IN RE PECKHAM

3, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985) (stating that the full faith and credit statute, 28 U.S.C. § 1738, "directs a federal court to refer to the preclusion law of the State in which the judgment was rendered."). Under Massachusetts law, collateral estoppel precludes relitigation of issues in prior actions between the parties or those in privity with those parties, provided the issues were actually litigated in the first action, and determined by a "final judgment on the merits." Smith Barney, Inc. v. Strangie (In re Strangie), 192 F.3d 192, 194 (1st Cir. 1999). To apply the doctrine, a court must determine that: (1) there was a valid and final judgment on the merits in the prior adjudication; (2) the party against whom estoppel is asserted was a party (or in privity with a party) to the prior litigation; (3) the issue in the prior adjudication is identical to the issue in the current litigation; and (4) the issue in the prior litigation was essential to the earlier judgment. Alba v. Raytheon Co., 441 Mass. 836, 809 N.E.2d 516, 521 (2004) (citations omitted).

The Supreme Judicial Court of Massachusetts has noted that "the `guiding principle' in determining whether to allow a party to use collateral estoppel is whether the party against whom it is asserted had a `full and fair opportunity to litigate the issue in the first action or [whether] other circumstances justify affording him an opportunity to relitigate the issue.'" Treglia v. MacDonald, 430 Mass. 237, 717 N.E.2d 249, 253 (1999) (quoting Martin v. Ring, 401 Mass. 59, 514 N.E.2d 663 (1987)).

In re Stanley-Snow, 405 B.R. at 18. The bankruptcy appellate panel further observed that "[i]n Massachusetts . . . default judgments are generally not given collateral estoppel effect on an issue in a subsequent action because the issues have not been actually litigated." Id. at 19 (citing Treglia, 717 N.E.2d at 253; Staniunas v. Delisle (In re Delisle), 281 B.R. 457, 463 (Bankr. D. Mass. 2002); Phalon v. Varrasso (In re Varrasso), 194 B.R. 537, 539 (Bankr. D. Mass. 1996); Restatement (Second) of Judgments § 27 cmt. e (1982) (in the case of a judgment entered by default, none of the issues is actually litigated, therefore, the judgment should not have preclusive effect)). See also Sharfarz v. Goguen (In re Goguen), No. 09-4158, 2010 WL 2612662 (Bankr. D. Mass. June 25, 2010); Rivers Edge Condominium Homeowners Assoc. v. Cohen (In re Cohen), 370 B.R. 26, 29 (Bankr. D. N.H. 2007) ("There is a `strong presumption' against according collateral estoppel preclusive effect to default judgments, and the presumption will only be rebutted upon a finding `that a party's reasons for not litigating are such that the interests of fairness militate against the non-preclusion of issues already raised but not litigated'"); See also Kane v. Town of Harpswell (In re Kane), 254 F.3d 325, 329 (1st Cir. 2001) (identifying default judgments as

The court noted an exception, however, finding that the "actual litigation" requirement of collateral estoppel may be satisfied if the party actively or substantially participated in the proceedings prior to the entry of a default judgment. Id. at 19-20.

examples of matters not "actually litigated").

Based upon the foregoing statements of the law, the Court finds that Liddell is not entitled to a determination that Peckham obtained more than $2,000 from him by means of false pretenses or false representations. Peckham testified that he was unable to afford an attorney to defend the litigation in the Cambridge District Court, and he did not participate in the action until after the entry of the judgment when he filed a Motion for Relief from Judgment. He did not actively participate in the case, and Liddell failed to establish an exception to the general rules that "Chapter 93A violations and fraud are not synonymous, and that Chapter 93A liability may be premised on conduct other than fraud." See Stoehr v. Mohamed, 244 F.3d 206, 209 (1st Cir. 2001). Additionally, Liddell failed to establish an exception to the general rule that default judgments are not entitled to collateral estoppel effect. Thus, the Court rejects Liddell's argument that his $2,000 in damages should be trebled and include attorney's fees for purposes of determining the amount of his nondischargeable debt under section 523(a)(2)(A).

B. Section 523(a)(6)

1. Applicable Law

Section 523(a)(6) excepts from discharge debts "for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6). As under 11 U.S.C. § 523(a)(2), the Plaintiff bears the burden of proving that his claim under § 523(a)(6) by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 287 (1991).

In Kawaauhau v. Geiger, 523 U.S. 57 (1998), the Supreme Court analyzed the "willful" component of section 523(a)(6). It stated:

The word "willful" in (a)(6) modifies the word "injury," indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead "willful acts that cause injury." Or, Congress might have selected an additional word or words, i.e., "reckless" or "negligent," to modify "injury." Moreover, as the Eighth Circuit observed, the (a)(6) formulation triggers in the lawyer's mind the category "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." Restatement (Second) of Torts § 8A, Comment a, p. 15 (1964) (emphasis added).

523 U.S. at 61-62.

As a result of the Supreme Court's decision, actions of the debtor which simply cause injury, but which are not deliberately undertaken, are not excepted from discharge. Because the Supreme Court found that the defendant's medical malpractice did not rise to the level of willful injury, the Court did not reach the question of what the term "malicious" added to the analysis. Id.

The United States Court of Appeals for the First Circuit in Printy v. Dean Witter Reynolds, Inc., 110 F.3d 853 (1st Cir. 1997), held that the element of malice in section 523(a)(6) requires that the creditor show that the willful injury was caused without justification or excuse, adding that "personal hatred, spite or ill-will" need not be established to find the element of malice. Id. at 859. The Printy formulation is followed by bankruptcy courts in this circuit. See, e.g., Bauer v. Colokathis, 417 B.R. 150, 158 (Bankr. D. Mass. 2009) (citing Caci v. Brink (In re Brink), 333 B.R. 560, 567 (Bankr. D. Mass. 2005); Gomes v. Limieux (In re Limieux), 306 B.R. 433, 440 (Bankr. D. Mass. 2004); and McAlister v. Slosberg (In re Slosberg), 225 B.R. 9, 21 (Bankr. D. Maine 1998)). See also Hermosilla v. Hermosilla (In re Hermosilla), 430 B.R. 13, 22 (Bankr. D. Mass. 2010).

In Colokathis, this Court stated:

Construing Geiger and Printy, together this Court concludes that, for an exception to discharge under 11 U.S.C. § 523(a)(6) to apply, the creditor has the burden of showing . . . that 1) the creditor suffered injury; 2) the debtor intended to cause the injury or that there was substantial certainty that the injury would occur; and 3) the debtor had no justification or excuse for the action resulting in injury. This is consistent with the Slosberg court's view that although "the terms [willful and malicious] might share elements, i.e., they both require that the act itself be intentional, they must have independent significance. In re Geiger should not be read to collapse the two elements into one." Slosberg, 225 B.R. at 19-20 (citations omitted).

Colokathis, 417 B.R. at 157-58. See also Hermosilla v. Hermosilla (In re Hermosilla), 430 B.R. 13, 22 (Bankr. D. Mass. 2010).

Despite the interpretation of malice in the First Circuit and elsewhere, the law remains unsettled. For example, in GMAC, Inc. v. Coley (In re Coley), No. 09-0307, 2010 WL 2991416 (Bankr. E.D. Pa. July 29, 2010), the court stated:

Courts also have invoked different standards for determining whether an intentional tort involved "malice" within the meaning of § 523(a)(6). For example in In re Long, 774 F.2d 875, 881 (8th Cir. 1985), the court reasoned that, for the debt for any injury arising from an intentional tort to be nondischargeable under § 523(a)(6), the debtor's conduct must be "more culpable than that which is in reckless disregard of creditors' economic interests and expectancies." Further, in assessing the debtor's culpability, "knowledge that legal rights are being violated is insufficient to establish malice, absent some additional `aggravated circumstances'. . . ." Id. Other courts, too, have stated that the existence of "aggravating circumstances" and a conscious disregard of one's societal duties to others are essential aspects of the malice requirement under § 523(a)(6). See, e.g., In re Logue, 294 B.R. 59, 63 (B.A.P. 8th Cir. 2003); In re Richardson, 2007 WL 2381990, at *6-7 (Bankr. N.D. Ala. Aug. 17, 2007); In re Weiser, 2007 WL 4868319, at *2 (Bankr. N.D. Ind. Apr. 4, 2007); In re Hambley, 329 B.R. 382, 402 (Bankr. E.D.N.Y. 2005); In re Blankfort, 217 B.R. 138, 143-45 (Bankr. S.D.N.Y. 1998).

In this unsettled area of the law, one court has summarized the differing standards for malice as follows:

One standard requires proof from the creditor that the debtor acted with the specific intent to injure the creditor. A second view is that the creditor need only prove that the debtor acted without just cause or excuse. A third approach requires that the debtor's conduct target the creditor, at least in the sense that the conduct was certain or almost certain to cause financial harm. A fourth approach, which has been characterized as a "totality of the circumstances" approach, adopts the position that an injury is malicious if the debtor fails to act in subjective good faith.

In re Pineau, 149 B.R. 239, 242 (D. Me. 1993) (emphasis added) (citing In re Horldt, 86 B.R. 823 (Bankr. E.D.Pa. 1988)).

In re Coley, 2010 WL 2991416 at *13.

Litigation under section 523(a)(6) for willful and malicious injuries often arises in the context of conversion of collateral, resulting in courts' focusing on harm to creditors' economic interests.

In the context of a nondischargeability action under § 532(a)(6) involving contempt, the court in Musilli v. Droomers (In re Musilli), No. 08-2572, 2010 WL 2222806 (6th Cir. Jun 3, 2010), observed: "[f]or the discharge exception under § 523(a)(6) to apply, a debtor must: (1) `will or desire harm[;]' or (2) `believe injury is substantially certain to occur as a result of his behavior.'" 2010 WL 2222806 at * 4 (citingMarkowitz v. Campbell (In re Markowitz), 190 F.3d 455, 465 n. 10 (6th Cir. 1999)). The Musilli court added: "This court has created a non-exclusive list of the `types of misconduct [that] satisfy the willful and malicious injury standard: intentional infliction of emotional distress, malicious prosecution, conversion, assault, false arrest, intentional libel, and deliberately vandalizing the creditor's premises.'" 2010 WL 2222806 at *4 (citing Steier v. Best (In re Best), 109 F. App'x. 1, 5 n. 2 (6th Cir. 2004)). In Musilli, the Sixth Circuit affirmed the bankruptcy court's determination that the debtor and his law partner willfully and maliciously harmed the plaintiff when they violated a court order to escrow funds sufficient to cover a judgment against the law firm. Specifically, the plaintiff, who claimed entitlement to a referral fee, asserted that because the firm had violated the Uniform Fraudulent Transfer Act by failing to set aside a referral fee during litigation and instead transferred the money to shareholders, it would be difficult or impossible to collect on the fee. The plaintiff asked the court to require the firm to place the claimed funds in escrow pending resolution of the suit. The court granted the plaintiff's motion and enjoined the firm from transferring any firm assets until it placed the disputed sum in escrow. The firm never escrowed the funds, and transferred money to its shareholders, including the debtors, without obtaining court permission. After a bench trial, in which the state court entered a judgment in favor of the plaintiff, the state court held the firm in contempt. After a lengthy and complex procedural history in which the debtors violated an agreement with the plaintiff and sued her for extortion, they filed bankruptcy petitions. The bankruptcy court eventually determined that the state court's criminal contempt award was nondischargeable. In affirming, the Sixth Circuit stated:

We find that the court's escrow order made clear that "injury [wa]s substantially certain to occur" should Musilli and Baumgardner [the debtors] violate it. In re Markowitz, 190 F.3d at 465 n. 10. Musilli and Baumgardner point to no facts in the record that refute this finding. Despite having clear instructions from the court that the firm was to escrow funds sufficient to cover a judgment against it, Musilli and Baumgardner transferred all of the firm's assets away from the firm, including transferring a significant amount of money to themselves. The appellants directly violated the court order and have offered no legitimate justification that might explain why their actions were not willful and malicious. Therefore, we affirm the bankruptcy courts grant of summary judgment for Droomers [the plaintiff] on her claim that the debt is nondischargeable under § 523(a)(6).

In re Musilli, 2010 WL 2222806 at *5. In support of its decision, the Sixth Circuit observed:

Other courts uniformly have held that a contempt penalty constitutes a nondischargeable willful-and-malicious injury under § 523(a)(6). See, e.g., Siemer v. Nangle (In re Nangle), 274 F.3d 481, 484 (8th Cir. 2001) (finding that a debtor's conduct in disobeying a court order was "willful," and his "conduct was malicious because it was `targeted at the creditor . . . at least in the sense that the conduct is certain or almost certain to cause . . . harm.'" (quoting Barclays American/Business Credit, Inc. v. Long (In re Long), 774 F.2d 875, 881 (8th Cir. 1985))); Williams v. Int'l Brotherhood of Elec. Workers Local 520 (In re Williams), 337 F.3d 504, 511-13 (5th Cir. 2003) (holding that a contempt judgment resulting from the debtor's violation of an agreed judgment was nondischargeable under § 523(a)(6) because the judgment had "made him substantially certain that his acts would inflict injury" should he not comply with its directives).

2010 WL 222806 at *5.

The Court finds that the Musilli decision and the cases cited in it are distinguishable from the facts present in the instant case, and they highlight divergent views of what is required to establish a willful and malicious injury for purposes of § 523(a)(6). As the court in Suarez v. Barrett (In re Suarez), 400 B.R. 732, 736-37 (B.A.P. 9th Cir. 2009), recognized, "Section 523(a)(6) does not make "contempt" sanctions nondischargeable per se, and neither does any other subpart of section 523(a)." 400 B.R. at 737. It added: "Whether contempt sanctions are nondischargeable accordingly depends not on whether they are labeled as "contempt," but on whether the conduct leading to them was "willful and malicious." Id.

In Suarez, the bankruptcy appellate panel held that attorneys fees and costs assessed against the Chapter 7 debtor and in favor of her ex-husband's new wife based on her willful and malicious conduct in repeatedly violating a state court order that enjoined her from contacting, molesting, harassing, attacking, threatening, assaulting, or telephoning the new wife and that required her to maintain 100 yard distance from the new wife, were nondischargeable in bankruptcy as being for "injury" that debtor had inflicted, even in absence of any compensatory judgment debt.

In In re Nangle, a decision cited by the court in Musilli, a jury awarded the plaintiff punitive damages as a result of the debtor's willful and wanton conduct, which the trial judge defined as "`a course of action which shows actual or deliberate intention to harm or which, if not intentional, shows an utter indifference to or conscious disregard of a person's own safety and the safety of others.'" 274 F.3d at 483. InNangle, the plaintiff registered her Illinois judgment as a foreign judgment in Missouri and attempted to collect the judgment by filing a motion to compel the debtor to produce documents disclosing his assets. The state court held the debtor in contempt when he failed to comply with the order and imposed a "compensatory fine" against him, which the parties referred to as a doubling of the underlying judgment. Id. at 484. The court explained:

Some courts have held that failure to comply with a court order constitutes willful and malicious conduct as a matter of law within the meaning of § 523(a)(6). See, e.g., In re Allison, 176 B.R. 60, 64 (Bankr. S.D. Fla. 1994). We do not believe, however, that it is necessary in the present circumstances to express a view one way or the other on that matter. In this case, the Missouri state court that entered the contempt order found explicitly that Mr. Nangle's conduct was "willful." That court, moreover, stated that Mr. Nangle's actions were "designed to interfere with [Ms. Siemer's] efforts to collect the judgment entered against him herein." It follows that Mr. Nangle's conduct was malicious because it was "targeted at the creditor . . . at least in the sense that the conduct is certain or almost certain to cause . . . harm," Long, 774 F.2d at 881.

Although the bankruptcy appellate panel concluded that "the record is insufficient to determine" whether Mr. Nangle's contempt was intended to inflict injury on Ms. Siemer or on the court itself, it is not a matter of mutually exclusive alternatives: We think it perfectly clear that the state court held that Ms. Siemer was a target, if not the only target, of Mr. Nangle's willful refusal to obey the court order.

Finally, we believe that the contempt order is a final judgment for collateral estoppel purposes. The bankruptcy appellate panel held otherwise because it concluded that under the relevant state law a civil contempt order is not final until it has been enforced. Although that is true for the purposes of an appeal, "`[r]ecent decisions have relaxed traditional views of the finality requirement'" in the collateral estoppel context by applying the doctrine "`to matters resolved by preliminary rulings or to determinations of liability that have not yet been completed by an award of damages or other relief,'" let alone enforced, see John Morrell v. Local Union 304A, 913 F.2d 544, 564 (8th Cir. 1990) (quoting 18 Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice and Procedure § 4434 at 321 (1981)), cert. denied, 500 U.S. 905, 111 S.Ct. 1683, 114 L.Ed.2d 78 (1991). According to the Restatement (Second) of Judgments § 13 cmt. b (1982), moreover, "execution or enforcement" are not pre-requisites for meeting the finality standard of claim preclusion, and, by implication, the finality standard of collateral estoppel as well.

Nangle, 274 F.3d at 484-85. InNangle, there was an underlying judgment sufficient to establish the willful and malicious conduct based on actual litigation. The Eighth Circuit concluded that the contempt judgment could be afforded collateral estoppel effect, thus reversing the bankruptcy appellate panel, finding that the contempt judgment essentially enhanced "a judgment that it had already held nondischargeable because it consisted of punitive damages and thus bespoke malice on the part of the debtor." Id. at 484 ("Mr. Nangle's acts involved an actual or deliberate intention to harm Ms. Siemer."). See Steier v. Best (In re Best), 109 F.App'x 1, 7 (6th Cir. 2004).

Similarly, the decision in In re Williams, 337 F.3d 504 (5th Cir. 2003), is distinguishable because in that case the debtor failed to abide by an agreed judgment. The Fifth Circuit based its conclusion on the finding of the district court that the debtor "purposefully and willfully" violated the agreed judgment. The court observed:

At the contempt hearing, Williams [the debtor] admitted that he had notice of the Agreed Judgment and that it was clear and unambiguous, that he had continued to use non-union electricians on commercial projects, and that he had not yet paid the restitution for his earlier breach of the CBA [collective bargaining agreement]. The district court found Williams in contempt and imposed sanctions, which included attorney's fees and additional restitution. A second audit was performed for the period between the entry of the Agreed Judgment in December of 1999 and the contempt hearing in April of 2000. This audit revealed Union electricians had been deprived of $106,911.43 in wages and benefits when Williams hired non-union workers. From the record, it appears that the attorney's fees incurred in the contempt hearing are included in this figure.

337 F.3d at 511. See also The Spring Works, Inc. v. Sarff (In re Sarff), 242 B.R. 620, 627-28 (B.A.P. 6th Cir. 2000); Dentrust Dental Internat'l v. Rosenberg (In re Rosenberg), No. 05-1587, 2007 WL 2156282 at *4 (Bankr. N.D. Ohio July 23, 2007) (collateral estoppel prevented debtor from relitigating contempt order with respect to willful and malicious injury caused by violation of non-compete agreement); Heyne v. Heyne, (In re Heyne) 277 B.R. 364, 369 (Bankr. N.D. Ohio 2002) ("a finding of contempt-which at the very least requires that the alleged contemptor must have knowingly disobeyed the underlying order-clearly lends itself to a finding of a deliberate and intentional act"); Bundy American Corp. v. Blankfort (In re Blankfort), 217 B.R. 138, 145 (Bankr. S.D.N.Y. 1998) (the "existence of the Injunction Order and the defendants' defiance of it removes the Contempt Judgment from the category of ordinary judgments for violation of common law or statutory duties . . . the Debtors' persistent violations of the Injunction Order . . . constitute the type of aggravating circumstances which the courts in the Second Circuit and elsewhere have found to be sufficient to satisfy the `malicious' requirement of subsection (6)"); Buffalo Gyn Womenservices, Inc. v. Behn (In re Behn), 242 B.R. 229, 238 (Bankr. W.D.N.Y. 1999) ("when a court . . . issues an injunction . . . telling a specific individual what actions will cross the line into injury to others, then damages resulting from an intentional violation of the order are ipso fact the result of a `willful and malicious injury'"); Haeske v. Arlington (In re Arlington), 192 B.R. 494 (Bankr. N.D. Ill. 1996) (intentional failure to comply with court orders contained in an injunction satisfies the definition of "willful and malicious"); Shteysel v. Shteysel (In re Shteysel), 221 B.R. 486 (Bankr. E.D. Wis. 1998) (same).

In City of Colton v. Corbly (In re Corbly), 61 B.R. 851 (Bankr. D. S.D. 1986), the court attempted to formulate a methodology for determining whether contempt orders are nondischargeable. It stated:

Courts determining contempt nondischargeability under this section find it dependent on whether the judgment is compensatory or imposed to uphold the dignity of the court. In re Marini, 28 B.R. 262, 265 (Bkrtcy. E.D.N.Y. 1983); In re Gedeon, 31 B.R. 942, 945-46 (Bkrtcy. D. Colo. 1983) (civil or criminal contempt nature is determinative); Parker v. United States, 153 F.2d 66, 70-73 (1st Cir. 1946); see also, Guariglia v. Community Nat'l Bank Trust Co., 382 F.Supp. 758 (E.D.N.Y. 1974); In re Bell, 53 F.Supp. 993 (E.D.N.Y. 1943). A judgment which is compensatory and not imposed to uphold the dignity of the court is not precluded discharge under this section. In re Marini, 28 B.R. at 265; In re Gedeon, 31 B.R. at 945.

Courts are not bound by the judgment's criminal or civil contempt characterization but must look to surrounding circumstances for determining its true nature. Id. A requirement that the contempt judgment is directly payable to a creditor is not necessarily determinative of whether it is compensatory or imposed to uphold the dignity of the court. Id. Unfortunately, courts addressing this issue have not been uniform as to what factors may be considered for determining the true nature of the contempt judgment.

In re Corbly, 61 B.R. at 856-57. In Corbly, the court determined that a portion of a contempt judgment was nondischargeable under 11 U.S.C. § 523(a)(7), not § 523(a)(6), because the judgment was to uphold the dignity of the court. On reconsideration, however, the court declared the debt dischargeable. See In re Corbly, 149 B.R. 125, 127 (Bankr. D. S.D. 1992). Nevertheless, Corbly is an older decision and has not been widely cited.

In Mortgage Capital Advisers, Inc. v. Hawkins (In re Hawkins), No. 99-3537 (MAW), 2001 WL 1820324 (Bankr. D. Del. Mar. 1, 2001), the court considered an award of sanctions against debtors arising from facts similar to those here. The debtors ignored discovery in aid of execution, and the state court, after granting motions to compel, ordered the debtors to pay costs, attorney's fees, and civil sanctions. In the event the debtors failed to pay, the court ordered that they would be liable to the plaintiff for civil and/or criminal sanctions in the amount of $5,000 per day. In ruling on a motion for summary judgment, the court framed the issue as follows: "whether the Delaware Court, after actual litigation, necessarily concluded in a final, valid order that the injury to MCA was caused by a deliberate or intentional action of the Debtors which was substantially certain to cause harm." Id. at *3. In finding that collateral estoppel did not apply, the bankruptcy court noted that the state court made no express findings that the debtors had acted willfully or maliciously in failing to produce the requested documents. Moreover, it distinguished numerous cases, including Bundy American Corp. v. Blankfort (In re Blankfort), 217 B.R. 138 (Bankr. S.D.N.Y. 1998) (debtor continued to use the franchiser's trademarks and trade names after receiving notice of termination; when franchiser sought to enjoin the debtor's continuing violations., an injunction entered, which the debtor ignored; magistrate made express findings that the debtor had blatantly and willfully violated the contempt orders); and P.P. Wine Int'l, Inc. v. Allison (In re Allison), 176 B.R. 60 (Bankr. S.D. Fla. 1994) (violation of the Florida Trade Secrets, being akin to theft, is willful and malicious and sanctions order premised on the debtor's continuing violation of the statute which was a willful and malicious injury).

2. Analysis

Resolution of the issue of whether Peckham willfully and maliciously injured Liddell by failing to respond to discovery in aid of execution of Liddell's judgment and subjecting himself to contempt and civil arrest is not straightforward. The case law is fact driven, and the holdings in the decisions examined in this Memorandum often are the result of both egregious and affirmative misconduct by debtors in contravention of court orders or injunctions, rather than the virtual paralysis exhibited by Peckham in the instant case in response to the demands made upon him by Liddell and the orders of the Cambridge District Court resulting from Liddell's collection efforts with respect to a debt he had no ability to pay and the stress caused by his inability to pay his mortgage. Moreover, the cases reflect the unsettled area of the law with respect to the interpretation of malice, and many decisions involving contempt follow trials on the merits, rather than default judgments. Compounding these difficulties, there are few decisions on the issue in the First Circuit.

But see Parker v. U.S., 153 F.2d 66 (1st Cir. 1946), distinguishing between civil and criminal contempt. In Parker, the court stated:

Proceedings in civil contempt are between the original parties and are instituted and tried as a part of the main cause. Though such proceedings are `nominally those of contempt', the real purpose of the court order is purely remedial-to coerce obedience to a decree passed in complainant's favor, or to compensate complainant for loss caused by respondent's disobedience of such a decree. If imprisonment is imposed in civil contempt proceedings, it cannot be for a definite term. The respondent can only be imprisoned to compel his obedience to a decree. If he complies, or shows that compliance is impossible, he must be released, for his confinement is not as punishment for an offense of a public nature. If a compensatory fine is imposed, the purpose again is remedial, to make reparation to a complainant injured by respondent's disobedience of a court decree. While respondent may be confined to coerce payment of the compensatory fine, he must be released if he pays the fine or shows his utter inability to do so-confinement beyond that point would be punitive, not remedial. If complainant makes a showing that respondent has disobeyed a decree in complainant's favor and that damages have resulted to complainant thereby, complainant is entitled as of right to an order in civil contempt imposing a compensatory fine. The court has no discretion to withhold the appropriate remedial order. In this respect the situation is unlike that of criminal contempt where the court in its discretion may withhold punishment for the past act of disobedience. An order imposing a compensatory fine in a civil contempt proceeding is thus somewhat analogous to a tort judgment for damages caused by wrongful conduct.

Id. at 70 (citations omitted) (emphasis supplied).

This Court agrees with the observations made by the court in Corbly. Twenty years after the court issued its decision, courts addressing the issue of whether contempt judgments are nondischargeable are not uniform in their analysis. This Court concludes that in the absence of collateral estoppel, the contempt judgment must be based on conduct of the debtor that is both willful and malicious for that judgment to be nondischargeable under § 523(a)(6), and that the surrounding circumstances will determine the true nature of the debtor's conduct, without regard to whether the contempt order was compensatory or imposed to uphold the dignity of the court. See In re Corbly, 61 B.R. at 856-57.

The judgment of the Cambridge District Court contains no findings that would permit this Court to conclude that it determined that Peckham acted willfully and maliciously for purposes of applying collateral estoppel in this adversary proceeding. As the court in FL Receivables Trust 2002-A v. Fernandez (In re Fernandez), No. 06-2059, 2008 WL 268975 (Bankr. D. Conn. Jan. 29, 2008), recognized in the context of the federal rules governing discovery:

Sanctions for failure to comply with a discovery order are governed by Fed.R.Civ.P. 37, made applicable in bankruptcy proceedings by Fed.R.Bankr.P. 7037. See, e.g. Societe Internationale Pour Participations Industrielles Et Commerciales, S.A. v. Rogers, 357 U.S. 197, 206-207, 78 S.Ct. 1087, 1092-1093 (1958) (sanctions for "noncompliance with a production order depends exclusively upon Rule 37, which addresses itself with particularity to the consequences of a failure to make discovery"); Evans v. State of Connecticut, 967 F.Supp. 673, 689 (D. Conn. 1997), aff'd, 24 Fed.Appx. 35 (2d Cir. 2001) ("Since there was a court imposed-discovery order in this case, Rule 37 sanctions are applicable."). Rule 37 provides a broad range of sanctions that may be imposed by the court for failure to comply with discovery orders, ranging from reimbursement of a movant's attorney's fees and costs to entry of a default judgment against a noncompliant party. Willfulness is not a precondition for the imposition of Rule 37 sanctions, but may be a consideration in a court's exercise of its discretion to enter judgment against the offending party, widely considered the harshest of sanctions. Societe Internationale, 357 U.S. at 208 ("[T]he willfulness or good faith of petitioner, can hardly affect the fact of noncompliance and are relevant only to the path which the District Court might follow in dealing with petitioner's failure to comply."). Imposition of attorney's fees, the "mildest sanction," for violation of a discovery order does not require a finding of willfulness. Evans, 967 F.Supp. at 689.

2008 WL 268975 at *5. See also Atlas Tack Corp. v. Donabed, 47 Mass. App. Ct. 221, 224 (1999) ("Willful noncompliance was eliminated in 1984 as a prerequisite to the imposition of sanctions [under Mass. R. Civ. P. 37] `to increase compliance with discovery orders, by making it easier for parties to achieve, and judges to award, sanctions for the failure to comply with a discovery order.'"). Moreover, and more importantly,

Cf. Mass. R. Civ. P. 37(b).

. . . [S]ection 523(a)(6) does not make "contempt" sanctions nondischargeable, and neither does any other subpart of section 523(a). Section 523(a)(6) says that a debt resulting from a "willful and malicious injury" is nondischargeable. 11 U.S.C. § 523(a)(6). Whether the sanctions against the Debtor] are nondischargeable accordingly depends, not on whether they are labeled as "contempt" or as something else, but on whether the conduct leading to them was "willful and malicious."

Pearle Vision, Inc. v. Romm (In re Romm), 2006 WL 3692416 at *3 (Bankr. N.D. Ill. Dec. 13, 2006). See also Suarez v. Barrett (In re Suarez), 400 B.R. 732, 736-37 (B.A.P. 9th Cir. 2009).

Peckham ignored the court's order to produce discovery, but this Court is unable to infer that he did so with the requisite intent to harm Liddell. The sanctions imposed by the Cambridge District Court were imposed to either compel Peckham's obedience or to compensate Liddell. While the court indicated its intent to punish Peckham, Peckham could have avoided the daily sanction through compliance. Peckham's conduct violated the dignity of the Court, but there was no evidence that he intended to harm Liddell in not appearing in the Cambridge District Court or obeying its orders. In other words, the Court

cannot find that there was a "deliberate or intentional injury" as opposed to a deliberate or intentional act by Peckham. In the instant case, Peckham failed to act, leading to injury, namely Liddell's liability for legal fees. See Geiger, 523 U.S. at 61. Indeed, Peckham's whole course of action in the state court matter was to ignore his dire predicament which ultimately led to his arrest. Peckham took no affirmative steps to address his financial crisis until he was faced with incarceration. As the Eighth Circuit observed in Blocker v. Patch (In re Patch), 526 F.3d 1176 (8th Cir. 2008):

As an abstract legal matter, the BAP concluded that the failure to act in the face of a duty can constitute an intentional tort. But we question whether a debtor's breach of a legal duty to act can ever constitute a "willful . . . injury," as the Supreme Court and this circuit have interpreted § 523(a)(6) consistent with the Restatement (Second) of Torts.

526 F.3d at 1181-82.

The Eight Circuit added:

The Restatement appears to take the categorical position that the failure to act in the face of a legal duty can never constitute an intentional tort. "The Restatement speaks only of an act (not of an omission) in defining intent, in § 8A, and requires an act, as distinguished from inaction, for battery. . . ." W. Page Keeton et al., Prosser and Keeton on Torts § 8, at 36 n. 6 (5th ed. 1984). Correspondingly, the Restatement characterizes an actor's deliberate breach of a legal duty to protect as negligence. Id. On the other hand, while the Supreme Court's decision in Geiger, and our en banc decision, relied on the Restatement in interpreting the meaning of "willful . . . injury" under § 523(a)(6), neither decision requires strict adherence to every particular of the Restatement, and neither decision can be read for the broad rule that a debtor's breach of a legal duty to act can never be "willful" under § 523(a)(6). The propriety of any such categorical rule is questionable. See Keeton, supra, § 8, at 36 n. 6 ("This curious usage is confounding, since there is as clear a distinction (1) between purposely failing to act, in order to produce a desired consequence, and failing to act without adverting to that consequence, as (2) between purposely acting to produce a desired consequence and acting without adverting to that consequence."). . . .

526 F.3d at 1182.

This Court finds that Liddell not only failed to establish that Peckham acted with the requisite intent to injure, he failed to establish that he acted without just cause or excuse for purposes of both components of § 523(a)(6). See Bauer v. Colokathis, 417 B.R. 150, 158 (Bankr. D. Mass. 2009). Peckham testified that he suffered from severe depression, which together with his financial problems and lack of income, manifested itself in his failure to defend the Cambridge District Court action or produce discovery. Additionally, in the context of this case, malice as defined as "without just cause or excuse" is lacking. In Bundy Am. Corp. v. Blankfort (In re Blankfort), 217 B.R. 138 (Bankr. S.D.N.Y. 1998), the Court stated:

[T]he statutory element of maliciousness will be found by imputation where the debtor has breached a duty to the plaintiff founded in contract, statute or tort law, willfully in the sense of acting with deliberate intent, in circumstances where it is evident that the conduct will cause injury to the plaintiff and, most important, and under some aggravating circumstance such as to warrant denial of discharge. In the absence of a finding of "Biblical malice," an ordinary tort or breach of contractual or statutory duty generally is not sufficient to deny discharge under subsection (6) without some aggravating circumstance evidencing conduct so reprehensible as to warrant denial of the "fresh start" to which the "honest but unfortunate" debtor would normally be entitled under the Bankruptcy Code.

217 B.R. at 144 (emphasis supplied). The Court can find no aggravating circumstances here.

Peckham had advised Liddell repeatedly of his financial woes. Indeed, Liddell intimated that he was tired of hearing about Peckham's financial problems. Moreover, Liddell knew that Peckham had been evicted from the Rogers Street premises because he had permission from the new tenant to inspect his piano at that location. In short, Liddell and his attorney had information from Peckham and could have obtained more from public records to conclude that there was little likelihood that Peckham would be able to satisfy a $27,000 judgment. While Liddell had every right to pursue discovery in aid of his execution, and Peckham's failure to respond exhibited poor judgment, Peckham knew he would be unable to satisfy any judgment Liddell might obtain. Depressed and unemployed, he failed in his duty to respond to Liddell's legitimate requests and to the orders of the Cambridge District Court. He buried his head in the sand and presumably hoped that the whole matter would go away. The Court cannot find, however, that he acted willfully or maliciously.

The Court recognizes that Liddell produced substantial evidence of the Debtor's lack of truthfulness in the form of his false loan application, his misrepresentations to Liddell and Bergmann as to the status of repairs and delivery of their pianos, and his failure to list pianos held for others in his Schedules. Making false representations in other contexts, however, is not a component of a cause of action under section 523(a)(6), and the Court addressed the issue with respect to Liddell's claim under 523(a)(2)(A).

C. Forbearance Claim

1. Applicable Law

In Ojeda v. Goldberg, 599 F.3d 712 (7th Cir. 2010), the United States Court of Appeals for the Seventh Circuit set forth the standard for evaluating a claim for a fraudulently induced forbearance. It stated:

In determining whether a forbearance is fraudulently induced, the creditor must prove that "`[1] it had valuable collection remedies at the time of the misrepresentation, [2] it did not exercise those remedies based upon the misrepresentation, and [3] that the remedies lost value during the extension period.'" In re Kucera, 373 B.R. 878, 885 (Bankr. C.D. Ill. 2007) (quoting In re Beetler, 368 B.R. 720, 730-31 (Bankr. C.D. Ill. 2007)).

599 F.3d at 719.

2. Analysis

Liddell argues that "through a forbearance induced by Peckham's misrepresentations commencing at least with those he made on August 30, 2005, and extending to his promised delivery of the piano on July 11, 2006, Liddell effectively extended credit to the Debtor." Liddell contends that had he acted a few months sooner he would have been able to levy his judgment on the interest the Peckhams held in The 66 Sumner Street Trust to which they transferred their home in July of 2006. Citing Mass. Gen. Laws ch. 223, § 67 with respect to pre-judgment attachments, Liddell reasons as follows:

The Peckhams . . . would not have been able to refinance out of the Trust — as they did in January 2007 — without addressing Liddell's lien. It is thus highly likely that Liddell would have had the leverage at that time to collect at least some portion of the judgment held, even if not the full sum.

The Court finds that Liddell failed to sustain his burden with respect to his forbearance argument under 11 U.S.C. § 523(a)(2)(A). In the first place, he did not establish that he had any valuable collection remedies in 2006 and he certainly did not establish that the remedies lost value during the time of forbearance. The Court was presented with no credible evidence of the property's value. The values ascribed to the property in the mortgage loan application are not compelling, particularly in view of the absence of any

appraisal reports and the price obtained for the property by the Trustee. Moreover, when Liddell commenced his action in the Cambridge District Court he either did not seek or obtain an attachment. The Court takes judicial notice that in his proof of claim, Liddell asserted as grounds for his secured claim the levy of execution, which is dated April 30, 2007, after the March 9, 2007 judgment. In sum, the Court rejects Liddell's forbearance claim as speculative.

V. CONCLUSION

In view of the foregoing, the Court shall enter judgment in favor of Liddell and against Peckham in the sum of $2,000.

Dated: September 13, 2010