Scranton Laminated Labels, Inc. v. Florimonte (In re Florimonte)

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IN RE: CAROLYN J. FLORIMONTE CHAPTER 7 DEBTOR(S)

SCRANTON LAMINATED LABELS INC; SCRANTON LABEL and EDMUND J. CARR PLAINTIFFS v. CAROLYN J. FLORIMONTE DEFENDANT

No. 5:15-bk-02377-HWV

ADV. PRO. No. 5:15-ap-00144-HWV

United States Bankruptcy Court, M.D. Pennsylvania

February 22, 2022

MEMORANDUM OPINION^[1]

Henry W.Van Eck, Chief Bankruptcy Judge

THIS CAUSE comes before the Court on the Plaintiffs' Complaint Objecting to Debtor's Discharge Pursuant to 11 U.S.C §§ 523 and 727 (AP Docket #1^[2]). On September 2 2021, the Court conducted a bench trial in this matter. During the trial, the Plaintiffs abandoned their claims under § 727, leaving just the issue of whether the Defendant-Debtor should be denied discharge under § 523.^[3] At the conclusion of trial, the Court took the matter under advisement. The Court has since reviewed the testimony, exhibits, and post-trial briefs and is prepared to rule.

I. JURISDICTION

This Court has subject matter jurisdiction pursuant to 28 U.S.C § 1334(a), 28 U.S.C. §157(a) and the Standing Order of Reference signed by Chief Judge Christopher C. Conner of the U.S. District Court for the Middle District of Pennsylvania and dated September 11, 2000. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(J)(objections to discharge).

II. FACTS^[4] AND PROCEDURAL POSTURE

The Debtor-Defendant is Carolyn J. Florimonte ("Florimonte") who filed the underlying Chapter 7 bankruptcy on June 3, 2015. Florimonte has been proceeding pro se in both the underlying bankruptcy and in this adversary proceeding since the withdrawal of her prior counsel approved in an Amended Order granted by this Court on August 24, 2021. The Plaintiffs (collectively "Plaintiffs") are Scranton Laminated Labels, Inc. t/a Scranton Label ("Scranton Label"), a Pennsylvania corporation, and Edmund J. Carr ("Carr"), the corporation's owner.

The facts of this case are somewhat acrimonious and occasionally bizarre but ultimately only incidental to the Court's ruling, which is based primarily if not entirely on legal conclusions. Briefly stated, Florimonte was a former employee of Scranton Label, where she worked as customer service representative until her termination on April 18, 2003. Florimonte filed for unemployment compensation and was denied. She then filed a discrimination claim against Scranton Label with the Pennsylvania Human Relations Commission ("PHRC") and was again denied. Finally Florimonte filed a civil suit against both Scranton Label and Carr individually, asserting claims of gender discrimination, retaliatory discharge, and hostile working environment in violation of federal and state law. That suit ended with a non-jury verdict entered on March 15, 2010, against Florimonte and in favor of Scranton Label and Carr.

The gravamen of Florimonte's claims throughout the administrative and legal proceedings was her persistent belief that her employers conspired to spy on her through surveillance equipment hidden in her car and office. Florimonte further alleged that this supposed surveillance was the result of gender bias against her. At no point in any of the administrative or judicial proceedings in which she appeared did Florimonte present proof of the existence of any such surveillance beyond her own subjective and insistent belief that it took place.

On April 5, 2010, the Plaintiffs filed a state court action against Florimonte in the Court of Common Pleas of Lackawanna County, Pennsylvania (Civil Action No. 10-CV-2325)(hereinafter the "State Court Action"), seeking compensatory and punitive damages for wrongful use of civil proceedings arising from Florimonte's unsuccessful administrative and civil actions against them which were allegedly without probable cause and for an improper purpose. The State Court Action ended with a jury verdict for the Plaintiffs and a finding that Florimonte "acted in a grossly negligent manner or without probable cause, and primarily for a purpose other than that of securing the adjudication of her claims, when she initiated or continued civil proceedings against [Carr and Scranton Label]." See AP D kt. #1, Complaint, Exhibit A ("Jury Verdict Slip from the State Court Action").

The jury awarded Plaintiffs a total of $37, 404.03 in compensatory damages and $7, 595.97 in punitive damages (a total of $45, 000.00) after finding that Florimonte's conduct in wrongfully initiating or continuing the civil proceedings was "outrageous." Id. On April 4, 2013, the state trial court judge affirmed the jury's award in a memorandum opinion and order denying Florimonte's motion for post-trial relief. Id. at Exhibit B ("Memorandum Opinion and Order").

On June 3, 2015, Florimonte filed the underlying Chapter 7 case and listed a claim by Scranton Label for $52, 917.71 on her Schedule F. On September 24, 2015, Florimonte amended her Schedule, moving Scranton Label's claim of $52, 917.71 to Schedule D and adding Carr's claim for the same amount. This amended filing identifies each of the Plaintiff's claims as a "Civil Judgment" and does not identify any specific property subject to lien. From other docket entries, however, it appears that the Plaintiffs had obtained and perfected a lien on Florimonte's personal home, one which was third in priority behind Florimonte's first and second mortgages. See Dkt. #18 (Motion for Relief from Automatic Stay filed on behalf of the Plaintiffs) and #21 (Florimonte's Motion to Avoid Lien [of Scranton Label and Carr] to Preserve Exemptions).

On September 8, 2015, the Plaintiffs filed the instant adversary proceeding. Since then, the case's path to trial has been circuitous-it has been reassigned to a different judge a total of five times since the date of filing, and the original counsel for the Plaintiffs and Florimonte have both withdrawn.^[5] The trial itself took only one day, in the course which, the Plaintiffs abandoned their claims under § 727 and proceeded exclusively under § 523. Post-trial briefing concluded on October 21, 2021.

III. CONCLUSIONS OF LAW

Under § 523(a)(6) of the Code, a Chapter 7 discharge "does not discharge an individual debtor from any debt … for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6). The burden is on the creditor to prove these elements by preponderance of the evidence. In re Webb, 525 B.R. 226, 232 (Bankr. M.D. Pa. 2015)("And like all exceptions to discharge under § 523, subsection (a)(6) is construed strictly against creditors and liberally in favor of debtors.")

In Kawaauhau v. Geiger, 523 U.S. 57, the Supreme Court addressed the elements of § 523(a)(6) and held that the "willful and malicious" language represents separate elements.:

The word "willful" in (a)(6) modifies the word "injury," indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead "willful acts that cause injury." Or, Congress might have selected an additional word or words, i.e., "reckless" or "negligent," to modify "injury." Moreover, as the Eighth Circuit observed, the (a)(6) formulation triggers in the lawyer's mind the category "intentional torts," as distinguished from negligent or reckless torts. Intentional torts generally require that the actor intend "the consequences of an act," not simply "the act itself." Restatement (Second) of Torts § 8A, Comment a, p. 15 (1964) (emphasis in original).

Kawaauhau, 523 U.S. at 61.

The Court must find both willfulness and malice for a debt to be declared nondischargeable under § 523(a)(6). In re Barr, 606 B.R. 210, 214 (Bankr. D.N.J. 2019). A "willful" act is one that occurs "when the actor purposefully inflicts injury or acts in such a manner that he is substantially certain that injury will result." Barr, 606 B.R. at 214. A "willful" injury must be intentional and deliberate, and injuries that are the result of reckless or negligent conduct are insufficient. Kawaauhau, 523 U.S. at 64. A "malicious" act, in contrast, refers to "a wrongful act done consciously and knowingly in the absence of just cause or excuse." Barr, 606 B.R. at 214.

The Plaintiffs rely heavily on Barr in their arguments, as that case was one in which a prior state judgment arising from malicious prosecution and abuse of process claims was held nondischargeable because of the court's application of issue preclusion:

Issue preclusion in bankruptcy applies when the issue was previously adjudicated by a state court. Issue preclusion applies when "(1) the issue sought to be precluded [is] the same as that involved in the prior action; (2) that issue [was] actually litigated; (3) it [was] determined by a final and valid judgment; and (4) the determination [was] essential to the prior judgment ...."

Id. at 214-15.

The Court finds Barr to be distinguishable from the instant case. In Barr, the state court judgment which served as a basis for the nondischargeability action resulted from specific jury findings of willfulness and maliciousness as those terms are used in § 523(a)(6). Id. at 215.

Specifically, the claims against the debtor in Barr for malicious prosecution and abuse of process were indisputably intentional torts evincing willfulness and malice under New Jersey law:

To find malicious prosecution in New Jersey, a jury must find that "(1) a criminal action was instituted by this defendant against this plaintiff; (2) the action was motivated by malice; (3) there was an absence of probable cause to prosecute; and (4) the action was terminated favorably to the plaintiff." "Malice" is defined under New Jersey law as "the intentional commission of a

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