Michael Nifong Files for Bankruptcy: Buys Some Time and Maybe More

by Joseph Krcmar February 7 2008, 20:37

Introduction:

       Michael Nifong, the former North Carolina prosecutor made controversially famous for his rape accusations against several lacrosse players from the University of Duke, has filed for bankruptcy. [1] After resigning and being disbarred, the former D.A. filed for a Chapter 7 bankruptcy, listing liabilities in excess of 180 million dollars. [2]

     The 180 million dollars in liabilities stem from three pending prosecutorial-misconduct lawsuits, accounting for 30 million dollars in potential damages to Dave Evans, Collin Finnerty, and Reade Seligmann; the three players who were accused, and then exonerated, of raping a stripper at a team party. [3] The listed liabilities also take into consideration 30 million dollars in potential damages to three other non-indicted lacrosse players, who were never actually charged but have filed civil claims for emotional distress at the end of last year. [4]

     U.S. District Judge James Beaty has removed Nifong from the lawsuit filed by the three exonerated players while trying to organize Nifong's bankruptcy petition.  However, Judge Beaty "left open the possibility that Nifong could again become a defendant in the suit." [5] The filing of this petition places the players’ lawsuit, as well as any other civil actions against Nifong, on hold until the Judge Beaty can settle the bankruptcy issues. [6]

     The new issue that presents itself is whether the claims filed by these players will be determined dischargeable. Under 11 U.S.C.A § 523(a)(6), Nifong would not be protected by the Bankruptcy Code if a court deemed his actions to be "willful and malicious," causing injury to the claimants. [7] According to section 523, claims are nondischargeable "for willful and malicious injury by the debtor to another entity or to the property of another entity." [8] For a debt to be nondischargeable under the this exception, "both the willful and malicious elements must be shown, and without proof of both a ‘willful’ act and ‘malicious’ injury, an objection to discharge...must fail." [9] The term ‘willful’ means that nondischargeability "requires deliberate or intentional injury, not merely deliberate or intentional act that leads to injury." [10]

     Under this provision, the claimants will have to illustrate "either objective substantial certainty of injury, or subjective motive to cause harm." [11] David Rudolf, an attorney for Seligmann, stated that "he and other lawyers on the team did not plan to let Nifong hide in bankruptcy court…[and] they will argue that Nifong maliciously and intentionally went after the players long after he knew the charges were unwarranted." [12] The suit brought by Evans, Finnerty, and Seligmann contends that Nifong, the Durham police, and others, "maliciously conspired" to charge the three with rape "even though they knew that the allegations were a total fabrication." [13] Rudolf and his fellow lawyers will have the burden of proof to show that the nondischargeability exception does apply by a preponderance of the evidence. [14]

     Filing this petition for bankruptcy may have placed NiFong in a better position; as he will be able to argue to a judge rather to a jury, that his debts stem from reckless or negligent inflicted injuries. Accordingly, if Nifong is able to show that the debts arose from recklessly or negligently inflicted injuries, they will "not fall within the compass of the willful and malicious injury exception to discharge." [15] Furthermore, not even gross negligence is "a sufficient basis upon which to fasten the label of nondischargeability on the grounds that debt was incurred through willful and malicious injury." [16] However unlikely it may seem that Nifong will be able to place his actions in one of these categories, it does seem more likely that a judge would award fewer damages than a jury would. Nifong maybe delaying the inevitable, nevertheless, he has bought some time to develop his defense.

[1] Posting of Peter Lattman to Wall Street Journal, http://blogs.wsj.com/law/2008/01/15/michael-nifong-files-for-personal-bankruptcy/ (Jan. 15, 2008 17:57 EST).

[2] The Smoking Gun, Mike Nifong Bankrupt: Disgraced Duke Prosecutor lists $180M in liabilities, http://www.thesmokinggun.com/archive/years/2008/0115084nifong1.html (last visited Feb 7, 2008).

[3] Editorial, Citing bankruptcy filing, judge removes Duke lacrosse prosecutor from players' lawsuit, Daily Report, Jan. 30, 2008, http://www.dailyreportonline.com/Editorial/News/singleEdit.asp?individual_SQL=1%2F30%2F2008%4020960.

[4] Anne Blythe, Nifong out of lawsuit - for now: A judge removes the former prosecutor from a civil action until a bankruptcy action is resolved, The News & Observer, Jan 30, 2008, available at http://www.newsobserver.com/news/crime_safety/duke_lacrosse/nifong/story/911856.html [hereinafter Blythe, Nifong out of lawsuit].

[5] Id.

[6] Anne Blythe and Matt Dees, Nifong files for bankruptcy; city replies to suit, The News & Observer, Jan 16, 2008, available at http://www.newsobserver.com/news/crime_safety/duke_lacrosse/nifong/story/882992.html

[7] 11 U.S.C. § 523(a)(6) (2006).

[8] Id.

[9] 8B C.J.S. Bankruptcy § 1076 (2008).

[10] In re Keaty, 397 F.3d 264 (5th Cir. 2005).

[11] Id.

[12] Blythe, Nifong out of lawsuit, supra note 4.

[13] Id.

[14] Id.

[15] 8B C.J.S. Bankruptcy § 1076 (2008).

[16] Id.

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