GLF Attorney Jennifer Tichelaar Obtains a Non-Dischargeability Judgment

Jennifer Tichelaar, attorney at The Gallagher Law Firm, PLC, recently obtained a nondischargeability Judgment of her Nevada client’s $9,674,057.18 Nevada District Court Judgment. The underlying Nevada state court litigation involved a dispute regarding a casino development project in Dayton, Nevada.

The Nevada District Court entered a default against the defendants following the defendants’ flagrant and continued failure to appear and participate in the litigation process with the obvious intent to delay and postpone the proceedings. The Nevada District Court heard proofs and entered a Judgment in favor of the plaintiffs in the amount of $9,674,057.18 with specific findings of fraud and misrepresentation.

In June 2011, the Defendant filed Bankruptcy in the United States Bankruptcy Court for the Western District of Michigan. Plaintiff’s filed an Adversary Proceeding which requested an order of nondischargeability pursuant to 11 U.S.C. §523(a)(3).

The parties filed Collateral Estoppel Briefs and the Court heard oral arguments in May 2013. On July 17, 2013 the Honorable Jeffrey R. Hughes issued a Bench Opinion holding that Ms. Tichelaar’s client’s $9,674,057.18 Nevada District Court Judgment is to be given collateral estoppel effect and is nondischargeable.

When applying collateralestoppel principles to a nondischargeability proceeding, a bankruptcy court is directed to apply the law of the forum where the original proceeding took place. Marrese v. American Academy of Orthopedic Surgeons, 470 U.S. 373, 380 (1985). The Nevada courts have stated four requirements must be met for issue preclusion to apply: (1) the issue decided in the prior litigation must be identical to the issue presented in the current action; (2) the initial ruling must have been on the merits and have become final; (3) the party against whom the judgment is asserted must have been a party or in privity with a party to the prior litigation; and (4) the issue was actually and necessarily litigated. Five Star Capital Corp. v. Ruby, 124 Nev. 1048, 1055 (2008).

The Bankruptcy Court found that the default entered against the defendant was not a ‘true default’ in which the defendant did not participate in the proceedings, but rather was a default entered as a sanction. After a thorough analysis of relevant case law, the Bankruptcy Court was satisfied that the State of Nevada’s elements of collateral estoppel had been met and therefore the defendant was precluded from re-litigating the fraud allegations in the Bankruptcy Court. As a result, the Bankruptcy Court entered a Judgment holding that the $9,674,057.18 Nevada District Court Judgment against the defendant is nondischargeable pursuant to 11 U.S.C. §523(a)(3).