Case 17-01034-R Document 14 Filed in USBC ND/OK on 01/24/18 Page 1 of 21 UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OKLAHOMA IN RE: ) Filed/Docketed ) Jan 24, 2018 OSLIN, DEBORAH JOYCE, ) ) Case No. 17-11214-R Debtor. ) Chapter 7 ________________________________________________________________________ MAXINE ARMSTRONG, as ) Guardian of the Person and Estate ) of Adrian Armstrong, ) ) Plaintiff, ) ) vs. ) Adv. No. 17-1034-R ) DEBORAH OSLIN, ) ) Defendant. ) ORDER GRANTING MOTION TO DISMISS CLAIMS UNDER 11 U.S.C. § 523(a)(6) AND § 523(a)(9) Before the Court is the Motion to Dismiss Claims Under 11 U.S.C. § 523(a)(6) and § 523(a)(9) (Adv. Doc. 5) (“Motion to Dismiss”) filed on November 6, 2017, by Defendant/Debtor Deborah Oslin (“Oslin”), and the response and brief in support (Adv. Doc. 9) (“Response”) filed on November 20, 2017, by Plaintiff Maxine Armstrong, as Guardian of the Person and Estate of Adrian Armstrong (“Armstrong”). On October 11, 2017, Armstrong filed a Complaint . for Determination of: 1) Non- Dischargeability; and 2) Objections to Debtor’s Discharge, Pursuant to Sections 523 and 727, Respectively, of the Bankruptcy Code (Adv. Doc. 1) (“Complaint”). Oslin seeks dismissal only of the claims asserted under 11 U.S.C. § 523. Case 17-01034-R Document 14 Filed in USBC ND/OK on 01/24/18 Page 2 of 21 I. Jurisdiction The Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§ 1334, 157(a), and 157(b)(1) and (2)(I) and (J), and Local Civil Rule 84.1(a) of the United States District Court for the Northern District of Oklahoma. II. Motion to Dismiss Standard Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a party may move to dismiss for “failure to state a claim upon which relief can be granted.”1 Under Rule 8 of the Federal Rules of Civil Procedure, a “pleading that states a claim for relief must contain: . a short and plain statement of the claim showing that the pleader is entitled to relief.”2 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to <state a claim to relief that is plausible on it face.’”3 “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”4 “The plausibility standard is not akin to a <probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”5 1Fed. R. Civ. P. 12(b)(6), made applicable in adversary proceedings by Bankruptcy Rule 7012(b). 2Fed. R. Civ. P. 8(a)(2), made applicable in adversary proceedings by Bankruptcy Rule 7008. 3Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). 4Id. (citation omitted). 5Id. (citation omitted). 2 Case 17-01034-R Document 14 Filed in USBC ND/OK on 01/24/18 Page 3 of 21 Although the Court must accept as true all factual allegations, it must also ignore conclusory material, including legal conclusions couched as factual allegations, as “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”6 Based upon its “judicial experience and common sense,”7 the Court must then determine whether the well-pleaded factual allegations “plausibly give rise to an entitlement to relief.”8 To state a claim that a debt is excepted from discharge under 11 U.S.C. § 523(a)(6), the well-pleaded facts must contain sufficient detail to support a plausible inference that the debtor willfully and maliciously injured the plaintiff or the plaintiff’s property.9 To state a claim that a debt is excepted from discharge under 11 U.S.C. § 523(a)(9), a plaintiff must plead facts from which a fact-finder could plausibly infer that the debtor operated a motor vehicle; such operation was unlawful because the debtor was intoxicated from alcohol, drugs or another substance; and such operation of the vehicle by the debtor caused a death or personal injury.10 III. Summary of Well-Pleaded Allegations Relevant to the Section 523 Claims For the purposes of determining the Motion to Dismiss, the following allegations and reasonable inferences are taken as true: 6Id. (citation omitted). 7Id. at 679 (citation omitted). 8Id. 911 U.S.C. § 523(a)(6). 1011 U.S.C. § 523(a)(9). 3 Case 17-01034-R Document 14 Filed in USBC ND/OK on 01/24/18 Page 4 of 21 Armstrong is the court-appointed guardian of her adult son, Adrian, who was severely injured when an intoxicated minor driver ran a red light and crashed into the vehicle in which Adrian was a passenger. Employees of the Vegas Club (“Club”), a bar managed by Oslin, served alcohol to the minor driver on the night of, and prior to, the crash. Oslin was and is the sole shareholder of the Vegas Corporation (“Corporation”), the entity that owned and operated the Club. Armstrong filed a lawsuit in Tulsa County District Court against Oslin and the Corporation, alleging that both were liable for Adrian’s injuries under Oklahoma’s “dram shop” law because they illegally sold and served alcohol to a minor (the “State Court Action”). In June 2017, after a bench trial on the merits, Armstrong, on behalf of Adrian, obtained a judgment in the State Court Action against Oslin and the Corporation jointly in an amount in excess of $23 million. In its Journal Entry of Judgment Nunc Pro Tunc and Order for Costs (“Journal Entry of Judgment”), the state court found that the minor driver was allowed entry into the Club without showing identification, and that a Club employee served intoxicating beverages to the minor.11 The court concluded that the Club “owed a duty of ordinary care” to Adrian to refrain from serving alcohol to minors; the Club breached the duty by allowing the minor into the Club and serving her liquor; the minor caused a serious accident that resulted in severe injuries to Adrian; and the minor’s consumption of alcohol was the proximate cause of Adrian’s injuries.12 Adrian was awarded damages for 11Journal Entry of Judgment Nunc Pro Tunc and Order for Costs (“JEJ”), Exhibit A to Complaint, at 2, ¶¶ 5-6. 12JEJ at 6. 4 Case 17-01034-R Document 14 Filed in USBC ND/OK on 01/24/18 Page 5 of 21 past medical expenses, permanent injury and impairment, pain and suffering, future medical expenses, and lost wages.13 The judgment was not appealed and is a final order. At all relevant times, Oslin was the sole owner, officer, and director of the Corporation, and was the manager of the Club.14 Oslin was responsible for operating the Club, including hiring and firing employees. She “made all the rules, and . enforced them.”15 The Corporation’s corporate charter had been suspended for almost two years at the time the accident that injured Adrian occurred.16 Oslin “failed to maintain and manage Vegas Corporation as an entity separate and distinct from its ownership.”17 The state court concluded that due to Oslin’s failure to “maintain separate personalities between herself individually” and the Corporation, Oslin was not entitled to protection of the corporate veil and was personally liable for the injuries suffered by Adrian.18 Armstrong alleges that the minor driver had been to the Club before, and that the minor driver was “not challenged at the door, or carded at the table.”19 The state court found that Oslin had a “lax attitude toward owning and operating” the Club, that “she did not care 13JEJ at 3-4, ¶¶ 16-25, and at 6-7. The trial court also awarded pre-judgment interest on the damage award. 14JEJ at 5, ¶ 30. 15Complaint at 3, ¶ 17. 16JEJ at 5, ¶ 31. 17Complaint at 3, ¶ 18. 18JEJ at 7. 19Complaint at 4, ¶ 21. 5 Case 17-01034-R Document 14 Filed in USBC ND/OK on 01/24/18 Page 6 of 21 who was working so long as the shifts were covered,” and that she “had no way to contact employees that worked at the Vegas Club . the night alcohol was served to a minor.”20 Armstrong alleges that Oslin filed bankruptcy due to her “inability to pay [Adrian] for the lifetime of misery and medical expenses that has been foisted upon Adrian by [Oslin’s] employees’ gross negligence in serving liquor to underage patrons, and by [Oslin’s] own gross negligence in her management, supervision, and operation of her tavern[.]”21 Armstrong further alleges that Oslin’s “gross negligence in the management of [the Club] resulted in the unlawful service of liquor and beer to the minor . which resulted in the horrific injuries suffered by [Adrian].”22 Armstrong contends that the “conduct which created [Oslin’s] debt to [Adrian] was willful and malicious and intentional” and that “[t]he conduct and the results that are described in [the Journal Entry of Judgment] meet the requirements for non-dischargeability that are set forth in §523(a)(6).”23 In addition, based upon the allegations summarized above, Armstrong contends that “[w]hen Congress enacted §523(a)(9), it made drunken drivers liable for life for their bad judgment. Congress did not intend thereby to exclude from the ambit of this statute the bar 20JEJ at 5, ¶ 34. 21Complaint at 5, ¶ 27. 22Id. at 14, ¶ 88. 23Id. at 14, ¶ 89. Per Iqbal, 556 U.S.