Bankruptcy discharge of TCPA claims

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Eric left California (within the Ninth Circuit) and entered Idaho (also within the Ninth Circuit). He's stuck with their law.

As you all know, Title 11 USC § 523(a)(6) excepts from discharge any debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." An "'entity' includes person, estate, trust, governmental unit, and United States trustee." [11 USC § 101(15)] "'[D]ebt' means liability on a claim." [11 USC § 101(12)] Thus, where the debt results from a claim arising out of a "willful and malicious injury" to another, or the property of another, that debt is excepted from discharge.

The question is what it is in the Ninth Circuit that constitutes a "willful and malicious injury"? Prior to 1998, the controlling definition in the Ninth Circuit consisted of a five-part test: (1) the debtor committed a wrongful act [a TCPA violation = a wrongful act]; (2) the act was intentional [here we use the TCPA case law to establish knowing or willful violation]; (3) the act necessarily produced harm [here we rely on evidence of the nature of the database and the lack of consent of the persons who subscribe to the phone numbers in the database and the evidence adduced from victims and the like]; (4) the debtor had actual knowledge, or it was reasonably foreseeable to him, that his conduct would result in injury to the creditor [use evidence of prior law suits, the FCC NAL, and the like]; and (5) the debtor acted without just cause or excuse [that's his affirmative defense, which will fail through counter evidence and argument]. [In re Cecchini, 780 F.2d 1440 (CA9 1986)] This test did not require a showing of biblical malice, i.e., personal hatred, spite, or ill-will. Nor did it require a showing of an intent to injure, only an intentional act which causes injury. [In re Bammer, 131 F3d 788 (CA 9 1997) en banc]

In May 1998, the U.S. Supreme Court, in a medical malpractice case, rejected the argument that only an intentional act which results in injury was sufficient to trigger § 523(a)(6). [Kawaahuhau v. Geiger, 523 US 57, 118 SCt 974, 140 LEd2d 90 (1998)] Instead, the court, drawing by analogy from Restatement (Second ) Torts, § 8A, comment a (1964), held "willful," as used in § 526(a)(6), requires an intent to cause an injury to the victim, not merely a deliberate or intentional act that leads to injury. I think that once the evidence comes in that Eric knew of a successful TCPA action against and thereafter he participated in's continued faxing orgy, his intent clearly was to cause injury to the victims of the TCPA violations. Section 523(a)(6) is triggered by "intentional torts," as distinguished from negligent or reckless torts. Intentional torts generally require that the actor intend the consequences of an act, not simply the act itself. Thus, under Geiger, liability based upon negligent or reckless conduct, even a reckless disregard, is insufficient to bar discharge under § 523(a)(6). [See S Rep. 95-989 (1978), reprinted in 1978 USCCAN 5787, and HR Rep. 95-595 (1977), reprinted in 1978 USCCAN 5963. It easily can be argued that Eric intended the consequences of his acts; he was much more than merely negligent or reckless. Both houses of Congress also specifically stated that it was their intention to overturn any cases that had applied "a 'reckless disregard' standard" in deciding what debts were not dischargeable.] Moreover, Geiger appears to indicate that the "unintentional consequences of an intentional act" doctrine, that may give rise to tort liability, might not suffice to render a debt nondischargeable under § 523(a)(6). Here, of course, Eric was never dealing with unintentional consequences; all consequences of his TCPA activity were intentional. Under the restatement approach, the debtor must desire to cause the consequences of his act, or believe that the consequences are substantially certain to result from it. [Restatement (Second) of Torts § 8A, comment b] This is all the situation in Eric's case.

One must also define "malicious." The law concerning the meaning of malicious in § 523(a)(6) has long been confused. Courts have divided roughly into two camps, some requiring "special malice," which requires a showing of a motive to harm, and others requiring merely "implied malice." The difference in opinion has been whether § 523(a)(6) repudiated an implied malice test previously established in Tinker v. Colwell, 193 U.S. 473 (1904). [For a discussion these two lines, see Matter of Miller, 156 F2d 598 (CA5), cert. denied sub nom, Miller v. J.D. Abrams, Inc., 119 SCt 1249, and J.D. Abrams, Inc. v. Miller, 119 SCt 1250 (1998)] The Ninth Circuit follows the implied malice line, i.e., malice can be established from the nature of the conduct. [See In re Littleton, 942 F2d 551 (CA9 1991)] I don't really think we have much trouble with malice in Eric's case; he clearly had a motive to harm (and to benefit financially from that harm); indeed, it was ONLY by harming others that he could benefit financially (from those few recipients, from among the vast masses of non-consenting recipients, who actually ended up liking the faxes).

What liabilities then come within the § 523(a)(6) exception? It seems clear that most, if not all, intentional torts, as long as the debtor intended to cause the injury would qualify. E.g., intentional interference with contractual relations [In re Rogstad, 126 F3d 1224 (CA9 1997)]; conversion [In re Cecchini, supra; In re Riso, 978 F2d 1151 (CA9 1992)]; malicious prosecution [In re Abbo, 168 F3d 930 (CA6 1999)]; assault and battery [Matter of Thirtyacre, 36 F3d 697 (CA7 1994)]; sexual harassment [In re Topakas, 202 BR 850 (Bank.ED Pa 1996)]; trespass [In re Sullivan, 198 BR 417 (Bank. Mass 1996)]; and intentional infliction of emotional distress [In re McNallen, 62 F3d 619 (CA4 1995)]. As we all know, the TCPA cases clearly classify a TCPA violation as a species of conversion (use of my fax machine and telephone line without my permission), a species of trespass (same). The other species of injury, nuisance, likely does not fit into the mix and need not be discussed.

I think a good argument can be made that a debt incurred as a result of a TCPA violation is or should be declared to be non-dischargeable in bankruptcy (especially when it is incurred by someone of the likes of Mr. Wilson).