Opinion
Case No. 18-12624 Adv. Proc. No. 18-1061
2019-05-17
IN RE: Valerie LEE & Clyde Lee, Debtors. State of Ohio, Office of the Attorney General of Ohio, on behalf of Value Learning & Teaching Academy, Plaintiff, v. Clyde Lee, et al., Defendants.
Todd R. Marti, Joseph Michael McCandlish, Office of the Ohio Attorney General, Columbus, OH, for Plaintiff. Valerie Elaine Lee, Hamilton, OH, pro se. Clyde Wilton Lee, Jr., Hamilton, OH, pro se.
Todd R. Marti, Joseph Michael McCandlish, Office of the Ohio Attorney General, Columbus, OH, for Plaintiff.
Valerie Elaine Lee, Hamilton, OH, pro se.
Clyde Wilton Lee, Jr., Hamilton, OH, pro se.
MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Jeffery P. Hopkins, United States Bankruptcy Judge
This is an action to determine the dischargeability of a debt pursuant to 11 U.S.C. § 523(a)(7). Before the Court is a motion for partial summary judgment ("Motion") (Doc. 12) filed by the Plaintiff, State of Ohio ("the State") against the Debtor-Defendants, Clyde and Valerie Lee (the "Lees" or the "Defendants"). The State brings this action on behalf of Value Learning & Teaching Academy ("VLT Academy"), a state charter school previously operated by the Defendants. Although cautioned against it by this Court, the Lees are appearing in this adversary proceeding, pro se , and are not represented by counsel. This is a core proceeding over which this Court has jurisdiction, pursuant to 28 U.S.C. §§ 157(b)(2)(I) and 1334.
The Motion is part of a larger adversary proceeding objecting to discharge under 11 U.S.C. §§ 727(a)(3), and (a)(5), and seeking a determination of the nondischargeability of the debt owed by Defendants under 11 U.S.C. §§ 523(a)(4), 523(a)(6), 523(a)(7) and 523(a)(8). During the status conference held on April 30, 2019, the attorney for the state of Ohio indicated on the record that the State will likely file a motion dismissing the remaining claims objecting to discharge under § 727(a) and those seeking nondischargeability under § 523(a), should it prevail on the Motion for partial summary judgment on the § 523(a)(7) claim.
The State Court found three bases upon which the Attorney General was deemed to have standing to file an action against the Defendants, including (1) Ohio Rev. Code § 117.42, which authorizes the Attorney General to bring certain types of claims against an individual(s) when the Auditor of State requests that action; (2) Ohio common law based on the Attorney General's ability to sue to protect or recover public property; and, (3) the Attorney General's right to sue to address misapplications of public funds in cases not involving findings for recovery, the subject of Ohio Rev. Code 117.28. See Sun Bldg. Ltd. P'ship v. Value Learning & Teaching Academy , 2018 WL 1678061, ¶¶ 19-24, 2018 Ohio Misc. LEXIS 2, ¶¶ 19-24 (Hamilton Cnty. C.P. March 26, 2018)§ (Doc. 14, Apx. 339-40).
PLAINTIFF'S CLAIMS
This adversary proceeding arises from a case litigated in the Court of Common Pleas of Hamilton County, Ohio (the "State Court"). See Sun Bldg. Ltd. P'ship v. Value Learning & Teaching Academy , 2018 WL 1678061, 2018 Ohio Misc. LEXIS 2 (Hamilton C.P. March 26, 2018) (Doc. 14, Apx. 335-370). The Judge in the case, Honorable Steven E. Martin, entered judgment on multiple identical claims asserted in separate intervening complaints filed by the Ohio Department of Education and the Ohio Attorney General against various insiders of VLT Academy, including the Defendants, based on certain unlawful contracts and payments from State funds that had been made at the charter school between the years 2007 and 2014 ("the Judgment"). In this proceeding, the State contests the dischargeability of a portion of the monetary damages awarded by the State Court against the Lees on the basis that certain of the damages constitute a "debt [ ] for a fine, penalty or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss," within the ambit of 11 U.S.C. § 523(a)(7).
In summary format, the State Court found that:
• VLT Academy entered into a series of illegal contracts with CEED, a company which was wholly owned by Clyde Lee. The State Court further found that all the funds VLT Academy paid CEED went into accounts from which Clyde and Valerie Lee could make cash withdrawals. VLT Academy paid CEED $1,694,973.84 pursuant to those contracts. Id. at ¶¶ 41-68 (Doc. 14, Apx. 344-47).
• By virtue of their employment, Clyde Lee and Valerie Lee were public officials of VLT Academy. The Lees violated their fiduciary duty of loyalty to VLT Academy by benefitting from the contracts between the school and CEED. The State Court held that due to his violation of the fiduciary duty Clyde Lee forfeited his right to $352,078.83 in compensation from VLT Academy under the Faithless Servant Doctrine. Similarly, the State Court also held that Valerie Lee forfeited her right to $887,441.46 in compensation from VLT Academy under the Faithless Servant Doctrine. The State Court entered a judgment against both Defendants in favor of VLT Academy for those amounts. Id. at ¶¶ 89-105, 143-44 (Doc. 14, Apx. 350-53, 357).
• The series of contracts between CEED and VLT Academy referred to above constituted a pattern of corrupt activity within the meaning of Ohio's Corrupt Practices Act. Clyde Lee and Valerie Lee participated in a pattern of illegal conduct and VLT Academy was injured by paying $1,694,973.84 to CEED pursuant to the referenced contracts. Clyde Lee and Valerie Lee were therefore liable for those payments under Ohio's Corrupt Practices Act. Treble damages were assessed against the Defendants because their violations of the Corrupt Practices Act were proved by clear and convincing evidence. The trebled damages amount totaled $5,084,921.52. Id. at ¶¶ 106-44 (Doc. 14, Apx. 353-57).
The State Court ultimately determined that Valerie Lee was solely liable on a Faithless Servant claim in the amount of $887,441.46, State Court Judgment , ¶ 143 (Doc. 14, Apx. 357), and Clyde Lee was solely liable on a Faithless Servant claim in the amount of $352,078.83, Id. ¶ 144 (Doc. 14, Apx. 357). The State Court also found that the Lees were jointly and severally liable pursuant to the Ohio Corrupt Practices Act in the amount of $1,694,973.84, representing the amounts paid by VLT Academy on various CEED contracts. Id. ¶¶ 138-39 (Doc. 14, Apx. 356). Pursuant to the treble damages provision of the Ohio Corrupt Practices Act, see Ohio Rev. Code § 2923.34(E), the State Court awarded additional damages in the amount of $3,389,947.68 for a total under the Ohio Corrupt Practices Act of $5,084,921.52. Id. ¶ 140-42 (Doc. 14, Apx. 356-57).
Ohio Rev. Code § 2923.32, a criminal statute, is entitled Engaging in a pattern of corrupt activity; fines; penalties; forfeiture; records and reports; third-party claims to property subject to forfeiture . The Statute provides, in relevant part: "No person employed by, or associated with, any enterprise shall conduct or participate in, directly or indirectly, the affairs of the enterprise through a pattern of corrupt activity or the collection of an unlawful debt." Ohio Rev. Code § 2923.34(A) gives "any person who is injured by a violation of section 2923.32" a right of civil recovery. Under § 2923.34(E), if a violation of § 2923.32 is proven by clear and convincing evidence, then trebled damages are available. See State Court Judgment ¶ 106 (Doc. 14, Apx. 353).
The present motion seeks a determination that the Faithless Servant claims' damages awarded against the Lees and the treble damages portion of the Judgment under the Corrupt Practices Act claim assessed against the Lees are nondischargeable pursuant to 11 U.S.C. § 523(a)(7), as expressed in the tables below:
Though the State Court ultimately found Valerie Lee liable for damages in the aggregate amount of $6,132,071.24, State Court Judgment ¶ 143 (Doc. 14, Apx. 357), and Clyde Lee liable in the aggregate amount of $5,448,520.23, id. ¶ 144 (Doc. 14, Apx. 357), the present Motion only seeks a determination under Count One of the Amended Complaint that the Faithless Servant Claims and the treble damages penalty under the Ohio Corrupt Practices Act are nondischargeable (Doc. 6 ¶¶ 30-32). The State expressly stated at the hearing on the Motion, held on April 30, 2019, their view that the actual amount due under the Ohio Corrupt Practices Act ($1,694,973.84) is not a penalty within the meaning of 11 U.S.C. § 523(a)(7) ; only the trebled portion is properly considered a penalty. As such, this Court expressly refrains from determining the dischargeability of any portion of the Judgment entered by the State Court except as it related to the Faithless Servant and the Ohio Corrupt Practices Act claims.
NONDISCHARGEABLE CLAIMS AGAINST VALERIE LEE
Claims Amount Faithless Servant Claim $887,441.46 Ohio Corrupt Practices Act trebled damages $3,389,947.68 (joint and several with Clyde Lee) Total $4,277,389.14
NONDISCHARGEABLE CLAIMS AGAINST CLYDE LEE
Claims Amount Faithless Servant Claim $352,078.83 Ohio Corrupt Practices Act trebled damages $3,389,947.68 (joint and several with Valerie Lee) Total $3,742,026.51
For the reasons that follow, the Motion is GRANTED and the damages related to the Faithless Servant claims and the treble damages related to the Ohio Corrupt Practices Act claims are NONDISCHARGEABLE .
SUMMARY JUDGMENT STANDARD
Summary judgment is governed by Fed. R. Civ. P. 56, made applicable to this adversary proceeding pursuant to Fed. R. Bankr. P. 7056. The rule provides that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Material facts are those "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue exists with respect to a material fact "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
The moving party bears the initial burden of "identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If this is accomplished, the non-moving party must establish the existence of facts, beyond mere allegations or denials in the pleadings, that demonstrate a genuine issue for trial. Id. at 324, 106 S.Ct. 2548 ; Anderson , 477 U.S. at 248, 106 S.Ct. 2505. In this regard, the evidence of the non-movant is to be taken as true and all justifiable inferences are to be drawn in favor of the non-movant. Anderson , 477 U.S. at 254, 106 S.Ct. 2505. Notwithstanding, the mere existence of a scintilla of evidence in support of the non-movant's position is insufficient. Id. at 252, 106 S.Ct. 2505. There must exist sufficient evidence requiring resolution by a trier of fact of the parties' differing versions of the truth. Id. at 249, 106 S.Ct. 2505.
THE DOCTRINE OF ISSUE PRECLUSION
The Motion relies explicitly upon the doctrine of issue preclusion to satisfy the summary judgment standard. The State relies upon the findings of fact and conclusions of law contained in the Judgment rendered by the State Court to satisfy the requirements under § 523(a)(7).
Issue preclusion enjoins relitigation of certain issues of fact or law decided in a prior action between the parties based upon a different cause of action. In re Markowitz , 190 F.3d 455, 461 (6th Cir. 1999). Issue preclusion applies in dischargeability proceedings. Grogan v. Garner , 498 U.S. 279, 285 n. 11, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) ; Spilman v. Harley , 656 F.2d 224, 227-28 (6th Cir. 1981). If a state court decided the prior action, federal courts apply that state's law to determine the preclusive effect of the judgment in federal court. Markowitz , 190 F.3d at 461 ; In re Sweeney , 276 B.R. 186, 189 (6th Cir. BAP 2002) (Ohio law governs the preclusive effect of Ohio judgments in federal court.).
The Sixth Circuit has expressly adopted the Ohio Supreme Court's standard on issue preclusion for Ohio judgments: "Issue preclusion applies when a fact or issue ‘(1) was actually and directly litigated in the prior action, (2) was passed upon and determined by a court of competent jurisdiction, and (3) when the party against whom [issue preclusion] is asserted was a party in privity to the prior action.’ " Corzin v. Fordu (In re Fordu) , 201 F.3d 693, 704 (6th Cir. 1999) (quoting Thompson v. Wing , 70 Ohio St.3d 176, 637 N.E.2d 917, 923 (1994) ). The State Court Judgment meets all of those requirements. A court of competent jurisdiction entered the Judgment in a prior action between the State of Ohio and the Lees. The Judgment's findings resulted from actual and direct litigation.
The State Court actually and directly litigated whether the Lees are liable under the Faithless Servant doctrine and Ohio's Corrupt Practices Act. The Lees were named as defendants by the Attorney General in the two intervening complaints filed against them, appeared as parties, answered and mounted a vigorous defense to the State's claims in that case all while being represented by counsel. See State's Intervening Complaint , at ¶¶ 21-23 (Doc. 14, Apx. 28); Lees' Answer (Doc. 14, Apx. 127-142); State's Intervening Complaint , ¶¶ 145-64 (Doc. 14, Apx. 48-51) (the Lees' liability under the Faithless Servant Doctrine and Corrupt Practices Act claims was addressed in the pleadings filed in State Court.); see also Lee's Answer , ¶¶ 145-64 (Doc. 14, Apx. 138-39); State's Opening Brief (Doc. 14, Apx. 193-200) (showing the issue was briefed by the parties.); Lees' Opening Brief (Doc. 14, Apx. 231-34); State's Second Brief (Doc. 14, Apx. 255-62); Lees' Second Brief (Doc. 14, Apx. 286-89); State's Third Brief (Doc. 14, Apx. 302-03); Lees' Third Brief (Doc. 14, Apx. 325-32). The pleadings filed by the State also thoroughly addressed the liability each Defendant faced based upon all the claims asserted by the Ohio Department of Education and Attorney General in the two intervening complaints. See State's Intervening Complaint , at pp. 33-34 (Doc. 14, Apx. 54-55).
The fact that the State Court Judgment is on appeal does nothing to limit its preclusive effect. "[U]nder Ohio law, ‘the pendency of an appeal ... does not prohibit application of claim preclusion. The prior state court judgment remains "final" for preclusion purposes, unless or until overturned by the appellate court.’ " Libertarian Party of Ohio v. Husted , 831 F.3d 382, 406 (6th Cir. 2016) (quoting United States ex rel. Sheldon v. Kettering Health Network , 816 F.3d 399, 415 (6th Cir. 2016) ).
ANALYSIS
"To fall within the provisions of [ 11 U.S.C. § 523(a)(7) ], a debt must satisfy three requirements: (1) it must be ‘for a fine, penalty, or forfeiture’; (2) it must be ‘payable to and for the benefit of a governmental unit’; and (3) it must not be ‘compensation for actual pecuniary loss.’ " In re Hollis , 810 F.2d 106, 108 (6th Cir. 1987) (quoting § 523(a)(7) ). The Judgment issued by Judge Martin in the State Court establishes each of those elements.
(1.) Damages Awarded on the Faithless Servant Claims and the Trebled Damages Portion Awarded on the Corrupt Practices Act Claim are Penalties .
In the bankruptcy context, penalties have been construed as serving some " ‘punitive’ or ‘rehabilitative’ governmental aim," Whitehouse v. LaRoche , 277 F.3d 568, 573 (1st Cir. 2002), such as "the protection of the public," Mitchell v. Supreme Court of Ohio , 2015 WL 1530626, *4, 2015 U.S. Dist. LEXIS 44694, *9 (N.D. Ohio April 6, 2015) ; see also Atty. Griev. Comm'n v. Smith (In re Smith) , 317 B.R. 302, 311-12 (Bankr. D. Md. 2004) ; Colorado ex rel. Salazar v. Jensen (In re Jensen ), 395 B.R. 472, 481-82 (Bankr. D. Colo. 2008). "The primary purpose of a penalty is to regulate conduct," In re Idak Corp. , 19 B.R. 765, 775 (Bankr. D. Mass. 1982) (construing the former 11 U.S.C. § 57j), by "deterring further offenses," California v. Taite (In re Taite) , 76 B.R. 764 (Bankr. C.D. Cal. 1987). The Judgment at issue here meets those standards.
Faithless Servant sanctions have all those attributes. They are triggered by violations of the fiduciary duty of loyalty, a fundamental rule of law. See In re Binder: Squire v. Emsley , 137 Ohio St. 26, 27 N.E. 2d 939, 955 (1940) ("the rules of law relating to the loyalty of a trustee to his trust are, for the most part, constant and immutable...."). They are intended to protect the public generally "by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others." Consol. Edison Co. v. Zebler , 2013 WL 4467291, *4, 2013 N.Y. Misc. LEXIS 3701, *10 (N.Y. Sup.Ct. Aug. 20, 2013) (quoting Diamond v. Oreamuno , 24 N.Y.2d 494, 498, 301 N.Y.S.2d 78, 248 N.E.2d 910 (N.Y. 1969) ). Faithless servant sanctions are not based on actual injury; they are imposed even absent injury and are calculated based on the disloyal fiduciary's regular earnings, rather than whatever benefit he received from his disloyalty. State Court Judgment , ¶ 89 (Doc. 14, Apx. 350) (the doctrine applies "even though the conduct of the agent does not harm the principal...") (quoting Restatement (2d) of Agency , § 469, cmt. a.); State Court Judgment , ¶ 104 (Doc. 14, Apx. 353) ("A fiduciary violating his/her duties forfeits compensation otherwise due during the period of faithlessness.") (internal quotation marks and citations omitted). The primary purpose of the sanction is to deter disloyalty, Burrow v. Arce , 997 S.W.2d 229, 238 (Tex. 1999), Kaye v. Rosefielde , 223 N.J. 218, 121 A.3d 862 (2015) ; Restatement (3d) of Agency , § 8.01 (3rd 2006), a "conduct-regulating" function. Tyco Internatl., Ltd. v. Kozlowski , 756 F.Supp.2d 553, 559 (S.D.N.Y. 2010).
The same is true of trebled damages under Ohio's Corrupt Practices Act. Those damages are only available upon a clear and convincing showing that the Defendants engaged in a pattern of corrupt activity, which requires multiple violations of the criminal law. See Ohio Rev. Code §§ 2923.34(E) (treble damages), 2923.31(E) and (I) (definitions of pattern of corrupt activity). Because it is triggered by criminal conduct, it necessarily implicates the public interest. Trebled damages are, by their very nature, disproportionate to the actual loss. Ohio's Corrupt Practices Act has a deterrent purpose; it was modeled on the federal RICO statutes, State v. Schlosser , 79 Ohio St.3d 329, 681 N.E.2d 911, 913 (1997), and courts construing the federal RICO statutes have consistently noted that treble damages serve deterrent and punitive purposes. Cullen v. Margiotta , 811 F.2d 698, 718 (2d Cir. 1987) ; Genty v. RTC , 937 F.2d 899, 912 (3d Cir. 1991) ; Katahn Assocs. v. Wien , 155 B.R. 479, 489 (Bankr. N.D. Ill. 1993).
In sum, the Judgment as it relates to the Faithless Servant claims and treble damages portion of the Corrupt Practices Act claims rendered by the State Court has all the hallmarks of a penalty: It was triggered by violations of well-defined rules of law, predicated upon multiple violations of the criminal law, and the Judgment was intended to vindicate the public's interest in adherence to those rules. Finally, the Judgment was not based on the actual harm suffered, and it is intended to deter future violations by these Defendants or others engaged in similar activities. The Judgment therefore constitutes a penalty. The Defendants have failed to raise any genuine issues of material fact that the Judgment does not qualify as a penalty pursuant to 11 U.S.C. § 523(a)(7).
(2.) The Damages Awarded by the State Court are Payable to and for the Benefit of a Governmental Unit -- VLT Academy.
The Judgment in question is in favor of VLT Academy. State Court Judgment , ¶¶ 143, 144 (Doc. 14, Apx. 357). VLT Academy was a community school organized under Ohio Rev. Code § 3314. Id. , ¶ 1 (Doc. 14, Apx. 336). Community schools are political subdivisions of the State of Ohio. Id. ¶¶ 45, 110, 119 (Doc. 14, Apx. 345, 353, 354); State ex rel. Elec. Classroom of Tomorrow v. Cuyahoga Cty. Court of Common Pleas , 129 Ohio St. 3d 30, 35, 950 N.E.2d 149 (Ohio 2011). Political subdivisions are "municipalities" under 11 U.S.C. § 101(40). "Municipalities" are "governmental units" under 11 U.S.C. § 101(27). Those damages are therefore payable to and for the benefit of a governmental unit. The Defendants have failed to raise any genuine issues of material fact to contest that the debt is payable to a governmental unit pursuant to 11 U.S.C. § 523(a)(7).
(3.) The Damages are not Compensation for Actual Pecuniary Loss.
Neither the Faithless Servant damages nor the treble damages assessed by the State Court under the Corrupt Practices Act are compensation for actual loss. As previously noted, Faithless Servant damages are unrelated to actual loss. They are imposed "whether the principal may be injured or not" because their "main purpose of forfeiture is not to compensate an injured principal...." Burrow v. Arce , 997 S.W.2d at 238. Indeed, these damages are imposed by courts—regardless of loss—because "[a]n agent's breach of fiduciary duty should be deterred even when the principal is not damaged." Id. at 240 ; see also Consol. Edison Co. v. Zebler , 2013 WL 4467291, at *4, 2013 N.Y. Misc. LEXIS 3701, at *9-10 ("the function [of a breach of fiduciary duty action], unlike an ordinary tort or contract case, is not merely to compensate the plaintiff for wrongs committed by the defendant but ... to prevent them....") (emphasis in original). The State Court noted that dynamic in its Judgment. State Court Judgment , ¶ 89 (Doc. 14, Apx. 350) (the Faithless Servant Doctrine "applies even though the conduct of the agent does not harm the principal....").
The Court notes that there is an overlap between the first and third elements of 11 U.S.C. § 523(a)(7). The fact that a debt is not compensation for actual pecuniary loss is also indicia that the debt constitutes a penalty, fine or forfeiture within the meaning of the statute.
That general disconnect is amplified by the specific facts of this case. The Faithless Servant damages here were based on the Lees having illegal interests in the contracts between VLT Academy and CEED. VLT Academy paid CEED $1,855,047.17 on those contracts, State Court Judgment ¶ 8 (Doc. 14, Apx. 337), but the amount of the Faithless Servant damages imposed by the State Court was more than $600,000 less, only $1,239,520.29. Id. ¶¶ 104-105 (Doc. 14, Apx. 353). Further, they were based on a calculation that was unrelated to the payments VLT Academy made pursuant to the contracts targeted in the State Court case. Instead, those damages were based on the amount of the regular salary that the Lees were paid during a particular period of time. There was simply no compensatory connection here.
The trebled damages portion of the Corrupt Practices Judgment, by its very nature, is non-compensatory. It is inherently more than the amount of the injury resulting from the underlying violation. It is therefore non-compensatory. Indeed, courts have consistently reached that result in cases considering trebled or otherwise multiplied damages under § 523(a)(7). New York v. Kelly , 155 B.R. 75, 79 (Bankr. S.D.N.Y. 1993) ; United States v. Cassidy (In re Cassidy) , 213 B.R. 673, 679 (Bankr. W.D. Ky. 1997) ; New York v. Sokol (In re Sokol), 170 B.R. 556, 561 (Bankr. S.D.N.Y. 1994) ; United States v. Aiello (In re Aiello) , 1996 Bankr. LEXIS 1988, at *8 (Bankr. E.D. Cal. Aug. 5, 1996); McFarland v. United States (In re McFarland) , 399 B.R. 549, 553 (Bankr. M.D. Fla. 2009) ; United States v. Custodio , 1995 WL 670137, 1995 U.S. Dist. LEXIS 16907 (D. Colo. Nov. 1, 1995) ; see also In re Guy , 101 B.R. 961, 995 (Bankr. N.D. Ind. 1988) ; In re Suter , 59 B.R. 944, 947 (Bankr. N.D. Ill. 1986).
The Defendants have failed to raise any genuine issues of material fact that would contravene the conclusion that the penalty here is not for actual pecuniary loss pursuant to 11 U.S.C. § 523(a)(7).
CONCLUSION
Fed. R. Civ. P. 56(a) provides that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The State of Ohio has met its burden of identifying those portions of the State Court Judgment which demonstrate an absence of any genuine issues of material facts. The Faithless Servant and Ohio Corrupt Practices claims were fully litigated by the identical parties appearing before this Court; moreover, the State Court rendered a Judgment determining that certain damages assessed against the Lees constituted a penalty payable to a governmental unit. By contrast, the Lees, the nonmoving parties, have offered this Court the same arguments and evidence that their attorney articulated in State Court. However, the rule is well established that a bankruptcy court is not an appellate court. Under principles of comity, a bankruptcy court cannot sit in review of decisions made by a state court of competent jurisdiction or, for that matter, challenge any of that court's factual or legal determinations, when applying state law, inextricably linked to its judgment. See Rooker v. Fidelity Trust Co. , 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923) ; District of Columbia Court of Appeals v. Feldman , 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983).
Based on the foregoing, the State is entitled to partial summary judgment as a matter of law upon Count One of the Amended Complaint. The damages that the State Court awarded against the Lees which, in this context, constitutes a debt on a penalty payable to and for the benefit of a governmental unit is not entitled to a discharge under 11 U. S. C. § 523(a)(7).
Thus, the Motion for partial summary judgment shall be GRANTED in favor of the state of Ohio on Count One of the Amended Complaint and JUDGMENT shall be entered as follows:
• The $352,078.83 Faithless Servant Judgment against Clyde Lee, entered in ¶ 144 of the State Court Judgment , is excepted from discharge pursuant to 11 U.S.C. § 523(a)(7).
• The $887,441.46 Faithless Servant Judgment against Valerie Lee, entered in ¶ 143 of the State Court Judgment , is excepted from discharge pursuant to 11 U.S.C. § 523(a)(7).
• The trebled portion of the Corrupt Practices Act Judgments against Clyde Lee and Valerie Lee, totaling $3,389,947.68, entered in ¶¶ 138 and 142 of the State Court Judgment , are excepted from discharge pursuant to 11 U.S.C. § 523(a)(7).
• The State shall bear its own costs in this case.