Justia U.S. 11th Circuit Court of Appeals Opinion Summaries

The Florida Department of Revenue (Florida DOR) and the Virginia Department of Social Services (Virginia DSS) appealed the district court's decision affirming an order of the bankruptcy court holding the agencies in contempt and awarding debtor compensatory and punitive damages for the agencies' alleged violations of the automatic stay and discharge injunction issued by the bankruptcy court. The court held that state sovereign immunity shields the the Florida DOR and the Virginia DSS from debtor's claims for violations of the automatic stay. The court also held that, although sovereign immunity did not bar debtor's claims for violations of the discharge injunction, neither the Florida DOR nor the Virginia DSS violated the discharge injunction. Accordingly, the court reversed the judgment of the district court and remanded with instructions to vacate the bankruptcy court's order and dismiss the action.

This case stemmed from defendant's Chapter 7 bankruptcy proceeding where he sought to discharge a personal injury judgment debt that he had owed plaintiff since 1985. Plaintiff filed a complaint objecting to the discharge of defendant's debt to him on the ground that defendant had fraudulently avoided satisfying that debt since the judgment underlying it was entered 22 years before. Plaintiff subsequently appealed the district court's order affirming the bankruptcy court's order overruling plaintiff's objections and discharging plaintiff's debt to him. Plaintiff also appealed the district court's order affirming the bankruptcy court's award of attorney's fees to plaintiff as a sanction against defendant for filing the objections. The court held that it lacked jurisdiction to review the district court's judgment affirming the bankruptcy court's order denying plaintiff's objections on the merits where plaintiff's notice of appeal was time-barred. The court held, however, that it must remand the case to the bankruptcy court so that it could either flesh out its reasons for sanctioning plaintiff or decide that he was not to be sanctioned where that court did not make specific factual findings as to what constituted bad faith on plaintiff's part. The court also held that plaintiff's appeal to the district court of the denial of his objections to the discharge was colorable, non-frivolous enough, to prevent the district court's denial of sanctions against plaintiff from being an abuse of discretion. Accordingly, the court affirmed in part and reversed in part, remanding for further proceedings.

Plaintiffs filed a purported class action as an adversary proceeding before the bankruptcy court alleging that their mortgage lender, Wells Fargo Bank N.A. ("Wells Fargo"), violated various provisions of the Bankruptcy Code and Bankruptcy Rules by failing to disclose certain fees on the proof of claim it filed in plaintiffs' Chapter 13 bankruptcy case. At issue was whether the district court erred in affirming the bankruptcy court's grant of summary judgment in favor of Wells Fargo on plaintiffs' claims that Wells Fargo violated the automatic stay provisions in 11 U.S.C. 362; their claims that Wells Fargo violated 11 U.S.C 506(b) and Bankruptcy Rule 2016 by failing to disclose the fees; and their objection to the proof of claim. The court considered each of plaintiffs' automatic stay violations under section 362 and held that Wells Fargo was entitled to summary judgment on each claim. The court concluded that bankruptcy courts have not uniformly reached a conclusion supporting the proposition that pursuant to section 506(b), Rule 2016, or both of these provisions, a secured creditor must disclose and obtain court approval of post-petition legal expenses. Therefore, the court held that these provisions were not violated when a creditor merely recorded costs it had incurred in association with a mortgagee's bankruptcy for internal bookkeeping purposes and made no attempt to collect the fees or otherwise add them to the debtor's balance. Accordingly, to the extent plaintiffs' disclosure claims relied on events that have occurred during the course of their Chapter 13 case, the district court did not err in affirming the bankruptcy court's order granting summary judgment. The court further held that Wells Fargo's failure to include the proof of claim fees on the proof of claim did not provide a valid basis for an objection; and as to this amount, plaintiffs have identified no reason why such amount was unenforceable. Therefore, Wells Fargo was entitled to summary judgment on this claim.

Plaintiff filed a lawsuit against defendant alleging that defendant had discriminated against him because of his bankruptcy, in violation of 11 U.S.C. 525(b), by refusing to hire him and alternatively, by terminating him from the job after it had hired him. The primary issue was whether section 525(b) prohibited a private employer from denying employment to an individual on the ground that he was or has been in bankruptcy. The court applied elementary principles of statutory construction and common sense, holding that section 525(b) did not prohibit private employers from denying employment to persons because of their status as a bankruptcy debtor. The court also held that the evidence was more than enough for the jury to discredit appellant's contrary testimony and found that no employment relationship was formed. Accordingly, the court held that the district court did not err in denying plaintiff's renewed motion for judgment as a matter of law and in denying plaintiff's motion for a new trial where the jury's verdict was not against the great weight of the evidence.

Appellants appealed the district court's order affirming the bankruptcy court's decision to sustain the debtor's, Winn-Dixie Stores, Inc. ("Winn-Dixie"), objections to appellants' attempt to amend their claims post-confirmation of Winn-Dixie's reorganization plan after it filed for Chapter 11 proceedings. At issue was whether the doctrine of res judicata barred appellants' amended claims where the reorganization plan language explicitly set forth that acceptance of the new common stock constituted full satisfaction of a claim. The court affirmed the judgment and held that it could not find any compelling reason that would support amendment of appellants' claims which have been barred by the res judicata effect of Winn-Dixie's confirmed plan.