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In re Roussel

United States Court of Appeals, Eighth Circuit

October 3, 2014

In re: Blake Roussel; Amanda Roussel, Debtors;
v.
Blake Roussel, Appellant Clear Sky Properties, LLC; LuAnn Deere, Appellees,

Submitted September 8, 2014

For Clear Sky Properties, LLC, LuAnn Deere, Appellees: Daniel L. Herrington, Harold Wayne Young, Jr., FRIDAY & ELDREDGE, Little Rock, AR.

For Blake Roussel, Appellant: Stephen Witsell Jones, JACK & NELSON, Little Rock, AR; Kevin P. Keech, KEECH LAW FIRM, North Little Rock, AR.

Before BENTON, BEAM, and SHEPHERD, Circuit Judges.

OPINION

Page 575

BENTON, Circuit Judge.

Blake Roussel filed for bankruptcy under Chapter 7 of the Bankruptcy Code. In an adversary proceeding, the bankruptcy court refused to apply collateral estoppel to a state judgment. It found nearly all the debt dischargeable. On appeal, the district court[1] reversed. It found nearly all the debt nondischargeable, but remanded the attorney-fee debt (including costs and expenses). Roussel appeals, asserting the district court erred in determining he was barred by collateral estoppel, committed defalcation while acting as a fiduciary, and acted willfully and maliciously. He argues the bankruptcy court correctly determined that the attorney-fee award was dischargeable. This court dismisses for lack of jurisdiction under 28 U.S.C. § 158(d).

I.

A state jury found that Roussel breached fiduciary and contract duties to both

Page 576

Clear Sky Properties, LLC and the other member LuAnn Deere. It awarded compensatory and punitive damages and attorney fees. The state judge granted attorney fees: " Based on the arguments in the Motion and Brief." He did not mention the claims, or apportion the fees between them. The Motion invoked the parties' operating agreement (providing that the loser of any dispute shall pay attorney fees) and a state statute (authorizing attorney fees for breach of contract). The Brief reiterated the agreement and statute, but noted that the " breach of contract claim is inextricably intertwined with the breach of fiduciary duty" and that: " As these claims were so closely connected, Deere would have incurred the same expense in pursuing only the breach of contract claim as she did in pursuing all the claims."

Roussel later filed for bankruptcy under Chapter 7. Clear Sky and Deere alleged that his breach-of-fiduciary debt was nondischargeable because he committed defalcation as a fiduciary under 11 U.S.C. § 523(a)(4) and engaged in willful and malicious conduct under 11 U.S.C. § 523(a)(6). The parties stipulated that the breach-of-contract debt was dischargeable, but disputed (among other things) whether the attorney fees were linked solely to the breach of contract. Rejecting collateral estoppel, the bankruptcy court considered evidence from the state trial and heard testimony on Roussel's state of mind. The bankruptcy court concluded that nearly all the damages were dischargeable, as were the attorney fees. Clear Sky and Deere appealed to the district court. It reversed, applying collateral estoppel to hold that because the state jury awarded punitive damages, it necessarily found that Roussel committed defalcation while acting as a fiduciary under § 523(a)(4) and that he acted willfully and maliciously under § 523(a)(6). It found nondischargeable all the debt from Roussel's breach of fiduciary duty. The district court remanded the attorney fees--$87,523.25 in fees and costs, about one-sixth of the total debt--to the bankruptcy court for further consideration.

II.

Before addressing the merits, this court examines its jurisdiction of the appeal, even if not raised by the parties. Isaacson v. Manty, 721 F.3d 533, 537 (8th Cir. 2013); In re M & S Grading, Inc., 526 F.3d 363, 367-68 (8th Cir. 2008); In ...


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