The opinion of the court was delivered by: Ramos, D.J.
Richard and Kara Hartley (the "Hartleys" or "Appellants") appeal the Order of the Bankruptcy Court granting summary judgment in favor of Appellee Jennifer Esposito ("Ms. Esposito"). In the adversary proceeding below, Ms. Esposito sought to except from discharge in Appellants' personal bankruptcy petition a judgment she obtained against the defendants' business, Hartley's Catering, Inc. ("Hartley's Catering"). For the reasons set forth below, the judgment of the Bankruptcy Court is AFFIRMED.
Ms. Esposito is a former employee of Hartley's Catering. The underlying bankruptcy court adversary proceeding involved her efforts to collect a judgment she obtained in New York state court in the amount of $352,400.80 against her former employer and a co-worker. The parties do not dispute the facts giving rise to the state court action; they are discussed here only to the extent relevant to the resolution of this appeal.
Appellants Mr. and Mrs. Hartley were the sole shareholders of Hartley's Catering from January 2004 to September 2009. (Bankr. Doc. 13 ¶ 2.)*fn1 The business, located in New Windsor, New York was a delicatessen commonly known as Schlesinger's Deli Depot. (Id. ¶ 3.) Ms. Esposito began working there as a deli clerk in November 2005. (Id. ¶ 4.) Approximately one year later, in November 2006, Ms. Esposito began to be subjected to severe sexual intimidation and harassment, including sexual and physical assaults, by one of her co-workers. (Id. ¶¶ 15-19, 21-25.) Ms. Esposito complained to Mrs. Hartley about the intimidation and assaults, but she was dismissive of her complaints and never investigated or disciplined the co-worker. (Id. ¶¶ 26-32.) Mrs. Hartley advised Mr. Hartley of Ms. Esposito's complaints, but he did not investigate or discipline the co-worker, either. (Id. ¶ 32.) On January 16, 2007, the continuing harassment prompted Ms. Esposito to give two-week's notice of her resignation, but she was fired two days later. (Id. ¶¶ 32-34.)
On February 16, 2007, Ms. Esposito filed a verified complaint with the New York State Division of Human Rights (the "Division") charging Hartley's Catering and the co-worker with employment discrimination based on multiple instances of physical and sexual abuse. (Id. ¶¶ 43-44.) On February 21, 2008, after a public hearing, the Division issued a final order ruling in favor of Ms. Esposito and awarding her $300,000 in damages. (Id. ¶ 50.)
On April 16, 2008, Hartley's Catering commenced an Article 78 proceeding to annul the Division's final order. (Id. ¶ 51.) That proceeding was transferred to the New York State Supreme Court, Appellate Division, Second Department, on May 28, 2008. (Id. ¶ 54.) On October 27, 2009, the Appellate Division affirmed the final order and directed the defendants to pay Ms. Esposito the principal sum of $300,000 plus interest. (Id. ¶ 57.) On January 19, 2010, approximately three full years after she commenced her action, that judgment was entered in New York Supreme Court, Orange County, against Hartley's Catering and the co-worker, jointly and severally, in the amount of $352,400.80. (Id. ¶ 58.)
It was only after the final entry of judgment in Orange County Supreme Court, while she was taking steps to enforce her judgment, that Ms. Esposito learned of two actions Appellants had taken since she first successfully petitioned the Division of Human Rights: (1) on July 31, 2008, approximately five months after the Division's final order, the Appellants dissolved Hartley's Catering*fn2 (id. ¶ 60); and (2) on October 9, 2009, the Appellants filed for personal bankruptcy protection. (Id. ¶ 55.) Both of these actions were without notice to Ms. Esposito.
Ms. Esposito thereafter commenced the adversary proceeding against the Hartleys below. In her complaint, she alleged that the Hartleys purposely withheld the fact of the dissolution of the business from her, and thereafter continued to operate the business to prevent her from learning of the dissolution. (Bankr. Docs. 1 ¶¶ 17-18, 14 at 9-10.) At his deposition, Mr. Hartley admitted that he was aware that at the time he dissolved the business the Division had already ruled in favor of Ms. Esposito, and that the judgment was a factor in the decision to dissolve:
Q: So in or about July 2008 was when the corporation was dissolved?
Q: As you had already told me when you decided to dissolve the corporation, you were aware of the State Division of Human Rights' findings against Hartley Catering, correct?
Q: And just so I get it right, from the time the corporation was dissolved in
July 2008 until September 2009 continued to operate the business [sic]? A: Yes. ...