Opinion ID: 2818494
Heading Depth: 3
Heading Rank: 2

Heading: Violation of Injunctions

Text: The district court also found that no violation of the statutory discharge or plan injunctions occurred because the ratification motion did not seek to collect, recover, prosecute or satisfy the judgment against Taylor. We agree. When a debtor confirms a Chapter 11 reorganization plan, the plan “discharges the debtor from any debt that arose before the date of such confirmation.” 11 U.S.C. § 1141(d)(1)(A). Discharge in a bankruptcy case “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover, or offset any [discharged] debt as a personal liability of the debtor, whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)(2). Similarly, the plan injunction at issue enjoins creditors “from taking any action … to prosecute, collect or in any way to satisfy any claim such creditor may have against the Debtor or the Debtor’s property that arose prior to the confirmation of the plan.” See R. 70, Debtor’s First Am. Plan § 11.1 at 135. The bankruptcy court is permitted to “sanction a party for violating the discharge injunction only if the party took some action prohibited by § 524(a)(2)—i.e., an action to collect, recover or offset any [discharged] debt … of the debtor.” Paul v. Iglehart (In re Paul), 534 F.3d 1303, 1307 (10th Cir. 2008) (internal quotation marks omitted); see also In re Hunter, 970 F.2d 299, 310 (7th Cir. 1992) (explaining that a bankruptcy discharge “precludes only actions to establish personal liability.” (emphasis in original)). In seeking ratification, the Appellees were not attempting to modify the judgment against Taylor. They were not even 10 No. 14-3017 attempting to modify or cure a deficiency with the assignment of the judgment. The ratification order, as spelled out by the probate court, was nothing more than a declaration that the assignment “is valid, and has been valid since its original signing.” See Ratification Order at 42. The probate court recognized that the order had no impact on the legal status of the parties, and in particular, it had no impact on Taylor’s legal obligations in relation to the judgment. With or without the ratification order, Taylor’s liability remained the same. See Hawxhurst v. Pettibone Corp., 40 F.3d 175, 180 (7th Cir. 1994) (“Permitting a suit to obtain a declaration of liability against a debtor is not equivalent to authorizing the recovery of a barred claim in a bankruptcy proceeding”). Nonetheless, Taylor argues that ratification, albeit not a direct attempt to enforce the judgment, is prohibited because it constitutes an indirect attempt at establishing personal liability. According to Taylor, the ratification order would “set in motion a series of events” that may enable collection of the judgment. See Appellant’s Br. at 40. Taylor’s cites a handful of bankruptcy court decisions from other circuits to support this theory. See, e.g., Torres v. Chase Bank USA, N.A. (In re Torres), 367 B.R. 478 (Bankr. S.D.N.Y. 2007); Atkins v. Martinez (In re Atkins), 176 B.R. 998 (Bankr. D. Minn. 1994). The Appellees readily admit that ratification was sought to lay the groundwork for a Rule 60(b) motion (incorporated under Bankruptcy Rule 9024) to vacate the dismissal order and No. 14-3017 11 reopen the adversary proceeding.4 But gathering evidence to support a Rule 60(b) motion, in order to argue that a debt is not dischargeable, is not the same as taking action to collect on the debt. When taken to its logical conclusion, Taylor’s theory would render any attempt by a creditor to support a Rule 60(b) motion—a permissible motion under the Federal Rules of Civil Procedure and the Bankruptcy Code—as a violation of a discharge injunction. Such an outcome would undermine the purpose of Rule 60(b), and would, in effect, shut down Caiarelli’s remaining avenue for relief. The ratification order is also, to say the least, several steps removed from a collection on the judgment. Before Caiarelli could even present her argument that the judgment is nondischargeable—let alone initiate a collection action—the bankruptcy court must approve a Rule 60(b) motion to reopen the adversary proceeding. This is a high bar for relief. See, e.g., Eskridge v. Cook Cnty., 577 F.3d 806, 809 (7th Cir. 2009) (“relief under Rule 60(b) is ‘an extraordinary remedy and is granted only in exceptional circumstances’” (quoting McCormick v. City of Chi., 230 F.3d 319, 327 (7th Cir. 2000)). And even if Caiarelli does establish that “exceptional circumstances” warrant relief under Rule 60(b), she must also convince the bankruptcy court that the judgment is non-dischargeable. Then, and only then, could Caiarelli attempt collection. It goes without saying that, 4 While the appeal was pending before the district court, Caiarelli filed a Rule 60(b) motion to vacate the dismissal. The bankruptcy court denied the motion with prejudice to the extent it was based on subsections (1)–(3), and without prejudice to the extent it was based on subsections (4)–(6). See R. 47- 1, Order (Apr. 29, 2014). 12 No. 14-3017 at this stage of the litigation, a direct action to collect is purely hypothetical. Given the facts presented—and in particular, the procedural gulf between the ratification order and an action to collect—we are not convinced that the Appellees violated the statutory discharge or plan injunctions by obtaining evidence in support of a permissible post-judgment motion.