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

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.

Comments are closed.