Case Summary:
Prior to this bankruptcy filing, the Debtor was found liable on claims of unjust enrichment, wrongful conversion and breach of a fiduciary duty in state court. Once the Debtor filed bankruptcy, creditors from the state court action filed an adversary proceeding seeking to determine the dischargeability of their debt under 11 U.S.C. § 523(a)(2), (a)(4) and (a)(6). Despite the court’s recommendation, creditors relied on a theory of collateral estoppel and chose not to present any testimony. Creditors argued the Court should use the state court transcripts, in absence of sufficient findings of fact by the state court, to preclude the Debtor from defending this action. Finding the creditors’ theory lacked legal support, the Court dismissed the complaint.