                   UNITED STATES COURT OF APPEALS

                             FOR THE FIFTH CIRCUIT



                                     No. 98-30205
                                   Summary Calendar


In the Matter of: GREGORY JAMES CATON,
                                                  Debtor.

GREGORY JAMES CATON,
                                                                      Appellant,

                                         versus

KEVIN TRUDEAU,
                                                                       Appellee.



                       Appeal from the United States District Court
                          for the Western District of Louisiana
                                   October 26, 1998
Before POLITZ, Chief Judge, STEWART and PARKER, Circuit Judges.

POLITZ, Chief Judge:

      Gregory James Caton appeals the district court’s affirmance of the

bankruptcy court’s application of collateral estoppel to an Illinois state court

default judgment in its determination that said judgment was nondischargeable

under 11 U.S.C. § 523(a)(6). For the reasons assigned, we affirm.
                                 BACKGROUND

      In January 1996, Kevin Trudeau filed a libel suit against Caton in Illinois

state court based on statements Caton made in a book and on an Internet website.

Caton removed the action to federal court, but on Trudeau’s motion, the action was

remanded. Thereafter, Caton failed to respond to Trudeau’s claims and the court

entered a default and noticed an evidentiary hearing. On June 5, 1996, after a

hearing, the court rendered a default judgment against Caton, awarding Trudeau

$5 million in compensatory damages and $5 million in punitive damages.

      In November 1996, Caton filed for relief under Chapter 7 of the Bankruptcy

Code. Trudeau filed a complaint therein, seeking to have the Illinois default

judgment declared nondischargeable under section 523(a)(6). Trudeau then moved

for summary judgment, contending that the Illinois judgment for libel per se

established a nondischargeable debt for willful and malicious injury under section

523(a)(6) and further contending that collateral estoppel applied to prevent

relitigation of this issue. Caton responded that collateral estoppel did not apply and

that the claims supporting the Illinois judgment should be litigated in the

bankruptcy court. The bankruptcy court applied collateral estoppel, determined

that the Illinois judgment was nondischargeable under section 523(a)(6), and

granted Trudeau’s summary judgment motion. The district court affirmed; Caton

                                          2
timely appealed.

                                      ANALYSIS

      Collateral estoppel applies in bankruptcy dischargeability proceedings, but

the bankruptcy court retains exclusive jurisdiction to determine whether a debt is

dischargeable.1 A bankruptcy court’s decision to give preclusive effect to a state

court judgment is a question of law that we review de novo.2 Because the judgment

in question was entered by an Illinois state court, we apply Illinois rules of

preclusion.3

      Under Illinois law collateral estoppel applies when: (1) the issue decided in

the prior adjudication is identical with the one presented in the pending suit; (2) the

party against whom collateral estoppel is asserted was a party or in privity with a

party therein; (3) there was a final judgment on the merits; and (4) the party against

whom collateral estoppel is asserted had a full and fair opportunity to litigate the

issue in the prior suit.4 The existence of these elements is not disputed. Rather,

Caton contends that collateral estoppel does not apply to default judgments and that


      1
          Grogan v. Garner, 498 U.S. 279 (1991).
      2
          In re Schwager, 121 F.3d 177 (5th Cir. 1997).
      3
          In re Pancake, 106 F.3d 1242 (5th Cir. 1997).
      4
          Talarico v. Dunlap, 685 N.E.2d 325 (Ill. 1997).
                                            3
the state court record presented fails to provide a sufficient basis to support reliance

on the judgment.

       The Illinois Supreme Court has not yet determined whether default

judgments are entitled to the same preclusive effect under the doctrine of collateral

estoppel as any other judgment, but it has noted that there is a split of authority on

the issue with some courts giving default judgments limited preclusive effect.5 An

Illinois appellate court, however, recently has held that collateral estoppel may be

applied to a default judgment provided no injustice results from the application.6

This very recent pronouncement forecloses Caton’s contention, and we thus must

conclude that the doctrine of collateral estoppel may be applied to default

judgments under Illinois law.7

       For collateral estoppel to apply, a party must have had a full and fair


       5
        Housing Authority for La Salle County v. YMCA of Ottawa, 461 N.E.2d 959 (Ill.
1984). See also In re Asbury, 195 B.R. 412 (Bankr. E.D. Mo. 1996) (setting forth split of
authority on issue when analyzing Illinois law).
       6
       Paternity of Rogers, No. 97-353, 1998 WL 381587 (Ill. App. Ct. July 9, 1998). See
also Grisanzio v. Bilka, 511 N.E.2d 762 (Ill. App. Ct. 1987).
       7
         We note that the majority of the cases relied on by Caton apply federal rules of
collateral estoppel and, thus, are distinguishable. To any extent otherwise, we find the cases
unpersuasive, especially given the recent determination of this issue by an Illinois state court.
See In re Dempster, 182 B.R. 790 (Bankr. N.D. Ill. 1995); In re Dvorak, 118 B.R. 619
(Bankr. N.D. Ill. 1990); In re Martinez, 110 B.R. 353 (Bankr. N.D. Ill. 1990); In re Leigh,
165 B.R. 203 (Bankr. N.D. Ill. 1993); In re Cunningham, 59 B.R. 743 (Bankr. N.D. Ill.
1986).
                                               4
opportunity to litigate the issue in the prior action and there must be no undue

unfairness to the party estopped.8 Caton clearly had a full and fair opportunity to

contest the issue in the state proceeding, and we find no injustice in applying the

doctrine of collateral estoppel in this case. Caton was properly notified of the

proceeding and, in fact, filed a notice of removal therein. After remand, however,

Caton chose not to appear in the proceeding further, even though Trudeau sought

actual and punitive damages in excess of $10 million for libel per se. Under these

circumstances, it cannot be disputed that Caton had an opportunity to litigate.

Caton does not contest that he received notice of the default, as well as the

subsequent evidentiary hearing, and he provides no explanation for his failure to

pursue his legal remedies after the remand.

      Caton further contends that the bankruptcy court cannot rely on the Illinois

default judgment because the state record presented is insufficient to support the

judgment. He asserts that the facts supporting the judgment are not discernible

from the record presented and, thus, dischargeability cannot be determined

therefrom. In reviewing the application of collateral estoppel under Texas law, we

have articulated the standard upon which Caton relies; that the record reflect the

finding made and the supporting facts so that the bankruptcy court may determine

      8
          Rogers, 1998 WL 381587; Talarico, 685 N.E.2d 325.
                                          5
that the pertinent issue was litigated and decided.9 We have never required,

however, that a full state court record be presented.10 We only require that the

record introduced have sufficient detail to allow the use of collateral estoppel.11

Such has been established in the case at bar.

      The state record before us contains Trudeau’s complaint wherein he alleges

two counts of libel per se. The complaint details the particular words alleged to be

libelous and incorporates by reference the attached publications in question.

Trudeau also alleges in the complaint that (1) “the statements are false”; (2) the

statements “were made maliciously and intentionally with full knowledge of their

falsity or in complete and reckless disregard of their truth or falsity, for the purpose

of injuring and destroying Trudeau’s personal and professional reputation”; (3) the

statements “impute the commission of a criminal offense to Trudeau, impute the

inability to perform or want of integrity in the discharge of Trudeau’s duties of

employment and prejudice Trudeau in his business and occupation”; and (4) Caton

“acted with actual malice.” Such factual allegations are sufficient to support a


      9
        Pancake, 106 F.3d 1242; In re King, 103 F.3d 17 (5th Cir. 1997); In re Poston,
735 F.2d 866 (5th Cir. 1984); In re Allman, 735 F.2d 863 (5th Cir. 1984); In re Shuler, 722
F.2d 1253 (5th Cir. 1984).
      10
           King, 103 F.3d 17; In re Davis, 3 F.3d 113 (5th Cir. 1993).
      11
           Id.
                                             6
cause of action for libel per se under Illinois law.12

      Under Illinois law, by failing to plead Caton admits by default the factual

allegations contained in the complaint.13 The default judgment must rest upon the

allegations of the petition.14 Thus, because the factual allegations are deemed

admitted and the default judgment necessarily rests thereon, we are able to

determine conclusively the issue decided by the court when rendering the default

judgment. The judgment provides that after hearing the case on “prove-up” at

which Trudeau testified, Trudeau is awarded $5 million in compensatory damages

and $5 million in punitive damages.15 Libel being the only cause at issue, and

punitive damages requiring allegations of outrageous conduct or acts perpetrated

by evil motive or with reckless indifference to the rights of others,16 the state court

necessarily determined these issues by rendering the judgment. No additional

record support is required under Illinois law.



      12
           See Geick v. Kay, 603 N.E.2d 121 (Ill. App. Ct. 1992).
      13
        People v. $1,124,905 U.S. Currency and One 1988 Chevrolet Astro Van, 685
N.E.2d 1370 (Ill. 1997).
      14
           See Richards v. Davis, 185 N.E. 586 (Ill. 1933).
      15
        It is worth noting that this is a sum less than the amount Trudeau sought in his
complaint.
      16
           See Guice v. Sentinel Technologies, Inc., 689 N.E.2d 355 (Ill. App. Ct. 1997).
                                             7
      Having determined that collateral estoppel applies under Illinois law, we turn

to the dischargeability inquiry. Section 523(a)(6) provides that a debt for “willful

or malicious injury” by the debtor is nondischargeable.17 We have defined “willful

and malicious” to mean “without just cause or excuse.”18            “Willful means

intentional and malicious adds the absence of just cause or excuse.”19 There can

be no question, and Caton does not dispute, that a judgment for libel under Illinois

law, and a corresponding award of punitive damages, encompasses intentional

conduct undertaken without just cause or excuse, precluding discharge under

section 523(a)(6). Accordingly, we find no error in the determination by the courts

à quo that the Illinois default judgment had collateral estoppel effect as to section

523(a)(6) dischargeability.

      The judgment appealed is AFFIRMED.




      17
           11 U.S.C. § 523(a)(6).
      18
           In re Garner, 56 F.3d 677 (5th Cir. 1995).
      19
           Id. at 681.
                                             8
