Court Opinion

ID: 4192642
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:02:01.184432+00
Date Added: 2024-06-11T14:13:56.720451
License: Public Domain

FILED
                                                              DEC 09 2016
                                                          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 1                         NOT FOR PUBLICATION              U.S. BKCY.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
 6   In re:                        )         BAP No.    CC-16-1104-KiFD
                                   )
 7   ROBERT LEONARD KAPLAN,        )         Bk. No.    2:11-bk-60249-RK
                                   )
 8                  Debtor.        )         Adv. No.   2:12-ap-01415-RK
                                   )
 9                                 )
     ROBERT LEONARD KAPLAN,        )
10                                 )
                    Appellant,     )
11                                 )
     v.                            )         AMENDED MEMORANDUM1
12                                 )
     RENEWABLE RESOURCES COALITION,)
13   INC.; ARTHUR HACKNEY;         )
     HACKNEY & HACKNEY, Inc.,      )
14                                 )
                    Appellees.     )
15   ______________________________)
16                 Argued and Submitted on November 17, 2016,
                             at Pasadena, California
17
                            Filed - December 9, 2016
18
                 Appeal from the United States Bankruptcy Court
19                   for the Central District of California
20            Honorable Robert N. Kwan, Bankruptcy Judge, Presiding
21
     Appearances:     Leslie A. Cohen argued for appellant Robert Leonard
22                    Kaplan; Stephen W. Cusick of Nielsen, Haley &
                      Abbott LLP argued for appellees Renewable Resources
23                    Coalition, Inc., Arthur Hackney and Hackney &
                      Hackney, Inc.
24
25
26
27        1
             This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
28   have, it has no precedential value. See 9th Cir. BAP Rule 8024-1.

                                       -1-
 1   Before:   KIRSCHER, FARIS and DUNN,2 Bankruptcy Judges.
 2        Appellant Robert Leonard Kaplan ("Debtor") appeals a judgment
 3   determining that the debt of appellees was nondischargeable under
 4   § 523(a)(4) and (a)(6).3   The bankruptcy court applied issue
 5   preclusion to a prepetition arbitration award obtained by
 6   appellees and found that it and certain undisputed facts in the
 7   record established the elements of both claims.    Thus, the court
 8   granted appellees summary judgment.    Debtor also appeals the order
 9   denying his cross-motion for summary judgment and the order
10   denying his motion to dismiss appellees' second amended complaint.
11   We AFFIRM the judgment entered pursuant to § 523(a)(6).4
12              I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
13   A.   Prepetition events
14        1.   Events leading up to the arbitration
15        The instant dispute arises out of an arbitration award in
16   which Debtor's corporation was found to have misappropriated
17   Appellees’ confidential client documents by selling them to their
18
          2
19           Hon. Randall L. Dunn, Bankruptcy Judge for the District of
     Oregon, sitting by designation.
20
          3
             Unless specified otherwise, all chapter,   code and rule
21   references are to the Bankruptcy Code, 11 U.S.C.   §§ 101-1532, and
     the Federal Rules of Bankruptcy Procedure, Rules   1001-9037. The
22   Federal Rules of Civil Procedure are referred to   as "Civil Rules."
23        4
             Debtor, not through counsel, filed a letter, dated
     December 1, 2016, in this appeal, which is identified as
24   Document 24. Debtor requests that the Panel consider his letter
     as a Request for Judicial Notice, although it appears to provide
25   facts and argument. At oral argument, the Panel did not request
     Debtor to file any post-argument submission or any other document.
26   The Panel declines to consider Debtor’s Document 24, given that
     the appeal was deemed submitted for decision on November 17, 2016,
27   and Debtor, through counsel, had the opportunity to present his
     argument through written and oral presentations based on the
28   submitted record.

                                      -2-
 1   opponents.    Debtor is a professional fund-raiser in California for
 2   political campaigns.    Fund Raising, Inc. ("FRI") is a California
 3   corporation through which Debtor conducted his fund-raising
 4   business.    Debtor is the president, sole shareholder and sole
 5   employee of FRI. Appellee Renewable Resources Coalition, Inc.
 6   ("RRC") is a non-profit corporation based in Alaska.    It conducts
 7   education, research, publicity and fund-raising efforts in
 8   opposition to the proposed development of Pebble Mine – a large,
 9   open pit mine in Alaska.    Appellee Arthur Hackney is a political
10   consultant who helped manage the campaign in opposition to Pebble
11   Mine.    Appellee Hackney & Hackney, Inc. is a corporation through
12   which Hackney conducts his political consulting business
13   ("Hackney," together with RRC, "Appellees").
14           In April 2008, FRI executed a Consulting Agreement with RRC,
15   Hackney and others to provide fund-raising services for RRC's
16   anti-Pebble campaign, which included a high-profile campaign in
17   support of an Alaskan ballot initiative known as the Clean Water
18   Initiative.    The Consulting Agreement did not name Debtor as a
19   party, but he did sign it for and on behalf of FRI.    Debtor/FRI
20   was copied with the campaign's internal correspondence so that his
21   pitch for donations would accurately track the arguments being
22   asserted elsewhere in the campaign.     Because FRI was paid a
23   commission on amounts donated, Debtor/FRI was also provided copies
24   of RRC's bank deposit records, showing donations to RRC and the
25   name of the person or entity making the donation.    RRC also
26   provided Debtor/FRI with RRC's donor and membership lists for
27   purposes of solicitation.    RRC considered its donation and
28   membership information to be highly confidential and expressed

                                       -3-
 1   this to staff and board members.
 2        Under the Consulting Agreement, FRI agreed that it would,
 3   "with respect to any information designated by Client or its
 4   member organizations as confidential, hold such information in
 5   confidence and use same only in connection with the services
 6   provided hereunder."   Debtor testified that he was a member of the
 7   Board of Directors of the American Association of Political
 8   Consultants, and considered himself bound by its Code of Ethics,
 9   which provides, in part:
10        I will respect the confidence of my clients and not
          reveal confidential or privileged information obtained
11        during our professional relationship.
12   Ultimately, the Clean Water Initiative failed in the August 2008
13   election, thereby paving the way for the Pebble Mine project to
14   continue.
15        Unhappy with FRI's fund-raising efforts, board member Richard
16   Jameson, on behalf of RRC and the other parties to the Consulting
17   Agreement, emailed Debtor/FRI in September 2008 to advise that
18   they were electing to terminate the Consulting Agreement effective
19   October 4, 2008.   In response, Debtor on behalf of FRI sent two
20   emails on October 1 and 30, 2008.      In the October 1 email, Debtor
21   asserted that amounts remained due under the contract and stated
22   that the parties needed "a simple resolution" of his claim given
23   "all the focus on Alaska by the national media and all those
24   reporters running around looking for almost anything interesting
25   to write about" and "APOC’s5 review of the campaign's finances
26   . . . ."    In the October 30 email, Debtor quoted a number of
27
          5
             APOC, the Alaskan Public Officials Commission, is a state
28   regulatory body that oversees campaign finance issues in Alaska.

                                      -4-
 1   internal campaign communications and suggested that RRC was set up
 2   illegally to "veil contributors" or as a "pass through" for
 3   contributions from Bob Gillam (a significant contributor to the
 4   campaign effort).    Debtor further referred to "anonymous
 5   discussions with APOC" that suggested that RRC's position was
 6   "problematic."
 7        2.     The arbitration and APOC proceeding
 8               a.   FRI files the demand for arbitration.
 9        In October 2008, FRI initiated an arbitration proceeding as
10   provided in the Consulting Agreement.    FRI asserted several claims
11   against RRC, Jameson and others.    Retired Judge G. Keith Wisot
12   presided over the matter.
13        While the arbitration action was pending, in early January
14   2009, California attorney Allan Kaplan, Debtor's brother, acting
15   as counsel for Debtor and FRI, contacted Alaska attorney Thomas
16   Amodio, who had represented Pebble Mine interests during the
17   campaign.    Amodio confirmed that the topic of the initial contact
18   concerned reaching some agreement by which Amodio's Pebble clients
19   might acquire documentation with which to pursue an APOC complaint
20   for violations of campaign finance laws against opponents Gillam,
21   RRC and Americans For Job Security.6
22        Debtor on behalf of FRI met with Amodio in California on
23   February 2, 2009, to show Amodio documents FRI had obtained in its
24   work for the non-profits opposing the Pebble Mine.       Amodio did not
25
26        6
             Amodio had filed a prior APOC complaint against these
     anti-Pebble Mine parties, but the complaint was dismissed due to
27   lack of evidence. However, Amodio believed the internal documents
     Debtor/FRI acquired while working as a fund-raiser for RRC would
28   vindicate that complaint.

                                      -5-
 1   recall any discussion of the merits of the arbitration; to Amodio,
 2   the whole point of the meeting was to raise Amodio's clients'
 3   interest in the documents held by Debtor/FRI.   At that meeting,
 4   Debtor on behalf of FRI asked Amodio whether he could provide FRI
 5   with either legal representation in the California arbitration
 6   proceeding or financial support for the arbitration.7
 7        At some point in February 2009, before a second meeting with
 8   Debtor on March 1, 2009, both Amodio and Matthew Singer — a second
 9   Alaska attorney whose firm also represented Pebble Mine interests
10   – told Debtor they would not represent FRI in the California
11   arbitration.   In an email to Debtor dated February 23, 2009,
12   Amodio confirmed that no ongoing attorney-client relationship
13   existed between him and Debtor or FRI, but Amodio did confirm that
14   the documents Debtor showed him on February 2 remained
15   confidential and protected by the attorney-client privilege,
16   because FRI had approached him for purposes of seeking legal
17   advice.
18        In February 2009 phone discussions with Singer, Debtor on
19   behalf of FRI asked for $450,000 for the documents; Singer offered
20
21        7
             A February 23, 2009 email from Debtor/FRI to Amodio
     appears to reveal that Debtor/FRI also sought Amodio's assistance
22   for filing their own APOC complaint against FRI's former clients.
     This email contained a draft letter authored by Debtor to a John
23   Shively, a Pebble entity officer, regarding the RRC documents FRI
     had in its possession. In what seems to be Debtor's seeking of
24   approval from Amodio for the content of the letter, Debtor's
     proposed pitch to Shively was:
25
          You can evaluate the millions of dollars in campaign and
26        other costs to be saved in the next few years if you are able
          to call attention to the actions of your opponents through an
27        APOC complaint. You know these same opponents caused you and
          your colleagues to spend many millions of campaign and public
28        education dollars to protect your interests.

                                     -6-
 1   $34,000; they agreed to $50,000.
 2        On March 1, 2009, Debtor on behalf of FRI met with Alaska
 3   attorneys Amodio and Singer in California.      Debtor had organized
 4   the documents with tabs identifying what he thought were various
 5   violations of Alaska campaign laws.    During the meeting, Amodio,
 6   at Singer’s request, removed from the set of documents any that
 7   were marked as "confidential."    The $50,000 check Singer gave to
 8   Debtor was documented in an engagement letter with Singer's firm
 9   as a fee for FRI to be a consulting expert in the case Singer
10   would file with APOC.    Debtor signed the engagement letter; Singer
11   took with him the documents not marked confidential, including
12   donor lists, bank account information and contact lists obtained
13   from RRC.
14               b.   The APOC Complaint is filed.
15        In March 2009, Singer filed a complaint before APOC on behalf
16   of the Pebble parties against RRC, Gillam and others.     The gist of
17   the charge was that the non-profits, including RRC, had been set
18   up or used to shield from public view the fact that substantial
19   contributions in support of the Clean Water Initiative were being
20   made by Gillam, whose home is near Pebble Mine.     The APOC
21   Complaint stated in a footnote that "the exhibits [attached to the
22   complaint] marked as 'Doc #000001—000132' were provided by Robert
23   Kaplan, who has served as a consultant in this matter."
24        Jameson recognized the 132 exhibits to the APOC Complaint as
25   RRC documents provided to Debtor on behalf of FRI during FRI’s
26   retention, which included multiple internal campaign planning
27   communications.    The exhibits also included bank deposit detail
28   from RRC for April through July 2008, which were unredacted and

                                      -7-
 1   showed the names of all contributors, be they members or donors to
 2   RRC, during that time and the amounts of contributions.
 3        Ultimately, the APOC matter was settled, as memorialized in a
 4   Consent Decree filed in February 2010.   All charges against
 5   Hackney were dismissed for lack of a legal and factual basis.      The
 6   remaining respondents agreed to pay $100,000 to the State of
 7   Alaska, which was half of the investigation cost.    The Consent
 8   Decree recited that it "shall not constitute a formal finding on
 9   the merits of the complaints or of any other violation of any
10   statute," and that "nothing [in it] constitutes any acknowledgment
11   of any wrongdoing by any party."
12             c.   Counterclaims filed in the arbitration
13        As a result of Debtor/FRI's sale of FRI's former clients'
14   documents to its political opponents, RRC brought four
15   counterclaims in the arbitration against both Debtor and FRI,
16   alleging professional negligence, breach of contract, interference
17   with prospective economic advantage, and unjust enrichment.
18   Hackney brought similar counterclaims.   RRC and Hackney alleged
19   they suffered damages as a result of Debtor and FRI's actions,
20   including loss of income, loss of grants, loss of public support
21   and great public embarrassment.    Although RRC and Hackney named
22   Debtor individually as a counter-respondent, the arbitrator ruled
23   that as a nonparty to the Consulting Agreement, which governed the
24   arbitration, Debtor could not be made a party to the arbitration,
25   and respondents had not sufficiently alleged any alter-ego theory
26   to order a nonparty to participate in arbitration.
27
28

                                       -8-
 1             d.    Discovery, briefing and pretrial orders in the
                     arbitration
 2
 3        During his deposition, Debtor testified that he had met on
 4   behalf of FRI with Alaska attorneys Amodio and Singer in late
 5   February or early March 2009, before the APOC Complaint was filed,
 6   but only to determine whether those attorneys might either
 7   represent FRI in its arbitration or help cover the cost of that
 8   litigation.    Debtor testified on behalf of FRI that Singer gave
 9   him a check made payable to FRI on Singer’s law firm’s account for
10   $50,000 at the meeting for the sole purpose of helping cover FRI's
11   costs in prosecuting the arbitration.   Debtor further testified:
12   •    he never conveyed any documents to Singer in exchange for the
          $50,000, nor did he authorize release of those documents to
13        Singer’s firm;
14   •    he did not know how his client’s documents got into APOC’s
          hands and wound up as exhibits to the APOC Complaint; and
15
     •    he did not know why he was described in the APOC Complaint as
16        a consultant, because he was never paid anything as a
          consultant and he never authorized anyone to so describe him.
17
18   Allan, Debtor's brother and attorney representing Debtor and FRI,
19   gave similar testimony.
20        In August 2010, the arbitrator entered "Order #2," wherein he
21   made various findings, including that no attorney-client privilege
22   existed between Debtor and FRI and the Alaska attorneys based on
23   the crime-fraud exception.   The arbitrator also found that in the
24   months leading up to March 4, 2009, Debtor on behalf of FRI and
25   Allan, in efforts to settle the fee dispute in the arbitration,
26   repeatedly threatened the arbitration respondents with the
27   following statements:   "that all respondents had conspired to
28   violate Alaska election laws;" "that this information, if it

                                      -9-
 1   became known to [APOC], would result in great embarrassment and
 2   possible ethics investigations of the entities and individuals
 3   involved;" that Debtor and Allan "had talked with a
 4   politically-motivated attorney (Amonio) [sic] who represented
 5   mining interests and were adverse to respondents in the 2008
 6   campaign concerning Pebble Mine;" which attorney "would love to
 7   use the damaging email correspondence from FRI’s campaign to
 8   further prosecute election law violations;" that "Mr. Gillam, the
 9   primary contributor to the Pebble Mine campaign, had 'a lot of
10   reasons' why he would not want the FRI emails to be made public;"
11   and that the Kaplans' terms for settlement better "be accepted, or
12   [those] dire consequences . . . would follow."   Many of the
13   arbitrator's findings here were based on an exhibit submitted by
14   RRC, which consisted of a March 4, 2009 email drafted by RRC
15   attorney, Tung Khuu, reflecting his contemporaneous notes as to
16   what happened earlier that day in a settlement negotiating meeting
17   with Allan and Debtor/FRI.   This exhibit has been referred to as
18   "Exhibit X" and was offered in support of Appellees' motion for
19   summary judgment.   The arbitrator's findings made in Order #2 were
20   later incorporated into the final award.
21             e.   The final arbitration award
22        The arbitrator issued his Final Award ("Arbitration Award")
23   on January 6, 2012, just after Debtor filed his bankruptcy case.
24   In support of his decision that RRC had proven claims for
25   (1) conversion, (2) misappropriation of trade secrets and (3)
26   unjust enrichment, the arbitrator found that RRC's donor lists,
27   email listings and bank information were trade secrets and were
28   specifically discussed with Debtor as highly confidential

                                     -10-
 1   information by Jameson.   When Debtor sold the proprietary
 2   information of his clients, he breached his fiduciary duties and
 3   the duty of loyalty inherent in his Consulting Agreement, which
 4   duties continued after the contract termination.    The arbitrator
 5   rejected FRI's argument that the confidentiality clause in its
 6   Consulting Agreement provided confidentiality only to documents
 7   "marked confidential" by the client.
 8        In addition, the arbitrator found that Debtor committed
 9   perjury in the arbitration on at least three material topics;
10   Allan was intentionally untruthful in his testimony with respect
11   to one topic.   Specifically, the arbitrator found that Debtor on
12   behalf of FRI and Allan were each intentionally untruthful in
13   their hearing testimony and depositions regarding their reasons
14   for contacting attorneys Amodio and Singer and the purpose for
15   meeting them.   Both asserted that their purpose was to seek legal
16   representation for the arbitration.    Debtor, on behalf of FRI,
17   continued to so assert even with respect to the March 1, 2009
18   meeting, after the Alaskan attorneys had already made it clear in
19   February that neither of their firms would do so.
20        The arbitrator found that not only should Debtor, advised by
21   his attorney brother Allan, know that sharing documents with
22   counsel for clients adverse to FRI's former clients was not a
23   report to the proper authorities, but Debtor persisted to the
24   point of committing perjury in the falsehood that he had contacted
25   Amodio and Singer for representation in the arbitration and
26   engaged in privileged discussions with them.   Thus, found the
27   arbitrator, the purpose of the meetings was not to consult counsel
28   for representation in the arbitration, but rather to pursue

                                     -11-
 1   Debtor’s threats to expose Gillam and the arbitration respondents
 2   to public and regulatory review and attempt extortion in ongoing
 3   settlement talks.
 4        The arbitrator found that Debtor had also committed perjury
 5   in testifying he was "surprised" at being listed as a consultant
 6   for Singer and the Pebble parties in the APOC Complaint.   Debtor
 7   on behalf of FRI had received, modified, returned and signed an
 8   engagement letter to act in precisely that capacity and had so
 9   acted by spending several hours reviewing the documents with
10   Singer.   The arbitrator found that this evidence supported
11   respondents' defense of unclean hands and also established their
12   causes of action for breach of fiduciary duty, interference with
13   prospective economic advantage and unjust enrichment.
14        Damages were assessed against FRI as follows:   the arbitrator
15   awarded RRC (1) $50,000 for unjust enrichment (the amount FRI
16   received for its misappropriation of RRC's confidential
17   documents), (2) the $3,169 RRC spent in attorney's fees to redact
18   documents in trying to salvage confidentiality after they were
19   delivered to APOC, (3) $386,330 for a lost grant caused by the
20   impact of the APOC Complaint and public investigation, as reported
21   in the Alaska press and other public communications, and
22   (4) $156,804 for attorney's fees and $32,704 for expenses incurred
23   in the arbitration as a prevailing party enforcing the terms of
24   the Consulting Agreement; Hackney was awarded (1) $1,011,681.68
25   for lost clients and revenues "resulting from the APOC Complaint
26   with its FRI documents" and $56,120.30 for the attorney's fees
27   incurred in responding to the APOC investigation (for total
28   compensatory damages of $1,070,301.98), and (2) $675,758.76 for

                                     -12-
 1   attorney's fees and $69,768.77 for expenses incurred in the
 2   arbitration as a prevailing party enforcing the terms of the
 3   Consulting Agreement.
 4           The arbitrator also awarded RRC and Hackney each $1,000,000
 5   for punitive damages, "arising from the tort causes of action, and
 6   perjury of FRI/Kaplan."       Thus, RRC was awarded a total of
 7   $1,628,977; Hackney was awarded a total of $2,815,829.51.         These
 8   amounts were doubled per the Consulting Agreement when FRI failed
 9   to pay within 30 days.
10           FRI's efforts to vacate the Arbitration Award failed.      The
11   federal district court confirmed the Arbitration Award on July 31,
12   2012.       The Arbitration Award is final.
13   B.      Postpetition events
14           Debtor filed his chapter 7 bankruptcy case on December 9,
15   2011.       He listed his 100% ownership interest in FRI in his
16   Schedule B with a value of $0.       He also listed FRI's debts owed to
17   RRC and Hackney in his Schedule F.
18           Appellees filed their first amended complaint ("FAC") against
19   Debtor on July 31, 2012, seeking to except the Arbitration Award
20   debt from discharge under § 523(a)(4) – for defalcation while
21   acting in a fiduciary capacity – and § 523(a)(6).8      Debtor's
22   answer denied generally Appellees' allegations.
23
24
25
26
27
             8
             The original complaint for these same claims was filed on
28   March 19, 2012.

                                         -13-
 1        1.   Appellees' motion for summary judgment and Debtor's
               cross-motion for summary judgment9
 2
               a.      The initial briefing on the cross-motions
 3
          Appellees moved for summary judgment on their § 523(a)(4) and
 4
     (a)(6) claims on April 15, 2013, on the basis of issue preclusion,
 5
     contending that Debtor was precluded from relitigating the
 6
     arbitrator's findings ("MSJ").     Appellees contended that privity —
 7
     an element for purposes of issue preclusion — was the basis for
 8
     which the bankruptcy court could impose personal liability for the
 9
     Arbitration Award on Debtor.
10
          Even though Appellees had pleaded in the FAC a claim under
11
     § 523(a)(4) based on Debtor's alleged defalcation, they now argued
12
     that the Arbitration Award established a § 523(a)(4) claim for
13
     embezzlement.10    Appellees contended the following findings by the
14
     arbitrator supported their claims:
15
     •    that Debtor actively identified, sought out and expressly
16        induced the Alaska lawyers for his clients' opponents to
          purchase the confidential documents for use against his
17        clients;
18   •    that Debtor had demonstrated awareness that the documents
          were proprietary and that his acts were wrongful by the
19        extraordinary lengths to which he and his brother went to
          avoid detection of the fact that they had transferred those
20        documents to those opponents at all. Such efforts included:
21
22
          9
             The parties filed no less than 25 briefs in connection
23   with their cross-motions for summary judgment, Appellees' motion
     for leave to amend the FAC and Debtor's motion to dismiss
24   Appellees' second amended complaint. We focus on those issues
     still relevant to this appeal.
25
          10
             Appellees conceded that a fund-raiser/client relationship
26   might not rise to a level of a formal fiduciary relationship
     needed to support a finding of "defalcation while acting in a
27   fiduciary capacity." Embezzlement, on the other hand, does not
     require a fiduciary relationship between the parties. Bullock v.
28   BankChampaign, N.A., 133 S. Ct. 1754, 1760 (2013).

                                       -14-
 1        •    setting up a bogus claim to attorney-client privilege to
               shield the transfer, by including in the discussions an
 2             illogical request that Alaskan lawyers represent FRI in
               an arbitration in Los Angeles under California law;
 3
          •    falsely testifying that they contacted those Alaskan
 4             attorneys solely for the purpose of obtaining such
               representation, or a contribution to their fight against
 5             now-common opponents;
 6        •    meeting those lawyers surreptitiously, without FRI's
               clients’ knowledge or permission, and transferring the
 7             client documents to them for $50,000; and
 8        •    falsely testifying (i) that Debtor never transferred the
               documents to the clients’ opponents, (ii) that they had
 9             no knowledge how those documents came to appear as
               exhibits to the APOC Complaint, and (iii) that Debtor
10             had never agreed to become a consultant for the Pebble
               parties.
11
12   Appellees contended the awards for attorney's fees and expenses
13   and punitive damages were also excepted from discharge.11
14        Debtor opposed the MSJ.   He disputed Appellees' privity
15   argument as a means to hold him personally liable for the
16   Arbitration Award.   Alternatively, Appellees had not pleaded a
17   claim for embezzlement in the FAC, but rather for defalcation.
18   Thus, argued Debtor, they could not have summary judgment on an
19   unpleaded claim.   Debtor's statement of genuine issues filed in
20   support of his opposition did not respond to Appellees' forty-
21   three proffered uncontroverted facts as required under Local Rule
22   7056-1(b)(2), but rather raised thirty separate issues of his own
23   that he believed were in dispute.
24        In reply, Appellees noted that none of their forty-three
25
26        11
             Appellees conceded that only the single award of damages
     of $4,444,806.51 was nondischargeable as opposed to the doubled
27   amount of $8,889,613.02, since the doubling was the result of
     FRI's nonpayment within 30 days as required under the Consulting
28   Agreement and not the result of Debtor's tortious conduct.

                                     -15-
 1   proffered uncontroverted facts had been disputed by Debtor.        As
 2   for embezzlement, Appellees argued they had pleaded all of the
 3   facts on which they now based their embezzlement claim in the
 4   original complaint and FAC, even though they had not specifically
 5   alleged that the facts showed "embezzlement" under the alternative
 6   ground set forth in § 523(a)(4).    Appellees argued, under the rule
 7   of notice pleading, that the same alleged facts could constitute
 8   embezzlement would not have been a surprise to Debtor's
 9   experienced bankruptcy counsel.
10        At the first hearing on the MSJ, the bankruptcy court decided
11   to defer ruling on it and to grant Debtor's request for more time
12   for limited discovery, considering the large dollar amount being
13   sought against him and the parties' dispute regarding privity and
14   the applicability of issue preclusion.
15        After taking further discovery (depositions of Hackney,
16   Gillam and Jameson), Debtor filed his own motion for summary
17   judgment and statement of uncontroverted facts containing
18   112 proffered facts ("Cross-MSJ").       Debtor contended he was
19   entitled to summary judgment on Appellees' claim under § 523(a)(4)
20   for defalcation in a fiduciary capacity, a legal theory which
21   Appellees were no longer pursuing.       Debtor contended he was also
22   entitled to summary judgment on Appellees' § 523(a)(6) claim;
23   Appellees had provided no evidence that it was Debtor's specific
24   intention to cause the harms alleged by Appellees.      At best,
25   argued Debtor, the arbitrator's findings established only a
26   deliberate act of turning over documents which eventually led to
27
28

                                       -16-
 1   the APOC Complaint which "allegedly"12 harmed RRC and Hackney's
 2   business.   Debtor also contended he was entitled to summary
 3   judgment because no Appellee could identify any actions by Debtor
 4   that caused them harm and no evidence existed to support recovery.
 5   At minimum, Debtor contended he was entitled to summary judgment
 6   on all claims as to Hackney because Hackney's deposition testimony
 7   demonstrated that the dischargeability action was proceeding
 8   without his knowledge or involvement.
 9        Appellees opposed the Cross-MSJ, responding to each of
10   Debtor's 112 proffered uncontroverted facts.    Appellees argued
11   that Hackney's involvement, or lack thereof, in the
12   dischargeability action did not matter; his underlying claims
13   against Debtor at issue had already been litigated to a final
14   judgment.   As for Debtor's assertion that no Appellee could
15   identify any actions by Debtor that caused them harm, the action
16   by Debtor — selling his clients' documents to his clients'
17   opponents for use against them for $50,000 — had been litigated,
18   adjudicated, found to have happened, and confirmed in a final
19   judgment.   Moreover, much evidence existed to support Appellees'
20   claims:   the same evidence that was submitted in the arbitration.
21   Nonetheless, Debtor was still stating, under oath, things already
22   found to constitute perjury by him, or that were opposite of what
23   the evidence showed and what was adjudicated:   (1) that he only
24   contacted the Alaskan attorneys for representation in the
25
          12
             Debtor continues to use the words "alleged" or "allegedly"
26   throughout his brief on appeal. However, with respect to findings
     made by the arbitrator, those findings are no longer "alleged" but
27   proven and are final and cannot now be disputed. Neither can
     Debtor dispute the uncontroverted facts established in the summary
28   judgment proceeding before the bankruptcy court.

                                     -17-
 1   arbitration; (2) that he never served as a consultant for Singer
 2   or the Pebble parties; and (3) that he never released documents
 3   designated as confidential.     Appellees contended that Debtor was
 4   not entitled to summary judgment on either claim in the FAC,
 5   because the evidence clearly established both claims, particularly
 6   Debtor's intent to injure.
 7           In reply, Debtor disputed that issue preclusion applied:
 8   (1) the issues in the two proceedings were different; (2) the
 9   issues presented here were not actually litigated or necessarily
10   decided in the arbitration; and (3) Debtor was not in privity with
11   FRI.
12                b.   "Seven question" briefing for the cross-motions and
                       hearing
13
14           During the proceedings on the cross-motions, the bankruptcy
15   court posed seven questions to the parties and directed further
16   briefing on them before ruling.     Those briefs were filed.
17           A hearing on the seven questions was held on February 19,
18   2014.    There, the bankruptcy court raised the issue of Debtor's
19   failure to respond to Appellees' forty-three proffered
20   uncontroverted facts.     The court and counsel for the parties then
21   proceeded to review all forty-three proffered facts and determine
22   which ones Debtor disputed.     Subject to some amendments made on
23   the record by Debtor's counsel (e.g., reference to acts by Debtor
24   were reworded to read "Debtor on behalf of FRI" and some facts
25   were reworded to say "the arbitrator found" as opposed to any
26   admission by Debtor), the parties agreed and the court determined
27   that forty-two of Appellees' forty-three proffered facts were
28

                                       -18-
 1   undisputed.13    (The court later deemed the forty-third fact also
 2   undisputed.).    Ultimately, the court decided that further briefing
 3   was necessary on the cross-motions based on the now uncontroverted
 4   facts.
 5               c.   Briefing for the cross-motions based on joint
                      uncontroverted facts
 6
 7        The parties filed their Joint Uncontroverted Facts ("JUF")
 8   for the cross-motions as agreed at the February 19 hearing.
 9   Curiously, the JUF contained a disclaimer by Debtor stating that
10   he did not agree with any of Appellees' forty-three proffered
11   facts and was reserving his right to dispute them with contrary
12   evidence.    The parties then filed four more briefs for the cross-
13   motions based on the JUF.    One major point of contention was
14   whether Debtor could or could not be found personally liable for
15   the Arbitration Award debt through either the doctrine of alter-
16   ego or privity, or both, or neither.
17               d.   Crawford briefing
18        The bankruptcy court held another hearing on September 23,
19   2014, after the JUF briefs were filed.    In response to Debtor's
20   counsel's comment that Debtor was reserving his right to present
21   contrary evidence to the JUF, as stated in the JUF, the court
22   stated that it had already ruled that the facts in the JUF were
23   undisputed at the February 19, 2014 hearing.    The court then
24   ordered further briefing based on Crawford v. Gould, 56 F.3d 1162,
25   1168 (9th Cir. 1995), which Debtor argued prevented the court from
26   granting summary judgment to Appellees on their embezzlement claim
27
          13
             Debtor's 112 proffered uncontroverted facts were deemed
28   undisputed at a later hearing on September 23, 2014.

                                      -19-
 1   under § 523(a)(4), when no allegations of embezzlement were
 2   pleaded in the FAC.
 3            In their opening Crawford brief, Appellees argued that the
 4   case was distinguishable, but in any event suggested they could
 5   seek leave to amend under Civil Rule 15(a) to add the embezzlement
 6   claim.    Appellees announced their intent to move to amend the FAC,
 7   which could be heard before the final hearing on the cross-motions
 8   scheduled in February 2015.
 9        2.      Appellees' motion for leave to amend the FAC
10        Appellees moved to amend the FAC under Civil Rule 15(a)(2) on
11   December 8, 2014, to add what they contended was the legal theory
12   of embezzlement under § 523(a)(4), which was related to the same
13   facts already pleaded.     Appellees attached a copy of the proposed
14   second amended complaint ("SAC").
15        Debtor opposed the motion for leave, arguing that it was
16   impermissible in the Ninth Circuit to amend a complaint while a
17   motion for summary judgment is pending.     In addition, Appellees
18   waiting 28 months before seeking leave to amend the FAC for a
19   claim which they knew about constituted undue delay.        Debtor
20   argued he would be unduly prejudiced by Appellees amending at this
21   late date; adding new claims would necessitate reopening
22   discovery, which had closed 18 months ago, the filing of an answer
23   and the revision of his Cross-MSJ to address the new grounds of
24   the SAC, all of which would create more expense and delay.
25        In reply, Appellees argued that no "bright-line" rule existed
26   in the Ninth Circuit that no amendments can be made to a complaint
27   once a motion for summary judgment has been filed.     Appellees
28   further argued that no undue prejudice existed because the parties

                                       -20-
 1   had already litigated the test for embezzlement in their
 2   cross-motions, and the claim was first raised before Debtor had
 3   requested further time for discovery.     In any event, no further
 4   discovery was needed because the asserted claim for embezzlement
 5   arose from the same exact transaction alleged to have constituted
 6   a "defalcation in a fiduciary capacity."     In short, Appellees
 7   argued that given the nature of the specification Debtor demanded
 8   for the embezzlement claim and the extent to which the claim had
 9   already been litigated, it was more efficient to give Debtor the
10   more specific pleading he insisted upon and remove that ground for
11   objection or appeal going forward.
12        Determining that under Ninth Circuit authority it had
13   discretion to grant leave to amend even with a summary judgment
14   motion pending, the bankruptcy court granted Appellees' motion to
15   amend their § 523(a)(4) claim for embezzlement.    Debtor's counsel
16   indicated that a new answer would be filed within 15 days.    To
17   give Debtor time to file anything else he felt necessary based on
18   the SAC, the hearing on the cross-motions was continued to March
19   5, 2015.14    An amended order granting leave to amend was entered on
20   January 14, 2015.
21        3.      Debtor's motion to dismiss the SAC
22        Rather than filing an answer, Debtor moved to dismiss the SAC
23   ("MTD").     He contended the amendments made in the SAC exceeded the
24   leave granted by the court.     Appellees were allowed to amend only
25   the embezzlement claim, yet they amended the § 523(a)(6) claim as
26
27        14
             On March 4, 2015, the bankruptcy court entered a tentative
     ruling stating that it would decide the pending MSJ, Cross-MSJ and
28   MTD on the briefs. As a result, the final hearing was vacated.

                                       -21-
 1   well.        Second, the claims in the SAC were time barred.15   Finally,
 2   Debtor argued that Appellees had failed to present sufficient
 3   facts to establish embezzlement.
 4           Appellees opposed the MTD, contending the allegations in the
 5   SAC did not go beyond assertions made in the FAC and in the MSJ.
 6           4.      More briefing on the cross-motions based on the SAC
 7           Meanwhile, the parties filed supplemental briefing for the
 8   cross-motions based on the SAC.        Debtor made the following
 9   arguments:        (1) that the MSJ was now moot because it was based on
10   the FAC, which was now moot due to Appellees' filing of the SAC;
11   (2) that the SAC raised issues on which Debtor had not been
12   permitted to take discovery; (3) that Appellees failed to provide
13   sufficient uncontroverted facts to establish either a § 523(a)(4)
14   or (a)(6) claim; (4) that Appellees had failed to show that issue
15   preclusion, particularly privity, applied to the Arbitration
16   Award; (5) that even if the MSJ could proceed and established a
17   viable theory for summary judgment, Appellees’ damages were
18   limited to $50,000, the amount awarded for misappropriation of
19   trade secrets.
20           Appellees argued that while some courts have held that
21   amending a complaint "ordinarily" moots a motion for summary
22   judgment noticed on the prior operative complaint, "ordinarily"
23   does not mean "necessarily."        Debtor had not cited any case that
24   provides an absolute bar to a court's consideration of a summary
25   judgment motion after an amended complaint has been filed.         As for
26
27           15
             The bankruptcy court ruled against Debtor on the statute
     of limitations argument. Debtor does not dispute that ruling on
28   appeal.

                                          -22-
 1   additional discovery, Debtor had never identified any specific
 2   discovery he would need to undertake despite being given several
 3   opportunities to do so.
 4           After the bankruptcy court took the MSJ, Cross-MSJ and MTD
 5   under submission, the parties filed seven additional briefs.
 6           5.   Bankruptcy court's ruling on the MSJ, Cross-MSJ and MTD
 7           The bankruptcy court entered its Memorandum Decision, Order
 8   and Judgment respecting the MSJ, Cross-MSJ and MTD on April 1,
 9   2016.    As a threshold matter, the court ruled that Appellees' MSJ
10   did not become moot because of the filing of the SAC.
11           Next, the court determined that issue preclusion applied to
12   the Arbitration Award, ruling that Debtor was in privity with FRI,
13   and that the arbitrator's findings combined with the
14   uncontroverted facts established the elements for Appellees' claim
15   for embezzlement under § 523(a)(4) and claim for a willful and
16   malicious injury under § 523(a)(6).      The court further determined
17   that because damages under the Arbitration Award were based on
18   Debtor's malicious and fraudulent conduct, the amounts awarded to
19   RRC and Hackney representing actual damages, including punitives,
20   but not the doubled amounts due to late payment, were
21   nondischargeable under § 523(a)(4) and (a)(6).
22           Accordingly, because Appellees were entitled to summary
23   judgment as a matter of law, Debtor's Cross-MSJ was denied.
24   Because the SAC pleaded sufficient facts upon which relief for
25   embezzlement could be granted, the court also denied Debtor's MTD.
26   An exception to discharge judgment was entered in favor of RRC for
27   $1,628,977.00 and in favor of Hackney for $2,815,829.51.     This
28   timely appeal followed.

                                       -23-
 1                              II. JURISDICTION
 2          The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
 3   and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C. § 158.16
 4                                III. ISSUES
 5   1.     Did the bankruptcy court abuse its discretion in granting
 6   Appellees leave to amend the FAC to include the embezzlement
 7   claim?
 8   2.     Did the bankruptcy court err in determining that issue
 9   preclusion was available, and did it abuse its discretion in
10   applying it to the Arbitration Award?
11   3.     Did the bankruptcy court err in granting summary judgment to
12   Appellees determining that the debt was excepted from discharge
13   under § 523(a)(4) and (a)(6)?
14   4.     Did the bankruptcy court err in denying the Cross-MSJ or the
15   MTD?
16                          IV. STANDARDS OF REVIEW
17          We review for abuse of discretion the bankruptcy court’s
18
19        16
             Debtor also appeals the bankruptcy court's decision to
     deny his Cross-MSJ and his MTD. The Panel lacks jurisdiction to
20   hear appeals from interlocutory orders, such as an order denying a
     motion to dismiss an adversary proceeding, Morrison-Knudsen Co.,
21   Inc. v. CHG Int’l, Inc., 811 F.2d 1209, 1214 (9th Cir. 1987), and
     an order denying a motion for summary judgment, Comsource Indep.
22   Foodservice Cos., Inc. v. Union Pac. R.R. Co., 102 F.3d 438,
     441-42 (9th Cir. 1996). However, because the bankruptcy court
23   decided these matters conclusively in its Memorandum Decision,
     Order and Judgment, the interlocutory orders denying the Cross-MSJ
24   and MTD merged into the final appealable order granting the MSJ.
     The Panel may review on appeal all earlier interlocutory orders
25   that merge in the final appealed order. Fear v. U.S. Tr.
     (In re Ruiz), 541 B.R. 892, 895 n.7 (9th Cir. BAP 2015). See also
26   Am. Ironworks & Erectors Inc. v. N. Am. Constr. Corp., 248 F.3d
     892, 897-98 (9th Cir. 2001) ("A necessary corollary to the final
27   judgment rule is that a party may appeal interlocutory orders
     after entry of final judgment because those orders merge into that
28   final judgment.").

                                      -24-
 1   decision whether to grant leave to amend the complaint.      See
 2   Zadrozny v. Bank of N.Y. Mellon, 720 F.3d 1163, 1167 (9th Cir.
 3   2013); Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir.
 4   1990).
 5           We review summary judgment determinations de novo.   See
 6   Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125
 7   (9th Cir. 2014); Shahrestani v. Alazzeh (In re Alazzeh), 509 B.R.
 8   689, 692-93 (9th Cir. BAP 2014).    In reviewing a bankruptcy
 9   court's determination of an exception to discharge, we review its
10   findings of fact for clear error and its conclusions of law de
11   novo.    Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th
12   Cir. BAP 2009).
13           We review de novo the preclusive effect of a judgment;
14   whether issue preclusion is available is a mixed question of law
15   and fact.    Stephens v. Bigelow (In re Bigelow), 271 B.R. 178, 183
16   (9th Cir. BAP 2001).     If issue preclusion is available, the
17   bankruptcy court's decision to apply it is reviewed for abuse of
18   discretion.    Lopez v. Emergency Serv. Restoration, Inc.
19   (In re Lopez), 367 B.R. 99, 104 (9th Cir. BAP 2007).      Under that
20   standard, we reverse where the bankruptcy court applied an
21   incorrect legal rule or where its application of the law to the
22   facts was illogical, implausible or without support in inferences
23   that may be drawn from the record.       Ahanchian v. Xenon Pictures,
24   Inc., 624 F.3d 1253, 1258 (9th Cir. 2010) (citing United States v.
25   Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).
26                                V. DISCUSSION
27           Resolution of this appeal requires the Panel to apply several
28   legal standards to the bankruptcy court's decision:      summary

                                       -25-
 1   judgment, issue preclusion and exception to discharge under
 2   § 523(a)(4) and (a)(6).   In particular, we must determine if the
 3   Arbitration Award is entitled to preclusive effect and, if so,
 4   whether any disputed material facts remained which prevented the
 5   bankruptcy court from granting summary judgment to Appellees for
 6   an exception to discharge under either § 523(a)(4) or (a)(6).
 7   A.   Even if the bankruptcy court had not granted leave to amend
          the FAC to include the embezzlement claim, Appellees were
 8        entitled to summary judgment on their § 523(a)(6) claim.
 9        Debtor contends the bankruptcy court should have denied leave
10   to amend the FAC because the MSJ and Cross-MSJ had been pending
11   for years and that the liberal amendment rules were not intended
12   to allow a party to circumvent the effects of summary judgment by
13   amending the complaint, citing Acri v. International Association
14   of Machinists & Aerospace Workers, 595 F. Supp. 326, 334 (N.D.
15   Cal. 1984).   Debtor also cites Ninth Circuit authority, where the
16   court has expressed that a pending summary judgment motion and
17   completed discovery weigh heavily against allowing leave to amend.
18   M/V Am. Queen v. San Diego Marine Constr. Corp., 708 F.2d 1483,
19   1492 (9th Cir. 1983); Schlacter-Jones v. Gen. Tel. of Cal.,
20   936 F.2d 435, 443 (9th Cir. 1991), overruled on other grounds by
21   Cramer v. Consol. Freightways, Inc., 255 F.3d 683, 692 (9th Cir.
22   2001).
23        We disagree with Debtor.   The Ninth Circuit has affirmatively
24   held that amendments for the purpose of adding new claims are
25   clearly permitted by Civil Rule 15 and may be introduced and
26   considered during the pendency of a motion for summary judgment.
27   William Inglis & Sons Baking Co. v. ITT Cont'l Baking Co.,
28   668 F.2d 1014, 1053 n.68 (9th Cir. 1981) (citing 6 Moore's Federal

                                     -26-
 1   Practice ¶ 56.10 (2d ed. 1976)).   However, we need not reach the
 2   merits of the bankruptcy court's decision to grant leave to amend
 3   the FAC to include the embezzlement claim, because the FAC
 4   supported Appellees' claim for a willful and malicious injury
 5   under § 523(a)(6).17   As we are not reaching the merits on the
 6   bankruptcy court’s decision to grant leave to amend the FAC, we
 7   are also not reaching the merits of its decision respecting the
 8   § 523(a)(4) claim, even though sufficient facts and conclusions by
 9   the court exist in the record to satisfy the elements of an
10   embezzlement claim.
11
     B.   The bankruptcy court did not err in determining that issue
12        preclusion was available or abuse its discretion in applying
          it to the Arbitration Award.
13
          1.   Issue preclusion standards
14
          The doctrine of issue preclusion applies to dischargeability
15
     proceedings under § 523(a).   Grogan v. Garner, 498 U.S. 279, 284
16
     n.11 (1991).   The question of whether California or federal issue
17
     preclusion law applied to the Arbitration Award was a subject of
18
     much debate because the award, although based entirely on state
19
20
          17
             We reject Debtor's argument that he was denied the
21   opportunity to file an answer to the SAC. Debtor chose instead to
     file the MTD. We also reject Debtor's contention that the
22   bankruptcy court erred in granting the MSJ because the MSJ was
     rendered moot by the filing of the SAC, citing Mink v. Suthers,
23   482 F.3d 1244, 1254 (10th Cir. 2007), and other out-of-circuit
     cases. The bankruptcy court rejected this argument as "hyper-
24   technical" and "lack[ing] legal support." Mem. Dec. at 10.
     Specifically, the court noted that Debtor had not cited, nor had
25   the court found, any binding authority that required, as a per se
     rule, the court to treat Appellees' MSJ as moot because of the
26   filing of the SAC. Id. at 9. In any event, once the SAC was
     filed, the parties engaged in further briefing and filed no less
27   than nine briefs for the cross-motions based on the SAC. Thus,
     Debtor had more than sufficient opportunity to brief his defenses
28   to Appellees' claims, whether based on the FAC or SAC.

                                     -27-
 1   law claims, had been affirmed by a federal district court
 2   conducted under diversity jurisdiction.   Ultimately, the
 3   bankruptcy court decided that California law applied; we agree.
 4        In California, issue preclusion prevents parties from
 5   relitigating issues already decided in prior proceedings.    Lucido
 6   v. Super. Ct., 51 Cal. 3d 335, 341 (1990).   Application of issue
 7   preclusion requires that:   (1) the issue sought to be precluded
 8   must be identical to that decided in the former proceeding;
 9   (2) the issue must have been actually litigated in the former
10   proceeding; (3) the issue must have been necessarily decided in
11   the former proceeding; (4) the decision in the former proceeding
12   must be final and on the merits; and (5) the party against whom
13   issue preclusion is sought must be the same as, or in privity
14   with, the party to the former proceeding.    Harmon v. Kobrin
15   (In re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001) (citing
16   Lucido, 51 Cal. 3d at 341).   The party asserting preclusion bears
17   the burden of establishing the threshold requirements.   Id.
18        Even if all five requirements are satisfied, however,
19   California places an additional limitation on issue preclusion:
20   courts may give preclusive effect to a judgment if it would be
21   fair and consistent with sound public policy to impose issue
22   preclusion in the particular setting.   Khaligh v. Hadaegh
23   (In re Khaligh), 338 B.R. 817, 824-25 (9th Cir. BAP 2006).      Under
24   this sixth element, when applying issue preclusion based on a
25   confirmed arbitration award, the court must examine "whether the
26   underlying arbitration followed basic elements of adjudicatory
27   procedure and was, thus, 'adjudicatory in nature.'"   Id. at 828
28   (quoting Kelly v. Vons Cos., 67 Cal. App. 4th 1329, 1336 (1998)).

                                     -28-
 1   Finally, in the case where issue preclusion is applied offensively
 2   to preclude a defendant from relitigating an issue the defendant
 3   previously litigated and lost, the courts consider whether the
 4   party against whom the earlier decision is asserted had a "full
 5   and fair" opportunity to litigate the issue.   Roos v. Red,
 6   130 Cal. App. 4th 870, 879 (2005).
 7        2.   Analysis
 8        Debtor does not challenge that the confirmed Arbitration
 9   Award was final and on the merits, or that the issues were
10   necessarily decided in the arbitration proceeding.   He takes issue
11   primarily with the bankruptcy court's finding of privity, the
12   identity of issues, whether the issues were actually litigated and
13   whether the court's application of issue preclusion was fair and
14   consistent with public policy.
15             a.   Whether the arbitration proceeding was adjudicatory
                    in nature
16
17        As a threshold matter, the bankruptcy court considered
18   whether the arbitration proceeding was sufficiently adjudicatory
19   in nature for issue preclusion to apply to the Arbitration Award —
20   part of the sixth element under California law.   After thoroughly
21   analyzing the issue, which was not raised by the parties, the
22   court determined that the arbitration proceeding was sufficiently
23   adjudicatory in nature to give issue preclusive effect to the
24   arbitrator's findings, assuming the other five elements of issue
25   preclusion were also satisfied.
26        On appeal, Debtor contends the bankruptcy court erred in
27   determining that the arbitration proceeding was sufficiently
28   adjudicatory in nature to give issue preclusive effect to the

                                       -29-
 1   arbitrator's findings for a variety of reasons:   (1) it was not a
 2   judicial-like proceeding; (2) the court failed to consider whether
 3   the burdens of proof applied by the arbitrator to the claims in
 4   arbitration were identical to standards for § 523; (3) the
 5   arbitrator did not apply any legal rules to the facts in making
 6   his determinations on the various claims at issue; and (4) the
 7   arbitrator made sua sponte determinations of conversion and
 8   misappropriation.   Except for the last issue, Debtor never raised
 9   any of these arguments before the bankruptcy court in his
10   multitude of briefs opposing the MSJ.   Therefore, we will not
11   address them on appeal.   See Ezra v. Seror (In re Ezra), 537 B.R.
12   924, 932 (9th Cir. BAP 2015) ("Ordinarily, federal appellate
13   courts will not consider issues not properly raised in the trial
14   courts.").
15        As for the arbitrator's "sua sponte" determination that the
16   facts established claims for conversion and misappropriation of
17   trade secrets, those claims were raised by Appellees in their
18   closing briefs in the arbitration and opposed by Debtor in his
19   unsuccessful efforts to vacate the Arbitration Award.   But more
20   importantly, Debtor's challenges to the underlying determinations
21   made by the arbitrator, which he makes frequently throughout his
22   appeal brief, come too late and before the wrong court.   See
23   Molina v. Seror (In re Molina), 228 B.R. 248, 250 (9th Cir. BAP
24   1998) (confirmation of an arbitration award is a final judgment,
25   even if clearly erroneous, and must be given full faith and credit
26   by federal courts).   Accordingly, for this and the reasons set
27   forth in the Memorandum Decision, the bankruptcy court did not err
28   in finding that the arbitration proceeding was sufficiently

                                     -30-
 1   adjudicatory in nature for issue preclusion to apply to the
 2   Arbitration Award.
 3               b.   Whether Debtor was in privity with FRI and whether
                      Debtor had a full and fair opportunity to litigate
 4
 5          Under California law, in the claim and issue preclusion
 6   context, "privity" refers:
 7          [T]o a mutual or successive relationship to the same
            rights of property, or to such an identification in
 8          interest of one person with another as to represent the
            same legal rights and, more recently, to a relationship
 9          between the party to be estopped and the unsuccessful
            party in the prior litigation which is “sufficiently
10          close” so as to justify application of the doctrine of
            collateral estoppel. “This requirement of identity of
11          parties or privity is a requirement of due process of
            law.” “Due process requires that the nonparty have had an
12          identity or community of interest with, and adequate
            representation by, the . . . party in the first action.
13          The circumstances must also have been such that the
            nonparty should reasonably have expected to be bound by
14          the prior adjudication . . . .”
15   Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Ass'n,
16   60 Cal. App. 4th 1053, 1069-70 (1998) (internal citations
17   omitted).
18          The bankruptcy court found that Debtor was in privity with
19   FRI.    Based on the undisputed facts, the court found that at the
20   time of FRI’s retention under the Consulting Agreement and
21   throughout the arbitration proceeding, Debtor had a sufficiently
22   close relationship with FRI, because he was the president, sole
23   shareholder and sole employee of FRI.    In addition, Debtor worked
24   from his home to carry out FRI’s business and offered no evidence
25   in arbitration that he maintained any corporate formalities.
26   Moreover, as a due process matter, the bankruptcy court found that
27   Debtor, who had counsel throughout the proceeding (in fact, his
28   own brother), should reasonably have expected to be bound by the

                                      -31-
 1   Arbitration Award.    First, Appellees had brought intentional tort
 2   claims against FRI.   Second, under California law, corporate
 3   officers are liable to persons they tortiously injure even though
 4   the corporation may be liable, and an officer is not relieved of
 5   personal liability for misappropriating property of another merely
 6   because he or she did it on behalf of his or her corporate
 7   principal.
 8        As further support for finding Debtor was in privity with
 9   FRI, which somewhat overlaps with the fairness and public policy
10   considerations found in element six because Debtor was a nonparty
11   to the arbitration,18 the bankruptcy court found that Debtor had a
12   full and fair opportunity to litigate in the arbitration.    The
13   arbitration proceeding was conducted in a judicial-like adversary
14   proceeding before a retired judge that featured at least seven
15   status conferences, motions in limine, taking of testimony of
16   witnesses (including Debtor) with cross-examination, a briefing
17   schedule for written closing arguments, the submission of
18   deposition transcripts, a twenty-six page final award that
19   included detailed findings of fact and conclusions of law, and
20   citations to witness testimony under oath.   Further, nothing in
21   the record suggested that Debtor had no incentive to vigorously
22   litigate the issues in the prior action.   To the contrary, it was
23   Debtor, through FRI, who initiated the arbitration proceeding.
24
          18
             See Nein v. HostPro, Inc., 174 Cal. App. 4th 833, 846
25   (2009) (nonparty should reasonably be expected to be bound if he
     had in reality contested the prior action even if he did not make
26   a formal appearance, for example, by controlling it; privity
     appertains "against one who did not actually appear in the prior
27   action . . . where the unsuccessful party in the first action
     might fairly be treated as acting in a representative capacity for
28   a nonparty").

                                      -32-
 1   Moreover, Debtor had an opportunity to defend his interests and
 2   had consented to the arbitration through his wholly owned entity,
 3   FRI.   Finally, the court found that even though Debtor was a
 4   non-party as a matter of form, he was a signatory party as a
 5   matter of substance; no one besides Debtor and his attorney were
 6   present at the arbitration proceeding on FRI’s behalf.
 7          Debtor first contends that the bankruptcy court's decision
 8   that he was in privity with FRI is wrong because (1) the court
 9   relied exclusively on facts derived from the Arbitration Award to
10   find privity, and (2) reliance on the Arbitration Award is
11   insufficient because the arbitrator declined to make any finding
12   of alter-ego, and so Debtor's relationship to FRI was neither
13   litigated nor established in the arbitration.   Debtor's blatant
14   misrepresentation of the record is alarming.    The bankruptcy court
15   did not rely exclusively on facts derived from the Arbitration
16   Award to find privity (which are final in any event); it relied
17   almost entirely on the uncontroverted facts to determine privity,
18   which were supported by Debtor's deposition, his resume and his
19   bankruptcy schedules.   Secondly, Debtor's relationship to FRI did
20   not have to be litigated or established in the arbitration for the
21   bankruptcy court to determine whether privity applied to Debtor in
22   this proceeding.
23          In arguing that the bankruptcy court failed adequately to
24   consider due process, Debtor contends he did not have, and should
25   not have had, any expectation whatsoever to be bound by the
26   Arbitration Award; he was not a party to the Consulting Agreement,
27   and the arbitrator refused to hold him personally liable for the
28   Arbitration Award against FRI without a litigated finding of

                                      -33-
 1   alter-ego.        The standard is not whether Debtor had any expectation
 2   to be bound by the Arbitration Award, but rather whether he had a
 3   reasonable expectation to be bound.         The bankruptcy court's
 4   findings as to Debtor's incentive to litigate on behalf of FRI and
 5   his control over that litigation, which we do not find clearly
 6   erroneous, belie Debtor's argument.         Further, Debtor is
 7   sophisticated enough to know that he cannot commit intentional
 8   torts and perjury behind the shield of his corporation without
 9   encountering adverse consequences.          His reasonable expectation to
10   be bound by the Arbitration Award is also evidenced by his
11   immediate bankruptcy filing after the arbitration had concluded
12   and the fact that he listed the Arbitration Award debt in his
13   bankruptcy schedules.        Finally, as noted above, a finding of
14   alter-ego was not needed in this proceeding to find Debtor
15   personally liable for the Arbitration Award like it was in the
16   arbitration proceeding.
17        Accordingly, the bankruptcy court did not clearly err in
18   finding that Debtor was in privity with FRI.
19                c.     Whether the issues are identical
20        "The 'identical issue' requirement addresses whether
21   'identical factual allegations' are at stake in the two
22   proceedings, not whether the ultimate issues or dispositions are
23   the same."        Lucido, 51 Cal. 3d at 342 (citing People v. Sims,
24   32 Cal. 3d 468, 485 (1982)).        To determine whether issues in prior
25   and subsequent proceedings are identical for purposes of applying
26   issue preclusion, a court examines whether the requirements for
27   proving the issue at stake in the subsequent proceeding "closely
28   mirror" requirements of proving issues presented in the prior

                                          -34-
 1   action.   See Nourbakhsh v. Gayden (In re Nourbakhsh), 162 B.R.
 2   841, 844 (9th Cir. BAP 1994).
 3        Debtor raises a host of arguments here, but his primary
 4   complaint is that the issues in the adversary proceeding were not
 5   identical to those in the arbitration, and the arbitrator did not
 6   make any express findings of Debtor's intent, fraud or malice to
 7   provide a basis for the bankruptcy court's determination that the
 8   issues in the arbitration were identical to those in the adversary
 9   proceeding.    We disagree.
10        The bankruptcy court determined that the Arbitration Award
11   included factual findings that were identical to the elements
12   required to establish willful and malicious injury under
13   § 523(a)(6).   First, the award and uncontroverted facts
14   established that Debtor made multiple implied threats to Appellees
15   about revealing the confidential documents.   The court determined
16   that this factual finding, combined with other undisputed facts
17   proving that Debtor later sold those confidential documents to
18   Singer, demonstrated that Debtor had a "subjective motive to
19   inflict injury" to Appellees, which was identical to the issue of
20   whether Debtor acted willfully.    The court further determined that
21   the Debtor's act of misappropriating FRI's former clients'
22   documents, which was the causal event that contributed to the loss
23   of grant funds of $386,300 by RRC and the $1,070.301.68 in lost
24   revenues to Hackney, was identical to the issue of whether
25   Debtor's wrongful and intentional act necessarily caused injury to
26   Appellees.
27        Here, Debtor argues that in determining whether the issue of
28   his willfulness was identical to the issues in the arbitration,

                                       -35-
 1   the bankruptcy court pointed only to uncontroverted fact 21, which
 2   concerned Debtor's "alleged" email threats about revealing
 3   confidential RRC documents and was based exclusively on the self-
 4   serving Exhibit X — the email between counsel for Appellees.     Not
 5   only does Debtor fail to state why this was erroneous if true, it
 6   is not true.   In determining that Debtor's willfulness was at
 7   issue in the arbitration, the bankruptcy court relied not only on
 8   uncontroverted fact 21, but also on the other undisputed fact that
 9   Debtor later sold the confidential documents to Singer, which
10   confirmed Debtor's subjective intent to injure Appellees in the
11   precise way he did.   In addition, Debtor fails to mention his
12   October 1 and October 30 emails to Appellees, wherein he made
13   similar threats to expose his former clients' confidential
14   documents to their opponents.
15        Accordingly, we see no clear error in the bankruptcy court's
16   finding that the issues were identical.   While the causes of
17   actions alleged may have been different in the arbitration — not
18   willful and malicious injury — the factual allegations respecting
19   Debtor's conduct were identical.
20             d.   Whether the issues were actually litigated
21        An issue is "actually litigated" when the issue was raised,
22   actually submitted for determination, and determined.   Baker v.
23   Hull, 191 Cal. App. 3d 221, 226 (1987).   The bankruptcy court
24   found that based on the Arbitration Award’s detailed findings of
25   fact as to Debtor's conduct (whether his misappropriation of RRC's
26   confidential documents and subsequent perjury about that conduct
27   constituted embezzlement or inflicted a willful and malicious
28   injury on Appellees) and the other arbitration proceeding

                                     -36-
 1   documents presented by the parties, the issues were actually
 2   litigated in the prior proceeding.
 3        Debtor contends that nothing in the record demonstrates that
 4   the required elements for embezzlement or willful and malicious
 5   injury were ever considered, applied or actually litigated.    In
 6   addition, Debtor contends that his intent or fraud was not
 7   litigated in the arbitration.
 8        The elements of a state law cause of action are rarely
 9   identical to those proving a claim under § 523(a)(4) or (a)(6).
10   However, issue preclusion will apply if the findings of fact
11   actually and necessarily litigated in the arbitration meet the
12   bankruptcy-law definitions for those claims.   The bankruptcy court
13   determined that the arbitrator's findings met the bankruptcy-law
14   definitions for willful and malicious injury, as stated more fully
15   above, which we conclude is correct.   Thus, the bankruptcy court
16   did not err in determining that the identical issues were actually
17   litigated in the prior proceeding.
18        Therefore, because all of the necessary elements for applying
19   issue preclusion to the Arbitration Award were met here, the
20   bankruptcy court did not err in determining that issue preclusion
21   was applicable to the Arbitration Award.
22   C.   The bankruptcy court did not err in granting summary judgment
          to Appellees for their claim under § 523(a)(6).
23
24        1.   Summary judgment standards
25        Summary judgment may be granted by the trial court "if the
26   pleadings, the discovery and disclosure materials on file, and any
27   affidavits show that there is no genuine issue as to any material
28   fact and that the movant is entitled to judgment as a matter of

                                     -37-
 1   law."    Civil Rule 56(a), as incorporated by Rule 7056; Barboza v.
 2   New Form, Inc. (In re Barboza), 545 F.3d 702, 707 (9th Cir. 2008).
 3   Summary judgment should not be entered when there are disputes
 4   over facts that may affect the outcome of the suit under the
 5   governing law.     Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
 6   (1986).    The moving party bears the initial burden of showing that
 7   no material factual dispute exists.      Celotex Corp. v. Catrett,
 8   477 U.S. 317, 322-23 (1986).     When ruling on a motion for summary
 9   judgment, a court must view all the evidence in the light most
10   favorable to the nonmoving party.     Cty. of Tuolumne v. Sonora
11   Cmty. Hosp., 236 F.3d 1148, 1154 (9th Cir. 2001).
12                2.   The elements for a willful and malicious injury
                       under § 523(a)(6) were met.
13
14           Section 523(a)(6) excepts from discharge debts "for willful
15   and malicious injury by the debtor to another entity or to the
16   property of another entity."     Both willfulness and maliciousness
17   must be proven in order to apply § 523(a)(6).     Ormsby v. First Am.
18   Title Co. of Nev. (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir.
19   2010).    "A 'willful' injury is a 'deliberate or intentional
20   injury, not merely a deliberate or intentional act that leads to
21   injury.'"     In re Barboza, 545 F.3d at 706 (quoting Kawaauhau v.
22   Geiger, 523 U.S. 57, 61 (1998) (emphasis in original)).      The
23   willful injury requirement under § 523(a)(6) "is met only when the
24   debtor has a subjective motive to inflict injury or when the
25   debtor believes that injury is substantially certain to result
26   from his own conduct."     In re Ormsby, 591 F.3d at 1206.   "A
27   malicious injury involves (1) a wrongful act, (2) done
28   intentionally, (3) which necessarily causes injury, and (4) is

                                       -38-
 1   done without just cause or excuse.      Malice may be inferred based
 2   on the nature of the wrongful act."     Id. at 1207.
 3        Debtor's primary contention here is that his intent was not
 4   litigated or determined in the arbitration, and Appellees had
 5   failed to present any evidence of Debtor's intent here or in the
 6   arbitration.   Apparently, Debtor needs to review the record and
 7   the uncontroverted facts.
 8        The undisputed facts established that Debtor made various
 9   threats implying he would reveal RRC's documents if Appellees
10   refused to settle his fee dispute arising from the Consulting
11   Agreement to his satisfaction.   On March 1, 2009, Debtor sold
12   various RRC documents, including donor lists, bank account
13   information and contact lists to Singer.     In sum, Debtor
14   threatened RRC with harm in an attempt to coerce RRC to pay him,
15   and then carried through on his threats when Appellees did not
16   cooperate.   On these facts, the bankruptcy court determined that
17   Debtor acted willfully within the meaning of § 523(a)(6) because
18   he had a "subjective motive to inflict injury."     Mem. Dec. at 28.
19        The undisputed facts showed that:     (1) Debtor was provided
20   with the documents during his retention by RRC to enable him to
21   perform his contractual duties; (2) Jameson had specifically
22   discussed with Debtor that the subject documents were highly
23   confidential; (3) RRC designated its membership and donor
24   information as confidential to staff and on its website; (4) FRI
25   had contracted with RRC to keep the documents in confidence and to
26   use the documents only in connection with the services to be
27   provided under the contract; (5) Debtor, as a professional
28   political consultant, considered himself ethically bound to not

                                      -39-
 1   reveal confidential information obtained during his professional
 2   relationship; and (6) despite all of the foregoing, Debtor sold
 3   the confidential documents for $50,000 to Singer, who then used
 4   those confidential documents in the APOC Complaint against RRC,
 5   Hackney, Gilliam and others.   On these facts, the bankruptcy court
 6   determined that Debtor's act was wrongful.   Mem. Dec. at 29.
 7        The undisputed facts showed that Debtor's act of selling the
 8   confidential documents to Singer was done intentionally.    Debtor
 9   made threats implying he would reveal RRC’s information and that
10   if his terms for settlement were not accepted, dire consequences
11   would follow.    On these facts, the bankruptcy court found that
12   Debtor's wrongful act was intentional.
13        The undisputed facts further showed that Debtor's act of
14   selling the confidential documents to Singer necessarily caused
15   injury.   The arbitrator found an "inescapable inference" that the
16   APOC Complaint, which incorporated the confidential documents and
17   public investigation, was a causal event that contributed to the
18   cancellation of $386,300 in grant funds to RRC and loss of clients
19   and revenues to Hackney, for which the arbitrator awarded
20   $1,070,301.68.   In addition, the record reflects that the prior
21   APOC complaint Amodio filed against Appellees was unsuccessful,
22   and that the second one resulted in an investigation of Appellees
23   only because of the confidential RRC documents Debtor sold to
24   Singer.   Accordingly, the bankruptcy court found that Debtor's act
25   necessarily caused injury to Appellees.
26        Finally, the bankruptcy court determined that Debtor's act of
27   selling FRI's former clients’ confidential documents to their
28   political opponents for use against them was done without just

                                      -40-
 1   cause or excuse.     Although Debtor portrayed himself as an
 2   altruistic whistle blower in the arbitration, the arbitrator found
 3   that Debtor and his attorney brother Allan should have known that
 4   sharing documents with counsel for clients adverse to FRI's former
 5   clients was not a report to the proper authorities, and certainly
 6   not for a fee of $50,000 (although Debtor wanted $450,000).     The
 7   bankruptcy court also found that Debtor's perjury regarding his
 8   act of selling the documents evidenced that he himself did not
 9   believe he had a just cause or excuse for doing so.
10        In short, Debtor sold his former clients’ confidential
11   materials to their Pebble Mine opponents, and he did so to help
12   the Pebble Mine parties in their efforts to take out Appellees in
13   their role as the organized opposition to the Pebble Mine.     Debtor
14   articulated that plan both in written communications to Appellees
15   and to the Alaska attorneys representing the Pebble parties,
16   thereby documenting his intent to injure Appellees in precisely
17   that manner.     He then repeatedly testified, falsely, that he had
18   never transferred those materials at all.     Clearly, the undisputed
19   facts show that Debtor inflicted a willful and malicious injury on
20   Appellees.
21        Accordingly, with no genuine issues of material fact in
22   dispute and the elements satisfied, the bankruptcy court did not
23   err in granting summary judgment to Appellees on their § 523(a)(6)
24   claim.    We now consider whether the damages awarded were
25   appropriate.
26        3.      The bankruptcy court did not err in determining that all
                  damages awarded to Appellees in the Arbitration Award
27                were nondischargeable.
28        The bankruptcy court determined that all of the damages the

                                       -41-
 1   arbitrator awarded to RRC and Hackney, including punitive damages,
 2   were nondischargeable under § 523(a)(4) and (a)(6), because they
 3   flowed from Debtor's malicious and fraudulent conduct, which had
 4   been actually litigated and was necessary to the Arbitration
 5   Award.
 6        To recap, the arbitrator awarded RRC:   (1) the $50,000 FRI
 7   received for its misappropriation of RRC's confidential documents;
 8   (2) $3,169 RRC spent in attorney's fees to redact documents in
 9   trying to salvage confidentiality after they were delivered to
10   APOC; (3) $386,330 for a lost grant caused by the impact of the
11   APOC Complaint and public investigation; and (4) $156,804 for
12   attorney's fees and $32,704 for expenses incurred in the
13   arbitration as a prevailing party on the Consulting Agreement.
14   Hackney was awarded:   (1) $1,011,681.68 for lost clients and
15   revenues "resulting from the APOC Complaint with its FRI
16   documents" and $56,120.30 for the attorney's fees incurred in
17   responding to the APOC investigation; and (2) $675,758.76 for
18   attorney's fees and $69,768.77 for expenses incurred in the
19   arbitration as a prevailing party on the Consulting Agreement.
20        It is clear by the arbitrator's findings that the course of
21   misconduct by Debtor — his selling of RRC confidential documents
22   which resulted in the APOC Complaint and investigation and his
23   lying about his actions — was the direct cause of Appellees'
24   actual damages.   Thus, these damages are nondischargeable.   Cohen
25   v. de la Cruz, 523 U.S. 213, 220 (1998).   Likewise, the attorney's
26   fees and expenses awarded to RRC and Hackney for the arbitration
27   proceeding, which were awardable based on the Consulting
28

                                     -42-
 1   Agreement, are part of the nondischargeable debt.19    Id. at 223.
 2   Cohen stands for the general proposition that any liability duly
 3   imposed as a direct, but-for result of the defendant's
 4   nondischargeable conduct constitutes a nondischargeable debt,
 5   including attorney's fees and costs.   See also Suarez v. Barrett
 6   (In re Suarez), 400 B.R. 732, 738-39 (9th Cir. BAP 2009) (applying
 7   Cohen to affirm bankruptcy court's determination under § 523(a)(6)
 8   that attorney's fees and costs were nondischargeable, even though
 9   no compensatory damages were awarded); Roussos v. Michaelides
10   (In re Roussos), 251 B.R. 86, 94 (9th Cir. BAP 2000) (attorney's
11   fees and costs, if awardable under state law, are also part of the
12   nondischargeable debt).
13        The arbitrator also awarded RRC and Hackney each $1,000,000
14   for punitive damages, "arising from the tort causes of action, and
15   perjury of FRI/Kaplan."   For an award of punitive damages in
16   California under Cal. Civ. Code § 3294(a),20 clear and convincing
17   evidence of either malice, oppression or fraud must be presented.
18   Debtor contends the Arbitration Award is devoid of any express
19   findings of malice, oppression or fraud, and none of these were
20
21
          19
             The attorney's fees clause in the Consulting   Agreement is
22   very broad, to include an award of fees and costs to   the
     prevailing party not only for proceedings to enforce   or interpret
23   the contract, but also "to resolve any other dispute   or
     controversy between the Parties[.]"
24
          20
               Cal. Civ. Code § 3294(a) provides:
25
          In an action for the breach of an obligation not arising from
26        contract, where it is proven by clear and convincing evidence
          that the defendant has been guilty of oppression, fraud, or
27        malice, the plaintiff, in addition to the actual damages, may
          recover damages for the sake of example and by way of
28        punishing the defendant.

                                     -43-
 1   elements of any claims determined in the award.    In Plyam v.
 2   Precision Development, LLC (In re Plyam), 530 B.R. 456, 470 (9th
 3   Cir. BAP 2015), we acknowledged that a question may arise when
 4   issue preclusion is based solely on a California punitive damages
 5   award and the basis for the award is unclear.    Here, however, we
 6   have no such concerns.   The arbitrator based the award on
 7   nondischargeable tort claims.    His findings make clear that
 8   Debtor's actions were intentional and not merely reckless or
 9   negligent.   Thus, we can infer that he based the punitive damages
10   award on malice or fraud of the type that supports section
11   523(a)(6) nondischargeability.    In re Molina, 228 B.R. at 250-51
12   (if legal test for award of punitive damages for malice,
13   oppression or fraud is the same legal test as would be applied
14   under § 523(a)(6), then punitive damages are given preclusive
15   effect).
16        Accordingly, the bankruptcy court did not err in giving
17   preclusive effect to the Arbitration Award damages and determining
18   that all were nondischargeable.
19   D.   The bankruptcy court did not err in denying the Cross-MSJ or
          the MTD.
20
21        Because we conclude that Appellees were entitled to summary
22   judgment as a matter of law on their § 523(a)(6) claim for a
23   willful and malicious injury, we conclude that Debtor was not
24   entitled to summary judgment.    Alternatively, even if the
25   bankruptcy court abused its discretion in allowing Appellees to
26   amend the FAC, which we conclude it did not, their claim under
27   § 523(a)(6) would stand even with the FAC as the operative
28   complaint.   Thus, it would still have been proper for the court to

                                       -44-
 1   deny Debtor's Cross-MSJ on that claim.   Along this same vein,
 2   because the SAC alleged a plausible and timely claim for exception
 3   to discharge under § 523(a)(6), the court did not err in denying
 4   the MTD.
 5                             VI. CONCLUSION
 6        For the foregoing reasons, we AFFIRM the judgment entered
 7   under § 523(a)(6), and conclude that given this affirmance, it is
 8   unnecessary to reach the merits on the other issues.
 9
10
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12
13
14
15
16
17
18
19
20
21
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28

                                    -45-