In re Kish, Bankruptcy No. 95-36624
| Decision Date | 22 May 1998 |
| Docket Number | Adversary No. 96-3371.,Bankruptcy No. 95-36624 |
| Citation | 221 BR 118 |
| Parties | In re Barbara June KISH, Debtor. Barbara June KISH, Plaintiff, v. Peter VERNIERO, in his capacity as Attorney General of New Jersey, C. Richard Kamin, in his capacity as Director of the New Jersey Division of Motor Vehicles, the New Jersey Automobile Full Insurance Underwriting Association, and the New Jersey Market Transition Facility, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
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Gail Chester, Middlesex County Legal Services Corp., Perth Amboy, NJ, for Plaintiff/Debtor.
Marc Alan Krefetz, Trenton, NJ, for Defendants.
This is the court's decision on remand from the district court and on a motion by defendants Peter Verniero, in his capacity as Attorney General of New Jersey, C. Richard Kamin, in his capacity as Director of the New Jersey Division of Motor Vehicles (the "DMV"), the New Jersey Automobile Full Insurance Underwriting Association (the "JUA"), and the New Jersey Market Transition Facility (the "MTF") (collectively the "defendants") to dismiss the complaint in this adversary proceeding pursuant to FED. R.CIV.P. 19. The plaintiff, Barbara June Kish (the "debtor"), opposes the motion. The issues are: 1) whether the JUA and MTF are entitled to Eleventh Amendment immunity, 2) whether the doctrine of Ex parte Young permits this court to exercise jurisdiction over defendants Verniero and Kamin, and 3) whether the DMV is an indispensable party pursuant to FED.R.CIV.P. 19, which is incorporated by reference in FED. R.BANKR.P. 7019. The court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 151, and 157(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (O). The following shall constitute the court's findings of fact and conclusions of law.
On September 20, 1995, the debtor filed a petition for relief under chapter 7 of title 11, United States Code (the "Bankruptcy Code" or "Code"). Between 1985 and 1987, the debtor committed three separate violations of New Jersey motor vehicle laws. As a result, the debtor's license was suspended, she was assessed a fine, and the DMV assessed motor vehicle surcharges totaling $6,000.00 pursuant to N.J.STAT.ANN. § 17:29A-35. During the pendency of the debtor's bankruptcy case, the DMV took no action to collect the surcharge debt or to determine dischargeability of the debt. On December 20, 1995, the debtor received a discharge in bankruptcy, and notification of discharge was sent to all creditors, including the DMV Office of Surcharge and Collections.
On May 22, 1996, the DMV restored the debtor's driver's license for a fee. The debtor alleges that the DMV informed her both orally and in writing that she owed nothing to the DMV. However, on May 17, 1996, five days before restoring the debtor's license, the DMV sent a letter to the debtor demanding payment of the $6,050 surcharge debt plus an unspecified amount of prepetition interest.1 The debtor did not receive the letter until after her licence had been restored.
On August 15, 1996, this court issued an order permitting the debtor to reopen her bankruptcy case to file an adversary proceeding to determine the dischargeability of the surcharge debt. On August 30, 1996, the debtor filed her adversary complaint against Peter Verniero, in his capacity as Attorney General of New Jersey, and C. Richard Kamin, in his capacity as Director of the DMV, the DMV, the JUA, and the MTF. Specifically, the complaint seeks:
(Complaint, ¶¶ 86-95.) The defendants did not file an answer and, instead, on September 23, 1996, filed a motion seeking to dismiss the adversary complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief could be granted.
This court determined that the debtor's surcharge debt, net of administrative expenses, was nondischargeable under Code section 523(a)(7) and that the debtor's remaining claims were moot in light of the dischargeability ruling. On February 4, 1997, this court entered an order granting defendants' motion for summary judgment.
On February 10, 1997, the debtor filed a notice of appeal contending that this court erred "(1) by converting defendants Rule 12(b)(6) motion without providing sufficient notice to the parties; and (2) by finding that the surcharge bills at issue constitute a `fine, penalty, or forfeiture to and for the benefit of a governmental unit.'" Kish v. Verniero (In re Kish), 212 B.R. 808, 812 (D.N.J.1997) (hereinafter "Kish II").
On appeal, the district court sua sponte raised the issue of the DMV's Eleventh Amendment immunity in light of the Supreme Court's decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996). The district court held that Congress' purported abrogation of states' sovereign immunity pursuant to Code section 106(a) was unconstitutional. Kish II, 212 B.R. at 817. The district court therefore reversed this court's finding of nondischargeability to the extent it implicated the legal rights of the DMV for lack of subject matter jurisdiction. Id. at 818. The district court also held that this court erred in converting defendants Rule 12(b)(6) motion to a Rule 56 motion for summary judgment without providing the parties adequate notice. Id.
The district court remanded the case to this court to consider whether the JUA and MTF are entitled to Eleventh Amendment immunity. The district court directed that, if this court decides that the JUA and MTF are not entitled to Eleventh Amendment immunity, this court must then consider whether dismissal of the case against the DMV requires dismissal of the case against the JUA and MTF pursuant to FED.R.CIV.P. 19. The district court further instructed that, if this court determines that the JUA and MTF are entitled to Eleventh Amendment immunity, this court must then consider whether the debtor's claims fit within the Ex parte Young exception.
On October 14, 1997, the defendants filed a motion to dismiss the debtor's adversary proceeding for failure to join an indispensable party pursuant to FED.R.CIV.P. 19. Therefore, the Rule 19 issue is before this court both on remand and by defendants' motion. Upon review of the directives in Kish II, this court directed the parties to submit briefs on the issues of whether the JUA and the MTF were arms of the state entitled to Eleventh Amendment immunity and whether the Ex parte Young doctrine was applicable in the instant case.
The defendants argue that the issue of the possible immunity of the JUA and MTF is irrelevant to the instant case and declined to brief this issue. The defendants claim that the Eleventh Amendment immunity issue is not relevant because the JUA and MTF are not creditors of the debtor. The defendants support their assertion by pointing out that the debtor listed the DMV as a creditor but not the JUA and MTF. The defendants assert that the DMV bills and collects the surcharges. The defendants therefore conclude that the debtor's surcharge debt is owed only to the DMV, not the JUA or MTF.
The defendants further argue that the Ex parte Young doctrine is not applicable in the instant case. They maintain that the doctrine should only be employed "to provide a review when the state refuses to provide a forum or requires the commission of a crime in order to invoke state court jurisdiction." (Suppl.Br. in Supp. of Def. Motion to Dismiss, at 4-5.) The defendants claim that Ex parte Young is ineffective to allow this court to exercise jurisdiction over defendants Verniero and Kamin because the debtor has not alleged that she could not be heard in state court.
The defendants set forth two primary arguments in support of their Rule 19 request for dismissal. The defendants argue that no adequate relief can be provided to the debtor without joining the DMV and that the debtor has an adequate alternate remedy against the defendants in state court.
Similar to their argument on the Eleventh Amendment issue, the defendants argue that no adequate relief can be provided to the debtor because the DMV assesses and collects motor vehicle surcharges, not the JUA or MTF. The defendants suggest that because all assessment and collection...
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