KSB

Judge Somers

08-05023 Wolfe Electric, Inc. v. Duckworth (Doc. # 43) - Document Text

Case 08-05023 Doc# 43 Filed 05/07/09

SO ORDERED.
SIGNED this 07 day of May, 2009.


Page 1 of 19

Dale L. Somers
UNITED STATES BANKRUPTCY JUDGE

Opinion Designated for Electronic Use, But Not for Print Publication
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In Re:

TERRY J. DUCKWORTH,
DEBTOR.

WOLFE ELECTRIC, INC.,
PLAINTIFF,

v.
TERRY J. DUCKWORTH,
DEFENDANT.

CASE NO. 07-12686-7
CHAPTER 7

ADV. NO. 08-5023

OPINION DENYING BOTH PLAINTIFF’S AND DEFENDANT-DEBTOR’S
MOTIONS FOR SUMMARY JUDGMENT


This dischargeability proceeding is before the Court on opposing motions for


Case 08-05023 Doc# 43 Filed 05/07/09 Page 2 of 19


summary judgment. Plaintiff Wolfe Electric, Inc., appears by counsel Karl R. Swartz and
Ryan M. Peck. Defendant-Debtor Terry J. Duckworth appears by counsel Edward J.
Nazar and Nicholas R. Grillot. The Court has reviewed the relevant materials and is now
ready to rule.

The Plaintiff seeks a summary judgment determining that, through the alleged
issue preclusion or collateral estoppel effect of a state court jury verdict and judgment
entered before the Debtor filed for bankruptcy, its claim against the Debtor is excepted
from discharge under 11 U.S.C.A. § 523(a)(6) as a debt based on willful and malicious
injury caused by his misappropriation of its trade secrets. The Debtor bases his motion on
the alleged claim preclusion or res judicata effect of the same jury verdict and judgment.
As explained below, the Court concludes that both motions must be denied.
FACTS

Although the parties attempt to raise some factual disputes, the facts necessary for
the Court to resolve their motions are not disputed.

The Plaintiff manufactures and sells conveyor pizza ovens. The Debtor served as
its president from May 2004 until March 2005, when he either quit or was fired,
depending on whose story is believed. Less than six months later, the Debtor was a part
owner of a newly-formed company making competing conveyor pizza ovens. The
Plaintiff sued him and the new company, asserting claims for breach of contract and
breach of fiduciary duties, as well as for misappropriation of trade secrets. In December
2006, a jury found in favor of the Plaintiff, awarding damages on all three claims.

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In its motion for summary judgment, the Plaintiff mistakenly described the jury
verdict as having awarded it $325,000 in damages on each of its claims against the
Debtor. However, the Plaintiff later corrected that description1 and effectively modified
the extent of its summary judgment motion. As relevant here, the jury verdict form
submitted to the Court shows the jury was presented with Questions A through F (each
with multiple subparts) concerning the three claims against the Debtor. Question A asked
the jury to determine whether the Debtor had breached his contract with the Plaintiff. If
they answered that question “Yes” (and they did), Question B asked them to determine
the damages caused by the breach. The jury fixed various items of damages caused by
the breach of contract in amounts that add up to $275,000. One of the items of damage
was “Loss of trade secrets and confidential business information,” and the jury awarded
$50,000 for this item. Question C asked the jury to determine whether the Debtor had
breached fiduciary duties to the Plaintiff. If they answered that question “Yes” (and they
did), Question D asked them to determine the damages caused by those breaches. The
possible items of damages were identical to those listed in Question B, and the jury fixed
exactly the same amounts in Question D as they did in Question B. Question E asked the
jury to determine whether the Debtor and the new company he had helped form
misappropriated trade secrets belonging to the Plaintiff. If they answered that question
“Yes” (and they did), Question F asked them to determine the damages caused by the

1See Docket # 39, Plaintiff Wolfe Electric, Inc.’s Memorandum in Opposition to Defendant Terry

J. Duckworth’s Motion for Summary Judgment, at 10, n. 1.
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misappropriation. Responding to that question, the jury decided the Debtor had caused
$50,000 in damages to the Plaintiff, and his new company had caused damages in the
same amount. On a separate claim against the Debtor’s new company for tortious
interference with existing contractual relations, the jury found in favor of the Plaintiff and
awarded damages of $225,000. The trial court entered judgment against the Debtor for
$325,000 and against his company for $275,000.

Later, at a hearing on the Plaintiff’s motion for an injunction and other relief, the
trial court awarded the Plaintiff attorney fees under K.S.A. 60-3323. The trial court said:
I will find based on the evidence that was presented at trial that under the
Kansas Trade Secrets Act that there was a willful and malicious conduct done by
[the Debtor]. And vicariously by [his company]. I say the worst culprit of those
obviously was [the Debtor], but the wink and nod analogy given by [the Plaintiff’s
attorney], is probably most appropriate to [his company]. They knew the restraint
[the Debtor] was under. They...circumvented and knowingly tried to go around
and violate those contract provisions in the Trade Secrets Acts and similar matters,
so I will find that willful and malicious conduct occurred on parts of both of the

defendants [the Debtor] and [his company].2
In September 2007, the court signed a journal entry awarding the fees and granting an
injunction. The journal entry stated, “the evidence establishes that [the Debtor and his
company] willfully and maliciously misappropriated Plaintiff’s trade secrets,” and then
awarded $140,122.06 in attorney fees “pursuant to K.S.A. § 60-3323(iii).”

On November 8, 2007, the Debtor appealed and, a year later, his appeal was
transferred to the Kansas Supreme Court on that court’s motion, where the appeal is now

2Docket # 30, Memorandum in Support of Defendant’s Motion for Summary Judgment, Ex. G,
(Partial transcript of July 6, 2007, hearing in state court on Plaintiff’s Motion for Attorney Fees, at 14:16
to 15:3).

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pending.

The Debtor filed a Chapter 7 bankruptcy petition on November 1, 2007. The
Plaintiff timely filed the complaint that initiated this proceeding, contending its judgment
is excepted from discharge under § 523(a)(6). Both parties have now moved for summary
judgment.
DISCUSSION

1. Summary judgment rules
Under the applicable rules of procedure, the Court is to grant summary judgment if
the moving party demonstrates that there is “no genuine issue of material fact” and that
the party “is entitled to a judgment as a matter of law.”3 The substantive law identifies
which facts are material.4 A dispute over a material fact is genuine when the evidence is
such that a reasonable factfinder could resolve the dispute in favor of the party opposing
the motion.5 In adjudicating disputes, bankruptcy courts usually both determine the law
and find the facts. In deciding a summary judgment motion, though, the Court is limited
to its role of deciding legal questions, not weighing the evidence and resolving factual
disputes, but merely determining whether the evidence favorable to the non-moving party
about a material fact is sufficient to require a trial6 at which the Court would act in its

3Fed. R. Civil P. 56(c), made applicable by Fed. R. Bankr. P. 7056.

4Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

5Id.

6Id. at 249-50.

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factfinding role. Summary judgment is inappropriate if an inference can be drawn from
the materials properly submitted either to support or oppose the motion that would allow
the non-moving party to prevail at trial.7

The substantive law’s allocation of the burden of proof also affects the Court’s
analysis of a summary judgment motion. The party asking for summary judgment has the
initial burden of showing that no genuine issue of material fact exists.8 But if the moving
party does not have the burden of proof on a question, this showing requires only pointing
out to the Court that the other party does not have sufficient evidence to support a finding
in that party’s favor on that question.9 When such a showing is made, the party with the
burden of proof must respond with affidavits, depositions, answers to interrogatories, or
admissions sufficient to establish that a finding on the question could properly be made in
the party’s favor at trial.10

2. The § 523(a)(6) exception to discharge
Section 523(a)(6) of the Bankruptcy Code excepts from a debtor’s 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 ruled that this provision
applies only to a deliberate or intentional injury, not merely a deliberate or intentional act

7See id. at 248.
8Shapolia v. Los Alamos Nat'l Lab., 992 F.2d 1033, 1036 (10th Cir. 1993).
9Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
10Celotex, 477 U.S. at 324; Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574,


586 (1986).
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that leads to injury.11 The Court explained that this means the debtor must have intended
the consequences of the act he or she performed, not simply the act itself.12

After Geiger, the Tenth Circuit declared in Panalis v. Moore (In re Moore) that
§ 523(a)(6) requires proof of both a willful act and a malicious injury.13 For the debtor’s
act to have been willful, the debtor must have intended to cause the consequences of the
act or have believed that the consequences were substantially certain to follow.14 Moore
involved a state court judgment based on a jury’s determination that a contractor
justifiably relied on a debtor’s false representation that he carried insurance and suffered
damages as a result of the false representation when he was subsequently injured in a gas
explosion.15 The Circuit said:

The essence of this case arises from basic tort law. It is a fundamental principle
that a person who commits an intentional tort is liable for the consequences of his acts.
However, it does not follow that everything that happens to the victim following the
commission of the tort was intended by the tortfeasor.16

Because Geiger required the debtor to have intended the consequences of his tortious act
and the debtor in Moore could not have intended for his fraudulent representation to cause
the contractor to suffer injuries in a gas explosion, the Circuit ruled the state court

11523 U.S. 57, 60-64 (1998).
12523 U.S. at 61-62.
13357 F.3d 1125, 1129 (10th Cir. 2004).


14Id.

15Id. at 1127.
16Id. at 1128.
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judgment was not a debt based on a willful injury, as required for it to be excepted from
discharge by § 523(a)(6).17 Although the Circuit indicated § 523(a)(6) requires proof of
both a “willful” act and a “malicious injury,” it based its ruling on the conclusion the
debtor had not intended to cause the contractor’s physical injuries, and so not committed
a willful act covered that provision.18 Consequently, the opinion, like the Supreme
Court’s opinion in Geiger, does not provide a detailed analysis of the “malicious” element
under § 523(a)(6), and does not suggest any significant difference between the “willful”
and “malicious” elements of the provision.

After saying both a willful act and a malicious injury is required to make
§ 523(a)(6) applicable, the Circuit said in Moore:
For example, in Mitsubishi Motors Credit of America, Inc. v. Longley (In re Longley),
235 B.R. 651, 657 (10th Cir. BAP 1999), the court held, to constitute a willful act under
§ 523(a)(6), the debtor must “desire . . . [to cause] the consequences of his act or . . .
believe [that] the consequences are substantially certain to result from it.” Id. at 657
(quoting Restatement (Second) of Torts, § 8A (1965)). Also, in Hope v. Walker (In re
Walker), 48 F.3d 1161, 1164 (11th Cir.1995), the court concluded the term “malicious”
requires proof “that the debtor either intend the resulting injury or intentionally take

action that is substantially certain to cause the injury.”19
The Court finds it difficult to perceive any meaningful difference between the quoted
requirements for the “willful” and “malicious” elements of § 523(a)(6), since
“consequences” and “injury” seem to refer to the same thing in the two statements.

Black’s Law Dictionary suggests some distinctions between the words, stating that

17Id. at 1128-29.
18Id. at 1127-30.
19357 F.3d at 1129.


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“willful” is an adjective that means, “Voluntary and intentional, but not necessarily
malicious,” while “malicious” is an adjective that means, “1. Substantially certain to
cause injury. 2. Without just cause or excuse.”20 These definitions suggest the Supreme
Court’s opinion in Geiger added some of the usual definition of “malicious” to its
construction of “willful.” Black’s also offers a definition specifically for “willful and
malicious injury” under § 523(a)(6): “[D]amage to another entity (such as a creditor)
caused by a debtor intentionally performing a wrongful act — without just cause or
excuse — that the debtor knew was certain or substantially certain to cause injury.”21
This definition seems to cover all aspects of the dictionary’s separate definitions of
“willful” and “malicious.” Black’s definitions echo the Tenth Circuit’s statements in
Moore, except they add the possibility the actor might have just cause or excuse for
causing the injury. Although that possibility was not mentioned in Moore, the Circuit did
mention it an earlier decision, Dorr, Bentley & Pecha, CPA’s, P.C., v. Pasek (In re
Pasek).22 A common example of this possibility making a difference in the analysis of a
person’s actions is when the person was properly acting in self-defense.23 Unless the

20Black’s Law Dictionary (version on Westlaw in April 2009, West/Thomson Publishing, 8th
edition, 2004).

21Id.

22983 F.2d 1524, 1527-28 (10th Cir.1993).

23See Restatement (Second) of Torts, § 63(1) (1965) (“An actor is privileged to use reasonable
force, not intended or likely to cause death or serious bodily harm, to defend himself against unprivileged
harmful or offensive contact or other bodily harm which he reasonably believes that another is about to
inflict intentionally upon him.”).

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justification or excuse possibility is added to the “willful” and “malicious” elements as
stated in Moore, a person who caused an injury while properly acting in self-defense
might have a debt for damages based on the injury excepted from discharge by
§ 523(a)(6).

3. Applicable law of preclusion
The Debtor contends that the Plaintiff’s claim under § 523(a)(6) must fail here
because the Plaintiff failed to prove in the state court trial that he caused it to suffer a
willful and malicious injury. Although the Debtor suggests this is a collateral estoppel (or
issue preclusion) argument, he is actually pushing for claim preclusion (or res judicata).
Collateral estoppel only prevents reasserting claims that were actually decided in prior
litigation, while claim preclusion is the doctrine that bars making claims in later litigation
that were not but should have been made in the prior suit.24 The Court will address claim
preclusion more completely in discussing the Debtor’s summary judgment motion.

The Plaintiff contends that the dischargeability of its claim against the Debtor is
established through the collateral estoppel, or issue preclusion, effect of its state court
judgment. The federal Full Faith and Credit Statute25 requires the Court to apply the
collateral estoppel law of Kansas, the state in which the judgment was rendered, to

24See Brown v. Felsen, 442 U.S. 127, 139 n. 10 (1979) (explaining difference between doctrines,
using res judicata and collateral estoppel terminology); see also Carter v. City of Emporia, 815 F.2d 617,
619 n. 2 (10th Cir. 1987) (indicating preference to use “claim preclusion” for res judicata and “issue
preclusion” for collateral estoppel because older terms are too often misused).

2528 U.S.C.A. § 1738.

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determine the judgment’s effect in this case.26 But if Kansas law says that the judgment
would have a preclusive effect here, the Court must then determine whether something
else in federal law makes an exception to the Full Faith and Credit Statute for purposes of
the Plaintiff’s claim.27 Under Kansas law,

The requirements of collateral estoppel are: (1) a prior judgment on the merits which

determined the rights and liabilities of the parties on the issue based upon the ultimate

facts as disclosed by the pleadings and judgment; (2) the parties must be the same or in

privity; and (3) the issue litigated must have been determined and necessary to support

the judgment. [Citation omitted.]28
The parties now before this Court engaged in a lengthy jury trial that resulted in the
Plaintiff’s judgment against the Debtor, so some of these requirements are clearly met in
this case. The only questions will be whether an issue involved in the Plaintiff’s claim
under § 523(a)(6) was already litigated in the state court trial, determined by the state
court judgment, and necessary to support the judgment.

4. Defendant-Debtor’s motion for summary judgment
As the Court reads it, the Debtor’s memorandum in support of his summary
judgment motion completely relies on the argument that the Plaintiff’s state court
judgment is dischargeable because neither the jury nor the trial judge made findings that
meet the § 523(a)(6) requirements for excepting the judgment from discharge. The Court

26Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 379-86 (1985);
Matsushita Electric Industrial Co., Ltd., v. Epstein, 516 U.S. 367, 373-75 (1996).

27Marresse, 470 U.S. at 379-86; see also National Union Fire Ins. Co. v. Boyovich (In re
Boyovich), 126 B.R. 348, 350 (Bankr. W.D. Wash. 1991) (Marresse approach applies in bankruptcy
proceedings).

28Regency Park v. City of Topeka, 267 Kan. 465, 478 (1999).

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considered and rejected the same argument in Frontier Farm Credit v. Norris (In re
Norris), explaining that bankruptcy law does not require a creditor to prove in a non-
bankruptcy forum facts necessary to except its claim against the debtor from discharge
before the debtor has even filed a bankruptcy case in which he might receive a
discharge.29 Instead, so long as the creditor secures a judgment determining the debtor
owes it a debt, the creditor can, after the debtor files for bankruptcy, try to prove the facts
necessary to except that debt from discharge.30 In other words, claim preclusion does not
apply in proceedings seeking a determination of the dischargeability of a debt.

After the Plaintiff pointed out the Norris opinion, the debtor filed a reply brief that
included this assertion: “[T]he facts as presented during the state-court case do not
establish that [the Debtor] intentionally and maliciously harmed [the Plaintiff].”31 Except
to the extent any of the Plaintiff’s state court claims required it to prove the Debtor’s
actions were willful and malicious, the state court judgment could not have foreclosed the
Plaintiff’s effort to prove the judgment is excepted from the Debtor’s discharge by
§ 523(a)(6). As will be discussed more thoroughly later in this opinion in deciding the
Plaintiff’s motion for summary judgment, the Plaintiff did ask the state court judge to
award attorney fees under K.S.A. 60-3323(iii) based on the Debtor’s allegedly “willful
and malicious” misappropriation of its trade secrets. If the state court had ruled the

292007 WL 1946547 (Bankr. D. Kan. 2007).

30Id.

31Dkt. # 41 at 2.

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Debtor’s actions did not meet the requirements of that statute and therefore denied the
request for attorney fees, the Plaintiff might well be barred from now arguing that the
Debtor willfully and maliciously misappropriated its trade secrets. But that is not what
the state court ruled. Based on the court’s award of attorney fees under the state statute,
any preclusion will operate against the Debtor in this adversary proceeding, not in his
favor.

In his reply, the Debtor asserts another, more unusual argument that should be
mentioned. He says the parties agreed in this adversary proceeding that discovery would
be very limited because of the extensive state-court litigation, and the Plaintiff in fact did
no additional discovery. Then he contends that, by doing no discovery in this proceeding,
the Plaintiff limited itself to the facts as presented in the state court trial. He cites no
authority to support this assertion, and the Court believes there is none. So far as the
Court is aware, the only way a party’s inaction in discovery can limit its ability to present
evidence at trial is if the party failed in response to discovery requests to produce the
evidence it wants to offer at trial.

Finally, the Debtor suggests that by pointing to the absence from the state court
trial of evidence to support all the essential elements of the Plaintiff’s § 523(a)(6) claim,
he has made an adequate showing that the Plaintiff does not have such evidence to
present , and he is entitled to summary judgment because the Plaintiff has not proffered
additional evidence in response to his motion. The Court cannot agree. Even if the
Plaintiff were limited to the evidence it presented in the state court trial, that evidence was

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sufficient to convince the trial judge that the Debtor willfully and maliciously
misappropriated the Plaintiff’s trade secrets. While it is true the trial judge did not extend
that finding to the Plaintiff’s claims for breach of contract and breach of fiduciary duties,
that may simply be because state law provided no reason for it to do so and not because it
did not believe the Debtor’s actions in breaching his contract and his fiduciary duties
were willful and malicious. The Plaintiff’s request for attorney fees was the only relief it
sought that required a finding about the allegedly willful and malicious nature of the
Debtor’s actions, and on that score, the trial judge found for the Plaintiff. On the
Plaintiff’s other claims, whether the Debtor’s actions were willful and malicious was not
legally relevant. In other words, the fact only a limited finding of willful and malicious
action was made does not establish that the Debtor’s other actions were in fact not willful
and malicious, only that it was not relevant to the Plaintiff’s other claims. Pointing to an
absence of findings on points that were not relevant in the state court trial is not sufficient
to shift the summary judgment burden to the Plaintiff to show it has evidence beyond the
record of that trial to support potential findings on points that are relevant in this
proceeding.

The Debtor’s motion for summary judgment must be denied.

5. The Plaintiff’s motion for summary judgment.
In its initial memorandum in support of its summary judgment motion, the Plaintiff
argued issue preclusion barred the Debtor from contesting the applicability of § 523(a)(6)
to every part of its state court judgment. Later, in its response to the Debtor’s motion for

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summary judgment, the Plaintiff conceded the state court’s determination the Debtor
willfully and maliciously misappropriated the Plaintiff’s trade secrets did not apply to its
claims for breach of contract and breach of fiduciary duties, so the Debtor is not barred
from contesting the dischargeability of the $275,000 judgment awarded on those claims.
The Plaintiff still contends the nondischargeability of the $50,000 in actual damages and
the $140,000 in attorney fees awarded on its misappropriation of trade secrets claim has
been established by the state judge’s ruling the Debtor’s conduct with respect to that
claim was willful and malicious.

The Court will first address a number of reasons the Debtor offers for denying the
Plaintiff’s motion.

The Debtor argues the Court should not grant the Plaintiff’s motion for summary
judgment because his appeal of the state court judgment is still pending before the Kansas
Supreme Court. However, although doing so can cause some problems, the general rule
federal courts follow is to give a federal judgment preclusive effect even though an appeal
of the judgment is pending.32 The Tenth Circuit has stated that Kansas also follows this
general rule.33 The Court will not deny the Plaintiff’s motion simply because the Debtor’s
appeal of the state court judgment remains pending.

32See 18A Wright, Miller & Cooper, Federal Prac. & Pro.: Jurisdiction 2d, § 4433 (2002)
(stating general rule and discussing difficulties it causes); see also 18 Wright, Miller & Cooper, Federal
Prac. & Pro.: Jurisdiction 2d, § 4402 (discussing terminology of res judicata and indicating treatise uses
“res judicata” to refer to both claim preclusion and issue preclusion).

33Phelps v. Hamilton, 122 F.3d 1309, 1318 (10th Cir. 1997) (citing Willard v. Ostrander, 51 Kan.
481, 486-90 (1893); Munn v. Gordon, 87 Kan. 519, 521-22 (1912)).

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The Debtor suggests the Court should not apply issue preclusion here because the
state court found both he and his company had willfully and maliciously misappropriated
the Plaintiff’s trade secrets, lumping both together and making it impossible to “determine
the nature and extent of the intent attributed to each defendant.”34 This argument seems
doubtful even if its factual premise were correct, but in this case, the premise is clearly
wrong. It is true the journal entry of the state court’s ruling says only that both
defendants committed willful and malicious misappropriation. But the transcript of the
hearing at which the court made that ruling reveals the court said: “I will find based on
the evidence that was presented at trial that under the Kansas Trade Secrets Act that there
was a willful and malicious conduct done by [the Debtor]. And vicariously by [his
company]. I say the worst culprit of those obviously was [the Debtor.]”35 This makes
clear the court was convinced the Debtor engaged in the worst conduct, and shows the
Debtor’s argument on this point must fail.

Finally, the Debtor seems to suggest the fact the jury was not asked to award
punitive damages and the trial judge, rather than the jury, made the willful and malicious
finding supporting the attorney fee award somehow prevents the finding from having
preclusive effect, though he cites no authority for such a rule. In fact, the Kansas version
of the Uniform Trade Secrets Act36 gives the power to make the necessary findings and

34Dkt. # 40 at 14.

35Docket # 30, Ex. G, partial transcript at 14:16 to 14:21.

36K.S.A. 60-3320 to 60-3330.

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award either punitive damages or attorney fees to the court, not to a jury.37 The award in
this case was made under K.S.A. 60-3323, which provides: “If . . . (iii) willful and
malicious misappropriation exists, the court may award reasonable attorney’s fees to the
prevailing party.” Although the U.S. Supreme Court has held the Constitution prevents
states from assigning some fact finding duties in criminal cases to the court rather than the
jury, the Debtor has cited nothing indicating any similar limit applies here, and the Court
is aware of none. The trial judge’s willful and malicious finding is entitled to the same
preclusive effect as a jury finding on any relevant point would be.

The Plaintiff argues the state court’s finding of willful and malicious
misappropriation of trade secrets and award of attorney fees under K.S.A. 60-3323(iii)
satisfies the requirements for collateral estoppel and establishes the actual damages and
attorney fees included in the judgment are excepted from discharge under § 523(a)(6).
The fact the trial judge said the Debtor engaged in “willful and malicious conduct”
suggests the court may have been convinced the Debtor had caused a “willful and
malicious injury” to the Plaintiff. The only question is whether those words meant the
same thing to the trial judge as they mean in § 523(a)(6). Kansas trial courts frequently
rely on the form jury instructions published by the Kansas Judicial Council when they
need definitions for words used in either statutes or the common law. The following
relevant definitions are found in the most recent edition of the PIK:

37See K.S.A. 60-3322 & 60-3323.

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An act performed with a designed purpose or intent on the part of a person to do wrong

or to cause an injury to another is a willful act.38

Malice is a state of mind characterized by an intent to do a harmful act without a

reasonable justification or excuse.39
These definitions are sufficiently similar to the meaning of “willful and malicious injury”
under § 523(a)(6), as discussed earlier, that the Court would conclude the state court’s
willful and malicious finding bars the Debtor from contesting the dischargeability of the
damages and attorney fees awarded for his misappropriation of the Plaintiff’s trade
secrets if the trial court applied these definitions in making its finding.

But the Court has found nothing in the materials the parties presented that suggests
the state judge necessarily had the PIK definitions in mind. Neither the relevant portions
of the transcript of the hearing where the court made the finding nor the journal entry
committing the court’s finding to writing include any discussion or explanation of what
the judge thought the words meant. The only thing the Court has found in the materials
the parties presented to support their opposing summary judgment motions that discusses
the meaning of “willful” and “malicious” is the motion for permanent injunction and
attorney’s fees that the Plaintiff presented to the state court.40 That document suggests the
state judge might have had a different meaning in mind. On page 14 of the motion, the

38Pattern Instructions for Kansas, Civil, 4th ed., § 103.04 (Kansas Judicial Council, PIK - Civil
Advisory Committee 2008).

39Pattern Instructions for Kansas, Civil, 4th ed., § 103.05 (Kansas Judicial Council, PIK - Civil
Advisory Committee 2008).

40See Docket # 39, Exhibit marked as Ex. 8, but entered into CM-ECF system as Ex. 13
(Plaintiff’s Motion for Permanent Injunction and Attorney’s Fees).

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Plaintiff said, “The phrase ‘willful and malicious misappropriation’ has been interpreted
to mean ‘an intentional misappropriation as well as a misappropriation resulting from the
conscious disregard of the rights of another,’” citing a Seventh Circuit decision involving
the Illinois Trade Secrets Act.41 This definition does not appear to include the intent to
injure that the Supreme Court said in Geiger is required to bring a debt within
§ 523(a)(6). It also omits the possibility some justification or excuse might prevent a
willful and malicious finding. Since nothing presented to the Court shows the state judge
was referred to the PIK definitions or otherwise relied on them, and this document shows
the judge was referred to a definition that does not satisfy § 523(a)(6), the Court is unable
to determine whether the trial judge’s willful and malicious finding was based on
definitions that equaled the standard required to except from discharge the Plaintiff’s
judgment for misappropriation of trade secrets.

The Plaintiff’s motion for summary judgment must be denied.

CONCLUSION

For these reasons, the Court concludes the opposing motions for summary
judgment must be and they are hereby denied.
# # #

41Quoting Mangren Research & Dev. Corp. v. National Chem. Co., Inc., 87 F.3d 937, 946 (7th
Cir. 1996).

19

 

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