### NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: MAZIYAR JAMES KHABUSHANI , Debtor

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MEMORANDUM * MAZIYAR JAMES KHABUSHANI , Appel lant,

v. KILEY TA S LITZ ANDERSON , Appellee.
Appeal from the United States Bankruptc y Court for the Central District of California Barry Russell , Bankruptcy Judge, Presiding

Before: T AYLOR , F ARIS , and L AFFERTY , Bankruptcy Judges.

* This dispositio n i s not appropria te for publ ic a tion. Altho ugh it may b e cited for whatever pers uasive va lue it may have, see Fed. R. App. P. 32 .1, i t h a s no precedent ial value , see 9th Ci r . BAP R ule 802 4

- 1. INTRODUCTIO N
An a rbitrator found that Mazi yar James Khabushani wrongfully

te rminated Kiley Ta s litz Anderson ’s employment with Mr. Khabushani ’ s wholly owned corporation , Madison + V ine , Inc. ( “M+V ”) , and awarded
her da mages , attorneys ’ fees, and costs . In so doing, the arbi tr ator express ly 

# FILED

JUN 22 2021

SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT2 rejected Mr. Khabushani ’ s assertion that the terminati o n was motivated by

M+V ’ s financial condition , not unlawful discrimination

. Mr. Khabushani later filed a chapter 7 1 case , and M s. An derson filed

a n adversary proceeding seeking a decla r a tion of nond isc h argeability o f
the wrongful termination judgment

. She prevailed on a summary judgment motion; t he bankruptcy court gave issue preclusive effect to the

a r bitrator ’ s fin d in gs and determin ed that the state court judgment debt was nondischarg ea ble 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 non etheless, w e AFFIRM

. T he arbitrator ’ s conclusions a nd
the Ninth Circuit authority charging Mr. Khabushani w ith knowledge of the natural consequences of h is w rongful actions provided an appropriate
basis f or th e application of issue preclusion

. FACTS 2

Mr. Khabush ani was the sole office r, direct o r , and sha re ho l der of

M+ V , a m arketing and adv ertising comp any

. He employed Ms. Anderson
first as a t emporary emp l oyee , then a s a n independent c ont ractor , and

1 Unless s pecified otherwise, all chapter and section references ar e to the Bankru ptcy Co de, 1 1 U.S.C. §§ 1 01

- 1532

. 2 We exerc ise our disc retion to take judicial notice of doc uments electron ic ally fil e d in the bankr uptcy cou rt ’ s dockets

. See Atwood v. Cha s e Manhatt a n 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 a n M+V employ ee with full benefits

. Five days later, Ms. Anderson in formed M r

. Khabus han i that she wa s pre gnant and requested a maternity leave commencing in Ma y of 2018.

Twe nty

- five days later , Mr. Khabushani terminated her

. In Febru ary of 2018, Ms. Anderson commence d arbitrat i on against

Mr. Khabus hani and M+ V , asserting claims a rising from h er terminat ion, including sex di scrimination i n vi olation of the Fair Employme nt and Housing Act ( “ FEHA ” ) , Cal. Gov

. Cod e § 12940 et seq

. , wrongfu l

termination in violation of public policy, alter ego c laim s , and Californi a
Labor Code viol at io ns. A retired judge acted as a rbitr a tor in the proceeding

. During the
three

- day arbitration hearing , the par tie s each prese nted te stimonial and
document ary evidence under oa th and cross

- examined witnesses

. T he Arbitrator then issued his final aw ard and a n a mended final

awa rd co r recting a single typo graphica l e rror ( “ Award ” )

. He found that

Mr. Khabu shani and M +V were jointly and s everally l iable for wrongful

terminati on of Ms. Anderson b ecause of her sex and pre gn ancy but wer e
not liable for Labor Code v i o la tions

. A m ong other t hi ngs, the Arbitrator
determ ined t hat : [t ] he evide nce regardin g the wrongful te rmination w as ve ry compell ing. A simple review of the time line, shows that [Anderson] was a valued employee u ntil she told [ Khabushani] t h at she was pre gn an t and within less than four weeks she was termina ted. T his combined wi t h the statements made by4 [Kh abushani] t o oth er employe es 3 and other actions taken by him just two days before termi nating [Ande rson] , 4 pro ves beyond doubt that her term i nation was bec au se of her pregnancy.

Th e evidence offered by [Khab ushani ] regarding the company ’ s poor financial con dition was not c onvincing ; at least at the time of [Anderson ’ s] t ermination, the compa ny ’ s financ es were not a consideration. The company ’ s condit ion at so me later date obviousl y convinced [Khabushani] that the c ompany needed t o go in a different direction , but this had n othing to do with the termination of [Anderson]

. 5

T he Arbi trator a warded Ms. A nder s on $ 43,759.00 in s pecial dama ges , $125,00 0 in emotion al distress damages, $319,66 7.50 i n attorneys ’ fe es , and
$4 8,787.68 in costs , fo r a total award of $537,214.18

. But h e decline d to
award punitiv e damag es aft er det ermining that “ [t]he evide n ce prese nted

3 The Arbitrator found that before the termination , Mr. Khabush an i told other M+ V employees that he was disappointed that Ms. Ander son would be taking maternity leave and informed them that he might terminate her employment b ecause she was not doi ng a great j ob and she let her children interfere with her career.

4 The A r bitrator found that during a November 28, 2017, meeting between M r. Khabushani and Ms. Anderson, he questioned her abilit y to hit her sales targets given that she was having a baby and would be “leaving,” reduced her performance bonuses because he “chan ge d h is mind,” an d attempted to raise her sales targets to “make up” for the time that she would be “losing” during maternit y leave.

5 The Ar bitrator determined that : Mr. Khabushani tol d M+V employees that he terminated Ms. Anderson due to undisclosed perf or mance i ssues an d that M+V was financially stable ; within a week of Ms. Anderson’s termination, Mr. Khab ushani booked an expensive vacation using M+V funds an d began looking for her replacement ; and i n January of 2018, Mr. Khabushani hired two new employe es , including a n ew President. The Arbitrator made these determinati ons while also acknowledg ing that , w ithin a few months of terminating Ms. Anderson, Mr. Khabushani terminated nearl y all of M+V’s employees.5 [ did ] not substantiate [ Ms. Anderson ’ s ] requ est for P un it i v e Dam ages. ”

Less t han two weeks after entry of the Award , Mr. Khabu s ha ni fi l ed a chapter 7 bankrup tcy

. Ms. Anderson timely filed a § 523(a)(6) complain t , 6 seeking to except from Mr. K habushani ’ s di sch a rge the debt owed her f or the wrongful terminatio n

. S h e subs equently obtained relief from t he

automat ic stay and convert ed the Award t o a fi nal judgment in state court. 7
After the app e al period e xp ired , Ms. Ander son filed a motion for summary judg men t on her § 5 23(a)(6) cl aim based on the preclusive effe ct
of the A rbitrator ’ s findings and the final state court judgment

. Mr. Khabushani opposed the summary judgment motion and

c ontended , am o ng other thin gs, t hat summary ju dgment wo uld b e improper bec a use t he issu es under p inning a willful an d malicious injury
d eterminat ion were not at issue , actuall y litig ated , or n ecessarily deci ded in
the ar bitration

. After holding a heari n g on the moti on, t he bankruptcy cou rt ent ered

a n o rder granting Ms. Anderson su mmar y judgment

. The o rder was

ac compani ed by find ings of f a c t and con clusio ns of la w in which the bankruptcy court determined that issue preclusion barr e d Mr. Khabushani
from re litigatin g wh ether he inflicted a will f ul and ma li cious injury on

6 The com plaint a l so included a § 727 claim , wh ic h will not be d iscussed herein a s it wa s voluntar ily di s mi ss ed.

7 T he state court e ntered judgment c onfirm in g the $537,214. 18 A ward and granting Ms. Anderso n $ 32,821.59 in pre judgment interest and $8,445 in additi onal attorne y s ’ fees a nd costs for a t ota l judgment of $57 8,480.77

.6 Ms. An derson by terminati ng her em ployme nt with M+V

. Mr. Khabushani tim el y appeale d from the summary judgm ent

. JURISDICTION The bankruptc y court h ad jurisdiction un der 28 U. S.C. §§ 1334 and 157(b)(2)( I ). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bank r up tcy court err in granting su mmary judgment on
Ms. Anderson ’ s § 523(a) (6) claim b ased on issue precl usion?
STAN DARD S OF REVIEW

We review a bankruptcy court ’ s grant o f summary judgme nt and § 523 (a )(6) nondischargea b ility determinat ion de novo

. See Black v. B o n nie Springs Family Ltd. P'ship (In re Black) , 487 B.R. 2 02 , 210 (9t h Cir. BAP 2013).
We likewise review a bankruptcy co urt ’ s d etermination that is sue preclusio n is avai lable de novo

. I d. If is sue preclusion is available, we review its application for an a b use of discretion. Id. A bankr uptcy court
abuses its dis cr etion if it applies the wrong l egal sta ndard, misapplies the

correct legal standard, or its factual f indings a re illogical, im plausibl e, o r without support by inference s from the facts in the reco r d

. See TrafficSchool.com, Inc. v. Ed river Inc. , 653 F.3d 82 0, 832 (9 th Cir. 201 1). We may affirm o n any basis supported by the record. In re Black , 487 B.R. at 211.7 DISC USSION
A. Summar y judgme nt a nd issue preclusion standa rds Summary judgment is appropri a t e if the pleadings and supplem ental
materials demonstr at e that the re is no gen uine issue as to an y 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, 9 1 (9th Cir. BAP 2000) , aff ’ d , 3 3 F. App ’ x 365 (9th Cir. 2 002)

. W hil e the eviden ce must be

view ed i n the light most favorable to the non moving par ty, only factual disputes that might affect the outc ome of the l awsuit can defea t a summary judgment motio n. S e e Anderson v. Liberty Lobby, In c. , 4 77 U.S. 242, 248 (1 98 6) ; Lopez v

. Smith , 20 3 F. 3d 1122, 1131 (9th Cir. 2000) (en banc).
Th e bankruptcy court may g rant summary judgment in a

non dischargeabi lity proceeding based on the iss ue preclusive effect of a n arb i t ration a war d confirmed by a Ca lifor nia state court

. Se e Khaligh v

. Hadaegh (In re Khaligh) , 338 B .R. 817, 826, 8 32 (9th Cir. B AP 2006) , aff ’ d , 5 06 F.3d 956 (9th Cir. 2007)

. To do so, the bankr uptc y court must apply

C alifornia ’ s law on issue preclusion. M i gr a v. Warren City Sch. Dist. B d. of
Ed uc. , 465 U.S. 75 , 81 (1984).
California law provides that i ssue preclusion , also known a s
collateral estop pel, prevents a party from re litigating a previo usly decided

issue in a second suit where : (1) the issue is id e nt ical to what was decided

in t he fi rst suit; (2) the i ss ue was act ually li tiga ted in the first su it; (3) the

issue was necessa rily decided in th e first suit; (4) the decision in the first8 suit is final and on the m erits; and (5) the party against whom pr e cl usion is sought is the same a s, or in privity w ith, a p arty to th e first suit

. Lucido v. Super. Ct. , 51 Cal. 3d 335, 341 (199 0). Even where the s e five requirements
are met, a court may not ap ply issue preclusion u nless its application i s
consistent with so und public polic y

. Id . at 3 4 3

. The party ad vocating f or issue pre clusion m ust prove all the cr iteria for its application by presenting a reco rd sufficient to reveal the controlling
facts a nd i s sues litigated in the first suit. Kelly v. O koye (In re Ke ll y) , 182 B.R. 255, 258 (9th Ci r. BA P 1995) , aff ’ d , 100 F. 3d 110 (9th Cir. 1996 )

. Any

r easonable do ubt regarding what was de cide d in the f irst sui t will w eigh against application of issue pre cl usion

. Id

. B. Issue preclusion is a vailab le

. On appeal, w e need n ot, and do not, add ress the b ankru ptcy court ’ s
unchallen ge d determin ation tha t the fourth ( final judgment on the merits )
and f ifth (same parties ) issue preclusion criteria are met. And we con clude
that Ms. Anderson produced evide nce showing that there i s n o genuine

issue as to any materia l fac t that the other c ri teria are met

. 1. Willful in j ury A creditor seeking to hold a d ebt nondischarge able under § 523(a)( 6 ) has the burden of proving by the prep onderance of the evidence tha t the
debt i s “ for will ful and malicious injury by the debtor to another en tit y or

to th e property of another entity

. ” § 523 (a)(6) ; Grogan v. Garner , 4 98 U.S.
279, 289 (199 1)

. The requirements of “willful” and “mali cious” are9 c onsidered separately. Carrill o v. Su (In re Su) , 2 90 F.3d 1 140, 1146 (9th Cir.

2 002).
a. Intentional t o rt
A “ willf ul ” injury i s “ a deliberat e or intentional inju ry , not merely a
deliberate or intentional act that lea ds to inju ry. ” Kawaauhau v. G eiger , 523 U.S. 57, 61 (199 8) (emphasis in original)

. “ [ T] he ( a)(6) f o rm u lati on triggers in the lawyer ’ s mind the category ‘ i nt entiona l t orts , ’ as
dist inguished from n eglig ent or reckless torts. Intentional torts ge nerally

requ ire that the actor intend ‘ th e consequences of an act, ’ not simply ‘ the act
itself. ’ ” Id

. a t 61

- 62 (e m phas is in original) (citation omitted) . T hus, tortio us
conduc t i s a required e lement for a § 5 23(a) (6) nondischargeability finding. Lockerby v . Sierra , 53 5 F.3d 1038, 1040

- 41 (9th Cir . 2008)

. A tort

- like statutory injury suffices

. See Petra lia v. Jerc i ch (In re Jercich) , 238 F.3d 1202, 1205

- 06 ( 9 th Cir. 200 1)

. Th is req uirement is easily met here ; b ecaus e p r egnan cy
discriminat io n vio late s the Cal ifornia Cons titution ’ s ban o n sex
discrim ination, 8 an employ e r who fire s a n employee based on her

pre g nan cy ma y be subject to tort liability for wrongful discharge in

v iolation o f pub lic policy. Se e id

. at 1206 (holding that the court must look

to state law to determine whether con duct is tortious and determining that
debtor ’ s non payment of wages was tor tio us beca use it violated C alifornia

8 California Cons titution, articl e I, section 8, provides that “ [a] person may not be disqual ified from

. . . pursuing

. . . employ ment because of se x

. . . . ”10 Labor C ode § 216 ); Kelley v

. Co nco Cos. , 196 Cal. App. 4th 1 91, 2 14, (2011) ( “ Sex discriminat ion in employm e nt may suppo rt a claim of tortious
discha rge in violation of public policy. ” (citation omitted) ) ; Badih v. Myers , 36 Cal. App. 4th 128 9, 1296 (1995) ( “[W] e concl ude that pre gn an cy
di scrimin ation is a form of sex d iscrimination under article I, section 8 o f
the Califor nia Constitution. Since artic le I, section 8 expresses a fundamental public policy against sex discrim ination in employmen t , [Plaintiff] was pr operly allowed to ma in ta in her cau se of action for

wr ongfu l discharge in contravention of pu blic pol i cy. ” (intern al citation

om itted)). So, Ms. Anderson holds a claim that may form the basis for § 523(a)( 6) nondischargeabi lity.
b . Int entional discriminatio n
A determination of w il lful injur y also requ ires that the debtor either
had the sub jective motive to inflict i njury or committed a “ delibe rate act
with kn owle dge that the act is substant ially certa i n to c ause injury

. . . . ” I n re Jer cich , 238 F.3d at 1208 (ci tation omitted)

. M r. Khabushan i , thu s,
contends § 523(a)(6 ) liability is not established for issue preclus ive

purpose s because the Arbitrator neither was requ ired to f i nd , no r actually
found , that he h ad the subjective i ntent to injure Ms. Anderson or belie ved
her inj ury wa s substantially cer tain to occur a s a result of h is conduct. We disag ree with his conclusion

. We begin w ith the elements of Ms. Anderson ’ s discr imination claim
under the F EHA. Th e FEH A pro hib its an empl oyer fro m discr iminating11 agai nst any pers on in terms , c o ndi tio ns, or priv ileges of e mploymen t
because of the person ’ s sex , whic h includes pregnancy or medical

con di tion s rel ated to pregnancy

. Cal. G ov

. Code §§ 129 26 (r) (1 ), 12940 (a)

. As relevant here, d isp arate tr eatment discrimination under th e FEHA is

int ent io na l discriminati on against a person on proh ib ited grounds

. See G uz v. Bechte l Nat ’ l, Inc. , 24 Cal. 4th 317, 361 ( 2000)

. To establish a n e mplo yer ’ s
liabi lity for such discr imination , a plaintiff must demonstr ate tha t her protected c hara cteri stic was a sub st antial m oti vatin g factor in the
cha llenged employm ent decision. Harris v . City of S anta Monica , 56 Cal. 4th

203 , 231

- 3 2 (2013) ; Cal. Code Reg s., tit. 2 , § 11009 ( c). Judicial Counci l of
California Adv isory Committ ee on Civil Jury Instru ction s 2507 provide s
that “ [ a] ‘ subst antial m oti vating r eason ’ is a rea son that actu a lly
contributed to the [

. . . ad verse employment action ]. It must b e more tha n a
remote or trivial reason. It does n ot h ave to be the o nly reason mo ti vating the [ adverse e mploy ment action ]. ” ( E mphasi s in orig inal )

. 9
In analyzi ng claims of di sparate tr eatm ent discrimination under the
FEHA , Califo rnia courts employ a th ree

- stage burden

- shifting approac h established by the Un ited Stat es Suprem e Court in McD on nell Douglas Corp.

v. Gree n , 411 U.S

. 792 (1973). Husman v . Toyota Mo tor Cred it Corp. , 12 Ca l. App. 5th 11 68, 1181 (2017)

. The McDonnell Douglas t hree

- st ep approach is

9 “ T he Judicial Council endorses [model jury ] instructions for use an d mak e s every eff ort to e n s u re that they accurat ely state existi ng law. The articulation and interpretation of Cal ifornia la w, ho wever, remains within the purview of the Legislatur e and th e courts of review

. ” Cal. R. of Court 2.1050(b)

.12 as fol lows : (1) the plaintiff must establ ish a prima f a cie case by a
prep onderance of ev idence that : (a) she h ad a protected c haracteristic; (b ) s he was qu ali fie d for her position o r per formed co mpetently in it; (c) she suf fered an adverse employm ent actio n; and (d) her p rotected
characteristic motivated the actio n; (2) the empl oyer may rebut a presumption o f disc rimin ation est ab l is hed by the plaint i ff ’ s pri ma fac ie

ca se by profferin g a nondiscr im inatory reaso n for the action; a nd (3) the plainti ff then will bear the burde n to show by a preponderance of the

ev idence that the empl oyer ’ s proffere d reasons are pretext s for
discrimi na tio n

. Id

. ; Heard v. Lockheed Mis siles & Space Co. , 44 C al. App. 4th

1 735, 1749 ( 1996)

. The McDonnell Douglas framework : presupposes that the emplo yer has a single reason for takin g an adverse action again st the e mployee and that the reason is ei th er disc ri minatory or legitima te. By h ingi ng liabi lity on whether the employer ’ s proffere d reason fo r taking the action is genuine or pretextual, the McDonn ell Douglas inquiry aims to ferre t out the “ true ” reason f or the e mployer ’ s action.

Harris , 5 6 Cal . 4th at 2 1 5

. With respect to t he emplo y er ’ s reason fo r terminatio n, if it is

no ndiscrimin atory :

“ [i] t is the employer ’ s honest belief in the stated rea sons for firing an employee and not th e obj ective truth or fal sity of the unde rlying facts that is at i ssue in a di scrimination case.” ( King

v . Un ited Par cel Service, In c

. (2007) 152 Cal. App. 4th 426, 436, 6013 Cal. Rptr. 3 d 359 ( King ).) As the Supre me Court e x plained in Guz , “if nondiscrimina tory, [the employer ’ s] t rue reasons need not necessarily hav e bee n wise or c or rect. [Citations.] While t he

o bjective soundness of a n e mployer ’ s p roffered r easons supports their credibi lity

. . . , the ultimate issue is sim pl y whether the employer acted with a m otive to discrimina te illegally . Th us, ‘legitimate’ rea sons [citation] in this context are

r easons that are fac ially unrelated to prohibited bias , and which, if true, would thus pr eclude a finding of discrimina tion. [ Ci tations.]” ( Guz , supra , 24 Cal. 4 th a t p. 358, 100 Cal. Rptr. 2d 352 , 8 P.3d 1089, original itali cs.)

.
Will s v. Super. Ct. , 195 Cal. Ap p. 4 th 143, 170

- 71 (2011), as modified on denial of reh ’ g (May 12, 2011)

. Thus , and c ontrary to Mr. Khabushani ’ s urg ing, the objective tru th or
fal sity o f M r. Khabushani ’ s alleged nondiscriminat or y reason for

terminati ng h er

— i. e

. , an allege d rapid deter ioration of t he f inancial
condition of h is bus iness and his need to cut cost s by el iminat ing

e mployees , including Ms. A n derson

— was not a t issue . Rather, the
Ar bitrator was charged w ith assessing wh ether Mr. Khabushani honestly
beli e v ed he must termina te Ms. Anderson to eliminate c os ts and wh ether
tha t belie f motivated his decision t o terminate her

. And f aced with

Ms. Anderson ’ s and Mr. Khabushani ’ s comp et in g proffe red explanation s
for M s. A nderson ’ s te rminatio n , the Ar bitrator ruled t hat Mr. Khabushani

wr on gfull y terminated Ms. Anderson based on her sex and the fact that sh e
was p regnant and not on the su b jective nondis cri minatory r eason claimed by Mr. Khab us hani

.14 c . N atural consequence s of intentional discr imination
While t he Arbi t r a tor did not need t o go a step fur ther and find that

Mr. Khabushan i ha d the s ubjective in tent to injure Ms. An derson o r that he
believed that her i njury was substan tially certain to occur as a result of his

co nduct , Mr. Khabushani is charged with knowled g e of the natu ral

con s e quences of his intentional discriminat ion. Or msby v. First Am. Title Co. of Nev. ( In re Ormsby ) , 591 F.3d 1199, 1206 (9th Cir. 2010 ) . H e mus t have
known tha t it was substantial ly cert ai n that Ms. A n derson wou ld suffer injur y as a resu l t of the wrongful t ermination . Af ter all, emotional and
f inancial damag es are n ormal, natural , and direct consequences of a wrongful termination decis ion. 10 Willfulness is established by th e Arbitration Judgment. The
Arbitrator necessarily decided an actua l l y litig ated issue as to
Mr. Khabushani ’ s intentional commitment o f a wrongful act, pregnancy
discrimination. And as to intent t o injur e, Mr. Khabushani is charged with knowledge of the na tural consequences of hi s wrongful act . And while he

10 In dee d, so me cour ts ta ke a more per se approach and hold t hat a discriminatory

e mp loyment action taken in vi olation of laws comparable to the FEHA mee t s the requisite intentio nal injur y re q uirement of § 523(a)(6)

. See , e.g., Jones v. Svreck ( In re Jone s ) , 300 B.R. 133, 141 ( 1st C ir. BAP 2003) ( “ T hi s Panel concludes that a fi nd ing of sexual harassment c o nstitut es the requisite injury and is equivalent to a finding of

m alicious a nd willfu l inj ury for dischargeability p urposes under § 523(a)(6)

. ” ) ; Fuller v. Rea ( In re Rea ) , 6 06 B. R. 53 1, 537

- 39 (Bankr . S.D.N.Y. 2019) ( “ This Cou rt now ho lds that discrimina tory ter mination is the injury Plaintiff suffered and that a judgment finding a Def end ant i ntentionally caused that injury, particula rly when an unlawful discriminat ory ani mus is a pp are nt, is eno ugh to meet the prong of willfuln es s under § 523(a)(6) of the Bankrup tcy Code. ” )

.15 argues vehemen t l y that the Arbi tra tor was inco r rect in his determination of

wrong ful inte nt, he has never ar gued that he did no t know that te rmination
would harm Ms. Anderson. To the contrary, bef ore the bankru ptcy court,
he emp hasized how u pset he was at taking this ac t i on. 11 The record an d a

common sense determination regarding knowle dge of the natural consequences of his action s support the bankruptcy court ’ s conclusion that

Mr. Khabusha ni acted with ce rtaint y of the harmful impact of an act that
the Arbitrator found t o be w rong ful

. d

. La ck of p unitive damages Nevertheless, Mr. Khabus hani contend s tha t t he Arbitrator ’ s decision

to not awar d punitive damages creates a triable issue o f fact rega rding his

intent to injur e

. Put another way, h e asserts that this creates suff i c ient

unc ert ainty t hat retrial is req uired. We dis agree

. A s expla ined abo ve, the p arties actually li tigated and the Arbitrator necessarily decid ed that Mr. Khabushani intentionally disc riminat e d against Ms. And erson when he te rminat ed her employ ment. And a s
Mr. Kh abu shani i s charged with knowledge of the natural consequ ences of
thi s wr ongful termin ation , he nece ssarily willfully injured Ms. Anderson by wrongfully terminat ing her employment. The Arbi trat or ’ s decisi on not

to a ward pu nitive dam ages does not u n dercut t his conclu sion. While p u nitive damages findings under Cal . Civ. Code § 3294 t hat

11 In his declaration, he stated t hat “ When I had to lay off the Plaintiff, I was sick to my stomach having to break the news to her . . . ”16 “ are clea rly and solely based on a finding of Intentional Malice, fraud, or
both

. . . are sufficient t o mee t th e wi llfulness req uirement of § 523(a)(6 ) [ , ] ” Plya m v. P recision D e v. , LLC ( In re Plya m ) , 530 B.R. 456, 470 ( 9th Cir. BAP

2 015) , 12 the A rbitrato r was not com pelled to awar d punitive damages even
if h e found “ Intentional Malice, fraud, or both ” because an a ward of punitive damages is alway s a di scre tionary m att e r

. Brewer v . S econd B aptist

C hurch of L.A. , 32 Cal. 2d 791, 801 (194 8) ( “ Upon th e cleare st proof of m alice in fact, it is still the exclusive province of the jury to say whether or not puni tive d amage s sh all be awarded. A plaintiff i s enti tled t o such dam a g es only af ter the ju r y, in the exercise of its un trammeled discreti on, has made
the awa rd .” (citatio n omitted) )

. Ms. A n derson had no “right” to punitive damages as she was presumptively made whole b y the com pensator y damag es awa rd. See State Farm Mut. Au t o . Ins . Co. v. Campbe ll , 538 U.S. 408,

419 (2003) ( “ I t should be pre sumed a plai ntiff has be en made whole for his injur ies by compensatory damages, so punitive damages shoul d only be
awarded if the d efend ant ’ s culpab ility, after having p aid compen satory
d a m ages, is s o r eprehen sible as to warrant the impositi on of further

s anctio ns to achieve puni shment or det errence. ” (cit ation omitted)) ;

12 In Plyam , we defi ne d “ I n tenti o n a l M al ice ” a s “ c onduct that the de fendant intends to cause inj ury to the plaintiff ” and “ Despicable Mali ce ” as “ d es picable conduct carried on by the defendant with a w illfu l and conscious disregard of the rights or safety of others

. . . ” 53 0 B.R. a t 46 5

. We add it i on al l y h el d that “ a punitive d amages award bas ed on Despic abl e Malice or oppression does not est ablish the subj ective intent required for § 523( a)(6 ) willfulness. ” Id

. a t 470.17 Ferguson v. Lieff, Cabraser, Heimann & Bernstein , LLP , 30 Cal. 4th 1 037, 1051 (2003)

. A lso , in a sse ssing whether to awa r d puni tive dam age s , t he Arbitrator

was con fined to awar ding damages t hat w e re prop or tionate t o the
d ef endants ’ ability to pay. Adams v. Murakami , 54 Cal. 3d 10 5, 112 (1991)

. After all, “ t he purpo se of p unitive damages is not served b y financially destroyi n g a defen dan t. The purpose is to deter, not to destroy.” Id

. It

ap p ears probable f rom the Ar b itrator ’ s f indin gs that Ms. Anderson failed

to establish that the defendants ’ financial condition permitt ed an awar d of

p unitive damages. Id. at 119 ( “ In li ght of o ur holdi ng that ev id ence of a
defendant ’ s financial condition is essential to support an award of punit ive damag es, Evidence Code section 500 mandates that the plaintiff bear the burden of proof on the issue . A pl aintiff seeking punitiv e damages is not

s e e king a m ere declar at ion by the jury that he is entitled to puniti ve damages in the ab stract. The plaint iff is se eking an award of real money in a specific amount to be set by the jury. Because the award , wha tever its amount, cannot be s ustained abs ent ev i d ence of the defend an t ’ s financial condition, such evidence is ‘ es sential to the claim for relief. ’ (Evi d. Code, § 500.) ” ). Specifically, the A rbi trator found that within a few months of terminating Ms. Ande rson, Mr. Khab us hani terminated a l l of M+V ’ s

em p l o ye es , “ e xcept hims el f and mayb e one o th er employee . There was no
new income because [he] ha d le t go all of the sales per son nel

. ” Thus , the18 defendan t s ’ ability to pay pu nitive damages was dubiou s at best

. The Ar bitrator, however, did not explain why he de c l ined to award punitive damages. B ut this ga p does not require retrial on the intent to injur e element , because even if the Arbitrator den ied punitive damages on
the alternative basis that Ms. A nders on failed to prove Intentional Malice

or f raud , his ru l i n g wo uld be i mmate rial to the issue of whether the
A rbitrator ’ s intention al discri mination findings sho uld pre cl u de

Mr. Khabushani f rom litigating the “ w illful injury ” requirement of § 523(a)(6)

. Int entio nal Malic e and fraud for the purpose o f awarding

pun i t i ve damages invo lve a higher standard of proof tha n is required for a

“ will ful injury ” finding under § 523( a)( 6 ) or for a determination of sex

based discrimination

. F or an award of punitive damages , cle ar a nd

co nvincing evidence must be pre sen ted. Cal. C i v

. C o de § 3294(a)

. But for
determinations of nondis chargeability and int ent ional di scrimination , the
elements need o nly be prov en by a p re ponderance of the eviden ce. Grogan , 498 U.S. at 279 ; Heard , 44 Ca l. App. 4 th at 1749

. We discussed the con sequ ence s o f th e differen t b urdens of proof in
Branam v. Crow d er ( In re Branam ) , 22 6 B.R. 45, 47 ( 9th Cir

. BAP 1998), aff ’ d , 20 5 F.3d 1350 (9th Cir . 1999)

. In Bran am , the ba nkruptcy cour t gra nted a
creditor su mmary judgment on its § 523(a)(6) claim sol ely based on th e
pr eclusive effe ct of a California state court ju d gment for ass ault and battery
under Cal. Labor Code § 3601 ( a)

. We affirmed , notwithstanding that the

state cour t jury failed to find “malice” for t he p u rpose of awarding19 punitive damages . We reasoned that t h e failure to fi nd malice was
ir relevant to the is sue of nondischa rgeab ility under § 523(a) (6) in part
becau se mali ce unde r Cal. Civ. Code § 3294(a) involves a d ifferent (higher) standard of pro of

. Id. at 53 ; ac cord Hernan dez v. Powers & Ef fler Ins. Broke r s ( In re Hernand ez ) , BAP No. EC

- 1 0

- 1025

- JuMkZi , 20 11 WL 3300927, at *6 ( 9th Cir. BAP Jan. 5, 2011) ( relying on Bran am )

. Thus, it is ir relevant

w hether the Arbitr ator failed to find Intentional M ali ce or f raud. 13

F or all these reasons, we det er mine that the b an kruptcy court properly found that the A rbit rato r ’ s findings wer e ent itled to preclusive
effect on the issu e of w illful injury.
2. Malicious injury

T he bankr uptcy court like wise properly foun d that the Arbit rator ’s finding s were entitle d to preclusive e ff ect o n the is sue of malicious injury.
A n i njury is mali ci o us if it i s “ a wrongful act, done intentionally, which necessarily causes injury, and which is done without just cause or excuse. ”
Thi ar a v. Spycher B ro s

. ( In re Thiara ) , 285 B .R. 420, 427 ( 9t h C i r. BAP 2002) (citing In re Jercich , 238 F.3d a t 1208 )

. W e agree wit h the bankruptcy court

t hat th e Arbitr ator ’ s determination that Mr. Khabushani unlaw fully

termin ated Ms. Anderson based on her sex a nd the fact that she was
pregnant establi shes three of t h e fou r mal ic iousness elements: a leg ally

wrong f ul act , done intenti onally, which necessarily caused inj ur y.

13 But , we a cknowledge, liability under Cal. L abor Code § 3601(a) req uires a sp ecific int ent to injur e

. In re B ranam , 226 B.R. at 53.20 As fo r the fourth and final maliciousness element

— the absen ce of just

cause or excuse

— the r e c ord d id no t contain any argument of j ust cause or

exc u s e, excep t for Mr. Khabushani ’ s contention that he subject ively
believed that the termination was ju stified by t he financial de terioration of
his business and his need to cut costs

. But this con te ntion is barred by th e preclusive e ffect of the Arbitrator ’ s fin dings r egarding the true motivation
b ehind Ms. Anderso n ’ s termination. The Arbitrator expressly rej ec ted this
stated reason for terminating Ms. An derson

. Mr. Khabu shan i also necessarily fail ed to pr ove t hat he wou ld have made the same decision to

term i n ate Ms. A nder s on for lawful reasons even if he had not taken

Ms. Anderson ’ s se x and p regnant status into a ccou nt because

Ms. Anders on would not h ave been ent itled t o an award of damages had
he done so

. See Harri s , 56 C al. 4th at 241 ( “ If th e em ployer pro v e s by a prepondera nce of t he evidence that it w o uld have made the same decisio n fo r lawful reasons, then the plaintiff cannot be awa rded damages, backpay,

or an order of reinstatement. ” )

. Accordingly , we perceive n o err or in the bankruptcy c ourt ’ s holding

t hat the Arbitrato r ’ s fact ual determinations es t a blished, for issue preclusion

pur po ses, § 523(a)(6) maliciousness.

C. Any fail ure to conduct a public policy anal y sis const ituted harmless

error . After determining that the five threshold criteria for issue p reclus ion were met, the bank ruptcy court was r equired to consider whether21 imposing issue preclusion wo uld be fair and cons istent with sound public policy

. In re Khaligh , 338 B.R. at 824

- 25

. We ag ree with Mr. Khabushan i that

t he record does not clearly re f l ect th at the b ankruptcy court co nducted a publ ic policy inquiry

. There was no discussion of this element at the hearing but in finding numbe r twelve there is a discussion of those
element s typically consi de red in such an analysi s

— conservation of judicial

r e so urces and avoidance of multiple , and potentiall y inconsistent , results.
The bankruptcy court found t hese interests served by an application of issue preclusi on here

. And w e dis agree that if there was an ov ersight , it cons titu tes

re v ersible er ror becau s e we can conduct the analysis in the first instanc e given that the record allows a complete understandin g of thes e issues.
De lannoy v. Woodlawn Coloni al, L.P. ( I n re Delannoy ) , 615 B.R. 572, 583 ( 9th Ci r. B AP 2020) aff ’ d , 2021 WL 192374 4 (9th Cir. 2021) ( c i ting Swanson v. Levy , 509 F.2d 8 59, 861 (9th Cir. 19 75 ) )

. In Vandenberg v. Super ior C our t , the Califo rnia S u preme Court h eld
that in deciding whether there is “fairn ess and sound publi c policy,”

“ c ourts cons ider t he judicial nat ure of the p rior forum , i. e

. , i ts legal
formalit y, the scope of its jurisdiction, an d its procedural safeguards, particularly inc ludi ng the opportuni ty for judicial review of adverse rulings. ” 21 Ca l. 4th 815, 82 9 (1999)

. Thus, w hen ap plying issue preclusi on
based on a confirme d ar b i tra tion award , a cou rt must examine “whether
the under ly ing ar bitration followed basic elements of adj udic at ory22 procedure and was, thus, ‘adjudicatory in nature.’” I n re Khaligh , 338 B .R. at 828 (quoting Kel ly v. Vons Cos. , 67 C al. App. 4th 1329, 133 6 (1 9 9 8)) ; see also Jacobs v. CBS Broad. , Inc. , 291 F.3d 1173 , 1177

– 7 9 (9th Cir. 2002). The arbitration proc eedi ng s must be adju dicatory in nature even if the award

was con firm ed by the state court. I n re K haligh , 338 B. R. at 829

. In other

w ords, the ar bitrati on should af ford the parties “the opportunity for a hearing bef or e an i mpartial and qualified officer, at whic h th ey may give
form al recorded testimony under oath, cross

- exam ine and compel the testimony of witnesses, and o btain a written statement o f decis io n .” Kelly , 67 Cal. App. 4th at 1336

. Nothing in the rec ord ca us es us t o question the adjudicatory nature
of the arbi tr ation here

. The pa rties agreed to settle a ny dispute regarding
the termination of Ms. An derson ’ s employment by fin al and binding
arbitra t i on

. During th e arbitration proceedi ngs , they were r epr esente d by
counsel who filed written argu ments , submitted e xhi bi t s , and p resented three days of testimony by multiple witnesse s

. T he Arb itrat or was a retired judge who pre si ded o ver nu merous di s cover y d isputes and s tat us
conferenc es in t he arbitration

. A nd a fter con sidering the ev i dence, the
A rbitrator produced his five

- page Aw ard setting fo rth the bases for his
dec ision to award $537,214.18 to Ms. Ande rso n

. Mr. Khabushani fail s to

ra ise any public pol i c y con cern; re versal o n this point i s not appropriate.
C O NCLUSIO N
Based on the foregoing, we AFFIRM

.