IN RE CHANG SUP HAN Debtor.
CHANG SUP HAN, individually and dba GOLD MAINTENANCE, INC. Appellees. ALMA L. CASTRO; ANGELINA TENTATIVE ORDER MARQUEZ JUAREZ; ROSA MARIA CAMACHO FERNANDEZ, Appellants, Bankruptcy Case No. 2:11-bk-30025-RK Adversary Case No. 2:11-ap-2632-RK.
OTIS D. WRIGHT II, District Judge.
Appellants Alma Castro, Angelina Marquez Juarez, and Rosa Maria Camacho Fernandez appeal an order from the bankruptcy court discharging the debts owed them by Debtor Chang Sup Han. Han's debts arose in the context of his employment of Appellants in the janitorial-services industry-specifically, extensive violations of wage-and-hour laws and his failure to abide by his promises to pay them minimum wage. Appellants contend that the bankruptcy court erred in failing to hold that Han's debts are nondischargeable under 11 U.S.C. §§ 523(a)(2)(A) and (a)(6). As discussed below, the Court agrees that Appellants' debts are nondischargeable under § 523(a)(2)(A), and consequently REVERSES and REMANDS the matter to the bankruptcy court.
This Court has jurisdiction to hear appeals for judgments, orders, and decrees entered in intra-district bankruptcy cases referred to them under 28 U.S.C. § 157. 28 U.S.C. § 158. The judgment in this adversary proceeding is final, and was entered in a bankruptcy proceeding within this District. Accordingly, the judgment is appealable to this Court under 28 U.S.C. § 158.
Chang Sup Han has been working in the cleaning industry in the United States for twenty years. (Mem. Decision on Compl. to Determine the Dischargeability of Certain Debt ["Decision"] 11.) Han started his own janitorial-cleaning service, Gold Maintenance, Inc., approximately ten years ago. ( Id. ) Han operated Gold Maintenance and supervised each of his employees, the Appellants in this case. ( Id. at 3.) Gold Maintenance employed Castro from April 16, 2007 to October 10, 2008; Juarez from September 13, 2006 to May 4, 2008; and Fernandez from December 23, 2007 to May 4, 2008. ( Id. at 2-3.) Han fully controlled Appellants' wages, hours, and working conditions, and was directly responsible for the claimed underpayment of wages. ( Id. at 3.) Han typically required them to work thirteen to fourteen hours per night, five to seven nights per week. ( Id. )
Appellants testified at trial that Han promised to pay them "minimum wage, " but they were undercompensated based on the applicable minimum-wage rates. ( Id. ) Han never paid them for overtime or double-time hours, nor were they paid for their travel time during work hours. ( Id. ) Yet over the same 2006-2008 period that Han employed Appellants, his bank records show that he wrote over 280 checks to himself, to no addressee, or to "Cash"-in excess of $420, 000. (Appellants' Br. 7-8.) Han endorsed and cashed most of the checks himself. ( Id. at 8.)
In 2008, Appellants filed separate administrative-law claims with the California Labor Commissioner alleging Han owed them (1) unpaid wages for regular-time, overtime and double-time work, (2) unpaid wages for meal and rest periods, (3) interest on the wages under California Labor Code section 98.1, and (4) waiting-time penalties under California Labor Code section 203. (Decision 5.) On January 29, 2010, the Labor Commissioner entered separate decisions for each Appellant on these claims, which were confirmed by the Los Angeles County Superior Court. ( Id. ) The Labor Commissioner found that Appellants were employees (not independent contractors) of Gold Maintenance; had established their hours worked by their personal time records; and were entitled to unpaid wages, interest, and penalties. ( Id. at 5-6.) The Commissioner also found that Han should have known of the duty to pay the wages and volitionally failed to do so. ( Id. at 6.) Accordingly, the Labor Commissioner awarded Castro, Juarez, and Fernandez a total of $34, 323.62, $48, 253.76, and $12, 844.21, respectively. ( Id. )
On May 7, 2011, Han filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. ( Id. at 2.) On August 15, 2011, Appellants filed an adversary proceeding against Han seeking to have their Labor Code judgments deemed non-dischargeable under 11 U.S.C. §§523(a)(2)(A), 523(a)(4), and 523(a)(6). ( Id. ) The bankruptcy court held that Appellants had not shown by a preponderance of the evidence that Han's debts should be exempt from discharge under these sections. This appeal followed.
III. ISSUES ON APPEAL
Appellants argue that the bankruptcy court erred by failing to hold that: (1) Han's debts to them are nondischargeable under Bankruptcy Code section 523(a)(2)(A) as debts obtained by false pretenses, a false representation, or actual fraud; and (2) the debts are nondischargeable under Bankruptcy Code section 523(a)(6) because these debts arose from willful and malicious injury to Appellants.
IV. LEGAL STANDARD
The question of whether a claim is excepted from discharge under § 523(a)(2)(A) presents mixed issues of law and fact which this Court reviews de novo. In re Diamond, 285 F.3d 822, 826 (9th Cir. 2001). The bankruptcy court's conclusions of law are reviewed de novo and its findings of fact are reviewed for clear error. In re Hamada, 291 F.3d 645, 649 (9th Cir. 2002). A court's factual determination is clearly erroneous if it is illogical or implausible, or if it lacks "support in inferences that may be drawn from facts in the record." United ...