In re Platter

• Decision Date: 26 March 1998
• Docket Number: No. 97-2761.,97-2761.
• Citation: 140 F.3d 676
• Parties: In re Debra Kay PLATTER, Debtor. DEKALB COUNTY DIVISION OF FAMILY AND CHILDREN SERVICES, Plaintiff-Appellant, v. Debra Kay PLATTER, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

140 F.3d 676

In re Debra Kay PLATTER, Debtor DEKALB COUNTY DIVISION OF FAMILY AND CHILDREN SERVICES, Plaintiff-Appellant, v. Debra Kay PLATTER, Defendant-Appellee.

No. 97-2761.

United States Court of Appeals, Seventh Circuit.

Argued December 8, 1997.

Decided March 26, 1998.

Jon B. Laramore, Andrew L. Hedges (argued), Office of the Attorney General, Kirk D. Carpenter, Mefford & Carpenter, John Wood, Indiana Family & Social Services Administration, Indianapolis, IN, for Plaintiff-Appellant.

Steven J. Glaser (argued), Blaser & Ebbs, Fort Wayne, IN, for Debtor, Defendant-Appellee.

Before KANNE, ROVNER and EVANS, Circuit Judges.

KANNE, Circuit Judge.

In this appeal, the DeKalb County Division of Family and Children Services ("DFCS") claims that the debt which the debtor, Debra Kay Platter, owes it for support of her delinquent minor son is nondischargeable in bankruptcy under 11 U.S.C. § 523(a)(5). The district court affirmed the decision of the bankruptcy court which held this debt dischargeable. Because we agree that the debt does not fall within the requirements of § 523(a)(5), we affirm.

I. HISTORY

Debra Platter is the mother of Trevor Adam Storey. The DeKalb (Indiana) Circuit Court determined that Trevor was a juvenile delinquent and placed him in a residential treatment center. Trevor spent approximately 25 months in treatment centers at a cost of $65,565. A provision of the Indiana Code requires a parent to repay DFCS for assistance it provides a child. See Ind.Code § 31-6-4-18(b). Relying on this provision, the DFCS filed a request for reimbursement from Platter with the same Indiana trial court. That court has yet to rule or hold a hearing on this request.

On July 10, 1996, Platter filed a petition for relief under Chapter 7 of the Bankruptcy Code. Attempting to forestall discharge of the debt Platter owes it, DFCS initiated an adversary proceeding against Platter in the bankruptcy court on July 29, 1996. DFCS argued that Platter's debt falls under a provision in the Bankruptcy Code that makes certain child support debts nondischargeable. See 11 U.S.C. § 523(a)(5). After analyzing the divided authority on this issue, the bankruptcy court held Platter's debt dischargeable. See DeKalb County Div. of Family & Children Servs. v. Platter (In re Platter), No. 96-1087, slip op. at 7 (Bankr.N.D.Ind. Feb. 7, 1997). The court concluded that a debt owed to DFCS for housing a delinquent youth did not satisfy 11 U.S.C. § 523(a)(5) because it is not owed "to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child...." See id. at 2 (quoting 11 U.S.C. § 523(a)(5)).

On June 11, 1997, the District Court for the Northern District of Indiana affirmed this decision. See DeKalb County Div. of Family & Children Servs. v. Platter (In re Platter), No. 97 CV 97, slip op. at 3 (N.D. Ind. June 11, 1997). It held that a court order for reimbursement to DFCS is not a debt owed to a child of the debtor for support of the child since the order does not require payment to the child or to DFCS on the child's behalf. See id. at 8-9; see also Ind. Code § 31-6-4-18(b). DFCS appealed to this Court.

II. ANALYSIS

When we review a district court's decision to affirm a bankruptcy court's ruling, we use the same standard of review as the district court. See Kravit, Gass & Weber v. Michel (In re Crivello), 134 F.3d 831, 834-35 (7th Cir.1998); In re A-1 Paving & Contracting, Inc., 116 F.3d 242, 243 (7th Cir. 1997); In re Marrs-Winn Co., 103 F.3d 584, 589 (7th Cir.1996); see also Fed. R. Bankr.P. 8013. Because neither party contests the facts and the issues before us involve questions of statutory and constitutional interpretation, we review the district court's decision de novo. DFCS presents two issues. The first issue is whether a bankruptcy court has authority to discharge debts owed to a state after the Supreme Court's decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 71-74, 116 S.Ct. 1114, 1131-32, 134 L.Ed.2d 252 (1996), if the state asserts its Eleventh Amendment immunity. The second issue is whether a debtor's obligation to reimburse DFCS for the costs it incurred providing court-ordered residential treatment of the debtor's delinquent son is a debt to the child of the debtor for the maintenance or support of that child within the scope of § 523(a)(5).

A. Eleventh Amendment Immunity

The Eleventh Amendment provides:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

Although the text of the Amendment appears to restrict only the federal courts' Article III diversity jurisdiction, the Supreme Court has interpreted this Amendment "to stand not so much for what it says, but for the presupposition ... which it confirms." Blatchford v. Native Village of Noatak, 501 U.S. 775, 779, 111 S.Ct. 2578, 2581, 115 L.Ed.2d 686 (1991). "The Amendment is rooted in a recognition that the States, although a union, maintain certain attributes of sovereignty, including sovereign immunity." Puerto Rico Aqueduct and Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146, 113 S.Ct. 684, 688-89, 121 L.Ed.2d 605 (1993). For over a century, the Supreme Court has interpreted the Amendment to deny to the federal courts authority to entertain a suit brought by private parties against a state without its consent. See Hans v. Louisiana, 134 U.S. 1, 15, 10 S.Ct. 504, 507, 33 L.Ed. 842 (1890).

1.

DFCS claims that the bankruptcy court has no authority to resolve whether Platter's debt is dischargeable. See Seminole Tribe, 517 U.S. at 71-74, 116 S.Ct. at 1131-32. Although DFCS did not assert its Eleventh Amendment immunity in the courts below, the Eleventh Amendment is sufficiently jurisdictional that a state may raise it at any time. See Edelman v. Jordan, 415 U.S. 651, 677-78, 94 S.Ct. 1347, 1362-63, 39 L.Ed.2d 662 (1974). Thus, even though DFCS asserts Eleventh Amendment immunity for the first time on appeal, we will consider it.

To succeed, DFCS must establish 1) that it is an agency of the state; 2) that the Eleventh Amendment applies; 3) that Congress has no authority to abrogate its Eleventh Amendment immunity under the Bankruptcy Code; and 4) that DFCS has not waived this immunity. As one might predict, the parties disagree on the second element, whether the Eleventh Amendment applies. Platter contends that the Eleventh Amendment does not apply because DFCS initiated this adversary proceeding. DFCS contends that Platter initiated the case by filing for bankruptcy and argues that it did not waive its Eleventh Amendment immunity by participating in this action because the Indiana Attorney General is not authorized to waive that defense.¹

2.

To decide whether Platter or DFCS has properly framed the question, we must identify the implications of initiating an adversary proceeding in a bankruptcy case. If this act is similar to filing compulsory counterclaims after being sued in federal court, then the Eleventh Amendment applies and DFCS has not waived its immunity. See supra n. 1. However, if starting an adversary proceeding is analogous to filing a claim in a previously initiated property dispute, then the Eleventh Amendment does not apply and any waiver argument is irrelevant. Because a state voluntarily chooses to enter a bankruptcy case when it initiates an adversary proceeding, we hold that a state removes itself from the Eleventh Amendment's protection by starting one. See Department of Transp. & Development v. PNL Asset Management Co. (In re Estate of Fernandez), 123 F.3d 241, 245 (5th Cir.1997) ("We do not doubt that after Seminole Tribe, a State may voluntarily choose to participate in a bankruptcy proceeding and [forego] its Eleventh Amendment sovereign immunity. But this remains a choice to be made by the State.").

The Supreme Court addressed the effect of filing a claim in a bankruptcy proceeding on a state's sovereign immunity defense in Gardner v. New Jersey, 329 U.S. 565, 67 S.Ct. 467, 91 L.Ed. 504 (1947). In that case, New Jersey filed a proof of claim for unpaid taxes against the debtor. See id. at 570, 67 S.Ct. at 470. After receiving objections from other creditors about the claim, the trustee petitioned the bankruptcy court to adjudicate the conflicting claims. See id. at 571-73, 67 S.Ct. at 470-72. New Jersey objected to the trustee's petition, arguing that it constituted an impermissible suit against it. See id. at 573, 67 S.Ct. at 471-72.

The Supreme Court held that no sovereign immunity problem existed where the state filed the claim and where no one sought money from the state, reasoning that "[i]t is traditional bankruptcy law that he who invokes the aid of the bankruptcy court by offering a proof of claim and demanding its allowance must abide the consequences of that procedure." Id. at 573, 67 S.Ct. at 472. Thus, when a state becomes an actor and files a claim against the bankruptcy res, it steps outside the bounds of Eleventh Amendment protection. See id. at 574, 67 S.Ct. at 472; Clark v. Barnard, 108 U.S. 436, 447-48, 2 S.Ct. 878, 882-84, 27 L.Ed. 780 (1883).

The situation in Gardner is highly analogous to the situation today. The Eleventh Amendment applies only to suits "commenced or prosecuted against one of the United States." U.S. Const. amend. XI (emphasis added). DFCS commenced a suit when it filed a complaint in the bankruptcy court against Platter on July 29, 1996, asserting its claim that its debt was nondischargeable under 11 U.S.C. § 523(a)(5). See Gardner, 329 U.S. at 574, 67 S.Ct. at 472; see also Fed. R. Bankr.P. 7001(6), 7003, 9002(1). When a state chooses to avail itself of the bankruptcy court as a plaintiff, the Eleventh Amendment does not apply and the state will receive the same treatment as other parties. See Missouri v. Fiske, 290 U.S. 18,...