Von Kiel v. U.S. Dept. of Health & Human Servs. (In re Von Kiel)

• Decision Date: 19 June 2012
• Docket Number: Adversary No. 11–2022.,Bankruptcy No. 10–21364REF.
• Citation: 473 B.R. 78
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania
• Parties: In re D. Erik VON KIEL, Debtor. D. Erik Von Kiel, Plaintiff v. U.S. Dept. of Health & Human Services, et al., Defendants.

473 B.R. 78

In re D. Erik VON KIEL, Debtor.D. Erik Von Kiel, Plaintiff

v.U.S. Dept. of Health & Human Services, et al., Defendants.

Bankruptcy No. 10–21364REF.

Adversary No. 11–2022.

United States Bankruptcy Court, E.D. Pennsylvania.

June 19, 2012.

Charles Laputka, Allentown, PA, for Debtors.

MEMORANDUM OPINION

RICHARD E. FEHLING, Bankruptcy Judge.

I. INTRODUCTION

Plaintiff/Debtor, Erik Von Kiel, formerly known as Dennis Fluck, (“Debtor”), is a doctor who owed, as of February 29, 2012, $200,239.42 in Health Education Assistance Loans (“HEAL loans”). See Declaration of Barry M. Blum (“Blum Declaration”), p. 6, ¶ 32 (attached to Defendants' Motion for Summary Judgment as Exhibit 1).¹ Through his Complaint, Debtor seeks a determination that for various reasons, the HEAL loans should be deemed not to exist (Counts 1, 2, 3, and 6) or, in the alternative, that the HEAL loans were discharged in his 1991 bankruptcy case (Count 4) or, again in the alternative, are dischargeable in this bankruptcy case (Count 5).

Defendants, United States Department of Health & Human Services (“HHS”) and

United States Department of Justice (collectively “Defendants”), have filed their Motion for Summary Judgment, which is the subject of this Memorandum Opinion. Defendants maintain that no genuine issues of material fact exist and that they are entitled to judgment on the Complaint as a matter of law because: (1) I lack jurisdiction over Counts 1, 2, 3, and 6 of the Complaint under the Rooker–Feldman doctrine; (2) even if I have jurisdiction over Counts 1, 2, 3 and 6, these Counts are barred under the doctrine of res judicata, also known as claim preclusion; (3) the HEAL loans were not discharged in Debtor's prior bankruptcy case (Count 4); and (4) the HEAL loans cannot be discharged in Debtor's present bankruptcy case (Count 5) because I denied Debtor a discharge in this bankruptcy case by my Memorandum Opinion and Order entered on January 5, 2012, in Deangelis v. Von Kiel (In re Von Kiel), Adv. No. 10-2136 (10-21364REF), reported in 461 B.R. 323 (Bankr.E.D.Pa.2012).² Debtor responded by filing a Cross–Motion for Summary Judgment.

For the reasons that follow, I find that no genuine issue of material fact exists and Defendants are entitled to summary judgment as a matter of law on Counts 1–6 of the Complaint. I therefore grant Defendants' Motion for Summary Judgment on these Counts and deny Debtor's Cross–Motion for Summary Judgment. This Memorandum Opinion constitutes my findings of fact and conclusions of law.

II. PROCEDURAL HISTORY

Debtor filed his 15–count Complaint against Defendants and the Honorable Petrese Tucker, United States District Court Judge for the Eastern District of Pennsylvania, United States Attorney David Zane Memerager, Assistant United States Attorney Virginia Powell, United States Trustee Roberta A. DeAngelis and Assistant United States Trustee Dave Adams on February 17, 2011.

On March 24, 2011, Defendants filed a Motion To Dismiss and/or Strike Complaint (“Motion To Dismiss”). Both parties filed briefs and I heard argument on the Motion To Dismiss on May 12, 2011. After which I entered a bench Order that granted the Motion To Dismiss in part, denied it in part and took under advisement and directed the parties to brief the res judicata and collateral estoppel arguments raised by Defendants.

My May 12, 2011 Bench Order was later memorialized in two written Orders. My May 13, 2011 written Order directed the parties to brief the res judicata and collateral estoppel arguments and granted in part and denied in part Defendants' Motion To Dismiss.

Specifically, my May 18 Order dismissed Judge Tucker as a defendant in this proceeding because Debtor consented to her dismissal during the May 12, 2011 argument. In footnote 3, I explained that Counts 11 and 12 were the only counts of the Complaint that pertained to Judge Tucker and I dismissed Counts 11 and 12.

My May 18 Order also dismissed United States Attorney David Zane Memerager, Assistant United States Attorney Virginia Powell, United States Trustee Roberta A. DeAngelis, and Assistant United States Trustee Dave Adams as defendants in this proceeding because they were entitled to absolute immunity from this suit and because they had no duty to report or investigate the claims that Debtor argued should have been reported or investigated. Finally, my May 18 Order dismissed Counts 7–11 and Counts 13–15 of the Complaint for Debtor's failure to state claims that were plausible on their face under Fed. R. Bankr.P. 7012(b) and Fed.R.Civ.P. 12(b)(6). After my May 18 Order, Counts 1–6 were the only counts of the Complaint that remained pending and HHS and the United States Department of Justice were the only parties who remained as defendants.³

The parties then briefed the res judicata and collateral estoppel issues, and on October 7, 2011, I entered an Order granting Defendants' Motion To Dismiss as to Counts 1, 2, 3, 4 and 6 of the Complaint. After my October 7 Order, only Count 5, which requests a determination that the HEAL loans are dischargeable in this bankruptcy case, remained pending.

On October 21, 2011, Debtor filed a Motion To Reconsider my October 7, 2011 Order (“Motion To Reconsider”), as well as a Request for Extension of Time To Complete his Motion To Reconsider. Meanwhile, Defendants filed their Answer to Count 5 of the Complaint on October 28, 2011. On November 3, 2011, Debtor filed another Motion To Reconsider my October 7, 2011 Order. For some reason, on November 18, 2011, Debtor, without explanation and without seeking leave of court, filed an Amended Complaint which purported to reinstate Counts 1, 2, 3, 4 and 6 of the Complaint. On November 21, 2011, I dismissed the Amended Complaint, finding that Debtor violated Fed.R.Civ.P. 15(a)(1)⁴ by filing the Amended Complaint without first obtaining leave of court.

Meanwhile, on January 20, 2012, Defendants filed a Renewed Motion To Dismiss Count 5 of Complaint. On February 13, 2012, I held a hearing on Debtor's Motion To Reconsider and I heard argument on Defendants' Renewed Motion To Dismiss Count 5. On February 13, 2012, I entered an Order granting Debtors' Motion To Reconsider and vacating my October 7, 2011 Order dismissing Counts 1–4 and Count 6 of the Complaint. My February 13 Order also denied Defendants' Renewed Motion To Dismiss Count 5, and directed Defendants to file, by March 10, 2012, a Motion for Summary Judgment on Counts 1–6 of the Complaint or an Answer to Counts 1–6 of the Complaint. I also directed Defendants to limit any summary judgment motion to three issues, namely: (1) Whether Debtor's HEAL loans were discharged in a prior bankruptcy; (2) whether In re Dabrowski, 257 B.R. 394 (Bankr.S.D.N.Y.2001) has precedential value in the Third Circuit; and (3) the effect of my January 5, 2012 Memorandum and Order denying Debtor a discharge ⁵ on Debtor's ability to have his HEAL loans discharged in his main bankruptcy case. Defendants filed their Motion for Summary Judgment and brief in support thereof on March 12, 2012.⁶

Debtor filed a Motion for Summary Judgment (construed as his “Cross–Motion for Summary Judgment”) with accompanying brief on April 6, 2012, to which Defendants filed a Reply on April 13, 2012. Debtor then filed a Response to Defendants' Reply on April 27, 2012 and a supplemental brief on May 4, 2012. All briefs are now filed and Defendants' Motion for Summary Judgment and Debtor's Cross–Motion for Summary Judgment are now ripe for my disposition.

III. FACTUAL BACKGROUND

Debtor is a medical doctor who financed his education with the use of Health Education Assistance (“HEAL”) loans insured by the federal government under the Public Health Service Act, 42 U.S.C. § 292f–p. Debtor's HEAL loans came due on the first day of the tenth month after Debtor ceased being a full-time student. The HEAL loans financed by First Eastern Bank and First American Bank, N.A. were subsequently purchased, and were held, by the Student Loan Marketing Association (“Sallie Mae”). Defendants refer to these loans as “Claim I.” The remaining HEAL loans were held by the Pennsylvania Higher Education Assistance Agency (“PHEAA”). Defendants refer to these loans as “Claim II.” See Blum Declaration, pp. 1–2, ¶ 4.

A. CLAIM I—SALLIE MAE LOANS

The loans that were held by Sallie Mae (Claim I) first came due on March 30, 1989, after Debtor completed his internship programs and the nine month forbearance period expired. See Blum Declaration, p. 2, ¶ 5. From May 10, 1989 through January 29, 1998, Debtor made 34 payments on these loans totaling $26,717.03. Debtor made no other payments on the Sallie Mae loans. See Blum Declaration, p. 2, ¶ 6. Sallie Mae declared Debtor in default and filed a complaint against Debtor in 2000 in the Lehigh County Court of Common Pleas, Civil Division, docketed at No. 2000–C–757. On July 14, 2000, the state court entered a judgment in this action against Debtor in the amount of $132,185.27. See Blum Declaration, p. 2, § 7, and Exhibit D (Blum–00054–72) (certified state court docket and pleadings). Sallie Mae then filed an insurance claim against HHS. HHS paid Sallie Mae's claim on November 20, 2000, and Sallie Mae assigned the judgment to HHS. See Blum Declaration, pp. 2–3, ¶¶ 8–9, Exhibit E (Blum–00073–4), Exhibit G.⁷

After receiving the assignment of the judgment, HHS repeatedly attempted to collect the debt from Debtor. See Blum Declaration, p. 3, ¶¶ 10–12, Exhibit H. On September 19, 2002, HHS registered the judgment with the United States District Court for the Eastern District of Pennsylvania. See Blum Declaration, p. 3, ¶ 13, Exhibit I (Blum–00088–90).

B. CLAIM II—PHEAA LOANS

The loans that were held by PHEAA (Claim II) first became due on May 15, 1989. See Blum Declaration, p. 3, ¶ 14. From May 9, 1989 through April 22, 1998, Debtor made 43 payments on the PHEAA loans totaling $23,027.93. Debtor made no other payments on the PHEAA loans. See Blum Declaration, p. 4, ¶...