Petition for Writ of Certiorari — Brian K. Failon, Petitioner v. Compass Chemical International, LLC

No. __________

In the

Supreme Court of the United States

BRIAN K. FAILON,

v.

Petitioner,

COMPASS CHEMICAL INTERNATIONAL, LLC,

Respondent.

-----------------------------------------ON PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

-----------------------------------------APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

-----------------------------------------Richard F. Hawkins, III

Counsel of Record

The Hawkins Law Firm, PC

2222 Monument Avenue

Richmond, VA 23220

(804) 308-3040

Counsel for Petitioner

GibsonMoore Appellate Services, LLC

206 East Cary Street ♦ Richmond, VA 23219

804-249-7770 ♦ www.gibsonmoore.net

TABLE OF CONTENTS

Appendix

Page:

Opinion

United States Court of Appeals for

The Fourth Circuit

entered February 12, 2018 .................................. 1a

Opinion

United States District Court for

The Eastern District of Virginia

Richmond Division

entered May 8, 2017 ............................................ 3a

Opinion and Order

United States Bankruptcy Court

Eastern District of Virginia

Richmond Division

entered March 29, 2016 ...................................... 7a

1a

[ENTERED FEBRUARY 12, 2018]

UNPUBLISHED

UNITED STATES COURT OF APPEALS FOR THE

FOURTH CIRCUIT

No. 17-1709

BRIAN K. FAILON,

Debtor - Appellant,

v.

COMPASS CHEMICAL INTERNATIONAL, LLC,

Plaintiff - Appellee.

Appeal from the United States District Court for the

Eastern District of Virginia, at Richmond. John A.

Gibney, Jr., District Judge. (3:16-cv-00926-JAG)

Submitted: January 29, 2018

Decided: February 12, 2018

Before WILKINSON, FLOYD, and HARRIS, Circuit

Judges.

2a

Affirmed by unpublished per curiam opinion.

Richard F. Hawkins, III, THE HAWKINS LAW

FIRM, PC, Richmond, Virginia, for Appellant.

Jennifer J. West, James Donaldson, SPOTTS FAIN,

PC, Richmond, Virginia, for Appellee.

Unpublished opinions are not binding precedent in

this circuit.

PER CURIAM:

Brian K. Failon appeals the district court’s order

affirming the bankruptcy court’s order determining

that his debt to Compass Chemical International,

LLC, is nondischargeable in his Chapter 7

proceeding under 11 U.S.C. § 523(a)(6). We have

reviewed the record included on appeal, as well as

the parties’ briefs, and find no reversible error.

Accordingly, we affirm for the reasons stated by the

district court. Failon v. Compass Chem. Int’l, LLC,

No. 3:16-cv-00926-JAG (E.D. Va. May 8, 2017). We

dispense with oral argument because the facts and

legal contentions are adequately presented in the

materials before this court and argument would not

aid the decisional process.

AFFIRMED

3a

[ENTERED MAY 8, 2017]

IN THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF VIRGINIA

Richmond Division

BRIAN K. FAILON,

Appellant,

COMPASS CHEMICAL INTERNATIONAL, LLC,

Appellee.

Civil Action No. 3:16-cv-00926-JAG

OPINION

Brian K. Failon appeals the order of the United

States Bankruptcy Court for the Eastern District of

Virginia

(the

"Bankruptcy

Court")

holding

nondischargeable a debt that Failon owes to

Compass Chemical International, LLC ("Compass").

Because the Bankruptcy Court correctly applied the

facts found in the litigation from which the debt

arose to the elements of nondischargability, the

Court AFFIRMS the decision of the Bankruptcy

Court.

I. BACKGROUND

The Court will provide only a summary of the

facts in this case, as the opinion of the Bankruptcy

Court included a thorough recitation of the facts.

Compass Chems. Int'/, LLC v. Failon (In re Failon},

Adv. Pro. No. 11-03229-KLP, 2016 WL 1238912, at

*1-8 (Bankr. E.D. Va. Mar. 29, 2016).

Failon worked for Compass from 1999 through

July 2009. About a month before his departure,

4a

Compass sent Failon a new employment agreement

that reduced his base salary by thirty percent. A few

days later, Failon met with a competitor of Compass

about working with the competitor in the future. A

few days after that, Failon wiped the hard drive of a

Compass- owned computer. He also instructed that

the statement from the company doing the wiping

not include the wipe of the hard drive. A few weeks

later, Failon rejected the new employment

agreement and returned the Compass-owned

computer. Failon then formed a new company and

began to solicit clients of Compass. In November

2009, Compass sued Failon and the new company in

Georgia (the "Georgia Litigation").

In October 2010, Compass filed a motion for

spoliation sanctions in the Georgia Litigation based

on (1) Failon having wiped the hard drive of a

Compass-owned computer prior to his departure, and

(2) his inconsistent testimony on the issue during

discovery. The district court referred the motion to a

magistrate judge who conducted a three-day

evidentiary hearing.

In February 2011, the

magistrate

judge

issued

his

report

and

recommendation (the "Spoliation Report"). The

Spoliation Report found that Failon had engaged in

spoliation of evidence and had lied about it. The

Report recommended that the district court sanction

Failon. In reaching this decision, the magistrate

judge applied a five-factor test that included a

finding that Failon had acted in bad faith. The

district court approved the Spoliation Report and

directed Failon to pay Compass $123,835.95 (the

"Spoliation Damages").

Failon filed for bankruptcy in June 2011. In

September 2011, Compass filed a complaint against

5a

Failon in the Bankruptcy Court, initiating an

adversary proceeding. In June 2015, Compass filed a

partial motion for summary judgment in the

adversary proceeding seeking summary judgment as

to the dischargability of the Spoliation Damages. On

March 29, 2016, the Bankruptcy Court granted the

partial motion, holding the Spoliation Damages

nondischargeable under 11 U.S.C. § 523(a)(6). In so

holding, the Bankruptcy Court applied the factual

findings from the Spoliation Report to the elements

of § 523(a)(6). Failon appealed.1

II. DISCUSSION2

Section 523(a)(6) excludes from discharge any

debt "for willful and malicious injury by the debtor to

another entity or to the property of another entity."

Importantly, the words "willful" and "malicious"

modify the word "injury." Kawaauhau v. Geiger, 523

U.S. 57, 61 (1998). This indicates "that

nondischargability takes a deliberate or intentional

injury, not merely a deliberate or intentional act that

leads to injury." Id. (emphasis in original). The

Fourth Circuit has phrased this inquiry as whether

the debtor intended to injure the creditor (or the

creditor's property), as opposed to engaging in an

intentional act that injured the creditor. Duncan v.

Failon originally appealed in May 2016. Failon v. Compass

Chems. Int'/, LLC, No. 3:16-cv-00317-JAG. The Court

dismissed the appeal for lack of jurisdiction because Failon had

appealed an interlocutory order, and remanded the case to the

Bankruptcy Court. On remand, the Bankruptcy Court entered

final judgment. Failon timely appealed.

2Appellate courts review the factual findings of the bankruptcy

court for clear error and review questions of law de novo. In re

Merry-Go-Round Enters., Inc., 400 F.3d 219, 224 (4th Cir.

2005).

1

6a

Duncan (In re Duncan), 448 F.3d 725, 729 (4th Cir.

2006).

In this case, Failon intended to injure Compass

when he wiped the computer.

Failon acted

deliberately and intentionally, and he knowingly

disregarded Compass's rights. Further, the facts

show that Failon had intent to injure Compass with

these actions. Accordingly, the Spoliation Damages

awarded in the Georgia Litigation because of these

actions are not dischargeable in bankruptcy under §

523(a)(6).

II. CONCLUSION

For the reasons stated, and for the reasons stated

by the Bankruptcy Court, Compass Chems. Int'/,

LLC v. Failon (In re Failon), Adv. Pro. No. 11-03229KLP, 2016 WL 1238912 (Bankr. E.D. Va. Mar. 29,

2016), the Court AFFIRMS the judgment of the

Bankruptcy Court.

The Court will enter an appropriate order.

Let the Clerk send a copy of this Order to all

counsel of record.

Date: May 8, 2017

Richmond, VA

7a

[ENTERED MARCH 29, 2016]

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

Richmond Division

In re: Brian K. Failon, Case No. 11-33877-KLP

Debtor

Chapter 7

Compass Chemical International, LLC,

Plaintiff,

v.

Adv. Pro. No. 11-03229-KLP

Brian K. Failon,

Defendant.

MEMORANDUM OPINION

This matter is before the Court on the motion by

Plaintiff Compass Chemical International, LLC,

(“Compass”) for summary judgment (the “Summary

Judgment Motion”) against Debtor Brian K. Failon.

For the reasons set forth below, the Court finds that

summary judgment is appropriate in this instance

and therefore will grant the Summary Judgment

Motion.

Procedural History in this Court

Debtor filed this chapter 7 case on June 12, 2011.

Lynn L. Tavenner was appointed as trustee. At the

time the Debtor’s chapter 7 case was filed, Compass

and the Debtor were engaged in a lawsuit in the

United States District Court for the Northern

8a

District of Georgia (the “Georgia District Court”),

Civil Action No. 1:09-cv-3491-RLV-WEJ (the

“Georgia Litigation”),1 in which Compass sought an

award of damages against the Debtor, True North

Products, LLC, (“True North”) and Source 1

Specialty Chemicals, Inc. (“Source 1”)2 arising from

the Debtor’s prior employment by Compass. The

Georgia Litigation was stayed by the filing of the

Debtor’s chapter 7 case in this Court.

On September 14, 2011, Compass filed a

complaint (the “Complaint”) initiating the instant

adversary proceeding. In Count I of the Complaint,

Compass objected to the discharge of the alleged

unliquidated debt that was the subject of the

Georgia Litigation, based upon 1) 11 U.S.C. §

523(a)(4), which prohibits the discharge of debts

arising from fraud, conversion and larceny, and 2)

11 U.S.C. § 523(a)(6), which prohibits the discharge

of debts that arise as a result of willful and

malicious injury. In Count II of the Complaint,

Compass requested that the Court find an order in

the Georgia Litigation awarding damages for

spoliation of evidence in favor of Compass and

1 The RLV-WEJ suffix was subsequently changed to MHC

upon the retirement of the judge to whom the case was

originally assigned.

2 True North Products, LLC, is a debtor in this Court,

having filed a chapter 7 petition on June 12, 2011, Case No. 1133876-KLP. The Debtor owns a 100% interest in True North

Products, LLC. Source 1 Specialty Chemicals, Inc., is also a

debtor in this Court, having filed a chapter 7 petition on June

12, 2011, Case No. 11-33875- KLP. True North Products, LLC,

owns a 100% interest in Source 1 Specialty Chemicals, Inc.

9a

against the Debtor to be nondischargeable under 11

U.S.C. § 523(a), and in particular § 523(a)(6).3

In the Complaint, Compass also stated that it

intended to file a motion to transfer venue to enable

the Georgia Litigation and this dischargeability

action to be heard simultaneously, either in this

Court or in the Georgia District Court. Relative

thereto, on March 8, 2012, Compass filed motions for

relief from the automatic stay to enable it to proceed

with the Georgia Litigation in the Georgia District

Court. After a hearing held on April 4, 2012, this

Court granted the motion for stay relief in the cases

of the Debtor, True North, and Source 14 The orders

provided that the automatic stay of § 362 of the

Bankruptcy Code remained in effect with respect to

collection of any amounts awarded in the Georgia

Litigation. The orders further provided that “[t]he

issues of dischargeability raised by Compass in the

Adversary Complaint shall remain under the

jurisdiction of this Court and shall be held in

abeyance pending completion of a trial and entry of a

Final Order in the Georgia Action.”

During the subsequent course of the Georgia

Litigation, the parties regularly advised this Court

as to its progress, either at a hearing or by filing a

joint statement. At a status hearing held on May 20,

2015, which was attended by the Debtor pro se and

by Compass through counsel, Compass advised this

Court that the Georgia Litigation had been

3 All further references to the Bankruptcy Code are to 11

U.S.C. §§ 101-1532.

4 Orders granting relief from the stay were entered in each

case on April 19,

2012.

10a

completed by the Georgia District Court’s March 27,

2015, entry of a final judgment on spoliation

damages and by Compass’s voluntary dismissal of

the remaining issues in the Georgia Litigation. At

the status hearing, Compass, by counsel, advised the

Court of its intent to file a motion for summary

judgment in this adversary proceeding, seeking a

determination of the dischargeability of the Georgia

District Court’s award of spoliation damages. The

Court issued a scheduling order relative thereto on

May 28, 2015, and on June 26, 2015, Compass filed

the Summary Judgment Motion, seeking partial

summary judgment as to the dischargeability of the

spoliation damages pled in Count II of the

Complaint. A hearing on the Summary Judgment

Motion was held on October 1, 2015, at which the

Court took the matter under advisement. After the

October hearing, each party submitted proposed

findings of fact and conclusions of law.

The Georgia Litigation

History of the litigation.5 The Georgia

Litigation was commenced on November 11, 2009,

when Compass filed a complaint (the “Georgia

Complaint”) against the Debtor and True North in

the Superior Court of Cobb County, Georgia. The

Georgia Complaint centered on the termination of

5 Where appropriate, findings of fact shall be construed as

conclusions of law and conclusions of law shall be construed as

findings of fact. See Fed. R. Bankr. P. 7052.

The history of the Georgia Litigation is set forth in the

Complaint, the Summary Judgment Motion and Compass’s

post-trial proposed findings of fact and conclusions of law. The

Debtor has not contested this history.

11a

the Debtor’s employment with Compass and his

formation of Source 1 and True North. In December

2009, the Georgia Complaint was removed to the

United States District Court for the Northern

District of Georgia. Source 1 was added as party

defendant thereafter.

In October 2010, Compass filed a motion for

spoliation sanctions (the “Spoliation Motion”), and

the presiding judge in the case (the “District Court

Judge”)6 referred the motion to a magistrate judge

(the “Magistrate”). The Magistrate addressed the

Spoliation Motion in two separate reports and

recommendations,

first

considering

whether

sanctionable spoliation had occurred and then

addressing the issue of damages.

In determining whether spoliation of evidence

had occurred, the Magistrate held a three-day

evidentiary hearing, at which both parties were

represented, before and after which the parties

submitted briefs. In February 2011, the Magistrate

issued an 86-page final report and recommendation

(the “Spoliation Report”), which made detailed

findings of fact and conclusions of law. The

Magistrate concluded that the Debtor had engaged

in spoliation of evidence and recommended that

sanctions be awarded against the Debtor and in

favor of Compass.7 On March 21, 2011, the District

Court Judge approved the Spoliation Report over the

6 The district court judge to whom the case was originally

assigned retired during the pendency of the case and the case

was reassigned to another judge. The use of the term “District

Court Judge” in this opinion may refer to either of those two

judges.

7 The Spoliation Report is attached to the Complaint as

Exhibit B and to the Summary Judgment Motion as Exhibit A.

12a

objection of the Debtor, Source 1 and True North,

stating that “none of the defendants’ arguments

have merits,” and adopted the Spoliation Report as

the opinion and order of the Georgia District Court.8

The findings of the Spoliation Report will be

discussed below.

After approving the Spoliation Report, the

District Court Judge referred the matter of damages

to the Magistrate. After further briefing, the

Magistrate

filed

a

second

report

and

recommendation

(the

“Damages

Report”),

recommending that the Debtor, True North and

Source 1 pay damages to Compass in the amount of

$123,835.95 (the “Spoliation Damages”).9 The

District Court Judge approved the Damages Report

on May 31, 2011, adopting the report as the opinion

and order of the Georgia District Court and ordering

that the Debtor pay $123,835.95 to Compass within

ten days.10 That order was stayed by the June 2011

bankruptcy filings of the Debtor, Source 1 and True

North in this Court. The findings of the Damages

Report will also be discussed below.

No trial was ever held on the substantive

portions of the Georgia Complaint. Rather, Compass

moved for entry of final judgment, pursuant to Rule

54(b) of the Federal Rules of Civil Procedure, Fed. R.

Civ. P. 54(b), on the Spoliation Damages. The

The order of the District Court Judge approving the

Spoliation Report is attached to the Complaint as Exhibit C

and to the Summary Judgment Motion as Exhibit B.

9 The Damages Report is attached to the Complaint as

Exhibit E and to the Summary Judgment Motion as Exhibit E.

10 The order of the District Court Judge awarding

Spoliation Damages is attached to the Complaint as Exhibit F

and to the Summary Judgment Motion as Exhibit F.

8

13a

Georgia District Court granted the motion as to the

Debtor on March 27, 2015, and the clerk of that

court entered judgment in the amount of

$123,835.95 the same day.11

The Spoliation and Damages Reports. The

Magistrate’s lengthy Spoliation Report, adopted by

the District Court Judge, sets forth in great detail

the facts surrounding the Spoliation Motion as well

as the standard of law employed in ruling on that

motion. Because both the facts and the law employed

by the Magistrate and adopted by the District Court

Judge are germane to this Court’s decision as to

dischargeability, they are summarized and set forth

below.

Findings of fact in the Spoliation Report.

Compass

manufactures

and

sells

specialty

chemicals. The Debtor joined Compass in October

1999. Initially, he was an account manager and

eventually rose to become, in 2001, Vice President

and Technical Director. In 2006, he was named Vice

President and Sales Manager, and in July 2007, he

was named Vice President of Business Development

and Technology, with a primary duty of developing

new products as well as markets and applications for

Compass’s products. In that position, he became

quite knowledgeable about Compass’s products and

pricing structure.

Because the Debtor did not work in the Atlanta

headquarters of Compass but instead maintained a

home office in Richmond, Virginia, Compass gave

him a laptop computer (the “Laptop”) and a desktop

computer (the “Desktop”) for his professional use. He

11 The 2015 Final Order of the District Court is attached to

the Summary Judgment Motion as Exhibit G.

14a

used the Laptop extensively for email and to access

Compass’s databases. He used the Laptop when he

traveled and also to access contact information for

Compass’s customers.

The Debtor’s July 13, 2007, employment

agreement with Compass, in effect when his

employment with Compass ended, contained a

confidentiality clause. The Debtor knew that he

could not share confidential information he obtained

while employed by Compass, keep confidential

information he obtained while employed by

Compass, or share with Compass’s competitors any

confidential information he obtained while employed

by Compass. Among other things, Compass

considered its customer lists, price structure, profit

margins, product formulations, future development

plans, and distribution structure to be confidential

information.

Much of the information that Compass

considered to be confidential was contained on two

computer databases. The Debtor had access to each

of those databases. The information on each

database could be viewed, printed, saved to the

computer’s hard drive, saved to an external drive, or

communicated via email. The Debtor accessed the

information on the databases from time to time, but

he testified at the evidentiary hearing before the

Magistrate that he could not recall downloading any

materials to the Laptop. The Debtor did access

certain of Compass’s online sales reports in April

2009 for six hours, for two hours in May 2009, and

for over 12 hours in June 2009.

On May 22, 2009, the Debtor received a letter

from Compass notifying him that his employment

15a

agreement would be terminated effective July 13,

2009. The letter stated that the company wished to

enter into a new employment agreement with the

Debtor, to be negotiated in the “coming days.” This

information had been shared informally with the

Debtor two weeks prior to the May 22, 2009, letter.

The Compass president testified that under the new

agreement, the Debtor’s base salary would be lower

but that his compensation package would be

restructured so that he could earn as much as or

more than he had earned before.

On June 1, 2009, the Debtor took the Desktop to

“Personal Computer Service Company” (“Personal

Computer”) and directed that its hard drive be

reformatted. The effect of this was to delete any data

that had been stored on it. The Debtor stated that

his purpose was to delete any personal information

from the machine, since his family had used it, and

to make it possible to return the computer in

working condition, because he had realized that

there were problems with the machine. After the

Desktop’s hard drive was reformatted, the Debtor

used the Desktop and did not further reformat the

hard drive, delete any files, or wipe the hard drive.

On June 24, 2009, Compass gave the Debtor a

draft of a new employment agreement (the “Draft

Agreement”), which reduced his base salary by 30

percent, while other employees received only a 10

percent reduction. Prior thereto, the Compass

president did not perceive that the Debtor was

unhappy with his employment. After receipt of the

Draft Agreement, the Compass president believed

that the Debtor planned to review the Draft

Agreement with his attorney and then negotiate

with Compass.

16a

On June 27, 2009, the Debtor met in Houston

with principals of Access Chemicals and Services

(“Access Chemicals”), a competitor of Compass. Prior

to that meeting, the Debtor met with his attorney. It

is unclear exactly when that meeting took place, but

in the Spoliation Report the Magistrate found that

the meeting took place after the Debtor received the

Draft Agreement. The Debtor’s motivation in holding

this meeting remains unclear, as the Debtor gave

conflicting explanations as to why he had sought

legal advice. In the Spoliation Report, the Magistrate

cited deposition testimony of the Debtor that he had

sought the advice of his attorney because he was

concerned that he might be sued by Compass.

The meeting with Access Chemicals focused on

the Debtor’s working with Access Chemicals in some

way in the future, whether as an employee, as a

participant in a joint venture, or as a purchaser of

Access Chemicals’ products. At the conclusion of the

meeting, the Debtor and the Access Chemicals

principals agreed that the Debtor would submit a

detailed proposal to Access Chemicals.

Two days later, on June 29, 2009, the Debtor took

the Laptop to Personal Computer and requested that

its hard drive be “wiped” so that others could not

access its contents. The Debtor also stated that he

needed documentation of the state of the Laptop

when he returned it to Compass, and he requested

that Personal Computer also prepare a written

statement detailing the Laptop’s problems. He also

requested that the wipe of the hard drive not be

included in that statement. Personal Computer

subjected the hard drive to a military wipe, which

preventing anything on that drive from ever being

17a

accessed.12 The Debtor testified in the Georgia

Litigation that he did not remove any Compass

information from the Laptop because he had

transferred all Compass information that might

have been on the Laptop to the Desktop after its

June 1, 2009, reformatting.

On July 10, 2009, the Debtor informed Compass

that he was rejecting the Draft Agreement and

leaving his position at Compass. The Debtor and the

Compass president met on July 14, 2009, at which

time the Debtor returned both the Laptop and the

Desktop. The Debtor advised the Compass president

that the Laptop had been inoperable for several

weeks and presented the statement from Personal

Computer but did not disclose the wipe of the hard

drive. At the meeting, the Compass president made

it clear to the Debtor that if he engaged in behavior

prohibited by his 2007 employment agreement,

Compass would pursue action against the Debtor.

On July 15, 2009, the day after the meeting, the

Debtor registered True North as a limited liability

company in Virginia. Thereafter, the Debtor

incorporated Source 1 as a Texas corporation that

was wholly owned by True North. The Debtor began

to solicit Compass clients, maintaining that the nonsolicitation provisions of his 2007 employment

agreement had ended when the contract was

terminated. At the evidentiary hearings in the

Georgia Litigation, however, he did concede that the

12 At the Georgia Litigation evidentiary hearing, the Debtor

testified that he wanted to delete any personal information

from the Laptop before returning it to Compass. He further

stated that he wanted to return the Laptop in the best possible

condition.

18a

confidentiality and non- disparagement clauses of

the 2007 employment agreement remained in effect.

After the Georgia Litigation was commenced and

discovery began in that case, questions arose

regarding the Desktop and Laptop and the

information thereon. In particular, information

emerged proving that the Debtor had been less than

candid during the litigation process as to his use of

at least one computer thumb drive prior to his

turnover of the Laptop and the Desktop to Compass.

On April 26, 2010, the Debtor answered a

Compass interrogatory in which Compass asked the

Debtor whether he had used any removable media,

including “CD-ROMS Zip disks, floppy disks, tape

drives, thumb drives, and removable hard drives” in

any computer system he had used after July 13,

2007. The Debtor unequivocally stated that he had

used no such device. Later, in a July 2010

deposition, the Debtor stated that he had not

retained any information from the Laptop by using a

thumb drive and that he had not owned a thumb

drive in 2009. He further stated that Personal

Computer’s representative had not copied anything

from the Laptop to a thumb drive.

Thereafter, after an examination of the Laptop

and Desktops, Compass’s forensic expert concluded

that in fact a thumb drive had been used to copy

data from the Desktop. At that point, in November

2011, the Debtor amended his interrogatory

response to disclose the thumb drive and produced it

for inspection. The Debtor stated at the evidentiary

hearing held in the Georgia Litigation that he had

been fatigued and confused at the July 2010

deposition and thought that the question had related

19a

solely to any thumb drive provided to him by

Compass. He further revealed that he had used the

thumb drive to transfer data to or from the Laptop

and Desktop. The expert examination of this thumb

drive showed that most of its contents had been

deleted. The expert was able to recover some of the

deleted files, and the Compass president testified

that ninety percent of the recovered deleted content

had been confidential Compass documents.

At the evidentiary hearing, the Debtor initially

denied the existence of a second thumb drive but

later admitted its possible existence. He was unable

to produce such a drive and testified that he had

either thrown it away or lost it. He further testified

that he had not used a thumb drive to steal

Compass’s confidential information. There was an

unresolved dispute as to when a second thumb drive

might have been used and whether it was used

before or after the Debtor turned over the Laptop

and Desktop to Compass.

After reviewing the evidence relative to the

thumb drives, the Magistrate noted that:

Mr. Failon denied ownership or knowledge of

any thumb drive in multiple interrogatory

responses and in his deposition, admitting to

the existence of the known thumb drive only

after plaintiff’s expert discovered its use .

. . . Mr. Failon’s claimedconfusion simply is not

credible. Moreover, although the second thumb

drive is not the smoking gun that plaintiff

hoped it would be, it was inexcusable for Mr.

Failon to deny its existence until the second

day of the evidentiary hearing. Furthermore . .

. Mr. Failon’s testimony during the evidentiary

20a

hearing was replete with inconsistencies that

further undermine his credibility.

Spoliation Report, p. 75.

Conclusions of law in the Spoliation Report. In

determining whether the Debtor was liable for

spoliation, the Georgia District Court found that

spoliation could have occurred only if the Debtor had

an obligation to preserve the evidence in June 2009

when the hard drive of the Desktop was reformatted

and the hard drive of the Laptop was wiped. It

further found that federal law was applicable to the

issue of whether the Debtor engaged in spoliation of

evidence. It used the federal standard set forth in

Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423

(2d Cir. 2001), that “[t]he obligation to preserve

evidence arises when the party has notice that the

evidence is relevant to litigation or when a party

should have known that the evidence may be

relevant to future litigation.” Id. at 436.

The Georgia District Court found the Debtor had

a duty to preserve the information on the Laptop but

not the information on the Desktop. The wellconsidered factual analysis of the Georgia District

Court in determining that the Debtor had a duty to

preserve the evidence on the Laptop is set forth

below:

[S]everal facts convince the Court that Mr.

Failon had a duty to preserve evidence by the

time he wiped the laptop’s hard drive on June

29, 2009. Mr. Failon knew as of May 22,

2009, that Compass intended to allow the

2007 employment agreement to terminate on

July 13, 2009, and that Compass desired to

enter into a new employment agreement.

21a

When he received the draft employment

agreement on June 24, 2009, Mr. Failon

learned that Compass sought to reduce his

base salary by thirty percent. Mr. Failon’s

reasonable beliefs concerning the potential for

litigation must be informed by his history with

Compass. Namely, when Mr. Bellah attempted

in 2006 to get Mr. Failon to agree to changes

in the 2005 employment agreement, Mr.

Failon and his attorney “interpreted it as a

serious threat” and filed a lawsuit for

anticipatory breach of contract. . . . Moreover,

Mr. Failon felt oppressed by negotiations

leading to the 2007 employment agreement. . .

. Thus, it would not have been idle speculation

for Mr. Failon to foresee in 2009 the potential

for litigation with Compass. See KCH Servs.,

Inc. v. Vanaire, Inc., No. 05-777-C, 2009 WL

2216601, at *1 (W.D. Ky. July 22,

2009)

(finding

familiarity

with

competitor’s

“willingness and ability to file suit” relevant to

foreseeability of litigation).

Further, seeking legal counsel is indicative

of anticipating litigation. Mr. Failon met with

his attorney after reformatting the desktop’s

hard drive, but before wiping the laptop’s hard

drive. Although he denied any concern over

being sued when he went to see Mr. Lorenz on

June 29, 2009, Mr. Failon testified at his

deposition and at the hearing that he was

concerned that he might be sued by Compass. .

. . Mr. Failon insisted during the hearing that

he was no longer worried about litigation with

Compass after meeting with his attorney.

However, at most, the attorney could have

22a

reassured Mr. Failon that he would prevail in

any dispute (as opposed to telling Mr. Failon

what Compass would or would not do).68

Moreover, Mr. Failon shared his concerns

over potential litigation with Ron Treece, the

Access Vice-President, whom he was

prohibited from contacting during his

Compass employment. Specifically, Mr. Treece

testified that when he first received a copy of

Mr. Failon’s employment agreement with

Compass (before the June 27, 2009 meeting),

Mr. Failon mentioned the possibility of being

sued because “knowing Bellah. . . there’s a

possibility of it.” . . . On the likelihood of

litigation, Mr. Treece recalled that Mr. Failon

“didn’t say he was worried. He just said that

there is a possibility that he would be [sued]

regardless.” . . . Finally, despite testifying to

the “paramount” importance that he placed on

returning the computers to Compass “in as

close to full functionality as possible” . . . , Mr.

Failon returned the laptop in a non-working

condition (inasmuch as there was no software

on it), not only neglecting to inform Mr.

McCaul that he had wiped its hard drive but

also affirmatively concealing that fact.69

This is particularly true in light of the preexisting animosity and Mr. Failon’s stated belief that

“[t]here’s no limit to what Mr. Bellah will do” to prevent

him from competing with Compass.

69 If returning the laptop in full functionality was of

paramount importance, Mr. Failon could have had Mr.

Lorenz

perform

the

recommended

repairs,

notwithstanding the latter’s opinion that doing so would

not have been cost effective, or reinstall the original

68

23a

A reasonable person in Mr. Failon’s

position should have known on June 29, 2009,

that the laptop’s hard drive could be relevant

to future litigation. See Silvestri, 271 F.3d at

591. Further, the evidence strongly suggests

that Mr. Failon actually knew that there was a

reasonable possibility of litigation at that

time.70 Given his distrust of Mr. Bellah and

Mr. McCaul and his concern that he might be

sued “regardless,” a reasonably prudent

person in Mr. Failon’s position would have

removed his own personal data from the

laptop’s hard drive and nothing more. That

Mr. Failon affirmatively hid that he wiped the

laptop’s hard drive and gave false testimony

about the thumb drive (and numerous other

software after wiping the hard drive. But, like in so

many instances at the hearing, Mr. Failon contradicted

himself about the software. With respect to the desktop,

he testified that because he “had the original disks of

the operating system and all the Office suite software,”

he instructed Mr. Lorenz to “load everything back onto

the desktop in the hopes that it would be returned to

like-new condition.” . . . However, with regard to the

laptop, Mr. Failon asserted he would have had Mr.

Lorenz reload the Windows operating system and

related software, but he “couldn’t find it or maybe never

had it because it might have been installed by Dell at

the factory.” . . . A consistent lack of veracity destroyed

Mr. Failon’s credibility.

If in fact Mr. Failon did not misappropriate

confidential information, then he had no reason to think

the hard drive would be relevant to such claims.

However, he admittedly was concerned about the nonsolicitation clause and should have known that the

laptop’s hard drive would provide evidence to prove or

disprove any violation of the 2007 employment

agreement.

70

24a

matters) only leads the Court to reject any

claim by Mr. Failon that he did not reasonably

foresee litigation with Compass.

Spoliation Report, pp. 67-71.

Having determined that the Debtor had a duty to

preserve the contents of the Laptop, which duty he

breached by wiping the contents of that device, the

Georgia District Court addressed whether sanctions

should be imposed for spoliation. It employed a fivepart test: 1) whether the destruction of the evidence

was prejudicial, 2) whether any such prejudice could

be cured, 3) how practically important the evidence

was, 4) whether the actions were done in good or bad

faith, and 5) the potential for abuse.13 The Georgia

District Court determined that all five factors were

satisfied and that the imposition of sanctions was

appropriate. In finding that the Debtor acted in bad

faith in destroying evidence, the Georgia District

Court remarked that the Debtor’s actions were “at

least negligent and may have been deliberate.”14 The

Georgia District Court pointed out that the wipe of

the Laptop’s hard drive followed on the heels of the

Debtor’s meeting with Compass’s competitor, but

noted that even if the timing had been coincidental,

the Debtor’s subsequent lack of candor in disclosing

13 The five-factor test the Magistrate employed is found in

Graff v. Baja Marine Corp., 310 F. App’x 298, 301 (11th Cir.

2009).

14 It appears that the Georgia District Court made its

finding that the Debtor acted at least negligently and possibly

deliberately because one remedy for spoliation, the granting of

default judgment, was available in the Eleventh Circuit only if

the spoliation were not the result of “mere negligence in losing

or destroying records.” Spoliation Report p. 74, n.71.

25a

the facts and circumstances surrounding the wipe of

the Laptop indicated bad faith.

The Damages Report. The Georgia District Court,

in awarding Spoliation Damages against the Debtor

in the total amount of $123,835.95, focused on the

calculation of the damages amount and did not

further address the Debtor’s actions or culpability

other than to note several times the bad faith of the

Debtor. The District Court Judge, in approving the

damages recommendation of the Magistrate, said

that the purpose of the award was to “shift the costs

of the timely and expensive motion practice related

to the filing of the motion for spoliation damages

from the plaintiff to Mr. Failon.”15 On March 27,

2015, the award was reduced to final judgment upon

the motion of Compass.

Conclusions of Law

The Court has jurisdiction over this proceeding

pursuant to 28 U.S.C. §§ 157(a) and 1334(a) and the

general order of reference entered by the U.S.

District Court for the Eastern District of Virginia on

August 15, 1984. This matter is a core proceeding

under 28 U.S.C. § 157(b)(2)(I).

Summary judgment is governed by Rule 7056 of the

Federal Rules of Bankruptcy Procedure, Fed. R.

Bankr. P. 7056, which makes Rule 56 of the Federal

Rules of Civil Procedure, Fed. R. Civ. P. 56,

applicable in adversary proceedings, with one

difference not applicable in this case. Rule 56(a)

provides in part that “[t]he 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.”

26a

In evaluating a15 motion for summary judgment, a

court must view the evidence and factual inferences

arising therefrom in the light most favorable to the

party opposing the motion. Adickes v. S.H. Kress &

Co., 398 U.S. 144, 157 (1970). Compass asserts that

based upon the findings of the Georgia District

Court, there is no genuine dispute as to the facts and

that the Spoliation Damages are nondischargeable

under § 523(a)(6) of the Bankruptcy Code as a

matter of law.

Under Bankruptcy Rule 4005, Fed. R. Bankr. P.

4005, Compass bears the burden of proving

nondischargeability by a preponderance of the

evidence. Reed v. Owens (In re Owens), 449 B.R. 239,

253 (Bankr. E.D. Va. 2011); Grogan v. Garner, 498

U.S. 279, 291 (1991). In the Eastern District of

Virginia, preponderance of the evidence has been

defined as “evidence which, when weighed with that

opposed to it, has more convincing force and is more

properly true and accurate. [When] the evidence

appears to be equally balanced, or if it cannot be said

upon which side it weighs heavier, then plaintiff has

not met his or her burden of proof.” Brickhouse v.

Orts (In re Orts), Adv. No. 08-07075-SCS, 2009 WL

903259, at *11 (Bankr. E.D. Va. Feb. 24, 2009)

(quoting Smith v. United States, 726 F.2d 428, 430

(8th Cir. 1984)).

Section 523(a)(6) excepts from a debtor’s chapter

7 discharge any debt “for willful and malicious injury

by the debtor to another entity or to the property of

another entity.” To establish nondischargeability

under § 523(a)(6), “a creditor must ultimately prove

three elements: ‘(1) the debtor caused an injury; (2)

15 Order of May 31, 2011, p. 3.

27a

the debtor's actions were willful; and (3) that the

debtor's actions were malicious.’” Ocean Equity

Group, Inc. v. Wooten (In re Wooten), 423 B.R. 108,

128 (Bankr. E.D. Va. 2010) (quoting E.L. Hamm &

Assocs., Inc. v. Sparrow (In re Sparrow), 306 B.R.

812, 834 (Bankr. E.D. Va. 2003)). Exceptions to

discharge “under 11 U.S.C. § 523 are to be construed

narrowly.” La Bella Dona Skin Care, Inc. v Harton

(In re Harton), Adv. No. 13-03028-KRH, 2013 WL

5461832, at *3 (Bankr. E.D. Va. Oct. 1, 2013) (citing

Nunnery v. Nunnery (In re Rountree), 478 F.3d 215

(4th Cir. 2007)); Carmelo v. Mickletz (In re Mickletz),

544 B.R. 804, 812 (Bankr. E.D. Pa. 2016) (citing Ins.

Co. of N. Am. v. Cohn (In re Cohn), 54 F.3d 1108,

1113 (3d Cir. 1995)).

Judge St. John has set forth in detail the

requirements of § 523(a)(6). In Ocean Equity Group,

Inc. v. Wooten (In re Wooten), 423 B.R. 108 (Bankr.

E.D. Va. 2010), he discussed the two required

elements that are the most problematic, willfulness

and malice. As to willfulness, he confirmed that the

test in the Eastern District of Virginia is whether

the debtor acted with “substantial certainty [that]

harm [would result] or a subjective motive to cause

harm.” 423 B.R. at 129 (quoting Parsons v. Parks (In

re Parks), 91 F. App’x 817, 819 (4th Cir. 2003)).

Judge St. John summarized the history of the

element in light of the decision of the Supreme Court

in Kawaauhau v. Geiger, 523 U.S. 57 (1998):

The

United

States

Supreme

Court

dramatically changed the landscape of §

523(a)(6) nondischargeability proceedings in

its decision of Kawaauhau v. Geiger, 523 U.S.

57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998).16 In

28a

Geiger, the Supreme Court concluded the

language of § 523(a)(6) encompassed only acts

done with the actual intent to cause injury and

not merely intentional acts that happen to

cause injury:

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. Had Congress meant to exempt

debts resulting from unintentionally

inflicted injuries, it might have described

instead “willful acts that cause injury.”

Or, Congress might have selected an

additional word or words, i.e., “reckless”

or “negligent,” to modify “injury.”

Moreover, as the Eighth Circuit

observed, the (a)(6) formulation triggers

in the lawyer's mind the category

“intentional torts,” as distinguished from

negligent or reckless torts. Intentional

torts generally require that the actor

intend “the consequences of an act,” not

simply “the act itself.”

Id. at 61–62, 118 S.Ct. 974 (citing Restatement

(Second) of Torts § 8A cmt. a (1964)).

Immediately after Geiger, courts considered

different approaches as to the proper

application of Geiger to adjudication of these

disputes. In re Sparrow, 306 B.R. at 838

(“Thus, we are confronted by a difference of

interpretation between the various circuits in

the aftermath of Geiger, with the critical

distinction as to whether finding that a debtor

29a

was substantially certain that harm would

occur is measured by a wholly subjective

standard or an objective determination.”).

Judge Huennekens has more recently

considered this question and has written:

Since the Geiger decision, courts have

struggled to determine whether a debtor

must have specifically intended the injury

or whether the commission of an

intentional tort that is “substantially

certain to result in injury” is sufficient to

satisfy the willfulness requirement.

Johnson v. Davis (In re Davis), 262 B.R.

663, 670 (Bankr. E.D. Va. 2001). This

Court has previously adopted the

“objective substantial certainty” or

“subjective motive” test to satisfy the

willfulness requirement. In re Trammell,

388 B.R. 182, 187 (Bankr. E.D. Va. 2008)

(citing Parsons v. Parks (In re Parks), 91

Fed.Appx.

817, 818–19 (4th Cir.2003)

(“[t]he test, then, is whether the debtor

acted with ‘substantial certainty [that]

harm [would result] or a subjective

motive to cause harm.’ ”)).

Singh v. Sohail (In re Sohail), Adv. No. 08–

03059–KRH, 2009 WL 1851247, at *7 (Bankr.

E. D. Va. June 25, 2009).

In re Wooten, 423 B.R. at 129-29. See also Yousuf v.

Samantar (In re Samantar), 537 B.R. 250, 256

(Bankr. E.D. Va. 2015); Haas v. Trammell (In re

30a

Trammell), 388 B.R. 182, 186-87 (Bankr. E.D. Va.

2008).16

The element of malice may be addressed more

succinctly. Malice in the bankruptcy context may

differ from malice in contexts outside of bankruptcy.

Johnson v. Davis (In re Davis), 262 B.R. 663, 670

(Bankr. E.D. Va. 2001). An act is malicious in the

context of § 523(a)(6) if it is done “deliberately,

intentionally and with knowing disregard for [the]

The Fourth Circuit is not alone in its adoption of the

“substantially certain to cause harm” interpretation of Geiger.

See J & V Developers, Inc. v. Malloy (In re Malloy), 535 B.R. 81,

93 (Bankr. E.D. Pa. 2015) (“Case law in the Third Circuit

instructs that deliberate ‘actions taken for the specific purpose

of causing an injury as well as actions that have a substantial

certainty of producing injury are willful within the meaning of §

523(a)(6).’ Coley, 33 B.R. at 497 (citing In re Conte, 33 F.3d 303,

307–09 (3d Cir.1994)).”); Beard Research, Inc. v. Kates (In re

Kates), 485 B.R. 86, 105 (Bankr. E.D. Pa. 2012) (finding that

issue preclusion barred relitigation of state court finding of

spoliation of evidence and inferring intent sufficient to satisfy

the requirements of § 523(a)(6) from actions the court deemed

substantially certain to harm the plaintiffs); Netria Corp. v.

Graham (In re Graham), 363 B.R. 32, 38 (Bankr. D.N.H. 2007)

(“an injury is willful, for purposes of section 523(a)(6), if it is

inflicted ‘either with intent to cause the harm complained of, or

in circumstances in which the harm was certain or almost

certain to result from debtor's act.”) (quoting Jones v. Svreck (In

re Jones), 300 B.R. 133, 140 (B.A.P. 1st Cir. 2003));

Synergeering Gp., LLC, v. Jonatzke (In re Jonatzke), 478 B.R.

846, 855 (Bankr. E.D. Mich. 2012) (“The U.S. Court of Appeals

for the Sixth Circuit has held that ‘willfulness’ also means that

‘the actor desires to cause consequences of his act, or ... believes

that the consequences are substantially certain to result from

it....’”) (quoting Markowitz v. Campbell (In re Markowitz), 190

F.3d 455, 464 (6th Cir.1999)) (holding that state court judgment

for spoliation of evidence was entitled to conclusive effect in §

523(a)(6) action, based on principle of collateral estoppel).

16

31a

plaintiff’s rights.” In re Owens, 449 B.R. at 255

(quoting In re Davis, 262 B.R. at 670). Further,

malice may be demonstrated from the implications of

the debtor’s behavior, “as well as a presentation of

the surrounding circumstances.” In re Davis, 262

B.R. at 671. See also In re Wooten, 423 B.R. at 130.

As such, a creditor need not prove actual ill will on

the part of the debtor or any specific intent to injure

the creditor. In re Wooten, 423 B.R. at 130.

Compass maintains that the elements of §

523(a)(6) have already been proven in the Georgia

Litigation and that the doctrine of collateral estoppel

requires a finding that the Spoliation Damages are

nondischargeable. The doctrine of collateral estoppel,

or “issue preclusion,” prohibits the relitigation of an

issue of fact or law in a different cause of action by a

party when that party had “a full and fair

opportunity to litigate the issue in the previous

case.” Johnson v. Stemple (In re Stemple), 361 B.R.

778, 795 (Bankr. E.D. Va. 2007). The doctrine is

based upon the principle that “a losing litigant

deserves no rematch after a defeat fairly suffered, in

adversarial proceedings, on an issue identical in

substance to the one he subsequently seeks to raise.”

In re Mickletz, 544 B.R. at 813 (quoting Dici v.

Pennsylvania, 91 F.3d 542, 547 (3d Cir. 1996)).

A party seeking to assert collateral estoppel

must establish:

that (1) the issue or fact is identical to the one

previously litigated; (2) the issue or fact was

actually resolved in the prior proceeding; (3)

the issue or fact was critical and necessary to

the judgment in the prior proceeding; (4) the

judgment in the prior proceeding is final and

32a

valid; and (5) the party to be foreclosed by the

prior resolution of the issue or fact had a full

and fair opportunity to litigate the issue or

fact in the prior proceeding

In re Microsoft Corp. Antitrust Litigation, 355 F.3d

322, 326 (4th Cir. 2004). See also Collins v. Pond

Creek Mining Co., 468 F.3d 213, 217 (4th Cir. 2006).

The Debtor admits in his post-hearing brief that

“Plaintiff has succeeded in establishing the five (5)

elements necessary for Collateral Estoppel.”

However, he then states that “Plaintiff does not

establish the three (3) elements called for under §

523(a)(6) to render a debt non- dischargeable.” In

light of those two conflicting statements, the Court

will analyze whether collateral estoppel applies in

this case. Examining each of the elements of

collateral estoppel set forth above, the Court finds

that the two last elements are satisfied beyond

doubt. The Debtor had a full and fair opportunity to

defend himself in the Georgia Litigation, and the

judgment in that court is final and valid, the final

judgment having been entered by the Georgia

District Court on March 27, 2015.17

Elements one through three of collateral estoppel

are inextricably related, and a determination as to

them requires the Court to examine whether the

Georgia District Court made findings as to each of

the elements necessary for a finding of willful and

malicious injury in the bankruptcy context. It is not

disputed that the Georgia District Court found that

17 The Court has not been advised of any timely appeal of

this final order, and the Court takes judicial notice of the

official docket in the Georgia Litigation, which reveals no such

appeal.

33a

the acts of the Debtor injured Compass, as it

awarded damages against the Debtor for spoliation

of evidence. Thus, the only two elements of §

523(a)(6) in dispute are willfulness and malice.

As to malice, the Georgia District Court, citing

Fujitsu Ltd. v. Federal Express Corp., 247 F.3d at

436, found that under federal law, the Debtor had a

duty to preserve the information on the Laptop and

that the Debtor breached that duty. (Spoliation

Report at 67). The Georgia District Court found that

in light of his situation, the Debtor had a duty to

preserve the information contained on the Laptop

because he “should have known . . . that the laptop’s

hard drive could be relevant to future litigation.”

(Spoliation Report at 70). It found that despite this

duty, the Debtor caused the hard drive of the Laptop

to be wiped. The Georgia District Court’s finding

that the Debtor breached his duty to preserve

evidence satisfies the malice element of § 523(a)(6)

that an act be done “deliberately, intentionally and

with knowing disregard for plaintiff’s rights.”

Further, malice may be inferred from the

circumstances, set forth above in the Georgia

District Court’s Spoliation Report, surrounding the

Debtor’s actions in removing information from the

Laptop. These circumstances include the Debtor’s

actions in instructing that the invoice for wiping the

Laptop not disclose such action, the Debtor’s meeting

with his attorney, the Debtor’s solicitation of

Compass’s competition, the Debtor’s stated concern

that there might be future litigation, and the

Debtor’s distrust of the Compass executives. The

Debtor’s actions indicate that the Debtor knew he

was acting in disregard of Compass’s rights, and as

34a

such his actions may be construed as malicious

under § 523(a)(6).

The findings of the Georgia District Court also

establish that the Debtor acted willfully in the

context of § 523(a)(6). The Georgia District Court

found that the Debtor had a duty to preserve the

evidence because he either foresaw the potential

litigation with Compass or should have foreseen that

possibility. In a footnote, the Georgia District Court

noted also that the Debtor “admittedly was

concerned about the non-solicitation clause and

should have known that the laptop’s hard drive

would provide evidence to prove or disprove any

violation of the 2007 employment agreement.”

(Spoliation Report at 70, n.70). Applying the

willfulness test set forth by Judge Huennekens in In

re Sohail, whether a debtor acted with substantial

certainty that harm would occur, to the Georgia

District Court’s determination that the Debtor had a

duty to preserve evidence because he should have

known that the evidence he destroyed would be

relevant to future litigation, the Court finds that the

Georgia District Court’s findings are sufficient to

satisfy the § 523(a)(6) willfulness test.

The Debtor argues that his actions in wiping the

Laptop were a “willful, but negligent, act” that do not

satisfy the requirements of § 523(a)(6) as set forth in

Geiger. The Court disagrees with this assessment.

The proper standard by which the Debtor’s actions

are to be evaluated is the Fourth Circuit’s

interpretation of Geiger in In re Parks, which allows a

creditor to prove willfulness by showing that an was

35a

act taken “with a substantial certainty that harm

would result. . . .” In re Parks, 91 F. App’x at 819.18

The Court notes that Compass places great

emphasis on that fact that the Georgia District

Court found the Debtor acted in bad faith in wiping

the information from the Laptop. That finding, while

important in the Georgia Litigation as a prerequisite

to an award of damages for spoliation, is not

necessary for a determination of willful and

malicious injury under § 523(a)(6), although it is not

unusual for bad faith and willful and malicious

injury to coexist.

The Court finds that the issues and facts

determined in the Georgia litigation were the same as

those before this Court in Compass’s § 523(a)(6)

objection, that the Georgia District Court determined

those facts and issues, and that the facts and issues

were critical to the Georgia Litigation. Having now

found that all five elements of the Microsoft Antitrust

Litigation collateral estoppel test are satisfied, the

Court finds that the doctrine of collateral estoppel

precludes further litigation under § 523(a)(6) as to the

dischargeability of the Spoliation Damages and finds

that Compass is entitled to summary judgment as a

matter of law. Therefore, the Court will grant the

motion of Compass for summary judgment as to the

nondischargeability of the Spoliation Damages under

§ 523(a)(6). A separate order shall issue.

Entered:

March 29, 2016

The Debtor raises a host of other errors that he urges

were made in the Georgia Litigation. However, this Court does

not sit as an appellate court for the Georgia District Court and

as such will not address such arguments.

18

36a

/s/ Keith L. Phillips

United States Bankruptcy Judge

ENTERED ON DOCKET: Mar 29 2016

Copies:

James K. Donaldson

Jennifer J. West

Spotts Fain PC

411 East Franklin Street

Suite 600

Richmond, VA 23219

Brian K. Failon

3804 Maida Court

Richmond, VA 23233

Lynn L. Tavenner

20 North Eighth Street

Second Floor

Richmond, VA 23219

Shannon Pecoraro

Office of the U.S. Trustee

701 East Broad Street, Suite 4304

Richmond, VA 23219

37a

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

Richmond Division

In re: Brian K. Failon,

Debtor

Case No.

Chapter 7

11-33877-KLP

Compass Chemical International, LLC,

Plaintiff,

v.

Adv. Pro. No. 11-03229-KLP

Brian K. Failon,

Defendant.

ORDER

In accordance with the Memorandum Opinion

entered this date,

IT IS ORDERED that the motion of Plaintiff

Compass Chemical International, LLC, for summary

judgment as to Count II of the Complaint is

GRANTED, and it is further

ORDERED that the final judgment entered on

March 27, 2015, in Case No. 1:09-cv-3491-MHC in

the United States District Court for the Northern

District of Georgia in favor of Compass Chemical

International, LLC, and against Debtor Brian K.

Failon is nondischargeable pursuant to 11 U.S.C. §

523(a)(6) and is excepted from his discharge in

bankruptcy.

Entered: March 29, 2016

/s/ Keith L. Phillips

United States Bankruptcy Judge

ENTERED ON DOCKET: Mar 29 2016