In TKC Aerospace v. Muhs (In re Muhs), 923 F.3d 377 (4th Cir. 2019), the U.S. Court of Appeals for the Fourth Circuit held that a debt incurred as a result of a willful and malicious injury may nevertheless be dischargeable notwithstanding the provisions of 11 U.S.C. Section 523(a)(6). The court found it to be of no consequence that a debtor’s conduct giving rise to the injury, without more, was shown to be intentional; rather, the debtor must also have intended to cause injury to the creditor. In so holding, the TKC court has issued guidance to creditors seeking recovery of high-dollar lawsuits; proceedings that oftentimes precipitate bankruptcy filings.

Background

Charles Taylor Muhs was employed by TKC Aerospace, Inc. (TKCA) as a vice president of business development. In that role, Muhs had access to proprietary information: Muhs’ employment contract prohibited him from disclosing confidential information or competing with TKCA for a period of six months after the termination of his employment. During his tenure with TKCA, Muhs assisted TKCA to compete for, and win, contracts with the Department of State for the modification of certain aircraft.