In re Taylor
Citation | 263 BR 139 |
Decision Date | 21 May 2001 |
Docket Number | No. Civ.A. 00-G-3151-E.,Civ.A. 00-G-3151-E. |
Parties | In re Jimmy Clark TAYLOR and Deborah Carter Taylor, Debtors. Deborah Taylor, Appellee, v. United States of America, Department of Education, Appellant. |
Court | U.S. District Court — Northern District of Alabama |
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Herbert H. Henry III, Acting U.S. Attorney, Richard E. O'Neal, U.S. Attorney's Office, Birmingham, AL, J. Christopher Kohn, Tracy J. Whitaker, U.S. Department of Justice, Civil Division, Washington, DC, David W. Ogden, United States Department of Justice-Civil Division, Washington, DC, S. Dawn Scaniffe, United States Department of Education, Office of the General Counsel, Washington, DC, Sheryl L. Floyd, U.S. Department of Justice, Washington, DC, for USA, Department of Education.
Harry P. Long, Anniston, AL, for Deborah Carter Taylor, Jimmy Clark Taylor.
The above-styled case is on appeal from the United States Bankruptcy Court for the Northern District of Alabama, Eastern Division on the order of the bankruptcy court by which it awarded Ms. Deborah Carter Taylor $12,000.00 in emotional distress damages and $31,723.97 in attorney fees against the United States of America Department of Education hereinafter Education.1 The case is before this court on appeal on the following issues:
Discussion of each issue and pertinent governmental programs, regulations, and statutes will follow.
The enumerated issues before the court deal with provisions of and application of the Parent Loan for Undergraduate Students hereinafter PLUS program and related regulations as they relate to other federal statutes, particularly application of 11 U.S.C. § 525(c)(1) of the Bankruptcy Code. The Higher Education Amendments of 1992, 20 U.S.C. § 1078-2, provides, in part, the following:
20 U.S.C. § 1078-2(a)(1)(A) & (B).
The Code of Federal Regulations defines "eligible borrowers" and "adverse credit history." A parent borrower such as Ms. Taylor is defined accordingly:
The Regulations go on to define "adverse credit history" as follows:
34 C.F.R. § 682.201(b)(vii)(C). Thus, only with extenuating circumstances would a person who was the subject of a bankruptcy discharge not have an adverse credit history.
11 U.S.C. § 525(c)(1)
Plaintiff has brought the instant case alleging violations of 11 U.S.C. § 525(c)(1). Section 525(c)(1) of the Bankruptcy Code states in pertinent part the following:
A governmental unit that operates a student grant or loan program and a person engaged in a business that includes the making of loans guaranteed or insured under a student loan program may not deny a grant, loan, loan guarantee, or loan insurance to a person that is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act. . . .
11 U.S.C. § 525(c)(1).
Following enactment of the Bankruptcy Reform Act of 1994 which added 11 U.S.C. § 525(c)(1), Education issued a Dear Colleague Letter hereinafter DCL to guaranty agencies regarding possible changes to loan programs as a consequence of changes in the bankruptcy law. The DCL advised these agencies that PLUS applicants, among other applicants, continued to have an adverse credit history and were thus ineligible for the loans. Mitigating circumstances or the signature of a creditworthy endorser would rebut the negative inference suggested by the prior discharge.3
Ms. Taylor filed an adversary proceeding against Chase Manhattan Bank, N.A. hereinafter Chase on August 19, 1997, alleging a violation of 11 U.S.C. § 525(c)(1), pertinent portions of which have been previously set forth. Chase filed a motion to dismiss which the court denied on March 30, 1998. On November 11, 1998, Education filed a motion to intervene for the limited purposes of addressing certain legal issues. The court granted the motion to intervene on January 19, 1999. On March 25, 1999, plaintiff filed an amended complaint in which she alleged that both Chase and Education violated § 525(c)(1). She requested emotional distress damages and asserted that her complaint should be treated as a class action. The parties filed cross motions for summary judgment and defendants moved to dismiss the class action lawsuit. On June 22, 1999, the court denied Education's motion to dismiss and/or for summary judgment. In January 2000, Ms. Taylor and Chase entered into a settlement agreement in which Chase agreed to pay Ms. Taylor $12,000.000. Chase was subsequently dismissed as a co-defendant.
Trial was held May 11, 2000, and the court issued its decision granting Ms. Taylor $12,000.000 on June 26, 2000.4 Plaintiff submitted an application for attorney fees which the court granted, in part, after oral argument on August 8, 2000. Judgement was entered August 10, 2000. Education timely filed its appeal.
At trial, the following facts were stipulated by the parties:5
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In re Thompson, 00-16906-WV.
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