Court Opinion

ID: 2814399
Source: CourtListenerOpinion
Date Created: 2015-07-03 00:02:08.880104+00
Date Added: 2024-06-11T11:30:31.799827
License: Public Domain

FILED
                                                            JUL 02 2015
 1                         NOT FOR PUBLICATION
 2                                                      SUSAN M. SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
                                                          OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP Nos.    CC-14-1186-DTaKu
                                   )
 6   JAMES ELLIS ARDEN,            )      Bk.   No.   13-13879-VK
                                   )
 7                  Debtor.        )      Adv. No.    13-01164-VK
     ______________________________)
 8                                 )
     JAMES ELLIS ARDEN,            )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      M E M O R A N D U M1
11                                 )
     MARTINA A. SILAS,             )
12                                 )
                    Appellee.      )
13   ______________________________)
14                   Argued and Submitted on June 18, 2015
                            at Pasadena, California
15
                              Filed - July 2, 2015
16
              Appeal from the United States Bankruptcy Court
17                for the Central District of California
18      Honorable Victoria S. Kaufman, Bankruptcy Judge, Presiding
19
     Appearances:     Appellant James Ellis Arden and appellee Martina
20                    A. Silas argued pro se.
21
     Before: DUNN, TAYLOR and KURTZ, Bankruptcy Judges.
22
23
24
25
26        1
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8024-1.
 1        Prepetition, Martina Silas obtained a state court judgment
 2   against the debtor, James Arden, for malicious prosecution.     One
 3   month after the debtor filed his chapter 7 bankruptcy petition,
 4   Ms. Silas initiated an adversary proceeding to except the state
 5   court judgment from discharge under § 523(a)(6).   The debtor
 6   moved to dismiss the adversary proceeding under Civil
 7   Rule 12(b)(6).2   Before responding to the motion to dismiss,
 8   Ms. Silas moved for summary judgment on her complaint (“summary
 9   judgment motion”).   The bankruptcy court granted summary judgment
10   in Ms. Silas’s favor, giving issue preclusive effect to the state
11   court judgment.   It also denied the debtor’s motion to dismiss.
12        The debtor appeals the bankruptcy court’s orders granting
13   Ms. Silas’s summary judgment motion and denying his motion to
14   dismiss.3   We AFFIRM the bankruptcy court’s denial of the
15   debtor’s motion to dismiss, but VACATE and REMAND the bankruptcy
16   court’s summary judgment decision for further proceedings
17   consistent with this memorandum decision.
18
19
20
          2
            Unless otherwise indicated, all chapter and section
21
     references are to the federal Bankruptcy Code, 11 U.S.C.
22   §§ 101-1532, and all “Rule” references are to the Federal Rules
     of Bankruptcy Procedure, Rules 1001-9037. All “Civil Rule”
23   references are to the Federal Rules of Civil Procedure,
24   Rules 1-86.
          3
25          In his notice of appeal, the debtor neither listed nor
     included a copy of the bankruptcy court’s order denying his
26   motion to dismiss. However, in the statement of issues on
27   appeal, he did disclose his contentions regarding the bankruptcy
     court’s denial of his motion to dismiss. We thus address his
28   related arguments here.

                                      2
 1                                 FACTS4
 2   A.   Ms. Silas as counsel in the personal injury action
 3        Both Ms. Silas and the debtor are attorneys.   Fifteen years
 4   ago, Ms. Silas represented Ross Gunnell in a personal injury
 5   action against his former employer, Metrocolor Laboratories, Inc.
 6   (“Metrocolor”), and others for injuries allegedly sustained from
 7   exposure to a hazardous chemical substance Metrocolor required
 8   Mr. Gunnell to use to clean its film processing laboratories.
 9   Although Ms. Silas alleged several causes of action on
10   Mr. Gunnell’s behalf, including battery, intentional infliction
11   of emotional distress and fraud, only the battery cause of action
12   was presented to the jury at trial.5   Also, only Metrocolor
13   remained as a defendant in the personal injury action at trial,
14   as Ms. Silas had settled with the other defendants.
15        When conducting her legal research and factual
16   investigations for the personal injury action, Ms. Silas knew
17   that the California Workers’ Compensation Act (“WCA”) generally
18   provided the exclusive remedy for employees who have sustained
19   work-related injuries.   That is, the WCA prohibited employees
20
21        4
            We have taken some of the facts from the following state
22   court decisions: 1) Gunnell v. Silas, 2006 WL 204610 (2006);
     2) Silas v. Arden, 2009 WL 5158842 (2009); 3) Gunnell v.
23   Metrocolor Labs., Inc., 92 Cal. App. 4th 710 (2001); and 4) Silas
24   v. Arden, 213 Cal. App. 4th 75 (2013).
          5
25          Although Ms. Silas filed the civil action on Mr. Gunnell’s
     behalf, she did not file a worker’s compensation claim for him.
26   Apparently, Ms. Silas’ retainer agreement provided that her legal
27   services did not include the handling of any workers’
     compensation claims. See Gunnell v. Silas, 2006 WL 204610 (Cal.
28   Ct. App. 2nd 2006).

                                      3
 1   from bringing civil actions for damages against their employers
 2   unless certain statutory exceptions applied.     See Cal. Labor Code
 3   §§ 3600, 3602.
 4        She also knew that there were statutory exceptions to
 5   exclusive application of the WCA, including the exception for
 6   fraudulent concealment under Cal. Labor Code § 3602(b)(2).     This
 7   exception allowed an employee to bring a civil action against his
 8   employer where the employee’s injury was aggravated by the
 9   employer’s fraudulent concealment of the injury’s existence and
10   its connection with the employee’s employment.     Ms. Silas knew
11   that the fraudulent concealment exception did not apply where the
12   employer first learned of the injury from the employee.
13        Based on her discussions with Mr. Gunnell, Ms. Silas did not
14   believe that his personal injury action fell within the
15   fraudulent concealment exception.     She nonetheless asserted it
16   out of an abundance of caution.
17        Later, during pretrial discovery, Ms. Silas came across a
18   medical insurance form showing that Mr. Gunnell had sought
19   medical care for his hands a few days after he began working for
20   Metrocolor and that he had blamed the cleaning solution for his
21   hands’ condition.   Consequently, she abandoned her argument
22   concerning the fraudulent concealment exception.
23        At trial, the jury returned a substantial verdict in
24   Mr. Gunnell’s favor.   However, on Metrocolor’s motion for
25   judgment notwithstanding the verdict, the trial court overturned
26   the verdict.   It determined that the WCA’s exclusive remedy
27   provision barred Mr. Gunnell’s personal injury action against
28   Metrocolor, especially in light of Johns-Manville Prods. Corp. v.

                                       4
 1   Superior Court, 27 Cal. 3d 465 (1980), a California supreme court
 2   decision.    (Johns-Manville held that the WCA provided the
 3   exclusive remedy for toxic exposure injuries in the workplace.)
 4   The trial court further determined that Mr. Gunnell’s battery
 5   cause of action did not fall within the fraudulent concealment
 6   exception.
 7        The appellate court affirmed the trial court’s decision on
 8   substantially the same grounds as set forth by the trial court in
 9   its decision.    See Gunnell v. Metrocolor Labs., Inc., 92 Cal.
10   App. 4th 710 (2001).
11   B.   Mr. Gunnell’s legal malpractice action
12        Seven years later, acting pro se, Mr. Gunnell initiated a
13   legal malpractice action against Ms. Silas.    See Gunnell v.
14   Silas, 2006 WL 204610 (2006); Gunnell v. Silas, 2009 WL 5158842
15   (2009).   He alleged that Ms. Silas erroneously had abandoned
16   argument on the fraudulent concealment exception and had
17   misappropriated settlement funds.     The debtor later substituted
18   in as counsel for Mr. Gunnell.
19        Moving for summary judgment, Ms. Silas argued that she did
20   not commit legal malpractice by abandoning the fraudulent
21   concealment exception argument because it did not apply as a
22   matter of law.    Ms. Silas also argued that she did not
23   misappropriate settlement funds because: 1) Mr. Gunnell had
24   agreed to apply any settlement funds due him to the costs of the
25   personal injury action; and 2) he had signed the settlement
26   documents in her presence before a notary public and had signed
27
28

                                       5
 1   the back of the settlement check, endorsing it over to her.6
 2        The trial court agreed with Ms. Silas, granting summary
 3   judgment in her favor.   The appellate court affirmed the trial
 4   court’s decision.
 5   C.   Ms. Silas’ malicious prosecution action
 6        Ms. Silas then filed a complaint against the debtor for
 7   malicious prosecution of the legal malpractice action.   As part
 8   of her malicious prosecution cause of action, she asserted that
 9   the debtor lacked probable cause in prosecuting the legal
10   malpractice action and that he prosecuted it with malice.
11        Specifically, Ms. Silas contended that the debtor continued
12   to prosecute Mr. Gunnell’s claim for misappropriation of
13   settlement funds even though the debtor was shown copies of the
14   signed and notarized settlement agreement and the endorsed
15   settlement check.
16        Ms. Silas moreover argued that she did not erroneously
17   abandon the fraudulent concealment exception argument because she
18   determined that it did not apply based on the facts of
19   Mr. Gunnell’s personal injury action and prevailing California
20   case law.   She presented portions of Mr. Gunnell’s depositions
21   and trial testimony regarding his statements as to his knowledge
22   of his injuries over the years.   She also pointed out that the
23   debtor had represented Mr. Gunnell at the depositions and in the
24
25
          6
            Ms. Silas deposited the settlement check into her trust
26   account. Once the settlement check cleared, she applied the
27   settlement funds to the outstanding cost balance. As a courtesy,
     she also issued a $2,500 check to Mr. Gunnell, even though the
28   costs of the case exceeded the settlement amount.

                                       6
 1   legal malpractice action.
 2        At trial in the malicious prosecution action, the debtor
 3   opined that he would be committing malpractice if he conceded
 4   that Mr. Gunnell’s case lacked merit.   He believed that he had to
 5   proceed with it, otherwise he would have breached his duty to his
 6   client, Mr. Gunnell.
 7        The debtor testified that he based the legal malpractice
 8   action on his contention that Ms. Silas should not have abandoned
 9   the argument on the fraudulent concealment exception.    He
10   believed that Johns-Manville was not controlling law as to the
11   application of the fraudulent concealment exception in
12   Mr. Gunnell’s personal injury action.   He admitted that he did
13   not read all of Mr. Gunnell’s testimony in the personal injury
14   action.
15        Despite Ms. Silas’ repeated requests that he withdraw the
16   claim for misappropriation of settlement funds, the debtor
17   refused to do so.   He continued to press forward with
18   Mr. Gunnell’s claim for misappropriation of settlement funds
19   because: 1) he believed that Ms. Silas did not disburse the
20   settlement funds pursuant to her fee agreement with Mr. Gunnell;
21   and 2) he believed that the settlement documents were not
22   properly authenticated as they did not indicate that the notary
23   public witnessed Mr. Gunnell signing them.   However, the debtor
24   disclosed that he did not investigate Mr. Gunnell’s allegations
25   regarding Ms. Silas’ alleged misappropriation of settlement funds
26   because he was focusing on his contention concerning her
27   abandonment of the fraudulent concealment exception argument.     He
28   further admitted that he recognized Mr. Gunnell’s signatures on

                                      7
 1   the settlement documents and the settlement check.
 2        The debtor denied harboring any malice towards Ms. Silas.
 3   He claimed that he did not harass her in any fashion as she had
 4   counsel representing her.
 5        Following closing argument, the jury was given the following
 6   instructions:
 7        Martina Silas claims that James Arden wrongfully
          brought a lawsuit against her. To establish this
 8        claim, Martina Silas must prove all of the following:
 9             (1) That James Arden was actively involved in
               bringing or continuing the lawsuit;
10             (2) That James Arden acted primarily for a
               purpose other than succeeding on the merits of the
11             claim;
               (3) That Martina Silas was harmed; and
12             (4) That James Arden’s conduct was a substantial
               factor in causing Martina Silas’s harm.
13
          If you decide that James Arden’s conduct caused Martina
14        Silas harm, you must decide whether that conduct
          justifies an award of punitive damages. At this time,
15        you must decide whether Martina Silas has proved by
          clear and convincing evidence that James Arden engaged
16        in that conduct with malice or oppression. The amount
          of punitive damages, if any, will be decided later.
17             “Malice” means that James Arden acted with intent
          to cause injury or that James Arden’s conduct was
18        despicable and was done with a willful and knowing
          disregard of the rights or safety of another. A person
19        acts with knowing disregard when he or she is aware of
          the probable consequences of his or her conduct and
20        deliberately fails to avoid those consequences.
               “Oppression” means that James Arden’s conduct was
21        despicable and subjected Martina Silas to cruel and
          unjust hardship in knowing disregard of her rights.
22             “Despicable conduct” is conduct that is so vile,
          base, or contemptible that it would be looked down on
23        and despised by reasonable people.
24        The following additional instruction was given to the jury:
25        Suits with the hallmark of an improper purpose include,
          but are not necessarily limited to, those in which
26        (1) the person initiating them does not believe that
          the claim may be held valid; or (2) the proceedings are
27        begun primarily because of hostility or ill will.
28   The jury rendered a verdict in Ms. Silas’ favor.   In the verdict

                                     8
 1   form, the jury answered a number of questions.    Among them, the
 2   jury answered “yes” to this question: “Did James Arden act
 3   primarily for a purpose other than succeeding on the merits of
 4   the claim?”    It also answered “yes” to this question: “Do you
 5   find by clear and convincing evidence that James Arden engaged in
 6   the conduct with malice or oppression?”
 7        The jury awarded Ms. Silas $145,756 in legal fees and costs,
 8   $30,000 in non-economic damages and $125,000 in punitive damages.
 9        The debtor moved for judgment notwithstanding the verdict,
10   which the trial court denied.    He appealed, but the appellate
11   court affirmed the trial court’s decision in a published opinion,
12   Silas v. Arden, 213 Cal. App. 4th 75 (2013).
13        According to the appellate court,
14        [t]o establish a cause of action for malicious
          prosecution, a plaintiff must prove that the underlying
15        action was (1) terminated in the plaintiff’s favor,
          (2) prosecuted without probable cause, and
16        (3) initiated with malice.
17   Id. at 89 (citations omitted).
18        With respect to the element of probable cause, the appellate
19   court explained that a court must determine, “in light of the
20   facts known to counsel, whether any reasonable attorney would
21   have thought the claim tenable.    This is an objective
22   standard. . . .    [I]f the underlying claims were objectively
23   tenable, the malicious prosecution claim fails, regardless of any
24   evidence of malice on the part of the defendant.”    Id. at 90,
25   quoting Sheldon Appel Co. v. Albert & Oliker, 47 Cal. 3d 863, 875
26   (Cal. 1989).
27        The appellate court determined that there was sufficient
28   evidence supporting the jury’s verdict on the element of probable

                                       9
 1   cause.   The debtor lacked probable cause in prosecuting the legal
 2   malpractice claim against Ms. Silas in that: 1) the fraudulent
 3   concealment exception did not apply as a matter of law based on
 4   the holding in Johns-Manville and the fact that Mr. Gunnell was
 5   aware of his condition and its cause, which Mr. Gunnell had
 6   disclosed to a Metrocolor supervisor; and 2) the debtor continued
 7   to prosecute the claim for misappropriation of settlement funds,
 8   even after he was presented with the settlement documents and
 9   settlement check, which bore Mr. Gunnell’s signatures.
10        As for the element of malice, the appellate court noted that
11   this element went to “the defendant’s subjective intent,” though
12   it was “not limited to actual hostility or ill will toward the
13   plaintiff.”   Silas v. Arden, 213 Cal. App. 4th at 90.   The
14   appellate court explained that malice could exist
15        where the proceedings are initiated for the purpose of
          forcing a settlement which has no relation to the
16        merits of the claim. A lack of probable cause is a
          factor that may be considered in determining if the
17        claim was prosecuted with malice . . . but the lack of
          probable cause must be supplemented by other,
18        additional evidence. Since parties rarely admit an
          improper motive, malice is usually proven by
19        circumstantial evidence. . . . [T]hat evidence must
          include proof of either actual hostility or ill will on
20        the part of the defendant or a subjective intent to
          deliberately misuse the legal system for personal gain
21        or satisfaction at the expense of the wrongfully sued
          defendant. Suits with the hallmark of an improper
22        purpose are those where (1) the person initiating them
          does not believe that his claim may be held valid;
23        (2) the proceedings are begun primarily because of
          hostility or ill will; (3) the proceedings are
24        initiated solely for the purpose of depriving the
          person against whom they are initiated of a beneficial
25        use of his property; (4) the proceedings are initiated
          for the purpose of forcing a settlement which has no
26        relation to the merits of the claim.
27   Id. at 90-91 (citations omitted).
28        With respect to the element of malice, the appellate court

                                     10
 1   determined that sufficient evidence supported the jury’s verdict.
 2   Id. at 92.   According to the appellate court, the evidence
 3   demonstrated that the debtor had acted maliciously in instigating
 4   and continuing with the malicious prosecution action through
 5        [his] failure to investigate the merits of
          applicability of the fraudulent misrepresentation
 6        exception and his failure to withdraw allegations of
          misappropriation even when confronted with unequivocal
 7        evidence the allegations were not supported by the
          facts.
 8
 9   Id. at 92.   Having concluded that the elements for malicious
10   prosecution were met, the appellate court upheld the trial
11   court’s decision.
12        The debtor unsuccessfully petitioned the California supreme
13   court to review the appellate court’s decision.   Ms. Silas’
14   judgment in the malicious prosecution action against the debtor
15   is final.
16   D.   Ms. Silas’ § 523(a)(6) complaint
17        A month after the debtor filed his chapter 7 bankruptcy
18   petition on June 7, 2013, Ms. Silas filed a complaint seeking to
19   except the state court judgment from discharge under
20   § 523(a)(6).7   She contended that the state court judgment must
21
          7
22          Ms. Silas also sought to except the state court judgment
     from discharge under § 523(a)(2) and to deny the debtor’s
23   discharge under §§ 707(b) and 727(a). The debtor moved to
     dismiss these claims under Civil Rule 12(b)(6).
24
          The bankruptcy court held a hearing on both Ms. Silas’
25   summary judgment motion and the debtor’s motion to dismiss. As
     we describe more fully below, the bankruptcy court granted
26   summary judgment as to Ms. Silas’ claim under § 523(a)(6) only.
27   It granted the debtor’s motion to dismiss the claims under
     §§ 523(a)(2) and 707(b) with prejudice, and § 727(a) with leave
28                                                      (continued...)

                                     11
 1   be given issue preclusive effect because it was based on an
 2   intentional tort requiring proof of malice, which constituted a
 3   willful and malicious injury within the meaning of § 523(a)(6).
 4        The debtor filed his motion to dismiss the complaint under
 5   Civil Rule 12(b)(6) on the ground that Ms. Silas failed to allege
 6   facts showing that he had maliciously and willfully injured her
 7   within the meaning of § 523(a)(6).   He argued that the malice
 8   requirement for malicious prosecution was not the same as the
 9   malice and willful requirements for § 523(a)(6).   According to
10   the debtor, to establish malice for malicious prosecution, the
11   plaintiff must show that the injurious conduct was intended to
12   cause injury or was carried out with a willful and conscious
13   disregard of the rights or safety of others.   The level of intent
14   required for malicious prosecution did not satisfy that required
15   for willful and malicious injury under § 523(a)(6).
16        Before filing her opposition to the motion to dismiss,
17   Ms. Silas filed her summary judgment motion.   She maintained that
18   the state court judgment had issue preclusive effect because the
19   requirements for malicious prosecution were the same as those for
20   willful and malicious injury under § 523(a)(6).
21        With respect to the willfulness requirement, Ms. Silas
22   asserted that, in California, “malicious prosecution [was] deemed
23   a willful act as a matter of law.”   (Emphasis in original.)     As
24   for the malice requirement, she pointed out that the plaintiff
25
26        7
           (...continued)
27   to amend.
          To date, Ms. Silas has not amended her complaint as to her
28   § 727(a) claim.

                                    12
 1   must prove that the defendant either had actual hostility or ill
 2   will or a subjective intent to misuse the legal system
 3   deliberately for personal gain at the plaintiff’s expense.
 4        The bankruptcy court held a hearing on both the motion to
 5   dismiss and the summary judgment motion.   The bankruptcy court
 6   granted summary judgment in Ms. Silas’ favor and denied the
 7   debtor’s motion to dismiss as to her claim under § 523(a)(6).     It
 8   concluded that issue preclusion applied because the requirements
 9   for malicious prosecution in California satisfied the
10   requirements for willful and malicious injury under § 523(a)(6).
11        The bankruptcy court determined that the test for malice
12   under California law for malicious prosecution was the “same or
13   equivalent to [the test for] malice under § 523(a)(6).”    It found
14   that the debtor acted with malice and abused the court system by
15   maintaining the malpractice action as leverage against Ms. Silas.
16   It further noted that “the jury was instructed on malice in a way
17   that [met] the standards under [§] 523(a)(6) as defined in the
18   Ninth Circuit case law.”   The bankruptcy court also determined
19   that the debtor acted willfully because he continued the legal
20   malpractice action against Ms. Silas, despite knowing that he
21   could not prevail given that he lacked both legal and factual
22   support for it.   It thus declined to retry the issue as to
23   whether the debtor was liable for malicious prosecution.
24        The bankruptcy court entered an order denying the debtor’s
25   motion to dismiss on January 15, 2014.   Three months later, it
26   entered an order granting Ms. Silas’ summary judgment motion.     On
27   the same day, it entered judgment excepting the jury award from
28   discharge under § 523(a)(6).

                                     13
 1        The debtor timely appealed.
 2
 3                               JURISDICTION
 4        The bankruptcy court had jurisdiction under 28 U.S.C.
 5   §§ 1334 and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C.
 6   § 158.
 7
 8                                  ISSUES
 9        1) Did the bankruptcy court err in denying the debtor’s
10   motion to dismiss the complaint as to Ms. Silas’s § 523(a)(6)
11   claim?
12        2) Did the state court judgment for malicious prosecution
13   satisfy the elements of malice and willfulness for an exception
14   to discharge under § 523(a)(6)?
15        3) Did the bankruptcy court err in granting Ms. Silas’s
16   summary judgment motion by giving issue preclusive effect to the
17   state court judgment?
18
19                           STANDARDS OF REVIEW
20        We review de novo the bankruptcy court’s decisions to grant
21   summary judgment, Szajer v. City of Los Angeles, 632 F.3d 607,
22   610 (9th Cir. 2011), and to deny a motion to dismiss for failure
23   to state a claim, S.E.C. v. Colello, 139 F.3d 674 (9th Cir.
24   1998).
25        “‘We review de novo whether a particular type of debt is
26   nondischargeable as a willful and malicious injury under
27   § 523(a)(6).’”   Maaskant v. Peck (In re Peck), 295 B.R. 353, 360
28   (9th Cir. BAP 2003), quoting Tsurukawa v. Nikon Precision, Inc.

                                       14
 1   (In re Tsurukawa), 258 B.R. 192, 195 (9th Cir. BAP 2001).       See
 2   also Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir.
 3   2002)(“Whether a claim is nondischargeable presents mixed issues
 4   of law and fact and is reviewed de novo.”).     We review the
 5   bankruptcy court’s conclusions of law and interpretation of
 6   provisions of the Bankruptcy Code de novo.     Anwar v. Johnson,
 7   720 F.3d 1183, 1186 (9th Cir. 2013), quoting Greene v. Savage
 8   (In re Greene), 583 F.3d 614, 618 (9th Cir. 2009).
 9        We review de novo the bankruptcy court’s determination that
10   issue preclusion is available.    See Miller v. County of Santa
11   Cruz, 39 F.3d 1030, 1032 (9th Cir. 1994).     If we conclude that
12   issue preclusion is available, we review for abuse of discretion
13   the bankruptcy court’s application of issue preclusion to the
14   state court judgment.   Id.   A bankruptcy court abuses its
15   discretion if it applies the wrong legal standard, misapplies the
16   correct legal standard or if it makes factual findings that are
17   illogical, implausible or without support in inferences that may
18   be drawn from the facts in the record.     See TrafficSchool.com,
19   Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011), citing
20   United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)
21   (en banc).
22
23                                 DISCUSSION
24        Before we launch into our analysis, we must set forth the
25   legal standards that guide it.
26   A.   Applicable legal standards
27        1.   Motion to dismiss
28        “In order to survive a motion to dismiss, a party must

                                       15
 1   allege ‘sufficient factual matter, accepted as true, to state a
 2   claim to relief that is plausible on its face.’”    In re Fitness
 3   Holdings, Intern., Inc., 714 F.3d 1141, 1144 (9th Cir. 2013)
 4   (“Fitness Holdings”), quoting Telesaurus VPC, LLC v. Power,
 5   623 F.3d 990, 1003 (9th Cir. 2010).    See also Nordeen v. Bank of
 6   Am., N.A. (In re Nordeen), 495 B.R. 468, 477 (9th Cir. BAP 2013).
 7   “‘A claim has facial plausibility when the plaintiff pleads
 8   factual content that allows the court to draw the reasonable
 9   inference that the defendant is liable for the misconduct
10   alleged.’”    Fitness Holdings, 714 F.3d at 1144, quoting Ashcroft
11   v. Iqbal, 556 U.S. 662, 678 (2009).    See also Nordeen, 495 B.R.
12   at 477.    In reviewing a denial of a motion to dismiss for failure
13   to state a claim, we accept “‘[a]ll well-pleaded allegations of
14   material fact as true’” and construe them “‘in the light most
15   favorable to the non-moving party.’” Fitness Holdings, 714 F.3d
16   at 1144, quoting Faulkner v. ADT Sec. Servs., Inc., 706 F.3d
17   1017, 1019 (9th Cir. 2013).
18        After reviewing her complaint, we determine that Ms. Silas
19   has alleged facts sufficient to plead that the judgment she
20   obtained against the debtor in the malicious prosecution action
21   may be excepted from discharge under § 523(a)(6).    We thus
22   conclude that the bankruptcy court did not err in denying the
23   debtor’s motion to dismiss.
24        2.     Summary judgment may be based on the issue preclusive
                 effect of a state court judgment
25
26        When reviewing its decision on a summary judgment motion, we
27   apply the same standards for summary judgment as the bankruptcy
28   court.    Summary judgment is appropriate when the record shows

                                      16
 1   that no genuine dispute of material fact exists, and the moving
 2   party is entitled to judgment as a matter of law.       Fresno Motors,
 3   LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir.
 4   2014).    In making this determination, the bankruptcy court must
 5   view the evidence in the light most favorable to the non-moving
 6   party.    Id.   It must draw all justifiable inferences in the non-
 7   moving party’s favor.     Id.
 8        A bankruptcy court may grant summary judgment based on the
 9   issue preclusive effect of an existing state court judgment.       See
10   Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir.
11   2001).    In doing so, it must apply the forum state’s issue
12   preclusion law.    Id.   See also 28 U.S.C. § 1738.    Here,
13   California preclusion law applies.
14        In California, issue preclusion bars relitigation of an
15   issue when: 1) the issue sought to be precluded is identical to
16   that decided in a prior proceeding; 2) the issue was actually
17   litigated in the prior proceeding; 3) the issue was necessarily
18   decided in the prior proceeding; and 4) the decision in the prior
19   proceeding is final and on the merits.       Lucido v. Superior Court,
20   51 Cal. 3d 335, 341 (1990).     Additionally, in California, issue
21   preclusion may only be applied if it furthers underlying public
22   policies.    See id. at 343.
23        The party asserting issue preclusion bears the burden of
24   establishing these requirements.       Id. at 341.   To do so, “[the]
25   party must produce a record sufficient to reveal the controlling
26   facts and pinpoint the exact issues litigated in the prior
27   action.    Any reasonable doubt as to what was decided by a prior
28   judgment should be resolved against allowing [issue preclusive]

                                       17
 1   effect.”   Kelly v. Okoye (In re Kelly), 182 B.R. 255, 258 (9th
 2   Cir. BAP 1995), aff’d, 100 F.3d 110 (9th Cir. 1996).
 3        3.    The elements required to establish § 523(a)(6)
 4        Section 523(a)(6) excepts from discharge debts arising from
 5   a debtor’s willful and malicious injury to another person.
 6   Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 702, 706 (9th
 7   Cir. 2008).   We must analyze the willful and malice requirements
 8   separately, Carillo v. Su (In re Su), 290 F.3d 1140, 1146-47
 9   (2002), and we must determine that both have been met, Ormsby v.
10   First Am. Title Co. of Nev. (In re Ormsby), 591 F.3d 1199, 1206
11   (9th Cir. 2010).
12        “A ‘willful’ injury is a deliberate or intentional injury,
13   not merely a deliberate or intentional act that leads to injury.”
14   Barboza, 545 F.3d at 706, quoting Kawaauhau v. Geiger, 523 U.S.
15   57, 61 (1998).   To satisfy the willfulness requirement, it must
16   be shown that the debtor either had “a subjective intent to harm
17   or a subjective belief that harm is substantially certain.”    Su,
18 290 F.3d at 1144.   When determining the debtor’s intent under
19   § 523(a)(6), there is a presumption that the debtor knows the
20   natural consequences of his actions.   Ormsby, 591 F.3d at 1206.
21        “A malicious injury involves ‘(1) a wrongful act, (2) done
22   intentionally, (3) which necessarily causes injury, and (4) is
23   done without just cause or excuse.’”   Su, 290 F.3d at 1146-47,
24   quoting Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1209
25   (9th Cir. 2001).    “Within the plain meaning of this definition,
26   it is the wrongful act that must be committed intentionally
27   rather than the injury itself.”    Jett v. Sicroff (In re Sicroff),
28   401 F.3d 1101, 1106 (9th Cir. 2005), citing Murray v. Bammer

                                       18
 1   (In re Bammer), 131 F.3d 788, 791 (9th Cir. 1997)(“This four-part
 2   definition does not require a showing of biblical malice, i.e.,
 3   personal hatred, spite, or ill will.   Nor does it require a
 4   showing of an intent to injure, but rather it requires only an
 5   intentional act which causes injury.”).   “Malice may be inferred
 6   based on the nature of the wrongful act.”    Ormsby, 591 F.3d at
 7   1206, citing Transamerica Comm. Fin. Corp. v. Littleton
 8   (In re Littleton), 942 F.2d 551, 554 (9th Cir. 1991)(determining
 9   that, in the case of conversion, malice may be inferred).
10        4.   The elements required to establish malicious
               prosecution
11
12        In California, the common law tort of malicious prosecution
13   provides a remedy for individuals subjected to maliciously
14   instituted criminal and civil proceedings.    See Sheldon Appel Co.
15   v. Albert Oliker, 47 Cal. 3d 863, 871-72 (1989).    To establish a
16   cause of action for malicious prosecution of a civil proceeding,
17   the plaintiff must show “that the prior action (1) was commenced
18   [or continued] by or at the direction of the defendant and was
19   pursued to a legal termination in his [or her], plaintiff’s,
20   favor; (2) was brought without probable cause; and (3) was
21   initiated [or continued] with malice.”    Id., quoting Bertero v.
22   Nat’l Gen. Corp., 13 Cal. 3d 43, 50 (1974)(internal quotation
23   marks omitted).
24        “Probable cause . . . is a question of law that turns on
25   whether the underlying claim was ‘legally tenable, as determined
26   on an objective basis.’”   Tucker, 515 F.3d at 1031, quoting
27   Padres L.P. v. Henderson, 114 Cal. App. 4th 495, 517 (2004).
28   Probable cause “is measured by the state of the defendant’s

                                     19
 1   knowledge, not by his intent.”   Sheldon Appel Co., 47 Cal. 3d at
 2   881, quoting Dir. Gen. v. Kastenbaum, 263 U.S. 25, 27-28 (1923)
 3   (“Kastenbaum”).   The question ultimately is not whether the
 4   defendant believed the facts to constitute probable cause, but
 5   whether the court believes they did, an objective standard.
 6   Sheldon Appel Co., 47 Cal. 3d at 881, quoting Kastenbaum,
 7 263 U.S. at 27-28.
 8        “The ‘malice’ element of the malicious prosecution tort
 9   relates to the subjective intent or purpose with which the
10   defendant acted in initiating the prior action.”   Estate of C.
11   Delores Tucker v. Interscope Records, Inc., 515 F.3d 1019, 1030
12   (9th Cir. 2008)(“Tucker”), quoting Sheldon Appel Co., 47 Cal. 3d
13   at 874 (internal quotation marks omitted).   However, the malice
14   required in malicious prosecution “is not limited to actual
15   hostility or ill will toward [the] plaintiff but exists when the
16   proceedings are instituted primarily for an improper purpose.”
17   Albertson v. Raboff, 46 Cal. 2d 375, 383 (Cal. 1956).   See also
18   Tucker, 515 F.3d at 1030, quoting Sierra Club Found. v. Graham,
19   72 Cal. App. 4th 1135, 1147 (1999)(“Sierra Club”).
20        The California Supreme Court has explained:
21        [T]he principal situations in which the civil
          proceedings are initiated for an improper purpose are
22        those in which (1) the person instituting them does not
          believe that his claim may be held valid; (2) the
23        proceedings are begun primarily because of hostility or
          ill will; (3) the proceedings are initiated solely for
24        the purpose of depriving the person against whom they
          are instituted of a beneficial use of his property;
25        [or] (4) the proceedings are initiated for the purpose
          of forcing a settlement which has no relation to the
26        merits of the claim.
27   Albertson, 46 Cal. 2d at 383, quoting Rest., Torts § 676.
28   Accordingly, in a malicious prosecution action, the proof may or

                                      20
 1   may not establish a willful intent to injure on the part of the
 2   defendant.
 3   B.   Summary judgment in this appeal
 4        On appeal, the debtor contends that the bankruptcy court
 5   erred in granting summary judgment in Ms. Silas’ favor on her
 6   § 523(a)(6) claim based on issue preclusion.   He challenges the
 7   bankruptcy court’s application of the first and third California
 8   elements for issue preclusion: 1) that the issue sought to be
 9   precluded is identical to that decided in the prior proceeding;
10   and 2) that the issue was necessarily decided in the prior
11   proceeding.8
12        With respect to the first issue preclusion element, he
13
          8
14          The debtor advances two additional arguments. First, he
     contends that the bankruptcy court erred in relying on the
15   determinations made by the state appellate court in its opinion,
     Silas v. Arden, 213 Cal. App. 4th 75 (2013), “in lieu of [the]
16
     proof of what happened at trial.” Reading the transcript of the
17   hearing, we do not get a sense that the bankruptcy court relied
     on the background facts discussed in the state appellate court’s
18   opinion in making its determination. In fact, the bankruptcy
19   court told the debtor that it “relied on the materials submitted
     with them – with the briefs,” which included not only the state
20   appellate court’s opinion, but also the jury instructions. The
     bankruptcy court moreover indicated that it mostly relied on the
21   jury instructions and Ms. Silas’ brief.
22        The bankruptcy court also explained to the debtor that it
     was not a state appellate court. If it looked behind the state
23   court’s decision, it would “be assuming that the state court was
     wrong.”
24
          Second, the debtor argues that the bankruptcy court merged
25   issue preclusion with the Rooker-Feldman doctrine. At the
     hearing, the bankruptcy court explicitly stated that it was not a
26   state appellate court and could not review a state appellate
27   court’s decisions. The bankruptcy court did not err in
     considering the state appellate court’s analysis of California
28   state law issues in this case.

                                    21
 1   argues that the state court judgment did not have issue
 2   preclusive effect because the malice requirement for malicious
 3   prosecution is not the same as the willful requirement for
 4   § 523(a)(6).
 5        With respect to the second issue preclusion element, the
 6   debtor maintains that the bankruptcy court erred in refusing to
 7   consider evidence as to the debtor’s subjective intent at the
 8   time he continued the legal malpractice action on Mr. Gunnell’s
 9   behalf.   He claims that the evidence would show that he did not
10   intend to harm Ms. Silas in prosecuting the malicious prosecution
11   action on Mr. Gunnell’s behalf.    Rather, he simply sought to
12   carry out his duty as counsel to his client, Mr. Gunnell.    He
13   also believed that Mr. Gunnell had a meritorious malpractice
14   claim against Ms. Silas.
15        He moreover argues that “it was impossible to know” from the
16   jury instructions and the verdict whether the jury actually found
17   that he had intended to cause Ms. Silas injury in filing the
18   malicious prosecution action.   In fact, the only instruction
19   given to the jury concerning malice defined “malice” as either
20   that “(1) [the debtor] intended to cause injury to [Ms.] Silas
21   when he represented Mr. Gunnell or (2) [his] representation of
22   [Mr.] Gunnell was despicable and done with knowing disregard of
23   [Ms.] Silas’ rights.”   Appellant’s Opening Brief at 37.   Also,
24   the jury finding that the debtor had acted for a purpose “other
25   than succeeding on the merits” did not describe what that purpose
26   might have been.   Appellant’s Opening Brief at 38.
27        Comparing the elements of the California intentional tort of
28   malicious prosecution with the requirements to establish a

                                       22
 1   willful and malicious injury excepted from the debtor’s discharge
 2   under § 523(a)(6), we have no quarrel with the bankruptcy court’s
 3   conclusion that the “malicious” element was established, but
 4   although we acknowledge that it is a very close question, we
 5   disagree that the “willful” standard was necessarily met.    We
 6   thus conclude that the bankruptcy court erred in granting summary
 7   judgment in Ms. Silas’ favor based on the issue preclusive
 8   effects of the state court judgment with respect to the
 9   § 523(a)(6) “willful injury” element.
10        As we explained above, in order to except a debt from
11   discharge as a willful and malicious injury under § 523(a)(6), we
12   must analyze the elements of willfulness and maliciousness
13   separately, Su, 290 F.3d at 1146-47, and determine that both have
14   been met, Ormsby, 591 F.3d at 1206.   The § 523(a)(6) willfulness
15   requirement involves a deliberate or intentional injury.
16        Willfulness is not a separate and distinct element of the
17   tort of malicious prosecution, though it may be inferred from the
18   debtor’s intent in commencing or continuing litigation.
19   Moreover, “‘[m]erely because a tort is classified as intentional
20   does not mean that any injury caused by the tortfeasor is
21   willful.’”   Ditto v. McCurdy, 510 F.3d 1070, 1078 (9th Cir.
22   2007), quoting Miller v. J.D. Abrams Inc. (In re Miller),
23   156 F.3d 598, 604 (5th Cir. 1998).
24        The state court judgment did not necessarily include
25   findings of willfulness within the meaning of § 523(a)(6).     The
26   instructions to the jury did not ask specifically that the jury
27   find that the debtor continued the legal malpractice action
28   against Ms. Silas with a subjective intent to harm her.    Rather,

                                     23
 1   the jury instructions asked the jury to determine whether the
 2   debtor “acted primarily for a purpose other than succeeding on
 3   the merits of the claim.”   The additional jury instructions did
 4   not require the jury to specify this purpose.    Moreover, the
 5   verdict form merely repeated this instruction in the form of a
 6   question, to which the jury answered “yes.”
 7        One of the jury instructions stated that Ms. Silas must
 8   prove that the debtor’s conduct was a substantial factor in
 9   causing her harm.   But this instruction does not indicate whether
10   the conduct was wrongful and was done intentionally.    Moreover,
11   the question in the verdict form asking if the jury found that
12   the debtor “engaged in the conduct with malice or oppression” was
13   in the disjunctive.   The jury’s simple “yes” did not determine
14   definitely whether the debtor acted willfully.
15        The punitive damages instructions to the jury required the
16   jury to determine whether the debtor’s conduct was so
17   reprehensible as to support a determination by clear and
18   convincing evidence that the debtor acted with “malice or
19   oppression,” referencing “despicable conduct” as an applicable
20   standard.   As described in the instructions, “despicable conduct”
21   is “conduct that is so vile, base, or contemptible that it would
22   be looked down on and despised by reasonable people.”    Even so,
23   as the Panel recently discussed at length in Plyam v. Precision
24   Dev’t, LLC, 530 B.R. 456, 464-70 (BAP 9th Cir. 2015), a
25   California punitive damages award does not necessarily establish
26   “willfulness” for § 523(a)(6) purposes.   We conclude, on the
27   record before us, that the issue of whether the debtor willfully
28   injured Ms. Silas was not necessarily decided in the malicious

                                     24
 1   prosecution action.
 2
 3                                 CONCLUSION9
 4        Based on our review of the record, Ms. Silas alleged facts
 5   sufficient to support her claim under § 523(a)(6).   The
 6   bankruptcy court did not err in denying the debtor’s motion to
 7   dismiss.   We AFFIRM the bankruptcy court’s order denying the
 8   debtor’s motion to dismiss.
 9        However, we VACATE and REMAND the bankruptcy court’s order
10   granting Ms. Silas’ motion for summary judgment.   Because the
11   results in the malicious prosecution action did not establish the
12   element of “willfulness” for § 523(a)(6) purposes, the state
13   court judgment lacked issue preclusive effect.   The bankruptcy
14   court thus erred in granting summary judgment in Ms. Silas’ favor
15   on her § 523(a)(6) claim.
16
17
18
19
20
21
22
23
24
          9
25          While this appeal was pending, Ms. Silas filed a motion to
     sanction the debtor and his counsel for filing a frivolous appeal
26   (“sanctions motion”). Because we conclude that the bankruptcy
27   court erred in granting Ms. Silas’ summary judgment motion, the
     debtor’s appeal is not frivolous. We thus deny Ms. Silas’
28   sanctions motion.

                                       25