Opinion
Case No. 18-51994 Adv. Pro. No. 18-2065
2023-02-17
IN RE: Marcelle Rose ANTHONY, Debtor. Stephen A. Moyer, et al., Plaintiffs, v. Marcelle Rose Anthony, Defendant.
Stephen A. Moyer, Columbus, OH, Gregory Adam Wetzel, Hrabcak & Company, L.P.A., Worthington, OH, for Plaintiffs. Tiffany Strelow Cobb, Columbus, OH, Arryn K. Cole, Vorys, Sater, Seymour and Pease, Columbus, OH, for Defendant.
Stephen A. Moyer, Columbus, OH, Gregory Adam Wetzel, Hrabcak & Company, L.P.A., Worthington, OH, for Plaintiffs.
Tiffany Strelow Cobb, Columbus, OH, Arryn K. Cole, Vorys, Sater, Seymour and Pease, Columbus, OH, for Defendant.
OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT
John E. Hoffman Jr., United States Bankruptcy Judge
I. Introduction
A primary goal of consumer debtors who file bankruptcy petitions is the discharge of their prepetition debts. But a creditor may block the discharge of a particular debt if it falls within one of the discharge exceptions in § 523(a) of the Bankruptcy Code. Relevant here, § 523(a)(6) makes nondischargeable any debt caused by a debtor's willful and malicious injury to another entity. The factual bases for the findings of willfulness and malice can sometimes be satisfied by giving issue-preclusive effect to a state court judgment.
This matter began in the Franklin County Court of Common Pleas ("State Court") as a commercial dispute between business associates and closely-held limited liability companies and ended with the imposition of sanctions against an attorney, Marcelle Rose Anthony, who is the defendant in this adversary proceeding and the debtor in the bankruptcy case. Attorneys Stephen A. Moyer and Gregory A. Wetzel, and their law firm, Moyer Law Offices, LPA (collectively, "Moyer Parties"), move for summary judgment ("Motion") (Doc. 22). They seek a determination that the State Court judgment imposing sanctions against Anthony should be given issue-preclusive effect. The Moyer Parties contend that the judgment establishes that the sanctions are a debt for a willful and malicious injury to them by Anthony, making the sanctions nondischargeable under § 523(a)(6) of the Bankruptcy Code. In her response ("Response") (Doc. 24), Anthony argues that one of the requirements for the application of issue preclusion is that an issue must have been necessary to the final judgment, and that a finding of willfulness was not required for the imposition of sanctions under state law. She also asserts that the State Court did not find that she acted both willfully and maliciously.
The State Court made findings of both willfulness and malice on Anthony's part, and those findings were necessary to its judgment. The State Court judgment is thus entitled to issue-preclusive effect, and it establishes that the sanctions constitute a debt for willful and malicious injury by Anthony to the Moyer Parties. Because the Moyer Parties have shown that there are no genuine issues of material fact and they are entitled to judgment as a matter of law, the Motion will be granted.
II. Jurisdiction and Constitutional Authority
The Court has jurisdiction to hear and determine this adversary proceeding under 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding. 28 U.S.C. § 157(b)(2)(I). Because disputes over the dischargeability of debts "stem[ ] from the bankruptcy itself," the Court also has the constitutional authority to enter a final judgment. Hart v. S. Heritage Bank (In re Hart) , 564 F. App'x 773, 776 (6th Cir. 2014) (quoting Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) ).
III. Factual and Procedural Background
A. The State Court Case
The factual findings that the Moyer Parties say should be given preclusive effect are contained in a decision issued by State Court Magistrate Myron A. Thompson ("Magistrate's Decision") (Mot., Ex. 2) in the case captioned Musa Jallaq v. Mohammad A. Jallaq, et al ., Case No. 17CVH03-3025 ("State Court Case"). In the State Court Case, Musa Jallaq, represented by the Moyer Parties, asserted thirteen claims for relief against Mohammad Jallaq, Mid-Ohio Universal Investments, LLC ("Mid-Ohio") and Ohio Management and Consulting Services, Inc. ("Ohio Management") (collectively, "State Court Defendants"). The claims against the State Court Defendants were based on, among other things, allegations of fraud, breach of fiduciary duty, unjust enrichment and conspiracy.
The spelling of Mr. Jallaq's name varies in the pleadings and other documents filed in the State Court. For purposes of this opinion, the Court will use "Mohammad Jallaq."
Anthony, who at the time was a licensed attorney in Ohio, represented the State Court Defendants in the lawsuit. She has since been indefinitely suspended from the practice of law in Ohio. See Disciplinary Counsel v. Anthony , 166 Ohio St.3d 1221, 185 N.E.3d 119 (2022). Along with filing an answer and counterclaims on behalf of her clients, Anthony filed a third-party complaint ("Third-Party Complaint") against the Moyer Parties. Mot., Ex. 1. See also Order Adopting Magistrate's Decision and Overruling Amended Suppl. Objs. to Magistrate's Decision ("State Court Order") (Mot., Ex. 3) at 2. The Third-Party Complaint asserted claims based on alleged "discrimination under 42 U.S.C. 1981, violations of state and federal RICO statutes, and civil liability for aiding and abetting criminal acts." Id. Anthony's filing of the Third-Party Complaint, which "alleged serious claims of wrongdoing [against the Moyer Parties]," triggered their filing of a motion for sanctions ("Sanctions Motion"). Id. In accordance with Ohio Civil Rule 53, Common Pleas Court Judge Mark A. Serrott referred the Sanctions Motion to Magistrate Thompson for initial disposition.
B. Allegations Made in the Third-Party Complaint
In considering the Sanctions Motion, Magistrate Thompson focused on the allegations in the Third-Party Complaint that the Moyer Parties claimed were scandalous. These allegations are contained in both the prefatory portion of the Third-Party Complaint and in its five claims for relief. They include the following:
General Allegations
• The Moyer Parties "hate or seek to destroy Arab Americans or people and businesses owned by or of the race or national origin of Arab, including [the State Court Defendants] whose owners are also U.S. citizens, and others similarly situated." Third Party Compl. (Mot., Ex. 1) at 36.
Claim One
• The Moyer Parties "discriminate against the members and owners of [Mid-Ohio and Ohio Management] on the basis of their race of Arab." Id. at 37.
• The Moyer Parties, "with actual malice intended to and did and continue to discriminate and/or destroy under the guise, or under the color of law, the [State Court Defendants’] Contracts." Id.
• The Moyer Parties "intended to, and have, intentionally interfered in the business relations and business contracts of [the State Court Defendants] under the guise of lawsuit." Id.
• The Moyer Parties "do not discriminate against other Americans who are not of the Arab race." Id. at 38.
Claim Two
• The Moyer Parties "knew or should have known about the grand larceny, grand theft, theft by deception and conversion" engaged in by their client Musa Jallaq. Id.
• The Moyer Parties "aided and abetted Musa Jallaq, in the commission of those [criminal] acts and deeds[.]" Id.
• The Moyer Parties "intentionally determined to destroy Mohamm[e]d Jallaq, his businesses, his Property and his wealth" to prevent him from reporting the alleged criminal activity. Id. at 39.
• The Moyer Parties "conspired, or aided and abetted or unlawfully advised"
their client "in the commission of such criminal conducts and scams." Id.
Claim Three
• The Moyer Parties were "aware of the criminal activity of [their client]," and they conspired to aid him "to continue to commit criminal conduct or scams on the Arab American community which take away victims’ monies, wealth, properties, contracts and/or businesses." Id. at 39–40.
• The Moyer Parties aided and abetted their client "by teaching or advising Musa Jallaq those methods, by preparing legal documents and/or by preparing lawsuits against and/or preventing lawsuits by investor victims and/or sellers of businesses and/or properties, and/or settling on behalf of Musa Jallaq for a pittance in order to avoid litigation or criminal indictment of Musa Jallaq to the at times total destruction of savings, wealth, property and businesses, of the victims, or whistleblowers, almost all of which involved the Arab American community." Id. at 41.
• "[I]t can be reasonably inferred" that the Moyer Parties sought to destroy "the businesses, property, wealth and Contracts of [the State Court Defendants] using Musa Jallaq as a cover, in order to cover up their complicity in Musa Jallaq's criminal activity which include violations of the RICO Acts, both federal and state." Id .
Claim Four
• The Moyer Parties advised their client "to criminally trespass and put ... junk on the Property of Mid-Ohio and Ohio Management, ... [and] to break into the offices of Mid-Ohio ... to steal records and destroy spyware on the computer of Mid-Ohio and Mohamm[e]d Jallaq." Id. at 42.
• The Moyer Parties advised their client "to break into the offices of both Mid-Ohio and Ohio Management ... [to] steal property ... including records, and the property of one or more of the [property's] tenants ...." Id .
• The Moyer Parties advised or conspired with their client "to so commit the aforementioned acts, which constitute criminal acts of extortion and blackmail and bribery, or attempts to [do] so, criminal trespass, theft and/or destruction of property." Id. at 43.
• The Moyer Parties "advised or conspired with [their client] not to pay his pro[ ]rata share of Mid-Ohio expenses, including real estate taxes ...." Id.
Claim Five
• The allegations asserted in the complaint the Moyer Parties filed against the State Court Defendants were "frivolous, without merit, fraudulent, and without proof." Id. at 44.
The Third-Party Complaint sought a recovery of damages from the Moyer Parties "in the amount of $85 million, plus punitive damages, treble damages and attorney fees." Id. at 45; Magistrate's Decision at 7.
C. The State Court's Disposition of the Sanctions Motion
Thirteen days after filing the Third-Party Complaint, Anthony dismissed it without prejudice. Magistrate's Decision at 7. The Moyer Parties then filed their Sanctions Motion against Anthony and the State Court Defendants. Id . at 7–8. The Sanctions Motion was brought under Ohio Revised Code § 2323.51 and Rule 11 of the Ohio Rules of Civil Procedure ("Rule 11"). Mot. at 2. Section 2323.51 provides for an award of attorney's fees as a sanction for frivolous litigation conduct. And under Rule 11 a court may award attorney's fees and expenses for a willful violation of the requirement that every document be signed, with the signature certifying that: (1) the attorney has read the document and to the best of the attorney's knowledge, information and belief, there is good ground to support it; and (2) the document has not been interposed for purposes of delay.
Following briefing by both sides, the Magistrate conducted a two-day evidentiary hearing on the Sanctions Motion. Magistrate's Decision at 2, 8. Several weeks after the evidentiary hearing, but before the Magistrate's Decision was issued, Anthony filed her Chapter 7 petition. Id. at 2. But once Anthony received her discharge and the automatic stay expired, Magistrate Thompson concluded that the Sanctions Motion was "ripe for consideration," id., and he issued his decision. The Magistrate's Decision is a 40-page opinion that describes the parties’ dispute, outlines the allegations in the Third-Party Complaint, makes findings of fact based on the testimony of Attorney Wetzel, Anthony, Mohammad Jallaq and three other witnesses, and sets forth conclusions of law. As the Magistrate's Decision states, "[a]t the conclusion of the testimony of Mohammad Jallaq, it was memorialized on the record that Third-Party Defendants were dismissing [Mohammad Jallaq, Ohio Management and Mid-Ohio Defendants] from their [Sanctions Motion] and proceeding against Ms. Anthony only." Id. at 16.
Based on the evidence presented at the evidentiary hearing, Magistrate Thompson (1) granted the Sanctions Motion, (2) imposed monetary sanctions against Anthony in the amount of $13,718.40, and (3) granted the Moyer Parties’ request to strike the Third-Party Complaint and seal the record. Id. at 39–40. He concluded—and repeatedly stated in the Magistrate's Decision—that Anthony had (1) no factual basis for the allegations made in the Third-Party Complaint, and (2) filed the Third-Party Complaint against the express instruction of her client. See, e.g. , id. at 8, 10, 15, 26, 28, 31, 32.
Anthony objected to the Magistrate's Decision. State Court Order at 1. Her objections and the Magistrate's Decision were reviewed de novo by Judge Serrott, who overruled them in the State Court Order—an 11-page order that adopted the Magistrate's findings of fact and conclusions of law "in their entirety." Id. at 5, 8, 11. Anthony then appealed to Ohio's Tenth Appellate District Court of Appeals, which overruled all her assignments of error and affirmed the judgment of the State Court. Joint Notice of Decision in State Court Action (Doc. 8) at 14.
D. The State Court's Findings and Conclusions
In the hearing on the Sanctions Motion, Anthony testified that she had reviewed the Third-Party Complaint before it was filed and had determined that there were good grounds to support its claims. Magistrate's Decision at 8. But the Magistrate did not find her testimony credible, concluding that "notably absent was any information whatsoever to act as a factual foundation for the Third-Party Complaint itself." Id. Anthony "insisted that the [T]hird [P]arty [Complaint] was a good faith extension of the law, and did not bring shame to the legal profession." Id. at 9. But "[u]pon being asked what evidence she had to support the allegation that [the Moyer Parties] were aiding and abetting in stealing funds from Arab Americans, [she] struggled to answer." Id . Anthony also alleged in the Third-Party Complaint that Musa Jallaq's tax returns failed to report income and that he failed "to account for the sum of $500,000 that ‘he stole from the Arab American Community.’ " Id. at 9–10. Yet "[w]hen [Anthony was] asked repeatedly what specific information she relied on to make such accusations, [she] could only answer that ‘it is common knowledge in the community.’ " Id. at 10. And, according to Anthony, based on this "common knowledge," she was "entitled ... to make certain secondary ‘inferences and presumptions’ regarding [Jallaq's] counsel." Id. For instance, Anthony testified that she "deduced that because Mr. Wetzel ‘is a criminal defense lawyer [who] has represented clients in criminal matters,’ an inference [could be drawn] ... that he had knowledge of and/or assisted [Jallaq] in various criminal activities." Id. But "[u]pon being asked what ‘criminal matters’ she was even aware [of in which] counsel had acted as an advocate, Ms. Anthony responded that she didn't know." Id. "Taken together, the Magistrate [was] forced to find that this explanation was unpersuasive, and no actual factual foundation whatsoever was identified at the hearing concerning this claim against [the Moyer Parties][.]" Id.
Magistrate Thompson also analyzed the allegations in the Third-Party Complaint that related to the Moyer Parties’ supposed participation in criminal activities undertaken by their client. According to the Third-Party Complaint, the Moyer Parties advised Musa Jallaq to break into Mid-Ohio's business premises, steal confidential documents and tamper with/sabotage the Mid-Ohio computer system. Id. Anthony testified that she had a good-faith basis to assert that the Moyer Parties aided and abetted their client in his alleged commission of these criminal acts. Id. But Magistrate Thompson determined that (1) "nothing was referenced to establish any adjudication of criminal guilt on the part of [Musa Jallaq]"; and (2) the aiding and abetting allegations made against the Moyer Parties in the Third-Party Complaint went "far beyond any reasonable inference or extrapolation in their attempts to impute such alleged [criminal] acts to [the Moyer Parties]." Id. at 11. Finding that "no evidentiary basis whatsoever exist[ed] in the record to support such claims," Magistrate Thompson "[was] unfortunately ... obligated to find that this pleading was most likely filed exclusively with the improper purpose to harass, slander and malign opposing counsel, as well as for delay." Id.
Likewise finding no basis for the racial discrimination allegations leveled against the Moyer Parties in the Third-Party Complaint, Magistrate Thompson noted that Anthony had "loosely described a premeditated scheme to steal funds from innocent Arab Americans." Id. at 11. But he ultimately concluded that the "responses [Anthony] offered as to the [basis for these allegations made against the Moyer Parties] were impossible to discern." Id. at 11–12. The Magistrate acknowledged his "struggle[ ] to summarize a factual predicate that doesn't exist in the record." Id. at 12. Nor did Magistrate Thompson find good grounds for the alleged "State and Federal RICO violations by [the Moyer Parties] [arising from] their aiding and abetting and complicity in [Musa Jallaq's alleged] criminal activity." Id. He concluded that "[o]utside of supposition and apocryphal information, no factual predicate was lucidly identified to suggest by what means [the Moyer Parties] allegedly taught Plaintiff methods to illegally commit criminal activity [against] the Arab American community." Id. And the Magistrate found the evidence offered by Anthony in support of the allegation in the Third-Party Complaint that the Moyer Parties "taught [their client] illegal ‘scams’ or other criminal acts" to be "pure conjecture" Id. at 14.
In recommending that the State Court impose sanctions against Anthony, Magistrate Thompson credited Mohammad Jallaq's testimony that he did not authorize the filing of the Third-Party Complaint. Id . at 15. As the Magistrate put it, "Mr. Jallaq did not mince words. He was quite adamant that [the Third-Party Complaint] ‘was filed against his wishes.’ He further denied possessing knowledge that [the Moyer Parties] displayed any history whatsoever of discriminating against Arab Americans[.]" Id . The Magistrate also noted that when "later in time ... Mr. Jallaq realize[d] the Third-Party Complaint was ... filed against his instructions," he was " ‘very angry’ with his attorney." Id. Indeed, Mohammad Jallaq testified at the hearing on the Sanctions Motion that he "sta[u]nchly said no" when Anthony told him she was contemplating "filing something against Musa's lawyers," saying that "he was already fighting with Musa, and had no interest in more fighting with his lawyers." Id .; see also id . at 17 ("Mr. Jallaq verified that no factual basis exists for the claims included in the Third-Party Complaint, and that he expressly instructed his lawyer that [they] not be pursued before it was filed.").
Magistrate Thompson began his legal analysis by assessing whether Anthony was subject to sanctions for engaging in "frivolous conduct" as defined in Ohio Revised Code § 2323.51. Under the statute, a court may award reasonable attorney's fees to any party adversely affected by frivolous conduct. Ohio Rev. Code Ann. § 2323.51(B)(1) (West 2022); First Bank of Marietta v. Hartford Underwriters Ins. Co. , 307 F.3d 501, 529 (6th Cir. 2002). The statutory definition of "frivolous conduct" includes litigation that: (1) "obviously serves merely to harass or maliciously injure another party"; (2) "is not warranted under existing law and cannot be supported by a good faith argument for an extension, modification, or reversal of existing law"; (3) "consists of allegations or other factual contentions that have no evidentiary support or, if specifically so identified, are not likely to have evidentiary support after a reasonable opportunity for further investigation or discovery"; and (4) "consists of denials or factual contentions that are not warranted by the evidence or, if specifically so identified, are not reasonably based on a lack of information or belief." Ohio Rev. Code Ann. § 2323.51(A)(2)(a)(i)–(iv). The Magistrate found that "[e]ven though [ Ohio Revised Code §] 2323.51(A)(2)(a) provides a flexible and comprehensive definition of ‘frivolous conduct’ that is stated in the disjunctive, what is unusual in this instance is that all four of the independent bas[e]s are applicable ." Magistrate's Decision at 25 (emphasis added).
Ohio Revised Code § 2323.51(A)(1) defines "conduct" as the "filing of a civil action, the assertion of a claim, defense, or other position in connection with a civil action, the filing of a pleading, motion, or other paper in a civil action, including, but not limited to, a motion or paper for discovery purposes, or the taking of any other action in connection with a civil action." Ohio Rev. Code Ann. § 2323.51(A)(1).
Before examining each prong of the statute, Magistrate Thompson first noted that courts interpreting Ohio Revised Code § 2323.51(A) have employed an objective standard in determining whether litigation conduct is sanctionable. Id. at 23; see also Calypso Asset Mgmt., LLC v. 180 Indus., LLC , 171 N.E.3d 790, 805 (Ohio Ct. App. 2021) ("The court does not look to what the party or its attorney knew or believed in deciding whether conduct is frivolous. Instead, the trial court applies an objective standard—whether no reasonable lawyer would have brought the action in light of the existing law."). He then turned to Ohio Revised Code § 2323.51(A)(2)(a)(i), finding that Anthony's conduct met the definition of frivolous conduct contained in that subsection of the statute: the filing of a civil action that "serves merely to harass or maliciously injure another party to the civil action or appeal or is for another improper purpose, including, but not limited to, causing unnecessary delay or a needless increase in the cost of litigation." Magistrate's Decision at 25. The Magistrate based his determination on the following: (1) "the absence of evidence in support of each of the individual causes of action contained [in the Third-Party Complaint]"; (2) the filing "of the Third-Party Complaint was [made] against the specific instructions of Ms. Anthony's own client"; and (3) "no tangible or reliable evidence specific to [support the claims against the Moyer Parties] ever materialized in the course of two days of testimony." Id . at 26. Magistrate Thompson therefore concluded that, "[t]aken together, the evidence adduced at the hearing revealed an improper purpose that falls under the category of the very abuses that [Ohio Revised Code] § 2323.51 is designed to address and penalize, being ‘assertion of a claim that serves merely to harass or maliciously injure another.’ " Id . at 26.
Magistrate Thompson next looked to Ohio Revised Code § 2323.51(A)(2)(a)(ii). And after exhaustively reviewing the law governing the claims for relief asserted in the Third-Party Complaint and detailing the substantive inadequacy of each claim, he concluded that "all of the claims averred in the Third-Party Complaint are either: not warranted under existing law, cannot be supported by a good faith argument for an extension, modification or reversal of existing law, or good faith argument for the establishment of new law." Id . at 26–27 (citing Ohio Rev. Code § 2323.51(A)(2)(a)(ii) )). Magistrate Thompson did so based on the "glaring deficiencies ... [in] the causes of action set forth in the Third-Party Complaint," Anthony's "categorical[ ] fail[ure]" to "justify the[ ] allegations [in the Third-Party Complaint] ... in any intelligible manner," and because the purported basis for the claims asserted in the Third-Party Complaint was "hopelessly incongruent with the hearing evidence." Id. at 27–30.
Magistrate Thompson also had little difficulty determining that Anthony's filing of the Third-Party Complaint met the alternative definition of frivolous conduct found in Ohio Revised Code § 2323.51(A)(2)(a)(iii). Under that subsection of the statute, litigation conduct is considered frivolous if it consists of making "of allegations or other factual contentions that have no evidentiary support, or, if specifically so identified, are not likely to have evidentiary support after a reasonable opportunity for further investigation or discovery." Ohio Rev. Code Ann. § 2323.51(A)(2)(a)(iii). Finding Anthony's conduct to be frivolous under this alternative statutory standard, the Magistrate stated: "The purely fantastic nature of her claims was exposed once it was clear that Mohammad Jallaq ardently disapproved of [the Third-Party Complaint's] contents. In this respect, [the Moyer Parties] have insisted that [Anthony] advanced claims that she knew could never be substantiated. The [Magistrate] is compelled to agree, ...." Magistrate's Decision at 30.
In Magistrate Thompson's view, further investigation or discovery would not have spared Anthony from sanctions liability. He stated that:
• "The information adduced at the hearing failed to provide a scintilla of
evidence in support of [the] claims [asserted in the Third-Party Complaint]";]
• "Based upon the controlling case authority, ... no reasonable attorney would have brought the action against opposing counsel in light of the existing law"; and
• "Despite holding a two-day hearing, including rigorous cross-examination of witnesses, [he] was not left with any factual findings that form a basis or justification for these causes of action against [the Moyer Parties]."
Id. at 31. Given all this, the Magistrate found that the "allegations [contained the Third-Party Complaint] were not likely to have evidentiary support even after a reasonable opportunity for further investigation or discovery." Id . at 31. He thus concluded that "the evidence establishes conduct that is violative of [ Ohio Revised Code §] 2323.51(A)(2)(a)(iii)." Id. at 30.
Finally, Magistrate Thompson found that Anthony's conduct met the alternative definition of frivolous conduct in Ohio Revised Code § 2323.51(A)(2)(a)(iv), which includes "denials or factual contentions that are not warranted by the evidence or, if specifically so identified, are not reasonably based on a lack of information or belief." Id. at 31–32 (applying Ohio Revised Code § 2323.51(A)(2)(a)(iv) ). He reasoned that (1) the Third-Party Complaint "contains causes of action that are not warranted by the evidence in the record and introduced at the hearing, and such allegations fail to even satisfy information and belief sufficient from which the Court may infer a plausible cause of action"; and (2) Anthony's assertion of the claims contained in the Third-Party Complaint "clearly rises to the level of egregious conduct that [ Ohio Revised Code § 2323.51(A)(2)(a)(iv) ] protects against and seeks to deter." Id. at 32 (citations omitted).
In the end, Magistrate Thompson determined that Anthony's conduct met each element of the four-part, disjunctive definition of frivolous—and thus sanctionable—conduct found in Ohio Revised Code § 2323.51(A)(2)(a). Summing up, he stated that:
• "The testimony of [the Moyer Parties’] witnesses was generally credible at the hearing";
• "It was effectively shown that [Anthony] made materially false statements in the [Third-Party Complaint], and acted in a manner that can be characterized as overzealous, unjustifiable and frivolous"; and
• "In light of the testimony of Defendant Mohamm[e]d Jallaq, Ms. Anthony cannot hide behind ‘information and belief’ as a vehicle to justify the outrageous averments in the [Third-Party Complaint]."
Id. Based on these findings the Magistrate concluded that "(1) Ms. Anthony's conduct was frivolous, (2) [the Moyer Parties] were adversely affected by it, and (3) a monetary award is appropriate." Id. (citations omitted).
Magistrate Thompson also found that Anthony was not entitled to the protection of the "so-called litigation privilege," a long-established rule immunizing attorneys from liability for statements made during judicial proceedings unless the attorney seeking to invoke the privilege has engaged in malicious conduct. Id. at 25. In so doing, he relied on Scholler v. Scholler , 10 Ohio St.3d 98, 462 N.E.2d 158 (1984), an Ohio Supreme Court decision holding that "[a]n attorney is immune from liability to third persons arising from his performance as an attorney in good faith on behalf of, and with the knowledge of his client, unless ... the attorney acts maliciously ." Id. at 159–60 (syllabus ¶ 1) (emphasis added). This finding—like all the others contained in the Magistrate's Decision—was adopted in its entirety by the State Court. State Court Order at 5, 8, 11.
Having found Anthony's conduct sanctionable under Ohio Revised Code § 2323.51, Magistrate Thompson then turned to Rule 11 of the Ohio Civil Rules, which in relevant part reads:
The signature of any attorney or pro se party constitutes a certificate by the attorney or party that the attorney or party has read the document; that to the best of the attorney's or party's knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay. If a document is not signed or is signed with intent to defeat the purpose of this rule, it may be stricken as sham and false and the action may proceed as though the document had not been served. For a willful violation of this rule, an attorney or pro se party, upon motion of a party or upon the court's own motion, may be subjected to appropriate action, including an award to the opposing party of expenses and reasonable attorney fees incurred in bringing any motion under this rule. Similar action may be taken if scandalous or indecent matter is inserted.
Ohio R. Civ. P. 11 (West 2022). Applying the standards in Rule 11, the Magistrate found that "while Ms. Anthony read and drafted th[e] [Third-Party Complaint], it cannot be said that she harbored good grounds to support it to the best of her knowledge, information and belief." Magistrate's Decision at 33. He concluded, therefore, that "[t]he facts further substantiate that these claims [were] filed exclusively for purposes of delay and harassment of opposing counsel in their personal capacity." Id . And importantly for purposes of this adversary proceeding, Magistrate Thompson directly addressed the question of Anthony's mental state, determining that (1) her filing of "the [Third-Party Complaint] cannot survive even the subjective good faith standard"; and (2) "the hearing evidence made clear "that [Anthony's] ... violation of Civ. R. 11 was willful, as opposed to merely negligent." Id.
After reviewing the case de novo, Judge Serrott agreed with the Magistrate on all counts, and adopted the findings and conclusions detailed in the Magistrate's Decision in their entirety, stating that given
the gravity of these alleged offenses, and the potential damage they could cause to the [Moyer Parties], [Anthony] should not have alleged them unless she had good reasons to do so. As detailed exhaustively in the Magistrate's Decision, [Anthony] failed to present credible factual arguments that she had a good reason.
State Court Order at 4. He also concurred with the Magistrate's assessment of the credibility of Anthony's hearing testimony: "The record shows [Anthony] not answering pertinent questions or evading direct answers." Id.
Like the Magistrate, Judge Serrott stressed that "[Anthony's] own client did not approve [the assertion of] the[ ] claims [made in the Third-Party Complaint]." Id . He stated that:
• "[Anthony] crossed the line of decorum, not to mention opening herself up to even more severe legal liability beyond these sanctions, when she filed such outrageous and groundless claims against [the Moyer Parties]";
• "While [Anthony] eventually did the right thing when she withdrew the filing after thirteen (13) days, the act of filing still caused distress to [the Moyer Parties]"; and
• "For a lawyer who has been licensed to practice since 1972, [Anthony] should know better."
Id. at 5. The State Court also expressly adopted Magistrate Thompson's finding that the Third-Party Complaint "was most likely filed with the improper purpose to harass, slander and malign opposing counsel." Id. Summarizing his ruling, Judge Serrott found that
[Anthony] had no credible reason to file the Third Party Complaint, and even her own client did not want it filed. It also caused monetary and emotional harm to [the Moyer Parties] by [requiring them] to deal with unfounded accusations. Given the gravity of the claims and damages alleged, the Court is forced to conclude, like the Magistrate, that Defense Counsel's filing was frivolous under O.R.C. § 2323.51. It served to harass another party, was not warranted under existing law, and had no evidentiary support. Further, the Court also agrees with the Magistrate's conclusions on Civ. R. 11, which show that Defense Counsel's filing does not even satisfy a subjective good faith standard.
Id. at 6–7. Overruling Anthony's objections, the State Court adopted the Magistrate's Decision in its entirety and imposed sanctions against Anthony in the amount of $13,718.40. State Court Order at 11.
IV. Arguments of the Parties
The Moyer Parties assert that their Motion should be granted based on the doctrine of issue preclusion. Mot. at 8. They contend that the requirements established by Ohio Revised Code § 2323.51 and Rule 11 for the imposition of sanctions are substantially similar to § 523(a)(6) ’s willful-and-malicious nondischargeability standard. Id. at 7–9. The Moyer Parties specifically rely on the State Court's findings that (1) Anthony intentionally brought a baseless action against them "in bad faith and with the improper purpose to harass, slander and malign" the Moyer Parties, id. at 1, 4; and (2) filed the Third-Party Complaint "for an improper purpose, including ... to harass or maliciously injure Plaintiff's counsel[.]" Id. at 5. These findings, the Moyer Parties argue, should be given preclusive effect, and they establish the existence of a nondischargeable debt under § 523(a)(6). Id. at 7–9.
For her part, Anthony maintains that the State Court's factual findings are not entitled to preclusive effect, and thus the Moyer Parties should not be granted summary judgment. Resp. at 2. Anthony asserts—correctly—that for the doctrine of issue preclusion to apply, the issue adjudicated in a prior proceeding must have been necessary to the court's final judgment. Id. at 3. And because a finding of willfulness by the State Court was not required for it to impose sanctions under Ohio Revised Code § 2323.51, so her argument goes, the State Court's findings should not be given issue-preclusive effect in this adversary proceeding. Id . Anthony also argues that (1) the State Court did not find that she acted both willfully and maliciously, and (2) these dual findings are needed to except a debt from discharge under § 523(a)(6). Id . at 5. Finally, according to Anthony, her "subjective state of intent was not definitively decided in the [S]tate [C]ourt, which is required before a finding of intent can be established pursuant to § 523(a)(6)." Id . at 2.
V. Legal Analysis
A. Summary Judgment Standard
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable in this adversary proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure, a court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute over those facts. Ricci v. DeStefano , 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009). "A dispute is ‘genuine’ only if based on evidence upon which a reasonable [finder of fact] could return a [judgment] in favor of the non-moving party." Gallagher v. C.H. Robinson Worldwide, Inc ., 567 F.3d 263, 270 (6th Cir. 2009) (citation omitted). And "[a] factual dispute concerns a ‘material’ fact only if its resolution might affect the outcome of the suit under the governing substantive law." Id . "The party moving for summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Ray's Servs., Inc. v. Cunningham (In re Cunningham) , No. 12–3201, 2014 WL 1379136, at *2 (Bankr. N.D. Ohio Apr. 8, 2014) (cleaned up) (citing Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). The Court is compelled to grant summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial." Viet v. Le , 951 F.3d 818, 823 (6th Cir. 2020) (quoting Celotex , 477 U.S. at 322, 106 S.Ct. 2548 ). And a "nonmoving party has not made that sort of showing "if ‘the record taken as a whole could not lead a rational trier of fact to find’ in the party's favor." Id. ( quoting Ricci , 557 U.S. at 586, 129 S.Ct. 2658 ). "So what does it take for a party to establish that a ‘rational trier of fact’ could rule in its favor on a disputed element? The party must identify ‘specific facts, as opposed to general allegations,’ establishing the element." Id. (quoting 10A Charles Alan Wright et al., Federal Practice and Procedure § 2727.2 at 501 (4th ed. 2016) ).
B. Section 523(a)(6)
Section 523(a)(6) of the Code excepts from discharge a debt "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). To prevail on a § 523(a)(6) claim, a creditor must prove that: (1) the debtor owes a debt from an injury he caused to another entity or the entity's property; and (2) in causing the injury the debtor acted willfully and maliciously. To determine whether an injury is willful and malicious under § 523(a)(6), a bankruptcy court must assess "independently whether a debtor has willfully, and also maliciously, injured the creditor before rendering a debt non-dischargeable in accordance with § 523(a)(6)." MarketGraphics Rsch. Grp., Inc. v. Berge (In re Berge) , 953 F.3d 907, 916 (6th Cir. 2020) ; see also Schafer v. Rapp (In re Rapp) , 375 B.R. 421, 436 (Bankr. S.D. Ohio 2007) ("While willfulness and malice may often exist concurrently in the same set of facts, each is a distinct element in the § 523(a)(6) analysis; both requirements must be met to warrant a determination of nondischargeability.").
"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." Kawaauhau v. Geiger , 523 U.S. 57, 61, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998). "A willful injury results when the actor either desires to cause the consequences of his actions or ‘believes that the consequences are substantially certain to result’ from his actions." Rapp , 375 B.R. at 436 (quoting Markowitz v. Campbell (In re Markowitz) , 190 F.3d 455, 464 (6th Cir. 1999) ). "A debtor need not actually admit his intent; intent may be inferred from the circumstances of the injury." In re Berge , 953 F.3d 907, 915 (6th Cir. 2020). And for an injury to be "malicious," the debtor must have acted "in conscious disregard of [her] duties or without just cause or excuse." Wheeler v. Laudani , 783 F.2d 610, 615 (6th Cir. 1986) ; see also Gonzalez v. Moffitt (In re Moffitt) , 252 B.R. 916, 923 (B.A.P. 6th Cir. 2000).
C. Issue Preclusion
1. General Principles
The Moyer Parties seek summary judgment based on the issue-preclusive effect of the State Court's judgment. They argue that the judgment—and particularly the findings contained in the Magistrate's Decision, which were fully adopted by the State Court—proves the facts required to show that Anthony's debt is nondischargeable. The purpose of the doctrine of issue preclusion, or collateral estoppel as it used to be known, is to prevent the relitigation of issues of fact, necessary to the judgment, that have already been decided between the same parties. See Wagner v. Schulte (In re Schulte) , 385 B.R. 181, 188 (Bankr. S.D. Ohio 2008).
Under 28 U.S.C. § 1738, federal courts must give the same "full faith and credit" to a state court judgment as would be given by the laws of that state. Corzin v. Fordu (In re Fordu) , 201 F.3d 693, 703 (6th Cir. 1999). "The doctrine of collateral estoppel applies in dischargeability actions under 11 U.S.C. § 523(a)." Rally Hill Prods., Inc. v. Bursack (In re Bursack), 65 F.3d 51, 53 (6th Cir. 1995) ; see also Grogan v. Garner , 498 U.S. 279, 284 n.11, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) ("We now clarify that collateral estoppel principles do indeed apply in discharge exception proceedings pursuant to § 523(a)."). "Bankruptcy courts’ exclusive jurisdiction over dischargeability issues does not alter this rule." Bursack, 65 F.3d at 53. That Congress intended bankruptcy courts to determine issues of dischargeability does not require the bankruptcy court to redetermine all the disputed facts. Schulte , 385 B.R. at 189 (citing Spilman v. Harley , 656 F.2d 224, 227 (6th Cir. 1981) ).
Under Ohio law, for issue preclusion to apply, these elements must be shown:
(1) A final judgment on the merits in the previous case after a full and fair opportunity to litigate the issue; (2) The issue must have been actually and directly litigated in the prior suit and must have been necessary to the final judgment; (3) The issue in the present suit must have been identical to the issue in the prior suit; and (4) The party against whom estoppel is sought was a party or in privity with the party to the prior action.
Sill v. Sweeney (In re Sweeney) , 276 B.R. 186, 189 (B.A.P. 6th Cir. 2002). The proponent of issue preclusion has the burden of establishing its elements. See Simmons Cap. Advisors, Ltd. v. Bachinski (In re Bachinski) , 393 B.R. 522, 535 (Bankr. S.D. Ohio 2008) ("The party seeking to invoke issue preclusion has the burden of establishing its applicability."); In re Mullins , 449 B.R. 299, 302 (Bankr. S.D. Ohio 2011) (same). The question here is whether the Moyer Parties have met these requirements. The answer is yes.
2. Final Decision on the Merits/Identity of the Parties
There is no dispute that the State Court issued a final judgment in the sanctions dispute between the Moyer Parties and Anthony, who are also the parties in this adversary proceeding. Nor is there any doubt that the State Court's judgment was entered after Anthony and the Moyer Parties had a full and fair opportunity to litigate whether sanctions should be imposed. Magistrate Thompson issued a 40-page decision after the dispute was briefed by both sides and following a two-day evidentiary hearing during which documentary evidence was presented and five witnesses, including Anthony and Wetzel, testified. Magistrate's Decision at 2, 8. The State Court reviewed the Magistrate's Decision de novo and adopted its findings of fact and conclusions of law in their entirety. State Court Order at 5, 8, 11. In yet another layer of review, the Tenth Appellate District Court of Appeals affirmed the State Court's decision. Joint Notice of Decision in State Court Action (Doc. 8) at 14. The Moyer Parties have thus met the first two issue-preclusion requirements. They have shown (1) identity of the parties and (2) a final judgment on the merits after a full and fair opportunity to litigate.
3. Willfulness
a. Anthony's Conduct Was Willful.
Magistrate Thompson made clear that sanctions could be imposed under Rule 11 only if the violation of the rule was willful. Magistrate's Decision at 24, 25 (stating that "[i]f the trial court finds the Civ. R. 11 violation was willful, it may then impose an appropriate sanction"). Id . at 25. He also noted that, in assessing whether a violation is willful, " Civil Rule 11 employs a subjective bad faith standard." Id . at 24. So too does § 523(a)(6). See Berge, 953 F.3d at 915 ("This Circuit ... utilizes only a subjective standard, asking whether the debtor himself was motivated by a desire to inflict injury."). Thus, the question of willfulness here—that is, whether Anthony's debt to the Moyer Parties stems from willful misconduct on her part—is identical to the issue decided in State Court in determining whether sanctions under Civil Rule 11 were awardable. And the Magistrate did indeed find that Anthony's conduct was willful, concluding that "the hearing evidence was clear that [the] violation of Civ. R. 11 was willful, as opposed to merely negligent." Magistrate's Decision at 33.
The Magistrate's Decision points out that, under Ohio Revised Code § 2323.51, Ohio courts apply an objective test in determining whether an attorney's litigation conduct should be found to be "frivolous"—and thus sanctionable. Id . at 23 ("In interpreting the language of the statute, reviewing courts have determined that ‘the test is whether any reasonable attorney would have brought the action in light of the existing law.’ ") (quoting Calypso Asset Mgmt., 171 N.E.3d at 805 ). Even so, the State Court still found that Anthony "knowingly made materially false statements in the pleadings, and acted in a manner that can be characterized as overzealous, unjustifiable and frivolous." Id . at 32. And the Magistrate added that "[t]his finding fully extends to both a subjective or objective basis needed to assert this action"—meaning the objective test that governs the imposition of sanctions under Ohio Revised Code § 2323.51 and Ohio Civil Rule 11 ’s subjective standard. Id . The State Court thus left no doubt that the sanctions imposed against Anthony resulted from her willful misconduct.
b. Anthony's Intent to Injure the Moyer Parties May Be Inferred from the State Court's Findings.
Under § 523(a)(6), the subjective standard for willfulness is satisfied "if [it is shown that] the debtor intended to cause harm or knew that harm was a substantially certain consequence of his or her behavior." Berge , 953 F.3d at 915. According to Anthony, because the State Court did not "definitively decide[ ]" her "subjective state of intent," this Court cannot find that the Moyer Parties have met § 523(a)(6) ’s intent-to-injure requirement. Resp. at 2. Presumably, she makes this argument because neither the Magistrate's Decision nor the State Court Order contains language expressly stating that Anthony intended to cause injury to the Moyer Parties. Rather, Magistrate Thompson and Judge Serrott both found that the Third-Party Complaint "was most likely filed with the improper purpose to harass, slander and malign opposing counsel." Magistrate's Decision at 11 (emphasis added); State Court Order at 5. The State Court did not expressly say that Anthony intended to injure the Moyer Parties. But that does not prevent this Court from determining, based on the totality of the State Court's findings, that the sanctions judgment is a nondischargeable debt under § 523(a)(6). See Conklin v. Shepard (In re Shepard) , No. 08-13398-B-7, 2009 WL 9083918, at *8 (Bankr. E.D. Cal. Mar. 10, 2009), aff'd , Adv. No. 08-1210-WRL, 2009 WL 7809003 (B.A.P. 9th Cir. Nov. 24, 2009) (granting summary judgment on § 523(a)(6) claim because debtor's intent to cause injury could be inferred from "the totality of the circumstances" as described in the state court's decision).
In Shepard , Glenn Conklin, the former business partner of the Chapter 7 debtor, Robert Shepard, brought an action to determine the dischargeability of a prepetition state court judgment he had obtained against Shepard. Id. at *1. The state court judgment (1) followed "lengthy litigation" between the parties on Conklin's claims "for conversion, breach of contract, dissolution of partnership, breach of fiduciary relationship, fraud, unjust enrichment, accounting and constructive trust" and (2) was based on written findings of fact and conclusions of law the state court had issued after holding a bifurcated trial. Id. at *1–2. Asking the bankruptcy court "to give collateral estoppel effect to findings of fact and conclusions of law that have already been decided in the State Court," Conklin moved for summary judgment. Id. at 1.
The Shepard court granted Conklin summary judgment on his § 523(a)(6) claim based on the issue-preclusive effect of the state court's findings. Id. at *1, *9. In so doing, it pointed out that the state court's failure to make an express finding that Shepard intended to injure Conklin was not a bar to summary judgment:
[T]he State Court specifically found, inter alia , that (1) Shepard misappropriated Partnership property for his own use in the new Corporation, (2) Shepard knew his actions were wrongful and concealed his actions from Conklin, (3) Shepard changed the locks on the Partnership premises and intentionally excluded Conklin from the Partnership business activities, and (4) that Shepard's actions were willful and malicious. Although the State Court did not specifically find in so many words that Shepard "intended to cause injury" to Conklin, this court can infer that intent based on the totality of the circumstances .
Id. at *8 (emphasis added) (citing Washington Mut. Bank v. Dubovoy (In re Dubovoy) , 377 B.R. 705, 710 (Bankr. M.D. Fla. 2006) ).
Shepard tracks other decisions holding that, on summary judgment, a bankruptcy court may infer the facts required to support a judgment of nondischargeability—including that the debtor acted with the requisite mental state—from the totality of the circumstances described in a state court's findings. See Ormsby v. First Am. Title Co. of Nevada (In re Ormsby) , 591 F.3d 1199, 1206 (9th Cir. 2010) (affirming grant of summary judgment in a nondischargeability action and holding that the debtor's fraudulent intent could be inferred from the "totality of circumstances as described in the state court's findings of fact [which] make clear that [the debtor] acted with fraudulent intent"); Bane v. Sorayama (In re Bane) , No. CC-09-1108-MoPaH, 2010 WL 6451886, at *8, n.13 (B.A.P. 9th Cir. Jan. 15, 2010) ("Debtor argues that application of issue preclusion and consideration of the circumstantial evidence required the bankruptcy court to make improper inferences about the district court's ruling. We disagree. In the context of a summary judgment, a court may infer intent from the ‘totality of circumstances’ described in another court's findings of fact.").
True, the State Court—like the Shepard court—did not directly say that Anthony intended to injure the Moyer Parties. Shepard , 2009 WL 9083918, at *8. But as in Shepard , Ormsby and Bane , this Court may infer her wrongful intent from the totality of the State Court's findings. The State Court found that (1) acting against the express instructions of her client, Anthony filed the Third-Party Complaint against the Moyer Parties, seeking a recovery of $85 million in damages, treble damages, punitive damages and attorney's fees; (2) Anthony "had no credible reason to file the Third-Party Complaint;" (3) the Third-Party Complaint was scandalous on its face, alleging that the Moyer Parties, motivated by racial hatred, discriminated against Arab Americans and conspired with, or aided and abetted, their clients in the commission of crimes; (4) Anthony "knowingly made materially false statements in the pleadings" and included factual allegations in the Third-Party Complaint that were "outrageous," "incendiary," "baseless" and "without evidentiary or legal support," "groundless" and "fantastical;" (5) Anthony most likely filed the Third-Party Complaint "to harass, slander and malign" the Moyer Parties; (6) there were "glaring deficiencies ... [in] the causes of action set forth in the Third-Party Complaint;" and (7) Anthony's conduct was "egregious." Magistrate's Decision at 7, 11–12, 15, 25–33: State Court Order at 5–7. Based on the totality of the State Court's extensive factual findings, this Court concludes that Anthony acted willfully and with intent to harm the Moyer Parties or knew that harm was a substantially certain consequence of her conduct.
4. Whether the Issues Decided by the State Court Were Necessary to Its Final Judgment
According to Anthony, issue preclusion is unavailable to the Moyer Parties because the State Court did not need to find her conduct to be willful in order to impose sanctions under Ohio Revised Code § 2323.51. Resp. at 3. She says that under this statute sanctions may be awarded where "the conduct at issue ‘obviously serves merely to harass or maliciously injure another party to the civil action,’ " or where the conduct is for "another improper purpose, including but not limited to, causing unnecessary delay or a needless increase in the cost of litigation." Id. Thus, her argument goes, because Magistrate Thompson's "finding that the [Third-Party] Complaint served to cause unnecessary delay alone would have supported the [sanctions] award," the State Court's "finding of willfulness [was] not necessary to [its] final judgment." Id. at 3–4.
Anthony's argument misses the mark for several reasons. First, the State Court had to find Anthony's conduct to be willful to impose sanctions against her under Ohio Civil Rule 11. See Magistrate's Decision at 33 ("[T]he hearing evidence was clear that [Anthony's] violation of Civ. R. 11 was willful, as opposed to merely negligent."); see also Ohio R. Civ. P. 11 (providing that sanctions are awardable for "[f]or a willful violation of this rule"); State ex rel. Bardwell v. Cuyahoga Cty. Bd. of Comm'rs ., 127 Ohio St.3d 202, 937 N.E.2d 1274, 1276–77 (2010) ("Under Civ. R. 11, a court can impose sanctions only when the attorney or pro se litigant acts willfully and in bad faith by filing a pleading that he or she believes lacks good grounds or is filed merely for the purpose of delay.").
Federal Rule 11 does not have a willfulness requirement for the imposition of sanctions. See, e.g. , Foran v. Lutz (In re Lutz) , 169 B.R. 473, 477 n.6 (Bankr. S.D. Ga. 1994) ("[A] finding of willfulness and maliciousness is not a prerequisite to the imposition of Rule 11 sanctions."); Itel Containers Int'l Corp. v. Puerto Rico Marine Mgmt., Inc. , 108 F.R.D. 96, 102 (D.N.J. 1985) ("A finding of wilfulness or lack of good faith is not required in determining a violation of Rule 11 [.]").
More importantly, Anthony's argument ignores history. While the State Court could have imposed sanctions against Anthony under Ohio Revised Code § 2323.51(A)(2)(a)(i) based solely on a finding that the Third-Party Complaint was filed to cause unnecessary delay and not to harass or maliciously injure the Moyer Parties, that is not what happened. The State Court found that "[the Third-Party Complaint] was filed for an improper purpose, including ... to harass or maliciously injure Plaintiff's counsel, causing unnecessary delay or a needless increase in the cost of litigation." See State Court Order at 6; Magistrate's Decision at 25 ("Even though [ Ohio Revised Code §] 2323.51(A)(2)(a) provides a flexible and comprehensive definition of ‘frivolous conduct’ that is stated in the disjunctive, what is unusual in this instance is that all four of the independent bas[e]s are applicable. ... [F]or the reasons discussed at length above, the Magistrate has determined that the Third-Party Complaint was specifically initiated as a means to harass or maliciously injure opposing counsel. ") (emphasis added) Id. Thus, contrary to Anthony's argument, the State Court's finding of willfulness on her part was necessary to its final judgment granting the Sanctions Motion.
5. Malice
A person engages in malicious conduct when she acts "in conscious disregard of [her] duties or without just cause or excuse." Moffitt , 252 B.R. at 923 (B.A.P. 6th Cir. 2000). As for whether Anthony engaged in this type of conduct, Magistrate Thompson concluded that the Third-Party Complaint "was specifically initiated as a means to harass or maliciously injure opposing counsel." Magistrate's Decision at 25.
That the Magistrate's finding was in the disjunctive—the Third-Party Complaint was meant to harass or maliciously injure—does not bar issue preclusion here. In an earlier case, the Court applied the rule that a "judgment does not have issue-preclusive effect if it makes several findings of fact or conclusions of law in the disjunctive and at least one of the alternative findings is insufficient to support a nondischargeability judgment." Bachinski , 393 B.R. at 539. In other words, if a judgment's findings are in the disjunctive and several findings support nondischargeability but one or more does not, then the judgment cannot be given issue-preclusive effect. This is because "the alternatives that might otherwise have supported nondischargeability are not ‘necessary to the final judgment’ and issue preclusion, therefore, cannot apply." Id . But the rule applied in Bachinski does not help Anthony here because the findings that the Magistrate made in the disjunctive—that the Third-Party Complaint was intended to harass or maliciously injure the Moyer Parties—both show that her conduct was malicious.
The State Court's finding that Ms. Anthony intended the Third-Party Complaint to "maliciously injure" the Moyer Parties fits the bill for malicious conduct. So too does the alternative finding that, by filing the Third-Party Complaint, Anthony intended to harass the Moyer Parties. There are two ways to get there, both starting from the definition of harassment. First, harassment means "purposeful vexation," and vexation means "[t]he damage that results from trickery or malice." Black's Law Dictionary (11th ed. 2019). That may not do the job because the definition of vexation is also in the disjunctive—results from trickery or malice . But harassment also means "words, conduct or action (usu. repeated or persistent) that, being directed at a specific person, annoys, alarms, or causes substantial emotional distress in that person and serves no legitimate purpose ." Id . (emphasis added). The "serves no legitimate purpose" component of this definition tracks the meaning of "malicious," which is that the debtor must have acted in conscious disregard of her duties or without just cause or excuse . See Bean v. Pion (In re Pion) , No. 06-10538, 2007 WL 3088137, at *9 (Bankr. D. Vt. Oct. 22, 2007), aff'd sub nom. Pion v. Bean , No. 1:07-CV-272, 2008 WL 2756478 (D. Vt. July 14, 2008) (holding that the definition of harassment under which the harassing act "serves no legitimate purpose" satisfied the "without just cause or excuse" component of § 523(a)(6) ’s malice requirement); see also W. Rsrv. Area Agency on Aging v. Mitchell (In re Mitchell) , No. 13-1222, 2014 WL 6633033, at *6 (Bankr. N.D. Ohio Nov. 24, 2014) ("[Although] Ohio Revised Code section 2323.51(A)(2)(a)(ii) defines frivolous litigation without expressly referring to an intent to injure, the considerations under that subsection are relevant to the element of malice under Bankruptcy Code section 523(a)(6), particularly whether the conduct was wrongful, necessarily resulted in injury and was without just cause or excuse.").
Plus, as discussed above, the Magistrate found that Ohio's litigation privilege did not insulate Anthony from sanctions liability. Magistrate's Decision at 25. The litigation privilege immunizes attorneys from liability for statements made during judicial proceedings unless the attorney seeking the privilege's protection has engaged in malicious conduct. By finding that Anthony's conduct was "blatantly violative of the so-called ‘litigation privilege,’ " id. , the Magistrate necessarily found that Anthony's conduct was malicious.
In the final analysis, there is no question that Anthony's actions were both willful and malicious and that she intended to cause injury to the Moyer Parties. The Moyer Parties have met their burden of showing that the dispositive factual issues in this adversary proceeding were actually litigated in the State Court Case. And it was necessary for the State Court to decide those issues to enter its final judgment granting the Sanctions Motion. The State Court's findings prove the facts necessary to establish that Anthony's debt to the Moyer Parties arising from the State Court's sanctions judgment is nondischargeable under § 523(a)(6).
VI. Conclusion
For all these reasons, the Motion is GRANTED . The debt for sanctions in the amount of $13,718.40 payable from Marcelle Rose Anthony to Stephen A. Moyer, Gregory A. Wetzel and Moyer Law Offices LPA is excepted from discharge under 11 U.S.C. § 523(a)(6). The Court will enter a separate judgment entry in accordance with this opinion.