In re Mulligan

Filing 26

ORDER AFFIRMING DECISION OF BANKRUPTCY COURT. For the reasons stated in the attached ruling, the order of the Bankruptcy Court is AFFIRMED. The Clerk of Court shall close this case. Signed by Judge Jeffrey A. Meyer on 5/3/2018. (Zuckier, C.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

LAWRENCE R. MULLIGAN,
Appellant-Debtor,
v.
No. 3:17-cv-01873 (JAM)
BRUCE K. JALBERT and PAMELA D.
JALBERT,
Appellees-Creditors.

ORDER AFFIRMING DECISION OF BANKRUPTCY COURT
Appellant-debtor Lawrence Mulligan has appealed from a ruling of the United States
Bankruptcy Court, see In re Mulligan, 577 B.R. 6 (Bankr. D. Conn. 2017) (Nevins, J.), in which
the Bankruptcy Court granted summary judgment concluding that Mulligan’s debt to appelleescreditors Bruce and Pamela Jalbert was not a dischargeable debt in bankruptcy pursuant to 11
U.S.C. § 523(a)(4) (providing in part that a debt is not dischargeable “for fraud or defalcation
while acting in a fiduciary capacity, embezzlement, or larceny”). Judge Nevins relied on a prior
state court ruling that Mulligan in his capacity as an attorney for the Jalberts had engaged in
conversion and intentional statutory theft of funds they entrusted to him. See Jalbert v. Mulligan,
2013 WL 338862, at *3-9 (Conn. Super. 2013), aff’d, 153 Conn. App. 124, cert. denied, 315
Conn. 901 (2014).
Mulligan raises three grounds on appeal. First, he contends that the state court exceeded
its authority, because the Bankruptcy Court lifted the automatic stay only to permit the
underlying state court proceedings to proceed as to plaintiffs’ common law fraud allegations,
rather than as to additional claims such as statutory theft. I do not agree with this argument for
the reasons explained by Judge Nevins in her ruling as well as those reasons stated in the

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Jalberts’ briefing. Based on my review of the relevant portions of the transcript, I conclude that
the Bankruptcy Court’s lifting of the stay was not limited to only the claim for fraud, and the
parties themselves understood this when they later filed a stipulation in state court stating that the
stay was lifted as to a broad range of claims including conversion, statutory theft, CUTPA, fraud,
and false pretenses. See Appellant Appendix 173.
Second, Mulligan faults the Bankruptcy Court for relying on the “factually deficient”
findings of the state court despite the Jalberts’ alleged failure to identify underlying supporting
evidence for these findings in the state court record. I do not agree with this argument for the
reasons stated by the Jalberts in their briefing. Most significantly, the parties agreed that the
Bankruptcy Court “could not reconsider findings of fact made by the [state] trial court,” leaving
it to the Bankruptcy Court’s determination whether “those findings of fact constituted a violation
of 11 U.S.C. § 523(a)(4).” In re Mulligan, 577 B.R. at 14. Indeed, the whole point of collateral
estoppel is to pretermit a review of the underlying evidence where there have been factual
findings in another proceeding between the same parties by another competent court of
jurisdiction. In view of the parties’ agreement on the limited scope of review as well as the very
purpose of collateral estoppel, the Bankruptcy Court acted well within its authority by relying on
the state court’s factual findings without probing the underlying evidence in the state court
record.
Third, Mulligan argues that the requirements for collateral estoppel were not met. I do not
agree for the reasons set forth by the Jalberts in their briefing. It is well established that “a party
may assert the doctrine of collateral estoppel successfully when three requirements are met: [1]
[t]he issue must have been fully and fairly litigated in the first action, [2] it must have been
actually decided, and [3] the decision must have been necessary to the judgment.” Deutsche

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Bank AG v. Sebastian Holdings, Inc., 174 Conn. App. 573, 587 (2017). Each one of these
requirements was met as to the predicate facts as found by the state court to support the
conversion and statutory theft claims, see Jalbert, 2013 WL 338862, at *3-9, and these facts
were in turn relied on by Judge Nevins to support her conclusion that Mulligan engaged in a
defalcation of funds while acting in his attorney fiduciary capacity for the Jalberts. See In re
Mulligan, 577 B.R. at 17, 19-20. Having had a full and fair opportunity to litigate the facts before
the state trial court and then to challenge the trial court’s factual findings by means of his appeals
to the Connecticut Appellate Court and the Connecticut Supreme Court, Mulligan was not at
liberty to assail the integrity of those findings before the Bankruptcy Court. Judge Nevins
correctly concluded that Mulligan’s debt was not dischargeable in bankruptcy.
For the foregoing reasons, the order of the Bankruptcy Court is AFFIRMED.
Dated at New Haven this 3rd day of May 2018.
/s/ Jeffrey Alker Meyer
Jeffrey Alker Meyer
United States District Judge

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