A civil judgment for malicious prosecution under Florida law can give rise to a nondischargeable debt in chapter 13 under Section 1328(a)(4).
In her January 11 opinion, Bankruptcy Judge Elizabeth L. Gunn of Washington, D.C., held that malicious prosecution can result in “personal injury,” thereby rendering the debt nondischargeable. In other words, a “personal injury” under the Bankruptcy Code need not entail physical injury.
In a culmination of long-standing litigation in Florida, the creditor won a $590,000 civil judgment for conspiracy to commit malicious prosecution.
The judgment debtor filed a chapter 7 petition that he converted to chapter 13, where discharge is broader under Section 1328(a) than the discharge the debtor could have obtained under Section 727(a).
The judgment creditor filed a complaint for a declaration that the judgment debt was nondischargeable under Section 1328(a)(4). The subsection says that a debt is nondischargeable if it was “for . . . damages, awarded in a civil action against the debtor as a result of willful or malicious injury by the debtor that caused personal injury to an individual . . . .”
The debtor filed a motion to dismiss for failure to state a claim. The debtor reasoned that malicious prosecution does not result in “personal injury.” Judge Gunn disagreed.
The case involved non-physical injuries. Judge Gunn said that the question was whether “the definition of ‘personal injury’ is limited to physical/bodily personal injuries as urged by the [debtor].” She therefore focused “solely on the issue of the applicable definition of ‘personal injury’ as the term is used in § 1328(a)(4).”
Surveying caselaw, Judge Gunn found three approaches to the definition of “personal injury,” a term not defined in the statute.
The narrow approach advocated by the debtor requires physical or bodily injury.
The majority, or middle approach, Judge Gunn said, includes non-physical injuries but not “solely business or financial injuries.” She said that the middle approach “includes torts involving both bodily and reputational harm.”
Also a minority position, the third approach includes business and financial torts as personal-injury torts, Judge Gunn said, citing authorities.
Judge Gunn found the middle approach to be the “correct standard.” The narrow approach “reads language into § 1328(a)(4) that does not exist,” she said. Citing Section 522(d)(11), she observed that Congress knew how to say “personal bodily injury” when it was the intent of the statute.
Judge Gunn likewise faulted the third approach because “Congress knew how to distinguish between injury to a person and injury to a person’s property.” The “definition should not be read so broadly as to include those claims that Congress purposefully excluded,” she said.
Judge Gunn held that “the definition of ‘personal injury’ in § 1328(a)(4) . . . exclude[s] injuries to property and business and financial torts, but . . . include[s] nonphysical injuries such as defamation, emotional distress, libel, and other types of reputational harm.”
To resolve the dismissal motion, Judge Gunn consulted Florida law and found that conspiracy is not a freestanding tort. Rather, there must be an underlying civil wrong.
“Similar to defamation or libel,” Judge Gunn concluded from Florida Supreme Court precedent that “malicious prosecution results in an injury to the reputation of the plaintiff.” She denied the motion to dismiss.
A civil judgment for malicious prosecution under Florida law can give rise to a nondischargeable debt in chapter 13 under Section 1328(a)(4).
In her January 11 opinion, Bankruptcy Judge Elizabeth L. Gunn of Washington, D.C., held that malicious prosecution can result in “personal injury,” thereby rendering the debt nondischargeable. In other words, a “personal injury” under the Bankruptcy Code need not entail physical injury.