Opinion
Case No.: 14-00077 Adv. Proc. No.: 14-90018
06-26-2015
In re Cynthia Lee Kauanui dba Jet Set Management Group, Debtor. Lindsay Stewart, Plaintiff-Creditor, v. Cynthia Lee Kauanui, Defendant-Debtor.
Joshua Piovia-Scott, Esq. [Cal. S.B. #222364] Acrivi Coromelas, Esq. [Cal. S.B. #298305] HADSELL STORMER & RENICK LLP 128 North Fair Oaks Avenue Pasadena, California 91103-3645 Telephone: (626) 585-9600 Facsimile: (626) 577-7079 Email: jps@hadsellstormer.com acoromelas@hadsellstormer.com Jennifer Cynn, Esq. [S.B. #008558] UNITE HERE! Local 5 516 South King Street Honolulu, HI 96826 Telephone: (808) 941-2141 Facsimile: (808) 941-2166 Email: jcynn@unitehere5.org Attorneys for Plaintiff-Creditor LINDSAY STEWART
Joshua Piovia-Scott, Esq. [Cal. S.B. #222364]
Acrivi Coromelas, Esq. [Cal. S.B. #298305]
HADSELL STORMER & RENICK LLP
128 North Fair Oaks Avenue
Pasadena, California 91103-3645
Telephone: (626) 585-9600
Facsimile: (626) 577-7079
Email: jps@hadsellstormer.com
acoromelas@hadsellstormer.com
Jennifer Cynn, Esq. [S.B. #008558]
UNITE HERE! Local 5
516 South King Street
Honolulu, HI 96826
Telephone: (808) 941-2141
Facsimile: (808) 941-2166
Email: jcynn@unitehere5.org
Attorneys for Plaintiff-Creditor
LINDSAY STEWART
[Assigned to the Honorable Robert J. Faris]
PLAINTIFF-CREDITOR'S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW; DECLARATION OF ACRIVI COROMELAS AND EXHIBITS IN SUPPORT THEREOF
TRIAL: June 1, 2015
TIME: 9:30 a.m.
PLACE: U.S.B.C. Courtroom 1132 Bishop St., Ste. 250 Honolulu, HI 96813
Bankruptcy filed: January 24, 2014
Adversary filed: April 21, 2014
TABLE OF CONTENTS
Page(s) TABLE OF AUTHORITIES ............................................... iv I. INTRODUCTION ................................................... 1 II. PROPOSED FINDINGS OF FACT ..................................... 1 A. Background and procedural history ..................................... 1
1. Parties ....................................................... 1
2. The underlying San Diego Superior Court action ..................... 2
3. The instant bankruptcy proceeding ................................ 3 B. Despite Stewart being a dedicated and high-performing employee, Kauanui forced Stewart to quit after discovering Stewart was a lesbian and before she ostensibly suspected Stewart of any wrongdoing ........................... 3
1. Kauanui gave Stewart permission to work from Los Angeles ............ 3
2. Kauanui abandons Jet Set when she moves to Hawaii .................. 5
3. Kauanui discovered Stewart is a lesbian and forced her to quit .......... 6 C. Kauanui began a campaign of defamation, accusing Stewart of embezzlement
and of being under investigation for embezzlement ......................... 9
1. After Stewart left Jet Set, Kauanui began a campaign of defamation against Stewart ................................................ 9
2. Kauanui emailed and called numerous parents of former Jet Set child clients and, without justification, told them Stewart embezzled and
was under investigation for embezzlement .......................... 9
a. Kauanui told Amy Bryant that Stewart was under investigation
for embezzlement ......................................... 9
b. Kauanui told Grace Antipala that Stewart stole hundreds of thousands of dollars from Jet Set ............................ 10
c. Kauanui told Angie Lundgren that Stewart scammed Jet Set ...... 10
d. Kauanui told Jeannette Morales that Stewart took money ........ 11
e. Kauanui told Andrea Stowasser that Stewart was under investigation for stealing money ............................ 11
f. Kauanui emailed Barbara Froelich that Stewart was under investigation for embezzlement ............................. 11
g. Kauanui emailed Stephanie Harvey to take a job from Zuri ........ 12
h. Kauanui sent letters to parents after they withdrew from Jet Set ................................................. 12
i. In her amended complaint and in her responses for requests for admissions, Kauanui admitted that she defamed Stewart ...... 12
3. Kauanui made false allegations about Stewart to people in the modeling and acting industry in order to harm Stewart's business ....... 13
a. Kauanui made accusations to casting directors ................. 13D. Kauanui began her campaign of defamation in order to injure Stewart ......... 15
b. Kauanui made accusations about Stewart's character to SAG ..... 14
c. Kauanui accused Stewart of embezzlement to a photographer ..... 14
d. Kauanui told Jet Set employees that Stewart embezzled money .... 15
1. At no point in time before Stewart left Jet Set did Kauanuiever suspect Stewart of any wrongdoing ............................... 15
2. Kauanui knew her allegations against Stewart were false .............. 16
3. When communicating with persons outside the modeling industry in 2008 and 2009, Kauanui never stated that she suspected Stewart of any wrongdoing, instead only contending that Bennett was the perpetrator ................................................... 18
4. Kauanui admitted the purpose of her statements was to prevent Jet Set clients from leaving and to lure away Stewart's clients .......... 19 E. Kauanui's testimony during the instant bankruptcy trial was not credible and was repeatedly impeached ........................................ 20
1. Kauanui provided no evidence that she suffered from PTSD in 2008 or 2009 ............................................... 20
2. Kauanui's trial testimony contradicted her prior deposition testimony .... 21
3. There are inconsistencies between Kauanui's testimony and documented evidence .......................................... 22 III. PROPOSED CONCLUSIONS OF LAW ................................ 24 A. Kauanui's testimony was repeatedly impeached and she lacks credibility ...... 24 B. Legal standards .................................................... 26
1. Legal standards for finding a judgment is nondischargeable ............ 26
2. Legal standards for a defamation per se claim ....................... 27
3. Legal standards for an IIPEA claim ............................... 28 C. Kauanui's defamatory statements were willful and malicious injuries ......... 29
1. Kauanui's statements were defamatory per se ...................... 29
2. Kauanui's defamatory per se statements were willful and malicious ..... 32
a. Defamation per se is, as a matter of law, willful and malicious .... 32D. Kauanui's liability for IIPEA is nondischargeable because her conduct was willful and malicious ................................................ 38
b. Kauanui was aware that injury was substantially certain when she intentionally tried to lure away Stewart's clients through her defamatory statements ................................. 33
c. Kauanui's defamatory per se statements, which were made without just cause or excuse, were malicious .................. 36
1. Because Kaunaui's defamatory statements were willful and malicious, her IIPEA conduct was inherently willful and malicious .............. 38
2. Kauanui willfully and maliciously interfered with Stewart's prospective economic advantage ................................. 39 E. The punitive damages award is nondischargeable ......................... 41 IV. PROPOSED ULTIMATE FINDINGS ................................. 41
TABLE OF AUTHORITIES FEDERAL CASES
Page(s) Bane v. Hajime Sorayama (In re Bane) No. CC-09-1108-MoPaH, 2010 Bankr. LEXIS 3067 (B.A.P. 9th Cir. Jan. 15, 2010) ..................................... 40, 41 Bio Prime Enterprises v. Walker (In re Walker) No. 00-10958-B7, 2006 Bankr. LEXIS 4688 (Bankr. S.D. Cal. 2006) .............................................. 41 Burden v. Elias Brothers Big Boy Rests. 613 N.W.2d 378 (Mich. Ct. App. 2000) ................................. 32 Burks v. Bailev (In re Bailey) 499 B.R. 873 (Bankr. D. Idaho 2013) ................................ 33, 35 Carrillo v. Su (In re Su) 290 F.3d 1140 (9th Cir. 2002) ........................................ 27 Choice Hotels International, Inc. v. Wright (In re Wright) 355 B.R. 192 (Bankr. D.C. Cal. 2006) .................................. 36 Conte v. Jakks Pac., Inc. No. 12-CV-00006-LGO-GSA, 2012 U.S.Dist. LEXIS 174716 (E.D. Cal. Dec. 10, 2012) ......................................... 38, 39 Dorn v. Burlington N. Santa Fe R.R. Co. 397 F.3d 1183 (9th Cir. 2005) ..................................... 25, 26 Gateway One Lending & Finance LLC v. Raziyan (In re Raziyan) 501 B.R. 387 (Bankr. C.D. Cal. 2013) ................................. 36 Hernandez v. Powers & Effler Insurance Brokers (In re Hernandez) No. EC-10-1025-JuMkZi, 2011 Bankr. LEXIS 887 (B.A.P. 9th Cir. 2011) ........................................... passim In re Houtman 568 F.2d 651 (9th Cir. 1978) ......................................... 26 Jett y. Sicroff (In re Sicroff) 401 F.3d 1101 (9th Cir. 2005) ..................................... 36, 37 Kennedy v. Mustaine (In re Kennedy) 249 F.3d 576 (6th Cir. 2001) ......................................... 32 Khaligh v. Hadaegh (In re Khaligh) 338 B.R. 817 (B.A.P. 9th Cir. 2005) .............................. 37, 38, 41 Murray v. Bammer (In re Bammer) 131 F.3d 788 (9th Cir. 1997) ...................................... 27, 37 Muse v. Day (In re Day) 409 B.R. 337 (Bankr. D. Md. 2009) .................................... 32 National Sign & Signal v. Livingston 422 B.R. 645 (W.D. Mich. 2009) ...................................... 32 Ormsby v. First America Title Co. (In re Ormsby) 591 F.3d 1199 (9th Cir. 2010) ............................ 27, 33 Peck v. Maaskant (In re Peck) 295 B.R. 353 (B.A.P. 9th Cir. 2003) ................................ passim Petralia v. Jercich (In re Jercich) 238 F.3d 1202 (9th Cir. 2001) ..................................... 27, 33 Research Data Grp., Inc. v. Snegosky (In re Snegosky) No. 08-01709, 2010 Bankr. LEXIS 2088 (Bankr. D. Haw. 2010) ........................................... 36, 38 Serrao v. Picanco (In re Picanco) No. 03-00129, 2003 Bankr. LEXIS 2153 (Bankr. D. Haw. 2003) .............................................. 35 Sidense Corp. v. Kilopass Tech. Inc. No. C 11-04112 SI, 2012 U.S.Dist. LEXIS 115904 (N.D. Cal. Aug. 16, 2012) ............................................ 39 Solano v. Playgirl, Inc. 292 F.3d 1078 (9th Cir. 2002) ........................................ 27 Star's Edge, Inc. v. Braun (In re Braun) 327B.R. 447 (Bankr. N.D. Cal. 2005) .................................. 32 Turtle Rock Meadows Homeowners Association v. Slyman (In re Slyman) 234 F.3d 1081 (9th Cir. 2000) ...................................... 26 United States v. Antonakeas 255 F.3d 714 (9th Cir. 2001) ......................................... 26 United States v. Castillo 181 F.3d 1129 (9th Cir. 1999) ..................................... 25, 26 United States v. Chu 5 F.3d 1244 (9th Cir. 1993) ........................................... 25 United States v. Green 648 F.2d 587 (9th Cir. 1981) ......................................... 25 United States v. Higa 55 F.3d 448 (9th Cir. 1995) .......................................... 25 United States v. Kincaid-Chauncey 556 F.3d 923 (9th Cir. 2009) ......................................... 25 United States v. McLaughlin 663 F.2d 949 (9th Cir. 1981) ......................................... 25 United States v. Morgan 555 F.2d 238 (9th Cir. 1977) ......................................... 25 United States v. Smith 905 F.2d 1296 (9th Cir. 1990) ........................................ 26
STATE CASES
Arno v. Stewart 245 Cal. App. 2d 955 (1966) ......................................... 28 Albertini v. Schaefer 97 Cal. App. 3d 822 (1979) ..................................... 28, 30, 31 Burrill v. Nair 217 Cal. App. 4th 357 (2013) ................................... 28, 30, 31 Delia Penna v. Toyota Motor Sales, U.S.A., Inc. 11 Cal.4th 376 (1995) ............................................... 29 Douglas v. Janis 43 Cal. App. 3d 931 (1974) ..................................... 28, 30, 31 Kelly v. General Tel. Co. 16 136 Cal. App. 3d 278 (1982) ...................................... 30 Korea Supply Co. v. Lockheed Martin Corp. 29 Cal.4th 1134 (2003) ........................................ 29, 38, 40 Livitsanos v. Superior Court 2 Cal.4th 744 (1992) ................................................ 30 Maidman v. Jewish Publ'ns, Inc. 54 Cal.2d 643 (1960) ............................................... 27 PMC, Inc. v. Saban Entertainment 45 Cal. App. 4th 579 (1996), rev'd on other grounds, 29 Cal.4th 507 (2009) ............................................... 39 Smith v. Maldonado 72 Cal. App. 4th 637 (1999) ....................................... 27, 28 Taus v. Loftus 40 Cal.4th 683 (2007) ............................................... 27 Weinberg v. Feisel 110 Cal. App. 4th 1122 (2003) ........................................ 28 Westside Center Associates v. Safeway Stores 23, Inc. 42 Cal. App. 4th 507 (1996) .................................... 29, 40
FEDERAL STATUTES
§ 523 ............................................................ 37
§ 523(a)(6) .................................................... passim 28 U.S.C.
§ 157 (b)(2)(I) ..................................................... 24 Federal Rules of Bankruptcy Procedure
Rule 4005 ........................................................ 26 Federal Rules of Evidence
Rule 607 ......................................................... 25
Rule 613 ......................................................... 25
STATE STATUTES
§ 46 ............................................................. 28
§ 47 ............................................................. 31
MISCELLANEOUS
Model Civ. Jury Instr. 9th Cir. Jury Instruction 1.11 (2007) ....................................... 24, 26 Model Civ. Jury Instr. 9th Cir. Jury Instruction 2.8 (2007) ........................................ 25, 26
I. INTRODUCTION
After Plaintiff-Creditor Lindsay Stewart ("Stewart") was forced to quit her job at Defendant-Debtor Cynthia Lee Kauanui's ("Kauanui") company, Stewart started her own business. In order to harm Stewart's new business, Kauanui began making false statements about Stewart to Stewart's clients, potential clients, and others in the modeling industry. These statements included accusing Stewart of embezzlement, of her being under investigation for embezzlement, and for stealing clients from Kauanui's business. Kauanui admitted the purpose of these statements were to retain her former clients' business and preventing them from working with Stewart.
These statements were plainly false. Kauanui admitted that Stewart did not embezzle from Jet Set. Kauanui never provided evidence that she ever investigated Stewart of any wrongdoing. Moreover, Kauanui only made defamatory accusations about Stewart to persons within the modeling industry and never to law enforcement, investigators, or financial entities.
Accordingly, Kauanui willfully and maliciously, as defined by § 523(a)(6), injured Stewart when she committed defamation per se and intentional interference with prospective economic advantage ("IIPEA").
II. PROPOSED FINDINGS OF FACT
A. Background and procedural history.
1. Parties. 1. Defendant-Debtor Cynthia Lee Kauanui was the only owner of Jet Set Management Group, Inc. ("Jet Set"), a talent agency representing models and actors, located in La Jolla, California. See Kauanui Decl. ¶¶ 4-6; see also June 1, 2015 Tr. 68:13. 2. In 2000, Plaintiff-Creditor Lindsay Stewart accepted employment with Jet Set as its first Director of Jet Set's Kids Division. See Stewart Dep. 235:18-19; see also Kauanui Decl. ¶ 7. Stewart worked for Jet Set until she was forced to quit on August 26, 2008. Stewart Dep. 79:17-19; Ex. 7.
2. The underlying San Diego Superior Court action. 3. Kauanui, on behalf of Jet Set, filed a lawsuit against Stewart in September 2008. June 2, 2015 Tr. 77:11-13; see also Kauanui Dep. 1000:16-1001:21. 4. Kauanui, on behalf of Jet Set, filed an amended complaint against Stewart on April 3, 2009 in San Diego Superior Court. Ex. 18; June 2, 2015 Tr. 77:14-19. 5. After being served with an amended complaint, Stewart filed a cross-complaint against Jet Set and named Kauanui as a cross-defendant on April 23, 2009. Ex. 19. Stewart alleged, inter alia, claims of defamation per se and IIPEA. Ex. 19 ¶¶ 47-52, 59-66. 6. Kauanui voluntarily dismissed Jet Set's complaint, with prejudice and without warning, in the middle of her first day of deposition. Ex. 20; June 2, 2015 Tr. 79:12-81:3. 7. Kauanui and her counsel committed numerous discovery abuses, which resulted in the Superior Court imposing sanctions and later terminating sanctions in November 2009. Exs. 21-23. The Superior Court then granted Kauanui's motion to set aside default, which was appealed by Stewart but affirmed. Exs. 24-26. Limited discovery was reopened and trial was scheduled for September 2012. Ex. 27. 8. However, Kauanui abandoned her defense and disappeared. Exs. 28-29. The Superior Court then granted Stewart's motion for terminating sanctions on August 31, 2012 and entered default on December 11, 2012. Exs. 29-30. 9. On November 8, 2013, Stewart filed a brief for prove-up and in support of her request for entry of judgment. In support of her prove-up brief, Stewart included excerpts of the depositions of Amy Bryant, Paloma Jackson, Don Diaz, and Kauanui. Stewart also filed numerous exhibits to her prove-up brief, which included Exhibits 9-12, 15, and 31-37. See Exs. 9-12, 15, 31-37. 10. After the December 6, 2013 prove-up hearing during which the Superior Court considered the evidence and testimony presented, the Superior Court entered a default judgment against Kauanui, awarding Stewart $2,560,000.00 on her defamation and IIPEA claims, including punitive damages of $500,000.00. Ex. 38.
3. The instant bankruptcy proceeding. 11. On January 24, 2014, Kauanui filed bankruptcy a few weeks after Stewart secured her $2,560,000.00 judgment against Kauanui. See In re Cynthia Lee Kauanui, Case No. 14-00077 (D. Haw.). 12. Stewart then filed the instant adversary proceeding and later moved for summary judgment. Based on the doctrine of issue preclusion, in this Court's order following Stewart's motion for summary judgment, this Court held that Kauanui acted intentionally when she injured Stewart. See Mem. Decision Pl.'s Mot. Summ. J. 15, ECF No. 39. 13. Based on the doctrine of issue preclusion, Court also held that Kauanui's actions caused Stewart to suffer damages in the amount of $2,560,000, which included $500,000 in punitive damages. See Mem. Decision Pl.'s Mot. Summ. J. 15, ECF No. 39. B. Despite Stewart being a dedicated and high-performing employee, Kauanui forced Stewart to quit after discovering Stewart was a lesbian and before she ostensibly suspected Stewart of any wrongdoing.
1. Kauanui gave Stewart permission to work from Los Angeles. 14. Stewart was a dedicated and loyal Jet Set employee from 2000 until she was forced to quit in 2008. Grateful and aware of Stewart's significant contributions to Jet Set, Kauanui promised to make Stewart a Jet Set partner and to pay off her condominium, and Kauanui in fact paid for a Hawaiian vacation for Stewart. Stewart Dep. at 121:10-14, 240:8-17; 294:17-295:15, 296:1-7, 317:8-20; Ex. 2; Ex. 4. 15. In February 2007, Stewart asked Kauanui if she could work out of her home in Los Angeles. Kauanui approved Stewart's request for a period of six months. Stewart Dep. 245:8-246:16, 246:23-247:25; Kauanui Decl. ¶ 9. 16. To memorialize their arrangement, Stewart and Kauanui signed a renewable agreement, permitting Stewart to work from Los Angeles from February to August 2007. Ex. B; Stewart Dep. 245:8-246:16, 246:23-247:25; Kauanui Decl. ¶ 9. 17. As part of that agreement, Kauanui promised, "Lindsay will be provided with necessary materials to conduct her job, and she will have access to her Jet Set computer as needed. She will also have use of a Jet Set laptop computer which will remain Jet Set's property." Kauanui provided a laptop, telephone, and office supplies for Stewart's use from her home office. Kauanui also provided computer software and databases ton enable Stewart to work remotely. June 1, 2015 Tr. 48:22-52:4 18. As part of the arrangement for Stewart to work from Los Angeles, Kauanui also authorized Stewart's use of a fax machine and a Pitney Bowes postage machine. Stewart Dep. 415:18-416:12; Ex. 6; Ex. 7, at 2 (informing Kauanui in her resignation letter that Stewart would return "all billed Jet Set vouchers and invoices, all Jet Set confidential information and the computer, FAX machine, phone, Pitney Bowes machine and all other things I have that belong to or were purchased by Jet Set"); Ex. 44 (requesting the return of all Jet Set property, including the "computer, FAX machine, phone, [and] Pitney Bowes machine"); Ex. G, at 1 (Stewart's signature line in an August 11, 2008 email to Kauanui, which included the Los Angeles fax number); Ex. H, at 4-5 (Stewart's signature line in an June 11, 2008 email to Kauanui, which included the Los Angeles fax number); Ex. 43, at LS-BK 03361-62 (Pitney Bowes bills for a machine in Los Angeles, stemming from transactions that began on March 21, 2007, one month after the agreement for Stewart to work from Los Angeles); Ex. P, at POD 00103. POD 00107-08 (Pitney Bowes bills from September through November 2007). 19. After Stewart moved to Los Angeles, her sales increased by approximately sixty percent; everyone, including Kauanui, was happy that the arrangement was successful. Stewart Dep. 246:11-16; Ex. 3, at 1; June 2, 2015 Tr. 128:7-129:17.
2. Kauanui abandons Jet Set when she moves to Hawaii. 20. In Summer 2007, following the tragic death of her son, Kauanui moved to Hawaii. June 1, 2015 Tr. 54:16-23. 21. When Kauanui moved to Hawaii, she testified that her employees were supposed to keep the business running, and if there was an issue, they could contact Kauanui by phone or email. June 1, 2015 Tr. 55:12-56:2, 56:21-23. 22. However, while living in Hawaii, Kauanui rarely spoke with Stewart and rarely asked about the Kids Division's performance. Stewart Dep. 55:15-56:8. Kauanui also claims that there was a period during which time she was not receiving emails, despite there being evidence that she was occasionally responding to emails during that time. June 1, 2015 Tr. 69:12-70:5, 71:11-72:1; Ex. G, at 5-7; Ex. 42. 23. Kauanui did not sign checks while she was residing in Hawaii, instead authorizing Jet Set checks to be issued so long as it was under $5,000. Kauanui relied on her accounting department, including Melissa Bennett ("Bennett"), to issue checks. June 1, 2015 Tr. 57:11-58:9, 89:8-16. 24. At the time, there was only one bank account for all of Jet Set's Divisions, including the Kids Division. June 1, 2015 Tr. 89:17-90:6. 25. In early 2008, parents of children represented by Jet Set began complaining to Stewart that they were not getting timely paid. Stewart Dep. at 177:2-12, 178:5-13. On at least one occasion in June 2008, Stewart emailed Kauanui to inform her of the complaints from parents. Stewart Dep. 178:5-13 (mentioning one email regarding Ben Stone that Stewart sent to Kauanui); Ex. G, at 5-7 (Kauanui responding, asking Jet Set's accounting department to pay Ben Stone "a.s.a.p."). 26. Kauanui returned to La Jolla, California and returned to work at Jet Set in July 2008. Kauanui Decl. ¶ 15. 27. Soon thereafter, Kauanui began making accusations that Bennett was embezzling money and stealing from Jet Set. Stewart Dep. 51:11-23, 190:25-192:20; Kauanui Decl. ¶¶ 17-18. 28. On approximately July 25, 2008, Kauanui, Stewart, Bennett, and Paloma Jackson (a Jet Set employee) had a meeting. During that meeting, Kauanui praised Stewart's loyalty and stated Stewart was like "the daughter she never had." Stewart Dep. 182:8-183:5, 191:16-192:2, 269:1-7; Kauanui Decl. ¶ 17. 29. The next day, Kauanui fired Bennett, purportedly for embezzling money from Jet Set. Stewart Dep. 269:1-13; see Kauanui Decl. ¶¶ 23-24.
3. Kauanui discovered Stewart is a lesbian and forced her to quit. 30. After Kauanui fired Bennett, she began searching through Bennett's Jet Set email account and reading past emails. Kauanui Decl. ¶ 28. 31. On August 9, 2008, Stewart learned that Kauanui had been searching through Bennett's past emails because Kauanui started responding to old email communications from Bennett's account, which were originally only between Bennett and Jet Set employees, including Stewart. Ex. 1, at 1; Ex. 2, at 1; Ex. 3, at 3; Ex. G, at 2; Stewart Dep. 106:7-17, 201:25-203:7. 32. Through Kauanui's search, she discovered Stewart was a lesbian because Stewart had disclosed in emails to her co-workers that she was planning to have a baby with her romantic partner. Stewart Dep. 106:7-17, 197:24-200:13. 225:1-227:17. 33. Kauanui thereafter angrily began asking other Jet Set employees if they knew that Stewart was a lesbian and going to have a baby without a man. Stewart Dep. 169:2-170:17, 173:4-22, 526:13-528:21; Jackson Dep. 22:1-23:11. 26:17-27:21; Ex. 5. 34. After Kauanui's discovery of Stewart's sexual orientation, Kauanui's treatment of Stewart abruptly deteriorated. Kauanui questioned routine emails sent by Stewart concerning office matters, accused Stewart of improper billing, and treated her with hostility. Ex. 3, at 1-3; Stewart Dep. 114:22-115:8, 234:20-25, 239:1-11. 239:17-240:17, 400:21-401:10, 534:11-539:13. 35. Additionally, on August 11, 2008, Kauanui emailed Stewart and demanded that she work out of Jet Set's San Diego office as a condition of her continued employment. Ex. 3, at 2; Stewart Dep. 174:4-15. 36. Stewart responded on August 12, 2008, explaining that she was unable to work full-time in San Diego and that she believed she had been given an "ultimatum" to work from La Jolla or quit. Ex. 3, at 1. 37. In 2008, Stewart was Jet Set's only past kids booker and only child talent agent. June 2, 2015 Tr. 24:24-1, 25:13-17; Stewart Dep. 32:2-6, 72:21-74:3. 38. On Monday, August 18, 2008, Stewart received a letter from Jet Set's human resources representative Jennifer Aronce ("Aronce"), which instructed Stewart to meet with her on Monday, August 25, 2008, to bring any and all proprietary Jet Set information, including contracts, model bookings, and client information, and to return that information to Jet Set on August 25, 2008. Ex. 6; Stewart Dep. 330:10-15, 375:22-376:3. 39. Stewart contacted Aronce three times in an attempt to reschedule the meeting but received no response until August 25, 2008. During their phone conversation, Aronce told Stewart that Kauanui had recently hired a new child talent agent, which was the first time Stewart learned of the new hire. Stewart Dep. 73:12-75:10, 114:6-25, 239:17-240:17, 329:16-330:4, 377:19-378:4, 531:9-22. 40. After speaking with Aronce, Stewart tried calling Kauanui on August 25, 2008, but she did not answer. Stewart left a voicemail asking Kauanui, "Do I have a job?" and "Am I being replaced?" Stewart Dep. 70:13-16, 73:12-19, 75:5-18, 532:8-22. 41. That same night, Kauanui left Stewart a long and angry voicemail. Kauanui stated that it was her company and she could do whatever she wanted. To summarize Kauanui's message, she told Stewart, "If you even want to work here, you're going to need to relocate back to San Diego. You're going to have to take a pay cut. We're going to redo the commission structure." Stewart Dep. 70:25-71:17, 532:18-533:14. 42. Given Kauanui's unacceptable conditions, Aronce's demand of a return of all proprietary information, Kauanui's hiring of the new child talent agent, and Kauanui's voicemail, Stewart believed she was about to be fired. Stewart Dep. 75:13-79:10, 239:1-11, 534:11-539:13. 43. Stewart resigned from her position at Jet Set on August 26, 2008 and submitted a resignation letter to Kauanui. In her resignation letter, Stewart informed Kauanui that within the next forty-eight hours, "I will be returning to you all billed Jet Set vouchers and invoices, all Jet Set confidential information and the computer, FAX machine, phone, Pitney Bowes machine and all other things I have that belong to or were purchased by Jet Set." Ex. 7, at 1; Stewart Dep. 79:17-19, 526:1-12, 528:22-529:24, 532:18-25. 44. On August 27, 2008, Kauanui authorized Aronce to send Stewart an email, which stated, "We are requesting all Jet Set Jet Set [sic] property (Kids Information sheets and contracts, all billed Jet Set vouchers and invoices, all Jet Set confidential information and the computer, FAX machine, phone, Pitney Bowes machine and all other things I have [sic] that belong to or were purchased by Jet Set), before your final check is released." Ex. 44; June 1, 2015 Tr. 105:13-106:2. 45. Stewart's father returned the Pitney Bowes machine and all other Jet Set property on August 28, 2008. Stewart Dep. 415:18-416:12; Ex. 19 ¶ 27. C. Kauanui began a campaign of defamation, accusing Stewart of embezzlement and of being under investigation for embezzlement.
1. After Stewart left Jet Set, Kauanui began a campaign of defamation against Stewart. 46. In the end of August or early September 2008, Stewart launched her own talent agency, Zuri Model & Talent ("Zuri"). Stewart Dep. 124:11-23. 47. After Zuri's launch and without Stewart ever soliciting any clients from Jet Set, many parents of former Jet Set child clients withdrew their children from Jet Set's representation and signed with Zuri. Kauanui Decl. ¶ 39; Coromelas Decl. ¶ 2 & Ex. 50, June 26, 2014. 48. Kauanui assumed that parents of former Jet Set clients had placed their children with Stewart. Kauanui Dep. 540:2-22; June 2, 2015 Tr. 13:13-18. 49. Nearly immediately after starting her own agency, parents of former Jet Set clients began notifying Stewart that Kauanui told them that Stewart had embezzled money from Jet Set. These parents include Alicia Hanson, Amy Woodward, Janine Morales, Mark and Lisa Robbins, Amy Bryant, Gracie Galuppo, Karen Hancock and her husband, Desiree Salas, Tom Williams, Stephanie Harvey, Gigi Papasavvas, Jennifer DaRosa, Christina Kaylee Kaneshiro, Andrea Stowasser, and Barbara Froelich. Stewart Dep. 138:15-143:9, 146:5-147:11,
2. Kauanui emailed and called numerous parents of former Jet Set child clients and, without justification, told them Stewart embezzled and was under investigation for embezzlement.
a. Kauanui told Amy Bryant that Stewart was under investigation for embezzlement. 50. Amy Bryant ("Bryant") emailed Kauanui and stated that, unless the past due amounts were paid in full, she would no longer allow her daughter to go on future auditions for Jet Set. Kauanui responded, accusing Stewart of being under investigation for causing Jet Set's financial difficulties. Kauanui's email to Bryant insinuated that Stewart was involved in embezzlement or accounting issues because Stewart was the only past kids booker. Ex. 11, at ("Only past accounting dept [sic] along with the past kids booker are under investigation."); Bryant Dep. 32:11-25, 41:17-42:5, 50:11-52:1, 53:17-54:4, 54:15-24. 51. Additionally, Kauanui called Bryant, left a voicemail, and stated that, if Bryant was thinking of going with Stewart, she should think twice because Stewart was under investigation for embezzlement. Bryant Dep. 55:1-57:3, 57:21-58:2. Bryant then called Stewart to tell her about Kauanui's accusations. Stewart Dep. 31:1-32:22, 33:23-35:3. 52. Kauanui admitted she told Bryant in September or October 2008 that she suspected Stewart of embezzlement and that Stewart was under investigation for missing monies and for embezzlement. Kauanui Dep. 458:6-459:9; 565:6-16.
b. Kauanui told Grace Antipala that Stewart stole hundreds of thousands of dollars from Jet Set. 53. Grace Antipala ("Antipala"), a parent of a former Jet Set child client. withdrew her daughter from Jet Set and then contacted Stewart in Fall 2008 to have Zuri represent her daughter. Ex. 32, at LSBK 01559 ¶¶ 9-10; June 2, 2015 Tr. 71:6-8. 54. After Antipala withdrew from Jet Set, Kauanui called Antipala and told her that, if she went to Zuri, she was aligning herself with evil forces. Kauanui also told Antipala that Stewart and another former Jet Set employee had stolen hundreds of thousands of dollars from her and that she was investigating it. Ex. 32, at LSBK 01559 ¶ 11.
c. Kauanui told Angie Lundgren that Stewart scammed Jet Set. 55. Angie Lundgren ("Lundgren"), a parent of a former Jet Set child client, contacted Kauanui about being unable to cash two Jet Set checks. Ex. 33, at LSBK 01562 ¶ 5; June 2, 2015 Tr. 71:25-71:2. 56. During their conversation, Kauanui accused Lundgren of forging the checks. Kauanui also stated she could not pay Lundgren because Stewart, along with another former Jet Set employee, had stolen hundreds of thousands of dollars from her, had stolen clients, and had scammed her. Ex. 33, at LSBK 01562 ¶ 5.
d. Kauanui told Jeannette Morales that Stewart took money. 57. Jeannette Morales ("Morales") withdrew her son from Jet Set's management. Ex. 34, at LSBK 01565 ¶ 2. 58. After Morales withdrew, Kauanui called her and left a voicemail, and in a very intimidating tone said, "You need to be careful if you are going with Lindsay," and that "as we speak, she will be served with papers." Kauanui also told her that Stewart was "taking clients," "took money," and "could not be trusted." Ex. 34, at LSBK 01565 ¶ 7.
e. Kauanui told Andrea Stowasser that Stewart was under investigation for stealing money. 59. Andrea Stowasser ("Stowasser"), a parent of a former Jet Set model, emailed Kauanui regarding late payments. Ex. 10, at 2; June 2, 2015 Tr. 24:8-11. 60. Kauanui responded to Stowasser in an email, dated September 13, 2008, and wrote, "Since I came back from mourning my son's passing I caught my accounting dept stealing monies from me. They are under investigation along with our past kids booker." Ex. 10, at 1. Kauanui has admitted she wanted to inform Stowasser that she suspected that Stewart took money from her and that Stewart was under investigation for stealing money. Kauanui Dep. 444:4-445:10, 665:6-25.
f. Kauanui told Barbara Froelich that Stewart was under investigation for stealing money. 61. Barbara Froelich ("Froelich"), a parent of a former Jet Set model, complained that she was not being timely paid. Ex. 12; June 2. 2015 Tr. 38:6-8. 62. In response to Froelich's complaints, Kauanui responded, "I am so sorry for the delay in payment. I personally let go of the entire past accounting dept. They are also under investigation along with the past kids booker." Ex. 12, at 2; Kauanui Dep. 425:5-426:8, 426:22-427:5. Kauanui conceded that she communicated that Stewart was under investigation for suspected embezzlement. Kauanui Dep. 425:22-426:8.
g. Kauanui emailed Stephanie Harvey to take a job from Zuri. 63. Stephanie Harvey ("Harvey"), a parent of a former Jet Set model, withdrew from Jet Set's representation and signed with Zuri. June 2, 2015 Tr. 49:13-50:10. 64. After Kauanui learned that Harvey went to a job while under the representation of Zuri and not Jet Set, Kauanui emailed Harvey on October 9, 2008 and told her, "I definitely feel that you took a Jet Set job away from my company and gave it to Zuri agency. Zuri is not licensed to do business in the State of California." Ex. 16, at 1; June 2, 2015 Tr. 50:4-25.
h. Kauanui sent letters to parents after they withdrew from Jet Set. 65. Kauanui drafted a letter that she sent only to parents in the Kids Division. Exs. 13-14; Kauanui Dep. 226:16-228:6. In that letter, Kauanui wrote, "I had to do some rebuilding due to the moral and financial improprieties I found when I returned." Ex. 13, at 1; Ex. 14, at 1. 66. In that letter, Kauanui was specifically accusing Stewart of improprieties. Kauanui Dep. 233:15-20. 67. Kauanui would send a copy of that letter to parents after they gave her notice they were withdrawing their children from Jet Set's representation. Exs. 13-14; Kauanui Dep. 365:10-366:24; June 2, 2015 Tr. 18:22-24.
i. In her amended complaint and in her responses for requests for admissions, Kauanui admitted that she defamed Stewart. 68. In her first amended complaint, Kauanui alleged that Stewart "intentionally set forth to steal the representation contracts away from JET SET." Ex. 18 ¶ 50; see also id. ¶¶ 14-16, 18-19, 27, 33. 39. 69. Additionally, Kauanui alleged that Stewart accessed Jet Set's bank accounts and "arranged for payments related to modeling jobs involving child models exclusively contracted with [Jet Set] to be directed to STEWART." Ex. 18 ¶ 42. 70. Kauanui admitted that she "intentionally made statements to parents of former Jet Set child talent that STEWART was being investigated for embezzlement after the child talent was represented or seeking representation by Stewart." Exs. 35-36, Request for Admission No. 9. 71. Kauanui admitted that, "after the child talent was represented or seeking representation by STEWART," she "intentionally made statements to parent of former Jet Set child talent" that Stewart (1) "was being investigated for embezzlement," Exs. 35-36, No. 9, and (2) "had stolen client from Jet Set" Exs. 35-37, Request for Admission No. 11. 72. Kauanui admitted that she "intentionally made statements to persons who provide services to talent agencies that STEWART was being investigated for embezzlement after the child talent was represented or seeking representation by Stewart." Exs. 35-36, Request for Admission No. 17. 73. Kauanui also admitted that she made "statements to persons who provide services to talent agencies that STEWART had stolen clients from Jet Set." Exs. 35-37, Request for Admission No. 19.
3. Kauanui made false allegations about Stewart to people in the modeling and acting industry in order to harm Stewart's business.
a. Kauanui made accusations to casting directors. 74. Around the end of September or in October 2008, Stewart called Gail Means ("Means"), a casting director, and asked her why she was not casting any of the children represented by Zuri. Means stated that she refused to conduct business with Stewart because Kauanui accused Stewart of embezzling from Jet Set. Stewart Dep. 151:5-15, 153:7-154:7, 154:25-155:13. 75. Tolley Casparis ("Casparis"), a casting director, called Stewart. Casparis told Stewart that she and her client would not use Zuri because Kauanui told Casparis that Stewart was an embezzler. Stewart Dep. 152:24-153:6, 156:1-157:16. 76. After Kauanui's false accusations, other people within the modeling and acting industry, including Tommy Hilfiger, Tilley's, American Girl, Old Navy, Target, Liz Paulson Casting, and Mary Claire Sweeters Casting, refused to conduct business with Stewart and Zuri. Stewart Dep. 346:19-347:23. Because Stewart had previously had excellent working relationships with those people in the industry, there would be no other reason for them to refuse to return her calls. Stewart Dep. 350:5-351:14.
b. Kauanui made accusations about Stewart's character to SAG. 77. After completing a Screen Actors Guild ("SAG") Franchise Application, Stewart spoke with Zino Macaluso, SAG's National Director/Senior Counsel. He told Stewart that he had information from Jet Set that they were suing Stewart, that she embezzled money from Jet Set, and that she was not of good moral character or standing. Stewart Dep. 160:2-162:3, 165:1-167:14. 78. Kauanui spoke with a SAG representative. Kauanui informed SAG of her lawsuit against Stewart because SAG asked Kauanui about Stewart's character. Kauanui Dep. 395:18-397:24. 79. As a result, on March 16, 2009, SAG sent Stewart a letter, stating that Stewart's application may be denied on grounds that "the conduct alleged [in Jet Set's lawsuit against Stewart] would be incongruous with the high fiduciary standard" of SAG, namely that Stewart should "never [have] been convicted of a crime involving embezzlement, theft, fraud, forgery or dishonest conduct." Ex. 31, at LSBK 01480; Stewart Dep. 162:4-164:25.
c. Kauanui accused Stewart of embezzlement to a photographer. 80. Kauanui repeatedly told Don Diaz ("Diaz"), a photographer in the industry, that she suspected Stewart of embezzlement after Stewart left Jet Set. Diaz Dep. 10:22-11:9, 18:24-19:9, 19:16-20:9, 20:18-22:22. 81. Kauanui also told Diaz that Stewart used Jet Set funds to pay her rent and that Stewart may have misappropriated Jet Set's funds. Diaz Dep. 26:16- 30:21. 82. Kauanui told Diaz she believed Stewart conspired with Bennett to embezzle from Jet Set. Diaz Dep 31:5-32:19, 35:11-24, 36:11-24.
d. Kauanui told Jet Set employees that Stewart embezzled money. 83. Kauanui told Christiaan Almazan ("Almazan"), a former Jet Set employee, that Stewart and Bennett worked together to embezzle money from Jet Set. Almazan Dep. 77:20-78:6, 78:14-79:20, 80:3-81:20, 83:2-7, 87:8-24; June 2, 2015 Tr. 68:15-17. 84. Kauanui only told Almazan that she suspected Stewart after Stewart left Jet Set. Almazan Dep. 77:20-78:6, 78:14-79:20. 85. Additionally, Kauanui told Paloma Jackson ("Jackson"), another former Jet Set employee, that she believed Stewart had stolen money from Jet Set and had Jet Set pay off her condominium. Jackson Dep. 148:12-150:4. 86. After Kauanui made those statements to Jackson, Jackson told Kauanui that she did not believe Stewart would steal from Jet Set, and Kauanui responded, "I have the proof." Jackson Dep. 152:1-9. 87. Finally, Kauanui told Zoe Wheeler ("Wheeler"), a former Jet Set employee, that Stewart stole money from Jet Set. Wheeler Dep. 68:3-69:10, 69:16-25, 70:20-71:19; June 2, 2015 Tr. 75:24-25. 88. Kauanui made these accusations to Wheeler about Stewart only after Stewart left Jet Set. Wheeler Dep. 72:13-25.
D. Kauanui began her campaign of defamation in order to injure Stewart.
1. At no point in time before Stewart left Jet Set did Kauanui ever suspect Stewart of any wrongdoing. 89. In July 2008, Kauanui was not suspicious that Stewart was involved in any wrongdoing. Stewart Dep. 182:8-183:5, 191:16-192:2, 269:1-7; Kauanui Decl. ¶ 17. 90. Kauanui admitted that she only suspected Stewart of embezzlement and stealing money after Stewart quit her employment with Jet Set. June 1, 2015 Tr. 94:3-96:18 (deposition refreshing recollection and Kauanui testifying that she only suspected Stewart after Stewart and Aronce did not meet on August 25, 2008). 91. It was only after Stewart quit that Kauanui began to conduct an investigation into Stewart, which purportedly revealed the unauthorized fax and Pitney Bowes machines. June 1, 2015 Tr. 106:23-107:5; Kauanui Dep. 214:16-215:16.
2. Kauanui knew her allegations against Stewart were false. 92. Kauanui admitted that Stewart did not embezzle from Jet Set. Kauanui Dep. 1094:20-1095:8. 93. During her direct testimony, Kauanui claims that, while investigating Stewart's involvement in the purported embezzlement, she discovered three things that made her suspicious that Stewart embezzled from Jet Set: (1) Aronce purportedly discovered a check that Bennett paid to Stewart for her condominium, (2) Stewart was using a Pitney Bowes machine from her home office in Los Angeles, and (3) Stewart had Jet Set clients fax registration sheets and vouchers to her home office. Kauanui Decl. ¶ 40-41. 94. Kauanui provided no evidence that Stewart received a check for payment of Stewart's condominium, nor could she because Stewart never received any money from Kauanui or Bennett to pay off her condominium. Stewart Dep. 294:17-295:15, 296:1-8, 296:18-297:7; June 1, 2015 Tr. 93:9-24. 95. As a result of Kauanui's investigation into Stewart, Kauanui claimed that she first discovered Stewart's unauthorized Pitney Bowes machine a few months after Stewart quit. Kauanui purportedly made this discovery after she spoke with Pitney Bowes and after Pitney Bowes sent her documents. June 1, 2015 Tr. 106:23-107:5; Kauanui Dep. 214:16-215:16. 96. However, as explained supra Paragraph 18, Stewart received permission from Kauanui to rent a Pitney Bowes postage machine when Stewart began working from Los Angeles in February 2007. Given the invoices and bills for Stewart's Los Angeles Pitney Bowes machine were being sent to Jet Set's offices beginning in Spring 2007 and before Kauanui moved to Hawaii, Kauanui at the very least was aware of the machine well before she ostensibly claimed to have discovered the machine. Stewart Dep. 415:18-416:12; Ex. 6; Ex. 7, at 2; Ex.44; Ex. 43, at LS-BK 03361-62; Ex. P, at POD 00103, POD 00107-08. 97. Kauanui claims her investigation revealed that Stewart was using an unauthorized fax number. However, as explained supra Paragraph 18, Stewart received permission from Kauanui to have a Los Angeles facsimile machine. And, given that Stewart would send Kauanui emails with her Los Angeles fax number and given that Stewart promised to return the machine in her resignation letter, Kauanui was well-aware of the machine well before she made her purported discovery. June 1, 2015 Tr. 50:14-16, 106:3-107:5, 117:6-15; June 2, 2015 Tr. 8:10-11:9; 415:18-416:12; Ex. 6; Ex. 7, at 2; Ex. 44; Ex. G, at 1; Ex. H, at 4-5. 98. Although Kauanui claims that only the Kids Division was missing money, there was only one bank account for all of Jet Set's Divisions, including the Kids Division. Kauanui provided no evidence that the Kids Division was the only Jet Set Division missing money. June 1, 2015 Tr. 89:17-90:6, 91:19-92:9 ; Kauanui Decl. ¶ 35. 99. Although Kauanui claims that Dick Semerdijian helped conduct an investigation into Stewart, she later admitted that he only gave her a list of people to hire and did not conduct any investigation into Stewart. Nor has Kauanui provided any evidence that Dick Semerdijian ever conducted an investigation into Stewart. June 2, 2015 Tr. 33:18-33:24, 106:13-107:14. 100. Likewise, although Kauanui makes much ado of the accountants that she hired, these accountants are irrelevant to determining whether her statements about Stewart were willful and malicious. Kauanui never claimed that the accountants were investigating Stewart. Additionally, because Kauanui admitted that Stewart had no role in accounting or payments, the accountants that Kauanui hired could not have been investigating Stewart. June 1, 2015 Tr. 91:19-92:12; June 2, 2015 Tr. 106:13-109:21, 127:22-6. 101. Kauanui provided no proof that Stewart ever created any invoices. All Kauanui ever stated was that the invoices had a different fax number on them, which she claims Stewart improperly created and which she claims was the Los Angeles fax number. Even if Stewart had invoices with a Los Angeles fax number, that would not give rise to a reasonable suspicion of wrongdoing because Stewart was in charge of communicating with booking agencies and Jet Set models. June 1, 2015 Tr. 53:8-54:15, 104:23-105:2; June 2, 2015 111:19-113:7; Kauanui Decl. ¶ 40c.
3. When communicating with persons outside the modeling industry in 2008 and 2009, Kauanui never stated that she suspected Stewart of any wrongdoing, instead only contending that Bennett was the perpetrator. 102. As described supra Paragraphs 49-88, Kauanui told many people in the modeling industry that Stewart embezzled money from Jet Set, was under investigation for embezzlement or stealing money, and stole Jet Set's clients. 103. In 2008 and 2009, Kauanui only reported Bennett to the FBI, not Stewart. Ex. R, at 10; June 1, 2015 Tr. 117:20-118:12, 118:19-23; June 2, 2015 Tr. 61:11-64:17; June 2, 2015 Tr. 85:17-20. 104. However, when Kauanui communicated with persons outside the modeling industry in 2008 and 2009, she never stated that she suspected Stewart of any wrongdoing. This fact further demonstrates that Kauanui's statements were made with an intent to harm Stewart See infra Paragraphs 104-109. 105. In 2008, Kauanui's private investigator only investigated Bennett, not Stewart. June 1, 2015 Tr. 117:16-19, 118:19-23; June 2, 2015 Tr. 85:17-20, 127:22-24. 106. In 2008, Kauanui only filed police reports that named Bennett as a suspect, not Stewart. June 1, 2015 Tr. 118:13-118:18, 118:19-23; June 2, 2015 Tr. 85:17-20.. 107. When Kauanui spoke with Wells Fargo Bank about the purported embezzlement, she only was concerned about Bennett, and she did not mention Stewart. Kauanui Decl. ¶ 42a; June 2, 2015 Tr. 85:17-20. 108. On November 28, 2008, Kauanui wrote a letter to a Branch Manager at Wells Fargo Bank regarding identity theft and forgery. However, Kauanui only identified Bennett as a suspect, and she did not mention or reference Stewart. Ex. S, at 1-2; June 2, 2015 Tr. 60:12-61:2; June 2, 2015 Tr. 85:17-20. 109. On December 10, 2008, Kauanui wrote to Tanya Tyson with Financial Pacific Leasing so that she would not need to pay for items due to identity theft and fraud, Kauanui only mentioned Bennett. She did not accuse nor mention Stewart in that letter. Ex. R, at 1; June 2, 2015 Tr. 59:17-60:7.
4. Kauanui admitted the purpose of her statements was to prevent Jet Set clients from leaving and to lure away Stewart's clients. 110. Kauanui was motivated to save Jet Set when she made communications to parents of former Jet Set clients. June 2, 2015 Tr. 85:1-85:5. 111. Kauanui's sent a letter to parents after they withdrew from Jet Set because she did not want to lose her clients, because she tried to get them to return to Jet Set, and because she wanted to keep her good reputation. Kauanui Dep. 366:19-367:15, 540:16-22; June 2, 2015 Tr. 19:23-20:8; Exs. 13-14. 112. Kauanui sent an email, which accused Stewart of being under investigation for missing money, to Bryant to preserve her reputation and to let Bryant know that Kauanui was not to blame for the delay in payments but rather Stewart and Bennett were to blame. June 2. 2015 Tr. 35:3-37:19; Kauanui Dep. 563:24-565:16; Ex. 11, at 1. 113. Kauanui sent an email, which stated that she suspected Stewart of embezzlement, to Froelich because Froelich was not getting paid. Kauanui wanted Froelich to know that she was not responsible but rather Stewart and the accounting department were to blame. June 2, 2015 Tr. 42:21-43:13; Kauanui Dep. 425:5-426:8, 426:22-427:5; Ex. 12, at 2. 114. After Holly Blanks ("Blanks") withdrew her child from Jet Set, Kauanui emailed Blanks because she did not want Blanks to leave her agency. Kauanui admitted that she sent her emails to Blanks, between September 18, 2008 and September 19, 2008, with the intention to get Blanks to return to Jet Set. Ex. 15, at 2-4; Kauanui Dep. 540:2-22; June 2, 2015 Tr. 46:25-48:9, 48:19-49:6. 115. Kauanui emailed Stephanie Harvey and told her that Stewart's business was not licensed in California because she wanted the money from a booking to go to Jet Set and not Zuri. Ex. 16, at 1; June 2, 2015 Tr. 52:14-53:4. 116. Because SAG asked Kauanui about Stewart's character in connection with Stewart's SAG application, Kauanui told them that she had filed a lawsuit against Stewart and sent SAG a copy of the lawsuit. Kauanui Dep. 395:18-397:24; June 2, 2015 Tr. 53:13-54:12.
E. Kauanui's testimony during the instant bankruptcy trial was not credible and was repeatedly impeached.
1. Kauanui provided no evidence that she suffered from PTSD in 2008 or 2009. 117. Although Kauanui claims she was diagnosed with post-traumatic stress disorder ("PTSD") in May 2007, she provided no evidence that she was diagnosed with PTSD at that time or at any time in 2007, 2008, or 2009. Nor did she provide any evidence with respect to her mental state or ability to function during that time. June 2, 2015 Tr. 88:21-88:24. 118. Kauanui testified that she was thinking clearly in August 2008 and September 2008. June 2, 2015 Tr. 86:13-94:12. 119. Kauanui testified that she could not think straight during her depositions, which began in June 2009, because she was "coming from the killers' trial over to your deposition, same date." June 2, 2015 Tr. 86:4-13. However, her depositions did not start until June 2009 and every defendant was sentenced no later than February 2009. Coromelas Decl. ¶¶ 4-8 & Exs. 51-54, June 26, 2014. Moreover, she also contradicted herself: also claimed she could think clearly during her depositions. June 2, 2015 Tr. 87:7-12.
2. Kauanui's trial testimony contradicted her prior deposition testimony. 120. Kauanui's testimony during the trial on June 1, 2015 and June 2, 2015 repeatedly contradicted her prior deposition testimony. 121. For the first time during redirect testimony, Kauanui claimed that she was suspicious of Stewart because of an email chain among Jet Set employees, including Stewart. However, Kauanui never testified as to when she discovered that information. Indeed, based on Jackson's deposition testimony and Kauanui's and her counsel's statements during Jackson's deposition, Kauanui did not learn about these emails until Jackson's deposition on August 17, 2009. Thus, Kauanui made this discovery nearly one year after she began defaming Stewart, and thus her testimony before this Court was false. Coromelas Decl. ¶ 9 & Ex. 55, June 26, 2014; June 2, 2015 Tr. 113:12-115:2; Exs. DD-EE. 122. Additional examples of Kauanui's contradictions include, but are not limited to:
a. In May 2010, Kauanui stated under oath that Stewart did not embezzle. Kauanui Dep. 1095:4-5. Before this Court, however, Kauanui now claims that she does not know whether Stewart embezzled from Jet Set and claims that she is still suspicious of Stewart. June 1, 2015 Tr. 114:18-115:2; Kauanui Decl. ¶ 41.
b. In 2009. Kauanui stated that she wrote a letter. See Exhibits 13-14; Kauanui
Dep. 226:5-227:24. However, during trial, Kauanui testified that she never wrote that letter. June 2, 2015 Tr. 16:18-25.
c. In June 2009, Kauanui admitted that she wanted to inform Stowasser that Stewart was under investigation for taking money from her. See Kauanui Dep. 445:3-7. However, in 2015, Kauanui testified that she wanted to inform Stowasser that Stewart was only under investigation, generally speaking. June 2, 2015 Tr. 24:2-6.
d. In June 2009, Kauanui admitted that she told Bryant that Stewart was under suspicion of embezzlement. Kauanui Dep. 458:7-13. During trial and in direct contradiction of that admission, Kauanui flatly stated she never told Bryant that Stewart was under suspicion of embezzlement. June 2, 2015 Tr. 30:3-5.
e. In 2009, Kauanui stated that she learned about the Pitney Bowes machine a few months after Stewart quit. Kauanui Dep. 214:16-215:16. During trial, however, Kauanui testified that she learned about the Pitney Bowes machine immediately after Stewart quit. June 1, 2015 Tr. 98:9-99:18; see supra Paragraphs 18, 43-45, 91, 95-96.
f. Kauanui initially claimed that her email only had server problems while she was in Hawaii. June 1, 2015 Tr. 69:24-70:5, 71:11-24, 74:18-20; June 2, 2015 Tr. 103:3-12. She later claimed that her email had the same server problems while she was in San Diego. June 1, 2015 Tr. 108:1-8.
3. There are inconsistencies between Kauanui's testimony and documented evidence. 123. There are also significant inconsistencies between Kauanui's testimony and documented evidence. 124. For the first time during redirect testimony, Kauanui claimed that Stewart was stealing Jet Set's clients while Stewart was working for Jet Set. However, what Kauanui failed to mention is that ninety-nine parents submitted declarations in support of Stewart's motion for summary judgment in the underlying Superior Court case, all declaring that Stewart never solicited them to join Zuri. After Stewart filed her motion for summary judgment, Kauanui dismissed her lawsuit, which alleged unlawful solicitation of Jet Set's clients, against Stewart with prejudice. June 2, 2015 Tr. 80:22-81:3; 120:9-25; Coromelas Decl. ¶¶ 2-3 & Ex. 50, June 26, 2014. 125. Additional examples of these significant inconsistencies include, but are not limited to:
a. Kauanui stated in her declaration that she did not permit employees to work remotely. However, during cross-examination, she admitted that she permitted Stewart to work remotely. Kauanui Decl. ¶¶ 29-30; June 1, 2015 Tr. 48:22-49:18.
b. Kauanui claims that she never accused Stewart of embezzling money but merely assumed that Stewart may know information to help Kauanui connect the dots. June 2 Tr. 30:19-31:16.
c. Kauanui testified that Stewart first obtained the Pitney Bowes machine in her Los Angeles home office in December 2007. However, clear evidence demonstrates that Stewart obtained a Pitney Bowes machine for her home office in March 2007, one month after receiving approval to work from home. June l, 2015 Tr. 102:9-13; Ex. 43, at LS-BK 03361-62.
d. Kauanui's testimony that Aronce discovered the Pitney Bowes machine by the time Stewart quit because Aronce requested the return of the machine, is specious. This is because, in Aronce's email to Stewart requesting a return of Jet Set property, Aronce literally "cut-and-paste" Stewart's resignation email with respect to the items Stewart stated that she would return to Jet Set. Compare Ex. 7, at 2 (informing Kauanui in her resignation letter that Stewart would return "all Jet Set Kids Information sheets and contracts, all
billed Jet Set vouchers and invoices, all Jet Set confidential information and the computer, FAX machine, phone, Pitney Bowes machine and all other things I have that belong to or were purchased by Jet Set") with Ex. 44 ("We are requesting all Jet Set Jet Set [sic] property (Kids Information sheets and contracts, all billed Jet Set vouchers and invoices, all Jet Set confidential information and the computer, FAX machine, phone, Pitney Bowes machine and all other things I have [sic] that belong to or were purchased by Jet Set), before your final check is released."); June 1, 2015 Tr. 99:2-18, 105:13-106:2.
e. Although Kauanui claims that Jet Set employees were going behind her back to attempt to obtain an investor, Kauanui sent an email to a Jet Set employee in February 2008, stating that she was looking to bring in an investor. Ex. 42; Kauanui Decl. ¶ 28.
f. Kauanui testified that Bennett was merely an independent contractor, but she emailed a Jet Set employee that she was planning on making a management team of directors that would include Bennett, Kauanui, and Stewart. Additionally, it is highly unlikely that she would entrust Jet Set's finances to an independent contractor. Ex. 42; June 1, 2015 Tr. 61:6-22.
III. PROPOSED CONCLUSIONS OF LAW
126. The Court has jurisdiction over the parties and the controversy. 28 U.S.C. § 157 (b)(2)(I).
A. Kauanui's testimony was repeatedly impeached and she lacks credibility.
127. In determining the credibility of a witness, a trier of fact can weigh, among other factors: the witness's memory; the witness's manner while testifying; whether other evidence contradicted the witness's testimony; the reasonableness of the witness's testimony in light of all the evidence; and any other factors that bear on believability. Model Civ. Jury Instr. 9th Cir. 1.11 (2007). 128. Impeachment by contradiction is permitted to prevent witnesses from engaging in perjury and then using the prohibition on collateral fact testimony to conceal the perjury. United States v. Kincaid-Chauncey, 556 F.3d 923, 932 (9th Cir. 2009). 129. A trier of fact may find a witness to lack credibility where there is evidence showing the witness made "a prior statement inconsistent with his or her present testimony." Fed. R. Evid. 613; see also United States v. McLaughlin, 663 F.2d 949, 952 (9th Cir. 1981). Additionally, evidence that a witness lied under oath on a prior occasion bears on a witness' credibility. Model Civ. Jury Instr. 9th Cir. 2.8 (2007). A trial judge has a '"high degree of flexibility' in deciding how much inconsistency is enough to permit use of a prior statement for impeachment." United States v. Higa, 55 F.3d 448, 453 (9th Cir. 1995) (citing United States v. Morgan, 555 F.2d 238, 242 (9th Cir. 1977). Here, as set forth supra Paragraphs 120-122f, Kauanui's testimony contradicts her prior statements, such that she must have lied under oath either in her depositions or during trial. 130. A trier of fact may find a witness to lack credibility where there is evidence that the witness' testimony contradicts documents or testimony of other witnesses. See Dorn v. Burlington N. Santa Fe R.R. Co., 397 F.3d 1183, 1193 (9th Cir. 2005) (holding that "impeachment by contradiction is authorized by [Fed. R. Evid.] 607."). Generally, impeachment by contradiction is proper when "the statements in issue [are] volunteered on direct examination." United States v. Green, 648 F.2d 587, 596 n.12 (9th Cir. 1981). This general rule, however, does not have to be "rigidly enforced so as to exclude all impeachment by contradiction of testimony given during cross-examination." United States v. Castillo, 181 F.3d 1129, 1132 (9th Cir. 1999). Indeed, a court has "broad discretion over whether to admit extrinsic evidence to rebut a witness'[s] direct testimony. . . ." United States v. Chu, 5 F.3d 1244, 1249 (9th Cir. 1993). Here, as set forth supra Paragraphs 117-119, 123-125f, there are evidentiary documents that contradict Kauanui's testimony. Additionally, Kauanui's testimony directly contracts the unimpeached statements by Almazan, Antipala, Bryant, Diaz, Jackson, Lundgren, Morales, and Wheeler which were all made under oath and under the penalty of perjury. June 2, 2015 Tr. 29:15-30:5, 68:18-77:10. 131. Kauanui lacks credibility, and therefore her self-serving statements that she articulated for the first time during trial have little, if any, weight. Dorn, 397 F.3d at 1193 ("'Bias is always significant in assessing the witness's credibility . . . .'" (citation omitted)); United States v. Smith, 905 F.2d 1296, 1300 (9th Cir. 1990) (holding that the court is entitled to give little weight to a defendant's self-serving statements); Model Civ. Jury Instr. 9th Cir. 1.11 (2007). 132. Because Kauanui's testimony directly contradicts the unimpeached statements by Almazan, Antipala, Bryant, Diaz, Jackson, Lundgren, Morales, and Wheeler, their unimpeached statements have more weight and credence; to the extent that Kauanui's self-serving statements contradict their testimony, her statements should be disregarded. See United States v. Castillo, 181 F.3d 1129, 1132-33 (9th Cir. 1999) (holding that a witness' credibility may be attacked through impeachment by contradiction); United States v. Antonakeas, 255 F.3d 714, 724-25 (9th Cir. 2001) (holding that a witness' credibility may be impeached through the contradictory testimony of another witness); Model Civ. Jury Instr. 9th Cir. 1.11 (2007); Model Civ. Jury Instr. 9th Cir. 2.8 (2007).
B. Legal standards.
1. Legal standards for finding a judgment is nondischargeable. 133. A bankruptcy court is "required" to "consider all relevant evidence, including the state court proceedings, that is offered by the parties, or requested by the court, and on the basis of that evidence determine the nondischargeability of judgment debts." In re Houtman, 568 F.2d 651, 654 (9th Cir. 1978). 134. A plaintiff seeking nondischargeability bears the burden of proof by a preponderance of the evidence. Fed. R. Bankr. P. 4005; Turtle Rock Meadows Homeowners Ass'n v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000). 135. To prevent the discharge of a debt under § 523(a)(6), a plaintiff must demonstrate the injury was both willful and malicious. Ormsby v. First Am. Title Co. (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010). 136. "[T]he willful injury requirement of § 523(a)(6) is met when it is shown either that the debtor had a subjective motive to inflict the injury or that the debtor believed that 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). "The Debtor is charged with the knowledge of the natural consequences of his actions." Ormsby, 591 F.3d at 1206; Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002) ("In addition to what a debtor may admit to knowing, the bankruptcy court may consider circumstantial evidence that tends to establish what the debtor must have actually known when taking the injury-producing action."). 137. "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.'" Jercich, 238 F.3d at 1209 (quoting Murray v. Bammer (In re Bammer), 131 F.3d 788, 791 (9th Cir. 1997) (en banc)). 138. If a plaintiff establishes the wrongful act was willful, "[m]alice may be inferred based on the nature of the wrongful act." Ormsby, 591 F.3d at 1207.
2. Legal standards for a defamation per se claim. 139. Under California law, the intentional tort of defamation requires a showing of "the intentional publication of a statement of fact that is false, unprivileged, and has a natural tendency to injure or which causes special damage." Smith v. Maldonado, 72 Cal. App. 4th 637, 645 (1999); Taus v. Loftus, 40 Cal.4th 683, 720 (2007). 140. The California Supreme Court has explained, "'A defendant is liable for what is insinuated, as well as for what is stated explicitly.'" Maidman v. Jewish Publ'ns, Inc., 54 Cal.2d 643, 651 (1960) (citation omitted); accord Solano v. Playgirl, Inc., 292 F.3d 1078, 1083 (9th Cir. 2002). 141. Publication "to a single individual is sufficient." Smith, 72 Cal. App. 4th at 645. However, '"it is not necessary that anyone believe [the defamatory statement] to be true.'" Peck v. Maaskant (In re Peck), 295 B.R. 353, 361 (B.A.P. 9th Cir. 2003) (alterations in original) (citing Amo v. Stewart, 245 Cal. App. 2d 955, 963 (1966)). 142. A defendant's showing of "the truth of the offensive statements or communications is a complete defense against civil liability, regardless of bad faith or malicious purpose." Smith, 72 Cal. App. 4th at 646. 143. There are two types of defamation: defamation per quod and defamation per se. See Burrill v. Nair, 217 Cal. App. 4th 357, 382-83 (2013). Defamation per se is "actionable without proof of special damages." Ibid. 144. Slander per se is expressly limited to four categories, one of which being the verbal publication "[c]harges any person with crime, or with having been indicted, convicted, or punished for crime." Cal. Civ. Code § 46; Burrill, 217 Cal. App. 4th at 382. Slander per se includes calling an individual a thief or a crook or making statements to the effect that a plaintiff had stolen money. Albertini v. Schaefer, 97 Cal. App. 3d 822, 829-30 (1979); Douglas v. Janis, 43 Cal. App. 3d 931, 939 (1974). 145. Libel per se is not so limited, and it is found where the publication exposes a plaintiff "to contempt and ridicule on its face." Smith, 72 Cal. App. 4th at 651; Burrill, 217 Cal. App. 4th at 382-83. Nonetheless, it is well-established that false accusations of dishonesty, thievery, or embezzlement constitute libel per se as well.Burrill, 217 Cal. App. 4th at 383; Weinberg v. Feisel, 110 Cal. App. 4th 1122, 1127 (2003) ("[F]alse accusations of crime are libel per se.").
3. Legal standards for an IIPEA claim. 146. The elements of an IIPEA claim are the following: "'(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.'" Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1153 (2003) (quoting Westside Center Assocs. v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 521-22 (1996)). 147. A claim of IIPEA also requires a wrongful act. Indeed, in Korea Supply Co., which this Court relied upon in deciding Stewart's motion for summary judgment, the California Supreme Court held, "[T]he tort of interference with prospective economic advantage remain the same, except that the third element also requires a plaintiff to plead intentional wrongful acts on the part of the defendant designed to disrupt the relationship." Korea Supply Co., 29 Cal.4th at 1154 (emphasis added). 148. Thus, the independently wrongful act "must be wrongful by some legal measure, rather than merely a product of an improper, but lawful, purpose or motive." Korea Supply Co., 29 Cal.4th at 1159 n. 11 & 1153 ("[A] plaintiff . . . must plead and prove . . . the defendant's conduct was 'wrongful by some legal measure other than the fact of interference itself.'" (quoting Delia Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 393 (1995))).
C. Kauanui's defamatory statements were willful and malicious injuries.
1. Kauanui's statements were defamatory per se. 149. In her cross-complaint in the underlying San Diego Superior Court action, Stewart alleged that Kauanui's statements that Stewart "embezzled money, was being investigated for embezzling money, and stole clients from" Jet Set were defamation per se. Ex. 19 ¶ 48. Kauanui repeatedly made such written and verbal publications about Stewart. See supra Paragraphs 49-88. 150. Numerous individuals, including Almazan, Antipala, Diaz, Jackson, Lundgren, Morales, and Wheeler, have testified or declared that Kauanui told them that Stewart embezzled or stole funds from Jet Set. Kauanui admitted that she told Bryant that she suspected Stewart of embezzlement. Kauanui also published her accusation that Stewart "arranged for payment related to modeling jobs involving child models exclusively contracted with [Jet Set] to be directed to STEWART." Ex. 19 ¶ 42 (Jet Set's first amended complaint, which was filed at Kauanui's direction and approval). See supra Paragraphs 49-88. Such statements constitute defamation per se. See Burrill, 217 Cal. App. 4th at 382; see also Albertini, 97 Cal. App. 3d at 829-30; Douglas, 43 Cal. App. 3d at 939; Kelly v. General Tel. Co., 16 136 Cal. App. 3d 278, 284 (1982) (accusing someone of a crime is defamatory per se); Livitsanos v. Superior Court, 2 Cal.4th 744, 748 (1992) (accusations of embezzlement are defamatory per se). 151. Additionally, Kauanui sent emails accusing Stewart, Jet Set's only past kids booker, of embezzlement. These include the emails that Kauanui sent to Stowasser, Bryant, and Froelich. See supra Paragraphs 50-52, 59-62. Kauanui admitted that she sent an emails to several dozen former Jet Set clients, which accused Stewart of financial and moral improprieties. Exs. 13-14; Kauanui Dep. 233:15-20. Such emails and letters constitute defamation per se. See Livitsanos, 2 Cal.4th at 748 (finding defamation per se where"Cubaleski told Continental employees and others that $800,000 was 'missing' from Continental, implying that plaintiff had stolen the money."); see also Burrill, 217 Cal. App. 4th at 382; Albertini, 97 Cal. App. 3d at 829-30; Douglas, 43 Cal. App. 3d at 939. 152. With respect to Kauanui's accusations that Stewart was under investigation for embezzlement, Kauanui's emails to Bryant, Froelich, and Stowasser plainly state that Stewart is under investigation for stealing money. Exs. 10-12. Moreover, Kauanui admitted that she "intentionally made statements to parents of former Jet Set child talent that STEWART was being investigated for embezzlement after the child talent was represented or seeking representation by Stewart." Exs. 35-36, Request for Admission No. 9; Exs. 35-36, Request for Admission No. 17. These accusations also constitute defamation per se. See Burrill, 217 Cal. App. 4th at 382; see also Albertini, 97 Cal. App. 3d at 829-30; Douglas, 43 Cal. App. 3d at 939. 153. With respect to Stewart stealing clients, Jet Set's first amended complaint against Stewart and Zuri, which was filed at Kauanui's direction, is largely predicated on its allegations that Stewart unlawfully solicited Jet Set's clients to leave Jet Set and join Zuri. See Ex. 18 ¶ 50 (alleging Stewart "intentionally set forth to steal the representation contracts away from JET SET"); see also id. ¶¶ 14-16, 18-19, 27, 33, 39. Morales also declared that Kauanui told her that Stewart stole clients from Jet Set. Kauanui even admitted that she made this accusation about Stewart. Exs. 35-37, Request for Admission No. 19 (admitting that she made "statements to persons who provide services to talent agencies that STEWART had stolen clients from Jet Set"). Accusing Stewart of stealing clients and unlawful solicitation also constitutes defamation per se. See Albertini, 97 Cal. App. 3d at 829-30 (imputing dishonesty or a calling person a thief or crook constitutes defamation per se); see also Burrill, 217 Cal. App. 4th at 382; Douglas, 43 Cal. App. 3d at 939. 154. Kauanui's defamatory publications were plainly false. She admitted that Stewart did not embezzle from Jet Set, she conceded that Stewart did not steal Jet Set clients when she voluntarily dismissed with prejudice Jet Set's complaint against Stewart, and Kauanui provided absolutely no evidence that she—let alone anyone—ever investigated Stewart for embezzlement. See supra Paragraphs 6, 92-101, 104-109, 124. 155. Additionally, Kauanui's defamatory statements were unprivileged, as her statements fall do not fall within the ambit of "privileged publication[s] or broadcast[s]," which are enumerated in Section 47 of the California Civil Code. 156. Accordingly, the record conclusively demonstrates that there were more than sufficient facts to support the Superior Court's finding that Kauanui was liable to Stewart for defamation per se.
2. Kauanui's defamatory per se statements were willful and malicious.
a. Defamation per se is, as a matter of law, willful and malicious. 157. Numerous courts have held that judgments stemming from defamation per se claims are, as a matter of law, willful and malicious and thereby not dischargeable in bankruptcy. See Peck, 295 B.R. at 361 (finding slander per se willful because the debtor accused the creditor of a crime for the debtor's gain); see also Kennedy v. Mustaine (In re Kennedy), 249 F.3d 576, 583 (6th Cir. 2001) ("[T]he statements at issue are defamation per se under Michigan law, meaning that the courts presume that the speakers make such statements knowing that substantial harm or injury will result."); Star's Edge, Inc. v. Braun (In re Braun), 327 B.R. 447, 448 (Bankr. N.D. Cal. 2005) ("[T]he portion of the judgment based on libel per se is nondischargeable."); Nat'l Sign & Signal v. Livingston, 422 B.R. 645, 658 (W.D. Mich. 2009); Muse v. Day (In re Day), 409 B.R. 337, 343 (Bankr. D. Md. 2009) (citing Kennedy with approval and explaining "[w]hen state law does not presume intent to cause injury from statements that are defamatory per se, willfulness becomes a question of fact to be determined at trial"). 158. The Sixth Circuit and Ninth Circuit apply the same subjective standard in analyzing willful injury pursuant to § 523(a)(6). Su, 290 F.3d at 1145 (ratifying and adopting the Sixth Circuit's subjective standard approach as to § 523(a)(6)'s willful injury requirement). Additionally, the elements of defamation per se under Michigan law are substantially similar to California law: "(1) a false and defamatory statement concerning the plaintiff, (2) an unprivileged publication to a third party, (3) fault amounting to at least to negligence on the part of the publisher, (4) . . . actionability of the statement irrespective of special harm." Kennedy, 249 F.3d at 582 (quoting Burden v. Elias Brothers Big Boy Rests., 613 N.W.2d 378, 381 (Mich. Ct. App. 2000)). 159. Accordingly, as a matter of law and for the reasons previously set forth in, the Superior Court judgment for Kauanui's defamation per se is nondischargeable.
b. Kauanui was aware that injury was substantially certain when she intentionally tried to lure away Stewart's clients through her defamatory statements. 160. Even if defamation per se judgment was not nondischargeable as a matter of law, the evidence and testimony support a determination that Kauanui's statements were willful and malicious. 161. It is well-established that a debtor "is charged with the knowledge of the natural consequences of his actions," Ormsby, 591 F.3d at 1206, when a court determines whether a debtor "had a subjective motive to inflict the injury" or "believed that injury was substantially certain to occur." Jercich, 238 F.3d at 1208. Courts have consistently held that willful acts, as defined by § 523(a)(6), include a debtor's intentional attempts to lure away a creditor's clients or business. Hernandez v. Powers & Effler Ins. Brokers (In re Hernandez), No. EC-10-1025-JuMkZi, 2011 Bankr. LEXIS 887, at *17 (B.A.P. 9th Cir. 2011); Burks v. Bailey (In re Bailey), 499 B.R. 873, 894 (Bankr. D. Idaho 2013). 162. Overwhelming evidence supports a finding that Kauanui actively defamed Stewart in order to prevent Jet Set child clients from going with Stewart or leaving Jet Set. Examples of such intentionally injurious behavior include the following:
a. Kauanui admitted that (1) she assumed that parents of former Jet Set clients had placed their children with Stewart, (2) she would ask parents whether they left Jet Set in order to be represented by Stewart, (3) she sent them letters and emails to persuade them to return to Jet Set, and (4) those letters were "specifically aimed at accusing Lindsay Stewart of improprieties." Kauanui Dep. 233:15-20; Exs. 13-14;163. This voluminous evidence establishes that Kauanui's defamatory statements were intended to harm Stewart's business in order to improve Jet Set's prospects. It "would have been immediately obvious to anyone in [Kauanui's] position" that making those criminal accusations about Stewart would harm her business, and therefore Kauanui intended to injure Stewart within the meaning of § 523(a)(6). See Serrao v. Picanco (In re Picanco), No. 03-00129, 2003 Bankr. LEXIS 2153, at *5 (Bankr. D. Haw. 2003) (Faris, J.). 164. In Peck, the debtor falsely accused the creditor, who was the debtor's landlord, of a crime. 295 B.R. at 358. The court determined the accusation was slander per se and thereby injured the creditor's reputation. Id. at 363, 365. The court then determined the debtor willfully injured the creditor within the meaning of § 523(a)(6) because the fact that the debtor wanted to accuse the creditor of a crime so that she could remain on the property "would indicate that Debtor knew of the falsity" of the allegation. Peck, 295 B.R. at 365. Here, like in Peck, Kauanui made defamatory accusations for her benefit. She admitted that she made accusations about Stewart to prevent clients from signing with Zuri, to have them return to Jet Set, and to protect her reputation. See supra Paragraphs 110-106. 165. In Bailey, the court found the debtor's intentional attempts to lure away clients was willful, and the court explained, "Bailey clearly intended to bolster his own business. It is unclear whether Bailey did so with a primary motivation or goal to injure Plaintiffs, but the Court concludes Bailey was aware that injury was substantially certain to result from his conduct. . . . Bailey knew [they] were EAM clients, and that Plaintiffs had an economic expectancy in the income from managing those clients' investments. He also knew that by bringing EAM clients to Concierge where he would share financially, he would necessarily be taking those clients from EAM and Burks, thus injuring them. Therefore, Plaintiffs established the injury was willful." 499 B.R. at 894. Here, Kauanui admitted to making (defamatory) statements about Stewart in order to protect her business interests at Jet Set. See supra Paragraphs 110-116. It is overwhelmingly evident that Kauanui made those defamatory statements with the "inten[t] to lure customers away from [Stewart] for [her] benefit and to the detriment of [Stewart]." Hernandez, 2011 Bankr. LEXIS 887, at *17; Research Data Grp., Inc. v. Snegosky (In re Snegosky), No. 08-01709, 2010 Bankr. LEXIS 2088, at *7-8 (Bankr. D. Haw. 2010) (Faris, J.). 166. A finding that Kauanui's defamatory statements about Stewart were intended to harm Stewart is supported by the fact that Kauanui only defamed Stewart to persons within the modeling industry. When Kauanui communicated with law enforcement, private investigators, accountants, or persons in the financial industry in 2008 and 2009, Kauanui never stated that Stewart was ever a suspect, instead Kauanui only implicated Bennett. See supra Paragraphs 102-109. 167. Moreover, given Kauanui's admission that Stewart did not embezzle and given her "vague and unpersuasive" testimony that Stewart was under investigation for embezzlement, Kauanui knew or "subjectively had to know" that her accusations about Stewart were false when she made them. See Gateway One Lending & Fin. LLC v. Raziyan (In re Raziyan), 501 B.R. 387, 391 (Bankr. C.D. Cal. 2013); see supra Paragraphs 92-h101, 104-109. 168. Kauanui therefore had a subjective motive to cause Stewart's injury and her defamatory statements were willful under the definition of § 523(a)(6).
b. Kauanui only made defamatory statements after Stewart left Jet Set, see supra Paragraphs 46-88;
c. Kauanui admitted she knew Stewart did not embezzle and provided no
evidence anyone ever investigated Stewart for embezzlement, see supra Paragraphs 92-101, 104-109;
d. Kauanui repeatedly told people in the modeling industry that Stewart was involved in an embezzlement conspiracy, stole money, stole clients, and was under investigation for embezzlement, see supra Paragraphs 46-88;
e. Kauanui admitted that she made accusations about Stewart to prevent clients from signing with Zuri, to have them return to Jet Set, and to protect her reputation, see supra Paragraphs 110-116;
f. Kauanui admitted that she spoke to a SAG representative regarding Stewart's SAG application and told the SAG representative about her lawsuit against Stewart after the representative inquired about Stewart's character, see supra Paragraphs 77-79, 116;
g. Kauanui admitted that, "after the child talent was represented or seeking representation by STEWART," she "intentionally made statements to parent of former Jet Set child talent" that Stewart (1) "was being investigated for embezzlement," Exs. 35-36, Request for Admission No. 9, and (2) "had stolen client from Jet Set" Exs. 35-37, Request for Admission No. 11;
h. Stewart testified extensively as to how casting directors and clients refused to conduct business with Zuri or her due to Kauanui's defamation, see supra Paragraph 74-76;
i. Kauanui only communicated her defamatory suspicions and accusations about Stewart to persons within the modeling industry, see supra Paragraphs 46-88; and
j. Kauanui never told law enforcement, private investigators, accountants, or persons in the financial industry that Stewart was ever a suspect, instead Kauanui only implicated Bennett, see supra Paragraphs 102-109.
c. Kauanui's defamatory per se statements, which were made without just cause or excuse, were malicious. 169. Where a tortious act "was willful and necessarily caused injury . . . , the court can imply malice." See Choice Hotels Int'l, Inc. v. Wright (In re Wright), 355 B.R. 192, 213 (Bankr. C.D. Cal. 2006). 170. "A libelous act, by its nature, is self-evidently wrongful and is committed by an intentional act of publication." Jett v. Sicroff (In re Sicroff), 401 F.3d 1101, 1106 (9th Cir. 2005). 171. As described supra Paragraphs 46-88, 149-156, Kauanui's publications about Stewart were defamatory per se, and accordingly, the malice requirement pursuant to § 523(a)(6) is easily met. Indeed, the Ninth Circuit's decision in Sicroff, which examined whether defamatory per se statements were malicious under § 523(a)(6), is directly on point and controlling. In Sicroff, the Ninth Circuit explained, "Because we are persuaded that at least some of Sicroff's statements were libelous, we also conclude that the first two criteria of 'malicious injury' are met." 401F.3d at 1106. The court continued, "The third criterion—that the action necessarily cause injury—is also met because Sicroff's statements were directed at Jett's professional reputation and, therefore will necessarily harm him in his occupation. Ibid.; see id. at 1105 (explaining the statements charged Jett with "serious misbehavior" and "professional misconduct"). Likewise, Kauanui's comments were directed towards Stewart's professional reputation and accused her of committing the crime of embezzlement. Kauanui's defamatory statements thereby easily meet the third criterion. Id. at 1106; see also Khaligh v. Hadaegh (In re Khaligh), 338 B.R. 817, 831 (B.A.P. 9th Cir. 2005) (finding defamatory statements necessarily satisfied the first three elements of malicious); Peck, 295 B.R. at 365 (holding the debtor acted maliciously because she "subjectively intended to slander [the creditor] with the molestation accusation"). 172. With respect to the final element for malice under § 523(a)(6), there is no just cause or excuse for Kauanui's defamatory comments. Subjective elements, such as compassion or depression, cannot justify or excuse otherwise wrongful behavior. Bammer, 131 F.3d at 793. In Bammer, an en banc panel of the Ninth Circuit found, "We can think of no reason consistent with section 523 and the purposes of the Bankruptcy Code to permit a standardless, unmeasurable, emotional, and nonlegal concept such as compassion to negate an identifiably and legally wrongful act." Id. at 793; Sicroff, 401 F.3d at 1106. 173. Additionally, although Kauanui has claimed that she suffered from PTSD in 2008 and 2009, she provided absolutely no evidence that she actually suffered from PTSD at that time. Nor did she provide any evidence that such a diagnosis would exclude her defamatory statements made during that time. Moreover, she also admitted that she was thinking clearly in August and September 2008, which is when the bulk of the defamatory statements were made. See supra Paragraphs 117-119. Thus, she has "never asserted any cause or excuse for her conduct," her defamatory statements were malicious. Snegosky, 2010 Bankr. LEXIS 2088, at *8; Khaligh, 338 B.R. at 831 ("[T]here is no assertion that the defamation by Khaligh was directed towards a goal that might implicated just cause or excuse."). 174. Accordingly, the evidence and testimony presented establishes by a preponderance of the evidence that Kauanui's defamatory publications were willful and malicious pursuant to § 523(a)(6), and thereby the Superior Court judgment awarding Stewart damages for Kauanui's defamation is not dischargeable in bankruptcy.
D. Kauanui's liability for IIPEA is nondischargeable because her conduct was willful and malicious.
1. Because Kaunaui's defamatory statements were willful and malicious, her IIPEA conduct was inherently willful and malicious. 175. A claim of IIPEA requires a wrongful act. In Korea Supply Co., the California Supreme Court held, "[T]he tort of interference with prospective economic advantage remain the same, except that the third element also requires a plaintiff to plead intentional wrongful acts on the part of the defendant designed to disrupt the relationship." Korea Supply Co., 29 Cal.4th at 1154 (emphasis added). Thus, the independently wrongful act "must be wrongful by some legal measure, rather than merely a product of an improper, but lawful, purpose or motive." Id. at 1159 n.11. 176. Here, defamation was Kauanui's only independently wrongful act that Stewart alleged before the Superior Court. Thus, for the Superior Court to find either that Kauanui was liable under defamation or under IIPEA, that court inherently was required to determine that Kauanui defamed Stewart. See Conte v. Jakks Pac., Inc., No. 12-CV-00006-LGO-GSA, 2012 U.S. Dist. LEXIS 174716, at *17 (E.D. Cal. Dec. 10, 2012) (finding a defamatory statement meets the wrongful act IIPEA prong); see also PMC, Inc. v. Saban Entm't, 45 Cal. App. 4th 579, 603 (1996), rev'd on other grounds, 29 Cal.4th 507 (2009); cf. Sidense Corp. v. Kilopass Tech. Inc., No. C 11-04112 SI, 2012 U.S. Dist. LEXIS 115904, at *41 (N.D. Cal. Aug. 16, 2012) (granting summary judgment on the IIPEA claim because the court "already found that the statements were not defamatory"). Accordingly, when the Superior Court entered judgment in favor of Stewart on her cross-complaint for IIPEA, that court found that Kauanui made defamatory and false statements about Stewart. 177. Because Kauanui's liability for defamation was a condition precedent before a court could find her liable for the IIPEA claim, should this Court determine that Kauanui's defamatory statements were willful and malicious, Kauanui's IIPEA conduct must also be willful and malicious. For the reasons previously set forth, Kauanui's statements were willful and malicious.
2. Kauanui willfully and maliciously interfered with Stewart's prospective economic advantage. 178. Kauanui is liable for IIPEA. It is undisputed that Stewart had economic relationships with clients and casting directors. See supra Paragraphs 46-49, 74-76. Kauanui admitted that she knew that parents of child talent were signing with Zuri. See supra Paragraphs 46-49. Kauanui admitted that she emailed and called parents of child talent, which were defamatory publications, with the intent of luring them back to Jet Set and away from Zuri. See supra Paragraphs 46-88, 110-116. And, Stewart established that people in the modeling and acting industry, including parents and casting directors, refused to conduct business with her due to those defamatory publications, which caused her financial harm. See supra Paragraphs 74-76. Accordingly, the San Diego Superior Court determined Kauanui was liable for IIPEA. Korea Supply Co., 29 Cal.4th at 1153; Westside Center Assocs., 42 Cal. App. 4th at 521-22. 179. The evidence and testimony supporting Stewart's IIPEA claim against Kauanui are indistinguishable from Stewart's defamation per se claim. 180. Indeed, Kauanui's motive for making her defamatory publications was to interfere with Stewart's new business and to prevent third parties from working with Zuri. See supra Paragraphs 46-88, 102-116. Accordingly, based on the case law authority described in supra Paragraphs 149-161, 163-167 Kauanui's intentional interference injuries were willful and malicious. 181. Additionally, in Bane v. Hajime Sorayama (In re Bane), the court explained that, in finding that defendant liable for IIPEA, a court must determine: "(1) did Plaintiff have an economic relationship with third parties about which Debtor was aware, (2) did Debtor knowingly and deliberately disrupt Plaintiff's economic relationship with others, (3) was the disruption wrong by some legal measure other than the interference itself, and (4) did the disruption cause economic harm to Plaintiff?" No. CC-09-1108-MoPaH, 2010 Bankr. LEXIS 3067, *22 (B.A.P. 9th Cir. Jan. 15, 2010). The court in Bane then explained that these findings on an IIPEA are issues a "bankruptcy court would consider in determining if Debtor's actions constituted a willful and malicious tortious injury." Ibid. Thus, because Kauanui (1) knew third parties were conducting business with Stewart and Zuri, (2) admitted that she spoke with former Jet Set clients to convince them return to Jet Set and not sign with Stewart, (3) she defamed Stewart in her attempt to convince third parties to return to Jet Set, and (4) Stewart demonstrated that she was financially harmed. See supra Paragraphs 46-116. 182. In Hernandez, the court determined that the debtor's IIPEA claim was not dischargeable because the debtors "intended to lure customers away from [the creditor] for their benefit and to the detriment of [the creditor]." 2011 Bankr. LEXIS 887, at *17. Like in Hernandez, Kauanui admitted that she knew that Jet Set's former clients began signing with Stewart's agency, and thus Kauanui "knew that [Stewart] had contracts with various customers and intentionally sent out" publications "in an attempt to disrupt" those relationships. Ibid.; Bio Prime Enters. v. Walker (In re Walker), No. 00-10958-B7, 2006 Bankr. LEXIS 4688 (Bankr. S.D. Cal. 2006) (finding the injury was willful because the debtor knew of the creditor's clients, which meant "had to know" that, "if [he] contracts directly with Bio Prime's client, Bio Prime will lose that business); see supra Paragraphs 46-49, 92-116. 183. For the reasons previously set forth, Kauanui's IIPEA actions were willful and malicious and are not dischargeable.
E. The punitive damages award is nondischargeable.
184. Stewart secured a default judgment in the amount of $2,560,000, including $500,000 in punitive damages. Ex. 38. 185. The punitive damages are part of the Superior Court's judgment for Stewart's defamation per se and IIPEA claims, and they are therefore nondischargeable. See Bane, 2010 Bankr. LEXIS 3067 at *27-28 ("We are affirming the bankruptcy court's decision that the compensatory damages from both of these torts are nondischargeable. As the punitive damages relate to and flow from either one or both of these torts, they are nondischargeable."); see also Khaligh, 338 B.R. at 822-23 (affirming a finding that a $100,000 judgment, which included $25,000 in punitive damages, was nondischargeable).
IV. PROPOSED ULTIMATE FINDINGS
186. The San Diego Superior Court judgment stemmed from both Stewart's claims of defamation per se and IIPEA. 187. The evidence supports a determination that Kauanui willfully and maliciously, as defined by § 523(a)(6), injured Stewart when she committed defamation per se and IIPEA. 188. The Superior Court judgement that Stewart secured against Kauanui in the amount of $2,560,000, which included $500,000 in punitive damages, is nondischargeable. DATED: June 26, 2015
Respectfully submitted,
HADSELL STORMER & RENICK LLP
By /s/ - Acrivi Coromelas
Acrivi Coromelas, Esq.
[California State Bar #298305]
Attorneys for Plaintiff-Creditor
LINDSAY STEWART