In re Havens, Bankruptcy No. 97-35225
| Decision Date | 09 December 1998 |
| Docket Number | 97-39522.,97-33355,Bankruptcy No. 97-35225,97-32086 |
| Citation | 229 BR 613 |
| Parties | In re Norman Atwood HAVENS, Jr., In re John & Robin Crane, In re George W. Pennell, In re Charles L. Williams. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
William H. Oliver, Jr., Asbury Park, NJ, for the debtors, Havens and Crane.
Daniel Straffi, Toms River, NJ, for debtor Pennell.
Marc Alan Krefetz, Dept. of Law and Public Safety—Division of Law, Trenton, NJ, for State of New Jersey.
Charles L. Williams, New Brunswick, NJ, pro se debtor.
PROCEDURAL HISTORY
The primary issue presented in these cases is whether a debtor in bankruptcy can discharge Division of Motor Vehicle ("D.M.V.") insurance surcharges and the effect of Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996) on that determination. Additionally, this court must determine whether the Automobile Full Insurance Underwriting Association, known as the Joint Underwriting Administration ("JUA"), and the Market Transition Facility ("MTF"), which are assigned to collect such surcharges, are arms of the state entitled to sovereign immunity pursuant to the Eleventh Amendment of the United States Constitution. Further, assuming that Eleventh Amendment immunity does extend to the JUA and MTF, as alter-egos of the DMV (a state agency), this court must decide whether the Ex parte Young1 doctrine applies to enjoin state officials, C. Richard Kamin, individually and in his capacity as D.M.V. Director, and Peter Verniero in his capacity as Attorney General ("state officials") from violating the federal law, i.e. the Bankruptcy Code. Additionally, this Court is called upon to decide whether the Division of Taxation, who filed a Proof of Claim in the Pennell bankruptcy case, waived the D.M.V.'s sovereign immunity under general principles of waiver.
Plaintiff Norman Atwood Havens, Jr. (hereinafter "Havens") filed a Chapter 13 petition on May 16, 1997. (Debtor's Brief in Supp. Of Confirmation at 1). Havens listed in his petition, as debts, the insurance surcharges owed to the JUA and MTF. Havens sued state officials and two auto insurance companies, the JUA and MTF, and sought injunctive relief and a declaratory judgment confirming that the insurance surcharges were properly discharged under bankruptcy law, namely § 524 of the Code. (Debtor' Brief at 2). Specifically, Havens requests that this Court enjoin the Defendants from continuing its collection of the insurance surcharge debt. Further, Havens seeks to enjoin Kamin, the director of D.M.V., from permanently suspending his license for failure to pay the insurance surcharge. (Id). The state of New Jersey was not directly sued.
Similarly, Plaintiffs, John and Robin Crane (the "Cranes"), in their complaint, sought an injunction and declaratory judgment against state officials regarding the dischargeability of insurance surcharges. The insurance surcharges were the result of traffic violations and convictions that occurred in municipal court. As of the date the petition was filed, the surcharges totaled $6,050. (See Crane Adv.Comp.; Ex. B). The D.M.V. also holds a judgment in the amount of $3,750. (Id.) Also, the Cranes seek to enjoin the state officials from suspending their licenses. (Crane Compliant, at 2).
In the same vein, Charles Williams, a pro se debtor, recently submitted a letter dated July 21, 1998 seeking a determination of the dischargeability of D.M.V. surcharges and fees. The Cranes, Havens, and Williams are collectively referred to as the Debtors throughout this opinion. Debtor Williams did not submit a brief addressing the legal issues; since he is pro se, however, this Court will consider the arguments raised by Havens and Crane applicable to his case since it involves common issues of fact and law.
Attorney William Oliver, Esq., submitted a brief on behalf of Norman Havens which also addressed and incorporated legal arguments on behalf of the Cranes. First, the Debtors maintain that their due process rights under the Fourteenth Amendment have been denied because they were not given the opportunity to litigate the issue of whether the JUA/MTF are arms of the state entitled to Eleventh Amendment sovereign immunity. Specifically, Debtors argue that they had minimal input to the evidence adduced from Mark Alan Krefetz, Deputy Attorney General for New Jersey, and should therefore be given the opportunity to conduct further discovery on the arm of the state issue. Recently, the bankruptcy court in In re Kish, 221 B.R. 118 (Bankr.D.N.J.1998) decided on remand that the JUA/MTF were arms of the state. This court for the reasons stated herein is bound by that determination.
Additionally, the Debtors argue that Kamin, as director of the D.M.V., cannot suspend their licenses as a means of enforcing the surcharges. See Havens Suppl. Letter Brief filed 8/10/98. Specifically, Debtors point to a recent Supreme Court case, California v. Deep Sea Research, 523 U.S. 491, 118 S.Ct. 1464, 149 L.Ed.2d 626 (1998), in support of its proposition. That case held that a federal court, which has in rem jurisdiction over an admiralty action, was not barred by the Eleventh Amendment where the res of the admiralty action is not within the state's possession. 523 U.S. at ___, 118 S.Ct. at 1470. Analogously, Debtors argue that the bankruptcy court has plenary jurisdiction to decide all issues in a bankruptcy proceeding, including dischargeability of a debt owed to the state, where no monetary judgment is sought by the debtor.
Alternatively, Debtors maintain that the state officials and state agencies, like the JUA and MTF, by virtue of the Supremacy Clause of the U.S. Constitution, are bound by the decisions of the bankruptcy court. Debtors cite Hoffman v. Connecticut, 492 U.S. 96, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989) in support. That case held that ". . . a state that filed no Proof of Claim would be bound like other creditors by discharge of bankruptcy, including unpaid taxes . . . but would not be subject to monetary recovery." (Id).
Finally, Debtors argue that, pursuant to the Ex parte Young doctrine, they are entitled to injunctive relief against the state officials, Kamin and Verniero, who suspended their driving privileges in an effort to enforce the insurance surcharge debt via suspension of drivers license, are violating federal law, particularly § 524 and § 1328 of the Bankruptcy Code. Debtors contend that a debtor in bankruptcy, who is barred by the Eleventh Amendment from obtaining a monetary judgment against the state, nevertheless, may sue state officials for a determination that debt was discharged in bankruptcy and seek a prospective injunction protecting such discharge. Id. (citing Schmitt v. Missouri Western State College (In re Schmitt), 220 B.R. 68 (Bankr.W.D.Mo.1998)).
In addition, Daniel Straffi, Esq., attorney for George Pennell, has sought a determination of the avoidance of D.M.V. surcharges. On January 27, 1998, a confirmation hearing was held in Debtor Pennell's Chapter 13 case. The State of New Jersey, via the D.M.V., objected to the confirmation of Debtor's Chapter 13 Plan on the grounds that the bankruptcy court did not have jurisdiction over it because it is entitled to sovereign immunity under the Eleventh Amendment. (See Pennell Letter Brief at 1). Specifically, Debtor's Plan, which was filed on April 4, 1997, sought to avoid a judgment lien held by the D.M.V. pursuant to § 522(f) of the Code. (Id.) Thereafter, on July 29, 1997, the New Jersey Division of Taxation ("NJDT") filed a Proof of Claim in the amount of $12,414. On or about December 28, 1997, Debtor filed a motion to reduce, disallow and/or expunge the tax claim. After negotiations between Debtor's counsel and state counsel, the State, through, Deputy Attorney General M. Narazanan, amended its claim and filed a reduced Proof of Claim in the amount of $2,568.16 and an administrative claim in the amount of $314.55. As a result, the Debtor withdrew its motion, which withdrawal was placed on the record on January 27, 1998.
Debtor Pennell contends that the State through NJDT waived its sovereign immunity under general principles of waiver, because it filed a Proof of Claim. Further, Debtor Pennell contends that the NJDT, by virtue of filing a Proof of Claim, also waived the sovereign immunity of the D.M.V. In essence, Debtor Pennell argues that one state agency can waive the immunity of another state agency. Debtor cites two state statutes in support: N.J.S.A. 52:18-29, which requires both agencies to pay over the treasury all monies collected by them; and N.J.S.A. 52:18-20, which bars disbursement of funds except through the State treasurer. Debtor Pennell also cites Edelman v. Jordan, 415 U.S. 651, 673, 94 S.Ct. 1347, 1360-1361, 39 L.Ed.2d 662 (1974), for the general proposition that a state can waive its constitutional sovereign immunity under the Eleventh Amendment in the context of a particular controversy.
Conversely, the State, on behalf of the D.M.V., argues that filing a Proof of Claim does not serve as a blanket waiver of immunity. (See Pennell Brief Opp. dated 3/20/98). Specifically, the State contends that Debtor Pennell has failed to point to any logical relationship between the Proof of Claim filed by the Division of Taxation and the debt owed to the D.M.V.
This court must first determine whether it has subject matter jurisdiction over the various claims and parties. Congress has vested bankruptcy courts with jurisdiction over four kinds of Title 11 matters: (1) cases under Title 11; (2) proceedings arising under Title 11; (3) proceedings arising in Title 11; and (4) proceedings related to Title 11. See 28 U.S.C.A. § 1334(b); See Donaldson v. Bernstein, 104 F.3d 547 (3d Cir.1997); In re Lands End Leasing, Inc., 193 B.R. 426 (Bankr.D.N.J.1996). The...
To continue reading
Request your trial