Visser et al v. Twin Falls Staffing, LLC et al

Filing 14

MEMORANDUM DECISION The Court reverses the portion of the bankruptcy court's judgment that awards Twin Falls $128,151.55 for "costs and expenses" Twin Falls incurred in the state-court action. The judgment is affirmed in all other respects. The case is remanded to the bankruptcy court with instructions to enter judgment consistent with this ruling. The bankruptcy court's denial of Visser's Motion to Alter or Amend the Judgment is affirmed. The parties shall bear their own costs on appeal. AFFIRMED IN PART; REVERSED and REMANDED IN PART.. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

In re:

Case No. 1:13-cv-00408-BLW

JOSEPH STANLEY VISSER and
APRIL McGOVERN VISSER,

MEMORANDUM DECISION

Debtors.
__________________________________
TWIN FALLS STAFFING, LLC,
Plaintiff/Appellee,
v.
JOSEPH STANLEY VISSER and
APRIL McGOVERN VISSER,
Defendants/Appellants.
INTRODUCTION
Debtors appeal the bankruptcy court’s judgment and order denying their motion to
alter or amend the judgment. For the reasons expressed below, this Court will affirm in
part and reverse in part.

MEMORANDUM DECISION - 1

BACKGROUND
Debtor Joe Visser is a former employee of Twin Falls Staffing, LLC. He left
Twin Falls in 2009 to set up a competing business. Twin Falls sued Visser in state court,
claiming that he was violating a non-competition clause in his employment agreement.
In April 2010, the state court granted a preliminary injunction, prohibiting Visser from
competing with Twin Falls for a one-year period. The state court also scheduled trial to
begin on July 19, 2011, but Visser filed a Chapter 7 bankruptcy petition before then.
Twin Falls commenced an adversary proceeding against Visser, contending that
Visser’s debt to Twin Falls was nondischargeable under 11 U.S.C. § 523(a)(6). After a
bench trial, the bankruptcy court agreed, concluding that Visser had wilfully and
maliciously injured Twin Falls, causing the company to suffer $361,901.55 in damages.
Visser appeals the bankruptcy court’s judgment. He says the bankruptcy court “erred
both as to law and fact” in deciding he had maliciously injured Twin Fall and in deciding
the amount of damages. Opening Br., Dkt. 6, at 1. Visser also contends that the
bankruptcy court erred when it denied his motion to alter or amend the judgment.
STANDARD OF REVIEW
District courts review bankruptcy court decisions in the same manner as would the
Ninth Circuit. See In re George, 177 F.3d 885, 887 (9th Cir. 1999). “Whether a claim is
nondischargeable presents a mixed question of fact and law and is reviewed de novo.”
Carillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002). Nevertheless, the
bankruptcy court’s factual findings underlying the nondischargeability determination are
reviewed for clear error. See id.; Banks v. Gill Distrib. Ctrs., Inc. (In re Banks), 263 F.3d
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862, 869 (9th Cir. 2001) (“Whether an actor behaved wilfully and maliciously is
ultimately a question of fact reserved for the trier of fact.”); Murray v. Bammer (In re
Bammer), 131 F.3d 788, 791 (9th Cir. 1997). The bankruptcy court’s denial of Visser’s
motion to alter or amend the judgment is reviewed for an abuse of discretion. See State
of Idaho Potato Comm’n v. G&T Terminal Pkg., Inc., 425 F.3d 708, 719 (9th Cir. 2005).
ANALYSIS
1.

The Bankruptcy Court Did Not Err in Concluding that Visser’s Debt to Twin
Falls Staffing is Nondischargeable
An individual debtor may not discharge a debt “for willful and malicious injury by

the debtor to another entity . . . .” 11 U.S.C. § 523(a)(6). “Willful injury” and “malicious
injury” are separate and distinct requirements. See Barboza v. New Form, Inc. (In re
Barboza), 545 F.3d 702, 706 (9th Cir. 2008). Additionally, if a creditor contends that a
debt resulting from a breach of contract is nondischargeable under section 523(a)(6), the
creditor must prove that the debtor’s conduct was tortious. Lockerby v. Sierra, 535 F.3d
1038, 1040-41 (9th Cir. 2008). Conduct is tortious for purposes of § 523(a)(6) only if it
constitutes a tort under state law. Id. at 1041. The Court will address these requirements
in turn, beginning with willfulness.
A. Willfulness
Within the meaning of § 523(a)(6), willfulness means a “deliberate or intentional
injury, not merely a deliberate or intentional act that leads to injury.” Kawaauhau v.
Geiger, 523 U.S. 57, 61 (1998). Twin Falls may establish willfulness by showing “either
that the debtor had a subjective motive to inflict the injury or that the debtor believed that

MEMORANDUM DECISION - 3

injury was substantially certain to occur as a result of his conduct.” Petralia v. Jercich
(In re Jercich), 238 F.3d 1202, 1208 (9th Cir. 2001). Willfulness may be inferred from
all of the facts and circumstances established. Nahman v. Jacks (In re Jacks), 266 B.R.
728, 742 (9th Cir. BAP 2001); see also Carrillo v. Su (In re Su), 290 F.3d 1140, 1146 n.6
(9th Cir. 2002) (“[T]he bankruptcy court may consider circumstantial evidence that tends
to establish what the debtor must have actually known when taking the injury-producing
action.”).
The bankruptcy court did not err in finding that Visser inflicted a willful injury
upon Twin Falls Staffing. The most damning evidence supporting this finding is the
manner in which Visser left Twin Falls. When he resigned, Twin Falls had three key,
top-level employees: (1) Joe Visser; (2) Stan Visser, Joe’s father; and (3) Tom Welstad.
Joe managed the store. Stan owned 25 percent of the company and served as its chief
operating officer. Welstad owned 75 percent of the company and served as its chief
executive officer, but he was not involved in day-to-day operations. “He was the money
guy”, and he trusted Joe and Stan to operate the business in the best interest of all
involved. July 18, 2013 Oral Ruling (“Oral Ruling”), Bankr. Adv. Dkt. 1 75, at 12.
Toward the end of October 2009, Joe and Stan resigned, but they did not give
Welstad any meaningful advance notice. Instead, they went about establishing their new
business and then – just days before the new business was ready to open its doors – they
drafted resignation letters. See Bankruptcy Court Findings (“Findings”), Bankr. Adv.

1

Throughout this decision, references to “Bankr. Adv. Dkt.” are to the bankruptcy court’s docket in Twin
Falls Staffing, LLC v. Visser (In re Visser), Case No. 11-8096-JDP (Bankr. D. Idaho).

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Dkt. 58, ¶¶ 32-46, 50-51.
Joe wrote a resignation letter on Wednesday, October 28, 2009, and put it on his
father’s desk. Id. ¶ 51. But he knew his father would be leaving the company with him
and would not notify Welstad, until the following Monday, November 2, 2009 – the same
day Joe and Stan would open their new business. Stan played more or less the same
game. He wrote his resignation letter on October 26 but waited until October 30 to put it
in the mail, anticipating that Welstad would not receive it until the following Monday,
November 2. See id. ¶ 50; Oral Ruling, at 26.
When Monday morning, November 2, 2009, dawned, Joe and Stan’s new business
was humming. Among other things, the new company dispatched temporary workers to
Lamb Weston – formerly Twin Falls’ largest, best client – for day, swing, and graveyard
shifts. All of those temporary workers were former employees of Twin Falls Staffing.
See Findings ¶ 35. Twin Falls Staffing’s office, by contrast, was essentially closed. Stan
Visser had been at the Twin Falls’ building early that morning, but the doors were
locked, the curtains were drawn, and the phones were being forwarded to a pager. Id.
¶ 58.
The Vissers took all these actions despite being bound by non-competition clauses
with Twin Falls Staffing. Additionally, they did not arbitrarily select November 2, 2009
as the day to open their new business. This was the day Twin Falls’ contract with Lamb
Weston was set to expire. Id. ¶ 47.
On this record, Visser’s insistence that the evidence permits just one conclusion –
that he was doing nothing more than attempting to succeed in a new business venture –
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lacks any persuasive force. Likewise, Visser’s argument that his father was the only
person who may have inflicted a willful or malicious injury upon Twin Falls Staffing is
not supported by the facts. Rather, on the evidence before it, the bankruptcy court
correctly found that Joe Visser willfully injured Twin Falls Staffing within the meaning
of § 523(a)(6).
B.

Malice

Similarly, the bankruptcy court did not err in concluding that Visser inflicted a
“malicious injury” upon Twin Falls Staffing. “A ‘malicious’ injury involves ‘(1) a
wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done
without just cause or excuse.’” In re Bammer, 131 F.3d at 791. “This four-part
definition does not require a showing of biblical malice, i.e., personal hatred, spite, or illwill. Nor does it require a showing of an intent to injure, but rather it requires only an
intentional act which causes injury.” Id.
The evidence supports the bankruptcy court’s finding that Visser signed a noncompetition agreement and that he was fully cognizant of the import of that agreement.
Similarly, the evidence supports a finding that, despite this knowledge, Visser
intentionally breached the agreement by setting up a competing business in a manner that
“was carefully designed to not only injure but to cripple Twin Falls Staffing’s ability to
compete with his new business . . . .” Oral Ruling, at 5.
On appeal, Visser asserts that the bankruptcy court erred in finding that he was
bound by a non-competition agreement. Visser says he never signed any such agreement.
But the bankruptcy court did not believe him. See id. at 13. This credibility
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determination is afforded great deference because the bankruptcy court, as the trier of
fact, “had the opportunity to note ‘variations in demeanor and tone of voice that bear so
heavily on the listener’s understanding of and belief in what is said.’” Retz v. Samson (In
re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010) (quoting Anderson v. City of Bessemer, 470
U.S. 564, 575 (1985)). Moreover, Welstad testified that he personally saw Visser’s
original employment contract – which contained a non-competition clause – in Visser’s
personnel file. Findings ¶ 32; Day 1 Trial Tr., Dkt. 3-1, at 100:15-18. Welstad also
testified that Twin Falls Staffing had a strict, no-exceptions policy regarding noncompetition clauses. See Day 1 Trial Tr., Dkt. 3-1, at 100:5-14.
As for the document Visser signed in 2008 – a new employment agreement,
without a noncompetition clause – the evidence supports the bankruptcy court’s
conclusion that the parties had not actually agreed to modify the terms of Visser’s
original employment agreement. Oral Ruling, at 15; see generally Wash. Fed. Sav. v.
Van Engelen, 289 P.3d 50, 55 (Idaho 2012) (“A modification, like a contract, requires a
meeting of the minds.”).
In sum, the bankruptcy court did not err in finding that: (1) Visser was bound by a
non-competition agreement; (2) he intentionally breached that agreement; and (3) his
conduct was tortious. More broadly, the bankruptcy court did not err in finding that
Visser’s conduct was malicious, as the evidence easily supports a finding that Visser
performed an intentional act that caused injury, without just cause or excuse. 2

2

With this ruling, the Court does not need to resolve Visser’s brief arguments that he did not
misappropriate trade secrets or breach fiduciary duties.

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C.

Tortious Conduct

Visser has not challenged the bankruptcy court’s conclusion that his conduct was
tortious under state law. He did not identify any such error when he listed the appellate
issues in his opening brief. See Opening Br., Dkt. 6, at 1. Moreover, the bankruptcy
court found that Visser had committed various torts, including intentional interference
with a prospective economic advantage and intentional interference with contract. Visser
does not mention these findings on appeal.
In advancing other arguments, however, Visser does challenge the bankruptcy
court’s conclusions that he breached fiduciary duties and misappropriated trade secrets.
But even assuming he is correct on these points, Visser has still failed to launch an
effective challenge to the bankruptcy court’s conclusion that his conduct was otherwise
tortious. The Court thus has no reason to resolve the parties’ disagreements related to
misappropriation of trade secrets and breach of fiduciary duty.
2.

Damages
The next question is whether the bankruptcy court erred in computing damages.

The bankruptcy court’s damages award of $361,901.55 is comprised of the following
amounts: (1) $230,000 in lost net revenues; (2) $128,151.55 in attorneys’ fees Twin Falls
incurred in prosecuting the state-court action; and (3) $3,750 for the cost of a bond
related to the state-court injunction. Bankr. Ct. Judgment, Dkt. 8-6, ¶ 1(a)-(c).
Visser challenges the first two parts of the damages award – lost revenues and
attorneys’ fees. The Court will affirm the award of lost revenues, but will reverse the
attorneys’ fee award.
MEMORANDUM DECISION - 8

A.

Attorneys’ Fees

The bankruptcy court’s decision to award attorneys’ fees is reviewed for an abuse
of discretion or an erroneous application of law. See In re Baroff, 105 F.3d 439, 441 (9th
Cir. 1997); Bertola v. N. Wisconsin Produce Co. (In re Bertola), 317 B.R. 95, 99 (9th Cir.
BAP 2004).
The bankruptcy court’s decision to award fees as an item of compensatory
damages is contrary to the general rule that attorneys’ fees incurred in litigation are not
recoverable as damages because they are not the “legitimate consequences” of the
defendant’s wrongful conduct. 1 Robert L. Rossi Attorneys’ Fees § 8:1 (3d ed. 2013);
see generally Hellar v. Cenarrusa, 682 P.2d 524, 531 (Idaho 1984) (“We continue to
adhere to the so-called “American rule” to the effect that attorney fees are to be awarded
only where they are authorized by statute or contract.”).
A corollary rule is that attorneys’ fees incurred in a prior litigation against the
same defendant are not recoverable as damages in a subsequent lawsuit. See Rossi § 8:1;
Losser v. Bradstreet, 183 P.3d 758, 762 (Idaho 2008) (citing 25 C.J.S. Damages § 70
(2007) and 22 Am. Jur. 2d Damages § 435 (2007)). 3 Although this corollary rule does
not expressly contemplate an adversary proceeding as the “subsequent lawsuit,” the logic
3

There is an exception to this general rule, known as the wrong-of-another doctrine. Cf. Koelker v.
Turnbull, 899 P.2d 972, 976 (Idaho 1995) (in suit for breach of covenant of title, fees incurred in quiet
title suit against third parties were properly awarded as damages, but fees incurred in suit to enforce
covenant were not recoverable as damages). The Restatement of Torts formulates the doctrine as follows:
“One who through the tort of another has been required to act in the protection of his interests by bringing
or defending an action against a third person is entitled to recover reasonable compensation for loss of
time, attorney fees and other expenditures thereby suffered or incurred in the earlier action. Restatement
(Second) of Torts § 914(2). Twin Falls has not even suggested that the wrong-of-another doctrine applies
here, which makes sense because there is no third party involved within the meaning of the doctrine. That
is, Twin Falls was not forced to defend against or pursue a third party due to Visser’s misconduct.

MEMORANDUM DECISION - 9

still applies. If a litigant sues in state court, and later files a nondischargeability action in
the bankruptcy court, the fees incurred in the state-court action are not transmuted into
damages. They are still fees.
Of course, this does not mean Twin Falls lost any ability to recover attorneys’ fees
just because Visser filed a bankruptcy petition in the middle of the state-court
proceedings. If Twin Falls had identified a contractual provision or statute authorizing a
fee award, then the bankruptcy court could have concluded that: (1) Twin Falls was
entitled to recover its attorney fees; and (2) those fees were nondischargeable. See
generally Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 449
(2007); Cohen v. De la Cruz, 523 U.S. 213, 223 (1998); In re Bertola, 317 B.R. at 99100.
In this case, however, Twin Falls did not provide the bankruptcy court with any
authority to award attorneys’ fees in the first place. And on appeal, Twin Falls offers up
just one theory – mitigation – to support the fee award. Twin Falls says that when it sued
Visser in state court, it was mitigating its damages and should be allowed to recover its
attorneys’ fees as a mitigation expense.
There are at least two problems with this argument. First, the case Twin Falls
relies on – McCormick International USA, Inc. v. Shore, 277 P.3d 367 (Idaho 2012) –
discusses mitigation only in the most general terms. It does not hold or suggest that
attorneys’ fees may be awarded as damages award under a mitigation theory.
Second, if Twin Falls’ mitigation argument is carried to its logical conclusion,
then every plaintiff who is wronged and sues to prevent further damage would be entitled
MEMORANDUM DECISION - 10

to recover attorneys’ fees in a subsequent suit. This would effectively eviscerate the
American rule, which requires litigants to pay their own attorneys’ fees unless a statute or
contractual provision authorizes a fee award. See generally Hellar, 682 P.2d at 531
(Idaho adheres to the American rule).
This principle is illustrated in GME, Inc. v. Carter, 917 P.2d 754, 756-57 (Idaho
1996). The case is not directly on point because it does not deal with attorneys’ fees
incurred in a previous litigation. But it is still informative because the plaintiff in that
case won a trade secrets claim and then sought to recover part of its attorneys’ fees as an
element of damages. The Idaho Supreme Court refused, explaining that “actual loss” in
the trade-secrets context includes “lost profits, lost customers, lost market share, and
similar losses” – not attorneys’ fees. See id. at 757. The same is true here. Twin Falls’
losses from Visser’s wrongful conduct logically include lost profits, but not attorneys’
fees.
For all these reasons, the bankruptcy court erred when it awarded attorneys’ fees
as an item of compensatory damages.
B. Lost Net Revenues
Turning to the $230,000 lost-revenues award, a trial court’s computation of
damages following a bench trial is reviewed for clear error. See Masu, B.V. v. Walt
Disney Co., 185 F.3d 932 (9th Cir. 1999). An appellate court “will not disturb an award
of damages unless it is clearly unsupported by the evidence.” Id. (citation omitted).
Here, the bankruptcy court clearly explained how it arrived at the $230,000 lostrevenues award. The short version is that the court did a before-and-after comparison of
MEMORANDUM DECISION - 11

net revenues and concluded that Twin Falls lost roughly $470,000 during the one-year
period after Visser left the company.
This finding is supported by Tom Welstad’s testimony and Trial Exhibit 182,
which contains a profit-and-loss statement for Twin Falls Staffing. See Twin Falls LLC
Profit & Loss Statement, Dkt. 8-6, at 834-35 (GSS0004117-18). Welstad testified that
within Exhibit 182, he had “firm[ed] up” Twin Falls’ estimated losses. See Day 2 Trial
Transcript, Dkt. 3-2, at 194:21 to 195:7. Exhibit 182, in turn, shows that Twin Falls
netted around $380,000 during the one-year period before Visser left. It also shows that
in the year following Visser’s departure, Twin Falls lost around $90,000. Then it’s just
basic math: $380,000 less –$90,000 = $470,000.
After arriving at that $470,000 figure, the bankruptcy court cut it roughly in half,
explaining the reduction as follows:
While Joe left them in the lurch and for a period of six months they
were really scrambling and that was Joe’s fault if you will, from my
perspective, even despite him leaving, it could reasonably be expected
that Mr. Welstad and his folks would come in, get the business back up
and running, get other people hired, get other relationships reestablished, get back on their feet, and back in the competition within a
period of approximately six months.
Oral Ruling, at 23:15-23.
The Court finds no reason to disturb this award. The computation is
straightforward, logical, and easily supported by the evidence. Visser’s main attack on
appeal is that Twin Falls failed to establish damages with “reasonable certainty.” But the
reasonable-certainty standard focuses more on determining the fact of damages, rather
than fixing the amount of damages with mathematical certainty. As the Idaho Supreme
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Court has explained:
The measure of damages for loss of profits is rarely susceptible of
accurate proof . . . . Therefore, the law does not require accurate proof
with any degree of mathematical certainty . . . . Damages need be
proved only with a “reasonable certainty[,] and this means that [the]
existence of damages must be taken out of the realm of speculation. The
mere fact that it is difficult to arrive at [an] exact amount of damages,
where it is shown that damages resulted, does not mean that damages
may not be awarded; it is for the trier-of-fact to fix the amount.
Trilogy Network Sys., Inc. v. Johnson, 172 P.3d 1119, 1121 (Idaho 2007) (emphasis
added; all internal quotation marks and citations omitted); see also Milgard Tempering,
Inc. v. Selas Corp. of Am., 902 F.3d 703, 710 (9th Cir. 1990) (requirement that lost profits
be proved with reasonable certainty “‘is concerned more with the fact of damage than
with the extent or amount of damage’”) (citation omitted).
In addition to arguing that damages were not established with reasonable certainly,
Visser asserts the following, more specific challenges to the lost-revenues award:
i. Assumptions Related to Future Revenues. First, Visser argues that the
bankruptcy court selected an improper base-line year (or, put differently, the “before
year”) for the before-and-after comparison because Twin Falls had had one of its best
years ever. He suggests that the court should have assumed that sales and profits would
have dropped. But, based on the evidence at trial, it would be just as easy to infer that
Twin Falls would have made at least the same amount as it had made the year before.
After all, the Twin Falls’ sales had mainly been trending upward for years. At trial,
Visser testified that under his management, sales had been steadily increasing: “When I
took the role as a manager, my father had done 1.4 million. I took it to 1.9 the next

MEMORANDUM DECISION - 13

following year. Then I went to 2.3, then 2.7, 3.2, 3.9 and then 4 million, back to back
years.” Day 3 Trial Transcript, Dkt. 3-3, at 192:22 to 194:11. On this record, the
bankruptcy court reasonably assumed that revenues would at least hold steady, if not
increase.
ii. Losses Not Attributable to Visser’s Wrongful Conduct. Visser next argues
that not all of Twin Falls’ claimed losses could be attributed to his wrongful conduct. He
says the company would have lost business if he quit, regardless of whether there was
any wrongful conduct associated with his departure. But the bankruptcy court already
took that into account. It explained that some of the Twin Falls losses could not be
attributed to “Joe’s wrongful conduct. Some of it is just plain business.” Oral Ruling, at
24. That is why damages were limited to a six-month period.
iii. Miscellaneous Expenses. Finally, Visser complains about miscellaneous
expenses reported in Trial Exhibit 182, which, as already noted, is the profit-and-loss
statement the bankruptcy court relied on in computing damages. Visser says this
statement wrongly includes various costs or expenses for the year following Visser’s
departure – thus inflating the company’s claimed losses. Visser’s ultimate goal, with this
series of arguments, is to convince the Court to back out these expenses and then recalculate a new, lower damages award.
The first problem with this argument is that Visser stipulated to the admission of
Exhibit 182 at trial, without any reservations or limitations. See Day 2 Trial Tr., Dkt. 32, at 194:22-23. If Visser had issues with the expenses reported within this statement, he
should have raised those issues at trial.
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Travel and Lodging; Fringe Benefits; State Unemployment
A second problem is that Visser’s challenges are often speculative. For example,
regarding the listed expenses for (1) travel and lodging, (2) fringe benefits, and (3) “state
unemployment,” Visser simply dropped the following sentences into his brief:
• Travel and lodging was also extremely high for the period
November 2, 2009, to November 2, 2010, versus the previous
year for a difference of $14,141.37.” Opening Br., Dkt. 6, at 20.
•

“In November 2, 2009, to November 2, 2010, fringe benefits
were used as an expense when no such [expense] existed the
previous year, namely, a reduction of $2,042.41.” Id.

• “[T]here is no reason why the state unemployment amount would
be higher in the period of November 2, 2009, to November 2,
2010, namely, a discrepancy of $1,084.59, if there is less work
going on at the Twin Falls location.” Id.
These unfinished thoughts do not convince the Court that the bankruptcy court
erred by relying on a profit-and-loss statement that included the listed expenses.
Legal and Professional Fees
Visser’s arguments regarding expenses for “legal fees” and “professional fees” are
slightly more specific. From what the Court can gather, Visser is arguing that these fees
should not be factored into the profit-and-loss statement because they duplicate the
attorneys’ fees the bankruptcy court separately awarded to Twin Falls.
Preliminarily, there is no evidence that the legal and professional fees reported in
the profit-and-loss statement are, in fact, the same fees Twin Falls paid to prosecute the
state-court action. (In fact, the legal and professions fees reported in Exhibit 182 do not
appear to match up – in terms of dollars spent – with the $128,151.55 in attorneys’ fees

MEMORANDUM DECISION - 15

Twin Falls incurred in the state-court action. Compare Trial Ex. 182, at 1 (reproduced at
Dkt. 8-6, at 832) with Trial Ex. 182 at GSS0004117-18 (reproduced at Dkt. 8-6, at 83435). This likely explains why Visser is forced to say that the reported professional fees
“appear[] to be a duplication.” Opening Br., Dkt. 6, at 20 (emphasis added).
But even assuming the legal and professional fees reported in the profit-and-loss
statement represent the dollars Twin Falls spent litigation the state-court action, there is
no longer any duplication. The Court has reversed the bankruptcy court’s $128,151.55
attorneys’ fees award.
A logical follow-up issue is whether attorneys’ fees should also be backed out of
the profit-and-loss statement before Twin Falls’ lost profits are calculated. But Visser
has not made that argument. Rather, his only argument on appeal is that the attorneys’
fees should not be awarded twice – once as a separate item and then again, by factoring
them into a profit-and-loss statement. Because Visser has never argued that attorneys’
fees should be entirely excluded from the profit-and-loss statement, the Court will not
resolve the issue.
Office Equipment
Visser’s final challenge to the reported expenses deals with $26,207.21 that Twin
Falls expensed to “Office Equip Maint/Replace.” See Trial Ex. 182 at GSS0004118.
Visser says these expenses should be backed out of the profit-and-loss statement because
the bankruptcy court “clearly stated it was not going to require anything with respect to
damage to the computer . . . .” Opening Br., Dkt. 6, at 20; see also Oral Ruling, at 21-22.
Visser is referring to the fact that Twin Falls accused Visser of sabotaging the
MEMORANDUM DECISION - 16

company’s computers right before he left the company. See Oral Ruling, at 21. The
bankruptcy court found that Twin Falls had failed to prove sabotage and declined to
assess the computer-repair costs to Visser. Id. at 22.
But this conclusion does not lead the Court to believe the bankruptcy court’s
damages award needs to be adjusted. First, there is no evidence establishing that the
$26,207.21 expensed to the category “Office Equip Maint/Replace” is the same money
Twin Falls spent repairing computers in the immediate wake of Visser’s departure.
But even assuming these dollars are the same ones used to repair the computers,
Visser’s argument is still defective. Visser is basically arguing that the bankruptcy
court’s damages award is inconsistent because the court stated it was not going to assess
the computer repair costs as damages against him, but it then allowed those same costs
come in via the lost profits award.
But there is another way of viewing the damages award that supports the
judgment. As this Court views the record, the bankruptcy court was declining to isolate
the entire computer repair bill and then assess that amount against Visser separately. But
when it determined the lost-profits award, there would be no reason to for the bankruptcy
court to assume – contrary to the evidence – that Twin Falls had not incurred the reported
$26,207.21 expense in maintaining or replacing equipment during the relevant time
period. In fact, Visser himself pointed out that Twin Falls often had problems with its
computers. Trial Memo., Bk. Adv. Dkt. 60, at 20.
For all these reasons, the Court will affirm the bankruptcy court’s $230,000
damages award for lost net revenues.
MEMORANDUM DECISION - 17

3.

The Motion to Alter or Amend the Judgment
Visser next argues that the bankruptcy court erred when it denied his motion to

alter or amend the judgment. On appeal, Visser’s arguments on this point focus mainly
on the attorneys’ fees awarded to Twin Falls. Based on the Court’s earlier ruling, these
arguments are moot.
Otherwise, Twin Falls’ arguments related to the motion to amend are
extraordinarily general. For example, Twin Falls attacks the entire damages award with
the following few sentences, with no supporting citations to legal authority:
The revenue was not been explained at all [sic]. For loss of revenue,
plaintiff merely provided an exhibit without explanation. The
[Bankruptcy] Court should not have to reach, which it had no alternative
to do, to determine additional damages. The only damages defendant
deems to be incurred is for the [$3,750] bond. Therefore, the Findings
of Fact and the Judgment should be amended accordingly.
Opening Br., Dkt. 6, at 23. For the reasons already explained, the bankruptcy court did
not err in computing the compensatory damages awarded as lost net revenues. Further,
the bankruptcy court did not err in denying Visser’s motion to alter or amend the
judgment. As the bankruptcy court correctly observed when it ruled on the motion,
Visser did not set forth any proper grounds for altering or amending the judgment.
Rather, Visser merely rehashed the evidence and arguments that had been advanced
before. The bankruptcy court thus did not abuse its discretion by denying the motion.
4.

Twin Falls’ Request for Attorneys’ Fees
Finally, the Court will deny Twin Falls’ request for an award of attorneys’ fees on

appeal. Federal Rule of Bankruptcy Procedure 8020 allows the Court to award “just

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damages and single or double costs to the appellee” if it determines that an appeal is
frivolous. Fed. R. Bankr. P. 8020. The rule further contemplates a separately filed
motion or notice from the district court.
There is no basis for an award of fees here, given that Visser has partially
succeeded on its appeal. Further, although Visser’s arguments did not, by and large,
carry the day, the Court does not believe they were frivolous.
CONCLUSION
The Court reverses the portion of the bankruptcy court’s judgment that awards
Twin Falls $128,151.55 for “costs and expenses” Twin Falls incurred in the state-court
action. The judgment is affirmed in all other respects. The case is remanded to the
bankruptcy court with instructions to enter judgment consistent with this ruling. The
bankruptcy court’s denial of Visser’s Motion to Alter or Amend the Judgment is
affirmed. The parties shall bear their own costs on appeal.
AFFIRMED IN PART; REVERSED and REMANDED IN PART.
DATED: April 21, 2014

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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