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2008 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

2008 Recent Developments in Discharge and Dischargeability Litigation

By Hon. Keith M. Lundin

 

3. Professional "negligence"

Ditto v. McCurdy, No. 02-16252, 2007 WL 4355367 (9th Cir Dec. 14, 2007) (Applying Kawaauhau

v. Geiger, 523 U.S. 57, 118 S. Ct. 974, 140 L. Ed. 2d 90 (1998), to a pre-Geiger cause of action still open on appeal, failure of informed consent is species of negligence, not the intentional tort of battery; judgment based on failed informed consent is not willful and malicious injury for purposes of S 523(a)(6). State court entered multi-million dollar judgment against doctor for failing to obtain informed consent and for fraud. Doctor filed bankruptcy and in 1996 bankruptcy court granted victim summary judgment finding debt nondischargeable under S 523(a)(6). In 1997, state supreme court reversed underlying malpractice judgment with respect to liability for fraud, leaving only judgment based on gross negligence with respect to informed consent. Debtor made Rule 60(b) motion to set aside judgment of nondischargeability. That motion was granted by Ninth Circuit in 2000. In the interim, Supreme Court decided Geiger. On remand, bankruptcy court granted debtor summary judgment, finding debt dischargeable under S 523(a)(6). Because judgment of nondischargeability was set aside pursuant to Rule 60(b) adversary proceeding remained open on direct review and it was appropriate to apply intervening Geiger interpretation of S 523(a)(6). "Drawing on the Second Restatement of Torts, the Supreme Court noted that '[i]ntentional torts generally require that the actor intend 'the consequences of an act,' not simply 'the act itself,'' and stated definitively that 'debts arising from recklessly or negligently inflicted injuries do not fall within the compass of S 523(a)(6).'. . . [T]he Supreme Court stated in Geiger that the 'willful and malicious injury' exception of S 523(a)(6) is limited to cases where the debtor not only meant to act, but meant to cause injury. . . . The failure to obtain informed consent, without evidence of intent to injure, does not give rise to a willful and malicious injury with the meaning of S 523(a)(6). While there are some cases that treat and inform consent action as sounding in battery, most jurisdictions distinguish between medical battery (where the doctor has failed to obtain any authorization, or has gone well beyond the authorization given) and a negligent failure to disclose, with the latter sounding in negligence, rather than battery. . . . The Supreme Court in Geiger was clear that in order for the injury to be 'willful and malicious' the debtor must intend the injury itself. The Restatement (Second) of Torts S 8A, a comment to which the Supreme Court cites favorably in Geiger, defines 'intent' as 'denot[ing] that the actor desires to cause consequences of his act, or that he believes the consequences are substantially certain to result from it.' In order to qualify for the S 523(a)(6) 'willful and malicious' exception to discharge, therefore, the debtor must have acted with either the desire to injure or a belief that injury was substantially certain to occur. There is no evidence in the record that might lead a trier of fact to conclude that McCurdy had any such desire or belief.").

4. Other wrongful acts

Lopez v. Emergency Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99 (B.A.P. 9th Cir. 2007) (State court finding that "misappropriation of. . .customer list trade secrets was willful and malicious" did not preclude S 523(a)(6) litigation under either Rooker-Feldman doctrine or collateral estoppel; misappropriation of trade secrets could be willful and malicious injury but bankruptcy court had exclusive jurisdiction to make that determination and erroneously concluded that it had no discretion whether to apply collateral estoppel. "The Rooker-Feldman doctrine has no application to this case,

 

 

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