In re Justice, Bankruptcy No. 94-14310
| Decision Date | 03 April 1998 |
| Docket Number | Adversary No. 97-1024.,Bankruptcy No. 94-14310 |
| Parties | In re Ginger JUSTICE, Debtor. Ginger JUSTICE, Plaintiff, v. STATE OF OHIO, BUREAU OF WORKERS' COMPENSATION, Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
Harry B. Zornow, Hamilton, OH, for debtor.
Thomas J. Straus, Ohio Attorney General's Office, Cincinnati, OH, for State of Ohio, Bureau of Workers' Compensation.
Margaret A. Burks, Cincinnati, OH, Chapter 13 Trustee.
DECISION ON MOTION TO DISMISS AND MOTION TO AMEND
This matter is before the Court on the motion to dismiss the complaint filed by the Debtor seeking an injunction against the Bureau of Workers' Compensation ("Bureau"). In the motion, the Bureau asserts, under the holding in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), that this Court lacks jurisdiction over it as an agency of the State of Ohio which is protected by Eleventh Amendment sovereign immunity. The Debtor then sought to amend her complaint to join James Conrad, Administrator of the Bureau of Workers' Compensation, as a party defendant ("Administrator"). The Bureau responded by objecting to Debtor's motion to amend the complaint, claiming also that the Court has no jurisdiction over the Administrator.
The issues to be resolved are (i) whether the Court can exercise jurisdiction over the Bureau, (ii) if this Court lacks jurisdiction over the Bureau, whether the Court can and should consider Debtor's motion to amend her complaint and (iii) whether Debtor should be permitted to amend her complaint to add the state official under the doctrine of Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908).
Motions to dismiss are governed by Federal Rule of Civil Procedure 12(b)(6) incorporated into bankruptcy proceedings pursuant to Rule 7012(b). In accordance with this rule the Court must construe all facts "in the light most favorable to the plaintiff, accept all factual allegations as true and determine whether the plaintiff undoubtedly can prove no set of facts in support of its claims that would entitle it to relief." In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993), also see Hishon v. King & Spalding, 467 U.S. 69, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). Motions to dismiss should only be granted if there is no doubt that, even if plaintiff is able to prove all facts necessary to support his claim as alleged, plaintiff would not be entitled to the relief sought. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The parties presented oral arguments on their motions on September 29, 1997, and the Court took the matters under advisement. Consistent with these standards the Court now considers the matters before it.
Debtor filed a petition under Chapter 13 on November 17, 1994, and her Plan was confirmed on January 24, 1995. The Bureau did not file a proof of claim in Debtor's Chapter 13 case. This adversary proceeding was begun against the Bureau on January 31, 1997. The complaint seeks an injunction prohibiting the Bureau from recouping an overpayment of workers' compensation benefits through a State administrative process. The Debtor concedes that the Bureau has a right to recoup the overpayments from the specific claim to which they relate (Claim # 91-18345)1. But, she asserts that the Bureau cannot recoup those overpayments from future unrelated workers' compensation claims that she might assert against the Ohio's workers' compensation fund. Debtor does not specify from what other claims the Bureau might attempt to recoup the overpayments or whether she even has other claims to present for payment by the Bureau. Finally, the Debtor seeks a determination in these proceedings that the Bureau's "unsecured claim" for overpaid benefits will be discharged at the end of the case. The Bureau counters with an argument that its rights to recoupment of the overpayment under state law are not affected by the automatic stay. See 11 U.S.C. § 362. The Bureau's argument further implies that the discharge injunction applicable to other creditors does not affect its right of recoupment. See 11 U.S.C. § 727.
This led the Bureau on February 14, 1997, to file the motion to dismiss the complaint. In a response, Debtor concedes that the Court lacks jurisdiction over the Bureau. However, to counter the motion, Debtor moved to amend her complaint to join the Administrator of the Bureau, as a party defendant in the hopes of achieving the same objective. In the proposed amended complaint, Debtor requests:
A declaration from this Court that Defendants\' unsecured claim will be discharged upon completion of payments, except for their right of recoupment in Debtor\'s Workers Compensation Claim # 91-18345; that Defendants have no right of recoupment against Debtor\'s future Workers Compensation claims that are unrelated to Claim # 91-18345; an Order enjoining Defendants from any and all collection proceedings during the pending of Debtor\'s Chapter 13 case, other than recoupment;2 an Order permanently enjoining Defendants from any and all collection proceedings, other than recoupment.
Subsequently, the Bureau objected to Debtor's motion to amend on the basis that the Court has no jurisdiction to consider that matter either. In its response to the Debtor's motion, the State contends:
The Bureau would not object to the refiling of Debtor\'s complaint adding another party and cause of action. However, the Bureau desires an opinion by this Court that the Debtor\'s original action must be dismissed for lack of subject matter jurisdiction based on the holding of Seminole Tribe of Florida.
As noted, the Debtor concedes that this Court lacks jurisdiction over the Bureau on the basis of the State's assertion of its Eleventh Amendment sovereign immunity.3 The Court's inquiry, however, does not end there. Federal courts have both the power and the duty to determine their own jurisdiction and should not shift to another court a matter within its jurisdiction without examining its own duties. United States v. United Mine Workers of Am., 330 U.S. 258, n. 57, 67 S.Ct. 677, 91 L.Ed. 884 (1947) (); Wilson-Jones v. Caviness, 99 F.3d 203 (6th Cir.1996); Dental Capital Leasing Corp. v. Martinez (In re Martinez), 721 F.2d 262 (9th Cir.1983); In re Holiday Towers, Inc., 18 B.R. 183 (Bankr.S.D.Ohio 1982) (). Competing with this duty in the context of this particular case, is the State of Ohio's sovereign immunity and the desire of the State not to be forced to answer to its own citizens in federal court without consenting.
Having concluded that the Court has the authority to determine its own jurisdiction, we next turn to the holding in Seminole Tribe to consider whether it would be appropriate for us to entertain the present suit. Seminole Tribe defined a two-part test for the courts to use in determining whether Congress has abrogated sovereign immunity: The first is whether Congress has unequivocally expressed its intent to abrogate the immunity and second, whether Congress has acted pursuant to a valid exercise of power. Seminole Tribe, 517 U.S. at 55, 116 S.Ct. 1114. Seminole Tribe further declared that Congress's authority to abrogate state sovereign immunity may only be exercised pursuant to § 5 of the Fourteenth Amendment and the Commerce Clause under Article I of the United States Constitution. Seminole Tribe, 517 U.S. at 59, 116 S.Ct. 1114. The Supreme Court went on, however, to overrule its earlier plurality decision in Pennsylvania v. Union Gas Co., 491 U.S. 1, 109 S.Ct. 2273, 105 L.Ed.2d 1 (1989), the only case in which Article I powers had been employed by Congress in an attempt to abrogate state sovereign immunity. Id. at 66, 109 S.Ct. 2273.
With this backdrop, the Court must next apply the test in Seminole Tribe to the Bankruptcy Code. We first note that Article I of the United States Constitution provides:
U.S. Const. art. I, § 8, cl. 4. In an effort to override state sovereign immunity, § 106(a) of the Bankruptcy Code provides in pertinent part:
Because the language of § 106(a) is a clear expression of Congressional intent to abrogate sovereign immunity, the first part of the test in Seminole Tribe has been satisfied. See Department of Transp. v. PNL Asset Management Co., LLC (In re Estate of Fernandez), 123 F.3d 241, 243 (5th Cir.), amended on denial of reh'g, 130 F.3d 1138, (5th Cir.1997); In re Lush Lawns, Inc., 203 B.R. 418, 421 (Bankr.N.D.Ohio 1996).
The second prong of the test set forth by the Supreme Court is not, however, so easily assuaged. In a recent decision, Judge Baxter of the Northern District of Ohio, was presented with the opportunity to discuss the effect of Seminole Tribe on the constitutionality of § 106(a...
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