UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
WILLIAM A. TIMMEL, No. 98-13709
DENT WIZARD INTL. CORP.,
v. A.P. No. 99-1118
WILLIAM A. TIMMEL,
Memorandum of Decision
Prior to bankruptcy, the claims of plaintiff Dent Wizard International Corporation against
debtor and defendant William Timmel were arbitrated before the American Arbitration Association.
In a detailed written decision after a full hearing, the arbitrator awarded Dent Wizard contract damages
of $133,000.00. However, the arbitrator rejected Dent Wizard's punitive damage claims, finding:
[Claimants] also seek punitive or exemplary damages from Timmel
and assert that his conduct, after he left the employ of [Dent Wizard],
in avoiding his restrictive covenant obligations was willful, intentional,
malicious and with an evil motive. The evidence does not, however,
support this contention.
After conclusion of the arbitration hearing, Timmel filed a Chapter 7 petition. Dent Wizard has filed a
dischargeability action based on the same allegations rejected by the arbitrator. Timmel now seeks
summary dismissal on grounds that Dent Wizard is precluded from relitigating the issues.
Relying on the older case of Brown v. Felson
, 442 U.S. 127 (1979), Dent Wizard argues that it
is not precluded from relitigating the issue. However, the Supreme Court in that case specifically left
open the applicability of collateral estoppel to dischargeability litigation. 442 U.S. at 139n10. Dent
Wizard has completely ignored more recent cases answering the question left open in Brown v. Felson
and holding that in most cases earlier litigation does have a preclusive effect on later dischargeability
actions. Grogan v. Garner
, 498 U.S. 279, 284-85 (1991); In re Bugna
, 33 F.3d 1054 (9th
Under California law, decisions of arbitrators are given collateral estoppel effect in subsequent
litigation between the same parties and may not be relitigated in any court. 6 Cal.Jur.3d, Arbitration
and Award, § 62. State law governs collateral estoppel issues in subsequent bankruptcy litigation. In
, supra, at 1057.
Where a creditor has unsuccessfully argued to a finder of fact that the debtor has committed
fraud or other intentional misconduct, the creditor may not, in a subsequent nondischargeability action,
seek a judgment based on the same alleged misconduct. RecoverEdge L.P. v. Pentecost
, 44 F.3d 1284
Cir. 1995); In re Bottagaro
, 95 B.R. 766 (D.Colo.1987); In re Browning
, 182 B.R. 913
In this case, Dent Wizard aggressively sought a finding from the arbitrator that Timmel had
engaged in willful and malicious conduct and was liable for punitive damages. The arbitrator having
expressly rejected these assertions, Dent Wizard is not free to raise them again in this adversary
proceeding. Accordingly, Timmel's motion will be granted. Counsel for Timmel shall submit an
appropriate form of order.
Dated: September 14, 1999 ____________________________
United States Bankruptcy