Hanson v. Cassidy (In re Cassidy)

595 B.R. 507

IN RE: Steven Conway CASSIDY, Debtor.

Pat Hanson, Plaintiff,

v.Steven Conway Cassidy, Defendant.

Case No. 18-60196

Adv. P. No. 18-06010

United States Bankruptcy Court, W.D. Virginia.

Signed January 10, 2019

Larry L. Miller, Miller Law Group, PC, Charlottesville, VA, for Debtor.

Hannah W. Hutman, Harrisonburg, VA, for Trustee.

MEMORANDUM OPINION

Rebecca B. Connelly, UNITED STATES BANKRUPTCY JUDGE

The matter before the Court is Pat Hanson's motion for summary judgment on her complaint to except her debt from Steven Conway Cassidy's discharge. For the following reasons, the Court grants the motion for summary judgment.

On February 2, 2018, Mr. Cassidy filed his chapter 7 petition in this Court. Two months later, Ms. Hanson initiated this adversary complaint seeking to have the debt owed to her declared non-dischargeable under 11 U.S.C. § 523(a)(6). Mr. Cassidy answered the complaint denying that the debt meets the elements of section 523(a)(6) to except it from discharge.

The Court issued a scheduling order setting deadlines for discovery and dispositive motions. ECF Doc. No. 10. Ms. Hanson timely filed a motion for summary judgment. ECF Doc. No. 14. Mr. Cassidy filed a response contesting summary judgment. ECF Doc. No. 17. Counsel for the parties argued their respective positions before the Court at a pretrial conference on November 28, 2018. After hearing the arguments, the Court took the motion for summary judgment under advisement.

The Court has considered the pleadings, exhibits, and arguments voiced at the hearing. Pursuant to Federal Rule of Bankruptcy Procedure 7052, the Court makes the following findings of fact and conclusions of law.

Jurisdiction

This Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1334. The plaintiff is a creditor in this bankruptcy case and the defendant is the debtor.

The Court has jurisdiction to hear and determine core proceedings, including motions for summary judgment, pursuant to 28 U.S.C. § 157(b), Federal Rule of Bankruptcy Procedure 7056, and the Western District of Virginia District Court General Order of Reference dated December 6, 1994. This is a core proceeding because it is a determination of dischargeability of a particular debt. 28 U.S.C. § 157(b)(2)(I). Specifically, the matter is a request for summary judgment concerning the dischargeability of a state court judgment for assault and intentional infliction of emotional distress.

Background

The facts are largely uncontested. Ms. Hanson and Mr. Cassidy were neighboring landowners in Madison County, Virginia. The neighbors quarreled over a period of many months. Ultimately, in June 2008, Ms. Hanson filed suit in the Madison County Circuit Court seeking $100,000.00 in damages from Mr. Cassidy. She pleaded three counts: Count I alleging assault, Count II alleging insulting and abusive words actionable under Virginia Code § 8.01-45, and Count III alleging intentional infliction of emotional distress.

The litigation lasted years. In 2016, Ms. Hanson filed a motion for summary judgment in the state court action. On September 28, 2016, the Madison County Circuit Court entered an agreed order ("the Circuit Court Consent Order") granting partial summary judgment against the defendant on Counts I and III.

The Circuit Court Consent Order provides that no material facts are genuinely in dispute as to Count I for assault and Count III for intentional infliction of emotional distress (IIED). Specifically, the Circuit Court Consent Order states:

THE COURT CONCLUDES, upon the agreement of counsel, that there is no material fact genuinely in dispute as to the remaining counts in this case, Plaintiff's Count 1 Assault and Count 3 Intentional Infliction of Emotional Distress.

ECF Doc. No 14, Ex. 1 at 1. The Circuit Court Consent Order also references and incorporates paragraphs from the complaint. After entry of the order establishing liability, the Circuit Court scheduled the matter for a jury trial to determine damages.

In November 2017, the damage issue was tried before a jury. The jury awarded $500,000 in damages to Ms. Hanson. Because the amount of the jury verdict exceeded the amount requested in the complaint, the Circuit Court judge remitted the award to either $100,000 or $200,000. Before the Circuit Court entered an order on the damage amount, Mr. Cassidy filed his chapter 7 bankruptcy petition.¹

The adversary proceeding challenging dischargeability

Not long after Mr. Cassidy filed his chapter 7 bankruptcy petition, Ms. Hanson filed a complaint to determine the dischargeability of her debt. In that proceeding, Ms. Hanson now asks this Court to grant summary judgment asserting that the debt is excepted from discharge under section 523(a)(6). Ms. Hanson contends that Mr. Cassidy is collaterally estopped from contesting facts from the state court complaint to the extent that they have been incorporated into the Circuit Court Consent Order, and from contesting that he is liable to Ms. Hanson for assault and IIED as those claims are defined by Virginia law.

Ms. Hanson points to the Circuit Court Consent Order. She stresses that it was entered with the consent of Mr. Cassidy's counsel, who is also representing him in this proceeding, and that it unequivocally states that no material facts are genuinely in dispute as to assault and IIED. Next, Ms. Hanson points out that the grounds to except a debt from discharge under section 523(a)(6) match the elements of the cause of action for assault and IIED under the facts incorporated into the Circuit Court Consent Order. For these reasons, Ms. Hanson argues that no material facts are genuinely in dispute as to the liability of Mr. Cassidy for assault and IIED or that the liability is excepted from discharge under section 523(a)(6).

Mr. Cassidy disagrees. Mr. Cassidy argues that although the state court issued an order on partial summary judgment regarding Count I (assault) and Count III (IIED), the state court did not issue a final order regarding damages on these counts so the matter was not fully litigated, or did not result in a final order. For these reasons, Mr. Cassidy contends that the doctrine of collateral estoppel does not apply. Mr. Cassidy also argues that the state court order did not address whether the action was "malicious." Consequently, Mr. Cassidy asserts that the question of whether the debt resulted from "malicious conduct intended to cause injury" was not litigated. Hence, Mr. Cassidy maintains that this Court cannot grant judgment as a matter of law on the question of dischargeability of the debt.

Summary judgment standard

In determining whether to grant the plaintiff's motion for summary judgment, the Court must apply the summary judgment standard of review articulated by the Fourth Circuit:

Summary judgment should be granted if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Facts are material when they might affect the outcome of the case, and a genuine issue exists when the evidence would allow a reasonable jury to return a verdict for the nonmoving party. The moving party is entitled to judgment as a matter of law when the nonmoving party fails to make an adequate showing on an essential element for which it has the burden of proof at trial. In ruling on a motion for summary judgment, the nonmoving party's evidence is to be believed, and all justifiable inferences are to be drawn in that party's favor. To overcome a motion for summary judgment, however, the nonmoving party may not rely merely on allegations or denials in its own pleading but must set out specific facts showing a genuine issue for trial.

News & Observer Publ'g Co. v. Raleigh-Durham Airport Auth. , 597 F.3d 570, 576 (4th Cir. 2010) (internal citations and quotations omitted) (summarizing Supreme Court precedent).

Is summary judgment appropriate?

Ms. Hanson alleges that her debt is non-dischargeable because it arose from Mr. Cassidy's willful and malicious injury to her, and that he is estopped from arguing otherwise. Under Bankruptcy Code section 523(a)(6), a debt is non-dischargeable in bankruptcy if it arose from a willful and malicious injury. 11 U.S.C. § 523(a)(6). The liability of Mr. Cassidy on the debt to Ms. Hanson is memorialized in the Circuit Court Consent Order. See 11 U.S.C. § 101(12). This order established that the debt arose from assault and IIED but did not establish the amount of monetary damages resulting from such conduct. Ms. Hanson argues that summary judgment is appropriate because the state court order memorialized that no material issues are genuinely in dispute as to assault and IIED, and so in this proceeding, no material issues should be tried. In fact, the defendant is estopped from contesting any material issues.

Is the defendant collaterally estopped from contesting the dischargeability of this debt?

Ms. Hanson contends that the Circuit Court Consent Order should be given collateral estoppel effect as to the debtor's alleged willful and malicious conduct.² "Issue preclusion, or collateral estoppel, bars the ‘successive litigation of an issue of fact or law litigated and resolved in a valid court determination essential to the prior judgment[.]’ " Data Mountain Solutions, Inc. v. Giordano (In re Giordano) , 472 B.R. 313, 325 (Bankr. E.D. Va. 2012) (quoting Taylor v. Sturgell , 553 U.S. 880, 892, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008) ). Collateral estoppel may apply in bankruptcy dischargeability cases. Grogan v. Garner , 498 U.S. 279, 284–85, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). As the Fourth Circuit explains, in a dischargeability proceeding the bankruptcy court may use collateral estoppel to give preclusive effect to the state court judgment, after applying the concept using the rule from that forum.

[T]he Supreme Court concluded explicitly that principles of collateral estoppel apply in

...