BILL PARKER, Bankruptcy Judge.
ON THIS DATE the Court considered the Motion for Summary Judgment (the "Motion") filed by the Plaintiff, Midway Collections, Inc., in the above-referenced adversary proceeding. Plaintiff filed its "Complaint to Determine Dischargeability of Debt" on September 13, 2011 seeking to have the judgment debt owed by the Debtor-Defendant, Logan Evan Graff, declared nondischargeable pursuant to, primarily, 11 U.S.C. § 523(a)(6) as a debt for "willful and malicious injury by the debtor" and, alternatively, 11 U.S.C. § 523(a)(4) as a debt for "embezzlement, or larceny." See 11 U.S.C. § 523(a).
The adversary proceeding at bar arose from a previous course of litigation between the Plaintiff's predecessor-in-interest, Nationwide Recovery Systems, Ltd. ("NRS"), and the Debtor-Defendant, Logan Evan Graff, among others.
Plaintiff brings its Motion for Summary Judgment in this adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7056. That rule incorporates Federal Rule of Civil Procedure 56 which provides that summary judgment shall be rendered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), quoting FED.R.CIV.P. 56(c).
The party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the "pleadings, depositions, answers to interrogatories, and affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The moving party asserting that a fact cannot be genuinely disputed must support that assertion by:
FED.R.CIV.P. 56(c).
The operation of the summary judgment standard depends upon which party will bear the burden of persuasion at trial. If, as in this case, the burden of persuasion is on the moving party, "that party must support its motion with credible evidence — using any of the materials specified in Rule 56(c) — that would entitle it to a directed verdict if not controverted at trial." Celotex, 477 U.S. at 331, 106 S.Ct. 2548. Upon a prima facie showing of entitlement to judgment as a matter of law, the non-movant may not rest upon the mere allegations or denials in its pleadings, but rather must demonstrate in specific responsive pleadings the existence of specific facts constituting a genuine issue of material fact for which a trial is necessary. Anderson, 477 U.S. at 248-49, 106 S.Ct. 2505 (citing FED.R.CIV.P. 56(e)). If the nonmoving party cannot muster sufficient evidence to demonstrate a genuine issue of material fact, a trial would be useless. The substantive law will identify which facts are material. Id.
In this case, Plaintiff bears the burden to present a prima facie case for nondischargeability under either theory presented, meaning Plaintiffs are entitled to a summary judgment only if there exists no genuine issue of material fact as to each essential element under § 523(a)(6), or, in the alternative, § 523(a)(4). The motion for summary judgment under consideration herein seeks judgment as a matter of law through the application of collateral estoppel. Plaintiff claims that the entry of the State Court Judgment, and the associated jury findings from the 219th Judicial District Court for Collin County, Texas, form the basis for a determination that the underlying judgment debt is non-dischargeable in Debtor's Chapter 7 bankruptcy case. Resolving this question requires that the Court first determine the applicability of the doctrine itself. If collateral estoppel applies, any relevant (i.e. related to the required elements for non-dischargeability) factual findings from the State Court Judgment should not be disturbed here. The Court applies those findings to the required elements for non-dischargeability to ascertain what factual issues, if any, remain. If collateral estoppel does not apply, Plaintiff's motion must be wholly denied.
"Collateral estoppel or, in modern usage, issue preclusion, `means simply that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.'" Schiro v. Farley, 510 U.S. 222, 232, 114 S.Ct. 783, 127 L.Ed.2d 469 (1994), quoting Ashe v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970); see also RESTATEMENT (SECOND) OF JUDGMENTS § 27 (1982) ("When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim."). "[P]arties may invoke collateral estoppel in certain circumstances to bar relitigation of issues relevant to dischargeability" and satisfy the elements thereof. Raspanti v. Keaty (In re Keaty), 397 F.3d 264 (5th Cir.2005) (quotation marks omitted).
Under Texas law, a party is collaterally estopped from raising an issue when: (1) the facts sought to be litigated in the second case were fully and fairly litigated in the first; (2) those facts were essential to the prior judgment; and (3) the parties were cast as adversaries in the first case. Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex.1984), MGA Ins. Co. v. Charles R. Chesnutt, P.C., 358 S.W.3d 808, 817 (Tex.App.-Dallas 2012, no pet.). Collateral estoppel principles apply under Texas law whether the issue is heard and determined through adjudication by a tribunal or is determined by the agreement of the parties. Withers v. Republic Nat'l Bank, 248 S.W.2d 271, 282 (Tex.Civ.App.-Beaumont 1951, writ ref'd n.r.e.); Price v. Texas Employers' Ins. Assn., 782 S.W.2d 938, 941 (Tex.App. — Tyler 1989, no writ).
In the context of issue preclusion, "issue" and "fact" are interchangeable. The purpose of the reviewing court is to determine the specific facts brought that were already established through full and fair litigation. As such, it is the burden of the party claiming issue preclusion to bring forth specific factual findings made by a previous court of competent jurisdiction. Fielder v. King (In re King), 103 F.3d 17, 19 (5th Cir.1997) (emphasis added). In this circuit, issue preclusion will prevent a bankruptcy court from determining dischargeability issues for itself only if "the first court has made specific, subordinate, factual findings on the identical dischargeability issue in question ... and the facts supporting the court's findings are discernible from that court's record." Id. (citing In re Dennis, 25 F.3d 274, 278 (5th Cir.1994) (citations omitted), cert. denied, 513 U.S. 1081, 115 S.Ct. 732, 130 L.Ed.2d 636 (1995)).
Taking the primary allegation first, Plaintiff's Motion for Summary Judgment claims that the jury findings underlying the State Court Judgment for tortious interference with a contract render the resulting damages nondischargeable pursuant to 11 U.S.C. § 523(a)(6) as a "willful and malicious injury" to the Plaintiff.
In re Keaty, 397 F.3d 264, 270 (5th Cir. 2005). The practical effect of this reasoning created an even narrower category of intentional conduct satisfying the "willful and malicious" standard. Despite the similarities between the language in 523(a)(6) and that used to describe most intentional torts, the fact that an intentional tort occurred does not necessarily render a debt arising therefrom non-dischargeable as the product of a "willful and malicious injury." See Williams, 337 F.3d at 509. In Miller, for example, the Fifth Circuit illustrated the distinction by recognizing that, under Texas law, "misappropriation of proprietary
In this case, though the jury found that the Debtor intentionally interfered with NRS' contractual relationships, that finding, by itself, is insufficient to constitute a "willful and malicious injury" for purposes of the § 523(a)(6) analysis. The same goes for the jury's findings regarding the Debtor's unfair competition and misappropriation of confidential information. Thus, the Court must look to "the particularized findings of the jury," in order to determine whether Plaintiff has shown that Defendant's intentional conduct entailed "either an objective substantial certainty of harm or a subjective motive to cause harm." Miller, 156 F.3d at 602.
Under Texas law, "[t]he elements of tortious interference with an existing contract are (1) an existing contract subject to interference, (2) a willful and intentional act of interference with the contract, (3) that proximately caused the claimant's injury, and (4) caused actual damages or loss." Anderton v. Cawley, ___ S.W.3d ___, 2012 WL 1606665 *15 (Tex.App.Dallas, May 8, 2012, no pet.) (citing Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000)). "Intentional interference does not require intent to injure, only that the actor desires to cause the consequences of his act, or that he believes that the consequences are substantially certain to result from it." Sw. Bell Tel. Co. v. John Carlo Tex., Inc., 843 S.W.2d 470, 472 (Tex.1992) (quotation marks omitted). "Consequence," in this context, refers to the "interference," not necessarily the injury. See id. (noting that "jury did not find that [defendant] desired to interfere with [plaintiff's] contract or believed that interference was substantially certain to result from it" (emphasis added)). The jury charge submitted by Plaintiff as Exhibit A-2 recognizes the distinction; Question 8 asks if the named defendants "intentionally interfere[d] with NRS' contractual relationships" before defining interference as intentional if "committed with the desire to interfere with the contract or the belief that interference was substantially certain to result."
Here, the jury found that the Debtor intentionally interfered with NRS' contractual relationships and that this interference "proximately caused" damages of $154,608.52."
Similarly, the jury findings presented by Plaintiff do not establish that " "that [the Debtor] had the subjective motive to cause harm." Id. at 606. In fact, the jury answered the only question posed to it regarding the existence of malice, defined as "a specific intent by the Defendant to cause substantial harm or injury to NRS", on behalf of the Debtor in the negative.
Turning now to the second argument before this Court, Plaintiff's Motion for Summary Judgment alternatively claims that the "judgment for misappropriation of confidential information may also fall under section 523(a)(4)'s embezzlement exemption to discharge."
In this case, the jury found in Question 15 that the Debtor "misappropriated NRS' confidential information" without reference to any fraudulent intent. The jury was not asked in any way to determine the Debtor's scienter during this conduct, and Plaintiff did not provide any other jury findings that bear on the issue. Despite Plaintiff's contentions, the jury's separate finding that the Debtor participated in a conspiracy that damaged NRS is irrelevant to purported fraudulent
For the foregoing reasons, Plaintiff's Motion for Summary Judgment, to the extent it requests judgment as a matter of law on all counts contained in Plaintiff's Complaint, must be denied. Several genuine issues of material fact relating to the Debtor's fraudulent intent under § 523(a)(4) and whether there is evidence of a "willful and malicious injury" under § 523(a)(6) exist that this Court is not precluded from re-litigating by the State Court Judgment. The existence of those issues, however, does not mean that the entire lawsuit must be tried again. The jury findings submitted and the State Court Judgment associated therewith are sufficient to determine numerous factual issues relating to the dischargeability of the Plaintiff's debt, including the Debtor's actual wrongful conduct. The jury findings establish that the Debtor "intentionally interfere[d] with NRS' contractual relationships with existing customers," "misappropriated confidential information" and "use[d] it for [his] own benefit or for the detriment of NRS," and "unfairly compete[d] with NRS," along with numerous elemental findings related to this conduct. These issues, which were fully and fairly litigated in the state court, should not be retried here and the findings disturbed. This Court is precluded, by effect of the State Court Judgment, from reconsideration of these facts pursuant to the doctrine of collateral estoppel.
Based upon the Court's consideration of the pleadings, the evidence submitted therewith, the relevant legal authorities, and for the reasons set forth herein pursuant to 28 U.S.C. § 2361, the Court finds that Plaintiff's Motion for Summary Judgment in the above-referenced adversary proceeding must be granted in part and denied in part. Plaintiff failed to demonstrate entitlement to judgment as a matter of law regarding the non-dischargeability of the judgment debt (or any portion thereof) owed to it by the Debtor through the doctrine of collateral estoppel. Significant genuine issues of material fact remain regarding both asserted claims of non-dischargeability under § 523(a)(4) and (a)(6) that must be determined through a trial on the merits. Summary judgment as to the relief sought by the Complaint must therefore be denied.
Some material factual issues were fully and fairly litigated in the prior state court litigation, and this Court is precluded from re-litigation of those issues. Plaintiff is therefore entitled to a partial summary judgment pursuant to Rule 56(g) on some factual issues. An order consistent with this opinion shall be entered.