NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re:

MAZIYAR JAMES KHABUSHANI,

Debtor.

BAP No. CC-20-1242-TFL

Bk. No. 2:19-bk-11796-BR

Adv. No. 2:19-ap-01096-BR

MEMORANDUM*

MAZIYAR JAMES KHABUSHANI,

Appellant,

v.

KILEY TASLITZ ANDERSON,

Appellee.

Appeal from the United States Bankruptcy Court

for the Central District of California

Barry Russell, Bankruptcy Judge, Presiding

Before: TAYLOR, FARIS, and LAFFERTY, Bankruptcy Judges.

* This disposition is not appropriate for publication. Although it may be cited for 

whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential 

value, see 9th Cir. BAP Rule 8024-1.

INTRODUCTION

An arbitrator found that Maziyar James Khabushani wrongfully 

terminated Kiley Taslitz Anderson’s employment with Mr. Khabushani’s

wholly owned corporation, Madison + Vine, Inc. (“M+V”), and awarded 

her damages, attorneys’ fees, and costs. In so doing, the arbitrator expressly 

FILED

JUN 22 2021

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
2

rejected Mr. Khabushani’s assertion that the termination was motivated by 

M+V’s financial condition, not unlawful discrimination.

Mr. Khabushani later filed a chapter 71 case, and Ms. Anderson filed 

an adversary proceeding seeking a declaration of nondischargeability of 

the wrongful termination judgment. She prevailed on a summary 

judgment motion; the bankruptcy court gave issue preclusive effect to the 

arbitrator’s findings and determined that the state court judgment debt was 

nondischargeable under § 523(a)(6). This appeal followed.

We acknowledge that in this Circuit there is no per se rule that such a 

judgment constitutes a willful and malicious injury for purposes of 

§ 523(a)(6). But nonetheless, we AFFIRM. The arbitrator’s conclusions and 

the Ninth Circuit authority charging Mr. Khabushani with knowledge of 

the natural consequences of his wrongful actions provided an appropriate 

basis for the application of issue preclusion.

FACTS2

Mr. Khabushani was the sole officer, director, and shareholder of 

M+V, a marketing and advertising company. He employed Ms. Anderson 

first as a temporary employee, then as an independent contractor, and 

1 Unless specified otherwise, all chapter and section references are to the 

Bankruptcy Code, 11 U.S.C. §§ 101-1532.

2 We exercise our discretion to take judicial notice of documents electronically 

filed in the bankruptcy court’s dockets. See Atwood v. Chase Manhattan Mortg. Co. (In re 

Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). We also adopt facts as determined in 

the arbitration.
3

finally, on November 2, 2017, as an M+V employee with full benefits. Five 

days later, Ms. Anderson informed Mr. Khabushani that she was pregnant 

and requested a maternity leave commencing in May of 2018.

Twenty-five days later, Mr. Khabushani terminated her.

In February of 2018, Ms. Anderson commenced arbitration against 

Mr. Khabushani and M+V, asserting claims arising from her termination, 

including sex discrimination in violation of the Fair Employment and 

Housing Act (“FEHA”), Cal. Gov. Code § 12940 et seq., wrongful

termination in violation of public policy, alter ego claims, and California 

Labor Code violations.

A retired judge acted as arbitrator in the proceeding. During the 

three-day arbitration hearing, the parties each presented testimonial and 

documentary evidence under oath and cross-examined witnesses.

The Arbitrator then issued his final award and an amended final 

award correcting a single typographical error (“Award”). He found that 

Mr. Khabushani and M+V were jointly and severally liable for wrongful

termination of Ms. Anderson because of her sex and pregnancy but were 

not liable for Labor Code violations. Among other things, the Arbitrator

determined that:

[t]he evidence regarding the wrongful termination was very 

compelling. A simple review of the time line, shows that 

[Anderson] was a valued employee until she told [Khabushani]

that she was pregnant and within less than four weeks she was 

terminated. This combined with the statements made by 
4

[Khabushani] to other employees3 and other actions taken by 

him just two days before terminating [Anderson],

4 proves 

beyond doubt that her termination was because of her 

pregnancy.

The evidence offered by [Khabushani] regarding the company’s 

poor financial condition was not convincing; at least at the time 

of [Anderson’s] termination, the company’s finances were not a 

consideration. The company’s condition at some later date

obviously convinced [Khabushani] that the company needed to 

go in a different direction, but this had nothing to do with the 

termination of [Anderson].

5

The Arbitrator awarded Ms. Anderson $43,759.00 in special damages, 

$125,000 in emotional distress damages, $319,667.50 in attorneys’ fees, and 

$48,787.68 in costs, for a total award of $537,214.18. But he declined to 

award punitive damages after determining that “[t]he evidence presented

3 The Arbitrator found that before the termination, Mr. Khabushani told other 

M+V employees that he was disappointed that Ms. Anderson would be taking 

maternity leave and informed them that he might terminate her employment because 

she was not doing a great job and she let her children interfere with her career.

4 The Arbitrator found that during a November 28, 2017, meeting between 

Mr. Khabushani and Ms. Anderson, he questioned her ability to hit her sales targets 

given that she was having a baby and would be “leaving,” reduced her performance 

bonuses because he “changed his mind,” and attempted to raise her sales targets to 

“make up” for the time that she would be “losing” during maternity leave.

5 The Arbitrator determined that: Mr. Khabushani told M+V employees that he 

terminated Ms. Anderson due to undisclosed performance issues and that M+V was 

financially stable; within a week of Ms. Anderson’s termination, Mr. Khabushani 

booked an expensive vacation using M+V funds and began looking for her replacement; 

and in January of 2018, Mr. Khabushani hired two new employees, including a new 

President. The Arbitrator made these determinations while also acknowledging that,

within a few months of terminating Ms. Anderson, Mr. Khabushani terminated nearly 

all of M+V’s employees.
5

[did] not substantiate [Ms. Anderson’s] request for Punitive Damages.”

Less than two weeks after entry of the Award, Mr. Khabushani filed a

chapter 7 bankruptcy. Ms. Anderson timely filed a § 523(a)(6) complaint,

6

seeking to except from Mr. Khabushani’s discharge the debt owed her for 

the wrongful termination. She subsequently obtained relief from the 

automatic stay and converted the Award to a final judgment in state court.7

After the appeal period expired, Ms. Anderson filed a motion for 

summary judgment on her § 523(a)(6) claim based on the preclusive effect

of the Arbitrator’s findings and the final state court judgment.

Mr. Khabushani opposed the summary judgment motion and 

contended, among other things, that summary judgment would be 

improper because the issues underpinning a willful and malicious injury

determination were not at issue, actually litigated, or necessarily decided in 

the arbitration.

After holding a hearing on the motion, the bankruptcy court entered

an order granting Ms. Anderson summary judgment. The order was 

accompanied by findings of fact and conclusions of law in which the 

bankruptcy court determined that issue preclusion barred Mr. Khabushani 

from relitigating whether he inflicted a willful and malicious injury on 

6 The complaint also included a § 727 claim, which will not be discussed herein as 

it was voluntarily dismissed.

7 The state court entered judgment confirming the $537,214.18 Award and 

granting Ms. Anderson $32,821.59 in prejudgment interest and $8,445 in additional

attorneys’ fees and costs for a total judgment of $578,480.77.
6

Ms. Anderson by terminating her employment with M+V.

Mr. Khabushani timely appealed from the summary judgment.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Did the bankruptcy court err in granting summary judgment on 

Ms. Anderson’s § 523(a)(6) claim based on issue preclusion?

STANDARDS OF REVIEW

We review a bankruptcy court’s grant of summary judgment and 

§ 523(a)(6) nondischargeability determination de novo. See Black v. Bonnie 

Springs Family Ltd. P'ship (In re Black), 487 B.R. 202, 210 (9th Cir. BAP 2013).

We likewise review a bankruptcy court’s determination that issue 

preclusion is available de novo. Id. If issue preclusion is available, we 

review its application for an abuse of discretion. Id. A bankruptcy court 

abuses its discretion if it applies the wrong legal standard, misapplies the 

correct legal standard, or its factual findings are illogical, implausible, or 

without support by inferences from the facts in the record. See

TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).

We may affirm on any basis supported by the record. In re Black,

487 B.R. at 211.
7

DISCUSSION

A. Summary judgment and issue preclusion standards

Summary judgment is appropriate if the pleadings and supplemental

materials demonstrate that there is no genuine issue as to any material fact 

on the claims at issue and the moving party is entitled to judgment as a 

matter of law. Roussos v. Michaelides (In re Roussos), 251 B.R. 86, 91 (9th Cir. 

BAP 2000), aff’d, 33 F. App’x 365 (9th Cir. 2002). While the evidence must be 

viewed in the light most favorable to the nonmoving party, only factual 

disputes that might affect the outcome of the lawsuit can defeat a summary 

judgment motion. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 

(1986); Lopez v. Smith, 203 F. 3d 1122, 1131 (9th Cir. 2000) (en banc).

The bankruptcy court may grant summary judgment in a 

nondischargeability proceeding based on the issue preclusive effect of an

arbitration award confirmed by a California state court. See Khaligh v.

Hadaegh (In re Khaligh), 338 B.R. 817, 826, 832 (9th Cir. BAP 2006), aff’d, 506 

F.3d 956 (9th Cir. 2007). To do so, the bankruptcy court must apply 

California’s law on issue preclusion. Migra v. Warren City Sch. Dist. Bd. of

Educ., 465 U.S. 75, 81 (1984).

California law provides that issue preclusion, also known as 

collateral estoppel, prevents a party from relitigating a previously decided 

issue in a second suit where: (1) the issue is identical to what was decided 

in the first suit; (2) the issue was actually litigated in the first suit; (3) the 

issue was necessarily decided in the first suit; (4) the decision in the first 
8

suit is final and on the merits; and (5) the party against whom preclusion is 

sought is the same as, or in privity with, a party to the first suit. Lucido v. 

Super. Ct., 51 Cal. 3d 335, 341 (1990). Even where these five requirements 

are met, a court may not apply issue preclusion unless its application is

consistent with sound public policy. Id. at 343.

The party advocating for issue preclusion must prove all the criteria 

for its application by presenting a record sufficient to reveal the controlling 

facts and issues litigated in the first suit. Kelly v. Okoye (In re Kelly), 182 B.R. 

255, 258 (9th Cir. BAP 1995), aff’d, 100 F.3d 110 (9th Cir. 1996). Any

reasonable doubt regarding what was decided in the first suit will weigh 

against application of issue preclusion. Id.

B. Issue preclusion is available.

On appeal, we need not, and do not, address the bankruptcy court’s 

unchallenged determination that the fourth (final judgment on the merits) 

and fifth (same parties) issue preclusion criteria are met. And we conclude

that Ms. Anderson produced evidence showing that there is no genuine 

issue as to any material fact that the other criteria are met.

1. Willful injury

A creditor seeking to hold a debt nondischargeable under § 523(a)(6) 

has the burden of proving by the preponderance of the evidence that the 

debt is “for willful and malicious injury by the debtor to another entity or 

to the property of another entity.” § 523(a)(6); Grogan v. Garner, 498 U.S. 

279, 289 (1991). The requirements of “willful” and “malicious” are 
9

considered separately. Carrillo v. Su (In re Su), 290 F.3d 1140, 1146 (9th Cir.

2002).

a. Intentional tort

A “willful” injury is “a deliberate or intentional injury, not merely a 

deliberate or intentional act that leads to injury.” Kawaauhau v. Geiger, 

523 U.S. 57, 61 (1998) (emphasis in original). “[T]he (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.’” Id. at 61-62 (emphasis in original) (citation omitted). Thus, tortious

conduct is a required element for a § 523(a)(6) nondischargeability finding. 

Lockerby v. Sierra, 535 F.3d 1038, 1040-41 (9th Cir. 2008). A tort-like statutory 

injury suffices. See Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1205-06 

(9th Cir. 2001).

This requirement is easily met here; because pregnancy 

discrimination violates the California Constitution’s ban on sex 

discrimination,8 an employer who fires an employee based on her 

pregnancy may be subject to tort liability for wrongful discharge in

violation of public policy. See id. at 1206 (holding that the court must look

to state law to determine whether conduct is tortious and determining that 

debtor’s nonpayment of wages was tortious because it violated California 

8 California Constitution, article I, section 8, provides that “[a] person may not be 

disqualified from . . . pursuing . . . employment because of sex . . . .”
10

Labor Code § 216); Kelley v. Conco Cos., 196 Cal. App. 4th 191, 214, (2011)

(“Sex discrimination in employment may support a claim of tortious 

discharge in violation of public policy.” (citation omitted)); Badih v. Myers, 

36 Cal. App. 4th 1289, 1296 (1995) (“[W]e conclude that pregnancy

discrimination is a form of sex discrimination under article I, section 8 of

the California Constitution. Since article I, section 8 expresses a 

fundamental public policy against sex discrimination in employment, 

[Plaintiff] was properly allowed to maintain her cause of action for 

wrongful discharge in contravention of public policy.” (internal citation 

omitted)). So, Ms. Anderson holds a claim that may form the basis for 

§ 523(a)(6) nondischargeability.

b. Intentional discrimination

A determination of willful injury also requires that the debtor either 

had the subjective motive to inflict injury or committed a “deliberate act 

with knowledge that the act is substantially certain to cause injury. . . .” In 

re Jercich, 238 F.3d at 1208 (citation omitted). Mr. Khabushani, thus,

contends § 523(a)(6) liability is not established for issue preclusive 

purposes because the Arbitrator neither was required to find, nor actually 

found, that he had the subjective intent to injure Ms. Anderson or believed 

her injury was substantially certain to occur as a result of his conduct. We

disagree with his conclusion.

We begin with the elements of Ms. Anderson’s discrimination claim 

under the FEHA. The FEHA prohibits an employer from discriminating 
11

against any person in terms, conditions, or privileges of employment 

because of the person’s sex, which includes pregnancy or medical 

conditions related to pregnancy. Cal. Gov. Code §§ 12926(r)(1), 12940(a). As 

relevant here, disparate treatment discrimination under the FEHA is 

intentional discrimination against a person on prohibited grounds. See Guz 

v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 361 (2000). To establish an employer’s 

liability for such discrimination, a plaintiff must demonstrate that her

protected characteristic was a substantial motivating factor in the 

challenged employment decision. Harris v. City of Santa Monica, 56 Cal. 4th 

203, 231-32 (2013); Cal. Code Regs., tit. 2, § 11009(c). Judicial Council of 

California Advisory Committee on Civil Jury Instructions 2507 provides 

that “[a] ‘substantial motivating reason’ is a reason that actually

contributed to the [. . . adverse employment action]. It must be more than a 

remote or trivial reason. It does not have to be the only reason motivating 

the [adverse employment action].” (Emphasis in original).

9

In analyzing claims of disparate treatment discrimination under the 

FEHA, California courts employ a three-stage burden-shifting approach 

established by the United States Supreme Court in McDonnell Douglas Corp. 

v. Green, 411 U.S. 792 (1973). Husman v. Toyota Motor Credit Corp., 12 Cal. 

App. 5th 1168, 1181 (2017). The McDonnell Douglas three-step approach is 

9 “The Judicial Council endorses [model jury] instructions for use and makes

every effort to ensure that they accurately state existing law. The articulation and 

interpretation of California law, however, remains within the purview of the 

Legislature and the courts of review.” Cal. R. of Court 2.1050(b).
12

as follows: (1) the plaintiff must establish a prima facie case by a 

preponderance of evidence that: (a) she had a protected characteristic; 

(b) she was qualified for her position or performed competently in it; 

(c) she suffered an adverse employment action; and (d) her protected

characteristic motivated the action; (2) the employer may rebut a 

presumption of discrimination established by the plaintiff’s prima facie 

case by proffering a nondiscriminatory reason for the action; and (3) the 

plaintiff then will bear the burden to show by a preponderance of the 

evidence that the employer’s proffered reasons are pretexts for

discrimination. Id.; Heard v. Lockheed Missiles & Space Co., 44 Cal. App. 4th 

1735, 1749 (1996).

The McDonnell Douglas framework:

presupposes that the employer has a single reason for taking an 

adverse action against the employee and that the reason is 

either discriminatory or legitimate. By hinging liability on 

whether the employer’s proffered reason for taking the action is 

genuine or pretextual, the McDonnell Douglas inquiry aims to 

ferret out the “true” reason for the employer’s action.

Harris, 56 Cal. 4th at 215.

With respect to the employer’s reason for termination, if it is 

nondiscriminatory:

“[i]t is the employer’s honest belief in the stated reasons for 

firing an employee and not the objective truth or falsity of the

underlying facts that is at issue in a discrimination case.” (King 

v. United Parcel Service, Inc. (2007) 152 Cal. App. 4th 426, 436, 60 
13

Cal. Rptr. 3d 359 (King).) As the Supreme Court explained in 

Guz, “if nondiscriminatory, [the employer’s] true reasons need

not necessarily have been wise or correct. [Citations.] While the 

objective soundness of an employer’s proffered reasons 

supports their credibility . . . , the ultimate issue is simply 

whether the employer acted with a motive to discriminate 

illegally. Thus, ‘legitimate’ reasons [citation] in this context are 

reasons that are facially unrelated to prohibited bias, and which, if 

true, would thus preclude a finding of discrimination. 

[Citations.]” (Guz, supra, 24 Cal. 4th at p. 358, 100 Cal. Rptr. 2d 

352, 8 P.3d 1089, original italics.).

Wills v. Super. Ct., 195 Cal. App. 4th 143, 170-71 (2011), as modified on denial 

of reh’g (May 12, 2011).

Thus, and contrary to Mr. Khabushani’s urging, the objective truth or 

falsity of Mr. Khabushani’s alleged nondiscriminatory reason for 

terminating her—i.e., an alleged rapid deterioration of the financial 

condition of his business and his need to cut costs by eliminating 

employees, including Ms. Anderson—was not at issue. Rather, the 

Arbitrator was charged with assessing whether Mr. Khabushani honestly 

believed he must terminate Ms. Anderson to eliminate costs and whether 

that belief motivated his decision to terminate her. And faced with 

Ms. Anderson’s and Mr. Khabushani’s competing proffered explanations 

for Ms. Anderson’s termination, the Arbitrator ruled that Mr. Khabushani

wrongfully terminated Ms. Anderson based on her sex and the fact that she

was pregnant and not on the subjective nondiscriminatory reason claimed 

by Mr. Khabushani.
14

c. Natural consequences of intentional discrimination

While the Arbitrator did not need to go a step further and find that 

Mr. Khabushani had the subjective intent to injure Ms. Anderson or that he 

believed that her injury was substantially certain to occur as a result of his 

conduct, Mr. Khabushani is charged with knowledge of the natural 

consequences of his intentional discrimination. Ormsby v. First Am. Title Co. 

of Nev. (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010). He must have 

known that it was substantially certain that Ms. Anderson would suffer 

injury as a result of the wrongful termination. After all, emotional and 

financial damages are normal, natural, and direct consequences of a 

wrongful termination decision.10

Willfulness is established by the Arbitration Judgment. The 

Arbitrator necessarily decided an actually litigated issue as to 

Mr. Khabushani’s intentional commitment of a wrongful act, pregnancy

discrimination. And as to intent to injure, Mr. Khabushani is charged with 

knowledge of the natural consequences of his wrongful act. And while he 

10 Indeed, some courts take a more per se approach and hold that a discriminatory

employment action taken in violation of laws comparable to the FEHA meets the 

requisite intentional injury requirement of § 523(a)(6). See, e.g., Jones v. Svreck (In re 

Jones), 300 B.R. 133, 141 (1st Cir. BAP 2003) (“This Panel concludes that a finding of 

sexual harassment constitutes the requisite injury and is equivalent to a finding of 

malicious and willful injury for dischargeability purposes under § 523(a)(6).”); Fuller v. 

Rea (In re Rea), 606 B.R. 531, 537-39 (Bankr. S.D.N.Y. 2019) (“This Court now holds that 

discriminatory termination is the injury Plaintiff suffered and that a judgment finding a 

Defendant intentionally caused that injury, particularly when an unlawful 

discriminatory animus is apparent, is enough to meet the prong of willfulness under

§ 523(a)(6) of the Bankruptcy Code.”).
15

argues vehemently that the Arbitrator was incorrect in his determination of 

wrongful intent, he has never argued that he did not know that termination 

would harm Ms. Anderson. To the contrary, before the bankruptcy court, 

he emphasized how upset he was at taking this action.11 The record and a 

common sense determination regarding knowledge of the natural 

consequences of his actions support the bankruptcy court’s conclusion that 

Mr. Khabushani acted with certainty of the harmful impact of an act that 

the Arbitrator found to be wrongful.

d. Lack of punitive damages

Nevertheless, Mr. Khabushani contends that the Arbitrator’s decision 

to not award punitive damages creates a triable issue of fact regarding his 

intent to injure. Put another way, he asserts that this creates sufficient 

uncertainty that retrial is required. We disagree.

As explained above, the parties actually litigated and the Arbitrator 

necessarily decided that Mr. Khabushani intentionally discriminated 

against Ms. Anderson when he terminated her employment. And as 

Mr. Khabushani is charged with knowledge of the natural consequences of 

this wrongful termination, he necessarily willfully injured Ms. Anderson 

by wrongfully terminating her employment. The Arbitrator’s decision not

to award punitive damages does not undercut this conclusion.

While punitive damages findings under Cal. Civ. Code § 3294 that

11 In his declaration, he stated that “When I had to lay off the Plaintiff, I was sick 

to my stomach having to break the news to her . . . ”
16

“are clearly and solely based on a finding of Intentional Malice, fraud, or 

both . . . are sufficient to meet the willfulness requirement of § 523(a)(6)[,]”

Plyam v. Precision Dev., LLC (In re Plyam), 530 B.R. 456, 470 (9th Cir. BAP 

2015),12 the Arbitrator was not compelled to award punitive damages even 

if he found “Intentional Malice, fraud, or both” because an award of 

punitive damages is always a discretionary matter. Brewer v. Second Baptist 

Church of L.A., 32 Cal. 2d 791, 801 (1948) (“Upon the clearest proof of malice 

in fact, it is still the exclusive province of the jury to say whether or not 

punitive damages shall be awarded. A plaintiff is entitled to such damages 

only after the jury, in the exercise of its untrammeled discretion, has made

the award.” (citation omitted)). Ms. Anderson had no “right” to punitive 

damages as she was presumptively made whole by the compensatory 

damages award. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 

419 (2003) (“It should be presumed a plaintiff has been made whole for his 

injuries by compensatory damages, so punitive damages should only be 

awarded if the defendant’s culpability, after having paid compensatory 

damages, is so reprehensible as to warrant the imposition of further 

sanctions to achieve punishment or deterrence.” (citation omitted)); 

12 In Plyam, we defined “Intentional Malice” as “conduct that the defendant 

intends to cause injury to the plaintiff” and “Despicable Malice” as “despicable conduct 

carried on by the defendant with a willful and conscious disregard of the rights or 

safety of others . . . ” 530 B.R. at 465. We additionally held that “a punitive damages 

award based on Despicable Malice or oppression does not establish the subjective intent 

required for § 523(a)(6) willfulness.” Id. at 470.
17

Ferguson v. Lieff, Cabraser, Heimann & Bernstein, LLP, 30 Cal. 4th 1037, 1051

(2003).

Also, in assessing whether to award punitive damages, the Arbitrator

was confined to awarding damages that were proportionate to the 

defendants’ ability to pay. Adams v. Murakami, 54 Cal. 3d 105, 112 (1991).

After all, “the purpose of punitive damages is not served by financially 

destroying a defendant. The purpose is to deter, not to destroy.” Id. It 

appears probable from the Arbitrator’s findings that Ms. Anderson failed

to establish that the defendants’ financial condition permitted an award of 

punitive damages. Id. at 119 (“In light of our holding that evidence of a 

defendant’s financial condition is essential to support an award of punitive 

damages, Evidence Code section 500 mandates that the plaintiff bear the 

burden of proof on the issue. A plaintiff seeking punitive damages is not 

seeking a mere declaration by the jury that he is entitled to punitive 

damages in the abstract. The plaintiff is seeking an award of real money in 

a specific amount to be set by the jury. Because the award, whatever its 

amount, cannot be sustained absent evidence of the defendant’s financial 

condition, such evidence is ‘essential to the claim for relief.’ (Evid. Code, 

§ 500.)”).

Specifically, the Arbitrator found that within a few months of 

terminating Ms. Anderson, Mr. Khabushani terminated all of M+V’s 

employees, “except himself and maybe one other employee. There was no 

new income because [he] had let go all of the sales personnel.” Thus, the 
18

defendants’ ability to pay punitive damages was dubious at best.

The Arbitrator, however, did not explain why he declined to award 

punitive damages. But this gap does not require retrial on the intent to 

injure element, because even if the Arbitrator denied punitive damages on 

the alternative basis that Ms. Anderson failed to prove Intentional Malice

or fraud, his ruling would be immaterial to the issue of whether the 

Arbitrator’s intentional discrimination findings should preclude

Mr. Khabushani from litigating the “willful injury” requirement of

§ 523(a)(6). Intentional Malice and fraud for the purpose of awarding 

punitive damages involve a higher standard of proof than is required for a 

“willful injury” finding under § 523(a)(6) or for a determination of sexbased discrimination. For an award of punitive damages, clear and 

convincing evidence must be presented. Cal. Civ. Code § 3294(a). But for 

determinations of nondischargeability and intentional discrimination, the 

elements need only be proven by a preponderance of the evidence. Grogan, 

498 U.S. at 279; Heard, 44 Cal. App. 4th at 1749.

We discussed the consequences of the different burdens of proof in

Branam v. Crowder (In re Branam), 226 B.R. 45, 47 (9th Cir. BAP 1998), aff’d, 

205 F.3d 1350 (9th Cir. 1999). In Branam, the bankruptcy court granted a 

creditor summary judgment on its § 523(a)(6) claim solely based on the

preclusive effect of a California state court judgment for assault and battery 

under Cal. Labor Code § 3601(a). We affirmed, notwithstanding that the 

state court jury failed to find “malice” for the purpose of awarding 
19

punitive damages. We reasoned that the failure to find malice was 

irrelevant to the issue of nondischargeability under § 523(a)(6) in part 

because malice under Cal. Civ. Code § 3294(a) involves a different (higher) 

standard of proof. Id. at 53; accord Hernandez v. Powers & Effler Ins. Brokers

(In re Hernandez), BAP No. EC-10-1025-JuMkZi, 2011 WL 3300927, at *6 

(9th Cir. BAP Jan. 5, 2011) (relying on Branam). Thus, it is irrelevant 

whether the Arbitrator failed to find Intentional Malice or fraud.13

For all these reasons, we determine that the bankruptcy court

properly found that the Arbitrator’s findings were entitled to preclusive 

effect on the issue of willful injury. 

2. Malicious injury

The bankruptcy court likewise properly found that the Arbitrator’s

findings were entitled to preclusive effect on the issue of malicious injury.

An injury is malicious if it is “a wrongful act, done intentionally, which

necessarily causes injury, and which is done without just cause or excuse.”

Thiara v. Spycher Bros. (In re Thiara), 285 B.R. 420, 427 (9th Cir. BAP 2002)

(citing In re Jercich, 238 F.3d at 1208). We agree with the bankruptcy court 

that the Arbitrator’s determination that Mr. Khabushani unlawfully 

terminated Ms. Anderson based on her sex and the fact that she was 

pregnant establishes three of the four maliciousness elements: a legally 

wrongful act, done intentionally, which necessarily caused injury.

13 But, we acknowledge, liability under Cal. Labor Code § 3601(a) requires a 

specific intent to injure. In re Branam, 226 B.R. at 53.
20

As for the fourth and final maliciousness element—the absence of just 

cause or excuse—the record did not contain any argument of just cause or 

excuse, except for Mr. Khabushani’s contention that he subjectively 

believed that the termination was justified by the financial deterioration of 

his business and his need to cut costs. But this contention is barred by the 

preclusive effect of the Arbitrator’s findings regarding the true motivation 

behind Ms. Anderson’s termination. The Arbitrator expressly rejected this 

stated reason for terminating Ms. Anderson. Mr. Khabushani also 

necessarily failed to prove that he would have made the same decision to 

terminate Ms. Anderson for lawful reasons even if he had not taken 

Ms. Anderson’s sex and pregnant status into account because

Ms. Anderson would not have been entitled to an award of damages had 

he done so. See Harris, 56 Cal. 4th at 241 (“If the employer proves by a 

preponderance of the evidence that it would have made the same decision 

for lawful reasons, then the plaintiff cannot be awarded damages, backpay, 

or an order of reinstatement.”).

Accordingly, we perceive no error in the bankruptcy court’s holding

that the Arbitrator’s factual determinations established, for issue preclusion

purposes, § 523(a)(6) maliciousness.

C. Any failure to conduct a public policy analysis constituted harmless 

error.

After determining that the five threshold criteria for issue preclusion 

were met, the bankruptcy court was required to consider whether 
21

imposing issue preclusion would be fair and consistent with sound public 

policy. In re Khaligh, 338 B.R. at 824-25. We agree with Mr. Khabushani that

the record does not clearly reflect that the bankruptcy court conducted a 

public policy inquiry. There was no discussion of this element at the 

hearing but in finding number twelve there is a discussion of those

elements typically considered in such an analysis—conservation of judicial

resources and avoidance of multiple, and potentially inconsistent, results.

The bankruptcy court found these interests served by an application of 

issue preclusion here.

And we disagree that if there was an oversight, it constitutes

reversible error because we can conduct the analysis in the first instance

given that the record allows a complete understanding of these issues. 

Delannoy v. Woodlawn Colonial, L.P. (In re Delannoy), 615 B.R. 572, 583 

(9th Cir. BAP 2020) aff’d, 2021 WL 1923744 (9th Cir. 2021) (citing Swanson v. 

Levy, 509 F.2d 859, 861 (9th Cir. 1975)).

In Vandenberg v. Superior Court, the California Supreme Court held

that in deciding whether there is “fairness and sound public policy,” 

“courts consider the judicial nature of the prior forum, i.e., its legal 

formality, the scope of its jurisdiction, and its procedural safeguards, 

particularly including the opportunity for judicial review of adverse 

rulings.” 21 Cal. 4th 815, 829 (1999). Thus, when applying issue preclusion 

based on a confirmed arbitration award, a court must examine “whether 

the underlying arbitration followed basic elements of adjudicatory 
22

procedure and was, thus, ‘adjudicatory in nature.’” In re Khaligh, 338 B.R. at 

828 (quoting Kelly v. Vons Cos., 67 Cal. App. 4th 1329, 1336 (1998)); see also

Jacobs v. CBS Broad., Inc., 291 F.3d 1173, 1177–79 (9th Cir. 2002). The 

arbitration proceedings must be adjudicatory in nature even if the award 

was confirmed by the state court. In re Khaligh, 338 B.R. at 829. In other 

words, the arbitration should afford the parties “the opportunity for a 

hearing before an impartial and qualified officer, at which they may give 

formal recorded testimony under oath, cross-examine and compel the 

testimony of witnesses, and obtain a written statement of decision.” Kelly,

67 Cal. App. 4th at 1336.

Nothing in the record causes us to question the adjudicatory nature

of the arbitration here. The parties agreed to settle any dispute regarding

the termination of Ms. Anderson’s employment by final and binding 

arbitration. During the arbitration proceedings, they were represented by

counsel who filed written arguments, submitted exhibits, and presented 

three days of testimony by multiple witnesses. The Arbitrator was a retired 

judge who presided over numerous discovery disputes and status 

conferences in the arbitration. And after considering the evidence, the

Arbitrator produced his five-page Award setting forth the bases for his 

decision to award $537,214.18 to Ms. Anderson. Mr. Khabushani fails to 

raise any public policy concern; reversal on this point is not appropriate.

CONCLUSION

Based on the foregoing, we AFFIRM.