Court Opinion

ID: 9496256
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:21:45.792301+00
Date Added: 2024-06-11T17:57:27.457180
License: Public Domain

CARL E. STEWART, Circuit Judge,
concurring in part, dissenting in part:
One of the pivotal questions before the Court is whether the debt incurred by Williams in the amount of $155,855.39 as a result of his breach of the collective bargaining agreement is nondischargeable under 11 U.S.C. § 523(a)(6). The bankruptcy judge held that the debt was non-dischargeable because it resulted from willful and malicious injury. The majority reverses that determination, finding that the debt is subject to discharge because it does not arise from a willful and malicious injury. For the following reasons, I concur in part and dissent in part with respect to the majority’s determination.1
Prior to determining whether Williams’s breach of the collective bargaining agreement resulted from willful and malicious conduct, the majority was faced with the question of whether a knowing breach of contract, unaccompanied by an independent intentional tort, falls within the exception to discharge under § 523(a)(6). The majority held that a debt arising out a knowing breach of contract is subject to exception to discharge under § 523(a)(6) when the debt results from an intentional or substantially certain injury. I concur in the majority’s holding, which, in my view flows naturally from the language of § 523(a)(6) and this Court’s interpretation of the statute.
Section 523(a)(6) excepts from discharge any debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” In Kawaauhau v. Geiger, the Supreme Court held that a “willful and malicious injury” results from an act done with the actual intent to cause injury.2 523 U.S. 57, 61, 118 S.Ct. *514974, 140 L.Ed.2d 90 (1998). In Texas v. Walker, we stated that an “intent to injure may be established by a showing that the debtor intentionally took action that necessarily caused, or was substantially certain to cause, the injury.” 142 F.3d 813, 823 (5th Cir.1998) (quoting In re Delaney, 97 F.3d 800, 802 (5th Cir.1996)). Thus, if a debtor acts with an actual intent to cause injury, the debt is nondischargeable under § 523(a)(6), notwithstanding that the underlying indebtedness may have derived from a contractual relationship between the parties.
I agree with the majority that the inquiry for determining whether a debt is excepted from discharge should focus on the nature of the conduct — whether the debt arose out a willful and malicious injury— and not on whether the conduct is accompanied by an independent tort.3 This Court’s decision in Walker supports this view. In Walker, the State of Texas brought suit against a university professor for conversion and breach of contract alleging that he improperly retained professional fees in violation of his contract with the university. Although the defendant admitted that he acted intentionally when he kept the professional fees, the district court determined that the fees were dis-chargeable under § 523(a)(6) because it found that “Walker’s retention of his professional fees was an innocent and technical act, rather than a willful and malicious injury.” 142 F.3d at 824. This Court reversed the district court’s determination because it found that an “issue of fact exists regarding whether Walker was aware of his obligations under the contract and nonetheless knowingly kept his professional fees with the intent of depriving the University of money owed to it.” Id. The Court remanded the case with the following instruction: “If a fact finder were to decide that Walker knew of his obligations under the [ ] contract and its by-laws, either at the time he signed the contract or received the November 1990 memorandum, then it might also find that Walker retained his professional fees in violation of the [contract], an act he knew would cause the University injury.” Id. In Walker, this Court focused on the willful and malicious nature of the university professor’s conduct in breaching his contract with the university. Thus, in line with Walker and the plain language of the statute, I concur in the majority’s holding that § 523(a)(6) excepts contractual debts from discharge when those debts result from an intentional or substantially certain injury.
*515I respectfully dissent, however, from the majority’s conclusion that Williams’s intentional breach of the collective bargaining agreement was not substantially certain to cause injury to the Union. The bankruptcy judge found that by breaching the collective bargaining agreement, Williams was substantially certain that he would deprive union electricians of employment opportunities and concomitant benefits. Specifically, the bankruptcy judge stated that “it’s clear through his testimony, Mr. Williams took the action in the fall of ’98 of simply deciding to ignore the contract and not calling the Union hall any more and to use non-Union workers to finish the Union jobs in violation of his contract ... and he did so at a time in which he knew that doing so would deprive Union workers of jobs and benefits and that he knew that would be an injury.” It should be noted that neither party contests the bankruptcy judge’s factual findings. In fact, Williams’s counsel specifically conceded during oral argument that he did not disagree with the bankruptcy judge’s factual findings regarding the injury to the Union. Moreover, Wilhams’s testimony is proof that he was substantially certain that injury would result from his breach of the collective bargaining agreement:
Q. ... by not contacting the Union hall, you knew that electricians would, therefore, not have the opportunity — electricians from the Union Hall would not have the opportunity to work for you.
A. True.
Q. Now, when you ceased — when you decided to cease following the Union contract, you also ceased paying the Union scale. Isn’t that true?
A. Yes.
Q. And you unilaterally set a lower wage scale for most of your hands. Correct?
A. Yes, back to the open shop scale.
Q. All right. And approximately, on the average, how much lower was the wage scale that you began paying when you ceased using the Union contract?
A. Maybe 10 to 12 an hour.
Q. All right. And the Union — under the Union contract, the wage scale for a journeyman was around 20 an hour, wasn’t it?
A. Yes, sir.
Q. And so the electricians that worked for you after you ceased honoring the Union contract were being paid by you 10 to $12 an hour instead of approximately $20 an hour as is called for in the Union contract.
A. Yes ..
Q. Okay. So I want to understand your question. When you stopped following the Union contract you also ceased contributing to the Union pension fund, didn’t you?
A. I had paid everything in as per the agreement while I was using the Union workers.
Q. All right.
A. After that it all ceased, yes.
Q. You ceased paying — all right. And so you knew that — when you ceased using the Union contract and you ceased paying into the Union pension plan you knew that the workers who were working for you would not be accruing any pension benefits under the Union pension plan. You knew that, didn’t you?
A. Yes.
Q. You also ceased contributing to the Union vacation fund. Correct?
A. Yes.
*516Q. And you knew that the workers would therefore no longer be accruing any benefits under that.
A. Yes.
In my view, the bankruptcy judge’s factual findings determine the resolution of this issue. The majority’s attempt to find error in the bankruptcy judge’s factual findings by separating the harm suffered by the union-workers from the Union is completely unpersuasive. In this case, Williams breached the collective bargaining agreement that he entered into with the Union; and, by doing so, he was substantially certain that the Union and its members would be injured. As the bankruptcy judge stated “[Williams] took actions that he knew were wrong, and he knew that there was a substantial certainty that the actions would result in harm to the Union, since he just admitted to the Court that the same thing he had done before that time had [ ] that effect.” Because I conclude that the Union was injured when its members were deprived of employment opportunities and concomitant benefits by Williams hiring of nonunion labor, I would affirm the bankruptcy court’s determination that the $155,855.39 was nondischargeable.

. I also concur in the majority’s determination that the debt arising from Williams's violation of the Agreed Judgment in the amount of $106,911.43 is nondischargeable.

. In Geiger, the Supreme Court, in determining the scope of the willful and malicious injury exception, noted that the § 523(a)(6) "formulation triggers in the lawyer’s mind the category 'intentional torts,’ as distinguished from reckless torts.” 523 U.S. at 61, 118 S.Ct. 974. The Supreme Court further noted that "intentional torts generally require that the actor intend ‘the consequences of an act,' not simply 'the act itself.’ ” Id. at 61-62, 118 S.Ct. 974. The Supreme Court rejected the petitioner’s encompassing interpretation of *514§ 523(a)(6) that would make debts from intentional acts that cause unintended or unanticipated injuries nondischargeable in bankruptcy. Id. The Supreme Court cited "a knowing breach of contract” as an example of conduct that would fall within this category. Thus, section 523(a)(6) has been interpreted as generally applying to intentional torts and not to contracts.

. I should note that this conclusion has been rejected by the Ninth Circuit. In In re Riso, a pre-Geiger decision, the Ninth Circuit held that "a simple breach of contract is not the type of injury addressed by § 523(a)(6)” and that "an intentional breach of contract is excepted from discharge under § 523(a)(6) only when it is accompanied by malicious and willful tortious conduct.” 978 F.2d 1151, 1154 (9th Cir.1992) (emphasis added). In In re Jercich, a post-Geiger decision, the Ninth Circuit again held that "although § 523(a)(6) generally applies to torts rather than to contracts and an intentional breach of contract generally will not give rise to a nondischargeable debt, where an intentional breach of contract is accompanied by tortious conduct which results in willful and malicious injury, the resulting debt is excepted from discharge under § 523(a)(6).” 238 F.3d 1202, 1205 (9th Cir.2001) (emphasis added). In In re Colclazier, the Bankruptcy Court for the Western District of Oklahoma also held that that § 523(a)(6) exempts from discharge only damages from tortious breaches of contract. 134 B.R. 29, 33 (Bankr.W.D.Okl.1991) (emphasis added).