In re Gurda Farms, Inc.
| Citation | 10 BR 479 |
| Decision Date | 03 September 1980 |
| Docket Number | 77 B 2171.,Bankruptcy No. 77 B 1389 |
| Parties | In re GURDA FARMS, INC., Bankrupt. Delia DeLEON et al., Plaintiffs, v. GURDA FARMS, INC., Defendant. In re Stanley J. GURDA, Bankrupt. Delia DeLEON et al., Plaintiffs, v. Stanley J. GURDA, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Mid-Hudson Legal Services, Inc., Farmworkers Project, Newburgh, N.Y., for plaintiffs-appellants; Howard Schell Reilly, Thomas S. Cook, Newburgh, N.Y., of counsel.
John S. Martin, Jr., U.S. Atty., S.D.N.Y., New York City, for intervenor, U.S.; Jane E. Booth, Asst. U.S. Atty., New York City, of counsel.
This appeal raises the issue whether plaintiffs-appellants ("plaintiffs"), creditors of the defendants-bankrupts ("defendants" or "defendants-bankrupts"), may be permitted to proceed in forma pauperis pursuant to 28 U.S.C. § 1915(a)1 in prosecuting an appeal from an order entered by the Bankruptcy Court on August 1, 1979. The United States sought leave to intervene and to oppose plaintiffs' application pursuant to 28 U.S.C. § 2403, which grants the United States the right to intervene in any action where the constitutionality of a federal statute has been raised; the Court has previously granted the Government's motion to intervene.
Plaintiffs are thirteen migrant seasonal farmworkers formerly employed by defendants-bankrupts. Plaintiffs allege that they have no significant resources or income beyond that required to support their immediate needs and that they are qualified to proceed as poor persons; they are represented by the Farmworker Project of Mid-Hudson Legal Services, Inc., without charge, under a program funded by the federal Legal Services Corporation.
In 1976, plaintiffs instituted a civil action in this District against a subsidiary of Gurda Farms, Inc. and Stanley Gurda under the Farm Labor Contractor Registration Act of 1963 ("FLCRA"), as amended, 7 U.S.C. § 2041 et seq., DeLeon, et al. v. Ramirez, et al., 76 Civ. 3770 (the "DeLeon action"). In their complaint, plaintiffs charged that defendants had employed an unregistered farm labor contractor to recruit migrant workers, including plaintiffs, to work on defendants' farm in violation of the provisions of the FLCRA. Plaintiffs were granted leave to prosecute the DeLeon action in forma pauperis.
In 1977, Gurda Farms, Inc. and Stanley Gurda filed voluntary petitions in bankruptcy scheduling plaintiffs as creditors; the filing of the voluntary petitions had the effect of automatically staying the DeLeon action pursuant to 11 U.S.C. § 29(a). In order to continue pursuing their rights against defendants in the DeLeon action, plaintiffs initiated two adversary proceedings under Part VII of the Bankruptcy Rules: in the first proceeding, plaintiffs sought, and were granted, leave to continue prosecuting the DeLeon action to final judgment; in the second proceeding, plaintiffs sought a determination that their FLCRA claims against defendants in the DeLeon action were not provable or dischargeable in bankruptcy. Each such filing required payment of a $15.00 filing fee in each of the two bankruptcy proceedings pursuant to 28 U.S.C. § 1914(a). Plaintiffs sought leave to proceed in the bankruptcy proceedings without payment of costs and fees but the Bankruptcy Court denied their request on June 6, 1978 on the authority of United States v. Kras, 409 U.S. 434, 93 S.Ct. 631, 34 L.Ed.2d 626 (1973). Plaintiffs' appeal from that order was not timely filed, and plaintiffs' request for an extension of time to file the notice of appeal on grounds of excusable neglect was denied by the Bankruptcy Judge and his order was affirmed, on appeal, by the District Court.
Thereafter, plaintiffs moved for partial summary judgment in the DeLeon action, then pending before Judge Robert W. Sweet. Judge Sweet ruled that plaintiffs had established that defendants violated the provisions of the FLCRA; he granted plaintiffs' motion and awarded them damages in the sum of $6,500. DeLeon v. Ramirez, 465 F.Supp. 698 (S.D.N.Y.1979).
Plaintiffs then returned to the Bankruptcy Court and sought partial summary judgment in their second adversary proceeding against defendants-bankrupts on the ground that the judgment awarded in DeLeon v. Ramirez, supra, was not provable and not dischargeable in bankruptcy. On August 1, 1979, Bankruptcy Judge R. Lewis Townsend issued a twelve-page decision on plaintiffs' motion. Judge Townsend ruled that the DeLeon judgment was provable in bankruptcy and that issues of fact existed with respect to whether the judgment was a debt for willful and malicious injuries to persons and thus not dischargeable in bankruptcy; accordingly, he denied plaintiffs' motion for summary judgment.
Thereafter, plaintiffs sought permission to proceed to appeal from the Bankruptcy Judge's decision of August 1, 1979 in forma pauperis pursuant to 28 U.S.C. § 1915(a), without payment of filing fees and other charges; plaintiffs' request was denied on August 14, 1979. Judge Townsend held that Section 40(c)(3) of the Bankruptcy Act, 11 U.S.C. § 68(c)(3),2 which requires payment of a $10 fee for the filing of a notice of appeal, takes precedence over 28 U.S.C. § 1914(a) and 1915(a), and that Section 40(c)(3) "makes no exception which would allow the granting of this application." Plaintiffs then paid the $40.00 joint filing fee in order to preserve their right to appeal Judge Townsend's orders of August 1 and 14 and Judge Townsend directed that plaintiffs' check be held by the Clerk pending the outcome of their appeal so that the issue whether they were improperly denied in forma pauperis status would not be mooted.
In their Notice of Appeal, plaintiffs state that the issue before this Court is "whether the Bankruptcy Judge erred as a matter of law or abused his discretion in holding that plaintiff migrant farmworkers are not entitled to file notice of appeal in forma pauperis and without payment of fees in these actions."
Plaintiffs make two arguments in support of their position: First, they contend that the $10 filing fee requirement under Section 40(c)(3) is subject to Section 1915(a), authorizing, under certain conditions, the commencement, prosecution, or defense of any suit without payment of fees; that the Supreme Court's statement in Kras, supra, 409 U.S. at 440, 93 S.Ct. at 635, that "1915(a) is not now available in bankruptcy," is not dispositive because Kras relied upon lower court rulings that a petitioner seeking discharge of his debts in bankruptcy could not proceed in forma pauperis under Section 1915(a) since the later-enacted Referees' Salary Act of 1946 abolished the so-called pauper petition whereas, here, plaintiffs had been proceeding in forma pauperis before being forced to participate in a bankruptcy proceeding; and that Section 1915(a) should be read broadly so as to avoid potential constitutional deficiencies in Section 40(c)(3), see Mayor of Philadelphia v. Educational Equality League, 415 U.S. 605, 94 S.Ct. 1323, 39 L.Ed.2d 630 (1974); Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 56 S.Ct. 466, 80 L.Ed. 688 (1936).
Plaintiffs' second contention is that Section 40(c)(3)'s appellate fee requirement is unconstitutional as applied to them under Boddie v. Connecticut, 401 U.S. 371, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971); that, just as in Boddie, in which the Supreme Court ruled that a state cannot permit filing fees to bar indigents from securing divorce through its courts, here the Government cannot bar plaintiffs from defending their fundamental interest in the DeLeon judgment; that, as in Boddie, in which the state had a monopoly of the techniques for dissolution of marriages, here a similar Government-created monopoly exists because, under the bankruptcy laws, once a bankrupt files his petition, a creditor's only remedy is to pursue his rights in the bankruptcy proceeding; and thus, as in Boddie, unless a countervailing state interest of overriding significance is shown, plaintiffs must be given a meaningful opportunity to be heard, especially where, as here, plaintiffs are persons whom Congress is seeking to encourage to vindicate their rights through the courts, see Legal Services Corporation Act of 1974, 42 U.S.C. § 2996, et seq.
The Government argues that Kras is dispositive of both of the issues raised by plaintiffs. First, the Government states, Kras explicitly ruled that Section 1915(a) is not applicable in bankruptcy proceedings, and that ruling applies to creditors in bankruptcy proceedings as well as to bankrupts in light of Congress' goal of creating a self-supporting bankruptcy court. Second, the Government urges, plaintiffs' constitutional claim is governed by Kras rather than Boddie because plaintiffs' interest in the DeLeon judgment is more analogous to the right to a discharge in bankruptcy which the plaintiff in Kras sought to protect than to the right to secure a divorce at issue in Boddie. Thus, the filing fee requirement is constitutional since it is rationally related to the goal of making the bankruptcy court self-supporting, see Kras, supra. Moreover, the Government argues, the constitutionality of the modest $10 fee is controlled by the Supreme Court's decision in Ortwein v. Schwab, 410 U.S. 656, 93 S.Ct. 1172, 35 L.Ed.2d 572 (1973), where the Court upheld the constitutionality of a $25 appellate filing fee which was a condition precedent to state appellate review of an agency determination resulting in the reduction of plaintiffs' welfare benefits. In Ortwein, the Court, relying on Kras, held that plaintiffs' due process and equal protection rights were not violated since the increase in welfare payments sought by them had less constitutional significance than the interests the Boddie plaintiffs sought to protect, and since the administrative evidentiary hearing provided a procedure, not conditioned on payment...
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