`MIDDLE DISTRICT OF TENNESSEE
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`CASE NO. 313-07626
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`JUDGE MARIAN F. HARRISON
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`Chapter 7
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`IN RE:
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`DAVID PETER BERGE,
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`Debtor.
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`MARKETGRAPHICS RESEARCH
`GROUP, INC.,
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`Plaintiff,
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`v.
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`DAVID PETER BERGE,
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`Defendant.
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`________________________________________________________________________
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`MEMORANDUM OPINION
`__________________________________________________________________________
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`This matter is before the Court upon MarketGraphics Research Group, Inc.’s
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`(“MarketGraphics”) renewed motion for summary judgment based on collateral estoppel.
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`For the following reasons, the Court finds that MarketGraphics’ motion for summary
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`judgment should be denied.
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`Dated: 6/28/2018
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`I. PROCEDURAL BACKGROUND
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`Prior to bankruptcy, the District Court entered judgment in favor of MarketGraphics
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`against the debtor in the amount of $332,314.94, jointly and severally with three
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`other defendants. The District Court found in a memorandum and order prepared by
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`MarketGraphics’ counsel on the default summary judgment that the debtor “willfully or
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`knowingly violated the Tennessee Consumer Protection Act” (“TCPA”) and that the debtor’s
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`copyright infringement was willful.
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`After the debtor filed his bankruptcy petition, MarketGraphics filed this adversary
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`complaint to determine the dischargeability of its claim pursuant to 11 U.S.C. § 523(a)(6).
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` MarketGraphics sought summary judgment relief based on collateral estoppel resulting from
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`the District Court’s action. This Court denied the motion, and MarketGraphics filed an
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`interlocutory appeal. After MarketGraphics’ appeal was dismissed by the District Court and
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`the Sixth Circuit Court of Appeals, this Court conducted a trial and determined that the debt
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`owed to MarketGraphics was dischargeable and dismissed MarketGraphics’ complaint.
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`MarketGraphics again appealed. The District Court affirmed the findings of this Court
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`following trial but reversed this Court’s decision on the initial summary judgment decision
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`and remanded the case “to determine the matter of issue preclusion on first impression.” To
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`decide whether issue preclusion should apply, the District Court remanded the case to
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`determine whether the District Court in the underlying judgment held that the debtor willed
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`or desired harm or believed that injury was substantially certain to occur as a result of his
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`behavior. In MarketGraphics’ renewed motion for summary judgment, it asserts that issue
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`preclusion applies to the District Court’s findings regarding the TCPA, copyright
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`infringement, and common law claims.
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`II. DISCUSSION
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`A. Summary Judgment Standards
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`Pursuant to Federal Rule of Civil Procedure 56(a), as incorporated by Federal Rule
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`of Bankruptcy Procedure 7056, an entry of summary judgment is mandated “if the movant
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`shows that there is no genuine dispute as to any material fact and the movant is entitled to
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`judgment as a matter of law.” When considering a motion for summary judgment, the Court
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`“must view the evidence and draw all reasonable inferences in favor of the nonmoving
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`party.” Browning v. Levy, 283 F.3d 761, 769 (6th Cir. 2002) (citation omitted). The Court
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`does not “‘weigh the evidence and determine the truth of the matter but . . . determine[s]
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`whether there is a genuine issue for trial.’” Id. (citation omitted).
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`B. Issue Preclusion
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`Issue preclusion prevents a party from relitigating issues that were actually litigated
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`in a prior proceeding. Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 461 (6th Cir.
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`1999) (citations omitted). “Principles of collateral estoppel apply in non-dischargeability
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`actions.” Livingston v. Transnation Title Ins. Co. (In re Livingston), 372 Fed. App’x 613,
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`617 (6th Cir. 2010) (unpublished) (citations omitted).
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`Whether federal or state law applies when seeking collateral estoppel from a federal
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`court judgment appears to be in a state of confusion. Some courts hold that collateral
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`estoppel application from any federal court judgment rests on federal preclusion law. Trost
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`v. Trost (In re Trost), 545 B.R. 193, 203 (Bankr. W.D. Mich. 2016) (citations omitted);
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`J.Z.G. Res., Inc. v. Shelby Ins. Co., 84 F.3d 211, 213-14 (6th Cir. 1996) (citations omitted).
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`The Supreme Court has stated that federal court judgments based on state law claims in
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`diversity actions rely on state issue preclusion standards, although the opinion noted that the
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`state and federal standards for issue preclusion were similar. Semtek Int’l Inc. v. Lockheed
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`Martin Corp., 531 U.S. 497, 508 (2001). In this case, federal and state law are almost
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`identical. The federal law of issue preclusion requires:
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`(i) the issue in the subsequent litigation is identical to that resolved in the
`earlier litigation;
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`(ii) the issue was actually litigated and decided in the prior action;
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`(iii) the resolution of the issue was necessary and essential to a judgment on
`the merits in the prior litigation;
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`(iv) the party to be estopped was a party to the prior litigation (or in privity
`with such a party); and
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`(v) the party to be estopped had a full and fair opportunity to litigate the issue.
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`In re Trost, 545 B.R. at 204 (citing Verizon North Inc. v. Strand, 367 F.3d 577, 583 (6th Cir.
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`2004)).
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`Tennessee law applies essentially the same standards for collateral estoppel as federal
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`law. Mullins v. State, 294 S.W.3d 529, 535 (Tenn. 2009). Accordingly, it makes no
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`difference which law is applied. This opinion relies on the federal standards recited above.
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`C. 11 U.S.C. § 523(a)(6)
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`Exceptions to discharge are to be strictly construed. Gleason v. Thaw, 236 U.S. 558,
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`562 (1915). Pursuant to 11 U.S.C. § 523(a)(6), a debt is nondischargeable when the debt is
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`“for willful and malicious injury by the debtor to another entity or to the property of another
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`entity.” Therefore, “nondischargeability takes a deliberate or intentional injury, not merely
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`a deliberate or intentional act that leads to injury.” Kawaauhau v. Geiger, 523 U.S. 57, 61
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`(1998). “[U]nless ‘the actor desires to cause the consequences of his act, or . . . believes that
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`the consequences are substantially certain to result from it,’ he has not committed a ‘willful
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`and malicious injury’ as defined under § 523(a)(6).” In re Markowitz, 190 F.3d 455, 464
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`(internal citation omitted).
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`D. Tennessee Consumer Protection Act
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`In the present case, the District Court ruled that “pursuant to Tennessee Code Ann.
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`§ 47-18-109(a)(3), that the Defendants . . . willfully or knowingly violated the Tennessee
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`Consumer Protection Act,” and awarded treble damages to MarketGraphics. The issue is
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`whether that judgment included a finding that the debtor intended harm to MarketGraphics
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`or was substantially certain that harm would occur as required under 11 U.S.C. § 523(a)(6).
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`If so, then MarketGraphics is entitled to collateral estoppel and summary judgment on its
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`TCPA claim.
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`To recover under the TCPA, a plaintiff must prove that the defendant engaged in an
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`unfair or deceptive act or practice declared unlawful by the TCPA and that the defendant’s
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`conduct caused an ascertainable loss of money or property. T.C.A. § 47-18-109(a)(1).
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`Under the TCPA, a defendant’s conduct need not be willful or even knowing, but if it is, the
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`trial court is permitted to award treble damages under T.C.A. § 47-18-109(a)(3). Tucker v.
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`Sierra Builders, 180 S.W.3d 109, 115-16 (Tenn. Ct. App. 2005) (citations omitted).
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`The term “willful” is not defined in the TCPA, but courts have interpreted the
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`“willful” requirement as “nothing more than intentional.” Akers v. Bonifasi, 629 F. Supp.
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`1212, 1223 (M.D. Tenn. 1984) (citation omitted). See also Mills v. Partin, No. M2008-
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`00136-COA-R3-CV, 2008 WL 4809135, at *7 (Tenn. Ct. App. Nov. 4, 2008) (citing Akers).
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`The term “knowing” is defined as “actual awareness of the falsity or deception, but actual
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`awareness may be inferred where objective manifestations indicate that a reasonable person
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`would have known or would have had reason to know of the falsity or deception.” T.C.A.
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`§ 47-18-103(10).
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`MarketGraphics cites several cases in support of its assertion that “willful and
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`knowing” under the TCPA is the same as that required under 11 U.S.C. § 523(a)(6) (a finding
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`that the actor desires to cause the consequences of his act or believes that the consequences
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`are substantially certain to result from it). The problem is that the cases cited by
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`MarketGraphics do not address the meaning of “willful and knowing” under the TCPA.1
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`MarketGraphics also rejects as simply wrong the opinion in Tomlin v. Crownover (In
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`re Crownover), 417 B.R. 45 (Bankr. E.D. Tenn. 2009). In Crownover, the plaintiffs’ pre-
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`petition state court judgment against the debtor was, in part, for violations of the TCPA, and
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`the plaintiffs sought to use the doctrine of collateral estoppel to obtain summary judgment
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`against the debtor on their dischargeability claims. In deciding that the judgment for
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`violations of the TCPA was not entitled to collateral estoppel with regard to
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`nondischargeability under 11 U.S.C. § 523(a)(6), the court pointed out that “willful” under
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`the TCPA means the debtor intended to commit the acts, id. at 58, but 11 U.S.C. § 523(a)(6)
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`requires a finding that the debtor intended his actions to bring about the harm suffered. Id.
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`As in Crownover, the District Court could have made a specific finding that the debtor
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`violated the TCPA with the intent to cause harm or that the debtor believed that the harm was
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`substantially certain to result from his actions. The underlying complaint did not include
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`1 See Hughes v. Metro. Gov’t of Nashville & Davidson Cty., 340 S.W.3d 352, 371 (Tenn.
`2011) (defendant who intended to create apprehension of harm in plaintiff has committed intentional
`tort of assault); Mix v. Miller, 27 S.W.3d 508, 515 (Tenn. Ct. App. 1999) (reviewing intent under
`unrelated statute); Steier v. Best (In re Best), 109 F. App’x 1, 5 (6th Cir. 2004) (“Debts arising out
`of these types of misconduct satisfy the willful and malicious injury standard: intentional infliction
`of emotional distress, malicious prosecution, conversion, assault, false arrest, intentional libel, and
`deliberately vandalizing the creditor’s premises.”).
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`specific factual allegations, analogous to 11 U.S.C. § 523(a)(6), and the District Court
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`judgment only states that the debtor violated the TCPA.
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`The TCPA does not require a finding that the actor desired to cause the consequences
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`of his act or believed that the injuries were substantially certain to result from it, and there
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`is no clear finding of such in the underlying District Court judgment or factual allegation in
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`the underlying complaint. Accordingly, summary judgment on MarketGraphics’ TCPA
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`claim must be denied.
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`E. Copyright Infringement
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`The same is true as to the copyright infringement claim. In the underlying judgment,
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`the District Court held that the debtor’s “infringement was willful.” To establish a copyright
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`infringement claim, a plaintiff must show “ownership of a valid copyright” and that the
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`“defendant copied protectable elements of the work.” Lexmark Int’l, Inc. v. Static Control
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`Components, Inc., 387 F.3d 522, 534 (6th Cir. 2004). In Princeton Univ. Press v. Michigan
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`Document Serv. Inc., 99 F.3d 1381 (6th Cir. 1996), the Sixth Circuit Court of Appeals
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`defined willful in the context of copyright infringement:
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`“In other contexts [‘willfulness’] might simply mean an intent to copy, without
`necessarily an intent to infringe. It seems clear that as here used, ‘willfully’
`means with knowledge that the defendant’s conduct constitutes copyright
`infringement. Otherwise, there would be no point in providing specially for the
`reduction of minimum awards in the case of innocent infringement, because
`any infringement that was nonwillful would necessarily be innocent. This
`seems to mean, then, that one who has been notified that his conduct
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`constitutes copyright infringement, but who reasonably and in good faith
`believes the contrary, is not ‘willful’ for these purposes.” Melville B. Nimmer
`& David Nimmer, 3 Nimmer on Copyright § 14.04 [B] [3] (1996).
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`. . . [T]he issue is whether the copyright law supported the plaintiffs’
`position so clearly that the defendants must be deemed as a matter of law to
`have exhibited a reckless disregard of the plaintiffs’ property rights.
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`Id. at 1392. See also Digital Filing Sys., L.L.C. v. Agarwal, No. 03-70437, 2005 WL
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`1702954, at *2 (E.D. Mich. July 20, 2005) (citing Princeton Univ. Press); Zomba Enters.
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`Inc. v. Panorama Records, Inc., 491 F.3d 574, 585 (6th Cir. 2007) (willfulness includes
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`reckless disregard of plaintiffs’ property rights); Abercrombie & Fitch Trading Co. v.
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`Importrade USA, Inc., No. 07-23212-CIV-ALTONAGA/Brown, 2009 WL 10668408, at *2
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`(S.D. Fla. Aug. 18, 2009) (citations omitted) (willful copyright infringement requires actual
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`knowledge or reckless disregard).
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`In Barboza v. New Form, Inc., 545 F.3d 702 (9th Cir. 2008), the court considered the
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`relationship between the Copyright Act and 11 U.S.C. § 523(a)(6):
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`[I]n the District Court Action, the jury was instructed that the infringement was
`willful if Appellants “knew that they were infringing the [Appellee’s]
`copyrights or that they acted with reckless disregard as to whether they were
`doing so.” The jury found that Appellants willfully infringed Appellee’s
`copyright by making unlawful copies of ten India Maria Pictures. However,
`the Bankruptcy Court had no way to determine whether the jury found the
`willful infringement based on a reckless disregard or a knowing violation of
`Appellee’s copyright.
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`Even though recklessness is sufficient for a finding of willful copyright
`infringement, the Supreme Court has clearly held that injuries resulting from
`recklessness are not sufficient to be considered willful injuries under
`§ 523(a)(6) of the Bankruptcy Code and are therefore insufficient to merit an
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`exemption to dischargeability. Geiger, 523 U.S. at 60–61, 118 S. Ct. 974. In
`Geiger, the Supreme Court specifically limited “willful” injuries under
`§ 523(a)(6) to “deliberate or intentional” injuries. Id. at 61, 118 S. Ct. 974.
`Therefore, if a finding of “willful” copyright infringement is based merely on
`reckless behavior, the resulting statutory award would not fit within the
`§ 523(a)(6) exemption.
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`Id. at 708 (emphasis added). See also Unicolors, Inc. v. Urban Outfitters, Inc., 853 F.3d
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`980, 992 (9th Cir. 2017) (citation omitted) (“a finding of willful infringement does not require
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`a showing of actual knowledge; a showing of recklessness or willful blindness is sufficient”).
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`In the present case, the underlying District Court judgment is not entitled to issue
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`preclusion on the issue of dischargeability because the term “willful or knowing” under the
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`Copyright Act does not equate with a desire to cause the consequences of an act or a belief
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`that the consequences are substantially certain to result from it.
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`F. Common Law Allegations
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`Several common law claims were made by the plaintiff, including unfair competition,
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`civil conspiracy, and interference with business relations. The District Court Judgment set
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`forth no undisputed facts or conclusions of law on these claims, and damages were not
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`awarded in the judgment for these claims. Accordingly, any reference to these allegations
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`in the District Court’s order were not essential to its judgment. See SunTrust Bank v.
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`Bennett (In re Bennett), 517 B.R. 95, 106 (Bankr. M.D. Tenn. 2014) (“The party asserting
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`the doctrine of collateral estoppel in seeking to bar litigation of an issue has the burden of
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`proving that the issue was necessary to the judgment.”); In re Trost, 545 B.R. 193, 203.
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`III. CONCLUSION
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`Accordingly, the Court finds that the plaintiff’s motion for summary judgment should
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`be denied.
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`An appropriate order will enter.
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`This Memorandum Opinion was signed and entered electronically as indicated
`at the top of the first page.
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`This Order has been electronically
`signed. The Judge's signature and
`Court's seal appear at the top of the
`first page.
`United States Bankruptcy Court.
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