NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: PHILLIP MICHAEL SPENCER,

Debtor,

------------------------------ NEIL F. CAMPBELL,

Appellant, v. PHILLIP MICHAEL SPENCER; MARK S. BUCKMAN, Esquire,

Appellees

. No. 17

- 60065
BAP Case No. SC

- 16

- 1253

- FBJu BK Nos. 3:14

- bk

- 09514

- MM, 3:14

- bk

- 08384

- MM
MEMORANDUM *

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Jury, Faris, and Brand, Bankruptcy Judges, Presiding

Submitted February 8 , 201 9 ** Pasadena , California Before: WARDLAW and BEA , Circuit Judges, and MURPHY, *** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3.

** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).

*** The Honorable Stephen J

. Murphy , III, United States District Judge for the Eastern District of Michigan, sitting by designation

. 

# FILED

FEB 12 2019 MOLLY C. DWYER, CLER K U.S. COURT OF APPEAL S2

Neil Campbell appeals the Bankruptcy Appel late Panel ’ s ( “ BAP ” ) affirmance of the bankruptcy co urt ’ s finding that the debt Phillip 1 Spencer and Mark Buckman owed to him was dischargeable in bankruptcy. The bankruptcy court determined the debt was dischargeable because Spencer and Buckman ’ s reliance on the advice of their counsel precluded a finding of the requisite intent under 11 U.S.C. § 523(a)(4). We have jurisdiction under 28 U.S.C. § 158(d)(1). We affirm. We review decisions of the B AP de novo. In re Straightline Invs., Inc. , 525 F.3d 870, 876 (9th Cir. 2008). We independently review the bankruptcy court ’ s rulings on appeal from the BAP. In re Khan , 846 F.3d 1058, 106 2 (9th Cir. 2017) (citation omitted). We review questions of law and mixed questions of fact and law

— such as the dischar geability of a debt

— de novo. Miller v. United States , 363 F.3d 999, 1004 (9th Cir. 2004). We review factual findings for clear error, which

means we “ accept findings of fact made by the bankruptcy court unless [those] findings leave the definite and firm c onviction that a mistake has been committed by the bankruptcy judge. ” In re K ha n , 846 F.3d at 1063 (alteration in original) (citation omitted). Finally, we review a bankruptcy court ’ s decision to apply issue preclusion for abuse of discretion. Dias v. Eliq ue , 436 F.3d 1125, 1128 (9th Cir. 2006).

1 The record suggests that Spencer ’ s first name is spelled “ Philip. ”3

During bankruptcy proceedings, a debtor cannot discharge a debt that arises from “ fraud or defalcation while [the debtor acted] in a fiduciary capacity. ” 11 U.S.C. § 523(a)(4). To prove defalcation, a creditor must establish a “ culpable state of mind . . . involving knowledge of, or gross reckless ness in respect to, the improper nature of the relevant fiduciary behavior. ” Bullock v. BankChampaign,
N.A. , 569 U.S. 267, 269 (2013). Conduct satisfying this state

- of

- mind requirement includes bad faith, moral turpitude, other immoral conduct, or an intentional
wrong

— defined as “ conduct that the fiduciary knows is improper ” or when the fiduciary “ consciously disregards (or is willfully b lind to) a substantial and unjustifiable risk that his conduct will . . . violate a fiduciary duty. ” Id. at 2 73

– 74 (internal quotation marks omitted) (citation omitted). First, the bankruptcy court did not abuse its discretion by rejecting the applicability of issue preclusion as to and conducting a trial on the question of Spencer and Buckman ’ s intent

. 2 The bankruptcy court properly determined th at the arbitrator ’ s findings regarding intent were not sufficiently clear. In his fiduciary

- duty ana lysis, the arbitrator found that Spencer and Buckman ’ s actions “ we re done purposefully (and therefore willfully), ” “ were harmful to [Campbell], ” and were “ designed to deny him the benefits of ownership. ” In his constructive fraud analysis, however, the arb itrator determined

2 Issue preclusion was available, and no party contends otherwise.4

that the same conduct lacked an “ intent to deceive ” and betrayed “ more of a simple ignorance of and perhaps a cavalier attitude toward the formalities of business organization and governance. ” The bankruptcy court ’ s “ reasonable doubts ” a bout the arbitrator ’ s seemingly contradictory findings precluded application of issue preclusion

. See In re Reynoso , 477 F.3d 1117, 1123 (9th Cir. 2007)

. The bankruptcy court ’ s application of the legal standard was not “ illogical, implausible, or without support in inferences that may be drawn from the facts in the record. ” United States v. Hinkson , 585 F.3d 1247, 1262

– 63 (9th Cir. 2009). Second, the bankruptcy court ’ s factual findings do not leave us with the

“ definite and firm conviction that a mistake h as been committed. ” In re K ha n , 846 F.3d at 1063 . The bankruptcy court detailed the testimony provided at trial. In particular, the bankruptcy court explained that it found the testimony of Spencer, Buckman, Paul Thomas (Spencer and Buckman ’ s attorney) , Pa tricia Wissehr, Ken Bobadilla, and Jeanne Goddard (Spencer and Buckman ’ s accountant), more credible than Campbell ’ s testimony. When considering the trial testimony, the undisputed facts, and the arbitrator ’ s finding s , no factual error committed by the bank ruptcy court was clear.
AFFIRMED.