Hanson v. Cassidy (In re Cassidy) (Case No. 18-60196, A.P. No. 18-06010) 01/10/2019
The Court found that an assault claim was properly excepted from discharge because the Virginia elements for the tort of assault lined up with the elements for the exception to discharge under 11 U.S.C. § 523(a)(6).
This adversary proceeding arose from a state law claim in circuit court based on a longstanding dispute between two neighbors, Ms. Pat Hanson and Mr. Steven Cassidy, in Madison County, Virginia. Ms. Hanson filed suit against Mr. Cassidy in circuit court in June 2008 seeking $100,000 in damages based on assault, insulting and abusive words, and intentional infliction of emotional distress (IIED). The litigation lasted several years and ultimately, Ms. Hanson was granted partial summary judgment on two of her claims: assault and intentional infliction of emotional distress. The judgment was memorialized in a Circuit Court Consent Order that established liability on behalf of Mr. Cassidy for the two claims. The damage issue was tried before a jury in November of 2017. Because the jury’s award of $500,000 exceeded the amount demanded in the complaint, the Circuit Court judge remitted the award to either $100,000 or $200,000. Before the Circuit Court could enter an award on damages, Mr. Cassidy filed for chapter 7.
Ms. Hanson filed a complaint to determine the dischargeability of her debt through an adversary proceeding, and then filed a motion for summary judgment. Ms. Hanson based her complaint on the assertion that the debt is excepted from discharge because the elements under 11 U.S.C. § 523(a)(6) mirror the elements of a cause of action for assault and IIED in Virginia, which were incorporated in the Circuit Court Consent Order. Because the parties agreed to liability in the Circuit Court Consent Order, Ms. Hanson argued that collateral estoppel prevented Mr. Cassidy from now denying liability. On the other hand, Mr. Cassidy argued that the state court did not issue a final order because the amount of damages was not finalized so the matter was not fully litigated. Thus, Mr. Cassidy proffered that collateral estoppel did not apply. Moreover, Mr. Cassidy argued that the state court did not address whether his action was “malicious” and therefore the question of whether the debt arose from “malicious conduct intended to cause injury” could not have been litigated.
The Court found that collateral estoppel indeed applied because the five elements were met. The parties to the proceedings were the same because the plaintiff from the state court action was the same in this action, Ms. Hanson, and likewise Mr. Cassidy was the same defendant. The prior proceeding resulted in a final judgment because liability was already finalized and Mr. Cassidy did not show how he could have disputed the Circuit Court Consent Order merely because the judge had not yet ruled on the amount of damages. For the third element, the factual issue to be precluded must actually have been litigated in the prior action. The Court found that because a long line of cases interpreted “willful and malicious” for the purposes of section 523(a)(6) to refer to actions that cause injury without just cause or excuse, then the Circuit Court Consent order that faulted Mr. Cassidy for the tort of assault indeed met this element because the Virginia law of assault merely requires an overt act committed with the intent to place the victim in fear or apprehension of harm (similar to the case law definition of willful and malicious). Further, just because the order is a consent order does not preclude the fact that it was actually litigated. Fourth, the factual issue to be precluded must have been essential to the prior judgment. In this case, the intent of placing a victim in fear or apprehension of bodily harm was essential to the state court judgment. Lastly, mutuality was present because the party invoking estoppel, Mr. Cassidy, would have been bound had the prior litigation reached the opposite result. Accordingly, the Court granted Ms. Hanson’s motion for summary judgment to except her debt from Mr. Cassidy’s discharge because the elements of 523(a)(6) closely lined up with the Virginia law elements of assault. Moreover, collateral estoppel prevented Mr. Cassidy from challenging the dischargeability of the debt owed to Ms. Hanson.