IN RE: NARINDER SANGHA (2017)

MEMORANDUM*

Creditor-Appellant Charles Schrader appeals the Bankruptcy Appellate Panel's (“BAP”) memorandum disposition vacating the bankruptcy court's order that granted summary judgment in favor of Schrader against Debtor-Appellee Narinder Sangha based on issue preclusion. We have jurisdiction under 28 U.S.C. § 158(d)(1).¹ We affirm the BAP and remand to the bankruptcy court.²

A California state trial court awarded Schrader a default judgment against Sangha. The default judgment included a punitive damage award.

Thereafter, the bankruptcy court granted summary judgment in favor of Schrader based on issue preclusion. The bankruptcy court held that Schrader's default judgment was not dischargeable under 11 U.S.C. § 523(a)(6). The bankruptcy court found that the punitive damage award, standing alone, precluded relitigation of § 523(a)(6)'s “willful and malicious” intent requirements ³ because the punitive damage award was based on a California state trial court's finding of “malice in fact.”

Between the time of the bankruptcy court's decision and the BAP's review of this bankruptcy appeal, Plyam v. Precision Development, LLC (In re Plyam), 530 B.R. 456 (9th Cir. BAP 2014) was decided, which called into question the bankruptcy court's reasoning. In re Plyam held that a California state court punitive damage award, standing alone, does not preclude relitigation of § 523(a)(6)'s “willful” intent requirement. 530 B.R. at 463–65 (holding that “under California law, the general definition of malice in fact encompasses less reprehensible states of mind” than § 523(a)(6)'s “willful” intent requirement).

Applying In re Plyam to this bankruptcy appeal, the state court's punitive damage award, standing alone, did not preclude relitigation of § 523(a)(6)' s “willful” intent requirement. In determining whether relitigation of § 523(a)(6)'s “willful” intent requirement is precluded, In re Plyam requires that the bankruptcy court review the allegations in Schrader's second amended complaint together with the punitive damage award. See 530 B.R. 456 at 465.

We AFFIRM the BAP. On REMAND, the bankruptcy court shall reevaluate whether issue preclusion is available in light of In re Plyam, 530 B.R. 456, 463–65 (9th Cir. BAP 2014). Accordingly, the bankruptcy court must consider whether the state court default judgment and the allegations in Schrader's second amended complaint preclude relitigation of § 523(a)(6)'s “willful” intent requirement. If the bankruptcy court determines that the allegations in the second amended complaint together with the punitive damage award preclude relitigation of § 523(a)(6)'s “willful and malicious” intent requirements, then the California state trial court default judgment in favor of Schrader is not dischargeable.

AFFIRMED and REMANDED to the bankruptcy court.

FOOTNOTES

1.   We exercise jurisdiction in light of the liberal standard for finality in bankruptcy appeals. This court can exercise jurisdiction if the issue before the court is legal and if resolving that issue “would aid the bankruptcy court in reaching its disposition on remand,” as is the case here. Bonner Mall P'ship v. U.S. Bancorp Mortg. Co., 2 F.3d 899, 904 (9th Cir. 1993).

2.   Creditor-Appellant Charles Schrader's motion to strike portions of Debtor-Appellee Narinder Sangha's answering brief is DENIED.

3.   The “willful” and “malicious” intent requirements are conjunctive and require separate analyses. Carrillo v. Su (In re Su), 290 F.3d 1140, 1146 (9th Cir. 2002). “Willful” intent must be established before “malicious” intent may be concluded. See Thiara v. Spycher Bros. (In re Thiara), 285 B.R. 420, 434 (9th Cir. BAP 2002).