The Court granted the Defendant/Debtor's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim for relief that is plausible on its face, and granted the Plaintiffs leave to amend the complaint. The Plaintiffs alleged nondischargeability of a debt pursuant to 11 U.S.C. § 523(a)(6) based on unliquidated state-law causes of action: tortious interference with prospective economic advantage, tortious interference with contract, libel, conspiracy, and violation of California's Unfair Competition Law. The claim for violation of California's Unfair Competition Law was dismissed with prejudice as that cause of action is limited to equitable,injunctive relief, and may not be the basis of a § 523(a)(6) dischargeability complaint.
The basis for the complaint was a series of allegedly defamatory emails sent by the Defendant/Debtor, who was a former member of the board of directors and a current shareholder of the corporate Plaintiff, to other investors and board members. The counts in the complaint related to torious interference with contract and tortious interference with prospective economic advantage were determined by the Court to lack elements necessary to constitute an injury under California law, and therefore did not result in a debt that could be subject to nondischargeability under § 523(a)(6). The counts of the complaint that were plausible under California law, libel, unlawful or unfair business practices, and conspiracy, were analyzed to determine if they constituted claims for willful and malicious injury under the § 523(a)(6) dischargeability exception. The Plaintiffs' allegations that Hunter made his statements "recklessly" and "in knowing disregard for their truth" may be sufficient to obtain a judgment for defamation under California law, but that mental state does not plausibly allege an intent to injure sufficient to render that judgment nondischargeable under § 523(a)(6). As Plaintiffs did not plead a willful and malicious injury for the tort of defamation, their pleading for conspiracy suffers from the same deficiency and is not alleged to be a willful and malicious injury subject to nondischargeability under § 523(a)(6).