665 F.3d 906 (7th Cir. 2011), 10-3465, In re Ortiz
|Docket Nº:||10-3465, 10-3466.|
|Citation:||665 F.3d 906|
|Opinion Judge:||TINDER, Circuit Judge.|
|Party Name:||In re Rene R. ORTIZ, Douglas L. Lindsey, and Valerie Jones, Debtors. v. Aurora Health Care, Inc., Defendant-Appellee. Rene R. Ortiz, Douglas L. Lindsey, and Valerie Jones, Plaintiffs-Appellants, In re Kathy Bembenek and Susan Dandridge, Debtors. Kathy Bembenek and Susan Dandridge, Plaintiffs-Appellants, v. Aurora Health Care, Inc., Defendant-Appell|
|Attorney:||Michael J. Watton (argued), Attorney, Watton Law Group, Milwaukee, WI, for Debtors-Appellants. Frank W. DiCastri, Brian W. McGrath (argued), Attorneys, Foley & Lardner LLP, Milwaukee, WI, for Appellee. Guy J. DuBeau, Attorney, Axley Brynelson, LLP, Madison, WI, for Amicus Curiae.|
|Judge Panel:||Before WILLIAMS and TINDER, Circuit Judges, and GOTTSCHALL, District Judge.[*]|
|Case Date:||December 30, 2011|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued Feb. 22, 2011.
[Copyrighted Material Omitted]
Wisconsin medical provider Aurora Health Care, Inc. filed proofs of claim in an estimated 3,200 bankruptcy cases in the Eastern District of Wisconsin from June 2003 to December 2008 that listed the debtors' medical treatment information. The filings were public and available on the court's docket. Two groups of debtors filed separate class action lawsuits against Aurora under a Wisconsin statute that allows individuals to sue if their health care records are disclosed without permission. See Wis. Stat. § 146.84. The bankruptcy judge granted Aurora summary judgment in both cases. We granted direct appeal. But granting direct appeal, although appearing proper then, was improvident given the Supreme Court's recent holding in Stern v. Marshall that bankruptcy judges lack authority under Article III of the Constitution to enter final judgments on claims that constitute " the stuff of the traditional actions at common law tried by
the courts at Westminster in 1789." __ U.S. __, 131 S.Ct. 2594, 2609, 180 L.Ed.2d 475 (2011) (quoting N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 90, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (Rehnquist, J., concurring in judgment)). Like the debtor's counterclaim in Stern v. Marshall, the debtors' claims are based on a state law that is " independent of the federal bankruptcy law" and " not necessarily resolvable by a ruling on the creditor's proof of claim in bankruptcy." Id. at 2611. The responsibility for deciding the debtors' claims " rests with Article III judges in Article III courts." Id. at 2609. Even though Congress gave the bankruptcy judge statutory authority to adjudicate the debtors' claims as " core" matters under 28 U.S.C. § 157(b), Stern v. Marshall reveals the absence of constitutional authority for the bankruptcy judge to enter summary judgment, or any form of final judgment, on the debtors' claims. Without a final judgment we lack a statutory basis for appellate jurisdiction. Thus, we must dismiss these appeals.
The debtors alleged that Aurora violated Wisconsin Statute section 146.82 by filing proofs of claim revealing their medical information. Wisconsin Statute section 146.82(1) mandates that " [a]ll patient health care records shall remain confidential" with certain exceptions in section 146.82(2). The debtors sought actual damages, statutory exemplary damages of $25,000 per class member, and their costs and fees under Wisconsin Statute section 146.84(1)(b) for Aurora's alleged willful violation of section 146.82. A first set of debtors, appellants Rene Ortiz, Douglas Lindsey, and Valerie Jones (the " Ortiz debtors" ), filed a class action adversary complaint in the U.S. Bankruptcy Court for the Eastern District of Wisconsin. (The district court refers all bankruptcy cases to its bankruptcy judges. See 84-1 Order of Reference, available at www. wieb. uscourts. gov/ index. php/ orders- rules/ rules/ general- orders (last visited Dec. 22, 2011).) The complaint defined the class as all Chapter 13 filers in Wisconsin's Eastern District where Aurora filed proofs of claim disclosing confidential medical information. A second pair of debtors, Kathy Bembenek and Susan Dandridge (the " Bembenek debtors" ), filed a class action complaint in a Wisconsin state court based on the same statute but expanded the proposed class to all of Wisconsin. Aurora removed the Bembenek debtors' case to the bankruptcy court under 28 U.S.C. § 1452, which authorizes removal of all cases arising under Title 11 or arising in or related to cases under Title 11. See 28 U.S.C. §§ 1334 & 157(a).
Both sides sought to avoid litigating the case in the bankruptcy court but also opposed the others' proposed forum. The Ortiz debtors filed a motion for the bankruptcy judge to abstain from jurisdiction in favor of a Wisconsin court, see 28 U.S.C. § 1334(c)(1) & (2), and the Bembenek debtors filed a motion for the bankruptcy judge to remand the case back to the Wisconsin court, see 28 U.S.C. § 1452(b). Aurora filed motions in both cases seeking to have the district court withdraw the reference from the bankruptcy judge. See 28 U.S.C. § 157(d). The bankruptcy judge denied the abstention and the remand motions for essentially the same reason: the cases constituted core proceedings because the debtors' claims could only arise in a bankruptcy context and Congress included the allowance or disallowance of claims and counterclaims by the estate against persons filing claims against the estate in its definition of core proceedings. See 28 U.S.C. § 157(b)(2)(B) & (C). The district court then denied Aurora's motions to
withdraw the reference because the debtors' claims were core proceedings involving counterclaims by the debtors' bankruptcy estate against a claimant. See id. § 157(b)(2)(C). The district court found that the bankruptcy court was well-suited to address whether bankruptcy law required Aurora to disclose the material to which the debtors objected and that it was familiar with the cases' facts and circumstances.
The bankruptcy judge then dismissed the Ortiz debtors' complaint on Aurora's motion for summary judgment because it found that Wisconsin Statute section 146.84 required proof of actual damages and that the debtors failed to point to specific evidence in the record to support the debtors' assertion that the existence of actual damages was in dispute. In re Ortiz, 430 B.R. 523, 534-35 (Bankr.E.D.Wis.2010). The bankruptcy judge also dismissed the Bembenek debtors' case for the same reasons. Aurora joined in the debtors' motions for certification of a direct appeal under 28 U.S.C. § 158(d)(2), which gives us jurisdiction over appeals that would normally go to the district court under 28 U.S.C. § 158(a). The bankruptcy judge granted the motions under 28 U.S.C. § 158(d)(2)(B)(ii), which states that if the bankruptcy court " receives a request made by a majority of the appellants and a majority of appellees" to certify an appeal, the bankruptcy court " shall make the certification." A motions panel of our court authorized the parties to proceed as a direct appeal, see id. § 158(d)(2)(A), and the cases were consolidated.
When we held argument in...
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