Source: https://www.finkellaw.com/Published-Works/Intentional-Torts-and-Bankruptcy.aspx
Timestamp: 2019-04-24 12:28:31+00:00

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This article focuses on the debate to preserve the stability in both tort and bankruptcy law, and in its discussion, notes the potential for an erosion of the concept of "willful" as applied to cases of intentional torts under tort law.
As mentioned above, Section 523(a)(6) exempts from discharge all debts "for willful and malicious injury by the debtor to another entity or to the property of another entity." 7 Broken down into its component elements, Section 523(a)(6) focuses on three significant points: the act subject of the discharge must be willful; the act must be malicious; and the act must be intended to result in an injury. The injury element is the most straightforward and most broad element of the three, 8 resulting in little need for judicial interpretation. It includes physical injury in tort as well as conversion of property. 9 However, the application of the willful and malicious component in Section 523 (a)(6) is not so straightforward and thus frequently subject to the scrutiny of the bankruptcy court, who acts as both judge and jury throughout the process.
Part of the difficulty in interpreting "willful" and "malicious" in bankruptcy is that these elements are not defined within the Code, and, as terms of art, are treated as separate elements to be proven. 10 Read alone, "willful" is generally taken to mean the same as "deliberate or intentional," which requires something more than "mere recklessness." 11The standard for willful is whether the act was undertaken voluntarily. 12 In contrast, the "malicious" standard requires more than willfulness but falls short of requiring personal animosity, spite, or ill will. 13 Although the three elements appear to be straightforward and easily understood, this is not the case, particularly when the willful and malicious elements are applied together. Until recently, bankruptcy courts have traditionally been able to rely on tort litigation interpretations of "willful and malicious," thereby creating an effective marriage of two otherwise separate legal disciplines.
Although the concepts inherent in tort law lack precise definition as well, 14 the concept of intent, or lack thereof, undoubtedly forms the backbone of this area of law. 15Accordingly, the concept of a tort involves action or inaction by one individual against another. This is particularly true of the concept of intentional torts, which is defined in part as a "[t]ort or wrong perpetuated by one who intends to do that which the law has declared wrong." 16 The term "intentional torts" implies an intent or purpose to injure, and involves both elements of purpose (intent) and malice. 17 Notice that in tort, malice does not have to be purposeful - malice can be shown by "indifference to the safety of others, with knowledge of their danger, or failure to use ordinary care to avoid injury after acquiring such knowledge." 18 Further, whether a negligent act amounts to a willful and malicious injury is a question of fact for trial, 19 is then decided by the jury according to the "reasonable person" standard.
In order for an act to constitute an intentional tort, the jury, acting as fact finders, must decide whether or not the act was intentional. The test for drawing such conclusion is whether or not the act was undertaken with the intention of bringing about a harmful or offensive contact or apprehension thereof to a particular person, or a third person, for the purpose of causing the contact or apprehension, or with knowledge on the part of the actor that such contact or apprehension is substantially certain to be produced 20. Consequently, a petitioner's burden of proving an intentional tort is limited to establishing the wrongdoer knew their action was substantially certain to cause an injury, without regard to the wrongdoer's intent.
Liability to third parties for intentional infliction of emotional distress is also evidence that tort law has traditionally held wrongdoers completely responsible for their actions. A third party victim of intentional infliction of emotional distress may recover damages against a tortfeasor, if the third party was closely related to the intended target of the abuse, or was within a reasonable proximity of the source of danger, allowing recovery without determining the subjective intent of the tortfeasor.
A thorough exploration into the requirements needed to prove an intentional tort is not complete without studying negligence theory, which continually evolves closer to intentional tort theory in holding a wrongdoer liable for injuries caused by their own behavior. Negligence is a legal mechanism often used when either the wrongdoer's behavior does not constitute an intentional act, or when the petitioner is incapable of meeting the burden of proof for an intentional tort. Negligence is often viewed as a product of intentional torts, separated only by the difference in the probability of whether or not the act of the wrongdoer will cause injury to others.
Despite the separation of the two disciplines, negligence has also remained steadfast in attempting to hold wrongdoers liable for all consequences of their actions as evidence by the "Eggshell" plaintiff doctrine, as well as the "zone of danger" test for establishing liability in negligent infliction of emotional distress cases. Perhaps the "Eggshell" plaintiff doctrine is the most obvious attempt to extend liability for negligence beyond the wrongdoer's intent, or foreseeability of a resulting injury. This doctrine, like intentional tort law, requires the wrongdoer to take the injured party as they are, and holds a negligent wrongdoer liable for all injuries caused by their actions, despite the wrongdoer's inability to predict the victim's actual injury 24.
Negligence theory has also developed a mechanism for holding wrongdoer's liable to third persons in negligent infliction of emotional distress actions. A third party suffering emotional distress because of another person's negligence can hold that wrongdoer liable for damages caused by the emotional distress as long as the victim can prove they were in the "zone of danger" created by the negligent behavior 25.
In summary, intentional tort law has traditionally held wrongdoer's liable for all consequences extending from their behavior without regard to the wrongdoer being able to foresee the actual injury nor exploring the wrongdoer's intentions. When the probability of a wrongdoer's behavior decreases below the "substantially certain" standard an injured party is afforded a civil remedy through negligence to hold the wrongdoer liable for the injuries extending from their actions. Deeply rooted into the fabric of tort litigation, whether the cause of action is negligence or intentional tort law, is the understanding that persons should be responsible for injuries actually and proximately caused to other persons, and to provide a method of recovery for injuries without regard to the wrongdoer's intent.
However, this division has apparently been resolved by the recent decision by the United States Supreme Court in Kawaauhau v. Geiger. 29 In their resolve, the Supreme Court, for purposes of evaluating intentional tort claims for discharge in bankruptcy, 30effectively endorsed the narrow interpretation, which requires an injured party to present evidence proving the alleged tortfeasor intended to cause the resulting injury. Simply stated, the Geiger court has severed the marriage between bankruptcy law and tort law in determining whether or not 523(a)(6) should be employed to except from discharge the debtor's wrongful acts.
Consequently, in defining the "willful and malicious" requirement in Section 523(a)(6), the Supreme Court has potentially eroded the standard for evaluating the "willful" prong in intentional tort litigation, which traditionally has relied on the alternative path not followed by the Supreme Court. Intentional tort law has traditionally required only a showing the wrongdoer intended to undertake the act which caused the injury 31.
In reaching this holding, the Court has abandoned previous interpretations of intentional tort law while noting that "[i]ntentional torts generally require that the actor intend the consequence of the an act, not simply the act itself 42." Simply stated, the Supreme Court has increased the burden of proof for a petitioner alleging an intentional tort. The petitioner must now prove the alleged tortfeasor intended the result of their actions; a tortfeasor can only be held liable for the damages they could substantially foresee, thereby constituting their intended result.
Without going the distance to embrace tort law concepts in full, the Supreme Court in Geiger may have inadvertently diluted the concept of "willful injury" as it applies in tort. If we follow the suggestion of the Court, an act will be judged to be "willful" only if the tortfeasor intended to produce the harm that results. Few acts will meet this high standard. Thus, the core concept of tort law, to compensate those who have been harmed according to the degree of that harm, will inevitably be diluted due to the inevitable transfer of this new concept into tort litigation.
Expanding the ability of a debtor to gain a fresh start by increasing the debtor's ability to discharge debts previously excepted from discharge, the Supreme Court most likely did not intend to abrogate the rights of the those injured in tort in favor of those who have substantially caused the injury. Despite the intentions of the Supreme Court, the ramifications which surely will flow from Geiger are real, and will result in diminishing the liability of many alleged tortfeasors who should be held liable for the consequences which flow from their actions.
As stated earlier, tort law has traditionally emphasized that intentional wrongdoers should be responsible for all damages which arise as a result of their ill behavior, as best evidenced by the doctrine of transferred intent, which extends liability to injured third party persons. 46 To charge a third party victim with the burden of proving an alleged wrongdoer intended to harm a person other than the intended victim is an almost insurmountable task, thereby allowing intentional wrongdoers to escape any liability to third persons despite violating a writ of trespass 47.
Perhaps the most concern arising out of Geiger is whether bankruptcy courts will uphold punitive damages awarded against the debtor, or will punitive damages be nullified for failing to pass the malicious standard as provided in Geiger. Because punitive damages were never awarded by the district court adjudicating Kawaauhaus' tortuous injury, the Geiger court failed to consider whether or not the increased malicious standard would absolve a wrongdoer's liability for punitive damages. While Geiger has instructed bankruptcy courts to abandon traditional tort mechanisms in assessing the presence of "willfull and malicious", the inconsistency of the two doctrines should not permeate to punitive damages awards. In order to preserve the punishing and rehabilitative goal of exemplary damage awards, 48 and to promote judicial economy 49 bankruptcy courts must be afforded the opportunity to ignore Geiger's interpretation of 523(a)(6).
The concern as to whether Geiger will diminish punitive damage awards is well-founded. Punitive damages awards are inextricably intertwined with intentional torts. If the jury impaneled in the tort action determines the wrongdoer's behavior was malicious, substantially certain to cause injury, then the wrongdoer's behavior is considered intentional. 50 Punitive damages are awarded when the wrongdoer acted with severe recklessness, malice, or deceit. 51 Punitive damages are specifically intended to punish, thereby deterring blameworthy conduct. Because malicious behavior is a requirement in proving the presence of an intentional tort, as well as a justification for awarding punitive damages, it necessarily follows that "blameworthy" is in the least malicious conduct. It necessarily follows, that when a wrongdoer acts maliciously the wrongdoer will be held liable for an intentional tort, and subsequent punitive damages.
Obviously, the Supreme Court, in Geiger, did not intend to sacrifice punitive damage awards to increase the likelihood debtor's will be afforded a fresh start. 55 However, the increased standard of proving the malicious element required in punitive damages will deny many punitive damage awards awarded in previous similarly situated tort actions. In order to avoid undermining the punitive and rehabilitative benefits enjoyed through punitive damages, bankruptcy courts must limit Geiger to discharging debtor's actual damages.
Failure to assert issue preclusion will only burden the bankruptcy courts by expanding their traditionally equitable nature into fact finders. Bankruptcy courts can accept the jury's determination in the tort action as to whether or not the wrongdoer's behavior was malicious, and justified punitive damages. However, failing to ignore Geiger when assessing the dischargeability of the debtor's punitive liabilities results in the court being forced into re-litigating previously decided factual decisions. Because "malicious" in tort actions is a much lower standard than the bankruptcy courts have been ordered to apply, bankruptcy courts must independently prove whether or not the debtor's behavior constituted "malicious," as provided in Geiger. 60 In order to escape this burden, bankruptcy courts must employ the readily available issue preclusion doctrines previously discussed.
1See George S. Singer, Section 523 of The Bankruptcy Code: The Fundamentals of Nondischargeability in Consumer Bankruptcy, 71 Am. Bankr. L.J. 325 (1997) [hereinafter Singer]. See also, Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934) (Stating "one of the primary purposes of the bankruptcy [law] is to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes. This purpose . . . has again and again been emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.") (punctuation omitted) (citations omitted).
211 U.S.C. § 523 (1994).
3Singer, supra note 1, at 326.
411 U.S.C. § 523(a)(6) (1994).
5See Singer, supra note 1, at 375.
6Rachel A. Hayes, Note, Geiger v. Kawaauhau: The Eight Circuit's Interpretation of "Willful" Under Section 523(a)(6) of The Bankruptcy Code, 66 U.M.K.C. L. Rev. 451, 452 (1997) [hereinafter Hayes].
711 U.S.C. § 523(a)(6) (1994).
8See Singer, supra note 1, at 376.
10See Singer, supra note 1, at 376, citing Barclays Am./Bus. Credit, Inc. v. Long, 774 F.2d 875, 882 (8th Cir. 1985) (holding debtors who breach security agreements "are testing the outer bounds of their right to a fresh start").
11See, Singer, supra note 1, at fn 293, citing H.R. Rep. No. 95-595, at 365 (1977), reprinted in 1978 U.S.C.A.N.N. 5963, 6320; S. Rep. No. 95-989, at 77-79 (1978), reprinted in 1978 U.S.C.A.N.N. 5787, 5865.
12See Long v. Long, 774 F.2d at 881 (8th Cir. 1985).
13See, Singer, supra note 1, at 377, citing Hope v. Walker, 48 F.3d 1161, 1164 (11th Cir. 1995).
14See, PROSSER ON TORTS , at 1 (4th Ed.1971) [hereinafter PROSSER], citing MILES, DIGEST OF ENGLISH CIVIL LAW (1910).
15See, PROSSER, supra note 14, at 1, citing COOKE, A PROPOSED NEW DEFINITION OF A TORT, 12 Harv. L. Rev. 335, 336 (1899) (defining a tort in part as "an act or omission, not a mere breach of contract, and producing injury to another, in the absence of any existing lawful relation of which such act or omission is a natural outgrowth or incident").
16BLACKS LAW DICTIONARY 1489 (6th Ed. 1990).
17BLACKS LAW DICTIONARY 1600 (6th Ed. 1990).
18BLACKS LAW DICTIONARY 1600 (6th Ed. 1990).
19See Caccamo v. Pouliot, 196 B.R. 641 (B.C.S.D. Fla. 1996).
20See Garrett v. Dailey, 46 Wash.2d 197, 279 P.2d 1091 (1955).
21See Talmage v. Smith, 101 Mich. 370, 59 N.W. 656 (1894).
22See Clark v. Gay, 112 Ga. 777, 38 S.E. 81 (1901). (stating, "on the other hand, when either the tort intended or the one accomplished does not fall within the trespass action, the doctrine does not apply").
23BLACKS LAW DICTIONARY 1489 (6th Ed. 1990).
24See Howe v. Thompson, 186 W.Va. 214, 217, 412 S.E.2d 212, 215 (1991).
25See Metro-North Commuter Railroad Co. v. Buckley, 521 U.S. 424, 117 S.Ct. 2113 (1997).
26See Singer, supra note 1, at 377.
27See Hayes, supra note 6, at 459 (stating, "the Third, Fifth, Tenth and Eleventh Circuits have adopted a narrow "willful" standard), citing Corley v. Delaney, 97 F.3d 800, 802 (5th Cir. 1996) (per curiam), In re Walker, 48 F.3d at 1165, Conte v. Gautam, 33 F.3d 303, 308 (3d Cir. 1994), Farmer's Ins. Group v. Compos, 768 F.2d 1155, 1159 (10th Cir. 1985).
28See Singer, supra note 14. See also, Hayes, supra note 6, at 458. See id. at footnotes 78-79 citing Printy v. Dean Witter Reynolds, 110 F.3d 853, 859 (1st Cir. 1997); Perkins v. Scharffe, 817 F.2d 392, 393 (6th Cir. 1987); Impulsora del Territorio Sur, S.A. v. Cecchini, 780 F.2d 1440, 1443 (9th Cir. 1986).
29See Kawaauhau v. Geiger, 118 S.Ct. 974, 523 U.S. 57 (1998) [hereinafter Geiger].
30See Geiger, supra note 29, at 978 (declaring that, "we hold that debts arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523(a)(6)").
31See Garrett v. Dailey, 46 Wash.2d 197, 279 P.2d 1091 (1955).
32See Geiger, supra note 29, at 974.
34See Geiger v. Kawaauhau, 113 F.3d 848, 849-50 (8th Cir. 1997).
35See Geiger v. Kawaauhau, 113 F.3d 848, 850 (8th Cir. 1997).
36In Re Geiger, 172 B.R. 916, 923 (Bankr. E.D.Mo. 1994).
37Geiger v. Kawaauhau, 113 F.3d 848, at 850 (8th Cir. 1997).
41Geiger, supra note 29, at 975 [emphasis added].
42See Geiger, supra note 29, at 977, citing RESTATEMENT (SECOND) OF TORTS, § 8A (1964).
43PROSSER, supra note 15, at 32.
44Conte v. Gautam, 33 F.3d 303, 308 (3rd Cir. 1994), citing RESTATEMENT (SECOND) OF TORTS, § 8A (1979).
45See Geiger, supra note 29, at 977.
46See Talmage v. Smith, 101 Mich. 370, 59 N.W. 656 (1894).
48See Charles v. Texas Co., 18 S.E.2d 719, 199 S.C. 156 (1942) (holding punitive damages are allowed to punish the wrongdoer and to discourage repetition of tort by him or another).
49See Smith v. Coughlin, 727 F.Supp. 834 (S.D.N.Y. 1990) (holding prior adjudication bars later proceeding when earlier decision was made on merits in to increase court efficiency).
50See Anderson v. Atlantic Coast Line R. Co., 184 S.E. 164, 179 S.C. 367 (1936).
51See Gilbert v. Duke Power Co., 179 S.E.2d 720, 255 S.C. 495 (1971).
52See Laird v. Nationwide Ins. Co., 134 S.E.2d 206, 243 S.C. 388 (1964) (holding "compensatory" or "actual damages" are synonymous and are based on the loss suffered by the injured party due to the wrongdoer's intentional or unreasonable behavior).
5311 U.S.C. § 523(a)(6) (1994).
54See Enis v. Brawley, 41 S.E.2d 680, 129 W.Va. 621 (1947) (holding punitive damages are arrived at by fixing an amount, which together with and in reasonable proportion to the amount of compensatory damages, in the judgment of the jury, will be sufficient to deter others from pursuing a like course of conduct and such damages are not in addition to, but are inclusive of, compensatory damages).
55See Singer, supra note 1, at 326.
56See Cavin's Inc. v. Atlantic Mut. Ins. Co., 220 S.E.2d 403, 27 N.C.App. 698 (1975) (holding the purpose of punitive damages are to punish the wrongdoer above and beyond compensatory damages because of the outrageous nature of their behavior. "Punitive damages are never awarded as compensation or merely because of a personal injury infliction" they are awarded to punish and to deter future similar acts).
57See Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934) (holding, "one of the primary purposes of the bankruptcy [law] is to relieve the honest debtor from the weight of oppressive indebtedness...this purpose...has again and again been emphasized by the courts as being of public as well as private interest...it gives to the honest...debtor" the ability to discharge their debts).
58See U.S. v. White, 936 F.2d 1326 (C.A.D.C. 1991).
59See In re Bono, 70 B.R. 339 (E.D.N.Y. 1987) (holding that the doctrines of collateral estoppel and res judicata apply with full force to proceedings in bankruptcy courts).
60See Geiger v. Kawaauhau, 113 F.3d at 852 (8th Cir. 1997) (holding bankruptcy courts will discharge any debts arising out of wrongful actions provided the debtor's wrongful act was not malicious; intended to cause the very serious consequences that Mrs. Kawaauhau suffered. This is different from traditional theories of tort law which hold intentional wrongdoer's liable for all the consequences of their malicious conduct).
61See Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).

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