In Matter of Coleman, No. 06-16477 (9th Cir. 8/1/2008)
| Decision Date | 01 August 2008 |
| Docket Number | No. 06-16477.,06-16477. |
| Parties | In the Matter of: CATHY COLEMAN, Debtor. EDUCATIONAL CREDIT MANAGEMENT CORPORATION, Appellant, v. CATHY COLEMAN, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Appeal from the United States District Court for the Northern District of California; Samuel Conti, District Judge, Presiding, D.C. No. CV-05-05231-SC.
Curtis P. Zaun (argued) and Miriam Hiser (briefed), Educational Credit Management Corporation, St. Paul, Minnesota, for the appellant.
Lars T. Fuller (argued and briefed), The Fuller Law Firm, San Jose, California, for the appellee.
Before: Diarmuid F. O'Scannlain and Michael Daly Hawkins, Circuit Judges, and James V. Selna,* District Judge.
Opinion by Judge Hawkins.
We consider whether "undue hardship" determinations— whereby bankruptcy courts decide whether student loans qualify for discharge—are ripe in a Chapter 13 case substantially in advance of plan completion.
Cathy Coleman filed for bankruptcy under Chapter 13 in 2004, and the bankruptcy court confirmed a five-year repayment plan. Coleman owes over $100,000 in student loans to Educational Credit. Since graduating from college, Coleman has been irregularly employed as a substitute teacher and art teacher, and was recently laid off in March of 2005. Just under a year after the plan was confirmed, Coleman sought a determination that it would constitute an undue hardship under 11 U.S.C. § 523(a)(8) for her to repay her student loans, and that her student loans should therefore not be excepted from discharge. Educational Credit moved to dismiss for lack of subject matter jurisdiction on ripeness grounds. The bankruptcy court denied the motion, In re Coleman, 333 B.R. 841 (Bankr. N.D. Cal. 2005), and the district court affirmed the decision of the bankruptcy court. This appeal followed.
We review the district court's decision on an appeal from a bankruptcy court de novo. In re Daily, 47 F.3d 365, 367 (9th Cir. 1995) (per curiam); In re Siragusa, 27 F.3d 406, 407 (9th Cir. 1994). "We apply the same standard of review to the bankruptcy court [decision] as does the district court: findings of fact are reviewed under the clearly erroneous standard, and conclusions of law, de novo." In re Tucson Estates, Inc., 912 F.2d 1162, 1166 (9th Cir. 1990). The issue of ripeness is a question of law. Chang v. United States, 327 F.3d 911, 921 (9th Cir. 2003).
[1] Debtors who seek Chapter 13 relief commit to a three-to five-year period of repayment, after which their remaining debts are discharged.1 Unlike Chapter 7 debtors, who are entitled to a discharge of debt as soon as their estate is liquidated and distributed,2 Chapter 13 debtors are not entitled to a discharge of debts unless and until they complete payments to creditors under a three-to five-year plan.3 11 U.S.C. § 1328(a)(2).4 Student loans are excepted from discharge unless the debtor can show "undue hardship." Id. §§ 523(a)(8), 1328(a)(2).5 Coleman is currently making payments under her five-year Chapter 13 plan. She will not be entitled to discharge any of her debts until she completes this plan, and will not be entitled to discharge her student loans unless she can show "undue hardship."
[2] To show undue hardship, the debtor must show "(1) that she cannot maintain, based on current income and expenses, a `minimal' standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment portion of the student loans; and (3) that the debtor has made good faith efforts to repay the loans." In re Saxman, 325 F.3d 1168, 1172 (9th Cir. 2003).
The question before us is one of timing: may Coleman obtain this undue hardship determination substantially in advance of the time she completes payments under her Chapter 13 plan?
[3] Federal Rule of Bankruptcy Procedure 4007(a) provides that "A debtor or any creditor may file a complaint to obtain a determination of the dischargeability of any debt." Under Federal Rule of Bankruptcy Procedure 4007(b), "[a] complaint other than under § 523(c)6 may be filed at any time."7 Coleman argues that this Rule shows that the undue hardship determination is ripe at any time, while Educational Credit argues that, because Coleman cannot obtain a discharge unless and until she completes payments under the plan, the undue hardship determination is not ripe until at or near the time Coleman completes plan payments.
[4] Ripeness has two components: constitutional ripeness and prudential ripeness.8 Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1138 (9th Cir. 2000) (en banc). "The constitutional ripeness of a declaratory judgment action depends upon `whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" United States v. Braren, 338 F.3d 971, 975 (9th Cir. 2003) (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)); see also Hulteen v. AT&T Corp., 498 F.3d 1001, 1004 n.1 (9th Cir. 2007) (en banc) ().
[5] The issues presented must be "definite and concrete, not hypothetical or abstract." Thomas, 220 F.3d at 1139 (internal quotation marks omitted). Where a dispute hangs on "future contingencies that may or may not occur," Clinton v. Acequia, Inc., 94 F.3d 568, 572 (9th Cir. 1996), it may be too "impermissibly speculative" to present a justiciable controversy. Portland Police Ass'n v. City of Portland, 658 F.2d 1272, 1273 (9th Cir. 1981). "The constitutional component of ripeness is a jurisdictional prerequisite." United States v. Antelope, 395 F.3d 1128, 1132 (9th Cir. 2005).
[6] A "substantial controversy" arose between Coleman and Educational Credit when Coleman filed for bankruptcy protection under Chapter 13: Coleman's purpose in filing was to seek the discharge of her student loans, and Educational Credit seeks to prevent this. Further, the controversy here is certainly "definite and concrete, not hypothetical or abstract,"9 because it is a controversy between Coleman and Educational Credit over a specific and defined debt.
[7] It is true that Coleman's actual discharge of her student loans will only occur, if at all, when she completes payments under the plan. 11 U.S.C. § 1328(a)(2). If she does not complete her plan payments, there will be no discharge.10 But plan completion is a single factual contingency—not a "series of contingencies" rendering the decision "impermissibly speculative." See Portland Police, 658 F.2d at 1273, 1274. In Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1211 (9th Cir. 2006) (per curiam), a majority of this court concluded that a challenge to the enforceability of a French court injunction was constitutionally ripe even though enforcement of that injunction had yet to be sought.11 If this factual contingency did not render the dispute so "impermissibly speculative" that it failed to meet the requirement, it is difficult to see how the dispute between Coleman and Educational Credit would not also qualify as constitutionally ripe. Just as Coleman could fail to complete her plan payments, parties to the Yahoo! dispute at the time ripeness was at issue could have decided not to seek the enforcement of its injunction in the United States.12 The dispute here is constitutionally ripe.
The Supreme Court has held that "[p]roblems of prematurity and abstractness may well present `insuperable obstacles' to the exercise of the Court's jurisdiction, even though that jurisdiction is technically present." Socialist Labor Party v. Gilligan,13 406 U.S. 583, 588 (1972) (citing Rescue Army v. Mun. Court, 331 U.S. 549, 574 (1947)).
[8] The Supreme Court has developed a two-part test for determining the prudential component of ripeness in the administrative context: "the fitness of the issues for judicial decision" and "the hardship to the parties of withholding court consideration." Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967) (overruled on other grounds by Califano v. Sanders, 430 U.S. 99 (1977)).14 Originally, we generally applied this two-part test in making prudential ripeness determinations without strictly limiting the test to the administrative law context. See, e.g., Nat'l Audubon Soc'y, Inc. v. Davis, 307 F.3d 835, 850 (9th Cir.) (); Knight v. Kenai Penninsula Borough Sch. Dist., 131 F.3d 807, 814 (9th Cir. 1997); In re Dominelli, 788 F.2d 584, 585 (9th Cir. 1986).
[9] However, in Principal Life Ins. Co. v. Robinson, 394 F.3d 665 (9th Cir. 2005), we held that Abbott does not apply to private contract disputes, and suggested that the test may only be appropriate in the administrative law context. The court noted, because an administrative action "has consequences for many members of the general public," it is "prudent for courts to limit their review of such actions to those involving the possibility of concrete injury greater than speculative or remote financial contingencies." Id. at 670-71. The court also observed that the concerns expressed in Abbott over "judicial entanglement," "allocation of authority," and the risks of "wide-ranging and remote adverse consequences" in administrative agency actions do not apply to private party contract disputes. Id. at 671.
The court then declined to apply the Abbott test to a private party contract dispute over a rent-adjustment provision, finding the matter ripe even though the provision...
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