In re Glaspie

• Decision Date: 28 September 2007
• Docket Number: No. 06-14871.,06-14871.
• Citation: 410 B.R. 261
• Parties: In re William E. GLASPIE.
• Court: U.S. District Court — Eastern District of Michigan

Page 261

410 B.R. 261

In re William E. GLASPIE.

No. 06-14871.

United States District Court, E.D. Michigan, Southern Division.

September 28, 2007.

COPYRIGHT MATERIAL OMITTED

Paul Decailly, Paul Decailly Assoc., Ann Arbor, MI, for William J. Glaspie.

David M. Davis, Hardy, Lewis, Birmingham, MI, for General Motors Corporation.

ORDER AFFIRMING IN PART AND REVERSING IN PART THE ORDER OF THE BANKRUPTCY COURT AND DENYING MOTION FOR CONTEMPT

VICTORIA A. ROBERTS, District Judge.

I. INTRODUCTION

William E. Glaspie ("Appellant") filed a Motion for Contempt in the Bankruptcy Court for the Eastern District of Michigan ("Bankruptcy Court") against General Motors ("Respondent"), alleging violation of the automatic stay provision of 11 U.S.C.S. § 362(a) and the injunction provision of 11 U.S.C.S. § 524(a). His motion was denied. This appeal followed. For the following reasons, the Court affirms in part and reverses in part the Order of the Bankruptcy Court, and DENIES the Motion for Contempt.

II. BACKGROUND

Appellant is a former employee of Respondent. After an accident suffered on September 25, 2001 while working for Respondent, Appellant received $550 per week in Sickness & Accident payments from Respondent under its Life and Disability Benefits Program ("L & DBP"). Beginning September 25, 2002, the L & DBP payments continued at $2180 a month through the long term Extended Disability Benefits provision of the L & DBP. These payments ceased on April 1, 2003 because Appellant became eligible for Respondent's "disability retirement benefits" program under Respondent's Hourly-Rate Employees Pension Plan, and because of a retroactive award of Social Security Disability Benefits covering a period beginning April 1, 2002.

On March 14, 2003, Respondent sent a letter to Appellant informing him that pursuant to Respondent's employment contract, his receipt of Social Security Disability payments made his previously received benefits under Respondent's L & DBP (covering the same time period) immediately due overpayments. This amount totaled $14,991.89. On April 18, 2003, Appellant filed his Petition in Bankruptcy, and on August 18, 2003, the Order Discharging Debtor was entered.

On May 12, 2003—between the filing of the petition and the discharge of his bankruptcy—Appellant was awarded workers' compensation benefits for the period from September 19, 2001, through April 20, 2003, and thereafter. The Workers' Compensation Agency/Board of Magistrates ("Workers' Compensation Board") award entitled Respondent to reduce the lump sum due Appellant by the amount that it had previously paid under the L & DBP. See MCL § 418.354(1)(b); Opinion/Order, Workers' Compensation Agency/Board of Magistrates, Respondent Exhibit B. Although granting Respondent this right to coordinate benefits, the Workers' Compensation Board noted in its Opinion that it appeared the Michigan coordination law conflicted with federal bankruptcy law because it constituted a prohibited "setoff." Appellant appealed this decision to the State of Michigan Workers' Compensation Appellate Commission ("Appellate Commission"). On March 20, 2006 the Appellate Commission affirmed the Workers' Compensation Board decision, but found there to be no conflict with federal bankruptcy law.

On October 19, 2006, the Bankruptcy Court found the coordination law did not violate 11 U.S.C.S. §§ 362(a), 524(a). It also held that Respondent was entitled to coordinate its payments under Michigan law. Based on these findings, the Bankruptcy Court denied the Motion for Contempt against Respondent. After the decision by the Bankruptcy Court, namely on October 27, 2006, the Michigan Court of Appeals affirmed the ruling of the Appellate Commission "on the merits," in a one sentence opinion. The same day, Appellant filed a timely notice of appeal of the Bankruptcy Court decision. This Court now reviews the Bankruptcy Court decision pursuant to 28 U.S.C.S. § 158(a).

Appellant alleges that the reduction by Respondent of his workers' compensation award pursuant to MCL § 418.354, may be legal in the general context, but violates the automatic stay and injunction imposed by bankruptcy courts after the filing of a bankruptcy petition. See 11 U.S.C.S. § 362(a)-(a)(1) ("a petition ... operates as a stay, applicable to all entities [regarding] the commencement or continuation [of an] action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title."); 11 U.S.C.S. § 524 ("A discharge in a case under this title ... operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived.").

The issues before the Court are: (1) whether the decision of the Michigan Court of Appeals resulted in res judicata or collateral estoppel; (2) whether this Court has no jurisdiction to consider this matter because the decision of the Michigan Court of Appeals resulted in the loss of jurisdiction pursuant to the Rooker-Feldman doctrine; and (3) whether the coordination provision of MCL § 418.354 violates 11 U.S.C.S. §§ 362(a), 524(a) when it is applied to the workers' compensation benefits of an individual who filed a bankruptcy petition.

III. BANKRUPTCY COURT OPINION

The Bankruptcy Court decided: (1) it did not lack jurisdiction pursuant to the Rooker-Feldman doctrine; (2) res judicata and collateral estoppel did not apply; and (3) the application of MCL § 418.354 to Appellant's workers' compensation award was not in conflict with the automatic stay and injunction protections of 11 U.S.C.S. §§ 362(a), 524(a).

The Court affirms the reasoning and outcome regarding issues (1) and (2), and the outcome of issue (3). Although the outcome of issue (3) is correct, the reasoning requires clarification. It is not clear whether the Bankruptcy Court based its decision on a finding that the countervailing claims arose from the same "transaction," and were therefore a permissible "recoupment," or whether, as is urged by Respondent, the court found that the workers' compensation award is neither a "recoupment" nor a "setoff," but merely an award that factors in, or "coordinates," the receipt of earlier and alternate benefits into the workers' compensation award.

Respondent continues to challenge the jurisdiction of the Court because of the Michigan Court of Appeals decision issued subsequent to the Bankruptcy Court decision. The Court addresses those challenges first.

IV. STANDARD OF REVIEW

This Court reviews the Bankruptcy Court's findings of law de novo and findings of fact for clear error. See Barnesville v. Rafoth, 106 F.3d 1255, 1259 (6th Cir.1997), cert. denied, 522 U.S. 816, 118 S.Ct. 65, 139 L.Ed.2d 27 (1997).

V. ANALYSIS

A) Jurisdiction and Preclusion Challenges

Jurisdiction to hear this appeal is established by 28 U.S.C.S. § 158(a). Respondent's preclusion and jurisdiction arguments fail because of one glaring shortcoming: the Michigan Court of Appeals decision came after the decision of the Bankruptcy Court.

i) Rooker—Feldman

The Rooker-Feldman doctrine arises from two Supreme Court cases which jointly prohibit federal district courts from reviewing the merits of state court judgments. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923). As summarized by Respondent, the Rooker-Feldman doctrine:

[I]s a combination of abstention and res judicata doctrines, and stands for the proposition that a federal district court may not hear an appeal of a case already litigated in state court.... [T]he lower federal courts do not have the authority to review state court decisions, even where a federal question is presented. [The doctrine], in essence bars `a party losing in state court ... from seeking what ... would be appellate review of the state judgment in a United States district court."

Respondent's Response at 13 (citing District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); United States v. Owens, 54 F.3d 271, 274 (6th Cir.1995), cert dismissed, 516 U.S. 983, 116 S.Ct. 492, 133 L.Ed.2d 418; Johnson v. De Grandy, 512 U.S. 997, 114 S.Ct. 2647, 129 L.Ed.2d 775 (1994)) (internal citations omitted).

The Bankruptcy Court rejected application of the Rooker-Feldman doctrine, holding that it "has no application to judicial review of executive action, including determinations made by a state administrative agency." Bank. Opin. at 3, Resp. Exh. F (citing Verizon Md., Inc. v. Public Service Com'n of Md., 535 U.S. 635, 644 n. 3, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002)). When the Bankruptcy Court issued its opinion, only state administrative tribunals had made a determination. Subsequently, the Michigan Court of Appeals affirmed these determinations on the merits.

At the core of this analysis is the unique nature of Bankruptcy Courts, and whether their orders, appealable to district courts, are final. If they are not, then the Michigan Court of Appeals decision rendered several days after the Bankruptcy Court decision, may mean that this case was "already litigated in state court," depriving this Court of jurisdiction to render a decision on the coordination of benefits.

Bankruptcy Courts are not Article III courts. These courts have been permitted by Congress to have the power to hear and make final decisions on all "core" proceedings arising under the bankruptcy code. See 28 U.S.C.S. § 157(b)(1). In contrast, these courts may hear "non-core" proceedings, but may not make final judgments without the consent of both parties, and are otherwise limited to making recommendations to the district...