NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS NOV 7 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: JAMES MARVIN ROTH, No. 14-56612
Debtor, D.C. No.
3:13-cv-02954-BAS-DHB
------------------------------
ANICE M. PLIKAYTIS, MEMORANDUM*
Plaintiff-Appellee,
v.
JAMES MARVIN ROTH,
Defendant-Appellant.
In re: JAMES MARVIN ROTH, No. 14-56700
Debtor, D.C. No.
3:14-cv-00011-BAS-DHB
------------------------------
ANICE M. PLIKAYTIS,
Plaintiff-Appellant,
v.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
JAMES MARVIN ROTH,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
Cynthia A. Bashant, District Judge, Presiding
Argued and Submitted October 6, 2016
Pasadena, California
Before: PREGERSON, NOONAN, and PAEZ, Circuit Judges.
The underlying federal case is a Chapter 11 bankruptcy proceeding to except
debts from discharge pursuant to 11 U.S.C. § 523(a). The debt at issue is the
judgment obtained in state court by Appellee/Cross-Appellant Anice Plikaytis
against her former employer Appellant/Cross-Appellee James Roth. Both Roth
and Plikaytis appeal the district court’s decisions affirming various rulings of the
bankruptcy court.
We have jurisdiction under 28 U.S.C. §§ 1291, 158(d). We review a district
court’s decision on an appeal from a bankruptcy court de novo, with no deference
given to the district court’s decision. In re JTS Corp., 617 F.3d 1102, 1109 (9th
Cir. 2010). We review the bankruptcy court’s conclusions of law de novo and
findings of fact for clear error. Id. We affirm.
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Appeal No. 14-56612
1. The bankruptcy court did not err in finding that Plikaytis’s claims in her
amended complaint that the state court judgment was nondischargeable under
§ 523(a)(2)(A), (a)(4), and (a)(6) related back to the time of filing of her original
complaint. Plikaytis’s amended complaint contained the same three claims pled in
her original complaint, but with additional factual information. Thus, the
“amendments” regarding these three claims necessarily “assert[] a claim or defense
that arose out of the conduct, transaction, or occurrence set out—or attempted to be
set out—in the original pleading . . . .” Fed. R. Civ. P. 15(c)(1)(B); 6A Charles
Alan Wright et al., Federal Practice and Procedure § 1497 (3d ed. 2016)
(“[A]mendments that do no more than restate the original claim with greater
particularity or amplify the details of the transaction alleged in the preceding
pleading fall within Rule 15(c)(1)(B).”).
2. The bankruptcy court’s justifiable reliance determination was not clearly
erroneous because there is substantial evidence in the record that Plikaytis
justifiably relied on Roth’s promise, including, most convincingly, the fact that she
and Roth had been business associates for over twenty years. See In re Kirsh, 973
F.2d 1454, 1460 (9th Cir. 1992).
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3. The bankruptcy court did not err in finding the full $2.8 million state
court breach of contract debt nondischargeable under § 523(a)(2)(A). The
bankruptcy court determined that the breach of contract debt had the additional
characteristic of fraud under § 523(a)(2)(A) and accordingly found the debt
nondischargeable. This was not in error as the state court judgment is the correct
measure of damages because it is the debt arising from the fraud. See Cohen v. De
La Cruz, 523 U.S. 213, 221 (1998) (“[Section] 523(a)(2)(A) is best read to prohibit
the discharge of any liability arising from a debtor’s fraudulent acquisition of
money, property, etc. . . . .”).
4. The bankruptcy court did not err in finding that Plikaytis’s § 523(a)(4)
claim was within the scope of her pleadings. The bankruptcy pleadings expressly
speak to Roth’s mismanagement of Talmadge East and misappropriation of
Talmadge East funds for personal use. The bankruptcy court found wrongful
defalcation based on Roth’s financial mismanagement of Talmadge East during
2009, which falls within the scope of the pleadings.
5. The bankruptcy court did not err in failing to consider the 2008-2009
ledgers in calculating the defalcation debt under § 523(a)(4). Roth’s argument
focuses on the bankruptcy court’s statement that the 2008 ledgers were unclear, but
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he ignores a crucial part of the bankruptcy court’s reasoning. The bankruptcy
court also relied solely on the 2009 ledger because it more appropriately reflected
the wrongful conduct that formed the basis of the judgment (i.e., financial
mismanagement during a time of financial crises). We find no fault with this
reasoning.
6. The bankruptcy court did not err in evaluating whether Roth had
fiduciary capacity under § 523(a)(4). Contrary to Roth’s argument, the bankruptcy
court did not rely on the state court’s fiduciary duty determination in making its
own § 523(a) fiduciary capacity determination. In a pretrial order, the bankruptcy
court decided the issue without reference to the state court’s decision.
7. The bankruptcy court did not err in finding that the emotional distress
damages were nondischargeable under § 523(a)(6). Intentional infliction of
emotional distress is an independent cause of action and does not rely on an
allocation of damages between dischargeable and nondischargeable debts. The
record supports the bankruptcy court’s finding of willful and malicious intent with
regard to the emotional distress damages, which Roth does not appear to challenge.
Cross-Appeal, No. 14-56700
1. The bankruptcy court did not err in finding that the $52,000 judgment for
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“engag[ing] in wrongful conduct through withholding payment of mortgagers in
the name of Anice Plikaytis” was subsumed within the $90,000 judgment for
“breach of fiduciary duties . . . by failing to pay mortgages for units held in the
name of Anice Plikaytis.” The bankruptcy court concluded that because the two
debts arose out of the same conduct, one award subsumed the other. Plikaytis
argues this was error, but cites no case law in support. Because the bankruptcy
court is in the best position “to fashion the remedy best suited to the harm” and “to
determine the appropriate damages,” we affirm. In re Anguiano, 99 B.R. 436, 438
(B.A.P. 9th Cir. 1989) (internal quotation marks omitted).
2. The bankruptcy court did not err in discharging the punitive damages and
attorneys’ fees debt. The state court jury awarded punitive damages and attorneys’
fees in lump sums, which were applicable to all causes of action. From the verdict
forms and judgment, the bankruptcy court could not decipher whether the
characteristics of § 523(a) had been litigated and decided in state court with regard
to part or all of the punitive damages and attorneys’ fees awards. Therefore,
collateral estoppel could not be applied. Before the bankruptcy court, and on
appeal, Plikaytis failed to present any evidence or argument that the two awards
stemmed from nondischargeable liability. Thus, she has not met her burden to
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establish nondischargeability.
3. Because Plikaytis failed to properly request attorneys’ fees in the
discharge proceedings, the bankruptcy court did not abuse its discretion in refusing
to award attorneys’ fees.
4. The bankruptcy court did not err in dismissing Plikaytis’s mechanic’s
lien claim. Neither the original complaint, nor the attached state court judgment,
explicitly or implicitly mention the mechanic’s lien claim. Therefore, unlike
Plikaytis’s other claims, this claim was entirely new when presented in the
amended complaint. Moreover, the mechanic’s lien claim did not arise from the
same conduct, transaction, or occurrence set forth in the original complaint.
Accordingly, the bankruptcy court properly concluded that relation back was not
appropriate as to this claim.
5. The bankruptcy court’s pretrial order was not an erroneous sua sponte
grant of summary judgment. “At any pretrial conference, the court may consider
and take appropriate action on . . . formulating and simplifying the issues, and
eliminating frivolous claims or defenses . . . .” Fed R. Civ. P. 16(c)(2)(A). As
discussed above, the bankruptcy court properly found that the $52,000 and the
$90,000 awards should not be aggregated. It was within the bankruptcy court’s
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discretion to simplify and eliminate this issue.
AFFIRMED.
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