sought to collect debt to the extent that the debt was not discharged in bankruptcy could not violate the bankruptcy courts discharge injunction in two thousand and sixteen bankruptcy court after many years of further proceedings state court decided exactly the opposite and fact that in and found that in fact there was a willful violation of the discharge injunction that decision and ruling on contempt is wrong for two reasons the first relates to issue preclusion based on state law and the second relates to the merits i'm going to start with the issue preclusion argument today and then and then talk about the merits also i think there may be some question as to whether the preclusion argument was raised below could you address that issue yeah there were three preclusion arguments that were actually raised your honor one of them is based on preclusion with respect to the bankruptcy courts decision in two thousand and nine granting the motion to dismiss the adversary complaint that was filed the second argument is preclusion based on the the bankruptcy courts abstention that was appealed to the bankruptcy appellate panel and affirmed in the last one is the argument based on the failure to litigate the discharge injunction in foresman issue in state court that issue was not addressed by the district court in its lengthy thirty six page decision on appeal from the bankruptcy court's ruling even though it was clearly raised and it's clearly raised on appeal here it's the argument that i want to focus on with respect to with respect to preclusion and the reason that the reason that argument works is because this court said in the apex decision that there is concurrent jurisdiction for a state court to consider the issues of the discharge and whether debt was is within the scope of the discharge and in foresman of the discharge injunction the debtor in a pacts filed a motion in state court i mean in bankruptcy court asking that the bankruptcy court reopen the case and hold the home owners who had started an action in state court against the debtor that they be held in contempt for violating the discharge injunction and this court affirmed the refusal to reopen and said that the state courts are fully competent to litigate matters involving the discharge and the discharge injunction the apex decision is not the only word on the subject because in this particular case the other word on the subject is the bankruptcy appellate panel decision same issues same result the debtors in this case sought contempt when they follow an adversary complaint before the bankruptcy court and when that was dismissed in two thousand and nine and went up to the bankruptcy of helping out all the bankruptcy appellate panel there is concurrent just jurisdiction in state court for the court to enforce the discharge and the discharge injunction enforcement was clearly at issue and the bankruptcy appellate panel said that can be litigated in state court there was clearly no expectation after that in further proceedings in state court that buyers or first state bank would be back in bankruptcy court at a later date on the very issue that the bankruptcy appellate panel said can be handled by the state court by the state court  to the extent that that there's an argument that there wasn't jurisdiction in state court to consider whether there was a willful violation of the discharge injunction that argument is simply wrong as a matter of law based on both apex and based on the bankruptcy appellate panel's decision and i know that the law of the case argument gets a little bit confusing but i i fail to understand how the bankruptcy appellate panel's decision cannot be law the case with respect to that issue in these proceedings there's a mandate from the bankruptcy of help panel that goes that goes back and it says these issues are litigated in state court the other thing that i think it's important to keep in mind with respect to the preclusion argument is that at the end of the day when this goes this goes partly to the merits and so it gets a little bit confusing but at the end of the day the the bankruptcy court even though the the the motion for contempt was based on litigating the counter claims that's clearly what paragraph twenty of the motion for contempt that was filed and decided by the bankruptcy court the second time around the twenty sixteen it says the assertion of these counterclaims and litigating the counter claims is what was a willful violation that's not what the bankruptcy court actually found content based on it found conte based on other conduct of john buyers that had been litigated in state court and at the end of the day if you're going to base your determination of a conduct that occurred in state court when the state court has jurisdiction in the first place to consider enforcement of the discharge injunction why would that matter not be resolved in state court there is no answer to that in this case with respect to  the principles of issue preclusion that is a matter of south dakota law south dakota law clearly says that issues in a matter that could be litigated but are not are barred from further the litigation if there is a final judgment on the merits and there's clearly a full and fair opportunity to litigate here as determined by the bankruptcy of patent appellate panel and as determined in the apex decision there was clearly  extensive proceedings in state court there's clearly a final judgment from the south coast green court at that point the matters over there is a suggestion that the bankruptcy court made an invitation to come back my response to that is it can't change the law issue preclusion it can't change the the law of jurisdiction and consider the context in which it was made the bankruptcy court in two thousand and nine said to the stable ors you're here form shopping you're here because things aren't going well for you in state court we're on the eve of what you think may be an adverse determination your form shopping go back to state court the bankruptcy pella panel firms that and calls it a grievous form shopping so in that context there's clearly i think no basis to conclude that the bankruptcy courts suggestion with respect to one of the abstention factors somehow review our rewrites the l preclusion and jurisdiction well can court i guess this sort of is this is the issue that maybe we have to grapple with but can a court partially abstain that seems to be the argument here that injunction i think that's the end of the story with respect to the merits the there's there's a problem here as i pointed out in connection with the the question of what's the basis for the contempt if you look at paragraph twenty of the motion for contempt it's clearly limited to litigating the counter claims in state court that's the very conduct that the bankruptcy court found in two thousand and one could not be a violation of the discharge injunction because it was only seeking to collect debt to the extent that it was not discharged to the extent that the willful the willfulness fining is ultimately based on other conduct i think it's very important to can to keep in mind the context of what was going on here there were there were many transactions that were entered into after the bankruptcy discharge in this case between not only brad and brenda stabler the debtors but of the parents stan and rose who were not in bankruptcy and to whom the bankruptcy just charged did not apply and with respect to those post discharge agreements it's very complicated situation the judgment in this case in state court runs to seventeen pages this was not a one sided affair in terms of the outcome by any means but with respect to those agreements this court in the venture bank case said that the law is confusing in i your reconcilable conflict so the to the extent that the agreement is not merely to forbear from foreclosing on debt but actually does something much more than that has happened in this case there were all kinds of additional loans that were extended including to including to the parents who were not in bankruptcy in that context there's clearly a good faith basis for not only litigating the counterclaims but for john buyer and for state bank to have taken the positions that they did with respect to those activities and to the extent yes yes your honor but even with respect to the primary transaction if you look at the verdict form the claim that was tried to the jury of course that's a claim against john or stan and rose the parents not against brad and round of  the jury found that only part of the debt could not be enforced the interest if it's which state bank debt even though the trial court judge and state court said this this transactions things i don't like it still found that it was in forcible so yes there was there was debt that was still inforced against both brad and brenda and stan and rose as a result of the state court proceedings so i think it's i think it's important to keep that good good faith standard in mind especially in the context of the claim that there's been a willful violation here especially when the willful must itself was not litigated in state court there's a piling on with respect to the conduct of john byers by the state court judge by the south coast print court by the bankruptcy court in two thousand and sixteen by judge lang the district court on appeal after that but there's no discussion of whether that conduct there's clearly it clearly was not litigated in the context of is this a willful violation of the discharge  johnson and there was clearly no opportunity for the bank in mr byers to litigate that issue given that when the case came back to the bankruptcy court in twenty sixteen what was evident from is that the only claim was were seen contempt based on what the gating the counter claims and that had already been determined i'm going to reserve the rest of my time thank you my first appearance in front of the eighth circuit in thirty seven years and for actually i'd like to start with just a little bit of a factual background  a fact that the only basis for the contempt was the comical yes and one of the things that troubles me about the can about the contempt motion is your client brings it in state court to say that that is it has been discharged and i presume they did that because the bank  been doing something and mr byers had been doing something to try to enforce that that we raised the bankruptcy discharge as an affirmative defense in this new court action so i thought you brought the case in state court maybe i'm getting maybe i'm getting mixed up about the proceed about the ok so we're just confusing is that they the counts three and four that we're talking about today were counterclaims brought by first the bank discharged yes ok so they file counter claim saying to the extent they're not discharge we want to judgment as at what happened right ok which was then to my question which is that it's it's alleged in the in the briefing and i presume probably correct that that would be a compulsory collar crime and to the extent that they have an argument that they need to that's this the compulsory counterclaim was a collection activity versus a request for a declaratory judgment as to whether or not the debt was just charged because clearly the bank had knowledge of the bankruptcy they received notice of the bankruptcy they were scheduled as a creditor in the bankruptcy there was no reaffirmation of the debt between the steelers and the bank and the debtors received a discharge so the discharge was clearly out there and so bringing up a counter claim to collect on that that was discharged clearly brought the discharge of the issue and the contempt i but if it's a compulsory counterclaim if they hadn't brought it then they would never be able to collect them that if they if they were correct or any of them was not  i think that they should have brought it as a declaratory judgment action to ask the court to determine whether or not any of the debt was just chargeable versus suing on the debt taking the position that the debt was not discharge yes procedurally judge what happened was the the action was brought in state court and the counterclaims were presented the debtor then filed a complaint the debtor allege the defense of discharging bankruptcy and then filed a complaint for contempt in van secord requesting sanctions against the bank because the action violated the discharge injunction ok and the bankruptcy judge decided to abstain not dismiss the matter because he didn't want to rule on the discharge injunction excuse me the discharge because the state court had concurrent just jurisdiction to rule on the discharge all that that it been discharged debtors then brought their motion in bankruptcy court for contempt and the judge looked at the written there's a fact that i'd like to explore a little bit further with you because i think it may be important it's my understanding that the bank wasn't just litigating the in force ability of a debt alone but in fact they were litigating the enforceability of an agreement split of authority concerning whether or not the requirements of section five twenty four c which is the discharge section apply when a debtor agrees to pay discharge debt in exchange for a creditors promise not to foreclose on leads that ha consideration necessary to make the discharge statute in a portable under the cases that the parent relies upon in this case there was no good faith on behalf  of first aid bank of roscoe the findings were that they sued on the six hundred fifty thousand dollars worth of debt that was discharged they didn't have any of this for the e surviving liens of praise to show that they had all supported a claim post discharge of six hundred fifty thousand dollars they took  they wouldn't have taken significant steps to foreclose if they felt that they had adequate collateral in this case buyers didn't act in good faith because he encouraged the bankruptcy he suggested  the bankruptcy lawyer for my clients who in fact was the bankruptcy lawyer for first a bank of roscoe which seemed surprising and the findings of the  complaint in bankruptcy court and that's exactly what the debtors did and i have a size of the words the judge will use allow and that's that's why when the state court judge roscoe takes the position that the state court should have enforced this and i want to quote here a cite from my brief furthermore proceedings to enforce the statutory injunction on eleven u s c subsection five twenty four a our core proceedings under twenty eight u s c subsection one fifty seven b to all and wolf violations of section five twenty four eighty two or punish will or otherwise enforceable by bankruptcy judges using their authority under eleven u s c subsection one all five a have the bankruptcy in my brief under my discussion in page five i have a quote from the vacancy court in that same decision that you're talking about judge and the judge says and if the state court determines al that i just want to raise the point that issue of preclusion only works as to the issue specifically appealed and passed upon by the appellate court here the issue on appeal at that time you your honor judgment why there was really declaratory relief that was requested on both sides the stabler as initial complaint and state court file in two thousand and seven sought declaratory relief there was later an amended complain that brought additional state law claims based on fraud breach you sure you do those kinds of claims that countered that there was an answer in a counterclaim that also essentially sought declaratory relief and i think under the taggart case which  es the standard for willful violation of the discharge injunction and once the once the bankruptcy court in two thousand and nine in connection with the motion to dismiss said to the extent that counterclaim seek to collect the debt only to the extent that it's not discharge that can't possibly violate the discharge injunction there's clearly a good faith basis for the bank and mr buyers to continue litigating that issues even if the outcome is ultimately bad and i think what's most troubling about the merits is that at the end of the day there's a strict liability standard that applies here there is irreconcilable conflict and confusing case law with respect to post discharge agreements of the sort at play here buyers in the bank said we'd like to litigate that and to the extent that what we did was ok we'd like to collect on that debt but only to that extent and after losing in state court because the state court accepts this line of cases as opposed to this line of cases then the bankruptcy court says well you're in willful violation of the discharge injunction that's a strict liability standard and it's contrary to the to establish law in this circuit it seems to me that maybe one of the one of the problems with this case is that mr doherty just said the only thing that formed the basis of the content was the counter claim but i  counterclaim and i don't know how to sort that out well he absolutely did in twenty sixteen your honor and we've argued that that's improper all that was it issue because all that said well that was it issue according to the motion is litigating the counterclaims how can how define how can we defend a motion for contempt based on litigating the counter claims when the judge later goes and says well i'm going to consider all these other things too that are effectively outside the pleadings well because i mean i think you can do it now i understand just made it but but you you make the point that it was a good faith counterpoint good faith implies i mean i think that's what judge nails started to talk about all this other stuff is not really good faith when byers in the bank paid for those sins in state court your honor that is not that is not the same thing as a willful violation of the discharge injunction giving rise to punitive damages and attorney fees and at the end of the day those were litigating the counter claim and judge neil was very specific about that in his twenty sixteen decision  roscoe's in north central south dakota it is it yes it is it's probably halfway between mo bridge and aberdeen  honor the there is trying to remember exactly what's in the record the state court several times refers to mr byers as the owner of the bank i don't i i'm sorry your honor i don't know whether he was one hundred