After Debtor Prevails in 523(a)(6) Claim Filed Against her in Bad Faith, Court says it will Entertain a Motion Seeking Attorney’s Fees from Creditor

After Debtor Prevails in 523(a)(6) Claim Filed Against her in Bad Faith, Court says it will Entertain a Motion Seeking Attorney’s Fees from Creditor

Technical Support (“Support”) and its sister corporation, Soyokaze, Inc. (“Soyokaze” and together with Support, the “Plaintiffs”), alleged that their former employee and human resources coordinator, Becky  (a co-debtor in the underlying bankruptcy case and herein, “Becky”), willfully and maliciously abused her human resources responsibilities, causing them to suffer substantial damages. Central to the Plaintiffs’ allegations were claims that Becky intentionally mishandled a sexual harassment claim against the husband of the Plaintiffs’ chief executive officer, and that Becky knowingly provided misinformation to an employee regarding his unused vacation time for which he later sought compensation, albeit unsuccessfully. The Plaintiffs claimed that pursuant to § 523(a)(6) of the Bankruptcy Code, Becky’s liability for their damages should not be discharged in her chapter 7 bankruptcy case.

After three days of trial, during which the court heard the testimony of the parties and other witnesses, and reviewed multiple exhibits and deposition testimony, the court has concluded that there was indeed a willful and malicious injury, but not caused by Becky. Contrary to the Plaintiffs’ allegations, Becky was the victim of the willful and malicious conduct perpetrated by the Plaintiffs at the hands of their owners and executive officers, Renee  (“Renee”) and her husband, Billy  (“Billy” and together with Renee, the “McElheneys”). The McElheneys adhere to the adage that the best defense is a good offense, and their offense, wantonly directed at Becky, was pursued in bad faith. Simply put, the McElheneys were vexatious bullies. They prosecuted this adversary proceeding for oppressive reasons, in a selfish attempt to distract attention away from Billy’s aggressive and boorish behavior toward a subordinate female employee. Below is an account of the Plaintiffs’ and the McElheneys’ sordid scheme to cast blame on Becky for their self-inflected woes.

In their original complaint filed in this adversary proceeding (AP Doc. 1), the Plaintiffs itemized with specificity the amount of damages they allegedly suffered “[a]s a result of [Becky’s] intentional, systematic, and malicious actions”: $254,815.62 lost profits for the years 2011 through 2014; $510,884.96 lost customer accounts; $65,179.40 and $3,308.13 defending claims made by Jayme and Rees; plus unspecified damages for the “tarnished and irreparably damaged” business reputations of the Plaintiffs and the McElheneys. The Plaintiffs amended their complaint (AP Doc. 94) and dropped their itemized claims for lost profits and lost customer accounts, but still claimed $65,179.40 and $3,308.13 they spent defending Jayme’s sexual harassment claims and Rees’s claim for unpaid vacation. They continued to allege the Plaintiffs’ and the McElheneys’ business reputations had been tarnished and irreparably damaged. The amended complaint concluded with a prayer for “compensatory, consequential, incidental, and exemplary damages” and a non-dischargeable judgment in favor of the Plaintiffs “in the amount determined by the Court.”

Notwithstanding that there was no credible proof that Becky was liable to the Plaintiffs as a consequence of the events alleged in their amended complaint, even if liability had been proven, the proof of damages offered at trial was totally inadequate. The Plaintiffs never offered evidence that the costs of defending claims made by Jayme and Rees, primarily attorneys’ fees, were reasonable. All that was offered was the amount of fees allegedly expended by the Plaintiffs. And the Plaintiffs made no attempt to place a monetary value on the damages they allegedly suffered to their business reputations, and any damages suffered by the McElheneys personally were not relevant—individually, they were not parties to this proceeding

Please note, in order to view NACBA Member Content, you must sign in and then visit NEWS. If you are not a NACBA member, you may Become a NACBA Member 

No Comments

Post a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.