Sixth Circuit Court of Appeals rules that Defendant cannot avoid $3.4 million obligation from default judgment in bankruptcy due to “willful and malicious” acts.
On May 4, 2020, the 6th Circuit Court of Appeals entered an opinion in favor of the firm’s client, CMCO Mortgage, hopefully bringing an end to years’ long litigation. Middleton Reutlinger attorney and head of the firm’s litigation group, Elizabeth Gray, argued the matter before the Sixth Circuit Court of Appeals. Firm attorneys Katherine Reisz, Matthew Dearmond, and Christopher Stewart, all in the firm’s litigation practice group, assisted in the case.
The decision affirms a finding by the bankruptcy court that the defendant cannot discharge a $3.4 million judgment where the bankruptcy court found his actions to be “willful and malicious” causing “deliberate and intentional injury.” The defendant accepted a job offer with a competitor of CMCO in breach of his contract and his fiduciary duties, recruited away CMCO’s employees, and took valuable trade secrets. The defendant then failed to participate in the litigation despite a warning by the trial court judge that failure to appear would have serious consequences, then failed to challenge the decision on appeal.
Significantly, the case establishes that “willful and malicious” action is an element of tortious interference under Kentucky law. The opinion also clarifies conflicting Kentucky law that a default judgment can be the basis for collateral estoppel.
Ms. Gray was interviewed for an article which appeared in Law360 on May 6 and which provides further details and analysis.