In re Lesniewski

Citation246 BR 202
Decision Date13 March 2000
Docket NumberBankruptcy No. 98-15226DWS. Adversary No. 99-0215.
PartiesIn re Theresa M. LESNIEWSKI, Debtor. Theresa M. Lesniewski, Plaintiff, v. C. Richard Kamin, Individually and in his capacity as Director of the New Jersey Division of Motor Vehicles, Peter Verniero, Individually and in his capacity as Attorney General of New Jersey, New Jersey Automobile Full Insurance Underwriting Assn., New Jersey Market Transition Facility, Defendants.
CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

COPYRIGHT MATERIAL OMITTED

Henry J. Sommer, Miller, Frank & Miller, Philadelphia, PA, for plaintiff/debtor.

John J. Farmer, Jr., Marc Krefetz, Trenton, NJ, for defendants.

Dave P. Adams, Office of the U.S. Trustee, Philadelphia, PA, United States Trustee.

OPINION

DIANE WEISS SIGMUND, Bankruptcy Judge.

Before the Court is the Plaintiff's Motion for Attorney's Fees (the "Motion") incurred in connection with the above captioned adversary proceeding which raised violations of 11 U.S.C. §§ 524 and 525 and 42 U.S.C. § 1983. Fees in the amount of $7,257 are sought by debtor Theresa Lesniewski ("Plaintiff") as the "prevailing party" pursuant to 42 U.S.C. § 1988. With the exception of the claim for attorney's fees, the adversary proceeding was resolved by a consent order approved on October 21, 1999. The defendants C. Richard Kamin and John J. Farmer (the "New Jersey Officials")1 claim immunity from the Motion under the Eleventh Amendment. In the event I disagree with their sovereign immunity defense, they also dispute plaintiff's entitlement to attorney's fees under 42 U.S.C. § 1988.

BACKGROUND

On March 17, 1999, Plaintiff filed a complaint against the New Jersey Officials, the NJ Automobile Full Insurance Underwriting Association ("JUA") and the New Jersey Market Transition Facility ("MTF") seeking a determination that any insurance surcharge obligations for the benefit of the JUA and MTF2 were discharged in bankruptcy and an injunction restraining collection of such surcharges and prohibiting the New Jersey Attorney General from enforcing certain New Jersey laws related to insurance surcharges as being in conflict with the discharge provisions of the United States Bankruptcy Code.3 The complaint alleged that the New Jersey Officials, and their employees and agents, have sought to collect discharged debts for insurance surcharges in violation of the discharge injunction of § 524. Moreover, the complaint alleged that the New Jersey Officials, and their employees and agents, violated § 525 by suspending Plaintiff's driver's license on account of the discharged debt and conditioning restoration on its payment. Finally Plaintiff alleged that the defendants, acting under color of state law, i.e., NJSA 17:29A-35, deprived Plaintiff of her rights and privileges under federal law in violation of 42 U.S.C. § 1983. The latter count is the nexus to the instant Motion since § 1983 actions carry with them potential entitlement to attorney's fees under 42 U.S.C. § 1988.

At the time of the acts in question the only reported decisions in New Jersey supported the defendants' view of the law that surcharges levied for driving offenses were nondischargeable. In re Kent, 190 B.R. 196 (Bankr.D.N.J.1995); In re Curtin, 206 B.R. 694 (Bankr.D.N.J.1996); In re Kish, 204 B.R. 122 (Bankr.D.N.J.1997).4 Accordingly, following the Plaintiff's discharge and the concomitant termination of the automatic stay, the New Jersey Officials notified Plaintiff to resume payment of her surcharge debt.

On March 15, 1999 the Debtor obtained an Order reopening her bankruptcy case, and filed the complaint on April 8, 1999. Thereafter on August 30, 1999, the bankruptcy court in Kish reversed its previous ruling on the dischargeability issue, 238 B.R. 271 (Bankr.N.J.1999). No appeal was taken.

With a split of New Jersey authority on the dischargeability of surcharges, the New Jersey Officials offered a settlement which is memorialized in the Consent Order dated October 21, 1999. Doc. No. 12. It provides for the dischargeability of the unpaid insurance surcharges and an injunction against the State of New Jersey and/or its officials to collect such debt or to suspend Debtor's driving privileges for any prepetition surcharges so discharged. As part of the parties' understanding, the Consent Order left open the issue of Plaintiff's entitlement to attorney's fees which she now presses and the New Jersey Officials resist.

DISCUSSION
A. Sovereign Immunity

The New Jersey Officials are, of course, correct when they state that the Eleventh Amendment of the Constitution bars suit against a state in federal court and that such bar remains in effect when state officials are sued in their official capacity because "a judgment against a public servant in his official capacity imposes liability on the entity that he represents."5Kentucky v. Graham, 473 U.S. 159, 169, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985). However, this general principle is subject to the Supreme Court's decision in Ex parte Young, supra, that "in an injunction or declaratory action grounded on federal law, the State's immunity can be overcome by naming state officials as defendants." Kentucky v. Graham, supra, 473 U.S. at 169 n. 18, 105 S.Ct. 3099. See also Edelman v. Jordan, 415 U.S. 651, 667, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) (reaffirming the principle that state officers are not immune from prospective injunctive relief). Therefore, sovereign immunity principles would not have barred prosecution of the adversary action against the New Jersey Officials since the relief sought was prospective, i.e., a declaration that the insurance surcharges were discharged and an injunction against their collection and the suspension of her driving privileges as a result thereof.6 This is significant because absent jurisdiction over the underlying claim, there is no jurisdiction over the claim for attorney's fees. Kentucky v. Graham, 473 U.S. at 164, 105 S.Ct. 3099 ("Thus, liability on the merits and responsibility for fees go hand in hand; where a defendant has not been prevailed against, either because of legal immunity or on the merits, § 1988 does not authorize a fee award against that defendant."). See also W.G. v. Senatore, 18 F.3d 60, 64 (2d Cir.1994) (fee shifting provisions such as § 1988 do not confer subject matter jurisdiction but require jurisdiction to proceed with the substantive claim under the civil rights laws); Bergman v. United States, 844 F.2d 353, 355 (6th Cir.1988) (since no cause of action existed under civil rights acts against United States due to its legal immunity, it could not be liable for attorney's fees under § 1988). Moreover, Plaintiff's demand for attorney's fees does not alter the essential nature of this lawsuit so as to make applicable here holdings from cases where the plaintiff sought damages against the state defendant.7 Rather a claim for attorney's fees may lie against state officials, without regard to the Eleventh Amendment, in connection with the enforcement of prospective relief permissible under Ex parte Young.

In Hutto v. Finney, 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978), the Supreme Court considered the appropriateness of two demands for attorney's fees against state officials. The first related to the unchallenged findings of the lower court that state prison officials had acted in bad faith in employing certain practices which violated the prisoners' Eighth Amendment right against cruel and unusual punishment. Accordingly, the Court affirmed the district court's remedial order as well as imposition of an attorney's fee of $20,000, finding the latter not to be barred by the Eleventh Amendment.8 Referring to its decision in Edelman, it reiterated that the line between retroactive and prospective relief cannot be so rigid that it defeats the effective enforcement of prospective relief.9 Having previously found that the state's treasury could be tapped to implement prospective relief, it was not difficult for the Court to similarly reason that litigation costs associated with an award of prospective relief could likewise be imposed.

In exercising their prospective powers under Ex parte Young and Edelman v. Jordan, federal courts are not reduced to issuing injunctions against state officers and hoping for compliance. Once issued an injunction may be enforced. . . . The principles that inform Eleventh Amendment doctrine surely do not require federal courts to enforce their decrees only by sending high officials to jail. The less intrusive power to impose a fine is properly treated as ancillary to the federal court\'s power to impose injunctive relief.
In this case, the award of fees for bad faith serves the same purpose as a remedial fine for civil contempt. It vindicated the District Court\'s authority over a recalcitrant litigant. . . . We see no reason to distinguish this award from any other penalty imposed to enforce a prospective injunction. Hence the substantive protections of the Eleventh Amendment do not prevent an award of attorney\'s fees against the Department\'s officers in their official capacity.

Hutto, 437 U.S. at 690-92, 98 S.Ct. 2565.

Notably this part of the Hutto decision is not implicated in the present matter where there is no allegation of bad faith and indeed the facts suggest just the opposite. Rather it is the second part of the opinion which addresses the additional $2,500 award made by the Circuit Court of Appeals to cover the fees and expenses of the appeal that is applicable. That fee award was affirmed relying on the Civil Rights Attorney's Fee Awards Act of 1976, 42 U.S.C. § 1988 (the "Act"). Referring to its decision in Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976) (involving the Civil Rights Act of 1994, i.e., Title VII), the Court stated:

Congress has plenary power to set aside the States\' immunity from retroactive relief in order to enforce the Fourteenth Amendment. When it
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