In re: Paul Charles Zeppinick

FILED APR 24 2017 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT — 4 — 5 In re: ) BAP No. CC-16-1293-LKuF ) 6 PAUL CHARLES ZEPPINICK, ) Bk. No. 1:14-bk-13168-VK ) 7 Debtor. ) Adv. No. 1:14-ap-01168-VK ______________________________) 8 ) PAUL CHARLES ZEPPINICK, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M* 11 ) LUIS RAMIREZ, ) 12 ) Appellee. ) 13 ______________________________) 14 Argued and Submitted on March 23, 2017 at Pasadena, California — 15 — Filed - April 24, 2017 — 16 — Appeal from the United States Bankruptcy Court 17 for the Central District of California 18 Honorable Victoria S. Kaufman, Bankruptcy Judge, Presiding _________________________ — 19 — Appearances: Katherine Butts Warwick argued for Appellant Paul 20 Charles Zeppinick; Michael John Hemming argued for Appellee Luis Ramirez. 21 _________________________ 22 Before: LAFFERTY, KURTZ, and FARIS, Bankruptcy Judges. — 23 — — 24 — — 25 — 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8024-1. 1 INTRODUCTION 2 In 2004, Appellee Luis Ramirez worked for Appellant Paul 3 Zeppinick on home remodeling projects. On one of those projects, 4 the home sustained damage after the plastic Ramirez placed on a 5 damaged roof blew off in a storm. Thereafter, Zeppinick refused 6 to pay Ramirez his wages, claiming an offset of $12,000-$14,000 7 for the damage. Ramirez filed a claim with the Labor 8 Commissioner of the State of California seeking payment of his 9 wages. The Labor Commissioner found in favor of Ramirez, finding 10 that Ramirez was an employee and not an independent contractor 11 and that Zeppinick should have known he had not right to offset 12 any damages against an employee’s wages. The Labor Commissioner 13 awarded Ramirez $23,156.50. Zeppinick did not appeal the Labor 14 Commissioner’s decision, and a judgment was entered in the 15 Superior Court (the “Judgment”). 16 After Zeppinick filed his chapter 71 case, Ramirez filed an 17 adversary proceeding seeking a declaration of nondischargeability 18 of the sums due him under the Judgment. At trial, the bankruptcy 19 court gave issue preclusive effect to the Labor Commissioner’s 20 findings and heard testimony from the parties. The bankruptcy 21 court ruled in favor of Ramirez, finding the debt 22 nondischargeable under § 523(a)(6). Zeppinick timely appealed. 23 We AFFIRM. — 24 — — 25 — — 1 — 26 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 , 27 “Rule” references are to the Federal Rules of Bankruptcy Procedure, and “Civil Rule” references are to the Federal Rules 28 of Civil Procedure. -21 FACTS2 2 Zeppinick is a California licensed general contractor with 3 50 years’ experience as a laborer, salesperson, foreman, and 4 general contractor. Prior to 2004, Zeppinick worked for a 5 company named Thoughtful Builders as a superintendent and project 6 manager doing home remodeling. During his employment with 7 Thoughtful Builders he met Ramirez, who also worked for 8 Thoughtful Builders, and the two worked on projects together. At 9 some point in 2004 the owner of Thoughtful Builders fell ill, and 10 Zeppinick took over management of the company’s operations. 11 Around December 2004, Zeppinick asked Ramirez to work for 12 him. They agreed that Ramirez would supervise projects and buy 13 materials, subject to reimbursement by Zeppinick. Ramirez would 14 be paid $25 per hour as compensation for his work. To be paid, 15 Ramirez would submit a weekly work report summarizing the work he 16 performed and detailing the number of hours he spent working and 17 any materials he purchased out of pocket. 18 From the beginning of the parties’ working relationship 19 until September 2005, Zeppinick regularly paid Ramirez his wages 20 and expense reimbursements; payments were made in cash. 21 Zeppinick did not pay the employer’s share of taxes, did not 22 withhold the employee’s share of taxes, and did not obtain 23 workers’ compensation insurance. 24 Around September 2005, Zeppinick was hired to repair the 25 roof of a house belonging to Chris Bentley (the “Bentley — 26 — — 27 — — 2 — In this factual recitation, we borrow heavily from the 28 bankruptcy court’s findings and conclusions. -31 Property”). During the course of this project, the Bentley 2 Property was damaged when Ramirez covered the already damaged 3 roof with plastic sheeting and left for the weekend; the plastic 4 blew off in a storm, resulting in water damage to the home. 5 Zeppinick testified that he had to pay to repair those damages. 6 From September 2005 through November 2005, Zeppinick did not pay 7 Ramirez his wages or reimburse Ramirez for his expenses. 8 Zeppinick testified that he withheld the funds owed to Ramirez 9 because Ramirez’s work resulted in damage to the Bentley 10 Property. In late November 2005, Ramirez’s employment with 11 Zeppinick was terminated. 12 On December 20, 2005, Ramirez filed a claim with the Labor 13 Commissioner of the State of California. Ramirez alleged that he 14 was owed (1) unpaid wages earned from September 15, 2005 to 15 November 28, 2005, a total of $10,000; and (2) unreimbursed 16 business expenses from July 16, 2005 to November 28, 2005, a 17 total of $13,459.92. To support his claim, Ramirez submitted 18 detailed documentation of wages and expenses he had incurred at 19 the time Zeppinick refused to pay Ramirez. 20 On July 31, 2006, the Labor Commissioner held a hearing on 21 the matter. Both Ramirez and Zeppinick appeared at the hearing. 22 Zeppinick appeared without an attorney and without any 23 documentary evidence. On September 6, 2006, the Labor 24 Commissioner issued its decision in favor of Ramirez. In 25 relevant part, the Labor Commissioner found: 26 Plaintiff performed services as an employee not an independent contractor (sub-contractor). — 27 — . . . . — 28 — -41 Plaintiff’s wage claim contains a deduction of $4,000.00 for damages at one of the work sites. — 2 — . . . . — 3 — Defendant’s position is that Plaintiff [is] a 4 sub-contractor, employed the crew and at least some of the work sites were fixed price wage agreements. 5 Defendant produced no written evidence whatsoever despite admitting the records were in fact maintained. 6 Defendant’s argument is really a setoff argument as Plaintiff’s leaving early caused extensive water damage 7 at the Chris Bentley work site . . . . 8 Defendant is a licensed contractor and should know the basic labor laws including the presumption in his state 9 that one who performs services for another is an employee. There was no explanation for the failure to 10 produce records at the hearing. Plaintiff is awarded $9,000.00 in wages deducting the week not worked that 11 caused the controversy between the parties. Plaintiff is awarded $12,495.14 based on effective evidence as 12 produced at the hearing. 13 Absent admissions and a conviction there is no demonstrated proof of employee wrong doing or gross 14 negligence on the part of the Plaintiff in the record although the parties are in dispute as to when 15 Plaintiff notified Defendant he would be off the job. Plaintiff did the work and Plaintiff incurred the 16 expenses and he has to be paid and deducted $4,000.00 off the claim for the damages to Bentley’s residence. 17 A majority of the evidence favors Plaintiff in this matter and he is awarded what he claims subject to the 18 modifications noted hereinabove. 19 The Labor Commissioner awarded Ramirez a total of $23,156.50 20 comprised of $9,000 in wages, $12,495.74 in reimbursable 21 expenses, and $1,660.76 in interest pursuant to Cal. Lab. Code 22 § 98.1. The Labor Commissioner’s Order included the following 23 notice of a right to appeal: 24 The parties herein are notified and advised that this Order, Decision or Award of the Labor Commissioner 25 shall become final and enforceable as a judgment in a court of law unless either or both parties exercise 26 their right to appeal to the appropriate court within ten (10) days of service of this document. — 27 — 28 Zeppinick neither appealed nor sent payment. As a result, the -51 Judgment in the amount of $23,877.96 (including post-hearing 2 interest and filing fee) was entered in favor of the Labor 3 Commissioner and against Zeppinick; the Labor Commissioner 4 subsequently assigned the Judgment to Ramirez. 5 Zeppinick filed a chapter 7 bankruptcy on June 29, 2014. 6 Ramirez filed a timely adversary proceeding seeking a declaration 7 of nondischargeability of the amounts owed to him pursuant to the 8 Judgment. The matter was tried on August 30, 2016. As a result 9 of amendments to the original complaint and a stipulation to 10 dismiss the § 523(a)(2)(B) claim, the sole claim remaining for 11 adjudication was under § 523(a)(6). 12 As of the trial date, Zeppinick had not paid any portion of 13 the Judgment. At trial, the bankruptcy court gave issue 14 preclusive effect to the Labor Commissioner’s findings and also 15 heard testimony from the parties. The bankruptcy court issued 16 its ruling the following day, finding in favor of Ramirez on the 17 § 523(a)(6) claim. The bankruptcy court entered judgment on 18 September 30, 2016 declaring $47,206.56 nondischargeable under § 19 523(a)(6). Zeppinick timely appealed. 20 JURISDICTION 21 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 22 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. 23 § 158. 24 ISSUES 25 Did the bankruptcy court err in applying issue preclusion to 26 the Labor Commissioner’s findings? 27 Did the bankruptcy court err in entering judgment finding 28 the debt Zeppinick owed to Ramirez to be nondischargeable under -61 § 523(a)(6)? 2 STANDARDS OF REVIEW 3 We review de novo the bankruptcy court’s determination that 4 issue preclusion was available. Plyam v. Precision Dev., LLC 5 (In re Plyam), 530 B.R. 456, 461 (9th Cir. BAP 2015). If issue 6 preclusion was available, we review the bankruptcy court’s 7 application of issue preclusion for an abuse of discretion. Id. 8 A bankruptcy court abuses its discretion if it applies the wrong 9 legal standard, misapplies the correct legal standard, or if its 10 factual findings are illogical, implausible, or without support 11 in inferences that may be drawn from the facts in the record. 12 See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 , 832 13 (9th Cir. 2011) (citing United States v. Hinkson, 585 F.3d 1247 , 14 1262 (9th Cir. 2009) (en banc)). 15 We review the bankruptcy court’s conclusions of law de novo 16 and its factual findings for clear error. Carrillo v. Su 17 (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002). A finding that 18 an injury is willful is a factual finding that is reviewed for 19 clear error, see Gee v. Hammond (In re Gee), 173 B.R. 189 , 192 20 (9th Cir. BAP 1994), as is a finding that an injury is malicious, 21 Thiara v. Spycher Bros. (In re Thiara), 285 B.R. 420, 427 (9th 22 Cir. BAP 2002). A finding is clearly erroneous “when although 23 there is evidence to support it, the reviewing court on the 24 entire evidence is left with the definite and firm conviction 25 that a mistake has been committed.” Anderson v. City of Bessemer 26 City, 470 U.S. 564, 573 (1985) (citation omitted). Where two 27 permissible views of the evidence exist, the factfinder’s choice 28 between them cannot be clearly erroneous. Id. at 574 . We are to -71 give “due regard to the trial court’s opportunity to judge the 2 witnesses’ credibility.” Civil Rule 52(a)(6) (incorporated via 3 Rule 7052). We also give deference to inferences drawn by the 4 trial court. Beech Aircraft Corp. v. United States, 51 F.3d 834 , 5 838 (9th Cir. 1995). 6 DISCUSSION 7 A. The bankruptcy court did not err in applying issue 8 preclusion to the Labor Commissioner’s findings. 9 Zeppinick contends that the bankruptcy court erred in giving 10 issue preclusive effect to the Labor Commissioner’s findings. In 11 its findings and conclusions, the bankruptcy court stated: “The 12 parties do not dispute the collateral estoppel effect of the 13 Labor Commissioner’s decision and the Judgment regarding the 14 amount of unpaid wages and unreimbursed expenses owed to 15 Plaintiff and as to the characterization of Plaintiff as an 16 employee.” In the bankruptcy court, Zeppinick’s counsel did not 17 expressly object to the application of issue preclusion to the 18 Labor Commissioner’s decision, but in the parties’ Joint Pretrial 19 Stipulation, they agreed that the issues of fact to be litigated 20 included Ramirez’s status as an employee of Zeppinick. However, 21 at trial, the bankruptcy court cut off Zeppinick’s counsel’s 22 questioning of Ramirez regarding facts relevant to whether 23 Ramirez was an employee or an independent contractor, stating 24 “there’s no real point in arguing about being an independent 25 contractor. It’s already been determined at a hearing . . . in 26 which the defendant participated.” Although Zeppinick could have 27 (and probably should have) explicitly raised and briefed the 28 preclusion issue, on this record we are reluctant to conclude -81 that he waived any objection to the bankruptcy court’s 2 application of the doctrine. That said, we find no error by the 3 bankruptcy court in applying issue preclusion to the Labor 4 Commissioner’s findings. 5 In applying issue preclusion to a state court judgment, the 6 bankruptcy court must apply the forum state’s law of issue 7 preclusion. In re Plyam, 530 B.R at 462. In California, 8 application of issue preclusion requires that: (1) the issue 9 sought to be precluded from relitigation is identical to that 10 decided in a former proceeding; (2) the issue was actually 11 litigated in the former proceeding; (3) the issue was necessarily 12 decided in the former proceeding; (4) the decision in the former 13 proceeding is final and on the merits; and (5) the party against 14 whom preclusion is sought was the same as, or in privity with, 15 the party to the former proceeding. Id. (citing Lucido v. Super. 16 Ct., 51 Cal. 3d 335, 341 (1990)). 17 Zeppinick does not contest the first, fourth or fifth 18 elements, but implicitly argues that the second element – the 19 “actually litigated” requirement – was not met here. He argues 20 that there was an insufficient record to determine the issues 21 litigated before the Labor Commissioner because no record of the 22 hearing was introduced into evidence, citing Kelly v. Okoye 23 (In re Kelly), 182 B.R. 255, 258 (9th Cir. BAP 1995), aff’d, — 24 — 100 F.3d 110 (9th Cir. 1996) (“a party [seeking the application 25 of issue preclusion] must introduce a record sufficient to reveal 26 the controlling facts and pinpoint the exact issues litigated in 27 the prior action”). Zeppinick misconstrues Kelly: there is no 28 requirement that the entire record of the underlying proceedings -91 be produced if the issues can be ascertained from the documents 2 presented. See Johnson v. GlaxoSmithKline, Inc., 166 Cal. App. 3 4th 1497, 1513 n.9 (2008) (a court may refer to the entire record 4 to determine the issues decided in the earlier case); 5 In re Plyam, 530 B.R. at 470 (to the extent jury findings are 6 clearly and solely based on the relevant elements, they may be 7 sufficient for the application of issue preclusion). Here, the 8 Labor Commissioner explicitly found that Ramirez was an employee 9 and not an independent contractor, noting that Zeppinick had 10 “produced no written evidence whatsoever despite admitting that 11 records were in fact maintained” to support his contention that 12 Ramirez was a subcontractor. 13 Zeppinick also cites Wehrli v. County of Orange, 175 F.3d 14 692 (9th Cir. 1999). In that case, the Ninth Circuit Court of 15 Appeals reversed the district court’s ruling that a state 16 administrative ruling was preclusive in a federal court action 17 under 42 U.S.C. § 1983 . Id. at 695 . However, in Wehrli, the 18 Court of Appeals’ holding was based on its conclusion that the 19 appellant did not have an adequate opportunity to litigate the 20 issues decided in the administrative ruling because the ruling 21 was not subject to judicial review. Id. at 694 . That is not the 22 circumstance here. It is undisputed that the Judgment based on 23 the Labor Commissioner’s Order was appealable; Zeppinick’s 24 failure to avail himself of this remedy does not change the 25 preclusive effect of the judgment. See id. (“If an adequate 26 opportunity for review is available, a losing party cannot 27 obstruct the preclusive use of the state administrative decision 28 simply by foregoing her right to appeal.”) (quoting Plaine v. -101 McCabe, 797 F.2d 713 , 719 n.12 (9th Cir. 1986)). 2 In his reply brief, Zeppinick argues for the first time that 3 he was not afforded due process before the Labor Commissioner 4 because he was not served with the Superior Court judgment and 5 thus had no opportunity to seek judicial review, again citing 6 Wehrli, 175 F.3d at 694 . However, we do not consider arguments 7 raised for the first time in a reply brief. Coleman v. Quaker 8 Oats Co., 232 F.3d 1271 , 1289 n.4 (9th Cir. 2000). In any event, 9 this argument is baseless: Zeppinick does not dispute that he was 10 served with the Labor Commissioner’s Order, which informed him 11 that the Order would become final in ten days unless a party 12 exercised its right to appeal. 13 B. The bankruptcy court did not err in finding that Zeppinick’s 14 failure to pay Ramirez was willful and malicious. 15 Section 523(a)(6) provides in relevant part: “[a] discharge 16 under 727 . . . does not discharge an individual debtor from any 17 debt . . . for willful and malicious injury by the debtor to 18 another entity or to the property of another entity.” The 19 plaintiff bears the burden of proof on these elements by a 20 preponderance of the evidence. Grogan v. Garner, 498 U.S. 279 , 21 287 (1991). The creditor must prove that the debtor’s conduct in 22 causing the injuries was both willful and malicious. In re Su, — 23 — 290 F.3d at 1146-47 . 24 Willfulness requires proof that the debtor deliberately or 25 intentionally injured the creditor, and that in doing so, the 26 debtor intended the consequences of his act, not just the act 27 itself. Id. at 1143 (citing Kawaauhau v. Geiger, 523 U.S. 57 28 (1998)). The debtor must act with a subjective motive to inflict -111 injury, or with a belief that injury is substantially certain to 2 result from the conduct. Id. at 1146. And for conduct to be 3 found malicious, the creditor must prove that the debtor: 4 (1) committed a wrongful act; (2) that was done intentionally; 5 (3) which necessarily causes injury; and (4) was done without 6 just cause or excuse. Id. at 1146-47. 7 1. Zeppinick’s conduct was willful. 8 The willful injury requirement is met “only when the debtor 9 has a subjective motive to inflict injury or when the debtor 10 believes that injury is substantially certain to result from his 11 own conduct.” Ormsby v. First Am. Title Co. of Nev. 12 (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010). The debtor 13 is charged with the knowledge of the natural consequences of his 14 actions. Id. Although this standard is subjective, the 15 bankruptcy court need not take the debtor’s word for his state of 16 mind; rather, “[i]n addition to what a debtor may admit to 17 knowing, the bankruptcy court may consider circumstantial 18 evidence that tends to establish what the debtor must have 19 actually known when taking the injury-producing action.” 20 In re Su, 290 F.3d at 1146 n.6 (citation omitted). 21 Here, it is undisputed that Zeppinick breached the parties’ 22 oral employment agreement by willfully failing to pay Ramirez his 23 wages. A breach of contract alone, even an intentional one, will 24 not generally give rise to a nondischargeable debt. But “where 25 an intentional breach of contract is accompanied by tortious 26 conduct which results in willful and malicious injury, the 27 resulting debt is excepted from discharge under § 523(a)(6).” 28 Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1205 (9th -121 Cir. 2001). In California, “conduct amounting to a breach of 2 contract becomes tortious only when it also violates an 3 independent duty arising from principles of tort law.” Id. at 4 1206 (quoting Applied Equip. Corp. v. Litton Saudi Arabia Ltd., — 5 — 7 Cal. 4th 503, 515 (1994)). And tort recovery for a bad faith 6 breach of contract is permitted only when “a defendant’s conduct 7 violates a fundamental public policy of the state.” Id. (quoting 8 Rattan v. United Servs. Auto. Assoc., 84 Cal. App. 4th 715 , 722 9 (2000)). 10 The prompt payment of wages due an employee is a fundamental 11 public policy in California. Id. (quoting Gould v. Md. Sound 12 Indus., Inc., 31 Cal. App. 4th 1137, 1147 (1995)). In fact, the 13 willful failure to pay wages is a misdemeanor under the 14 California Labor Code: 15 In addition to any other penalty imposed by this article, any person, or an agent, manager, 16 superintendent, or officer thereof is guilty of a misdemeanor, who: — 17 — (a) Having the ability to pay, willfully refuses to pay 18 wages due and payable after demand has been made. 19 (b) Falsely denies the amount or validity thereof, or that the same is due, with intent to secure for 20 himself, his employer or other person, any discount upon such indebtedness, or with intent to annoy, 21 harass, oppress, hinder, delay, or defraud, the person to whom such indebtedness is due. — 22 — — 23 — Cal. Lab. Code § 216 . Even where an employee owes a debt to his 24 or her employer, the employer may not set off that debt against 25 wages owed. Cal. Lab. Code § 201 ;3 Barnhill v. Robert Saunders & — 26 — — 3 — 27 That statute provides in relevant part: 28 (continued...) -131 Co., 125 Cal. App. 3d 1, 6 (1981). 2 Relying on these authorities, the Ninth Circuit Court of 3 Appeals in Jercich held that the debtor-employer engaged in 4 tortious conduct meeting the willfulness requirement of 5 § 523(a)(6) based on state court findings that the debtor knew he 6 owed the wages, had the ability to pay the wages, and knew that 7 injury to the plaintiff was substantially certain to occur if the 8 wages were not paid but chose instead to use the money for his 9 own personal benefit. In re Jercich, 238 F.3d at 1208-09 . 10 Here, Zeppinick testified that he had the ability to pay 11 Ramirez during the pertinent times but that he did not pay the 12 wages because he asserted a right of setoff against Ramirez. The 13 bankruptcy court did not make an explicit finding that Zeppinick 14 knew that harm to Ramirez was substantially certain to occur from 15 the nonpayment of wages. However, the court cited the rule that 16 the debtor is charged with the knowledge of the natural 17 consequences of his actions, In re Ormsby, 591 F.3d at 1206 , and 18 concluded that denying Ramirez “$9,000 in wages and reimbursement 19 of $12,495.74 paid out of pocket when one makes $4,000 in gross 20 wages per month is clearly injurious.” Under Jercich, this 21 finding is sufficient to support the conclusion that Zeppinick 22 knew that harm to Ramirez was substantially certain if the wages 23 were not paid. 24 Zeppinick argues that he had no subjective intent to harm — 25 — 26 3 (...continued) 27 (a) If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and 28 payable immediately. . . . -141 Ramirez but that he withheld the wages in the legitimate belief 2 that he was entitled to an offset for the roof repairs. However, 3 the bankruptcy court found not credible Zeppinick’s testimony 4 that he estimated the roof damage at between $12,000 and $14,000 5 – noting that had produced no documentary evidence to support 6 that estimate – and concluded that Zeppinick apparently 7 “exaggerated the amount of damage to the Bentley Property to 8 support his argument regarding offset and not because of any 9 legitimate basis.” We must defer to the bankruptcy court’s 10 credibility determination and the inferences it drew from the 11 evidence. See Civil Rule 52(a)(6); Beech Aircraft Corp., 51 F.3d 12 at 838. In any event, it is implausible that Zeppinick would not 13 have known that harm to Ramirez would result from the nonpayment 14 of wages. We find no error in the bankruptcy court’s finding 15 that Zeppinick’s conduct was willful. 16 2. The bankruptcy court did not err in finding that 17 Zeppinick’s conduct was malicious. 18 The bankruptcy court found that Zeppinick’s conduct was 19 malicious because his failure to pay Ramirez was an intentional 20 wrongful act done without just cause or excuse that necessarily 21 caused injury. The evidence supporting the bankruptcy court’s 22 willfulness finding also supports the finding of malice. As 23 noted above, the intentional failure to pay wages is a 24 misdemeanor under California law (an intentional wrongful act), 25 which necessarily caused injury. 26 Additionally, the bankruptcy court did not err in finding 27 that there was no just cause or excuse for Zeppinick’s 28 withholding of Ramirez’s wages. Although Zeppinick testified -151 that he withheld the wages because he believed he had an offset, 2 as noted above, the bankruptcy court found Zeppinick’s testimony 3 regarding the amount of the offset not credible. 4 Zeppinick argues that this case is distinguishable from 5 Jercich because there the employer had used the withheld funds 6 for his own benefit, a factor which the state court had found to 7 constitute substantial oppression under California Civil Code 8 § 3294, i.e., “despicable conduct that subjects a person to cruel 9 and unjust hardship in conscious disregard of that person’s 10 rights.” However, while that fact bolstered the Court of 11 Appeals’ holding that the conduct was malicious, it was not 12 dispositive. Therefore, what Zeppinick did with the funds is not 13 relevant to the analysis here. 14 CONCLUSION 15 For the reasons explained above, the bankruptcy court did 16 not err in applying issue preclusion to the Labor Commissioner’s 17 findings or in finding that the debt Zeppinick owed to Ramirez 18 pursuant to the Judgment was nondischargeable under § 523(a)(6). 19 Accordingly, we AFFIRM. — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 — -16-