Opinion ID: 4531501
Heading Depth: 3
Heading Rank: 4

Heading: Necessary to the Judgment

Text: Finally, the state court’s finding that Hill’s debt resulted from “willful and malicious injury” was necessary to the state court’s damages judgment. In order for the state court’s finding to be necessary to its judgment and provide preclusive effect to the bankruptcy court’s determination of nondischargeability, the same elements required for nondischargeability under the Bankruptcy Code must have also been required to enter judgment against Hill. Generally, parties to a federal bankruptcy proceeding should not be bound by state proceedings determining facts in anticipation of bankruptcy. “However, where the factual issues necessary for [a] dischargeability determination were also necessary to the state court determination, the parties would not have to anticipate the bankruptcy proceedings and the state courts would not be determining issues irrelevant to the state proceedings.” Spilman, 656 F.2d at 228. Section 523(a)(6) of the Bankruptcy Code provides that a Chapter 7 debtor cannot discharge a debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” “‘The word “willful” in (a)(6) modifies the word “injury,” indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury.’” In re Markowitz, 190 F.3d 455, 464 (6th Cir. 1999) No. 19-5861 In re Hill Page 11 (quoting Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998)); see also Berge, 953 F.3d at 914-15. The word “malicious” further requires that the injury be “without just cause or excuse.” Berge, 953 F.3d at 914 (quoting In re Boland, 946 F.3d 335, 338 (6th Cir. 2020)). Therefore, we must look to CMCO’s pleadings to determine if the state court’s finding that Hill deliberately or intentionally injured CMCO without just cause or excuse was a necessary element of any of CMCO’s claims against Hill on which it received a default judgment.5 CMCO sought an order enjoining Hill from engaging in certain activities and providing it compensatory damages, punitive damages,6 and costs and reasonable attorney’s fees relating to the eight claims it raised against him.7 CMCO’s third claim8 against Hill was for “interference with actual or prospective business advantage.” States disagree whether “willful and malicious injury” as defined under § 523(a)(6) is an element of a claim for tortious interference with actual or prospective business advantage. See In re Cardin, No. 11-52077, 2013 Bankr. LEXIS 503, at -23 n.7 (Bankr. E.D. Tenn. Jan. 31, 2013) (collecting cases). Although Kentucky courts have yet to answer this question, we can infer that their answer is that “willful and malicious injury” is an element of a tortious interference claim. Under Kentucky law, the elements of tortious interference with a prospective business advantage are: “(1) the existence of a valid business relationship or expectancy, (2) that the defendant was aware of this relationship or expectancy, (3) that the defendant intentionally interfered, (4) that the motive behind the interference was improper, (5) causation, and (6) special damages.” IB Agric., Inc. v. Monty’s Plant Food Co., No. 3:12-CV-00271-CRS, 2014 U.S. Dist. LEXIS 136833, at -23 (W.D. Ky. Sept. 29, 2014) (citing Snow Pallet, Inc. v. Monticello Banking Co., 367 S.W.3d 1, 6 (Ky. App. 2012)). The tort requires that the defendant 5 The state court’s Findings of Fact relate to all claims. Therefore, a finding that “willful and malicious injury” was necessary to one claim accordingly means that the element was necessary to the state court’s judgment. 6 CMCO attempted to obtain punitive damages, inserting language as such in the Findings of Fact and Judgment, with a requested recovery of $17,087,385, but the state court scratched out that portion in its entry of judgment and only awarded CMCO compensatory damages. 7 There were eleven claims in total (Claim X is listed twice), but several claims were brought solely against the other defendants. 8 This claim was listed as Count VI in CMCO’s complaint. No. 19-5861 In re Hill Page 12 “show malice or some significantly wrongful conduct.” Nat’l Collegiate Athletic Ass’n By and Through Bellarmine Coll. v. Hornung, 754 S.W.2d 855, 859 (Ky. 1988). Moreover, such cases “have turned almost entirely upon the defendant’s motive or purpose, and the means by which he has sought to accomplish it . . . .” Id. (quoting W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on the Law of Torts §130 (5th ed. 1984)). The key question is whether the defendant has a valid reason for taking the challenged action; if the defendant had a legitimate reason for doing what he did, the simultaneous existence of an improper motive, such as spite or a desire to cause the plaintiff harm, will not generally result in the defendant’s liability. Excel Energy, Inc. v. Cannelton Sales Co., 246 F. App’x 953, 967 (6th Cir. 2007) (citing Hornung, 754 S.W.2d at 859). Thus, to find Hill liable as to CMCO’s tortious interference claim, it was necessary for the state court to determine that Hill’s motive or reason for interfering with CMCO’s business advantage was not only improper, but that he had no legitimate reason at all. The state court’s finding that Hill caused “deliberate or intentional injury” to CMCO “without just cause or excuse” satisfied this element of the claim. Absent such a finding, it would not be possible for the state court to have entered judgment in CMCO’s favor. Therefore, this finding, which matches the elements of § 523(a)(6), was necessary to the state court’s judgment holding Hill liable to CMCO and precludes Hill from challenging the nondischargeability of his debt to CMCO.