugned Mills’ integrity and exposed him to ridicule and disrepute. Ellerbee’s purpose was to have Mills removed as a principal. Removal would have harmed Mills. Ellerbee admitted that part of his motivation in publishing the statements was to strike back at Mills. He admitted that the statements made tended to injure Mills’ reputation. He willed injury upon Mills and he did so because, he says, the statements were true. If they were true, no doubt Mills would have been injured.
Ellerbee understood that his statements were likely to be false, however. Mills’ legal counsel warned him to stop making them and had been asked to retract his allegations, but Ellerbee continued to publish statements about Mills. He does not and cannot deny that if they were false, injury to Mills followed necessarily from his persistent repetition of false statements.
Whether the statements were true or false, Ellerbee knew that their publication would necessarily lead to injury. Reckless though he may have been about the truth, he was deliberate about causing injury. Therefore, because he acted intentionally to inflict harm on Mills, Ellerbee acted willfully for purposes of section 523(a)(6). The Debtor offered no evidence to the contrary.
Application of the “implied malice” standard of
Hoskins v. Yanks (In re Yanks),
Just as the injury inflicted by Ellerbee was a willful one, it was also malicious, not because the court implies malice, but because the Plaintiff proved the classic elements of a malicious injury under section 523(a)(6): the commission of wrongful acts without just cause. Ellerbee committed a series of wrongful acts by defaming Mills. If Ellerbee can state no just cause for these acts, the injury he inflicted would be a malicious one under section 523(a)(6). The only excuses he offered for his conduct were that he spoke truthfully and that if the statements were false, he was merely reckless. Neither one of these contentions provides Ellerbee with a just cause or excuse for his wrongful acts of defamation.
In the first place, he is collaterally es-topped from relitigating the issue of whether his statements were false. That leaves the question of his reckless conduct. Ellerbee could not hide behind a veil of recklessness to avoid liability for punitive damages for defamation. The question is whether he should be permitted to do so under section 523(a)(6)'.
Ellerbee refuses to give an inch on his position that his statements were true, and hence he fails to articulate fully what his defense involving recklessness suggests, which is that he honestly believed his statements to be true and that if he had known the statements were false, he would not have made them. The implication of his position appears to be that he lacked the requisite degree of some malevolent frame of mind to satisfy section 523(a)(6)’s requirements.
Not every reckless disregard for the truth is a willful and malicious act for section 523(a)(6) purposes. In Ellerbee’s case, however, his lack of regard for the truth is not an excuse for his behavior. Indeed, it is the reason he has no excuse. In implying, if that is what he is doing, that he would not have published had he known his statements were false, Ellerbee misses the point. It is not what he would have done had he known the facts that matters. It is what he did with the facts that he knew that determines his liability-
Ellerbee knew he was recklessly disregarding the truth! He made a conscious and deliberate decision either (1) not to be informed and not to investigate or (2) to publish regardless of the truth of the statements because he found it impossible to check the facts. Though
Rex Wine Corp. v. Dunigan,
The Plaintiff has no burden to prove that Ellerbee would have published the statements even if he had known they were false or that Ellerbee knew that they were not true. His burden is only to make a prima facie showing that there is no just cause for the wrongful acts. He met that burden. Mills showed that Ellerbee repeatedly defamed him by making statements as to which Ellerbee had a high degree of awareness of their probable falsity. He showed that El-lerbee refused to stop making the statements even after being warned that the statements were defamatory and when he knew that the statements tended to injure Mills’ reputation. Ellerbee’s position as a former teacher gave rise to no duty to publish in the manner that he did, and the allegations were not made in situations in which others were subjected to irreparable harm. Mills showed that Eller-bee was aware of his failure to investigate his allegations, had time to conduct an investigation but did not.
Ellerbee does not dispute these facts. Instead, he says he was merely reckless, as if
For these reasons, the debt for damages embodied in the judgment is for a willful and malicious injury. Ellerbee’s interest in not paying for the resulting injury he desired cannot possibly outweigh the interest of Mills to collect the debt as recompense for injury that Mills had no means to prevent and as a deterrent to similar conduct in the future.
The Debtor cites two decisions of bankruptcy courts in the Eleventh Circuit rendered after
Yanks
for the proposition that a state court judgment based on a reckless disregard of a duty is not entitled to collateral estoppel effect in a section 528(a)(6) case.
MRB, Inc. v. Marshall (In re Marshall),
IV. Dischargeability of Attorney’s Fees Under Section 523(a)(6).
In addition to challenging the dis-chargeability of Ellerbee’s debt for compensatory and punitive damages, Mills contends that the debt for attorney’s fees embodied in the judgment is also not dischargeable. He reasons that “the nature of the conduct which gave rise to the injury” should bar discharge of the fees. Ellerbee points out that the jury may have determined either that he acted in bad faith or that he was stubbornly litigious or that he caused unnecessary trouble and expense and that it is impossible to tell from the record what facts the jury found. He concludes from this observation that there is no way to determine whether the award was for a willful and malicious injury.
The debt for attorney’s fees is not dis-chargeable for a reason that the Plaintiff hinted at but did not articulate in his memo-randa in support of his motion. Though attorney’s fees are normally not considered “damages,” they are under the Georgia statute that the state court applied. Moreover, they are damages, not for bad faith or stubborn litigiousness, but for the underlying tort, which, as shown above in Part III, involved a willful and malicious injury.
A. Federal Case Law.
Courts have based determinations of whether awards of attorney’s fees are dis-chargeable or nondischargeable on at least three different grounds. One line of cases, with support in the Second, Seventh and Eighth Circuits, holds that an award of attorney’s fees that is “ancillary” to the “primary debt” is not dischargeable if the primary debt is not dischargeable.
Klingman v. Levinson,
That approach has its critics, however.
See, e.g., Lupin v. Ziegler (In re Ziegler),
Following the same reasoning, courts have decided that fees may be nondischargeable, even in the absence of a contract to pay them, if a statute authorized the trial court to impose them.
See, e.g., Tricentrol Overseas, Ltd. v. Touchstone (Matter of Touchstone),
Many of the cases cited above lend strong support to the Plaintiffs claim that the debt for attorney’s fees is not dischargeable. Yet, the explanations that attorney’s fees are “ancillary” to nondischargeable debts or carry the same quality of nondischargeability beg the question whether the debt for fees is itself a debt for a willful and malicious injury. And, there is no contract here that supplies a basis for relief to the Plaintiff. Ellerbee defends on the ground that the jury might have decided that he was stubbornly litigious but that such a finding does not prove that he acted willfully and maliciously insofar as fees are concerned. In that connection, although he does not mention it, the fact is that Ellerbee was successful in resisting the broad scope of injunctive relief, resistance that may have caused Mills to incur some of the fees for which he obtained a judgment. Why, then, should the fees be nondischargeable, at least without a trial? The answer lies in how Georgia law treats attorney’s fees under O.C.G.A. § 13-6-11.
B. Attorney’s Fees as Damages for the Underlying Tort.
Under the common law, litigants bear their own attorney’s fees. This is the general rule in Georgia. Nonetheless, parties to a transaction may agree to a different allocation of litigation expenses, e.g., O.C.G.A. § 13-1-11, and in limited situations statutes permit the winning party to recover attorney’s fees from the losing party in the absence of a contract. E.g., O.C.G.A. §§ 9-15-14 and 51-7-83.
The basis on which Mills was permitted to recover attorney’s fees from Ellerbee is contained in O.C.G.A. § 13-6-11, which states:
The expenses of litigation generally shall not be allowed as a part of the damages; but where the plaintiff has specially pleaded and has made prayer therefor and where the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense, the jury may allow them.
The state court did not refer specifically to O.C.G.A. § 13-6-11 in the instructions to the jury, but the charge closely tracked the statute:
The expenses of litigation are generally not allowed as part of damages, but if the defendant has acted in bad faith or has been stubbornly litigious or has caused the plaintiff unnecessary trouble and expense, you may allow them.
Because the state court did not define the terms used in the charge, it is impossible to know for certain what facts concerning Eller-bee’s acts the jury found to support its conclusion that he had either acted in bad faith or had been stubbornly litigious or had caused unnecessary trouble and expense.
Ellerbee argues that this impossibility means that the court cannot determine whether or not the debt for attorney’s fees was for a willful and malicious injury. In
Fincher v. Holt (Matter of Holt),
Thus, the Holt court asked whether the bad faith or stubborn litigiousness of the defendant constituted willful and malicious conduct. The answer the court in Holt gave to its question may have been correct as applied to the facts in that case or even as a general proposition, but this court does not believe it is the relevant question. To ask the right question, it is necessary to focus on the purpose of the award of attorney’s fees.
Conduct that might be described as stubborn litigiousness or even bad faith might not be willful and malicious conduct. But, the purpose of O.C.G.A. § 13-6-11 is not to reimburse a plaintiff for the attorney’s fees a plaintiff incurs because of the defendant’s bad faith or stubborn litigiousness. The elements of O.C.G.A. § 13-6-11 are merely triggers that permit the recovery of attorney’s fees as separate, special damages flowing from the underlying tort. “Section 13-6-11 does not create an independent cause of action. [It] ... merely establishes the circumstances in which a plaintiff may recover the expenses of litigation as an additional element of damages.”
Brown v. Baker,
The cases applying O.C.G.A. § 13-6-11 consistently view attorney’s fees as a separate category of special damages for the underlying tort. The Georgia Court of Appeals has distinguished between awards of attorney’s fees based on “bad faith” and those for “stubborn litigiousness” or for causing “unnecessary trouble and expense,” but in all of the cases the rationale is that the defendant inflicted additional and needless costs or damage on the plaintiff that can said to have been the consequence of the underlying tort.
Bad faith relates to the conduct that gave rise to the litigation and is part of the claim itself.
Windermere, Ltd. v. Bettes,
The cases dealing with bad faith rarely define the term. In
Smith v. Maples,
In an action upon contract seeking damages for the breach of a contract and attorney’s fees under Code § 20-1404 (the predecessor to O.C.G.A. § 13-6-11) as an expense of litigation because of bad faith, the trial judge charged the jury that ‘the term ‘bad faith’ has a meaning which is the opposite of good faith. It means bad purpose, bad intent, bad state of knowledge or desire.’ There is no error in the charge.
In a tort action in which punitive damages are awarded, the same evidence that authorized the recovery of punitive damages may also suffice for a finding that the defendant acted in bad faith.
Ford Motor Co. v. Stubblefield,
Cases holding that the existence of a bona fide dispute is a defense to a claim for litigation expenses based on stubborn litigiousness or unnecessary trouble and expense reflect the same reasoning,
Tower Fin. Service, Inc. v. Smith,
The debt for attorney’s fees is nondis-chargeable because under Georgia law, it constitutes additional, special damages for the willful and malicious injury inflicted by Ellerbee on Mills.
C. Causation.
Whether attorney’s fees are viewed as ancillary obligations partaking of the nature of the underlying liability or as a contractual debt in the appropriate case or as statutorily imposed damages flowing from the underlying liability, there is one issue not addressed in most of the cases dealing with the dis-chargeability of attorney’s fees that deserves comment. That is the issue of causation.
If a bankruptcy court decides that a fee award is not dischargeable solely because the fees were “ancillary” to a nondischargeable debt, it may be assuming facts not in evidence, namely that the plaintiff had no choice but to incur the fees in order to gain satisfaction for the injury.
Under an approach that looks only to what a contract provides or only to the “ancillary” nature of the fees, the rule would be that a defendant always defends a case involving a willful and malicious injury at his or her peril insofar as attorney’s fees are concerned, regardless of the plaintiffs conduct or the nature of the defense. To be sure, a plaintiff would not incur fees but for the underlying tort. But in most, if not all cases, the fees are incurred after the conduct that gave rise to the tort claim. If all fees incurred by a plaintiff are always recoverable, a plaintiff, particularly one having few budgetary constraints, may incur more fees than are reasonably necessary to get a judgment. A debt for attorney’s fees has no special status under section 523. Hence, the plaintiff ought to have to prove that the debt for fees was proximately caused by the defendant’s conduct that otherwise gave rise to a willful and malicious injury, however egregious a defendant’s conduct might have been.
Compare, Collins v. Palm Beach Savings & Loan v. Collins (In re Collins),
Here, Ellerbee has raised no issue concerning the proximate cause of the damage Mills suffered when he incurred attorney’s fees to prosecute the claims against Ellerbee. Ellerbee’s refusal to stop publishing defamatory statements after having been warned to do so by Mills’ attorney establishes that Mills had no choice but to sue and to incur attorney’s fees.
For these reasons, it is hereby
ORDERED that the Plaintiffs motion for summary judgment is GRANTED and the Defendant’s motion for Summary Judgment is DENIED. The entire debt embodied in the judgment of the Superior Court of Cobb County, Georgia in favor of the Plaintiff is for a willful and malicious injury and is not dischargeable. The court will enter a separate judgment.