Dischargeability of Liability Arising from Willful and Malicious Injury After Kawaauhau

• Publication year: 1999
• Pages: 49
• Citation: Vol. 28 No. 5 Pg. 49

28 Colo.Law. 49 Colorado Lawyer 1999.

1999, June, Pg. 49. Dischargeability of Liability Arising from Willful and Malicious Injury After Kawaauhau

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Vol. 28, No. 5, Pg. 49

The Colorado Lawyer
June 1999
Vol. 28, No. 6 [Page 49]

Specialty Law Columns
Business Law Newsletter
Dischargeability of Liability Arising from Willful and Malicious Injury After Kawaauhau
by Duncan E. Barber, Philip C. Zimmerman

Consider the following facts: A patient visits her doctor complaining of a foot injury. Tests reveal the presence of an infection for which the doctor prescribes oral penicillin While the oral penicillin is a known substandard treatment the doctor prescribes it to save his patient money. The doctor then departs for a business trip, leaving the patient in the care of other doctors, who immediately replace the oral medication with powerful and more costly intramuscular antibiotics, and then refer the patient to an infectious disease specialist

On his return, the patient's regular doctor suspends the intramuscular antibiotics and resumes the oral penicillin. Within days of the return to the known substandard care, the patient's infection worsens to the point of requiring an amputation of the patient's leg below the knee and results in permanent kidney damage. The patient obtains a large malpractice judgment against the doctor and begins collection activity by garnishing the doctor's bank accounts. The doctor files for bankruptcy protection. The question then becomes whether the malpractice judgment against the debtor-doctor is dischargeable in bankruptcy.

On March 3, 1998, the U.S. Supreme Court decided in Kawaauhau v. Geiger1 that the debtor-doctor's medical malpractice judgment was dischargeable because the patient's injury was the result of mere reckless or negligent behavior. More precisely, the Kawaauhau Court ruled that the exception to discharge for a "willful and malicious injury" under Bankruptcy Code ("Code") § 523(a)(6)2 required the patient-creditor to demonstrate that her damages resulted from the debtor-doctor's specific intent to cause injury. The required "intent" is akin to the traditional common law of intentional torts. This article discusses whether this new ruling materially changed existing Tenth Circuit authority on the dischargeability of debts for "willful and malicious injury" under Code § 523 (a)(6), and suggests some guidance to practitioners who prosecute and defend against such claims.

Historical Development

To understand the impact of Kawaauhau on dischargeability actions under Code § 523(a)(6), a review of the policy underlying discharge exceptions and the development of case law under Code § 523 (a)(6) is necessary. A debtor's "fresh start" through debt discharge is a fundamental policy goal served by the federal bankruptcy process. In a Chapter 7 "liquidation" case, by far the most common bankruptcy filing, a trustee is appointed and charged with locating, liquidating, and distributing the proceeds of the debtor's nonexempt property to creditors. In return for relinquishing nonexempt property to the trustee, the Chapter 7 debtor receives a discharge that generally releases the debtor from personal liability on pre-bankruptcy debts, and enjoins further creditor action to collect such discharged pre-bankruptcy debts.3

The bankruptcy discharge, however, is widely regarded as being reserved for the "honest, but unfortunate" debtor.4 Thus, the Code reflects the policy decisions of Congress that certain types of debts should not be dischargeable in bankruptcy, such as child support and alimony,5 debts incurred by fraud,6 student loans,7 and criminal restitution debts,8 among others.

Federal bankruptcy law has long excepted from discharge those debts arising from a "willful and malicious injury" to a party or a party's property. Under § 17(a)(8) of the Code's statutory predecessor, the so-called Bankruptcy Act of 1898, this discharge exception was generally regarded to include some types of reckless behavior. For example, in In re Franklin, the Tenth Circuit held that a patient's damages caused by cardiac arrest during surgery where the doctor recklessly disregarded a known duty to the patient were nondischargeable as a willful and malicious injury.9 The Franklin court, dismissing the notion that any doctor would intentionally inflict harm on a patient, nevertheless stated that because the defendant intentionally committed an act that "necessarily resulted" in injury...