167 E. William LLC v. Thomas Spielbauer ( 2019 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS NOV 8 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 18-15630
In the Matter of: THOMAS SPIELBAUER,
____________________________________ D.C. No. 5:17-cv-03071-BLF
167 E. WILLIAM LLC,
MEMORANDUM*
Plaintiff-Appellee,
v.
THOMAS SPIELBAUER,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of California
Beth Labson Freeman, District Judge, Presiding
Submitted October 21, 2019**
San Francisco, California
Before: BYBEE and N.R. SMITH, Circuit Judges, and MENDOZA,*** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Salvador Mendoza, Jr., United States District Judge for
the Eastern District of Washington, sitting by designation.
1
Thomas Spielbauer appeals the district court’s order affirming the bankruptcy
court’s judgment in favor of 167 E. William LLC. The bankruptcy court determined,
in granting summary judgment, that the monetary award Spielbauer owes the LLC
under a California trial court judgment is not dischargeable under 11 U.S.C.
§ 523(a)(6) because it is a debt for willful and malicious injury. We have jurisdiction
under 28 U.S.C. § 158(d)(1), and we affirm.
The LLC satisfies all three requirements for standing in bankruptcy court: it
is a party in interest under the Bankruptcy Code, meets Article III’s standing
requirements, and does not implicate prudential standing concerns set forth in case
law. See Hughes v. Tower Park Props., LLC (In re Tower Park Props., LLC), 803
F.3d 450, 456 (9th Cir. 2015).
The LLC has a claim against Spielbauer by virtue of the state court judgment
it obtained against him. See 11 U.S.C. § 101(5)(A). This liability, specifically the
monetary award provided in the judgment, constitutes a debt Spielbauer owes the
LLC. See id. § 101(12). Therefore, the LLC is Spielbauer’s creditor. See id.
§ 101(10)(A). As such, the LLC is a party in interest to Spielbauer’s bankruptcy. See
id. § 1109(b). Under the Bankruptcy Code, the LLC may raise any issue pertaining
to its claim, including whether Spielbauer’s debt is dischargeable. See id.
§§ 523(c)(1), 1109(b); see also Fed. R. Bankr. P. 4007(a).
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Similarly, as Spielbauer’s creditor, the LLC satisfies all three of Article III’s
standing requirements. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016);
Sherman v. SEC (In re Sherman), 491 F.3d 948, 965 (9th Cir. 2007). The LLC
suffered an injury in fact because the pendency of the bankruptcy action affects its
ability to enforce the state court judgment in its favor and poses a risk that the debt
might be discharged. See Sherman, 491 F.3d at 965. The LLC’s injury is fairly
traceable to Spielbauer’s filing of the bankruptcy petition because such conduct
makes it likely that the debt will not be fully paid. See id. And it is likely, as opposed
to merely speculative, that the LLC’s injury will be redressed by a favorable
decision, as such a result would mean that the debt would not be discharged. See id.
In sum, the LLC has Article III standing to seek a determination that the debt
Spielbauer owes it under the state court judgment is nondischargeable. Spielbauer’s
argument that the LLC did not satisfy Article III’s standing requirements in the
California trial court is irrelevant. See ASARCO Inc. v. Kadish, 490 U.S. 605, 617
(1989).
Finally, the LLC, by seeking a determination that the debt Spielbauer owes it
under the state court judgment is nondischargeable, has not implicated the three
broad principles of prudential standing. See Lexmark Int’l, Inc. v. Static Control
Components, Inc., 572 U.S. 118, 126 (2014). The LLC is raising its own legal right
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to payment under state law, is not raising a generalized grievance, and is within the
zone of interests protected by the Bankruptcy Code.
Under California law, issue preclusion principles prevent Spielbauer from
relitigating the state court factual finding that he committed fraud. See Ormsby v.
First Am. Title Co. of Nev. (In re Ormsby), 591 F.3d 1199, 1205 n.3 (9th Cir. 2010);
Samara v. Matar, 419 P.3d 924, 926 (Cal. 2018). The state court judgment is a final
adjudication on the merits. It involves an issue identical to the issue raised in the
bankruptcy court: whether Spielbauer committed fraud by intentionally
misrepresenting a material fact known to him with the intention of injuring the LLC.
That issue was actually litigated and necessarily decided by both the California trial
and appellate courts; it did not evade review.1 And the LLC asserted issue preclusion
against the same defendant from the state court litigation, Spielbauer. Moreover, the
public policies underlying issue preclusion—preserving the judicial system’s
integrity, promoting judicial economy, and protecting litigants from vexatious
litigation—support applying issue preclusion here. See Harmon v. Kobrin (In re
Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001); Lucido v. Superior Court, 795 P.2d
1
The state trial court found by clear and convincing evidence that Spielbauer’s
conduct was fraudulent under California Civil Code section 3294(c)(3), which
defines fraud as “an intentional misrepresentation, deceit, or concealment of a
material fact known to the defendant with the intention on the part of the defendant
of thereby depriving a person of property or legal rights or otherwise causing injury.”
The state appellate court concluded substantial evidence supported this finding.
4 18-15630
1223, 1226–27 (Cal. 1990). Issue preclusion is available here, and the bankruptcy
court did not abuse its discretion in applying it. See Dias v. Elique, 436 F.3d 1125,
1128 (9th Cir. 2006).
The monetary award the LLC obtained against Spielbauer in the state trial
court is, under 11 U.S.C. § 523(a)(6), a nondischargeable debt for the willful and
malicious injury he caused the LLC. Spielbauer committed fraud by intentionally
misrepresenting a material fact known to him with the intention of injuring the LLC.
This qualifies as a deliberate and intentional injury, inflicted with the actual,
subjective motive and intent to cause the injury that flowed as a natural consequence
of the act. See Ormsby, 591 F.3d at 1206. This also qualifies as a malicious injury
because it was a wrongful, intentional act that necessarily caused injury without just
cause or excuse. See id. at 1207. Both elements of nondischargeability are satisfied.
No genuine dispute of material fact exists and the LLC is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56(a); Fed. R. Bankr. P. 7056. The
bankruptcy court did not err in granting summary judgment in favor of the LLC.
We decline to consider Spielbauer’s argument that the state court monetary
award is excessive because he did not present it to either the bankruptcy court or
the district court. See El Paso City v. Am. W. Airlines, Inc. (In re Am. W. Airlines,
Inc.), 217 F.3d 1161, 1165 (9th Cir. 2000).
5 18-15630
We overrule the LLC’s objection to portions of Spielbauer’s excerpts of
record because he cites them in his briefing on the standing issue and they are
minimally relevant. See 9th Cir. R. 30-1.4(a)(xi).
AFFIRMED.
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