Handler v. Moore (In re Moore), Case No. 19bk31162

• Decision Date: 05 March 2021
• Docket Number: Case No. 19bk31162,Adv. No. 20ap00074
• Citation: 625 B.R. 896
• Parties: IN RE: Emily MOORE, Debtor. Joel F. Handler, Plaintiff, v. Emily Moore, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

625 B.R. 896

IN RE: Emily MOORE, Debtor.Joel F. Handler, Plaintiff,

v.Emily Moore, Defendant.

Case No. 19bk31162

Adv. No. 20ap00074

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed March 5, 2021

Plaintiff, pro se: Joel F. Handler, Chicago, IL

Defendant, pro se: Emily Moore, Chicago, IL

MEMORANDUM DECISION

TIMOTHY A. BARNES, Judge.

The matter before the court arises upon the court's finding of default in the above-captioned adversary proceeding. See Order Granting Adversary Plaintiff's Motion for a Default Judgment [Adv. Dkt. No. 36] (the "Default Order"). Upon entry of the Default Order, the court entered a scheduling order to further investigate the amount of damages, if any, that should stem from the default in light of the allegations by evidence.¹ See Scheduling Order [Adv. Dkt. No. 37].

Upon considering submissions by plaintiff Joel F. Handler (the "Plaintiff") and taking the matter under advisement on February 18, 2021, the court determines as follows: Judgment against defendant Emily Moore (the "Debtor"), previously found in default in this matter, is appropriate in an amount not to exceed $15,759.97 on the sole count under the single-count Complaint for Declaratory Judgment Objecting to the Discharge of a Particular Debt Pursuant to 11 U.S.C. § 523(a)(2)(A) [Adv. Dkt. No. 1] (the "Complaint"). While the court finds that the default established the other elements for a finding of nondischargeability for misrepresentation, the Plaintiff's reliance on the same is not entirely justified. As a result, the court concludes that amounts billed by the Plaintiff after December 1, 2016, are dischargeable. Partial judgment in favor of the Plaintiff will accordingly be entered concurrent with the entry of this Memorandum Decision.

JURISDICTION

The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code, 11 U.S.C. §§ 101, et seq . (the "Bankruptcy Code"). 28 U.S.C. § 1334(a). The federal district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under the Bankruptcy Code or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred has statutory authority to enter final judgment on any proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the bankruptcy court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 28 U.S.C. §§ 157(b)(1), (c). Absent consent, the bankruptcy court must "submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).

In addition to the foregoing considerations, a bankruptcy judge must also have constitutional authority to hear and determine a matter. Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). Constitutional authority exists when a matter originates under the Bankruptcy Code or, in noncore matters, where the matter is either one that falls within the public rights exception, id ., or where the parties have consented, either expressly or impliedly, to the bankruptcy court hearing and determining the matter. See, e.g. , Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 135 S. Ct. 1932, 1939, 191 L.Ed.2d 911 (2015) (parties may consent to a bankruptcy court's jurisdiction); Richer v. Morehead , 798 F.3d 487, 490 (7th Cir. 2015) (noting that "implied consent is good enough").

In this case, the Plaintiff asked the court to enter judgment in the amount of his nondischargeable claim. An open question exists whether, on such a request, an Article I bankruptcy court can enter monetary judgment. The Seventh Circuit, in a case predating Stern , encouraged the bankruptcy court to do just that. In re Hallahan , 936 F.2d 1496, 1508 (7th Cir. 1991) (concluding that once a party submits itself to adjudication before the bankruptcy court, it submits itself to all that entails). Later, the Seventh Circuit appeared to question that conclusion. Lee v. Christenson , 558 Fed.Appx. 674, 676 (7th Cir. 2014) ("[I]t is unclear whether Stern ... restricts a bankruptcy court's power to resolve a creditor's state-law claim when the court decides whether that claim is nondischargeable.").

Since then, encouragement similar to that in Hallahan has been given, but that encouragement was not unfettered. Siragusa v. Collazo (In re Collazo ), 817 F.3d 1047, 1053 (7th Cir. 2016). There, the Seventh Circuit stated that a bankruptcy court hearing a section 523 matter "could have declined to award damages and instead remitted the creditors ... to their state-court remedies." Id . at 1053. However, in that same opinion, the Circuit stated that the trial court should consider whether the parties might consent to the bankruptcy court's adjudication as permitted by Wellness . Id . at 1054.

Here the Plaintiff has unquestionably consented to this court's jurisdiction by asking for the very relief in question. Dragisic v. Boricich (In re Boricich ), 464 B.R. 335, 337 (Bankr. N.D. Ill. 2011) (Schmetterer, J.). The Debtor, on the other hand, has not. While the Debtor did, of course, commence the bankruptcy case and did defend this suit to a point, the court cannot conclude that issue was ever squarely before the Debtor in a way that consent could be implied. Further, the Plaintiff here appears to assume that his billing is reasonable as stated, and thus has not addressed the reasonableness of his billing, something the court would have to consider if doing so.

As to jurisdiction specifically, an action under section 523 of the Bankruptcy Code is unequivocally a bankruptcy cause of action. In re Glenn , 502 B.R. 516, 522 (Bankr. N.D. Ill. 2013) (Barnes, J.), aff'd sub nom. Sullivan v. Glenn , 526 B.R. 731 (N.D. Ill. 2014), aff'd, 782 F.3d 378 (7th Cir. 2015). It arises in a case under title 11 and the code specifies it as a core proceeding. 28 U.S.C. § 157(b)(2)(I). While such actions may turn on state law, determining the scope of a debtor's discharge is a fundamental part of the bankruptcy process. See Deitz v. Ford (In re Deitz ), 469 B.R. 11, 20 (B.A.P. 9th Cir. 2012). As observed by one bankruptcy court, "there can be little doubt that [a bankruptcy court], as an Article I tribunal, has the constitutional authority to hear and finally determine what claims are nondischargeable in a bankruptcy case." Farooqi v. Carroll (In re Carroll ), 464 B.R. 293, 312 (Bankr. N.D. Tex. 2011) ; see also Deitz , 469 B.R. at 20 ; In re Boricich , 464 B.R. at 337.

As a result, the court concludes that it has jurisdiction, statutory authority and constitutional authority to hear and determine nondischargeability and the limits imposed thereby, but declines to enter monetary judgment.

PROCEDURAL HISTORY

As noted above, the Complaint commencing this matter contains a single count alleging that the Debtor's debt to the Plaintiff is nondischargeable because of misrepresentations made by the Debtor to the Plaintiff.

Rather than answer the Complaint, the Debtor—then represented by counsel—moved to dismiss the Complaint. See Motion to Dismiss [Adv. Dkt. No. 6] (the "Motion to Dismiss"). In response, the court entered an order scheduling briefing on the Motion. Order [Scheduling Motion to Dismiss] [Adv. Dkt. No. 9]. After briefing and a hearing thereon, the court denied the Motion to Dismiss. See Handler v. Moore (In re Moore ), 620 B.R. 617 (Bankr. N.D. Ill. 2020) (Barnes, J.).²

In Moore , the court noted its overall concerns with the Plaintiff's approach to this and multiple similar proceedings brought by the Plaintiff. The court noted that a majority of Plaintiff's allegations are mere broken promises to pay, which are not generally actionable under section 523. Id. at 629–30. The court also questioned the Plaintiff's justifiable reliance allegations in light of the previous court rulings against the Plaintiff on just such issue. Id . at 633. The court noted with concern what appears to have been selective disclosure of billing by the Plaintiff, producing invoices that reflect the Debtor's payments only in response to the Motion to Dismiss. Id . at 635. Finally, the court questioned whether the Plaintiff was using his position as an attorney to bring actions of questionable merit against former clients who, because of their financial circumstances, were likely to be unrepresented and therefore to settle or default. Id .

Still, because of the standard favoring the Plaintiff, the court—while expressing its skepticism that the Complaint would survive summary judgment—declined to dismiss the Complaint. Id . at 636.

After the Debtor was unsuccessful, counsel for the Debtor withdrew. See Order Granting Leave to Withdraw [Adv. Dkt. No. 31]. Thereafter, the Debtor ceased defending the adversary proceeding and, as a result, the Plaintiff moved for default judgment. See Adversary Plaintiff's Motion for a Default Judgment [Adv. Dkt. No. 32] (the "Default Judgment Motion"). When the Debtor did not defend the motion, the court...