In re Porter

Holly Sells (plaintiff) was employed by Mr. Speedy Car Care Center. During Sells’s employment, she was sexually harassed by one of Mr. Speedy’s owners, John Huffer. Sells repeatedly complained about the harassment to Mr. Speedy’s other owner, Michael Porter (debtor). However, Porter wrote a memo suggesting that Sells had told Porter that her interactions with Huffer were consensual, and Porter insisted that Sells sign the memo. Sells refused to sign and eventually resigned from Mr. Speedy. Sells brought an action against Mr. Speedy, Huffer, and Porter alleging claims including sexual harassment, retaliation, and constructive discharge. At trial, Sells testified that Porter threatened to terminate her if she did not sign the memo. The jury found in Sells’s favor and awarded her $360,000 in damages. Among other things, the jury found that Huffer had subjected Sells to unwelcome sexual harassment and that Mr. Speedy, Porter, and Huffer took adverse action against Sells and retaliated against her after she complained about Huffer’s conduct. Porter subsequently filed for bankruptcy under chapter 7 of the United States Bankruptcy Code. Although chapter 7 debtors may be entitled to discharge of their debts incurred prior to filing for bankruptcy, Section 523(a)(6) of the Bankruptcy Code provides an exception from discharge for any debt based on the debtor’s willful and malicious injury of another person. Sells filed an adversary complaint against Porter in the bankruptcy proceeding, asserting that the damages award in the sexual-harassment action was excepted from discharge under Section 523(a)(6). The bankruptcy court applied collateral estoppel to the judgment in the sexual-harassment action and held that the damages award could not be discharged in bankruptcy because Porter willfully and maliciously injured Sells. The Bankruptcy Appellate Panel affirmed, and Porter appealed to the United States Court of Appeals for the Eighth Circuit.