Court Opinion

ID: 4192881
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:07.733607+00
Date Added: 2024-06-11T14:40:26.818657
License: Public Domain

FILED
                                                             JUN 11 2015
                                                         SUSAN M. SPRAUL, CLERK
 1                        NOT FOR PUBLICATION              U.S. BKCY. APP. PANEL
                                                           OF THE NINTH CIRCUIT
 2
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )         BAP No. CC-14-1397-PaKiTa
                                   )
 6   NARINDER SANGHA,              )         Bankr. No. 13-16964-MH
                                   )
 7                  Debtor.        )         Adv. Proc. 13-01171-MH
     ______________________________)
 8                                 )
     NARINDER SANGHA,              )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )         M E M O R A N D U M1
11                                 )
                                   )
12   CHARLES EDWARD SCHRADER,      )
                                   )
13                  Appellee.      )
     ______________________________)
14
                     Argued and Submitted on March 19, 2015
15                           at Pasadena, California
16                           Filed - June 11, 2015
17               Appeal from the United States Bankruptcy Court
                     for the Central District of California
18
              Honorable Mark D. Houle, Bankruptcy Judge, Presiding
19
20   Appearances:    Deepalie Milie Joshi argued for Appellant Narinder
                     Sangha; Appellee Charles Edward Schrader argued pro
21                   se.
22
     Before: PAPPAS, KIRSCHER, and TAYLOR, Bankruptcy Judges.
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. See 9th
28   Cir. BAP Rule 8024-1.

                                       -1-
 1        Chapter 72 debtor Narinder Sangha (“Sangha”) appeals the
 2   judgment of the bankruptcy court declaring that his debt to
 3   creditor Charles Edward Schrader (“Schrader”) is excepted from
 4   discharge under § 523(a)(6).    We VACATE and REMAND.
 5                                  I.   FACTS
 6        On October 13, 2009, Schrader filed a complaint against
 7   Sangha for defamation (slander per se) in San Francisco Superior
 8   Court, alleging that Sangha had made false statements3 about
 9   Schrader in the course of an employment background investigation.
10   On November 17, 2009, Sangha filed an answer and general denial.
11   The state court granted Schrader leave to file a second amended
12   complaint4 on February 14, 2011.     In the second amended complaint,
13   all fourteen causes of action alleged that Sangha made the
14   defamatory statements with malice; the prayer sought an award of
15   exemplary damages.
16        Schrader, on March 4, 2011, filed a motion for terminating
17   sanctions against Sangha for engaging in discovery abuses.     The
18   state court granted Schrader’s sanctions motion and struck
19   Sangha’s answer to the second amended complaint, commenting: “The
20   Court finds that Defendant’s failure to respond to the Court’s
21
22
          2
             Unless otherwise indicated, all chapter and section
23   references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all
     Rule references are to the Federal Rules of Bankruptcy Procedure,
24   Rules 1001–9037, all Civil Rule references are to the Federal
     Rules of Civil Procedure 1–86, and all Appellate Rule references
25   are to the Federal Rules of Appellate Procedure 1-48.
26        3
             In sum, the allegedly defamatory statements were that
     Schrader had verbally, physically, and emotionally abused Sangha.
27
          4
             Our record does not include copies of the original
28   complaints.

                                         -2-
 1   orders compelling a response to interrogatory is willful.”      Sangha
 2   then dismissed his attorney Christopher Leuterio and filed a
 3   substitution of attorney showing Christopher N. Mandarano was to
 4   be his counsel.     On April 8, 2011, Sangha terminated Mandarano,
 5   and substituted Robert D. Finkle as his attorney.
 6         On April 18, 2011, the state court entered a default against
 7   Sangha.     It conducted a prove-up hearing on Schrader’s motion for
 8   entry of default judgment on June 2, 2011, and entered a judgment
 9   the same day (the “State Court Judgment”) awarding Schrader
10   $1,369,633.40, comprised of $1,000,000 for general damages,
11   $368,535.40 for “Special/Punitive Damages,”5 and $1,098.00 for
12   costs.
13       On November 14, 2011, the state court denied Sangha’s motion
14 to vacate the State Court Judgment.       Sangha did not appeal the
15 State Court Judgment.6
16       Sangha filed a chapter 7 bankruptcy petition on April 18,
17 2013.       In his schedules, he listed a disputed debt owed to
18 Schrader of $1,369,634.00 for the State Court Judgment.
19       On April 23, 2013, Schrader filed an adversary complaint
20 against Sangha seeking an exception to discharge under § 523(a)(6)
21 for the debt evidenced by the State Court Judgment.      Sangha filed
22 an answer on August 21, 2013, generally denying the complaint’s
23
24
           5
             Of this sum, $6,000 was for punitive damages.     See
25   discussion below in footnote 7.
26         6
             Sangha later obtained a malpractice judgment in the same
     state court against Leuterio in the amount of $1,370,349.85 based
27   upon Leuterio’s negligence in representing Sangha in the Schrader
     suit. Sangha alleges that he has been unable to collect the
28   malpractice judgment.

                                       -3-
 1 allegations and stating three affirmative defenses: that the
 2 purported false statements were privileged; that Schrader had
 3 engaged in fraud by concealment of material facts from the state
 4 court; and that Schrader had unclean hands.
 5       Schrader filed a motion for summary judgment on April 24,
 6 2014, arguing that there were no disputed material facts and that
 7 the State Court Judgment was preclusive as to all of the elements
 8 required for an exception to discharge under § 523(a)(6).
 9       Responding to the summary judgment motion on June 4, 2014,
10 Sangha asserted that triable issues of fact remained concerning
11 Schrader’s unclean hands, fraud, the damage award, and Sangha’s
12 intent.     Sangha also argued that he was entitled to conduct
13 discovery.    Schrader filed a reply on June 12, 2014, which
14 included various documents in opposition to Sangha’s allegations.
15       Before the motion hearing on July 8, 2014, the bankruptcy
16 court posted a detailed Tentative Decision.    Among the
17 conclusions in the Tentative Decision of the bankruptcy court were
18 that:
19       - There was no genuine dispute that the State Court Judgment
20 included $6,000 in punitive damages.7
21       - All elements of issue preclusion were satisfied.
22       - None of Sangha’s arguments supported the extrinsic fraud
23
           7
             As noted above, the State Court Judgment awarded Schrader
24   $368,535.40 in “Special/Punitive Damages.” That $6,000 of that
     sum was for punitive damages was hotly contested by the parties in
25   the bankruptcy court. The bankruptcy court ultimately concluded
     that $6,000 represented punitive damages after subtracting the
26   amounts awarded to Schrader for his lost wages and the costs of an
     unsuccessful appeal. Sangha has not continued his argument on
27   appeal, and indeed, his counsel conceded at oral argument before
     the Panel that the damages awarded in the State Court Judgment
28   included a punitive damages component.

                                     -4-
 1 exception to issue preclusion.
 2      - The evidence reflected that all damages awarded were
 3 attributable to Sangha’s malicious conduct.
 4      - Sangha was seeking discovery in order to relitigate the
 5 State Court Judgment findings.        The information he sought would
 6 not prevent summary judgment.
 7      After hearing from the parties at the hearing, the bankruptcy
 8 court decided to grant summary judgment, and adopted its Tentative
 9 Decision, which it incorporated in a judgment (the “Bankruptcy
10 Judgment”) entered on August 7, 2014, that declared the State
11 Court Judgment in the amount of $1,369,633.40 was excepted from
12 discharge under § 523(a)(6).
13      Sangha filed a timely appeal of the Bankruptcy Judgment on
14 August 18, 2014.
15                             II.     JURISDICTION
16      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
17 and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C. § 158.
18                                   III. ISSUES
19      Whether the bankruptcy court erred in granting Schrader a
20 summary judgment determining that the State Court Judgment was
21 excepted from discharge under § 523(a)(6) based on issue
22 preclusion.
23                       IV.    STANDARDS OF REVIEW
24      We review the grant of summary judgment de novo.       Omega S.A.
25 v. Costco Wholesale Corp., 776 F.3d 692, 695 (9th Cir. 2015);
26 Expeditors Int’l v. Official Comm. of CFLC, Inc. (In re CFLC,
27 Inc.), 209 B.R. 508, 512 (9th Cir. BAP 1997).       De novo review
28 requires the Panel to independently review an issue, without

                                         -5-
 1 giving deference to the bankruptcy court's conclusions.   First
 2 Ave. W. Bldg., LLC v. James (In re Onecast Media, Inc.), 439 F.3d
3 558, 561 (9th Cir. 2006).   Summary judgment is appropriate "if the
 4 pleadings, the discovery and disclosure materials on file, and any
 5 affidavits show that there is no genuine dispute as to any
 6 material fact and that the movant is entitled to judgment as a
 7 matter of law."   Civil Rule 56(a), incorporated by Rule 7056;
 8 Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 702, 707 (9th
 9 Cir. 2008).    In making this determination, the trial court must
10 view all facts and reasonable inferences in the light most
11 favorable   to the non-moving party.   Olsen v. Idaho St. Bd. of
12 Med., 363 F.3d 916, 922 (9th Cir. 2004).
13                             IV. DISCUSSION
14      Issue preclusion may provide a proper basis for granting
15 summary judgment.   San Remo Hotel, L.P. v. San Francisco City and
16 Cnty., 364 F.3d 1088, 1094 (9th Cir. 2004).   To meet its burden on
17 a motion for summary judgment based on issue preclusion, the
18 proponent must have pinpointed the exact issues litigated in the
19 prior action and introduced a record establishing the controlling
20 facts.   Honkanen v. Hopper (In re Honkanen), 446 B.R. 373, 382
21 (9th Cir. BAP 2011); Kelly v. Okoye (In re Kelly), 182 B.R. 255,
22 258 (9th Cir. BAP 1995).
23      Issue preclusion may apply in bankruptcy discharge
24 proceedings.   Grogan v. Garner, 498 U.S. 279, 284 (1991).   The
25 preclusive effect of a state court judgment in a subsequent
26 federal lawsuit generally is determined by the Full Faith and
27 Credit Act, 28 U.S.C. § 1738, which provides that state judicial
28 proceedings "shall have the same full faith and credit in every

                                    -6-
 1 court within the United States . . . as they have by law or usage
 2 in the courts of such State . . . from which they are taken."
 3 Marrese v. Am. Academy of Orthopaedic Surgeons, 470 U.S. 373, 380
 4 (1985).   When state preclusion law controls, the decision to apply
 5 the doctrine is made in accordance with state law.    Khaligh v.
 6 Hadegh (In re Khaligh), 338 B.R. 817, 823 (9th Cir. BAP 2006),
 7 aff’d, 506 F.3d 956 (9th Cir. 2007).
 8      Under California law, the party asserting issue preclusion
 9 has the burden of establishing the following threshold
10 requirements:
11      First, the issue sought to be precluded from
        relitigation must be identical to that decided in a
12      former proceeding. Second, this issue must have been
        actually litigated in the former proceeding. Third, it
13      must have been necessarily decided in the former
        proceeding. Fourth, the decision in the former
14      proceeding must be final and on the merits. Finally,
        the party against whom preclusion is sought must be the
15      same as, or in privity with, the party to the former
        proceeding.
16
17 Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir.
18 2001) (citing Lucindo v. Super. Ct., 795 P.2d 1223, 1225 (Cal.
19 1990)).   These are known as the “Harmon” factors.   But even if
20 these five requirements are met, application of issue preclusion
21 under California law requires a “mandatory ‘additional’ inquiry
22 into whether imposition of issue preclusion would be fair and
23 consistent with sound public policy.”   Khaligh, 338 B.R. at
24 824-25.   “The purposes of the doctrine are to promote judicial
25 economy by minimizing repetitive litigation, preventing
26 inconsistent judgments which undermine the integrity of the
27 judicial system and to protect against vexatious litigation.”
28 Younan v. Caruso, 51 Cal. App. 4th 401, 407 (1996).

                                   -7-
 1       In this appeal, we must decide if a critical issue — whether
 2 Sangha committed willful and malicious injuries to Schrader — was
 3 actually litigated (Harmon factor 2) in the state court.      The
 4 bankruptcy court concluded it was, but we disagree.     However,
 5 before we reach the merits of that question, we examine Sangha’s
 6 arguments in this appeal that lack merit.
 7       A.     Default judgments may be preclusive under both
                California and federal law.
 8
 9       In Gayden v. Nourbakhsh (In re Nourbakhsh), 67 F.3d 798 (9th
10 Cir. 1995), the Ninth Circuit held that the preclusive effect of a
11 state court judgment is determined by reference to the preclusion
12 law of the state in which the judgment was entered, and that if
13 applicable state law affords preclusive effect to the issues
14 decided in a default judgment, so will the federal courts of this
15 circuit.    The rules announced in this published Opinion are
16 binding on all the courts of the Ninth Circuit, including this
17 Panel.     Miranda B. v. Kitzhaber, 328 F.3d 1181, 1186 (9th Cir.
18 2003) (“[W]here a panel confronts an issue germane to the eventual
19 resolution of the case, and resolves it after reasoned
20 consideration in a published opinion, that ruling becomes the law
21 of the circuit,” binding on all lower courts.).8
22       While not the law in all states, California affords
23 preclusive effect to the default judgments entered by its courts.
24 Gottlieb v. Kest, 141 Cal. App. 4th 110, 149 (2006).     As the
25 Gottlieb court explained, a default judgment, under California
26
27        8
             The Ninth Circuit’s Nourbakhsh decision affirmed the
     published decision of this Panel in Nourbakhsh v. Gayden
28   (In re Nourbakhsh), 162 B.R. 841 (9th Cir. BAP 1994).

                                     -8-
 1 law,
 2        conclusively establishes, between the parties so far as
          subsequent proceedings on a different cause of action
 3        are concerned, the truth of all material allegations
          contained in the complaint in the first action, and
 4        every fact necessary to uphold the default judgment.
 5 Id. at 149.
 6        Sangha’s brief in this appeal attempts the same frontal
 7 attack on Nourbakhsh that he offered to the bankruptcy court:
 8        The Ninth Circuit’s position [giving preclusive effect
          to state court default judgments when authorized by
 9        state law] is the minority view . . . . By utilizing a
          blanket application of collateral estoppel to default
10        judgments, without considering why the default issues,
          the Ninth Circuit and other similarly-holding courts
11        have, in essence, created a new exception that is not
          based on any malicious wrongdoing, but may simply be the
12        result of “neglect, substance abuse, emotional turmoil,
          or simple inability to afford a lawyer. . . . The rule
13        results in increased litigation and a lack of uniformity
          in the results. . . . Because the [Nourbakhsh] rule
14        violates public policy and the rationale underlying
          issue preclusion, this Court should deign [sic] to
15        follow it.
16 Sangha Op. Br. at 12-15.    For support, Sangha cites to several
17 bankruptcy and district court decisions within the Ninth Circuit,
18 including the bankruptcy court in this appeal, that express
19 dissatisfaction with the Nourbakhsh rule.     However, none of those
20 courts refused to follow the rule.     Nor will we.   Simply put, we
21 have no authority to ignore binding circuit precedent:
22        Binding authority within this regime cannot be
          considered and cast aside; it is not merely evidence of
23        what the law is. Rather, case law on point is the law.
          If a court must decide an issue governed by a prior
24        opinion that constitutes binding authority, the later
          court is bound to reach the same result, even if it
25        considers the rule unwise or incorrect. Binding
          authority must be followed unless and until overruled by
26        a body competent to do so.
27 Hart v. Massanari, 266 F.3d 1155, 1171 (9th Cir. 2001).
28        Because we can not presume to overrule the Ninth Circuit,

                                    -9-
 1 even were we to disagree with the rule it announced, we must
 2 reject all of Sangha’s arguments suggesting that we should ignore
 3 the preclusive effect of a California default judgment in federal
 4 bankruptcy proceedings in this circuit.
 5      B.      The bankruptcy court erred in inferring that Sangha
                committed willful injury to Schrader based solely on the
 6              State Court Judgment awarding punitive damages.
 7      Section 523(a)(6) provides that: "(a) A discharge under 727
 8 . . . of this title does not discharge an individual debtor from
 9 any debt — . . . (6) for willful and malicious injury by the
10 debtor to another entity or to the property of another entity."
11 Whether a particular debt is for willful and malicious injury by
12 the debtor to another or the property of another under § 523(a)(6)
13 requires application of a two-pronged test to the conduct giving
14 rise to the injury.    In other words, the creditor must prove that
15 the debtor's conduct in causing the injuries was both willful and
16 malicious.    Barboza v. New Form, Inc. (In re Barboza), 545 F.3d
17 702,711 (9th Cir. 2008)(citing Carrillo v. Su (In re Su), 290 F.3d
18 1140, 1146-47 (9th Cir. 2002) and requiring the application of a
19 separate analysis of each prong of "willful" and "malicious").
20      In this context, to show that a debtor's conduct is willful
21 requires proof that the debtor deliberately or intentionally
22 injured the creditor, and that in doing so, the debtor intended
23 the consequences of his act, not just the act itself.    Kawaauhau
24 v. Geiger, 523 U.S. 57, 60-61 (1998); In re Su, 290 F.3d at 1143.
25 The debtor must act with a subjective motive to inflict injury, or
26 with a belief that injury is substantially certain to result from
27 the conduct.    In re Su, 290 F.3d at 1143.
28      For conduct to be malicious, the creditor must prove that

                                     -10-
 1 the debtor: (1) committed a wrongful act; (2) done intentionally;
 2 (3) which necessarily causes injury; and (4) was done without
 3 just cause or excuse.   Id.9
 4       The “identical issue” requirement addresses whether
 5 “identical factual allegations” are at stake in the two
 6 proceedings.   Murphy v. Murphy, 164 Cal. App. 4th 376, 400 (2008).
 7 Here, the bankruptcy court found that the issue examined, and the
 8 findings made in the state court, that Sangha acted with malice in
 9 fact in connection with each of the fourteen causes of action
10 stated in Schrader’s complaint, were identical to the issue raised
11 in the adversary proceeding, whether Sangha had inflicted willful
12 injury on Schrader.   We disagree.
13       The bankruptcy court reasoned that the state court had
14 awarded Schrader punitive damages of $6,000.   We find no error in
15 that determination.   In order to recover punitive damages in a
16 defamation lawsuit, the state court had to find that Sangha
17 committed slander with malice.   DiGiorgio Corp. v. Valley Labor
18 Citizen, 260 Cal. App. 2d 268, 277 (1968).   That malice must be
19 “malice in fact” in every case to support an award of punitive
20 damages.   Davis v. Hearst, 160 Cal. 143, 164 (1911).
21
          9
             Because we find that the bankruptcy court erred in
22   determining that there was a willful injury, we do not reach the
     issue of whether the State Court Judgment preclusively establishes
23   that Sangha acted maliciously for purposes of § 523(a)(6). We
     note that the bankruptcy court simply ruled that because the
24   injury was the result of malice in fact, the first two elements
     for malicious injury, that the individual committed a wrongful act
25   and it was done intentionally, were satisfied. However, the Panel
     in Plyam v. Precision Dev., LLC (In re Plyam), ___ B.R. ___,
26   No. CC-14-1362, 2015 WL 2124780 (9th Cir. BAP May 5, 2015),
     discussed below, noted that the maliciousness prong was partially
27   satisfied by a finding of malice in law, not malice in fact. On
     remand, the bankruptcy court may review its finding on the
28   maliciousness prong.

                                    -11-
 1      The bankruptcy court next examined the characteristics of
 2 “malice in fact” required to recover in defamation actions under
 3 California law.   California defines malice in fact as “a state of
 4 mind arising from hatred or ill will, evidencing a willingness to
 5 vex, annoy, or injure another person.”    Davis, 160 Cal. at 160;
 6 see also In re V.V., 51 Cal. 4th 1020, 1028 (1966)(“Malice in fact
 7 — defined as ‘a wish to vex, annoy, or injure’ . . . — consists of
 8 actual ill will or intent to injure.”).    From these legal
 9 premises, the bankruptcy court inferred:
10      Malice in fact is defined as having ill-will or an
        attempt to injure. Malice in fact contemplates that
11      defendant’s conduct is intended to specifically injure
        Plaintiff, not just an intentional act that leads to
12      injury. Thus, the Court finds that the issues set forth
        under malice in fact are the same as those for willful
13      injury under § 523(a)(6).”
14 Tentative Decision at 8, July 8, 2014.    Therefore, the bankruptcy
15 court reasoned that: (1) The state court awarded punitive damages
16 to Schrader in the State Court Judgment; (2) Punitive damages in a
17 California defamation suit must be founded upon the trial court’s
18 finding that, in making the defamatory statements, the defendant
19 acted with malice in fact; (3) Applying the state case law
20 standard for malice in fact, the bankruptcy court could infer that
21 Sangha had acted with an intent to injure Schrader.
22      The bankruptcy court then rounded out its reasoning with a
23 citation to the Panel’s unpublished memorandum in In re Emmerson,
24 2011 WL 3299852, at * 9 (9th Cir. BAP March 25, 2011) ("We have
25 therefore concluded that an award of punitive damages, even absent
26 specific findings of malice or oppression or fraud is entitled to
27 preclusive effect in a nondischargeability action.").    Based on
28 its own reasoning, and with the apparent blessing of

                                   -12-
 1 In re Emmerson, the bankruptcy court concluded that issue
 2 preclusion satisfied the willfulness component for an exception to
 3 discharge under § 523(a)(6).
 4       While otherwise sound, we find the third step in the
 5 bankruptcy court’s analysis and its reliance upon In re Emmerson
 6 problematic.10    According to the cases cited by the bankruptcy
 7 court, “malice in fact” exists when an act is committed with “ill
 8 will or intent to injure.”    Davis, 160 Cal. at 160 (emphasis
 9 added).     Ill will is manifested as a “willingness to vex, annoy,
10 or injure another person.”    Id. (emphasis added).   Because these
11 standards are stated in the disjunctive, the bankruptcy court
12 could not assume that Sangha’s acts were committed with an intent
13 to injure as the only possible inference from malice in fact.
14 There are other possible inferences, including that ill will may
15 not manifest itself in injury, or an intent to vex or annoy.
16 While it may be possible to infer an actor’s intent to injure from
17 a finding that the actor committed malice in fact when supported
18 by other facts in the record, that is not the case here.     The
19 bankruptcy court concluded that, in defaming Schrader, Sangha
20
21        10
             The bankruptcy court may have assigned too much weight to
     the Panel’s decision In re Emmerson. That case dealt with a very
22   specific application of issue preclusion in a child abduction
     case. The underlying state court action awarded punitive damages
23   against the debtor based on Cal. Civ. Code § 49, which provides a
     cause of action for child abduction, and Cal. Civ. Code § 3294 for
24   punitive damages ““where it is proven by clear and convincing
     evidence that the defendant has been guilty of oppression, fraud,
25   or malice.” Cal. Civ. Code § 3294(a). The state court in the
     In re Emmerson case made specific findings supporting its award of
26   punitive damages under Cal. Civ. Code § 3294. The Panel’s
     decision should be viewed as endorsing an exception to discharge
27   under the facts of that case, not as a general ruling that an
     award of punitive damages standing alone satisfies the willfulness
28   prong of § 523(a)(6).

                                     -13-
 1 acted with an intent to injure Schrader based solely on the State
 2 Court Judgment.    But that reasoning goes too far, since intent to
 3 injure cannot be inferred from malice in fact under California
 4 law.
 5        Rather than In re Emmerson, for guidance, we look to the
 6 Panel’s recent discussion of punitive damages and malice in fact
 7 under California law in Plyam v. Precision Dev., LLC
 8 (In re Plyam), ___ B.R. ___, No. CC-14-1362, 2015 WL 2124780 (9th
 9 Cir. BAP May 5, 2015).    In In re Plyam, the Panel examined whether
10 a California jury’s award of punitive damages to the creditor was
11 preclusive to show that the debtor had acted with the requisite
12 intent to injure required for an exception to discharge in
13 bankruptcy under § 523(a)(6).    As relevant here, the Panel
14 concluded that an award of punitive damages based upon an actor’s
15 malice in fact is “an insufficient basis for [application of]
16 issue preclusion” under the Supreme Court’s decision in Geiger.
17 As the Panel explained,
18        [B]y holding that the requisite state of mind was an
          actual intent to injure (or substantial certainty
19        regarding injury), the Supreme Court in Geiger
          effectively adopted a narrow construction and the most
20        blameworthy state of mind included within the common
          understanding of malice in fact. As relevant here,
21        under California law, the general definition of malice
          in fact encompasses less reprehensible states of mind.
22
23 Id. at *5.
24        As can be seen, the In re Plyam opinion explores those “less
25 reprehensible states of mind” that, while they support an award of
26 punitive damages under California law, may not be adequate to
27 support a discharge exception under the Bankruptcy Code.    Id.   The
28 Panel discussed the case law in both California and federal

                                    -14-
 1 bankruptcy law regarding malice in law and fact, observing that
 2 California law could allow punitive damages for conscious
 3 disregard of another’s rights, Taylor v. Super. Ct., 24 Cal. 3d
4 890, 895-96 (1979), and for reckless conduct with no intent to
 5 cause harm, Donnelly v. S. Pac. Co., 18 Cal. 2d 863, 869-70
 6 (1941).   But, as the opinion discusses, neither of those
 7 situations necessarily required a finding of intent to injure.
 8      In this case, the state court made no clear, specific
 9 findings explaining its reasons for awarding punitive damages, and
10 there are several grounds under California law that allow punitive
11 damage awards without the intent to injure.   Just as the Panel did
12 in In re Plyam, we conclude that the bankruptcy court, on summary
13 judgment, could not infer that Sangha acted with the requisite
14 willful intent solely because the State Court Judgment included an
15 award of punitive damages.   In other words, that Sangha committed
16 his acts with malice in fact did not preclusively establish that
17 the injury he inflicted upon Schrader was done willfully for
18 purposes of § 523(a)(6).   Because the State Court Judgment,
19 standing alone, did not establish that Sangha acted willfully,
20 that critical element for an exception to discharge was not
21 actually and necessarily litigated in the state court proceedings,
22 and we must VACATE and REMAND this action to the bankruptcy court
23 for further proceedings.
24                              CONCLUSION
25      We VACATE the judgment and REMAND this matter to the
26 bankruptcy court for further proceedings.
27
28

                                   -15-