Case Summary:
The Plaintiff brought a prepetition suit against the Chapter 7 Debtor in state court, alleging that the debtor stole nearly $300,000 from the Plaintiff, her employer. During the pendency of the proceeding, the state commenced a criminal proceeding against the Debtor, and she invoked the privilege against self-incrimination. The state court granted the Plaintiff’s motion for summary judgment as to fraud and unjust enrichment in a minute entry, but made no factual findings. Later, the state court held the Debtor’s marital community liable for unlawful acts, including racketeering. The Plaintiff then moved for summary judgment in the adversary proceeding and argued that the doctrine of collateral estoppel barred the debtor from litigating the issue of nondischargeability. The Court agreed with the Plaintiff and found that the state court’s two holdings, taken together, should be given preclusive effect as to the Plaintiff’s § 523(a)(2), (4), and (6) claims. The Court held that the minute entry order constituted a final judgment and rejected the Debtor’s argument that she was prevented from litigating the state court suit due to her invocation of the privilege against self-incrimination.
Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud in Fiduciary Capacity
11 U.S.C. § 523(a)(6) -- Nondischargeability - Willful and Malicious Injury
Ariz. Rev. Stat. § 13-1802
Key Terms:
Collateral Estoppel
Embezzlement
Final Judgment
Fraud
Jurisdiction
Larceny
Self-Incrimination Privilege
Unjust Enrichment
Willful and Malicious - Defined