Bjerkness v. SKF USA, Inc.
MEMORANDUM OPINION AND ORDER. Based upon the foregoing, IT IS HEREBY ORDERED that: 1. Appellant Dale Harold Bjerkness's Appeal (Doc. No. 1 ) is DENIED. 2. The Bankruptcy Court's September 13, 2012 Order for Judgment is AFFIRMED. (Written Opinion). Signed by Judge Donovan W. Frank on 3/12/2013. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Bky. No. 12-50004
Chapter 7 Bankruptcy
Dale Harold Bjerkness, II,
Dale Harold Bjerkness, II,
Adv. No. 12-5011
Civil No. 12-2744 (DWF/LIB)
OPINION AND ORDER
SKF USA, Inc.,
Jamie R. Pierce, Esq., Hinshaw & Culbertson LLP, counsel for Appellant.
Edwin H. Caldie, III, Esq., Robert T. Kugler, Esq., and Phillip J. Ashfield, Esq., Leonard
Street and Deinard, PA, counsel for Appellee.
This matter is before the Court Dale Harold Bjerkness, II’s (“Appellant”) appeal
from United States Bankruptcy Judge Gregory F. Kishel’s September 13, 2012 Order,
which determined that Appellant’s debt to SKF USA, Inc. (“Appellee”) is not
dischargeable in Appellant’s Chapter 7 bankruptcy proceedings. For the reasons set forth
below, the Court affirms Judge Kishel’s Order.
This matter is one of four cases in this District arising out of the same set of facts.
On January 24, 2013, Judge Paul A. Magnuson issued an Amended Memorandum and
Order in one of the related cases, affirming the Bankruptcy Court’s judgment. In re
Sever, Civ. No. 12-2588 (Doc. No. 13). The Court adopts the factual background
articulated in Judge Magnuson’s order, in relevant part, as follows.
Appellant was employed by Appellee, along with the debtors in the other three
cases: John Joseph Sever, Kevin Koch, and Walter G. Remick, Jr. See id. at 1.
Appellant left Appellee to form his own, competing business, and Sever, Koch, and
Remick followed Appellant. See id. Before they left Appellee, however, each debtor
downloaded thousands of files containing Appellee’s confidential customer information
without Appellee’s knowledge. Id.
Appellee sued its former employees in the United States District Court for the
Northern District of Illinois for violations of Illinois’s trade secret statute. Id. at 2. The
Illinois court ultimately found in favor of Appellee, awarding Appellee more than
$40,000 in compensatory damages, $40,000 in punitive damages, and more than
$1.1 million in attorney fees and costs against all former-employee defendants, including
Appellant, jointly and severally. See id. The former employees paid the compensatory
and punitive award but each filed for bankruptcy before paying the attorney fee award.
Appellee filed an adversary proceeding in the bankruptcy case of each former
employee, contending that the attorney fee award was a non-dischargeable debt under 11
U.S.C. § 523(a)(6). Id. And in each case, the Bankruptcy Judge agreed that the debt was
not dischargeable. Id. All former employees/bankruptcy debtors have appealed to the
United States Court for the District of Minnesota. See id.
Now, two of those appeals have been completed. In the first, Judge Ann D.
Montgomery of this District affirmed the Bankruptcy Court’s decision that the debt is
non-dischargeable. In re Koch, Civ. No. 12-1606, 2012 WL 4090179, at *1 (D. Minn.
Sept. 17, 2012). An appeal of that determination is now pending before the Eighth
Circuit. Judge Magnuson’s order has also been appealed to the Eighth Circuit. 1
Standard of Review
On appeal from a judgment of the Bankruptcy Court, a District Court sits as an
appellate court and applies the same standard as the Court of Appeals pursuant to
28 U.S.C. § 158(a); see Rampy v. Messerli, 224 B.R. 701, 704 (D. Minn. 1997). The
District Court reviews the Bankruptcy Court’s findings of fact for clear error and
conducts a de novo review of the Bankruptcy Court’s conclusions of law. Fed. R. Bankr.
P. 8013; see In re MBA Poultry, LLC, 291 F.3d 528, 533 (8th Cir. 2002).
Under the bankruptcy code, certain debts are excepted from discharge, including
those “for willful and malicious injury by the debtor to another entity.” 11 U.S.C.
The remaining appeal, In re Remick, Civ. No. 12-1940, is currently pending before
Judge John R. Tunheim of this District. Argument on that appeal was set for March 8,
§ 523(a)(6). Section 523(a)(6) “does not distinguish between debts which are
compensatory in nature and those which are punitive.” In re Miera, 926 F.2d 741, 745
(8th Cir. 1991). The language of the statute “is directed at the nature of the conduct
which gives rise to the debt, rather than the nature of the debt.” Id. at 745.
Consequently, “all damages stemming from a willful and malicious injury are
nondischargeable under § 523(a)(6).” In re Koch, Civ. No. 12-1606, 2012 WL 4090179,
The attorney fees at issue here were awarded as exemplary damages based on
Appellant’s willful and malicious injury to Appellee. See id. Notably, Appellant does
not dispute that the trade secret violation was a willful injury to Appellee; rather, he
claims that he did not “act with malice.” (Doc. No. 5 at 9, 11-13); see also In re Sever,
Civ. No. 12-2588 (Doc. No. 13 at 3).
As stated in Judge Montgomery’s thorough and well-reasoned opinion with
respect to Koch, the conduct of all four debtors “was certain to harm [Appellee] by
destroying the secrecy of trade secrets for which [Appellee] had paid considerable value,
and by giving [Appellee’s] competitor an advantage it would not have otherwise had.” In
re Koch, Civ. No. 12-1606, 2012 WL 4090179, at *4. Thus, all four debtors “acted with
malice by intending or fully expecting to harm the economic interests” of Appellee. Id.
The Court, therefore, concurs with the determinations of Judge Montgomery and
Judge Magnuson in their respective related cases and finds that the judgment debt for
attorney fees in this case is a non-dischargeable debt under 11 U.S.C. § 523(a)(6). See In
re Koch, Civ. No. 12-1606, 2012 WL 4090179, at *6; In re Sever, Civ. No. 12-2588
(Doc. No. 13 at 3-4).
Based upon the foregoing, IT IS HEREBY ORDERED that:
Appellant Dale Harold Bjerkness’s Appeal (Doc. No. ) is DENIED.
The Bankruptcy Court’s September 13, 2012 Order for Judgment is
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: March 12, 2013
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge