Ormsby v. First American Title Company of Nevada (In re Ormsby)

A Nevada state court found that Lawrence Ormsby (debtor) had engaged in the willful, wanton, and reckless misappropriation and conversion of real-estate title-searching records, also known as title plants, that belonged to First American Title Company (FATCO) (creditor). Among other things, the state court determined that Ormsby owned an escrow and title company that competed with FATCO. Ormsby had purchased the rights to use a Washoe County, Nevada title plant covering the years 2000 to the present but had not purchased any rights for title plants covering the 1900s. Instead, Ormsby hired one of FATCO’s employees away from FATCO, encouraged and assisted that employee in taking FATCO’s title plants for the 1900s, and then duplicated the title plants at a nonlocal copy service. The state court awarded FATCO $141,500 in compensatory damages and $283,000 in punitive damages, along with costs and prejudgment interest. The state court also awarded attorney fees based on the finding that Ormsby’s misappropriation of the title plants was willful and malicious. Ormsby and his wife subsequently filed for chapter 7 bankruptcy protection. FATCO moved to prevent the discharge of the state-court judgment under 11 U.S.C. § 523(a)(4), which prevents discharge for fraud, embezzlement, or larceny, and 11 U.S.C. § 523(a)(6), which prevents discharge for willful and malicious injury by the debtor to another entity or another entity’s property. The bankruptcy court granted summary judgment in FATCO’s favor, and the federal district court affirmed. Ormsby appealed to the United States Court of Appeals for the Ninth Circuit.