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The Bankruptcy StrategistFeaturesBankruptcyLitigation

Nondischargeability Judgment Requires Willful and Malicious Injury Under Section 523(a)(6)

By Rudolph J. Di Massa Jr. and Keri L. Costello
November 01, 2020

In In re Smith, (B.A.P. 10th Cir., Aug. 18, 2020), the U.S. Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Tenth Circuit recently joined the majority of circuit courts of appeals in finding that a creditor seeking a judgment of nondischargeability must demonstrate that the injury caused by the prepetition debtor was both willful and malicious under Section 523(a)(6) of the Bankruptcy Code.

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Factual Background

Michael Smith, an attorney, worked for 22 years for Equity Title Insurance Company (Equity Title) and served as Equity Title's chief operating officer and general counsel. In 2008, First American Title Co. and an affiliate (First American), a competitor of Equity Title, acquired a majority interest in Equity Title and changed Smith's title to "State Underwriting and Legal Counsel." In 2012, First American and Equity Title officially completed their merger.

Before the merger, in 2004, Smith had entered into an employment agreement with Equity Title that contained a non-compete clause and a non-solicitation clause. After the merger, Smith did not sign a new employment agreement with First American. First American, however, regularly required its employees to review and acknowledge the First American Employee Handbook and Code of Ethics and Conduct online; employees would receive a prompt to access the Employee Handbook and Code of Ethics, and a further prompt to clink an "I Acknowledge" button, which would confirm that they had read and agreed to the terms thereof. Smith did not deny making such an acknowledgment.

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