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`UNITED STATES BANKRUPTCY COURT
`EASTERN DISTRICT OF NEW YORK
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`In re:
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`QIAO LIN,
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`Debtor.
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`GUO ZHONG WU, RONG ZHENG,
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`and WEN DONG LIN,
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`Plaintiffs,
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`Chapter 7
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`Case No. 14-42344-ess
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`Adv. Pro. No.: 14-01111-ess
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`-against-
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`QIAO LIN,
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`Defendant.
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`MEMORANDUM DECISION ON PLAINTIFFS’ MOTION
`FOR PARTIAL SUMMARY JUDGMENT
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`Appearances:
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`Rebecca J. Osborne, Esq.
`Vladeck, Raskin & Clark, PC
`565 Fifth Avenue, 9th Floor
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`New York, NY 10017
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` Attorneys for Plaintiffs
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`Yimin Chen, Esq.
`Law Offices of Chen & Associates
`39-15 Main Street, Suite 502
`Flushing, NY 11354
` Attorneys for Defendant
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`Case 1-14-01111-ess Doc 66 Filed 09/28/17 Entered 09/28/17 17:26:45
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`HONORABLE ELIZABETH S. STONG
`UNITED STATES BANKRUPTCY JUDGE
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`Introduction
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`Before the Court is a motion for partial summary judgment by plaintiffs Gu Zhong Wu,
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`Rong Zheng, and Wen Dong Lin seeking an order finding that the default judgment entered
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`against the defendant Qiao Lin and others in Wu v. Glyphs Garden, Inc., No. 12-07995
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`(S.D.N.Y. May 20, 2013) (the “District Court Action”), a case brought by these plaintiffs in the
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`United States District Court for the Southern District of New York, is nondischargeable under
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`Bankruptcy Code Section 523(a)(6). The Plaintiffs argue that there is no genuine dispute as to a
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`material fact as to each element of their claim based on the record here, and separately, based on
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`the collateral estoppel effect of the District Court’s judgment.
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`Mr. Lin opposes this motion on grounds that collateral estoppel does not apply here, and
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`that the Plaintiffs have not established that there is no genuine dispute as to a material fact as to
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`whether he engaged in “willful” and “malicious” conduct as required by Section 523(a)(6).
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`Jurisdiction
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`This Court has jurisdiction over this adversary proceeding pursuant to Judiciary Code
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`Sections 157(b)(1) and 1334(b), and the Standing Order of Reference dated August 28, 1986, as
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`amended by the Order dated December 5, 2012, of the United States District Court for the
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`Eastern District of New York. In addition, this Court may adjudicate these claims to final
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`judgment to the extent that they are core proceedings pursuant to Judiciary Code Section 157(b),
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`and to the extent that they are not core proceedings, pursuant to Judiciary Code Section 157(c)
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`because the parties have stated their consent to this Court entering a final judgment. See
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`Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1940 (2015) (holding that in a non-core
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`Case 1-14-01111-ess Doc 66 Filed 09/28/17 Entered 09/28/17 17:26:45
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`proceeding, a bankruptcy court may enter final orders “with the consent of all the parties to the
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`proceeding”).
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`The District Court Action and Default Judgment
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`Background
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`On October 26, 2012, the Plaintiffs commenced an action (the “District Court Action”)
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`by filing an amended complaint in the District Court against Mr. Lin, as well as Glyphs Garden,
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`d/b/a Saigon Grill, d/b/a/ Saga (the “Restaurant”), Bei Lin, Xin Wei Lin, and Hsiao Tong Chang
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`a/k/a Frank Chang (the “Restaurant Defendants”). In that action, the Plaintiffs asserted
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`violations of the Fair Labor Standards Act of 1938 (the “FLSA”), promulgated and enforced
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`under New York’s Minimum Wage Act and Labor Law (the “NY Labor Law”). Neither Mr. Lin
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`nor the other defendants responded to the amended complaint.
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`On February 8, 2013, the Clerk of the Court entered a Certificate of Default as to Mr. Lin
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`and the other Restaurant Defendants, and a motion for default judgment followed. That motion
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`asserted that Mr. Lin, among others, willfully circumvented minimum wage and overtime laws;
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`willfully falsified pay stubs by reporting incorrect hours worked; willfully failed to post lawfully
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`required notices concerning federal and state minimum wage protections or otherwise to inform
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`the Plaintiffs of those protections; willfully failed to provide the Plaintiffs with notices required
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`under the NY Labor Law; willfully retained portions of the Plaintiffs’ tip earnings; and
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`unlawfully dismissed employees Mr. Wu and Mr. Zheng. The Plaintiffs sought entry of a default
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`judgment against all of the Restaurant Defendants, including Mr. Lin.
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`On April 25, 2013, the District Court held a hearing on the motion for default judgment.
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`None of the Restaurant Defendants appeared or opposed the motion, and on April 26, 2013, the
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`District Court entered an order granting the motion for default judgment. On May 20, 2013, the
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`District Court entered a judgment in the amount of $180,933.65 against the Restaurant
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`2
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`Case 1-14-01111-ess Doc 66 Filed 09/28/17 Entered 09/28/17 17:26:45
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`Defendants, jointly and severally, comprised of $125,422 in damages and $55,511.65 in
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`attorneys’ fees and costs, pursuant to the FLSA and the NY Labor Law (the “Default
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`Judgment”). Default Judgment, ECF No. 32, Wu v. Glyphs Garden, Inc., No. 12 Civ. 7995
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`(S.D.N.Y.).
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`This Bankruptcy Case
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`On May 9, 2014, Mr. Lin filed a petition for relief under Chapter 7 of the Bankruptcy
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`Code. On July 21, 2014, Richard J. McCord, the Chapter 7 Trustee, filed a Report of No
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`Distribution, and on August 11, 2014, Mr. Lin received a discharge.
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`This Adversary Proceeding
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`On August 11, 2014, the Plaintiffs filed this adversary proceeding seeking a
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`determination that the Default Judgment is nondischargeable pursuant to Sections 523(a)(2) and
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`523(a)(6). Here, as in the District Court Action, they allege that over the course of their
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`employment at the Restaurant, they regularly worked hours without compensation and were paid
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`less than the minimum wage, all in violation of the FLSA and the NY Labor Law. The Plaintiffs
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`also allege that in July 2011, Mr. Wu and Mr. Zheng complained to Mr. Lin that they were not
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`receiving compensation for hours that they worked in excess of forty per week, and he responded
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`that they would not be compensated for any hours worked in excess of that amount. The
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`Plaintiffs claim that on August 29, 2011, in retaliation for their complaints, Mr. Lin fired Mr. Wu
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`and Mr. Zheng.
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`The Plaintiffs allege that the Default Judgment should not be discharged in Mr. Lin’s
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`bankruptcy case because it arises from their claims that Mr. Lin obtained services from them by
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`violating minimum wage and overtime laws, including by falsifying pay stubs to report an
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`incorrect number of hours that they worked, failing to post notices required by wage and labor
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`3
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`Case 1-14-01111-ess Doc 66 Filed 09/28/17 Entered 09/28/17 17:26:45
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`laws, failing to provide Mr. Wu and Mr. Zheng with notices required by the NY Labor Law, and
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`retaining portions of their tip earnings. They also allege that Mr. Lin undertook each of these
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`actions willfully and maliciously.
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`On September 10, 2014, Mr. Lin answered the Complaint, and, in substance, denies
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`information sufficient to form a belief as to the allegations. Mr. Lin also asserts seventeen
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`affirmative defenses, including that the Complaint fails to state a claim upon which relief can be
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`granted, the claims are barred by applicable statute of limitations, and the relief requested is
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`precluded because his conduct was not willful; and as to damages, that the Plaintiffs failed to
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`mitigate their damages, and their damages were de minimis.
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`This Motion for Partial Summary Judgment
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`On July 1, 2016, the Plaintiffs moved for partial summary judgment on their Section
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`523(a)(6) claim (the “Summary Judgment Motion”). The Plaintiffs argue that Mr. Lin is
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`collaterally estopped from relitigating the elements of this claim, as these issues were previously
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`decided by the District Court. They state that each of the elements of collateral estoppel is met,
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`namely, that the issues raised here and in the District Court Action are identical, their claims
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`were actually litigated and decided by the District Court, and Mr. Lin was afforded a full and fair
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`opportunity to litigate the District Court Action. The Plaintiffs acknowledge that there has been
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`a change in interpretation of the New York Wage Theft Prevention Act (the “WTPA”) since the
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`District Court entered judgment, but argue that this shift leads only to a modest reduction in the
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`amount of that judgment, and is not “the type of ‘significant’ change in law that would preclude
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`this Court from applying collateral estoppel.” Plfs’ Mem. at 13, ECF No. 48 (quoting Faulkner
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`v. Nat’l Geographic Enters. Inc., 409 F.3d 26, 37 (2d Cir. 2005)).
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`The Plaintiffs also argue that if this Court finds that collateral estoppel does not apply,
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`they nevertheless should prevail on summary judgment because “there is significant undisputed
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`evidence for this Court to find independently that [Mr. Lin] committed the alleged wage and
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`hour violations.” Plfs’ Mem. at 14. They state that throughout the course of their employment,
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`they were paid less than minimum wage, and are entitled to the difference. They also argue that
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`they are entitled to overtime wages for their unpaid overtime hours each week. And they seek
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`reimbursement for expenses incurred in connection with their employment, including costs
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`arising from the maintenance of delivery vehicles, as well as “spread of hours” wages under the
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`NY Labor Law, which requires employees to be paid an extra hour for each work day longer
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`than ten hours. And finally, the Plaintiffs seek liquidated damages under the FLSA and NY
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`Labor Law, including damages for Mr. Lin’s retaliation in response to their complaints.
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`And the Plaintiffs contend that the Default Judgment should be found nondischargeable
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`under Section 523(a)(6) because Mr. Lin’s violations of the FLSA and NY Labor Law were
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`“willful” and “malicious.” Plfs’ Mem. at 29. They argue that Mr. Lin’s violations were
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`“willful” because he acknowledged that “he knew the minimum wage laws,” and that he was
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`aware of these laws because he purchased the Restaurant by signing a $1 million promissory
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`note to satisfy wage and hour violations committed by the previous owner of the Restaurant. Id.
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`They state that “[b]y paying [the] Plaintiffs less than they were owed, each deficient paycheck
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`the Restaurant issued to [the] Plaintiffs constituted a deliberate and intentional injury.” Id. And
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`they also argue that the retaliatory terminations of Mr. Zheng and Mr. Wu “constitute additional
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`deliberate and intentional acts.” Id.
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`The Plaintiffs argue that Mr. Lin’s violations were “malicious” because “there is
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`significant evidence that [Mr.] Lin engaged in sufficiently reprehensible conduct to find that
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`5
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`Case 1-14-01111-ess Doc 66 Filed 09/28/17 Entered 09/28/17 17:26:45
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`aggravating circumstances exist.” Plfs’ Mem. at 31. They argue that Mr. Lin’s actions were
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`malicious because “there is ample undisputed evidence that despite knowing his obligations
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`under the minimum wage laws . . . [Mr. Lin] intentionally paid Plaintiffs less than the wage
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`owed and for less time than he knew Plaintiffs had worked [and that Mr.] Lin, who was involved
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`in the management of the Restaurant, knew [its] actions would directly cause monetary injury to
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`Plaintiffs.” Plfs’ Mem. at 30-31. And the Plaintiffs argue that Mr. Lin acted with malice by
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`“engaging in a course of conduct geared toward intimidating his employees into abandoning
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`their [legal] rights,” including posting anti-union posters in the workplace and firing plaintiffs
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`Mr. Zheng and Mr. Wu in retaliation for their protests. Plfs’ Mem. at 31.
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`Mr. Lin opposes summary judgment, and on August 5, 2016, he filed opposition to the
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`Summary Judgment Motion. He responds that collateral estoppel does not apply here because he
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`did not appear or participate in the District Court Action in any way before the Default Judgment
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`was entered. And Mr. Lin argues that collateral estoppel should not apply here because the
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`District Court did not hold evidentiary hearings on the issues.
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`Mr. Lin contends that the District Court did not make any findings of “willful” or
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`“malicious” conduct, and that even though he nominally owned eighty percent of the Restaurant,
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`he was merely a “straw man” for other individuals who held stock in his name, and that he was
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`not aware of the previous wage and hour suit against the Restaurant. Opp. at 8-9, ECF No. 52.
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`He states that his acts were not malicious because he worked only as a cook at the Restaurant,
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`and because he did not know that the Restaurant’s promissory note was in satisfaction of the
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`prior wage and hour suit. And he states that he did not “curse or threat[en] the Plaintiffs to stop
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`their demonstration,” or fire them. Opp. at 10.
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`On August 19, 2016, the Plaintiffs replied. They argue that Mr. Lin’s response “ignores
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`the majority of [the] Plaintiffs’ arguments and supporting evidence, [and] rel[ies] improperly on
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`conclusory denials.” Reply at 3, ECF No. 53. They note that Mr. Lin did not file a statement of
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`disputed facts, and has therefore effectively conceded the facts as set forth in the Plaintiffs’
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`statement of undisputed material facts. And they argue that collateral estoppel should apply
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`here, because they provide “ample evidence upon which [the District Court] subsequently based
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`its determination,” including sworn affidavits, pay stubs, work schedules, and charts. Reply at 7.
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`The Plaintiffs also argue that Mr. Lin is an “employer” as defined under the FLSA and the NY
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`Labor Law, as shown by his responsibilities at the Restaurant including supervising employees,
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`hiring and firing employees, maintaining the Restaurant’s employment records, and other
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`activities. Plfs’ Reply at 8. Lastly, the Plaintiffs state that Mr. Lin’s actions were “willful” as he
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`had knowledge of the requirements under the FLSA and the NY Labor Law, and “malicious,”
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`based on the totality of the circumstances. Reply at 13.
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`The Court held conferences on the Summary Judgment Motion from time to time, at
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`which the Plaintiffs and Mr. Lin, each by counsel, appeared and were heard. The parties
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`attempted to resolve this dispute through mediation, and to that end, the Court entered a
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`Mediation Order on January 25, 2017. Mediation was unfruitful. The Court heard argument
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`from counsel on June 30, 2017, and closed the record and reserved decision.
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`The Applicable Legal Standards
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`The Elements of a Bankruptcy Code Section 523(a)(6) Claim
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`In order to establish that a debt should not be discharged under Section 523(a)(6), a
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`plaintiff must show that the debt at issue resulted from a “willful and malicious injury by the
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`debtor to another entity or to the property of another entity.” 11 U.S.C. § 523(a)(6). That is, a
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`7
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`Case 1-14-01111-ess Doc 66 Filed 09/28/17 Entered 09/28/17 17:26:45
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`plaintiff must establish three elements to succeed on a Section 523(a)(6) claim – first, that the
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`debtor acted willfully, second, that the debtor acted maliciously, and third, that the debtor’s
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`willful and malicious actions caused injury to the plaintiff or the plaintiff’s property. And “to
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`promote the ‘fresh start’ policy of the Bankruptcy Code, courts narrowly construe the exceptions
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`to dischargeability enumerated in § 523(a)(6).” Cocoletzi v. Orly (In re Orly), 2016 WL
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`4376947, at *3 (Bankr. S.D.N.Y. Aug. 10, 2016).
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`As to the first element, that the debtor acted willfully, the Bankruptcy Code does not set
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`forth a definition of “willful.” The Supreme Court has observed that “‘willful’ in [Section]
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`523(a)(6) means ‘deliberate or intentional.’” Kawaauhau v. Geiger, 523 U.S. 57, 61, n.3 (1998).
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`See Navistar Fin. Corp. v. Stelluti (In re Stelluti), 94 F.3d 84, 87 (2d Cir. 1996) (same). The
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`Supreme Court also noted that the kind of intent necessary in construing this section of the
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`Bankruptcy Code is similar to that of intentional torts, which “generally require that the actor
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`intend ‘the consequences of an act,’ not simply ‘the act itself.’” Restatement (Second) of Torts
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`§ 8A, comment a, p. 15 (1964) (emphasis added).” Kawaauhau, 523 U.S. at 61-62. And the
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`Supreme Court stated that “[a] wilful disregard . . . which necessarily causes injury and is done
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`intentionally, may be said to be done wilfully and maliciously.” Tinker v. Colwell, 193 U.S. 473,
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`487 (1904).
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`As to the second element, that the debtor acted maliciously, the Bankruptcy Code
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`likewise does not set forth a definition of “malicious.” The Second Circuit has concluded that
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`the term “malicious” in this context means “‘wrongful and without just cause or excuse, even in
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`the absence of personal hatred, spite, or ill-will.’” Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d
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`Cir. 2006) (quoting In re Stelluti, 94 F.3d at 87). And “[t]he conduct complained of must be
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`intended to or necessarily cause injury in order for the debt to be determined nondischargeable.”
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`8
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`Yash Raj Films (USA) v. Ahmed (In re Ahmed), 359 B.R. 34, 41 (Bankr. E.D.N.Y. 2005). In
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`Ahmed, the court concluded that because the finding that the debtor deliberately disregarded
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`warnings “was necessary to the District Court’s judgment, the subsumed finding of malice may
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`be given preclusive effect.” In re Ahmed, 359 B.R. at 43. In addition, as this Court previously
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`noted, “[m]alice may also be implied from ‘the acts and conduct of the debtor in the context of
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`[the] surrounding circumstances.’” Yash Raj Films (USA) Inc. v. Akhtar (In re Akhtar), 368 B.R.
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`120, 130-31 (Bankr. E.D.N.Y. 2007). This Court also noted that “a court may find malice ‘when
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`anyone of reasonable intelligence knows that the act in question is contrary to commonly
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`accepted duties in the ordinary relationships among people, and injurious to another.’” Akhtar,
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`368 B.R. at 132 (citation omitted). And malice is not the same as willfulness – as another court
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`observed, “the terms ‘willful’ and ‘malicious’ are separate elements with distinct meanings and
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`both must be satisfied by a preponderance of the evidence.” In re Orly, 2016 WL 4376947, at
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`*3.
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`A key component of a finding of malice for purposes of Section 523(a)(6) is that the
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`conduct at issue transcends ordinary norms of commercial behavior. The distinction drawn by
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`one bankruptcy court decision is instructive. One bankruptcy court distinguished between the
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`dischargeability of a judgment for damages, which arose from breach of contract and copyright
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`and trademark infringement, and dischargeability of a judgment for contempt, which arose from
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`“the blatant and willful contempt of court orders by the defendants, including the Debtor.”
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`Bundy Am. Corp. v. Blankfort (In re Blankfort), 217 B.R. 138, 146 (Bankr. S.D.N.Y. 1998).
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`As to the former, the court found that where “[t]he Damages Judgment was based solely
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`upon conduct of the defendants constituting breach of contract and copyright and trademark
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`infringement, with no evidence of actual malice and no aggravating factor sufficient to deny the
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`9
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`discharge normally granted to the ‘honest but unfortunate’ debtor,” the plaintiffs were not
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`entitled to summary judgment based on collateral estoppel with respect to the element of malice.
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`In re Blankfort, 217 B.R. at 146. The court noted that “[t]he cases in which courts denied
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`requests for non-dischargeability under § 523(a)(6) have as a common theme that persons of
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`honest character could have committed the acts or mistakes which led to legal liability.” In re
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`Blankfort, 217 B.R. at 144.
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`But as to the latter, the court reached a different conclusion. The court observed that
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`“[u]nder the law in this Circuit, the element of malice may be found . . . upon a finding of
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`aggravated, socially reprehensible conduct sufficient to justify an imputation of malice to the
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`debtor,” and found that with respect to a separate contempt judgment, “the blatant and willful
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`contempt of court orders by the defendants, including the Debtor, which is binding upon this
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`Court under the doctrine of collateral estoppel, constitutes the type of aggravated misconduct
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`which warrants an imputation of malice within the meaning of section 523(a)(6).” In re
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`Blankfort, 217 B.R. at 146.
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`Whether circumstances are sufficiently aggravating to support a finding of malice is a
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`fact-specific determination made on a case-by-case basis. See In re Stelluti (stating that malice
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`may be implied “by the acts and conduct of the debtor in the context of [the] surrounding
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`circumstances”) (internal quotations and citation omitted). “A court should look to the totality of
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`the circumstances to determine malice.” Forrest v. Bressler (In re Bressler), 387 B.R. 446, 455
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`(Bankr. S.D.N.Y. 2008).
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`As to the third element, that the debtor’s actions caused injury to the plaintiff or its
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`property, “[t]he conduct complained of must be intended to or necessarily cause injury in order
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`for the debt to be determined nondischargeable.” In re Ahmed, 359 B.R. at 41.
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`10
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`Finally, the standard of proof necessary in a Section 523 nondischargeability action is by
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`a preponderance of the evidence. As the Supreme Court stated, “we hold that the standard of
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`proof for the dischargeability exceptions in 11 U.S.C. § 523(a) is the ordinary preponderance-of-
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`the-evidence standard.” Grogan v. Garner, 498 U.S. 279, 291 (1991).
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`The Summary Judgment Standard
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`Federal Rule of Civil Procedure 56(c), made applicable to this adversary proceeding by
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`Bankruptcy Rule 7056, provides that summary judgment is appropriate “if the movant shows that
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`there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a
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`matter of law.” Fed. R. Civ. P. 56(a). A fact is “material” if it “might affect the outcome of the
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`suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
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`dispute is “‘genuine’ . . . if the evidence is such that a reasonable jury could return a verdict for
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`the nonmoving party.” Anderson, 477 U.S. at 248.
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`The moving party has the burden of demonstrating the absence of a genuine dispute as to
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`any material fact, and all of the inferences to be drawn from the underlying facts must be viewed
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`by the court in the light most favorable to the party opposing the motion. See Hayut v. State
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`Univ. of N.Y., 352 F.3d 733, 743 (2d Cir. 2003) (holding that the court’s role is “to view the
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`evidence in the light most favorable to the party opposing summary judgment, to draw all
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`reasonable inferences in favor of that party, and to eschew credibility assessments”).
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`Accordingly, the moving party must demonstrate that there is no genuine dispute as to a material
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`fact as to each element of its claim. If it does not, then summary judgment will be denied. See
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`Smith v. Goord, 2008 WL 902184, at *4 (N.D.N.Y. Mar. 31, 2008), aff’d, 375 F. App’x 73 (2d
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`Cir. 2010) (citing Anderson, 477 U.S. at 250 n.4) (holding that summary judgment should be
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`11
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`denied where the moving party does not show that there is no genuine dispute as to a material
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`fact with respect to each essential element of the claim)).
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`Once the moving party satisfies its initial burden, “the burden then shifts to the
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`nonmoving party to come forward with evidence sufficient to create a genuine dispute as to a
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`material fact for trial.” Silverman v. United Talmudic Acad. Torah Vyirah, Inc. (In re Allou
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`Distribs., Inc.), 446 B.R. 32, 49 (Bankr. E.D.N.Y. 2011). The nonmoving party “must do more
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`than simply show that there is some metaphysical doubt as to the material facts.” Matsushita
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`Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “Where the record taken as a
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`whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine
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`issue for trial.’” Matsushita, 475 U.S. at 587 (citation omitted). See Anderson, 477 U.S. at 249-
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`50 (internal citations omitted) (observing that “if the evidence is merely colorable . . . or is not
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`significantly probative . . . summary judgment may be granted”)
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`“Statements in the pleadings alone are not sufficient to meet this burden.” In re Allou
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`Distribs., Inc., 446 B.R. at 49. Rather, “[e]stablishing such facts requires going beyond the
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`allegations of the pleadings as the moment has arrived to ‘put up or shut up.’” In re Eugenia VI
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`Venture Holdings, Ltd. Litig., 649 F. Supp. 2d 105, 117 (S.D.N.Y. 2008) (quoting Weinstock v.
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`Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000), aff’d, 370 F. App’x 197 (2d Cir. 2010), cert.
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`denied, 540 U.S. 811 (2003)). “Unsupported allegations in the pleadings thus cannot create a
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`material issue of fact.” In re Eugenia VI Venture Holdings, 649 F. Supp. 2d at 117. As the
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`Supreme Court has observed, “Rule 56(e) . . . requires the nonmoving party to go beyond the
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`pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and
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`admissions on file,’ [and] designate ‘specific facts showing that there is a genuine issue for
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`trial.’” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). A party “must ‘set forth’ by affidavit
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`or other evidence ‘specific facts’ to survive a motion for summary judgment . . . and must
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`ultimately support any contested facts with evidence adduced at trial.” Bennett v. Spear, 520
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`U.S. 154, 168 (1997) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). As one
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`court observed, “[t]he non-moving party may not establish that there is a genuine issue to be
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`resolved at trial through mere allegations or denials of the adverse party’s pleadings, but rather
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`must demonstrate by affidavit or other admissible evidence that there are genuine issues of
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`material fact or law.” Beare v. Millington, 2014 WL 1236750, at *3 (E.D.N.Y. Mar. 25, 2014),
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`aff’d, 613 F. App’x 56 (2d Cir. 2015).
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`Claims that address the defendant’s intent, like claims that sound in fraud, raise
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`additional considerations. The Second Circuit noted that “summary judgment is ordinarily
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`inappropriate where an individual’s intent and state of mind are implicated. . . . The summary
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`judgment rule would be rendered sterile, however, if the mere incantation of intent or state of
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`mind would operate as a talisman to defeat an otherwise valid motion.” Meiri v. Dacon, 759
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`F.2d 989, 998 (2d Cir. 1985), cert. denied, 474 U.S. 829 (1985). And ‘“[c]ases in which the
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`underlying issue is one of motivation, intent, or some other subjective fact are particularly
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`inappropriate for summary judgment, as are those in which the issues turn on the credibility of
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`the affiants.’” Orange Lake Assocs. v. Kirkpatrick, 825 F. Supp. 1169, 1177 (S.D.N.Y. 1993)
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`(quoting Conrad v. Delta Air Lines, Inc., 494 F.2d 914, 918 (7th Cir. 1974)), aff’d, 21 F.3d 1214
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`(2d Cir. 1994). See Tolbert v. Smith, 790 F.3d 427, 434 (2d Cir. 2015) (stating, in the context of
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`an employment discrimination case based on violations of federal statute, that there is a “need for
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`caution about granting summary judgment to an employer in a discrimination case where . . . the
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`merits turn on a dispute as to the employer’s intent.”).
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`“Although summary judgment may be warranted in certain circumstances even when
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`examining state of mind, courts must be cautious in such cases, and, as a result . . . disputes
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`regarding intent are generally decided after a trial/evidentiary hearing resolving such factual
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`issues.” Adler v. Ng (In re Adler), 395 B.R. 827, 843 (Bankr. E.D.N.Y. 2015). Other courts are
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`in accord. As one court held, “the issue of [a] [d]ebtor’s intent in making the representations and
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`taking the actions alleged in the complaint is a material issue which is not subject to adjudication
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`by summary judgment.” Collum v. Redden (In re Redden), 234 B.R. 49, 51 (Bankr. D. Del.
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`1999).
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`The Doctrine of Collateral Estoppel
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`Collateral estoppel “bars ‘repetitious suits involving the same cause of action’ once ‘a
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`court of competent jurisdiction has entered a final judgment on the merits.’” Guggenheim v.
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`Birnbaum (In re Birnbaum), 513 B.R. 788, 799-800 (Bankr. E.D.N.Y. 2014) (quoting NML
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`Capital, Ltd. v. Banco Central de la Republica Argentina, 652 F.3d 172, 184 (2d Cir. 2011), cert.
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`denied, 567 U.S. 944 (2012)). “A ‘judgment in the prior suit precludes relitigation of issues
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`actually litigated and necessary to the outcome of the first action.’” In re Birnbaum, 513 B.R. at
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`800 (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n.5 (1979) (citations omitted)).
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`As the Restatement (Second) of Judgments states:
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`When an issue of fact or law is actually litigated and determined by a valid and
`final judgment, and the determination is essential to the judgment, the
`determination is conclusive in a subsequent action between the parties, whether
`on the same or a different claim.
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`Restatement (Second) of Judgments § 27 (1982).
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`The Supreme Court has confirmed that collateral estoppel may be invoked in Section 523
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`actions. As the Court noted, “collateral estoppel principles do indeed apply in discharge
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`exception proceedings pursuant to § 523(a).” Grogan, 498 U.S. at 284 n.11. The Supreme Court
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`also determined that “the ordinary preponderance standard . . . govern[s] the applicability of all
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`the discharge exceptions.” Grogan, 498 U.S. at 288. As a consequence, the Supreme Court
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`observed, “a bankruptcy court could properly give collateral estoppel effect to those elements of
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`the claim that are identical to the elements required for discharge and which were actually
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`litigated and determined in the prior action.” Grogan, 498 U.S. at 284. See Indo-Med
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`Commodities, Inc. v. Wisell (In re Wisell), 494 B.R. 23, 29 (Bankr. E.D.N.Y. 2011) (citing
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`Grogan). And as the Second Circuit noted, “[b]ankruptcy proceedings may not be used to re-
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`litigate issues already resolved in a court of competent jurisdiction.” Kelleran v. Andrijevic, 825
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`F.2d 692, 695 (2d Cir. 1987), cert. denied, 484 U.S. 1007 (1988). See In re Birnbaum, 513 B.R.
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`at 800 (discussing the collateral estoppel doctrine).
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`Courts recognize that the application of the collateral estoppel doctrine differs based on
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`the forum in which the first judgment was entered. The Supreme Court has noted that “‘[i]t has
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`been held in nondiversity cases since Erie R. Co. v. Tompkins, that the federal courts will apply
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`their own rule of res judicata.’” Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S.
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`313, 324 n.12 (1971). And as several courts have found, “[when] the issues sought to be
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`precluded were decided by a federal court, as in the case at bar, the Bankruptcy Court must apply
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`the theoretically uniform federal common law of collateral estoppel.” FTC v. Wright (In re
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`Wright), 187 B.R. 826, 832 (Bankr. D. Conn. 1995). See Smith v. Entrepreneur Media, Inc. (In
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`re Smith), 2009 Bankr. LEXIS 4582 (9th Cir. B.A.P. Dec. 17, 2009), aff’d, 465 F. App’x. 707
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`(9th Cir. 2012) (stating that “[t]he application of issue preclusion to a prior federal judgment is
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`determined by federal law”). See also In re Birnbaum, 513 B.R. at 800 (discussing the
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`application of collateral estoppel based on the forum where the first judgment was entered).
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