Court Opinion

ID: 4096195
Source: CourtListenerOpinion
Date Created: 2016-11-07 22:01:14.696389+00
Date Added: 2024-06-11T07:45:31.388386
License: Public Domain

NOT FOR PUBLICATION                    FILED
                       UNITED STATES COURT OF APPEALS                     NOV 7 2016
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                                  FOR THE NINTH CIRCUIT

 In re: JAMES MARVIN ROTH,                       No.    14-56612

                    Debtor,                      D.C. No.
                                                 3:13-cv-02954-BAS-DHB
 ------------------------------

 ANICE M. PLIKAYTIS,                             MEMORANDUM*

                    Plaintiff-Appellee,

   v.

 JAMES MARVIN ROTH,

                    Defendant-Appellant.

 In re: JAMES MARVIN ROTH,                       No.    14-56700

                    Debtor,                      D.C. No.
                                                 3:14-cv-00011-BAS-DHB
 ------------------------------

 ANICE M. PLIKAYTIS,

                    Plaintiff-Appellant,

   v.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
 JAMES MARVIN ROTH,

                  Defendant-Appellee.

                    Appeal from the United States District Court
                       for the Southern District of California
                    Cynthia A. Bashant, District Judge, Presiding

                       Argued and Submitted October 6, 2016
                               Pasadena, California

Before: PREGERSON, NOONAN, and PAEZ, Circuit Judges.

      The underlying federal case is a Chapter 11 bankruptcy proceeding to except

debts from discharge pursuant to 11 U.S.C. § 523(a). The debt at issue is the

judgment obtained in state court by Appellee/Cross-Appellant Anice Plikaytis

against her former employer Appellant/Cross-Appellee James Roth. Both Roth

and Plikaytis appeal the district court’s decisions affirming various rulings of the

bankruptcy court.

      We have jurisdiction under 28 U.S.C. §§ 1291, 158(d). We review a district

court’s decision on an appeal from a bankruptcy court de novo, with no deference

given to the district court’s decision. In re JTS Corp., 617 F.3d 1102, 1109 (9th

Cir. 2010). We review the bankruptcy court’s conclusions of law de novo and

findings of fact for clear error. Id. We affirm.

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Appeal No. 14-56612

      1. The bankruptcy court did not err in finding that Plikaytis’s claims in her

amended complaint that the state court judgment was nondischargeable under

§ 523(a)(2)(A), (a)(4), and (a)(6) related back to the time of filing of her original

complaint. Plikaytis’s amended complaint contained the same three claims pled in

her original complaint, but with additional factual information. Thus, the

“amendments” regarding these three claims necessarily “assert[] a claim or defense

that arose out of the conduct, transaction, or occurrence set out—or attempted to be

set out—in the original pleading . . . .” Fed. R. Civ. P. 15(c)(1)(B); 6A Charles

Alan Wright et al., Federal Practice and Procedure § 1497 (3d ed. 2016)

(“[A]mendments that do no more than restate the original claim with greater

particularity or amplify the details of the transaction alleged in the preceding

pleading fall within Rule 15(c)(1)(B).”).

      2. The bankruptcy court’s justifiable reliance determination was not clearly

erroneous because there is substantial evidence in the record that Plikaytis

justifiably relied on Roth’s promise, including, most convincingly, the fact that she

and Roth had been business associates for over twenty years. See In re Kirsh, 973

F.2d 1454, 1460 (9th Cir. 1992).

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       3. The bankruptcy court did not err in finding the full $2.8 million state

court breach of contract debt nondischargeable under § 523(a)(2)(A). The

bankruptcy court determined that the breach of contract debt had the additional

characteristic of fraud under § 523(a)(2)(A) and accordingly found the debt

nondischargeable. This was not in error as the state court judgment is the correct

measure of damages because it is the debt arising from the fraud. See Cohen v. De

La Cruz, 523 U.S. 213, 221 (1998) (“[Section] 523(a)(2)(A) is best read to prohibit

the discharge of any liability arising from a debtor’s fraudulent acquisition of

money, property, etc. . . . .”).

       4. The bankruptcy court did not err in finding that Plikaytis’s § 523(a)(4)

claim was within the scope of her pleadings. The bankruptcy pleadings expressly

speak to Roth’s mismanagement of Talmadge East and misappropriation of

Talmadge East funds for personal use. The bankruptcy court found wrongful

defalcation based on Roth’s financial mismanagement of Talmadge East during

2009, which falls within the scope of the pleadings.

       5. The bankruptcy court did not err in failing to consider the 2008-2009

ledgers in calculating the defalcation debt under § 523(a)(4). Roth’s argument

focuses on the bankruptcy court’s statement that the 2008 ledgers were unclear, but

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he ignores a crucial part of the bankruptcy court’s reasoning. The bankruptcy

court also relied solely on the 2009 ledger because it more appropriately reflected

the wrongful conduct that formed the basis of the judgment (i.e., financial

mismanagement during a time of financial crises). We find no fault with this

reasoning.

      6. The bankruptcy court did not err in evaluating whether Roth had

fiduciary capacity under § 523(a)(4). Contrary to Roth’s argument, the bankruptcy

court did not rely on the state court’s fiduciary duty determination in making its

own § 523(a) fiduciary capacity determination. In a pretrial order, the bankruptcy

court decided the issue without reference to the state court’s decision.

      7. The bankruptcy court did not err in finding that the emotional distress

damages were nondischargeable under § 523(a)(6). Intentional infliction of

emotional distress is an independent cause of action and does not rely on an

allocation of damages between dischargeable and nondischargeable debts. The

record supports the bankruptcy court’s finding of willful and malicious intent with

regard to the emotional distress damages, which Roth does not appear to challenge.

Cross-Appeal, No. 14-56700

      1. The bankruptcy court did not err in finding that the $52,000 judgment for

                                          5
“engag[ing] in wrongful conduct through withholding payment of mortgagers in

the name of Anice Plikaytis” was subsumed within the $90,000 judgment for

“breach of fiduciary duties . . . by failing to pay mortgages for units held in the

name of Anice Plikaytis.” The bankruptcy court concluded that because the two

debts arose out of the same conduct, one award subsumed the other. Plikaytis

argues this was error, but cites no case law in support. Because the bankruptcy

court is in the best position “to fashion the remedy best suited to the harm” and “to

determine the appropriate damages,” we affirm. In re Anguiano, 99 B.R. 436, 438

(B.A.P. 9th Cir. 1989) (internal quotation marks omitted).

      2. The bankruptcy court did not err in discharging the punitive damages and

attorneys’ fees debt. The state court jury awarded punitive damages and attorneys’

fees in lump sums, which were applicable to all causes of action. From the verdict

forms and judgment, the bankruptcy court could not decipher whether the

characteristics of § 523(a) had been litigated and decided in state court with regard

to part or all of the punitive damages and attorneys’ fees awards. Therefore,

collateral estoppel could not be applied. Before the bankruptcy court, and on

appeal, Plikaytis failed to present any evidence or argument that the two awards

stemmed from nondischargeable liability. Thus, she has not met her burden to

                                           6
establish nondischargeability.

      3.   Because Plikaytis failed to properly request attorneys’ fees in the

discharge proceedings, the bankruptcy court did not abuse its discretion in refusing

to award attorneys’ fees.

      4. The bankruptcy court did not err in dismissing Plikaytis’s mechanic’s

lien claim. Neither the original complaint, nor the attached state court judgment,

explicitly or implicitly mention the mechanic’s lien claim. Therefore, unlike

Plikaytis’s other claims, this claim was entirely new when presented in the

amended complaint. Moreover, the mechanic’s lien claim did not arise from the

same conduct, transaction, or occurrence set forth in the original complaint.

Accordingly, the bankruptcy court properly concluded that relation back was not

appropriate as to this claim.

      5.   The bankruptcy court’s pretrial order was not an erroneous sua sponte

grant of summary judgment. “At any pretrial conference, the court may consider

and take appropriate action on . . . formulating and simplifying the issues, and

eliminating frivolous claims or defenses . . . .” Fed R. Civ. P. 16(c)(2)(A). As

discussed above, the bankruptcy court properly found that the $52,000 and the

$90,000 awards should not be aggregated. It was within the bankruptcy court’s

                                          7
discretion to simplify and eliminate this issue.

      AFFIRMED.

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