Utah Behavior Services, Inc. v. Bringhurst (In re Bringhurst)
Utah Behavior Services, Inc. v. Bringhurst (In re Bringhurst)
Opinion of the Court
MEMORANDUM DECISION
Before the Court is the Motion for Summary Judgment (the “Motion”) filed May 16, 2017, by Defendant, Kyle Bringhurst (“Bringhurst” or “Defendant”) in the above-styled adversary proceeding.
On June 29, 2017, the Court held a hearing on the Motion (the “Hearing”). At the Hearing, Blake T. Ostler appeared on
After considering the relevant filings in this adversary proceeding including the Motion, the notice of hearing filed in connection with the Motion,
I. JURISDICTION
The Court’s jurisdiction over this adversary proceeding is properly invoked pursuant to 28 U.S.C. § 1334 and § 157(b)(1) except as hereinafter discussed. The matter herein, excluding counts 4 and 5, are determined to be core proceedings within the definition of 28 U.S.C. § 157(b)(2)(I), and the Court may enter a final order. Venue is appropriate under 28 U.S.C. § 1409.
II. FACTUAL BACKGROUND
For the purpose of ruling on the Motion, the Court finds that the following facts are not in genuine dispute:
On November 4, 2013, Bringhurst began his employment at UTBS as a part-time consultative and quality assurance employee.
Bringhurst and his family lived in Spanish Fork, Utah, and spent upwards of $15,000.00 investing in their home.
Bringhurst informed Whatcott and Sanders that he was interested in relocating to St. George with his family.
Bringhurst was tasked with expanding UTBS services in St. George, Washington, Utah and the surrounding areas.
To assist with his move to St. George, Bringhurst requested a signing bonus to cover the cost of his tuition assistance received from his previous job at Wasatch Mental Health.
Bringhurst signed a compensation agreement with UTBS and began travel-ling to St. George weekly to open the new UTBS location, open new client accounts, and employ new staff.
On June 15, 2014, Bringhurst signed a confidential nondisclosure agreement and a nonsolicitation agreement with UTBS.
UTBS filed a state action against Brin-ghurst and Anderson and received an injunction on July 7, 2015.
Bringhurst and his spouse filed for relief under Chapter 7 on September 16, 2016.
III. DISCUSSION
A. Summary Judgment Standards
In Becker v. Bateman, the United States Court of Appeals of the Tenth Circuit stated:
Summary judgment is appropriate when “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). “An issue is ‘genuine’ if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). “An issue of fact is ‘material’ if under the substantive law it is essential to the proper disposition of the claim.” Id. Put differently, “[t]he question ... is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law,” Shero v. City of Grove, 510 F.3d 1196, 1200 (10th Cir. 2007) (quotation omitted). “On summary judgment the inferences to be drawn from the underlying facts must be viewed in the light*821 most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quotation omitted).39
With these guiding principles in mind, the Court turns to the Motion.
B. Legal Standard Under Section § 523(a)(4)
Debts arising from “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny” áre excepted from the general discharge under 523(a)(4).
1. Fraud or defalcation while acting in a fiduciary capacity
To prevail under § 523(a)(4), a creditor must establish three elements: (1) the debt resulted from a fiduciary’s fraud or defalcation under an express or technical trust involving the entrusting of money or other property to a fiduciary for the benefit of another; (2) the debtor acted in a fiduciary capacity with respect to the trust; and (3) the transaction in question was a “defalcation” within the meaning of bankruptcy law.
The Tenth Circuit has taken a very narrow view of the concept of fiduciary duty under § 523(a)(4).
As a matter of bankruptcy law, § 523(a)(4) contemplates a trust relationship that is narrower than the general duty of one in a fiduciary relationship. It may be an express trust, defined in a written or oral agreement that created the relationship and identified the property held in trust (the res), the trustee, and the trustee’s duties with respect to the res. Or, it may be a technical trust that is imposed by statute. The statute must define the res, spell out the fiduciary duties of the party to whom the trust property is entrusted, and the trust must have arisen on the res before the debtor took the action that created the debt. The trust relationship must be imposed by the law rather than implied from it. Unless the trust is an express or technical one, other relationships from which general fiduciary duties might be implied by state law principles will not support a defalcation claim under § 523(a)(4). For example, a general attorney-client relationship has been found insufficient to establish the fiduciary relationship required .under § 523(a)(4). Neither is a partnership relationship unless there is an express agreement or a state law*822 creating a trust relationship.45
The creditor has the burden of persuasion, which must be met by a preponderance of the evidence.
The Court finds that there is no genuine issue of fact as to whether there was an “express or technical trust” established between Bringhurst and UTBS. The state court found that Bringhurst was a fiduciary of UTBS for injunctive relief purposes based on his employment contract; but as Bringhurst argues, the standard for such determination under § 523(a)(4) is different.
2. Embezzlement
Embezzlement under § 523(a)(4) is “the fraudulent appropriation of property by a person to whom such property has been entrusted or into whose hands it has lawfully come.”
The Court finds that there is a genuine issue of material fact as to whether Bringhurst used the American Express card for a purpose other than for which it was entrusted. Bringhurst argues he was authorized to use the American Express card for personal use. This assertion by Bringhurst is based on handwritten negotiations and his understanding. UTBS argues the American Express card was only authorized for company expenses. UTBS states that Bringhurst’s handwritten notes did not give him authority to use the company American Express card for his personal expenses.
3. Larceny
The Tenth Circuit adheres to the common-law definition of larceny.
The Court finds that summary judgment is appropriate under the claim of larceny as there is' no genuine issue of material fact supporting the required finding that Bringhurst acquired property of UTBS, the American Express card, by unlawful means. The parties do not dispute the fact that UTBS lawfully gave Brin-ghurst the American Express card. Accordingly, the Court grants summary judgment on cause of action two for larceny under § 523(a)(4) and those claim should be dismissed.
C. Legal Standard Under Section § 523(a)(6)
Debts arising from “willful and malicious injury by the debtor to another entity or to the property of another entity” are excepted from the general discharge.
The Court finds that summary judgment is not appropriate at to cause of action one as there is a genuine issue of material fact regarding whether Brin-ghurst’s conduct was intended to harm UTBS. There is a genuine issue of material fact as to whether Bringhurst knew or was substantially certain his actions would cause harm to UTBS. UTBS alleges that it suffered harm and damages by Brin-ghurst’s actions in leaving the company, starting his own company and reporting certain billing issues to the State of Utah and insurance companies which resulted in a month long investigation. It is unclear whether Bringhurst was willful and malicious in his actions. Accordingly, the Court denies summary judgment on cause of action one under § 523(a)(6).
D. Injunctive Relief
UTBS has requested permanent injunctive relief against Bringhurst in this Court to prevent Bringhurst from using UTBS’s confidential and trade secret information. Bringhurst states that UTBS’s claims are moot because the state court granted injunctive relief which expired after a period of time which the parties agreed has expired. The Court concludes that summary judgment is not appropriate under claims four and five as UTBS’s is seeking different relief in this Court than it sought in state court and therefore the claims cannot be rendered moot.
This ruling is -without prejudice to the Plaintiff seeking appropriate relief in the state court. Further, the Court determines that the jurisdictional link to this adversary case is tenuous for seeking injunctive relief. It is clearly not a core proceeding and at best, a related to claim. However, since the state court has already ruled on injunctive relief, it is more appropriate for the state court to determine what type of further injunctive relief is proper. As jurisdiction is a threshold issue which the Court can raise on its own, the Court does and determines it lacks jurisdiction on Counts four and five.
Accordingly, this Court determines it lacks jurisdiction over Counts four and five, which is consistent with a granting of the Defendant’s request for summary judgment.
IV. CONCLUSION
The Court concludes summary judgment is appropriate on cause of actions one, two and three as to claims asserted by UTBS under § 523(a)(4) and under the claim of larceny. Summary judgment is also appropriate on counts four and five for lack of jurisdiction. Summary judgment is not appropriate under cause of action one under § 523(a)(6) and cause of action two for embezzlement under § 523(a)(4).
The Court directs counsel for Defendant to submit a proposed form of order consistent with this Memorandum Decision for the Court’s consideration to sign.
. Adversary Case No. 16-02151, Docket No. 22. All future references to the Docket will be to Adversary Case No. 16-02151, unless otherwise specified.
. All subsequent statutory references are to title 11 of the United States Code unless otherwise indicated.
. Docket No. 1, Complaint. The Court notes that heading of the Complaint requests relief pursuant to § 523(a)(2) but the Complaint fails to list a claim for relief under § 523(a)(2) and the Motion does not request summary judgment on a claim under § 523(a)(2). Plaintiff argues, in the opposition to the Motion, that failure to plead a cause of action under § 523(a)(2)(A) was a scriveners error. Plaintiff has filed a Motion for Leave to file Amended Complaint [Docket No. 28] and that matter is set for hearing before this Court on July 20, 2017.
. Docket No. 23, Notice and Opportunity for Hearing on Motion for Summary Judgment.
. Docket No. 31, Memorandum in Opposition to Motion for Summary Judgment.
. Docket No. 37, Reply Memorandum. Plaintiff also filed a Motion to Strike [Docket No. 32]. The Court does not need to undertake a detailed analysis of the Plaintiff’s motions to strike because even if the Court granted them and did not consider the Statements of Undisputed Facts in question, the Court's decision herein would remain unchanged.
. The following discussion shall constitute findings of fact and conclusions of law under Fed.R.Bankr.P. 7052 and Fed.R.Civ.P. 52(a) for the limited purpose of ruling on the Motion. Any of the findings of fact herein are deemed, to the extent appropriate, to be conclusions of law, and any conclusions of law are similarly deemed, to the extent appropriate, to be findings of fact, and they shall be equally binding as both.
. Defendant's Statement of Undisputed Material Facts, ¶ 47.
. Defendant’s Statement of Undisputed Material Facts, ¶ 48, 49.
. Defendant’s Statement of Undisputed Material Facts, ¶ 50.
. Defendant’s Statement of Undisputed Material Facts, ¶ 51.
. Defendant’s Statement of Undisputed Material Facts, ¶ 52.
. Defendant’s Statement of Undisputed Material Facts, ¶ 53.
. Defendant’s Statement of Undisputed Material Facts, ¶ 54.
. Defendant’s Statement of Undisputed Material Facts, ¶ 55.
. Defendant’s Statement of Undisputed Material Facts, ¶ 56.
. Defendant’s Statement of Undisputed Material Facts, ¶ 57.
. Defendant’s Statement of Undisputed Material Facts, ¶ 48.
. Defendant's Statement of Undisputed Material Facts, ¶ 59.
. Defendant’s Statement of Undisputed Material Facts, ¶ 60.
. Defendant's Statement of Undisputed Material Facts, ¶ 60.
. Defendant’s Statement of Undisputed Material Facts, ¶ 61
. Defendant’s Statement of Undisputed Material Facts, ¶ 63
. Defendant's Statement of Undisputed Material Facts, ¶ 64.
. Defendant’s Statement of Undisputed Material Facts, ¶ 64.
. Defendant’s Statement of Undisputed Material Facts, ¶ 65.
. Defendant’s Statement of Undisputed Material Facts, ¶ 69, 71.
. Defendant’s Statement of Undisputed Material Facts, ¶ 69, 70.
. Defendant’s Statement of Undisputed Material Facts, ¶ 72.
. Defendant's Statement of Undisputed Material Facts, ¶ 74, 75.
. Defendant’s Statement of Undisputed Material Facts, ¶ 81.
. Defendant’s Statement of Undisputed Material Facts, ¶ 82.
. Defendant’s Statement of Undisputed Material Facts, ¶ 82.
. Defendant's Statement of Undisputed Material Facts, ¶ 95.
. Defendant’s Statement of Undisputed Material Facts, ¶ 97.
. Defendant’s Statement of Undisputed Material Facts, ¶ 97,
. Defendant’s Statement of Undisputed Material Facts, ¶ 97.
. Case No. 16-02151, Docket No. 1.
. Becker v. Bateman, 709 F.3d 1019, 1022 (10th Cir. 2013). See also Bird v. West Valley City, 832 F.3d 1188, 1199 (10th Cir. 2016) (summary judgment standard); Obermeyer Hydro Accessories, Inc. v. CSI Calendering, Inc., 852 F.3d 1008, 1014 (10th Cir. 2017) (same).
. 11 U.S.C. § 523(a)(4).
. Fowler Brothers v. Young (In re Young), 91 F.3d 1367, 1371 (10th Cir, 1996).
. Id.
. Id. See also Van De Water v. Van De Water (In re Van De Water), 180 B.R. 283, 289-90 (Bankr. D. N.M. 1995) (denying a discharge under § 523(a)(4) for breach of fiduciary obligations wherein "the debtor had been entrusted with property of another and then abused that trust.”),
. In re Young, 91 F.3d at 1371 (citing Romero v. Romero (In re Romero), 535 F.2d 618, 621 (10th Cir. 1976)).
. In re Bratt, 489 B.R. 414, 425-26 (Bankr. D. Kan. 2013).
. Grogan v. Garner, 498 U.S. 279, 290-91, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
. McDowell v. Stein, 415 B.R. 584, 595 (S.D. Fla. 2009) ("[w]hile the fact that a relationship is fiduciary under state law does not necessarily mean that it is a fiduciary relationship within the meaning of § 523(a)(4), if state law imposes the duties of a trustee on a party, then the party is a fiduciary for purposes of § 523(a)(4).”) (citing Quaif v. Johnson, 4 F.3d 950, 953 (11th Cir. 1993); In re Regan, 477 F.3d 1209, 1211 (10th Cir. 2007)).
. Hernandez v. Musgrave (In re Musgrave), No. AP. 09-01006, 2011 WL 312883, at *5 (10th Cir. BAP Feb. 2, 2011) (citing Klemens v. Wallace (In re Wallace), 840 F.2d 762, 765 (10th Cir. 1988)).
. Id. (citing Tulsa Spine Hosp., LLC v. Tucker (In re Tucker), 346 B.R. 844, 852 (Bankr.E.D. Okla. 2006)).
. Chenaille v. Palilla (In re Palilla), 493 B.R. 248, 252 (Bankr. D. Colo. 2013).
. Hill v. Putvin (In re Putvin), 332 B.R. 619, 627 (10th Cir. BAP 2005) (citation omitted).
. Hand v. United States, 227 F.2d 794, 795 (10th Cir. 1955).
. United States v. Smith, 156 F.3d 1046, 1056 (10th Cir. 1998) (citation omitted).
. Wonjoong Kim v. Hyungkeun Sun, 535 B.R. 358, 367 (10th Cir. BAP 2015) (citation omitted).
. 11 U.S.C. § 523(a)(6).
. Panalis v. Moore (In re Moore), 357 F.3d 1125, 1129 (10th Cir. 2004) (stating that there must be both a "willful act” and "malicious injury” to establish nondischargeability under Section 523(a)(6)); Mitsubishi Motors Credit of America, Inc. v. Longley (In re Longley), 235 B.R. 651, 655 (10th Cir. BAP 1999) (stating, “[i]n the Tenth Circuit, the phrase ‘willful and malicious injury’ has been interpreted as requiring proof of two distinct elements — that the injury was both ‘willful’ and ‘malicious.’ ”).
. Kawaauhau v. Geiger, 523 U.S. 57, 61, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998).
. Fletcher v. Deerman (In re Deerman), 482 B.R. 344, 369 (Bankr. D. N.M. 2012).
. Via Christi Regional Medical Ctr. v. Englehart (In re Englehart), 229 F.3d 1163 (10th Cir. 2000) ("[T]he ‘willful and malicious injury’ exception to dischargeability in
. Nat'l Labor Relations Board v. Gordon (In re Gordon), 303 B.R. 645, 656 n. 2 (Bankr. D. Colo. 2003) (it is "absolutely permissible to infer ... actual intent to cause injury from ,.. evidentiary facts”) (citations omitted).
Reference
- Full Case Name
- IN RE: Kyle BRINGHURST and Carrie Bringhurst, Debtors. Utah Behavior Services, Inc., a Utah Corporation v. Kyle Bringhurst
- Cited By
- 15 cases
- Status
- Published