941 F.3d 206 (5th Cir. 2019), 18-20254, In re Crocker

• Citation: 941 F.3d 206, 67 Bankr.Ct.Dec. 227
• Opinion Judge: LESLIE H. SOUTHWICK, Circuit Judge:
• Party Name: IN RE: Evan Brian CROCKER, also known as Haas Legal, P.L.L.C., Debtor Evan Brian Crocker, on behalf of themselves and all those similarly situated, also known as Haas Legal, P.L.L.C, formerly known as Evan Brian Haas: Michael Shahbazi, on behalf of themselves and all those similarly situated, formerly known as Montana Shahbazi; Wendy L. Landes,...
• Attorney: Jason W. Burge, Kathryn Johnson, Fishman Haygood, L.L.P., Lynn Elizabeth Swanson, Attorney, Jones, Swanson, Huddell & Garrison, L.L.C., New Orleans, LA, for Appellees. Thomas Miles Farrell, Attorney, Houston, TX, Karen Elizabeth Sieg, Richmond, VA, McGuireWoods, L.L.P., for Appellants. Mark Samue...
• Judge Panel: Before STEWART, SOUTHWICK and ENGELHARDT, Circuit Judges.
• Case Date: October 21, 2019
• Court: United States Courts of Appeals, U.S. Court of Appeals — Fifth Circuit

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941 F.3d 206 (5th Cir. 2019)

67 Bankr.Ct.Dec. 227

IN RE: Evan Brian CROCKER, also known as Haas Legal, P.L.L.C., Debtor Evan Brian Crocker, on behalf of themselves and all those similarly situated, also known as Haas Legal, P.L.L.C, formerly known as Evan Brian Haas: Michael Shahbazi, on behalf of themselves and all those similarly situated, formerly known as Montana Shahbazi; Wendy L. Landes, on behalf of themselves and all those similarly situated; Raegena Seitz-Moulds, on behalf of themselves and all those similarly situated, Appellees

v.

Navient Solutions, L.L.C.; Navient Credit Finance Corporation, Appellants

No. 18-20254

United States Court of Appeals, Fifth Circuit

October 21, 2019

REVISED October 22, 2019

Page 207

[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Southern District of Texas, David Ronald Jones, Chief Judge

Jason W. Burge, Kathryn Johnson, Fishman Haygood, L.L.P., Lynn Elizabeth Swanson, Attorney, Jones, Swanson, Huddell & Garrison, L.L.C., New Orleans, LA, for Appellees.

Thomas Miles Farrell, Attorney, Houston, TX, Karen Elizabeth Sieg, Richmond, VA, McGuireWoods, L.L.P., for Appellants.

Mark Samuel Goldstein, Alicia Martone Bendana, Lowe, Stein, Hoffman, Allweiss & Hauver, L.L.P., New Orleans, LA, for Amicus Curiae Bankruptcy Scholars.

Tara Ann Twomey, Attorney, National Consumer Bankruptcy Rights Center, San Jose, CA, for Amici Curiae National Association of Consumer Bankruptcy Attorneys, National Consumer Bankruptcy Rights Center.

Before STEWART, SOUTHWICK and ENGELHARDT, Circuit Judges.

OPINION

LESLIE H. SOUTHWICK, Circuit Judge:

An individual in Texas and another in Virginia separately obtained loans from the same lender to pay education expenses. Both later filed for bankruptcy in their respective states. In time, orders of discharge were entered. One of the discharged debtors then filed suit against the lender in the same Bankruptcy Court of the Southern District of Texas that had ordered the discharge of his debts. Later, the Virginia debtor joined the Texas suit. The suit seeks to certify a nationwide class of those who claim their education-loan debts were validly discharged but from whom this lender continues to demand payment. A declaratory judgment, injunction, and damages are sought.

The lender filed a motion for summary judgment, arguing bankruptcy courts cannot enforce the injunctions arising from discharge orders entered by courts in other judicial districts, and these private-education-loan debts are statutorily excepted from discharge. The bankruptcy court held the opposite as to both, then certified the two holdings for interlocutory appeal.

We conclude that a bankruptcy court does not have authority to enforce the discharge injunctions entered in other districts. On the other hand, we agree with the bankruptcy court that the particular

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education loans involved here are not statutorily excepted from discharge. The cause is REMANDED.

FACTUAL AND PROCEDURAL HISTORY

In 2009, Evan Crocker¹ obtained a $15,000 loan to fund his bar examination preparation. The lender was a subsidiary of SLM Corporation, d/b/a Sallie Mae, which is a for-profit, public corporation whose loans are not part of any governmental loan program. The loan documents informed Crocker that his repayment obligation "may not be dischargeable in bankruptcy." Crocker’s loan was transferred to SLM Education Credit Finance Corporation, which subsequently became Navient Credit Finance Corporation. In the complaint, Navient Solutions is said to be the entity pursuing collection. We will not differentiate among Navient entities in our discussion.

In 2015, Crocker filed for voluntary Chapter 7 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. He scheduled his bar-study loan claim as an "Educational ... Private loan" and did not dispute the debt. In February 2016, the court granted him a discharge under 11 U.S.C. § 727, informed him that "[m]ost debts are covered by the discharge, but not all," and closed his case.

Michael Shahbazi has a similar story. In 2002, Shahbazi obtained an $11,658.99 loan from Sallie Mae for tuition and expenses while he attended a technical school. He was given notice that his loan was "an education loan that must be repaid." Exactly how Navient obtained its interest is unclear to us, but it is servicing this loan.

In 2011, Shahbazi filed for voluntary Chapter 7 bankruptcy in the United States Bankruptcy Court for the Eastern District of Virginia. He scheduled his Sallie Mae loan as a "Student Loan" and did not dispute the debt. In December 2011, the court granted him a discharge and closed his bankruptcy proceeding. This discharge order specifically listed "Debts for most student loans" as not being discharged.

It is alleged that after both discharges, Navient had both of these plaintiffs contacted frequently by telephone and email to demand repayment. In August 2016, Crocker filed an adversary proceeding against Navient in the Bankruptcy Court for the Southern District of Texas, the same court that had granted him a discharge. He sought (1) a declaratory judgment that his private education debt had been discharged; (2) entry of judgment holding Navient in contempt for violating the injunction arising from his discharge; and (3) a temporary injunction. The court entered an agreed preliminary injunction on August 18, 2016, barring Navient from pursuing collection until further order.

Crocker, with Shahbazi as an additional plaintiff, filed an amended complaint, seeking to certify a nationwide class of those who (1) obtained prepetition private education loans from Navient or related companies to cover expenses at an institution not accredited under Title IV; (2) later filed for bankruptcy and were issued discharge orders; (3) have never reaffirmed their prepetition private education loan debt; and (4) are being induced to pay their allegedly discharged private education loans. Damages were now also sought.

Navient moved for summary judgment on these claims, arguing that a bankruptcy

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court has no jurisdiction to interpret and enforce discharge orders entered by courts in other judicial districts and that the plaintiffs’ education loans were nondischargeable. The bankruptcy court denied the motion in March 2018.² It rejected that the general rule giving an issuing court sole authority to enforce its own injunctions applied to the automatic injunction created by statute when a bankruptcy court grants a discharge under 11 U.S.C. § 727. The court also determined that the kind of loans for educational purposes relevant here, which the parties refer to as "private loans," were not within the ambit of the Bankruptcy Code’s bar on the discharge of some student loans. See 11 U.S.C. § 523(a)(8).

In the same order, the bankruptcy court first authorized an interlocutory appeal, then certified the order for direct appeal to this court, eschewing the usual initial appellate review by a district court. A bankruptcy court may certify a ruling for direct review by a circuit court of appeals when, among other reasons, it "involves a question of law as to which there is no controlling decision" by that circuit court or the Supreme Court, or because an appeal at that stage in the proceedings "may materially advance the progress of the case." 28 U.S.C. § 158(d)(2)(A)(i), (iii). If a bankruptcy court so certifies, the circuit court of appeals then exercises its discretion. § 158(d)(2)(A). A motions panel of this court granted the unopposed motion to authorize the appeal.

DISCUSSION

We review "grants and denials of summary judgment de novo . Summary judgment is appropriate when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ " Lyda Swinerton Builders, Inc. v. Okla. Sur. Co., 903 F.3d 435, 444 (5th Cir. 2018) (quoting Fed.R.Civ.P. 56). Federal Rule of Civil Procedure 56 is incorporated into the Federal Rules of Bankruptcy Procedure. FED. R. BANKR. P. 7056.

Navient has two principal contentions on appeal. The first is that the bankruptcy court either has no jurisdiction to enforce the statutory injunctions arising from a bankruptcy discharge that another bankruptcy court ordered, or at least for prudential reasons may not do so. Second, Navient contends that the plaintiffs’ education loans are within the category of loans that under the Bankruptcy Code are nondischargeable.

There are no meaningful factual issues presented to us. Instead, we have legal issues of statutory interpretation. We now turn to those.

I. Authority to enforce a Section 524 discharge order entered by a bankruptcy court in another judicial district

In broad brush, these proceedings concern two closed Chapter 7 bankruptcies in which generic discharges, i.e., discharges not specifying the discharged debts, were issued at completion. A discharge "operates as an injunction" against an extensive list of actions that a creditor might take to collect on the discharged debt. 11 U.S.C. § 524(a)(2), (3). The discharge is a "substantive right," and that right is "often enforced by a motion for contempt, but [it is] also enforceable through a declaratory judgment action."

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Nat’l Gypsum Co. v. NGC Settlement Tr. & Asbestos Claims Mgmt. Corp. (In re Nat’l Gypsum Co.), 118 F.3d 1056, 1063 (5th Cir. 1997) (citations omitted). The declaratory judgment was sought in National Gypsum by the opening of an adversary proceeding in the bankruptcy court that had granted the debtor’s discharge. Id. at 1060. Indeed, Federal Rule of Bankruptcy Procedure 7001(6) states that an adversary proceeding is, among other things, "a proceeding to...