UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

NORFOLK DIVISION

____________________________________ 

In re: ) 

 ) 

CHRISTOPHER WAYNE DELPH, ) 

SARA FRANCES DELPH, ) 

 ) Case No. 19-72494-SCS 

 Debtors. ) 

____________________________________) 

 ) 

BRANDON ZEIGLER, ) 

SAGIE DORON, ) 

FIRST CLASS SHIPPING ) 

 LOGISTICS, LLC, ) 

 ) APN 19-07024-SCS 

 Plaintiffs, ) 

 ) 

 v. ) 

 ) 

CHRISTOPHER WAYNE DELPH, ) 

 ) Chapter 7 

 Defendant. ) 

____________________________________) 

MEMORANDUM OPINION 

This matter came on for hearing on April 7, 2021, upon the Motion for Summary Judgment 

filed on October 18, 2020, by Brandon Zeigler, Sagie Doron, and First Class Shipping Logistics, 

LLC (collectively, the “Plaintiffs”), by counsel, and the response thereto filed by the Defendant, 

Christopher Wayne Delph, who is unrepresented in this adversary proceeding. Counsel for the 

Plaintiffs and Mr. Delph appeared at the hearing and presented their arguments. At the conclusion 

of the hearing, the Court took the matter under advisement. This Court has jurisdiction over this 

proceeding pursuant to 28 U.S.C. §§ 157(b)(2) and 1334(b). Venue is proper pursuant to 28 U.S.C. 

§§ 1408 and 1409(a). This Memorandum Opinion constitutes the Court’s conclusions of law. 

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I. PROCEDURAL HISTORY 

Christopher Wayne Delph and Sara Frances Delph (the “Debtors”), by counsel, filed a 

voluntary petition under Chapter 7 of the United States Bankruptcy Code on June 29, 2019. Clara 

P. Swanson, Esquire, was appointed to serve as the Chapter 7 Trustee. On October 5, 2019, the 

Plaintiffs, by counsel, timely filed a complaint seeking a determination of the dischargeability of 

debt (the “Complaint”) owed to them by Mr. Delph (the “Defendant”). ECF No. 1 (hereinafter, 

“Complaint”).

1

 

Count I of the Complaint seeks judgment and a determination that such amount is 

nondischargeable pursuant to 11 U.S.C. § 523(a)(2) because Mr. Delph allegedly made materially 

false representations as to the financial condition of the corporate Plaintiff, First Class Shipping 

Logistics, LLC (which the Plaintiffs assert was an insider of Mr. Delph), to the two individual 

Plaintiffs, upon which the latter reasonably relied. Id. ¶¶ 76-80. The Complaint further asserts 

that Mr. Delph knew or should have known such representations would induce Plaintiffs’ Zeigler’s 

and Doron’s reliance thereupon, and as a result, the individual Plaintiffs were harmed. Id. ¶¶ 81-

82. The Plaintiffs seek a nondischargeable judgment for compensatory damages of $250,000.00. 

Id. at prayer. 

Count II seeks a judgment for compensatory damages of $500,000.00 and a determination 

that such amount is nondischargeable pursuant to 11 U.S.C. § 523(a)(6) on the basis that Mr. Delph 

willfully and maliciously injured the corporate Plaintiff by purportedly utilizing its assets for 

noncorporate purposes and failing to perform proper maintenance on those assets. See id. ¶¶ 83-

1

 Unless otherwise indicated, all docket entry references are to the docket of the above-captioned 

Adversary Proceeding. 

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106, prayer. The Complaint further asserts that Mr. Delph’s actions harmed the corporate 

Plaintiff’s business and property. See id. at ¶ 106. 

Count III seeks a determination that certain debts are nondischargeable pursuant to 11 

U.S.C. § 523(a)(6) because Mr. Delph allegedly made false and malicious statements about the 

individual Plaintiffs to employees of the corporate Plaintiff. Id. ¶¶ 107-12. Further, the Complaint 

argues that Mr. Delph’s willful and malicious statements harmed the corporate Plaintiff and its 

reputation. Id. ¶ 113. For these actions, the Plaintiffs seek a nondischargeable judgment for 

compensatory damages of $1,000,000.00. Id. at prayer. Regarding all counts, the Plaintiffs further 

seek the imposition of punitive damages and a declaration of the nondischargeability of such 

damages. Id. 

The Court scheduled the Pretrial Conference in this proceeding for December 5, 2019, at 

9:30 a.m. ECF No. 4. Mr. Delph, appearing pro se in this adversary proceeding, filed a response 

to the Complaint on November 5, 2019. ECF No. 6. The Clerk’s Office issued a notice of deficient 

filing to Mr. Delph on November 6, 2019, because Mr. Delph failed to include with his response 

a certification pursuant to Local Bankruptcy Rule 2090-1. ECF No. 7. Mr. Delph re-filed his 

response and the required Local Bankruptcy Rule 2090-1 certification on November 21, 2019. 

ECF No. 11. 

The Plaintiffs filed a Motion to Strike Responsive Pleadings pertaining to Mr. Delph’s

November 5, 2019 and November 21, 2019 responses on November 25, 2019, which was followed 

by a Corrected Motion to Strike Responsive Pleadings (the “Motion to Strike”) on November 26, 

2019. ECF Nos. 14, 16. The Court scheduled a hearing on the Plaintiffs’ Motion to Strike for 

December 19, 2019, and continued the Pretrial Conference to the same date so as to coincide with 

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the hearing on the Motion to Strike. ECF No. 19. Mr. Delph responded to the Motion to Strike 

on December 9, 2019. ECF No. 22. 

The Pretrial Conference and a hearing on the Motion to Strike was held on December 19, 

2019; counsel for the Plaintiffs and Mr. Delph appeared. The Court advised the parties that the 

relief sought by the Plaintiffs in Count III of the Complaint constituted a personal injury claim 

under Virginia law, which the Court does not have jurisdiction to liquidate under 28 U.S.C. § 157. 

See ECF No. 80, Dec. 19, 2019 Pretrial Conference Transcript, at 3 (hereinafter, “Dec. 19, 2019 

Transcript”); see, e.g., Ayers v. U.S. Dep’t of Def. (In re Ayers), 581 B.R. 168, 175 (Bankr. W.D. 

Va. 2018) (“Despite its broad reference of bankruptcy authority under Section 157, a bankruptcy 

court does not have authority over all types of bankruptcy proceedings. An important reservation 

prohibits the bankruptcy court from adjudicating personal injury tort and wrongful death claims.”)

(citing 28 U.S.C. § 157(b)(5)), aff’d, Civil Action No. 7:18-cv-00032, 2019 WL 4145240 (W.D. 

Va. Aug. 30, 2019); see also Gilmore v. Jones, 370 F. Supp. 3d 630, 664 (W.D. Va. 2019) (tort 

actions include claims of defamation); Breckenridge v. Albemarle Cnty. Police Dep’t, Civil Action 

No. 7:07-cv-00326, 2007 WL 2029305, at *2 (W.D. Va. July 10, 2007) (citations omitted) 

(“[D]efamation, libel, and slander are tort claims traditionally governed by state law.”). 

Upon the Court’s inquiry, the parties confirmed that they were engaged in litigation prepetition on the Plaintiffs’ claims of fraud, constructive fraud, conversion, civil and statutory civil 

conspiracy, and defamation per se, which matter remained pending in, but had been stayed by, the 

Circuit Court for the City of Norfolk, Virginia. Id. at 3-4; see ECF No. 27, Order Allowing Parties 

to Litigate in State Court to Judgment All Claims and Counter-Claims, entered Jan. 24, 2020 

(hereinafter, “Jan. 24, 2020 Order”). Without objection by the parties, the Court determined that 

justice would be better served by deferring both the claim asserted in Count III as well as the 

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remaining counts of the Complaint to the state court for liquidation purposes, with the parties 

thereafter returning to this Court for the determination of dischargeability. Dec. 19, 2019 

Transcript, at 4. The Court’s ruling was memorialized by order entered January 24, 2020. See 

generally Jan. 24, 2020 Order.2

 The Court scheduled a Status Hearing for May 21, 2020. Id. at 2; 

Dec. 19, 2019 Transcript, at 6. 

The Status Hearing was continued twice while the matters were litigated in state court. 

ECF Nos. 34, 41 (orders entered May 21, 2020, and July 24, 2020, respectively, granting the 

Plaintiffs’ motions to continue). The Court held the Status Hearing and a continued Pretrial 

Conference telephonically on October 8, 2020, at which counsel for the Plaintiffs appeared; Mr. 

Delph did not appear. Based on the representations of Plaintiffs’ counsel, a hearing on the Motion 

to Strike was scheduled for November 5, 2020, and the Pretrial Conference was continued to the 

same date. ECF No. 47, Order Continuing Pretrial Conference, entered Oct. 14, 2020. 

On October 18, 2020, the Plaintiffs filed the Motion for Summary Judgment currently 

under consideration by the Court. ECF No. 49 (hereinafter, “Motion”). The Court conducted the 

continued Pretrial Conference and a hearing on the Motion to Strike telephonically on November 

5, 2020. Once again, counsel for the Plaintiffs appeared, but Mr. Delph did not. For the reasons 

stated on the record, the Court found that Mr. Delph’s responses to the Complaint failed to satisfy 

the requirements of Federal Rule of Civil Procedure 7008, granted the Plaintiffs’ Motion to Strike, 

and ordered Mr. Delph to file an answer to the Complaint within twenty-one (21) days of entry of 

2 The parties were ordered to return to and allow the state court to “adjudicate the validity and 

damages arising from the Fraud, Constructive Fraud, Conversion, Civil Conspiracy, Statutory 

Civil Conspiracy, and Defamation Per Se (collectively, the ‘Claims’) causes of action asserted 

against the Debtor and the non-debtor parties.” Jan. 24, 2020 Order, at 2. After adjudication in 

the state court, “this Court shall determine whether and to the extent such Claims are nondischargeable.” Id. 

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the order memorializing the ruling. ECF No. 57, Order Granting Motion to Strike, entered Nov. 

30, 2020. The Court continued the Pretrial Conference to allow Mr. Delph the opportunity to file 

his answer. ECF No. 55, Order Continuing Pretrial Conference, entered Nov. 9, 2020; ECF No. 

59, Notice of Continued Pretrial Conference, filed Dec. 1, 2020.3

 

The continued Pretrial Conference was conducted remotely via Zoom on January 14, 2021; 

Mr. Delph and counsel for the Plaintiffs appeared. Upon inquiry by the Court, Mr. Delph 

confirmed that he did not timely file an answer as required by the November 30, 2020 order and 

further represented that his address had changed; as a result, Mr. Delph did not receive all 

communications from the Court or from opposing counsel. See ECF No. 64, Order Continuing 

Pretrial Conference, entered Jan. 19, 2021. Upon consideration of Mr. Delph’s representations,

the Court ordered Mr. Delph to file an answer and change his address with the Court within ten 

(10) days of January 14, 2021, and continued the Pretrial Conference to January 28, 2021. Id. Mr. 

Delph filed his answer and exhibits thereto on January 26, 2021. ECF Nos. 68, 69. 

Counsel for the Plaintiffs and Mr. Delph appeared at the January 28, 2021 continued 

Pretrial Conference, at which time the Court again ordered Mr. Delph to provide his updated 

address to the Court and further ordered Plaintiffs’ counsel to re-serve the Plaintiffs’ Motion for 

Summary Judgment on Mr. Delph at his updated address. See ECF No. 71, Order Establishing 

Deadlines on Motion for Summary Judgment, entered Feb. 5, 2021. The Court further ordered 

Mr. Delph to file a response to the Motion for Summary Judgment on or before March 1, 2021, 

and scheduled a hearing on the Motion for Summary Judgment for April 7, 2021. Id. The Pretrial 

3

 The Pretrial Conference was initially continued to December 3, 2020, to allow Mr. Delph the 

opportunity to appear and file an appropriate response to the Complaint. The Court then continued 

the Pretrial Conference to January 14, 2021, to allow sufficient time following the November 30, 

2020 entry of the order granting the Motion to Strike for Mr. Delph to file his answer. 

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Conference was continued to the same date. Id. Mr. Delph filed his response to the Motion for 

Summary Judgment (the “Response”) on March 1, 2021. ECF No. 73 (hereinafter, “Response”). 

The continued Pretrial Conference and hearing on the Motion for Summary Judgment were held 

remotely on April 7, 2021, at which time the Court took the motion under advisement. The Court 

continued the Pretrial Conference generally pending the Court’s decision on the Motion for 

Summary Judgment. ECF No. 78, Order Continuing Pretrial Conference, entered Apr. 13, 2021. 

II. THE MOTION FOR SUMMARY JUDGMENT 

The Motion for Summary Judgment recounts the procedural history of the underlying 

bankruptcy case, this adversary proceeding, and the state court action. See Motion ¶¶ 1-12. 

According to the Plaintiffs, Mr. Delph did not appear at the hearings after the matter returned to 

state court or defend the litigation there. Id. ¶ 9. The Circuit Court for the City of Norfolk, Virginia 

entered default judgment against Mr. Delph following a hearing held May 27, 2020; the issues of 

damages and costs, however, were reserved to a later date. Id. ¶ 10; see also id. Ex. 4, Default 

Judgment Order entered by the Circuit Court for the City of Norfolk, Virginia on September 8, 

2020 (Case No. CL18-542) (hereinafter, the “Default Judgment Order”). The Plaintiffs represent 

that the state court conducted a hearing on September 2, 2020, as to damages and entered a final 

judgment order awarding damages on October 1, 2020. See Motion ¶ 11; see also id. Ex. 5, Final 

Judgment Order entered by the Circuit Court for the City of Norfolk, Virginia on October 1, 2020 

(Case No. CL18-542) (hereinafter, the “Final Judgment Order”).

4

 

The Plaintiffs assert that summary judgment is proper as to Counts I, II, and III of the 

Complaint because the October 1, 2020 Final Judgment Order entered by the state court resolved 

4 Copies of the cited Default Judgment Order and Final Judgment Order were originally filed as 

exhibits to the Motion for Summary Judgment. The Plaintiffs filed certified copies of these orders 

on April 3, 2020. ECF No. 75. 

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all genuine disputes of material facts regarding the allegations made in the Complaint, and the 

Plaintiffs are thus entitled to judgment as a matter of law. Id. ¶¶ 11, 15. Specifically, the Plaintiffs 

contend the state court judgment, which they represent was based upon fraud, conversion, civil 

conspiracy, and defamation, provides a basis for this Court to apply the doctrine of collateral 

estoppel in the instant proceeding. Id. ¶¶ 13-14, 17. The Final Judgment Order awarded: for fraud, 

$484,401.57 in compensatory damages, $175,000.00 in punitive damages, 6% pre-judgment and 

post-judgment interest, and fees and costs of $45,332.13, all payable to the Plaintiffs; for 

conversion, $1,643.29 in compensatory damages, $5,000.00 in punitive damages, and 6% prejudgment and post-judgment interest, payable to Plaintiff Sagie Doron; for civil conspiracy, 

$270,000.00 in compensatory damages, $350,000.00 in punitive damages, and 6% pre-judgment 

and post-judgment interest, payable to the Plaintiffs; and for defamation, $350,000.00 in 

compensatory damages, $200,000.00 in punitive damages, and 6% pre-judgment and postjudgment interest, payable to the Plaintiffs. Final Judgment Order at 2-3. In support of this 

argument, the Plaintiffs allege that the parties are the same in both this adversary proceeding and 

in the state court proceeding; “the [p]arties litigated the issue in question;” the issues in question 

here were essential to the Final Judgment Order; and the state court’s order represents a valid, final 

judgment against Mr. Delph. Id. ¶ 17 (citing Cheatham v. Bradley (In re Bradley), 478 B.R. 796, 

800 (Bankr. E.D. Va. 2012)). The Plaintiffs accordingly assert that summary judgment in their 

favor is appropriate and request that the Court declare the damages awarded by the state court on 

their fraud claim to be nondischargeable pursuant to 11 U.S.C. § 523(a)(2), and the damages 

awarded on their claims of conversion, civil conspiracy, and defamation to be nondischargeable 

pursuant to 11 U.S.C. § 523(a)(6). Id. ¶¶ 13-14, 16, 18, prayer. 

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III. MR. DELPH’S RESPONSE TO THE MOTION FOR SUMMARY JUDGMENT

Mr. Delph’s response to the Motion for Summary Judgment addresses the underlying 

factual allegations made in the Complaint at a general level. See generally Response. Mr. Delph 

acknowledges, in part, the procedural status of the case by way of his annotation of the Default 

Judgment Order (see id. at 4-10) and requests that the Court dismiss the Complaint. See id. at 1. 

Additionally, Mr. Delph notes that he believes Plaintiffs Ziegler and Doron are trying to gain 

money from him and that any malicious acts were performed not by him but by the individual 

Plaintiffs. Id. at 1-2. Mr. Delph requests that this Court examine his factual assertions regarding 

the Plaintiffs’ actions, including their use of corporate funds for personal expenses, replacing staff, 

changing corporate bank accounts, and blocking Mr. Delph from handling the corporate finances. 

Id. at 1. 

IV. CONCLUSIONS OF LAW 

A. The Standard for Adjudication of a Motion for Summary Judgment 

Rule 56 of the Federal Rules of Civil Procedure, as incorporated in bankruptcy proceedings 

by Federal Rule of Bankruptcy Procedure 7056, governs summary judgment proceedings. The 

Court of Appeals for the Fourth Circuit has often articulated the standards by which this Court 

must measure a motion for summary judgment: 

The party seeking summary judgment bears the initial burden of 

demonstrating that there is no genuine issue of material fact. Celotex Corp. v. 

Catrett, 477 U.S. 317, 323 (1986). “A fact is ‘material’ if proof of its existence or 

non-existence would affect the disposition of the case under applicable law. An 

issue of material fact is ‘genuine’ if the evidence offered is such that a reasonable 

jury might return a verdict for the non-movant.” Wai Man Tom v. Hosp. Ventures 

LLC, 980 F.3d 1027, 1037 (4th Cir. 2020) (citations omitted). Once the movant 

has made this threshold demonstration, the nonmoving party, to survive the motion 

for summary judgment, must demonstrate specific, material facts that give rise to a 

genuine issue. Celotex Corp., 477 U.S. at 323. Under this standard, “the mere 

existence of a scintilla of evidence” in favor of the non-movant’s position is 

insufficient to withstand the summary judgment motion. Anderson v. Liberty 

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Lobby, Inc., 477 U.S. 242, 252 (1986). “Likewise, conclusory allegations or 

denials, without more, are insufficient to preclude granting the summary judgment 

motion.” Wai Man Tom, 980 F.3d at 1037. 

Yet, “[s]ummary judgment cannot be granted merely because the court 

believes that the movant will prevail if the action is tried on the merits.” Jacobs v. 

N.C. Admin. Office of the Courts, 780 F.3d 562, 568 (4th Cir. 2015) (quoting 10A 

Charles A. Wright et al., Federal Practice & Procedure § 2728 (3d ed. 1998)). The 

court may grant summary judgment only if it concludes that the evidence could not 

permit a reasonable jury to return a favorable verdict. “Therefore, courts must view 

the evidence in the light most favorable to the nonmoving party and refrain from 

weighing the evidence or making credibility determinations.” Variety Stores, Inc. 

v. Wal-Mart Stores, Inc., 888 F.3d 651, 659 (4th Cir. 2018). (internal quotation 

marks omitted and alterations adopted). A court improperly weighs the evidence if 

it fails to credit evidence that contradicts its factual conclusions or fails to draw 

reasonable inferences in the light most favorable to the nonmoving party. Id. at 

659-60. 

Sedar v. Reston Town Ctr. Prop., LLC, 988 F.3d 756, 761 (4th Cir. 2021). 

Further, “[o]nce the moving party makes a Rule 56 motion, ‘[t]he burden is on the 

nonmoving party to show that there is a genuine issue of material fact for trial . . . by offering 

sufficient proof in the form of admissible evidence . . . .’” Variety Stores, Inc., 888 F.3d at 659 

(alterations in original) (quoting Guessous v. Fairview Prop. Invs., LLC, 828 F.3d 208, 216 (4th 

Cir. 2016)). If the nonmoving party fails to do so as to each essential element of the case, “there 

can be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning an 

essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” 

Celotex Corp., 477 U.S. at 322-23. The Court is permitted to draw reasonable inferences from the 

underlying facts; however, “those inferences must . . . fall within the range of reasonable 

probability and not be so tenuous as to amount to speculation or conjecture.” Thompson Everett, 

Inc. v. Nat’l Cable Advert. L.P., 57 F.3d 1317, 1323 (4th Cir. 1995) (citing Sylvia Dev. Corp. v. 

Calvert Cnty., 48 F.3d 810, 817 (4th Cir. 1995)). 

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B. Collateral Estoppel and the TransDulles Standard 

The Plaintiffs allege that the doctrine of collateral estoppel applies to the Final Judgment 

Order and that the issues raised in the Complaint are precluded from relitigation here. Motion ¶¶ 

17-18. The law of the state where a judgment originates controls the necessary elements of 

collateral estoppel. Pahlavi v. Ansari (In re Ansari), 113 F.3d 17, 19 (4th Cir. 1997). In Virginia, 

the doctrine of collateral estoppel is governed by the decision rendered in TransDulles Center, Inc. 

v. Sharma, 252 Va. 20 (1996), which was recently discussed by the Fourth Circuit Court of 

Appeals. 

Under Virginia law, a party asserting defensive issue preclusion has “the burden of 

proving that the claim or question had been in issue and determined in [a] prior . . . 

action.” Scales v. Lewis, 261 Va. 379, 541 S.E.2d 899, 901 (2001). Specifically, 

the proponent of issue preclusion must demonstrate that: “(1) the parties to the two 

proceedings, or their privies, be the same; (2) the factual issue sought to be litigated 

must have been actually litigated in the prior action and must have been essential 

to the prior judgment; and (3) the prior action must have resulted in a valid, final 

judgment against the party sought to be precluded in the present action.” 

Weinberger v. Tucker, 510 F.3d 486, 491 (4th Cir. 2007) (citing TransDulles Ctr., 

Inc. v. Sharma, 252 Va. 20, 472 S.E.2d 274, 275 (Va. 1996)). Also, “in Virginia, 

[issue preclusion] requires a fourth element, mutuality.” Id. (citing TransDulles 

Ctr., 472 S.E.2d at 275). 

Hately v. Watts, 917 F.3d 770, 778 (4th Cir. 2019) (alterations in original). The moving party 

bears the burden of proving by a preponderance of the evidence that the elements of collateral 

estoppel are met. In re Pro. Coatings (N.A.), 210 B.R. 66, 80 (Bankr. E.D. Va. 1997) (citing Reid 

v. Ayscue, 246 Va. 454, 456 (1993)). 

C. Application of TransDulles to Counts I, II, and III of the Complaint 

In the instant matter, three of the required elements require briefer analysis than the fourth. 

Here, the Plaintiffs in this action are the same as in the state court proceeding, and Mr. Delph was 

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one of the two named defendants in that matter.5 Indeed, this Court specifically allowed the parties 

to return to state court to litigate Mr. Delph’s liability as to the allegations raised in the Complaint. 

See Jan. 24, 2020 Order. Thus, the first element is satisfied since the parties to the state court and 

instant proceedings are the same. 

TransDulles also requires that the action to be afforded preclusive effect resulted in a valid, 

final judgment. The state court issued the Final Judgment Order, which incorporated the Default 

Judgment Order, and awarded damages to the Plaintiffs. Final Judgment Order at 1-3. In Virginia, 

an order is deemed final when “it disposes of the entire matter before the court, including all 

claims(s) and all cause(s) of action against all parties, gives all the relief contemplated, and leaves 

nothing to be done by the court except the ministerial execution of the court’s judgment, order or 

decree.” Va. Sup. Ct. R. 1:1(b); see, e.g., Super Fresh Food Mkts. of Va. v. Ruffin, 263 Va. 555, 

560 (2002); Daniels v. Truck & Equip. Corp., 205 Va. 579, 585 (1964). In addition, “[a]ll final 

judgments, orders, and decrees, irrespective of terms of court, remain under the control of the trial 

court and may be modified, vacated, or suspended for twenty-one days after the date of entry, and 

no longer.” Va. Sup. Ct. R. 1:1(a). Here, more than twenty-one days have passed since the entry 

of the Final Judgment Order on October 1, 2020. Final Judgment Order at 3. Neither the Plaintiffs 

nor Mr. Delph have advised the Court of any modifications to, vacation, suspension, or appeal of, 

the Final Judgment Order. Therefore, based upon the record before this Court, it appears that the 

order is no longer subject to the exclusive jurisdiction of the state court. Va. Sup. Ct. R. 1:1(a). 

5

 The second defendant in the state court is not a party to this adversary proceeding or a debtor or 

codebtor in the main bankruptcy case. The presence of a second defendant in state court does not 

affect this Court’s analysis of the first TransDulles element. See Beckett v. Bundick (In re 

Bundick), 303 B.R. 90, 102 (Bankr. E.D. Va. 2003) (finding this element of the TransDulles 

standard was satisfied even though the second defendant in state court action was not present in 

the action before the Bankruptcy Court). 

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The Final Judgment Order awarded damages to the Plaintiffs and resolved the entire matter 

brought before the state court; it did not reserve or contemplate any further issues to be decided.6

 

See generally Final Judgment Order. Further, the last sentence of the Final Judgment Order 

specifically provides, “This is a final order.” Id. at 3. Finally, the Final Judgment Order was 

entered against the Defendant here, Mr. Delph, who is the party against whom preclusion is sought. 

See generally id. It is clear from the record that the Final Judgment Order is a valid, final order of 

the state court entered against the Defendant in the instant matter. Thus, the third TransDulles

element is satisfied. 

The fourth TransDulles element, mutuality, is also met here. Mutuality in Virginia means 

that “a party is generally prevented from invoking the preclusive force of a judgment unless that 

party would have been bound had the prior litigation of the issue reached the opposite result.” 

TransDulles, 252 Va. at 23 (citing Norfolk & W. Ry. v. Bailey Lumber Co., 221 Va. 638, 640 

(1980)). Where the parties to both the prior and current actions are the same, the requisite 

mutuality exists. Beckett v. Bundick (In re Bundick), 303 B.R. 90, 102 (Bankr. E.D. Va. 2003). 

Had the Final Judgment Order instead found in favor of Mr. Delph in state court, the order would 

have been equally preclusive against the Plaintiffs, and so mutuality is present here. 

Whether the factual issues sought to be litigated in the instant matter were actually litigated 

and essential to the prior action is much less straightforward and warrants a more detailed analysis. 

For the factual issues to have been actually litigated so as to satisfy TransDulles, the defendant 

need not appear in person and contest the issues. TransDulles, 252 Va. at 24. The TransDulles

Court explicitly rejected the contention that the entry of default judgment created a blanket 

6

 By contrast, the Default Judgment Order specifically reserved the issues of damages, attorney 

fees, and pre-judgment interest for later determination. Default Judgment Order at 8. 

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exemption against applying collateral estoppel, noting instead that the issues “must be the subject 

of actual litigation for collateral estoppel to apply.” Id. at 25 (citing Horton v. Morrison, 248 Va. 

304, 306 (1994)). Rather, the record of the prior proceeding must show that evidence was 

presented for the court’s consideration. See id. at 24. In TransDulles, the Supreme Court of 

Virginia found that testimonial and documentary evidence was presented to the district court ex 

parte through the testimony of plaintiff’s bookkeeper and attorney, the latter of whom presented 

documentation in support of the plaintiff’s claims. Id. To determine whether the factual issues in 

the instant case were actually litigated, this Court turns to the record and the law of the Fourth 

Circuit. 

The Plaintiffs argue that summary judgment is warranted as to Counts I, II, and III of the 

Complaint because the Final Judgment Order resolved any and all issues of material fact that this 

Court must consider in relation to the three counts in the Complaint and that they are entitled to 

judgment as a matter of law. Motion ¶ 15. In support of their position, the Plaintiffs cite the Final 

Judgment Order’s incorporation by reference of the Default Judgment Order. Id. ¶ 16. Specifically 

the Plaintiffs quote the state court’s finding in the latter order that Mr. Delph “committed fraud 

when he made numerous written representation[s] to Plaintiffs that First Class Shipping Logistics 

was close to profitable because Defendant Delph knew that representation was false when he made 

it; he made the representation with the intention of deceiving Plaintiffs; Plaintiffs justifiably relied 

on Defendant Delph’s representation; and Plaintiffs were damaged as the proximate result of said 

representation.” Default Judgment Order at 7; see also Motion ¶ 16(a). The motion also points to 

the Default Judgment Order’s findings that Mr. Delph’s conduct resulting in the claims of 

conversion, civil conspiracy, and defamation was willful, malicious, and intended to cause injury. 

Default Judgment Order at 7-8; see also Motion ¶ 16(b). Accordingly, the motion asserts that the 

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Final Judgment Order contains the findings necessary to support excepting the judgment for 

damages for fraud, conversion, civil conspiracy, and defamation from discharge pursuant to 11 

U.S.C. §§ 523(a)(2) and (a)(6). Motion ¶¶ 13-14. 

At the hearing on the Motion for Summary Judgment, Plaintiffs’ counsel recounted the 

procedural history of the case in both this Court and state court. See ECF No. 81, Apr. 7, 2021 

Pretrial Conference and Hearing on Motion for Summary Judgment Transcript, at 3-5 (hereinafter, 

“Apr. 7, 2021 Transcript”). Upon inquiry by the Court, Plaintiffs’ counsel indicated that there was 

nothing present in the state court record to show that evidence was presented to, accepted, and 

considered by the state court on the issue of liability. Id. at 6. Counsel instead referred this Court 

to the “extensive nature of the allegations, . . . the [state] court’s finding of damages that were 

supported by [sic] the actually litigated, and also by the extensive notices . . . provided to Mr. 

Delph to participate” in the state court proceedings, as well as and that a demurrer was filed in the 

early stages of the state court proceedings. Id. Plaintiffs’ counsel also asserted that the state court 

proceeding was not “a blanket proceeding with no supporting facts.” Id. Based on these facts, 

Plaintiffs’ counsel argued that Mr. Delph was collaterally estopped from defending the Complaint 

and that the elements necessary to establish nondischargeability pursuant to 11 U.S.C. §§ 523(a)(2) 

and 523(a)(6) were actually litigated in state court. Id. at 6-7. 

Mr. Delph responded by noting that when the demurrer was filed in the state court 

proceeding, he had counsel but was now self-represented. Id. at 7. He further maintained that the 

allegations in the Complaint have not been proven. Id. at 8. In rebuttal, Plaintiffs’ counsel argued 

that the record from the state court action, particularly in consideration of this Court’s order to 

return to state court, amply supported that both liability and damages were actually litigated there 

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and requested that the Court grant summary judgment and except the damages amounts from 

discharge pursuant to §§ 523(a)(2) and (a)(6). Id. 

Courts throughout the Fourth Circuit have applied the TransDulles elements for collateral 

estoppel on multiple occasions and have often examined the “actually litigated” element. As 

discussed below, courts finding the “actually litigated” element satisfied have consistently done 

so only where it is clear from the record that evidence was presented and considered in the prior 

action. In In re Ansari, the Fourth Circuit found that the factual issues in the state court matter 

were actually litigated because the plaintiff “initiated the state court proceedings a year and a half 

before the entry of the default judgment. Prior to the default, multiple depositions were taken, 

many documents exchanged and the court and commissioner held numerous hearings in which 

Ansari [the defendant] appeared in person or by counsel.” Pahlavi v. Ansari (In re Ansari), 113 

F.3d 17, 21 (4th Cir. 1997). The defendant argued that default judgment was “entered as a 

discovery sanction,” and thus “the parties never ‘actually litigated’ Ansari’s fiduciary status or 

whether a defalcation occurred . . . .” Id. at 19. The Fourth Circuit disagreed: “The question of 

whether Ansari acted as a fiduciary for Pahlavi was actually litigated and resolved early in the 

case. Pahlavi continually asserted that Ansari was his fiduciary and submitted documents and 

depositions to support this position.” Id. at 20. Following entry of the order finding that Ansari 

was Pahlavi’s fiduciary, the court ordered an accounting, which was stalled by Ansari despite 

multiple discovery orders. Id. at 18. Ansari’s actions lead the court to enter default judgment 

against him, which resulted in the finding that, as a fiduciary, Ansari had engaged in defalcation. 

See id. Damages were determined after additional hearings, including an evidentiary hearing to 

decide punitive damages. See id. The Fourth Circuit concluded “there was much more evidence 

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before the state court in this case than in TransDulles, and the parties here certainly engaged in 

more extensive and two-sided litigation of the relevant issues.” Id. at 21. 

The United States Bankruptcy Court for the Western District of Virginia addressed the 

“actually litigated” element in In re Bane, where the debtor objected to a claim filed by a creditor 

who had obtained a default judgment in state court. In re Bane, 236 B.R. 352, 353 (Bankr. W.D. 

Va. 1999). The debtor did not appear to defend a fraudulent conversion action against him in the 

Circuit Court for the City of Roanoke, and the creditor-plaintiff was granted default judgment. Id. 

The state court required the creditor-plaintiff to present, at a subsequent hearing, “evidence as to 

both his pleadings of fraudulent conversion and his compensatory and punitive damages,” after 

which the state court entered judgment for the plaintiff for damages. Id. The creditor-plaintiff 

asserted that the debtor was collaterally estopped from objecting to his claim after it was filed with 

the Bankruptcy Court. Id. The Bane Court found that the factual issues necessary to substantiate 

the proof of claim were actually litigated when the state court considered evidence at the damages 

stage of the proceeding such that the TransDulles standard was satisfied: 

In assessing damages, the State Court found both compensatory and punitive 

damages for fraudulent conversion. Its letter to the parties dated July 9, 1996, 

indicates that it did not enter judgment against Bane until satisfactory evidence was 

presented with respect both to damages and to the allegations of Abbott [the 

creditor] in his motion for judgment. Thus, the State Court heard evidence of 

fraudulent conversion as well as the amount of damages sustained by Abbott. 

Id. at 354. Quoting In re Ansari, the Court recognized that evidence considered at the damages 

phase of the prior proceeding was sufficient to satisfy the “actually litigated” element for collateral 

estoppel purposes. Id. (quoting In re Ansari, 113 F.3d at 21). 

Similarly, this Court, in Cheatham v. Bradley, concluded that the necessary factual issues 

were actually litigated where the state court entered judgment against a defendant who failed to 

appear at trial for, among other claims, fraud and misrepresentation. Cheatham v. Bradley (In re 

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Bradley), 478 B.R. 796, 798, 802 (Bankr. E.D. Va. 2012). The state court’s judgment order 

provided, in pertinent part, “The evidence of the parties was presented. After hearing arguments 

of counsel and considering the testimonies of witnesses, the Court rendered the following 

Judgment amount of $215,181.67 for fraud and misrepresentation and $43,363.00 for breach of 

contract.” Id. at 799. The Bradley Court noted that despite the limited nature of the evidence 

presented in state court, the facts were sufficiently similar to TransDulles: “Plaintiffs’ evidence, 

slim as it is, establishes that the issues of ‘fraud and misrepresentation’ were actually litigated in 

Richmond Circuit Court . . . . [The] defendant’s filing of a counterclaim in the case is particularly 

cogent evidence of his active participation in the circuit court action.” Id. at 802-03. The Court 

was also influenced in this regard by the state court findings that the defendant had requested two 

continuances during the proceedings, including the day of trial. Id. at 798-99, 802. 

Conversely, there are multiple cases where courts of the Fourth Circuit have declined to 

apply collateral estoppel because the factual issues necessary to award the relief requested in the 

subsequent case were not actually litigated in the prior proceedings. These cases found that actual 

litigation did not occur where there was no evidence or testimony presented in the prior litigation 

or where the record was insufficient to demonstrate that the prior court had considered evidence 

in support of the request for relief. The Fourth Circuit addressed this issue in Capital Hauling v. 

Forbes, where the Richmond City General District Court entered a default judgment against 

Forbes for fraud. Cap. Hauling, Inc. v. Forbes, 75 F. App’x 170, 171 (4th Cir. 2003). The 

Bankruptcy Court ruled that Forbes was collaterally estopped from litigating the fraud issue and 

Capital Hauling was entitled to an order excepting the resulting debt from discharge. Id. The 

Fourth Circuit found that: 

In the instant case, there is nothing in the record establishing that “testimonial and 

documentary evidence was presented” in the state court proceeding, or that “proof 

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was presented” of any kind as to whether appellant committed fraud, or indeed that 

anything occurred at all at the state court trial other than the entry of a money 

judgment. 

Id. (quoting TransDulles, 252 Va. at 24). Therefore, the Fourth Circuit held that “[s]ince there 

was no evidence that the issue of fraud was actually litigated in the state court proceeding, the 

bankruptcy court erred by finding that appellant was collaterally estopped from litigating this issue, 

and hence we reverse the grant of summary judgment.” Id. at 171-72. 

 Similarly, where the plaintiff obtained a default judgment in Pennsylvania state court and 

subsequent relief to the defaulted party was barred by res judicata by a Virginia state court, the 

United States District Court for the Eastern District of Virginia found that the factual issues were 

not actually litigated in the prior proceedings. Schriver v. Valley Stream Fin. Corp. (In re 

Schriver), 218 B.R. 797, 800-01, 804-05 (E.D. Va. 1998). Rather, the record revealed that “no 

evidence was offered [in the Virginia state court], ex parte or otherwise, and no factual findings 

were made concerning Valley Stream’s Pennsylvania claims of fraud and conversion.” Id. at 804. 

The Court concluded that TransDulles was not satisfied because the application of res judicata by 

the Virginia court “[did] not satisfy the ‘actually litigated’ requirement for the application of 

collateral estoppel.” Id. at 805. For these reasons, the District Court reversed the Bankruptcy 

Court’s judgment that the debt was nondischargeable. Id. 

 The District Court again found that certain factual issues were not actually litigated when 

the state court dismissed a breach of contract action because the plaintiff’s counsel failed to 

prosecute the case. Delavan v. N. Am. Co. for Life & Health Ins., Case No. 2:07CV375, 2007 WL 

9808081, at *4-5 (E.D. Va. Dec. 11, 2007). The Delavan Court declined to apply collateral 

estoppel where it was unclear whether the necessary factual issue (if the plaintiff was a party to a 

contract) was actually litigated. Id. at *5. The Court found that it was “not clear from Plaintiff’s 

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allegation which asserts the issue was merely argued. Rather, the opinion on which Delavan relies 

debatably requires more than argument for an issue to be considered actually litigated.” Id. (citing 

TransDulles, 252 Va. at 24). Having been presented with no information demonstrating that 

evidence was submitted to the state court on the factual issue pending before the District Court, 

the plaintiff’s collateral estoppel argument failed. Id. 

 The United States District Court for the Western District of Virginia affirmed the 

Bankruptcy Court’s decision that collateral estoppel was inapplicable in Lewis v. Long, where a 

pro se defendant, following a criminal conviction, failed to appear in a subsequent, related civil 

proceeding until finally appearing at the default judgment hearing. Lewis v. Long, 521 B.R. 745, 

747 (W.D. Va. 2014). The state court entered default judgment against the defendant “based . . . 

on the fact ‘that more than twenty-one days [had] elapsed since personal service of process upon 

[Long] and that [Long had] failed to file responsive pleadings or make an appearance in [the] 

action in a timely fashion, although [he] appeared in person [on the date of the entry of the 

default].’” Id. at 751-52 (alterations in original). The state court thereafter scheduled a trial to 

determine damages; however, the parties settled the damages issue before trial. Id. at 747. 

When Long filed for bankruptcy protection, Lewis sought a declaration that the agreed 

damages amount Long owed to her was nondischargeable pursuant to 11 U.S.C. § 523(a)(6). Id. 

The District Court agreed with the Bankruptcy Court’s conclusion that the issue of willful and 

malicious injury, which was necessary for the Bankruptcy Court to enter a nondischargeability 

judgment, was not actually litigated in the state court. See id. at 749-50. The record did not 

indicate that Lewis presented testimony or documentary evidence in the state court civil 

proceeding. Id. at 750-51. Further, “[t]he record before the court contain[ed] no evidence of Lewis 

and Long engaging in depositions, exchanging documents, conducting extensive pretrial hearings 

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or activity, or of Long making any pretrial appearance in the state court action.” Id. at 751. Instead, 

the record indicated that the pro se defendant appeared at the default judgment hearing, despite his 

earlier failure to participate in the proceedings, and answered the court’s questions. See id. at 747-

48, 752. However, “Lewis did not produce any evidence of that exchange, and the default 

judgment order [was] silent on this point.” Id. at 752. Ultimately, “[t]he state court’s decision to 

enter the default judgment was based . . . not on any substantive findings as to the merits of Lewis’s 

state tort claims, but on a procedural technicality that Long could not refute.” Id. As the parties 

did not actually litigate the necessary factual issues for a finding of nondischargeability, collateral 

estoppel could not be applied. See id. 

This Court previously addressed the “actually litigated” question in In re Professional 

Coatings (N.A.), 210 B.R. 66 (Bankr. E.D. Va. 1997), where a final judgment was entered in the 

Circuit Court for the City of Norfolk on a contract dispute brought by the subcontractor plaintiff. 

Id. at 71. In Professional Coatings, affidavits were submitted purporting to explain what happened 

in state court; however, this Court could not consider those affidavits as they did not fall within a 

hearsay exception or contain relevant evidence so as to be admissible. See id. at 86-88. Rather, 

“the best way to prove that [the state court] made a consideration of the evidence would be the 

submission of a transcript from the December 7, 1995 hearing.” Id. at 86 (citing Pizlo v. Bethlehem 

Steel Corp., 884 F.2d 116, 119 (4th Cir. 1989); Rountrey v. Lee (In re Lee), 90 B.R. 202, 203 

(Bankr. E.D. Va. 1988)). This Court ultimately held that, pursuant to TransDulles, “for a default 

judgment to trigger collateral estoppel, there must be testimony, exhibits, or some form of evidence 

presented to the court by the appearing party notwithstanding the one party’s absence. 

Furthermore, this testimony or evidence must be duly considered by the trial judge notwithstanding 

the party’s absence.” Id. at 88 (citing TransDulles, 252 Va. at 23-24). 

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 Other decisions by the Bankruptcy Court for the Eastern District of Virginia addressing the 

concept of “actually litigated” include Fowler v. Garey and Reed v. Owens. Reed v. Owens (In re 

Owens), 449 B.R. 239 (Bankr. E.D. Va. 2011); Fowler v. Garey (In re Garey), 258 B.R. 356 

(Bankr. E.D. Va. 2000). In Garey, the state court “entered an order sanctioning Mr. Garey for his 

failure to appear at a deposition by finding him liable on all four counts in the Motion for 

Judgment.” In re Garey, 258 B.R. at 360. The state court’s final judgment order awarded 

compensatory damages with interest and attorney fees and costs to the plaintiff. Id. After the 

defendant filed for chapter 7 bankruptcy, the plaintiff sought to have the state court judgment 

amount deemed nondischargeable. Id. The Court denied the plaintiff’s motion for summary 

judgment and declined to apply collateral estoppel because “there was no evidence presented as to 

the prior judgment except for the motion for judgment and the two orders. One of the elements 

that must be shown is that the issues were actually litigated. Here there was no evidence that the 

issues were actually litigated.” Id. at 360, 363 (citing TransDulles, 252 Va. at 22-23). 

 In Owens, the Circuit Court for the City of Newport News entered a judgment order 

awarding the plaintiff $100,000.00 in damages, plus fees and costs, for negligence and intentional 

torts where that the defendants offered no defenses and failed to respond to the motion for 

judgment. In re Owens, 449 B.R. at 243. The judgment order noted that the matter was decided 

without a jury and that the order was final. Id. The Court noted, in accord with TransDulles, that 

“in determining whether to apply collateral estoppel in the face of a state court’s default judgment, 

in the § 523(a) nondischargeability context, bankruptcy courts must look to the actions of the 

parties prior to the entry of that default judgment.” Id. at 252. The record before the Court in the 

Owens case was distinguishable from that in Ansari because the Owens parties did not engage in 

discovery during the state court proceedings and Mr. Owens did not participate in the trial process. 

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Id. The Court acknowledged that the Owens state court’s judgment order stated that “‘evidence of 

the plaintiff [was] heard,’” but concluded that, unlike TransDulles, the record was incomplete 

regarding the presentation of evidence in the prior case. Id. 

The Court will only apply collateral estoppel when the record before it is 

complete. . . . Here, the Court is unable to determine with precision that the issue 

of Defendant’s assault and battery were actually litigated on the basis of the record 

before the Court. The Court will not speculate as to what issues may or may not 

have been litigated in the state court action. 

Id. at 252-53. The record in Owens only contained two documents form the state court action: the 

plaintiff’s motion for judgment and the judgment order. Id. at 253. Based on the scant record and 

the inability to discern whether the underlying issues were actually litigated, the Owens Court 

distinguished the facts of that case from those of TransDulles and declined to apply collateral 

estoppel. See id. 

 Additionally, in an action to determine dischargeability of debts pursuant to § 523(a)(4), 

the Court held that collateral estoppel did not apply where the order from the prior state court 

action lacked any specific findings to support the rendered judgment. Racetrac Petroleum, Inc. v. 

Ahmed (In re Ahmed), Adv. No. 12-01045, 2012 WL 6093446, at *3 (Bankr. E.D. Va. Dec. 7, 

2012). The Court noted that “other than a single reference to ‘Count III,’ along with a reference 

to Counts I, II, IV, and V, in the Judgment Order, there is nothing to suggest that the issues of 

whether or not the Defendant owed the Plaintiff a fiduciary duty, and whether or not the Defendant 

breached that duty, were actually litigated before the Circuit Court.” Id. 

 Here, as in Owens, the Court has a sparse record to review in determining whether the 

factual issues necessary for this Court to determine the specified debts to be nondischargeable 

under Sections 523(a)(2) and 523(a)(6) were actually litigated in state court. In support of the 

Motion for Summary Judgment, the Plaintiffs provided as exhibits the following: (1) the “Order 

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Dismissing Defendants’ Demurrers and Granting Plaintiffs’ Motion for Leave to File an Amending 

[sic] Complaint,” along with said motion (pages 1-5 of Exhibit 1 to the motion); (2) the amended 

state court complaint (pages 6-42 of Exhibit 1); (3) a two-page “Pleadings/Orders Detail” from the 

state court (Exhibit 2); (4) the instant Complaint and accompanying exhibit (the operating 

agreement of corporate plaintiff First Class Shipping Logistics, LLC) (Exhibit 3); (5) the Default 

Judgment Order (Exhibit 4); and (6) the Final Judgment Order (Exhibit 5). See generally Exhibits 

1-5 to Motion (hereinafter, “Ex. __”. As in Professional Coatings, the Plaintiffs did not tender a 

transcript of the state court proceedings to this Court. 

The order dismissing the demurrers and granting the Plaintiffs leave to file an amended 

complaint is a procedural and scheduling-focused order; it contains no information regarding 

whether evidence or testimony was, or was to be, offered in relation to the Plaintiffs’ claims. See

Ex. 1 at 1-3. Thus, the order dismissing demurrers does not support the Plaintiffs’ contention that 

the factual issues necessary for this Court to determine that the debts representing the damages 

awarded by the state court are nondischargeable were actually litigated in state court. The motion 

seeking leave to amend the complaint sought to do so to correct a typographical error and add the 

second defendant to the ad damnum clause for one of the counts. Id. at 4. As such, that motion 

too provides no support for the Plaintiffs’ position. The amended state court complaint is just as 

titled—a copy of the amended complaint filed in state court, which contains only allegations and 

does not contain any indication or intention to present evidence to the state court. See generally 

id. at 6-42. 

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The “Pleadings/Orders Detail”7 shows, in a truncated fashion, the date and filing party of 

the filings in the state court case but is otherwise uninformative as to whether the factual issues 

were actually litigated there. Ex. 2 at 1-2. The “Pleadings/Orders Detail” does, to be sure, provide 

confirmation of the Plaintiffs’ recitation of the state court procedural history. The initial complaint 

and exhibit were filed January 24, 2018, and the defendants’ demurrers were filed February 20, 

2018.8

 Id. at 1. The Plaintiffs moved to amend their complaint on April 22, 2019, which was 

granted by order entered the same day. Id. The record also reflects that the state court entered 

three orders permitting the withdrawal of counsel on April 22, 2019, but does not specify whose 

counsel departed the case. Id. The Plaintiffs filed their motion for default judgment and 

accompanying exhibits on May 7, 2020, which was granted by order entered September 8, 2020. 

Id. at 2. Also, on September 8, 2020, five exhibits were filed: “PLT Amend Statement;” 

“Affidavit;” “Doron Statement;” “Zedgler [sic] Statement;” and “PAPCO Fuel Card Invoice.” Id. 

None of these exhibits were produced to this Court, and the only representation by Plaintiffs’ 

counsel during the hearing on the Motion for Summary Judgment to these items was that 

“[e]xhibits, affidavits, and statements were filed supporting damages.” Apr. 7, 2021 Transcript, 

at 5. None of these items, nor the consideration of them by the state court, were referenced in the 

Default Judgment Order or the Final Judgment Order. The proposed final order was filed October 

1, 2020. Id. Nothing in the “Pleadings/Orders Detail” sheds any light on whether any discovery 

occurred at any stage of the proceedings. Without more, the Court finds that the “Pleadings/Orders 

7 The Motion for Summary Judgment describes the “Pleadings/Orders Detail” document as “the 

on-line docket” from state court. Motion ¶ 4. 

8 Mr. Delph noted at this Court’s April 7, 2021 hearing that he “had a few attorneys working the 

case” during the demurrer phase but that he was now defending himself due to lack of funds. Apr. 

7, 2021 Transcript, at 7. 

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Detail” does not assist the Plaintiffs in sustaining their burden to prove by a preponderance of the 

evidence that the elements of collateral estoppel have been met here. 

The Plaintiffs also filed as an exhibit the Complaint initiating this adversary case, which 

includes the operating agreement for the corporate Plaintiff, First Class Shipping Logistics. See

Ex. 3. The Complaint contains allegations and assertions against Mr. Delph but, having been filed 

prior to both this Court’s determination that the matters should be liquidated in the state court and 

the default judgment and subsequent state court proceedings, does not contain, nor could it have, 

any indicia that evidence or testimony as to Mr. Delph’s liability would be presented to or 

considered by the state court. See generally id. at 3-16. This leaves the Default Judgment Order 

and the Final Judgment Order as this Court’s means for determining whether the state court 

actually litigated the necessary factual issues as required by TransDulles. 

The Default Judgment Order sets forth detailed findings of fact and conclusions of law, 

ultimately holding Mr. Delph liable to the Plaintiffs on their claims of fraud, conversion, civil 

conspiracy, and defamation.9

 See generally Default Judgment Order. The Default Judgment Order 

does not, however, indicate that any evidence or testimony was presented to the state court to 

support these findings, nor does it reference whether the parties engaged in any discovery. See id. 

The only indication of what the state court did in fact consider is set forth on the first page of the 

Default Judgment Order: “Upon consideration whereof, the pleadings in this case, the June 23, 

2020 order requiring Defendant’s [sic] to answer to amended suit on or before 21 days from the 

June hearing, the applicable laws and Rules of the Supreme Court, specifically Rule[s] 3:8 and 

9

 The second defendant in the state court matter was also found liable to the Plaintiffs on their 

claim of civil conspiracy. Default Judgment Order at 8. 

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3:19, and for good cause shown . . . .”10 Id. at 1-2. This language falls well short of a clear 

indication that evidence or testimony was presented and considered on the underlying issues, and 

as in Owens, this Court will not speculate on whether this means evidence was presented and 

considered. 

Similarly, the Final Judgment Order does not indicate whether any depositions were taken, 

documents exchanged, or discovery otherwise promulgated. See generally Final Judgment Order. 

The record is unclear as to whether a hearing on the issue of damages was actually held, as only 

references to a hearing are set forth in paragraph 11 of the Motion for Summary Judgment (“On 

September 2, 2020, the Norfolk Circuit [C]ourt conducted a hearing on the issue of damages. After 

the hearing, on October 1, 2020, the Norfolk Circuit Court entered . . . the [Final] Judgment Order 

. . . .”); during the hearing on the Motion for Summary Judgment (“The state court conducted a 

hearing, and at that hearing, awarded damages in favor of the plaintiffs against Christopher Delph 

and the other defendant.”); and in the opening line of the Final Judgment Order (“This matter came 

to be heard before the Court on Tuesday, September 8, 2020 . . . .”). Motion ¶ 11; Apr. 7, 2021 

Transcript, at 5; Final Judgment Order at 1. As in Owens, that the record from the state court 

incomplete is reinforced by the Plaintiffs’ failure to submit a transcript or other evidence of a 

hearing record. On the issue of whether the state court considered any evidence, either testimonial 

or documentary, Plaintiffs’ counsel stated at the April 7, 2021 hearing, “I don’t have anything in 

the record that specifically says that evidence was presented on the liability issue.” Apr. 7, 2021 

Transcript 6. This representation is supported by both the Default Judgment Order and the Final 

Judgment Order, each of which fails to indicate whether evidence was presented and considered 

10 Rule 3:8 of the Rules of the Supreme Court of Virginia states the requirements of responsive 

pleadings, including demurrers, while Rule 3:19 controls the entry of default and default judgment. 

Va. R. Sup. Ct. 3:8, 3:19. 

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by the state court, either as to liability or as to the damages awarded to the Plaintiffs. See generally

Default Judgment Order; Final Judgment Order. At the hearing on the Motion for Summary 

Judgment, counsel for the Plaintiffs urged the Court to consider the “extensive nature of the 

allegations,” “the extensive notices . . . provided to Mr. Delph,” that a demurrer was filed in the 

early stages of the state court proceedings, and the state court’s findings of damages in support of 

the contention that the issues were actually litigated. Apr. 7, 2021 Transcript 6. Even taking these 

assertions into account, the Plaintiffs have failed to sustain their burden as detailed and analyzed 

above. 

In summary, the Court concludes that, like the outcome in the Owens case, there is no 

evidence in the record before this Court that the parties engaged in discovery, took depositions, or 

exchanged documents, or that the state court considered documentary evidence or heard testimony 

at any point during the proceedings there. See In re Owens, 449 B.R. at 251-53. As a result, 

pursuant to TransDulles and consistent with the case law of the Fourth Circuit, the Court cannot 

conclude that factual issues were actually litigated in the prior action that are necessary for this 

Court to enter a nondischargeability judgment. Therefore, as the elements necessary for collateral 

estoppel to apply are not met, the Court finds that the Plaintiffs have failed to sustain their burden 

of proof, and their Motion for Summary Judgment must be denied.11

V. SUMMARY 

 For the reasons stated above, the Court finds that the elements of collateral estoppel are not 

met, and thus, collateral estoppel does not apply here. Therefore, the Court concludes that the 

Plaintiffs’ Motion for Summary Judgment should be denied. 

11 Having found that the relevant factual issues were not actually litigated in the state court 

proceedings, the Court cannot address whether the issues litigated were essential to the prior 

judgment. 

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 The Court will issue a separate Order consistent with the conclusions contained in this 

Memorandum Opinion. Further, the Court will proceed to establish a trial date. 

 The Clerk shall transmit a copy of this Memorandum Opinion to counsel for the Plaintiffs; 

to Mr. Delph; and to the United States Trustee. 

 Entered this 7th day of June, 2021, at Norfolk, in the Eastern District of Virginia. 

 

 STEPHEN C. ST. JOHN 

 United States Bankruptcy Judge 

 /s/ Stephen C St-John

Entered On Docket: Jun 7 2021

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