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2. Collateral estoppel or "issue preclusion" may be available in discharge and dischargeability proceeding
Denton v. Hyman (In re Hyman), 502 F.3d 61 (2d Cir. 2007) (New York state court judgment for breach of fiduciary duty by "'misappropriating and co-opting assets of [] jointly-owned companies for his personal benefit'" not entitled to preclusion in S 523(a)(4) litigation because "defalcation under S 523(a)(4) requires a showing of conscious misbehavior or extreme recklessness--a showing akin to the showing required for scienter in the securities law context." State court made no findings concerning debtor's state of mind as no such requirement exists under New York law. Since state court applied different standards, identical issue was not necessarily decided and debtor did not have full and fair opportunity to contest any finding regarding his state of mind. Collateral estoppel principles did not apply.).
Berry v. Vollbracht (In re Vollbracht), No. 06-60619, 2007 WL 3144848 (5th Cir. Oct. 24, 2007) (per curiam) (State court conviction for simple assault could have been based on negligent injury and is not entitled to preclusive effect under S 523(a)(6); state court rejection of self-defense does not preclude debtor from asserting self-defense on remand to negate finding of willful and malicious injury. "The lower courts held, and we agree, that collateral estoppel does not apply to the Mississippi assault conviction for various reasons. For one, the Mississippi Assault Statute at issue includes 'negligently injuring the body of another'. If a jury found that Vollbracht acted negligently, the assault conviction would not require finding that Vollbracht's actions were willful and malicious under S 523(a)(6). We recognize that Vollbracht's self-defense argument failed at his criminal trial hence Berry could argue that the narrow issue of self-defense is foreclosed. However, we do not equate the required showing to establish self-defense in a criminal trial under Mississippi or any other law, with the showingrequired to render an injury not 'willful and malicious.'" "In bankruptcy cases, [ ] we have agreed with the Supreme Court and other circuits 'that a bankruptcy court faced with a claim of non-dischargeability . . . presented with a state court judgment evidencing a debt is not bound by the judgment and is not barred by res judicata or collateral estoppel from conducting its own inquiry into the character and, ultimately, the dischargeability of the debt.' . . . [However,] where the state court had decided the crucial element to non-dischargeability in the case below and had followed the same evidentiary standard, relitigation was unnecessary. . . . Just as a court need not defer to a state court decision that relied [sic] a different evidentiary standard, a bankruptcy court need not adopt a criminal assault finding of no self-defense-despite that finding's reliance on the strictest of evidentiary standards-that did not address the dischargeability issue of willful and malicious conduct. . . . Self-defense as litigated in a state criminal trial is not directly transferable to, and certainly not identical, to the question of self-defense in the context of willful and malicious behavior. . . . Applying collateral estoppel in this case would not uphold the purposes of that doctrine. We would not protect a party's 'adversaries from the expense and vexation attending multiple lawsuits,' nor would we 'conserve [ ] judicial resources,' since the bankruptcy court will
