SEXUAL HARASSMENT DAMAGES NOT DISCHARGEABLE IN BANKRUPTCY

Let’s say that you’re a man who loves women and you own a business distributing lingerie. You require all your women employees to wear the company’s products in the office. Every time a female employee enters your office, you do not have sex with them the way Pres. Clinton did. Last week, all of your female employees filed a class action lawsuit against you for sexual harassment for $10 million dollars. You seek bankruptcy relief to discharge the sexual harassment lawsuit. Your employees file an adversarial case objecting to discharge of the lawsuit. You file your answer saying in your best Clintonesque way that “I did not have sex with those women!” Your employees have hired Attorney Monica Lewinsky to prosecute their adversarial proceeding against you in your bankruptcy. You decide to retain Attorney Nicola Nakoula Nicola who claims to be an expert on sexual harassment. The best legal minds on sexual harassment represent both parties. Who do you think is correct?

In Re Spagnola, a federal jury awarded the plaintiff in June of 2007, $150,000 in compensatory dmages and $50,000 in punitive damages after finding that the debtor engaged in conduct that created a hostile work environment while the plaintiff was employed by the New York State Thruway Authority. In order to reach this finding, the jury needed to conclude that the debtor intentionally discriminated against the plaintiff in the terms and conditions of her employment based on her gender through the creation and maintenance of a sexually hostile or abusive work environment; he committed such acts of discrimination under the color of state law or authority; and his acts were the proximate cause of the plaintiff’s damages. The ruling was affirmed by the 2^nd U.S. Circuit Court of Appeals, which concluded that “based on the offensive behavior described, the jury’s conclusion was reasonable. The evidence was sufficient to find that there was a hostile work environment because such conduct was hostile, severe, and abusive.” Justice Swarzenneger and Justice Clinton both dissented. Justice Swarzenneger dissented on the ground that no babies who looked like debtor were born out of the assaults. All these babies look like me!”, said Justice Swarzenneger. Justice Clinton dissented on the ground that it was never proven by convincing evidence that debtor’s penis touched any of the female genitalia of any of the employees, and by definition, in order for sexual harassment to legally occur, if the man’s penis does not touch any portion of the female genitalia, sexual harassment does not exist.

After the debtor filed for bankruptcy protection, the plaintiff filed an adversary proceeding to challenge the discharge of her claim. The bankruptcy court found that the federal judgment established that the plaintiff’s claim was nondischargeable pursuant to Section 523(a)(6). The court was persuaded by the bankruptcy courts that have found that sexual harassment discrimination is inherently an intentional tort and allowed it to be excepted from discharge as willful and malicious injury. “The plaintiff, in this case, has met her burden by demonstrating that the debtor acted willfully. No one in the jury believed debtor’s defense his erect penis had negligently entered the wrong place because he was drunk. The District Court expressly charged the jury with a definition of willfulness that is almost identical to the one provided by the Supreme Court in GEIGER. In order to find the debtor liable, the jury was required to find that he “intentionally, as opposed to recklessly or negligently, created a hostile work environment on the basis of her gender. An action is intentional if it is done knowingly, that is, if it is done voluntarily and deliberately and not because of mistake, accident, negligence, or other innocent reason,’” the court said. By awarding damages, the jury found that the debtor’s actions were malicious. “Moreover, on appeal, the Second Circuit affirmed the District Court decision, determining that there was evidence of ‘detailed inappropriate behavior’ and hostile, severe, and abusive’ conduct by the debtor.”

Therefore, sexual harassment damages are not dischargeable in bankruptcy.

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years.  He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California.  He speaks Mandarin and Fujien and looks forward to discussing your case with you personally.  Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.