In re Myers
| Decision Date | 13 February 2014 |
| Docket Number | Case No. 11-12155,Case No. 12-10752,Case No. 11-12156 |
| Parties | IN RE: ANGELA KAY MYERS, Debtor. IN RE: MARK ANDREW HOBSON, ELAINE MICHELLE HOBSON, Debtors. IN RE: KYLE LYNN ROBERTS, HEATHER MARIE ROBERTS, Debtors. |
| Court | U.S. Bankruptcy Court — District of Kansas |
__________
Robert E. Nugent
United States Chief Bankruptcy Judge
DESIGNATED FOR ONLINE PUBLICATION BUT NOT PRINT PUBLICATION
In these three cases, the debtors claimed a portion of their earned income tax credit for the tax year 2011 exempt under KAN. STAT. ANN. § 60-2315 (2012 Supp.). This much-litigated provision exempts a debtor's right to receive an earned income credit (EIC), but only if the debtor is a debtor in a bankruptcy case. The federal constitutionality of this provision has been upheld by me, by Judge Karlin, by District Judge Marten, and by the Bankruptcy Appellate Panel for the Tenth Circuit.1 Those cases resolved trustees' constitutional challenges to the state exemption on a number of grounds, including whether it ran afoul of the Supremacy Clause, the Uniformity Clause, and other provisions of the U.S. Constitution. No bankruptcy trustee has yet asserted that the provision offends the Equal Protection Clause of the federal Constitution.2 The bankruptcy trustee in the current cases instead alleges that this statute violates the Uniformity Clause found in Article 2, Section 17 of the Kansas Constitution which provides that "All laws of a general nature shall have a uniform operation throughout the state ...."
The parties here join in asking that the reference of this matter be withdrawn by the District Court so that it may certify the question of the exemption statute'svalidity to the Kansas Supreme Court.3 In defense of the bankruptcy-only exemption statute, the intervener State of Kansas argues that the statute is in fact constitutional and that only the Kansas Supreme Court may interpret the Kansas Constitution. But questions of law should only be certified to the Kansas Supreme Court where there is no controlling authority from that Court that bears on the issue. That is not the case here. As such, withdrawal of the reference would serve no purpose. Accordingly, I recommend that the District Court deny the request and permit this Court to determine whether the exemption is valid and applicable in these cases.4
The Trustee's motion is brought as one for permissive withdrawal for cause under 28 U.S.C. § 157(d) and for discretionary abstention under 28 U.S.C. § 1334(c)(1).5 He contends that cause exists under D. Kan. Rule 83.8.6(a)(1) [] and (a)(6) [other specified cause].6 Note, though that this matter bears directly on the degree and extent of the property of the estate and is fundamentally a coreproceeding, a fact which the Trustee concedes.7 Only in the most unusual event would the District Court consider withdrawal of the reference to determine whether an exemption applies in a particular case.8 The fact that the bankruptcy court is determining application of a state law exemption statute is alone insufficient by itself to warrant withdrawal of the reference, because allowing exemptions is intrinsically connected to a debtor's bankruptcy case.9 Indeed, KAN. STAT. ANN. § 60-2315, enacted in 2011, has no application outside of a bankruptcy proceeding and would be unlikely to ever arise in a state court proceeding.10 Judicial economy and uniform bankruptcy administration is best served by having the bankruptcy court determine the validity of the bankruptcy-only exemption at issue in this case. Numerous bankruptcy courts have determined the constitutionality of state law bankruptcy specific exemptionsunder their applicable state constitution.11 Given the discretionary nature of withdrawal and abstention in these cases, I submit that the District Court should allow this Court to retain and decide this matter, giving due respect for controlling Kansas law regarding Art. 2, § 17 of the Kansas Constitution to guide its determination.12
Certification of Questions of Law, Kan. Stat. Ann. § 60-3201, et seq.
Kansas has adopted that Uniform Certification of Questions of Law Act.13 The statutes provide that the Kansas Supreme Court may answer legal questions certified to it by the Supreme Court of the United States, a federal court of appeal, a United States district court, or an appellate court from a sister state.14 It does not specifically authorize bankruptcy courts to certify questions to the Kansas Supreme Court. Indeed, one bankruptcy court concluded that without express authority to certify, itwould retain and decide the constitutionality of a state law exemption for itself.15 It is not clear that if a legal question is to be certified, the reference must be withdrawn.
In 28 U.S.C. § 151 Congress declared that bankruptcy courts shall constitute "a unit" of the district court and that bankruptcy judges are deemed to be a "judicial officer of the district court."16 Citing § 151, at least one bankruptcy court has concluded that it has the power to certify a question of law to its state supreme court.17 Thus, there is arguably authority for this Court to certify a question of law to the Kansas Supreme Court, mooting the Trustee's motion to withdraw the reference.
Even if the District Court withdraws the reference, it must conclude that "there is no controlling precedent in the decisions of the supreme court and the court of appeals of this state" to certify the question.18 Here, while there is no case that specifically addresses the Kansas constitutionality of § 60-2315, there are many Kansas cases that interpret and apply the Uniformity Clause of the Kansas Constitution and state the controlling legal principles to which this Court is bound. In addition, having heard and decided the federal constitutional challenges to the Kansas earned income tax credit exemption, this Court is already intimately familiar with both the exemption statute and the constitutional arguments, including theUniformity Clause of the U.S. Constitution and concepts such as geographic uniformity.19 Those concepts are not unsettled under Kansas law nor novel to the Kansas Constitution. As noted by the federal district court in Marzolf v. Gilgore:
"The decision to certify rests in the sound discretion of the federal district court." Allstate Ins. Co. v. Brown, 920 F.2d 664, 667 (10th Cir. 1990) (quoting Lehman Bros. v. Schein, 416 U.S. 386, 391, 94 S. Ct. 1741, 1744, 40 L.Ed. 2d 215 (1974)). Furthermore, "certification is not to be routinely invoked whenever a federal court is presented with an unsettled question of state law." Armijo v. Ex. Cam., Inc., 843 F.2d 406 (10th Cir. 1998).
"If a district court or court of appeals believes that it can resolve an issue of state law with available research materials already at hand, and makes the effort to do so, its determination should not be disturbed simply because the certification procedure existed but was not used." Lehman Bros. v. Schein, 416 U.S. 386, 395 . . .20
These certification principles were applied in In re Medill, a case where the chapter 7 trustee objected to debtors' claim of exemption of a personal injury action and asserted that the exemption violated the Minnesota Constitution.21 The debtorssought to have the bankruptcy court certify the constitutional issue to the Minnesota Supreme Court.22 In declining to certify, the bankruptcy court reasoned:
So too, here, there exists a body of Kansas Supreme Court case law interpreting Art. 2, § 17 of the Kansas Constitution from which this Court may decide the validity of the Kansas bankruptcy-only exemption. For all of these reasons, it is my recommendation that the request for certification to the Kansas Supreme Court be denied.
Uniformity under the Kansas Constitution, Art. 2, §17.
This provision has been amended several times since the Constitution was first adopted in 1861. It initially contained two provisions, the first relating to "laws of a general nature" and the second prohibiting the Legislature from enacting a "special "law" where a general law can be made applicable. The Kansas Supreme Court distinguished between laws of a general nature and general laws defining the former as a law "whose subject is common to all of the people of the state" and the latter as "which apply to and operate uniformly upon all members of any class of persons, places, or things, by requiring legislation peculiar to themselves in the...
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