In re Miller

• Citation: 511 B.R. 621
• Decision Date: 15 May 2014
• Docket Number: No. 12–50873–can7.,12–50873–can7.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri
• Parties: In re Michael Allen MILLER, Debtor.

511 B.R. 621

In re Michael Allen MILLER, Debtor.

No. 12–50873–can7.

United States Bankruptcy Court, W.D. Missouri.

Signed May 15, 2014.

Bruce E. Strauss, Merrick Baker Strauss, Kansas City, MO, Trustee.

MEMORANDUM OPINION AND ORDER GRANTING SUMMARY JUDGMENT

CYNTHIA A. NORTON, Bankruptcy Judge.

Michael Miller filed this Chapter 7 case pro se, as an inmate under the custody of the Missouri Department of Corrections (“MDOC”). He scheduled the MDOC as an unsecured creditor to whom he owed $831.25 for what he described as “Inmate Revolving Fund Debt,” or for certain fees the MDOC and the Missouri Board of Probation and Parole (the “Board”) had assessed against him before he filed bankruptcy. Mr. Miller subsequently received his discharge. He now reopens the case, asserting that the MDOC violated the discharge injunction by deducting those fees from his “inmate fund account.” The MDOC does not dispute that it imposed fees against Mr. Miller prepetition, or that it collected the fees from Mr. Miller after the discharge. Instead, the MDOC argues that the fees constitute a nondischargeable “fine, penalty, or forfeiture” within the meaning of 11 U.S.C. § 523(a)(7), such that collection of them does not violate the discharge injunction.

This matter comes before the Court on Mr. Miller's amended motion for summary judgment, based on undisputed facts. The Court has jurisdiction over this matter, which is a core proceeding. 28 U.S.C. §§ 1334, 157(b)(2)(I). Having reviewed the motion and response, the Court finds the “intervention fees” the MDOC collected from Mr. Miller constitute dischargeable fees for services, and are not nondischargeable fines, penalties or forfeitures under § 523(a)(7). The MDOC therefore violated the discharge injunction as a matter of law. The Court's reasoning follows.

Findings of Fact

At the time Mr. Miller filed bankruptcy, he was incarcerated and under the custody of the MDOC. He owed the MDOC for three types of fees: (1) “electronic monitoring fees” ¹ in the amount of $210.00; (2) “housing maintenance fees” ² of $510.06; and (3) “intervention fees” ³ of $90.00 imposed by the Board. The MDOC deducted some or all of these fees post-discharge from Mr. Miller's inmate fund account, with knowledge of Mr. Miller's bankruptcy filing and his subsequent discharge.

The MDOC now admits that the electronic monitoring fees were imposed in error, and represents that the $210.00 has been restored to Mr. Miller's account. Likewise, the MDOC says it has returned the $510.06 in housing maintenance fees; although not waiving the issue for future cases, the MDOC concedes the argument in this case “given the length of time since impositions of the fees.” ⁴ Mr. Miller has not disputed that these amounts have been returned to him. Therefore, the only issue here is whether the $90.00 in prepetition “intervention fees” constitutes a nondischargeable “fine, penalty or forfeiture” within the meaning of § 523(a)(7).

Discussion

A motion to determine whether a creditor has violated the discharge injunction is a contested matter. Fed. R. Bankr.P. 9014. Fed.R.Civ.P. 56, governing summary judgment, is incorporated in Fed.R.Bankr.P. 7056, and is applicable to contested matters. Rule 9014(c). Rule 56 authorizes the Court to grant summary judgment “if there are no genuine issues of material fact and the moving party is entitledto judgment as a matter of law.” ⁵

11 U.S.C. § 523(a)(7) provides that the discharge under § 727 does not discharge an individual debtor from any debt “to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss,” with the exception of certain tax penalties (not relevant here). The “fine, penalty, or forfeiture” exception to discharge is automatic, meaning that the governmental unit to whom the debt is owed need not object to the bankruptcy proceeding in order to preserve the nondischargeability of the debt. Cf.11 U.S.C. § 523(c)(1).⁶Section 524(a)(2) of the Bankruptcy Code provides that a discharge operates as an injunction against acts to collect discharged debts. A bankruptcy court may use its § 105(a) contempt powers to enforce the § 524(a) discharge injunction and to order damages for contempt. ⁷

Arguments of the Parties

In this case, Mr. Miller argues that the intervention, housing and related fees were not imposed as part of his criminal sentence, and therefore that such fees are not penal in nature. Pointing to a Missouri Supreme Court case that describes such fees as for “current and future services rendered,” ⁸ Mr. Miller contends that these fees are merely compensation for pecuniary loss, since the fees are imposed to cover the MDOC's and the Board's costs for providing various services to inmates and offenders. The MDOC, for its part, candidly acknowledges that the fees do reimburse the State for part of its costs. It argues, in essence, that although the fees are civil rather than criminal in nature, such fees are nonetheless assessed against offenders as part of the administration of the criminal justice system. And, the MDOC notes, failure to pay such fees may be punished by revocation of probation, parole or supervised release, as well as further incarceration. Thus, according to the MDOC, it is irrelevant that no court imposed the fees as part of a criminal sentence; the fees were imposed to further penal goals—penal goals that would be thwarted if Mr. Miller were permitted to discharge the fees.

Thus, before delving into the language of § 523(a)(7), the Court needs to examine the nature of intervention fees under Missouri law.

The Nature of Missouri's “Intervention Fees”

The parties do not dispute the State's authority to impose fees against offenders, and agree that the State may use the fees to provide community services to assist offenders in, among other uses, completing probation, parole, or conditional release.

The so-called “intervention fees” are imposed under the authority of § 217.690 RSMo 1995. This statute is part of the provisions regarding the powers and duties of Missouri's Probation and Parole Board. Subsection 217.690.1 authorizes the Board to release or parole certain offenders when, in the Board's opinion, there is a reasonable probability that an offender can be released without detriment to the community or himself. Subsection part 2 makes clear that an offender while on parole remains in the legal custody of the department of corrections but is still subject to the orders of the Board.

Subsection 217.690.3 provides the authority for imposing the fees in this case. That subsection provides:

The board has discretionary authority to require the payment of a fee, not to exceed sixty dollars per month, from every offender placed under board supervision on probation, parole, or conditional release, to waive all or part of any fee, to sanction offenders for willful nonpayment of fees, and to contract with a private entity for fee collection services.

This subsection goes on to specify that the fees may be used for various programs and services to assist the offender:

The fees collected may otherwise be used to provide community corrections and intervention services for offenders. Such services include substance abuse assessment and treatment, mental health assessment and treatment, electronic monitoring services, residential facilities services, employment placement services, and other offender community corrections or intervention services designated by the board to assist offenders to successfully complete probation, parole, or conditional release.

Finally, § 217.690.4 RSMo 1995 also authorizes the Board to adopt rules with respect to the eligibility of offenders for parole, the conduct of parole hearings, and the conditions to be imposed upon parole offenders. The rule that has been promulgated pursuant to this authority is 14 CSR § 80–5.020.

14 CSR § 80–5.020 of the Mo.Code of State Regulations, provides that, “[e]xcept as provided in subsections (1)(E), (F), (G), and (H), all offenders placed under probation, parole or conditional release supervision of the Board of Probation and Parole are required to pay an intervention fee ... [.]” Offenders are not charged intervention fees during the first 90 days of release [ (1)(E).1]; if the case is pre-trial, or a drug court, or deferred prosecution case [ (1)(E).2]; if the offender has been transferred outside of Missouri [ (F) ]; or if they have insufficient income [H]. 14 CSR § 80–5.020(1).

14 CSR § 80–5.020 also addresses consequences for nonpayment of the fees. If the offender fails to pay the intervention fees, an escalating scale of punishment is prescribed. First, the offender's supervising officer is to remind the offender of the unpaid fees at the next contact. 14 CSR § 80–5.020(I).1. Next, the supervising officer is to “direct the offender to specific programs or services that will assist him/her in addressing their [sic] inability to pay (i.e., financial management program, employment counseling and/or job seeking classes, substance abuse counseling, mental health counseling, etc.)” 14 CSR § 80–5.020(I).2. When a willful nonpayment has occurred for more than 90 days, the supervising officer “shall submit a notice of citation or violation report.” 14 CSR § 80–5.020(I).3. Sanctions for willful nonpayment include a written reprimand, travel restriction, community service, increased level of supervision, and shock detention. 14 CSR § 80–5.020(I).6.

Very few cases address the nature of intervention fees under Missouri law. The Supreme Court of Missouri has, however, examined whether imposing intervention fees against an offender already punished and on parole violates Missouri's Constitution as a law retrospectively applied.⁹

In Jackson v. Members of the Missouri Board of Probation & Parole,¹⁰ the Missouri Supreme Court en banc held that imposition of the fees against a previously punished...