In re Hardy

• Decision Date: 28 January 1997
• Docket Number: Bankruptcy No. 91-20469.
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re Lois C. HARDY, Debtor.

209 B.R. 371 (1997)

In re Lois C. HARDY, Debtor.

Bankruptcy No. 91-20469.

United States Bankruptcy Court, E.D. Virginia, Norfolk Division.

January 28, 1997.

Ellen C. Carlson, Wright & Carlson, P.L.L.C., Virginia Beach, VA, for debtor.

Peter V. Chiusano, Willcox & Savage, P.C., Virginia Beach, VA, for Marine Bank.

MEMORANDUM OPINION AND ORDER

STEPHEN C. ST. JOHN, Bankruptcy Judge.

This matter came before the Court on December 3, 1996 on a Motion To Reopen by the debtor, Lois C. Hardy, to have the Court reopen her Chapter 7 case pursuant to 11 U.S.C. § 350. After consideration of the evidence introduced at trial and the arguments of counsel, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

The debtor, a self-employed attorney on the Eastern Shore, filed for Chapter 13 protection in 1991. The debtor's case was subsequently converted to a Chapter 7 liquidation, and her debts were discharged on July 1, 1992. The debtor recites two legal bases to support her Motion To Reopen. First, the debtor alleges that, after her bankruptcy filing, some of her clients were told by the Marine Bank ("the Bank") not to utilize her legal services when closing real estate transactions between the Bank and its customers. This conduct is alleged by the debtor to be unlawful discrimination pursuant to 11 U.S.C. § 525(b). The debtor's second reason for her Motion To Reopen is that, one year after her debts were discharged, a pre-petition judgment creditor recorded a judgment lien against certain real property belonging to the debtor. The debtor alleges that the recording of this lien was a malicious act done in violation of 11 U.S.C. § 727 because it "casts a shadow" on the debtor's real estate title by suggesting that there is a post-petition judgment against the debtor. As the parties appear to have reached a resolution with respect to the § 727 title claim, the Court limits its holding on the Motion to Reopen to the claim of alleged discrimination by the Bank under § 525(b).

CONCLUSIONS OF LAW

Notwithstanding the fact that Hardy's bankruptcy case is closed and all scheduled debts have been discharged, the Court retains jurisdiction over the debtor's case for certain purposes. In re Winebrenner, 170 B.R. 878, 881 (Bankr.E.D.Va.1994). One of the specific purposes enumerated is if a party claims a right or remedy created by one of the specific Bankruptcy Code sections. In re Banks-Davis, 148 B.R. 810, 812-13 (Bankr. E.D.Va.1992). As § 525(b) is a specific Bankruptcy Code section, the motion to reopen the bankruptcy case under § 350(b) falls unequivocally within the Court's jurisdiction. The Court's next step, therefore, is to determine if the closed bankruptcy case should be reopened.

Under § 350(b) of the Bankruptcy Code, there are three conditions in which the Court can grant the reopening of a bankruptcy case: to administer assets, to accord relief to the debtor, and for other cause. In re Dove, 199 B.R. 342, 345 (Bankr.E.D.Va.1996). Notwithstanding the three prongs of § 350(b), it is axiomatic that the Court has final discretion in deciding whether to reopen a case. In re Walker, 198 B.R. 476, 478 (Bankr.E.D.Va.1996)(citing Thompson v. Virginia, 16 F.3d 576, 581-82 (4th Cir.1994), cert. denied 512 U.S. 1221, 114 S.Ct. 2709, 129 L.Ed.2d 836 (1994); Hawkins v. Landmark Finance Co., 727 F.2d 324, 326 (4th Cir.1984)). As there are no assets to administer in this case, the Court must base its decision to reopen upon whether the Court determines that either relief can be accorded to the debtor or that other "cause" exists for reopening.

I. Reopen The Bankruptcy Case To Accord Relief To The Debtor

Before the Court will reopen the bankruptcy case to accord relief to the debtor under § 350(b), the Court must determine if the underlying cause of action to the Motion To Reopen is "likely to be sustained when considered on its merits." In re Carter, 156 B.R. 768, 770-71 (Bankr.E.D.Va. 1993).¹ This a two step process requiring the Court to answer two questions. First, are there enough facts on the record that were pleaded with sufficient specificity and presented at the motion hearing to enable the Court to make a determination without prejudicing any party's rights? Second, after it is determined that there is sufficient information before the Court, is the underlying cause of action likely to be meritorious?

1. Is the matter sufficiently pleaded to enable the Court to determine the merits of the underlying cause of action?

The moving party, the debtor in this case, has the burden to demonstrate that there is a sufficient legal basis to reopen the case. In re Winburn, 196 B.R. 894, 897 (Bankr.N.D.Fla.1996)(citing In re Pagan, 59 B.R. 394, 396 (Bankr.D.P.R.1986)). In filing its Motion to Reopen, the debtor filed a motion along with accompanying exhibits, an affidavit which laid out the relevant facts, and a memorandum with supporting case law. The debtor further pleaded her case on December 3, 1996 at a hearing before this Court. In its defense, the Bank filed an Objection To Motion To Reopen Case and a memorandum highlighting relevant case law favorable to the Bank's objection. The Court believes that both sides were given the opportunity to argue their case and that any Due Process concerns with respect to opportunity to be heard have been satisfied. Therefore, in light of the pleadings filed, arguments heard during the oral hearing, and the legal memoranda submitted, the Court concludes that the record is sufficient to permit the Court to adjudicate the merits of the underlying cause of action to the Motion to Reopen.

2. Is the underlying cause of action likely to be sustained on its merits?

Having concluded that there is a sufficient amount of facts on the record, the Court must determine the merits of the underlying cause of action. Section 525(b) of the Bankruptcy Code states:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt —

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;

(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or

(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

11 U.S.C. § 525(b) (emphasis added).

At first blush, the Court believes that a key requirement of § 525(b) is that there must be an employee-employer relationship with the debtor as an employee of the private employer defendant. However, based on the pleadings and arguments made by counsel, it is stipulated that the debtor was not an "employee" employed by the Bank. As a result of this apparent dichotomy between the Court's perception of the requirements § 525(b) and the facts in this case, the Court diligently attempted to locate a reported case involving a § 350 Motion to Reopen, § 525(b) discrimination, and a plaintiff debtor who is not a direct "employee" of the defendant employer.

Although no case directly square with the facts of this case could be located, the Court finds persuasive the holding in In re Henry, 129 B.R. 75 (Bankr.E.D.Va.1991), where Judge Tice concluded that there was no employment discrimination under § 525(b) because the debtors were not employees of the defendant credit union. Id. at 78. Other courts have agreed with Judge Tice that the debtor must be a debtor employee of the alleged discriminating employer in order for § 525(b) to be triggered. In re Bradford, 181 B.R. 910, 915 (Bankr.E.D.Tenn.1995) ("section 525(b) of the Bankruptcy Code specifically and emphatically prohibits discrimination by an employer based on its employee's sic having taken advantage of a right created by federal statutes."); In re Spaulding, 116 B.R. 567, 572 (Bankr. S.D.Ohio 1990); In re Madison Madison Int'l of Illinois, 77 B.R. 678, 680 (Bankr. E.D.Wis.1987)("it is therefore implicit that there be an existing employer-employee relationship between the defendant and the debtor"); see In re Briggs, 143 B.R. 438, 444-45 (Bankr.E.D.Mich.1992); see In re Kanouse, 153 B.R. 81, 82-83 (Bankr.S.D.Fla. 1993). Moreover, as corroboration to the employee-employer relationship requirement in In re Henry, the Court located several cases in which the bankruptcy courts found § 525(b) discrimination because the debtor employee was terminated or was refused employment by its private employer. In re Sweeney, 113 B.R. 359, 362-63 (Bankr. N.D.Ohio 1990); In re Vaughter, 109 B.R. 229, 236-37 (Bankr.W.D.Tex.1989); In re Tinker, 99 B.R. 957, 958-60 (Bankr.W.D.Mo. 1989); In re Hopkins, 81 B.R. 491, 496 (Bankr.W.D.Ark.1987); In re Hicks, 65 B.R. 980, 983 (Bankr.W.D.Ark.1986).

On the other hand, the Court notes that some bankruptcy courts have eviscerated the employee-employer requirement that was deemed integral in In re Henry and the other aforementioned cases. For example, the courts in In re Patterson, 125 B.R. 40, 54-55 (Bankr.N.D.Ala.1990), and In re Callender, 99 B.R. 378, 380 (Bankr.S.D.Ohio 1989), held that the debtors' respective credit unions violated § 525(b) by closing the debtors' account and terminating their relationships with the debtors. The Court, nevertheless, believes that these cases are distinguishable from the current matter. First, the defendants were credit unions that were affiliated with and provided a work related function to the debtors' employer. In re Patterson, 125 B.R. at 54-55 ("section 525(b) can now require such a result when employment-affiliated benefits are denied solely based on bankruptcy") (emphasis added); In re Callender, 99 B.R. at 379. Second, notwithstanding the court's admonishment in In re Callender that the term "emp...