Court Opinion

ID: 9373977
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:54.782457+00
Date Added: 2024-06-11T17:16:50.357517
License: Public Domain

FILED
                                                                               MAR 2 2022
                          NOT FOR PUBLICATION                             SUSAN M. SPRAUL, CLERK
                                                                            U.S. BKCY. APP. PANEL
                                                                            OF THE NINTH CIRCUIT

           UNITED STATES BANKRUPTCY APPELLATE PANEL
                     OF THE NINTH CIRCUIT

In re:                                               BAP No. ID-21-1156-SGB
ANTONIO ALEJANDRO GUTIERREZ,
            Debtor.                                  Bk. No. 19-00416-JMM

ANTONIO ALEJANDRO GUTIERREZ,                         Adv. No. 20-06023-JMM
             Appellant,
v.                                                   MEMORANDUM*
STATE OF OREGON, DEPARTMENT
OF CORRECTIONS,
             Appellee.

                Appeal from the United States Bankruptcy Court
                           for the District of Idaho
              Joseph M. Meier, Chief Bankruptcy Judge, Presiding

Before: SPRAKER, GAN, and BRAND, Bankruptcy Judges.

                                 INTRODUCTION

       Antonio Alejandro Gutierrez is a former chapter 7 1 debtor and is an

inmate at the Snake River Correctional Institution, run by the Oregon

Department of Corrections (“ODOC”). After he received his discharge and

       *
         This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
       1 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532.

                                            1
his case was fully administered, Gutierrez filed a complaint stating two

claims for relief. One claim challenged the method used by the ODOC to

collect court filing fees he owed under 28 U.S.C. § 1915(b). The other claim

concerned the dischargeability of those debts under § 523(a)(17).

      The bankruptcy court first dismissed the dischargeability claim on

the merits. The court then dismissed the sole surviving claim challenging

ODOC’s collection methods for lack of subject matter jurisdiction.

Gutierrez has not appealed the dismissal of his dischargeability claim. He

only has appealed the dismissal of his remaining claim.

      Gutierrez insists that the bankruptcy court had “related to”

jurisdiction over the claim regarding ODOC’s collection methods.

Alternately, he contends that the bankruptcy court should have exercised

its discretion to “retain” jurisdiction over that claim. But the bankruptcy

court never had any jurisdiction over this claim to retain.

      Neither of Gutierrez’s arguments on appeal have any merit.

Accordingly, we AFFIRM.

                                       FACTS

      In April 2019, Gutierrez commenced his bankruptcy case by filing a

voluntary chapter 7 petition. In August 2019, the bankruptcy court entered

orders discharging debtor and closing Gutierrez’s no-asset case. 2

      2
         We exercise our discretion to take judicial notice of documents electronically
filed in Gutierrez’s bankruptcy case and the related adversary proceeding. See Atwood v.
Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
                                           2
      In October 2019, the bankruptcy court reopened the case at

Gutierrez’s request. The purpose of reopening the case was to permit the

debtor to commence an adversary proceeding challenging the

dischargeability of debts he owed for federal court filing fees he incurred

under 28 U.S.C. § 1915(b). Under the statute, such fees are owed to the

federal courts but typically are collected from an inmate’s prisoner trust

account by the applicable correctional institution. See 28 U.S.C. § 1915(b)(2).

In this case, that institution was ODOC.

      Gutierrez filed his adversary complaint seeking two forms of relief.

First, he challenged the dischargeability of the federal court filing fees. He

admitted in his complaint that his court fees were the type of debt that fell

within the scope of § 523(a)(17), but he asserted that the statute should not

be applied to his fees because none of the cases he filed were frivolous.

      Second, Gutierrez challenged ODOC’s method of collecting the fees.

Gutierrez alleged that pursuant to 28 U.S.C. § 1915(b)(2), ODOC

historically capped its collections at “20 percent of the preceding month’s

income credited to the prisoner’s account” regardless of the number of

cases for which the inmate owed filing fees. However, Gutierrez claimed

that after he received his bankruptcy discharge, ODOC notified him for the

first time that it would collect from his prisoner trust account 20% of his

income per lawsuit filed, instead of 20% total regardless of the number of

cases filed. According to Gutierrez, the changes in the ODOC’s collection

methods were both contractually and constitutionally prohibited.

                                       3
       The bankruptcy court partially granted ODOC’s motion to dismiss

the complaint. It dismissed Gutierrez’s dischargeability claim but declined

to dismiss the collection method claim, holding that this claim was not yet

ripe for consideration. 3

       Gutierrez then filed a motion seeking entry of a default judgment

against ODOC or alternately seeking entry of summary judgment on his

surviving claim challenging ODOC’s collection method. In support of his

default judgment motion, Gutierrez asserted that ODOC had not timely

complied with the court’s directions regarding further proceedings in the

adversary proceeding. As for his summary judgment motion, Gutierrez

contended that he was entitled to judgment as a matter of law on his

collection method claim.

       ODOC opposed Gutierrez’s motions and filed its own motion

seeking to dismiss the remaining claim for lack of jurisdiction. ODOC in

relevant part pointed out that Gutierrez’s collection method claim would

not have any conceivable effect on his no asset chapter 7 case. The

bankruptcy case had been fully administered back in August 2019, well

before Gutierrez commenced his adversary proceeding.

       The bankruptcy court held a hearing on the parties’ motions. The

court determined that it lacked jurisdiction over the surviving claim

       3 Gutierrez has not challenged on appeal the dismissal of his dischargeability
claim. In fact, he later admitted to the bankruptcy court that he “didn’t think [the fees]
were going to be discharged.” Hr’g Tr. (June 21, 2021) at 4:5-7.

                                             4
because the outcome would not affect Gutierrez’s bankruptcy case or the

bankruptcy estate. Based on that determination, the bankruptcy court held

that it lacked jurisdiction to decide the collection method claim, denied

Gutierrez’s motions, and dismissed the adversary proceeding.

      On June 24, 2021, the bankruptcy court entered its order dismissing

the collection method claim and denying Gutierrez’s motions for default

judgment or for summary judgment. Gutierrez timely appealed.

                               JURISDICTION

      The bankruptcy court’s jurisdiction is addressed in the discussion

section, below. We have jurisdiction under 28 U.S.C. § 158.

                                    ISSUES

1.    Did the bankruptcy court have jurisdiction over Gutierrez’s collection

method claim?

2.    Did the bankruptcy court abuse its discretion by not retaining

jurisdiction over the collection method claim?

                         STANDARDS OF REVIEW

      We review de novo whether the bankruptcy court had subject matter

jurisdiction over Gutierrez’s adversary proceeding. Wilshire Courtyard v.

Cal. Franchise Tax Bd. (In re Wilshire Courtyard), 729 F.3d 1279, 1284 (9th Cir.

2013); Alonso v. Summerville (In re Summerville), 361 B.R. 133, 139 (9th Cir.

BAP 2007).

                                       5
      We review for an abuse of discretion bankruptcy court decisions

concerning retention of jurisdiction after case dismissal. See Linkway Inv. Co.

v. Olsen (In re Casamont Invs., Ltd.), 196 B.R. 517, 521 (9th Cir. BAP 1996).

      The bankruptcy court abuses its discretion when it applies an

incorrect legal rule or when its factual findings are illogical, implausible, or

without support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d

820, 832 (9th Cir. 2011).

                                DISCUSSION

      Gutierrez has asserted two arguments on appeal. First, he argues that

the bankruptcy court had “related to” jurisdiction over his claim

challenging ODOC’s debt collection methods. And second, he argues that

even if the bankruptcy court lacked “related to” jurisdiction over that

claim, the court should have “retained” jurisdiction to determine whether

ODOC was properly collecting the nondischargeable court fees.

      Gutierrez acknowledges that the bankruptcy case was fully

administered long before he filed his adversary proceeding. He also

concedes that his claim regarding the dischargeability of the underlying

debt already had been dismissed. Yet he insists the bankruptcy court

should have exercised its discretion to keep and decide the collection

method claim because the court was “almost finished” adjudicating the

claim.

      We address each of these arguments in turn.

                                        6
A.    The bankruptcy court did not have subject matter jurisdiction over
      Gutierrez’s collection method claim.

      “Bankruptcy courts have subject matter jurisdiction over proceedings

‘arising under title 11, or arising in or related to cases under title 11.’” In re

Wilshire Courtyard, 729 F.3d at 1285 (quoting 28 U.S.C. § 1334(b)). Gutierrez

has conceded that his collection method claim did not arise under or arise

in the Bankruptcy Code. However, as he notes, the bankruptcy court also

has jurisdiction over “those proceedings that are ‘related to’ a bankruptcy

case.” Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 1189, 1193 (9th

Cir. 2005). The bankruptcy court typically has “related to” jurisdiction over

the claims stated in an adversary proceeding when “the outcome could

alter the debtor’s rights, liabilities, options, or freedom of action (either

positively or negatively) and which in any way impacts upon the handling

and administration of the bankrupt estate.” Fietz v. Great W. Sav. (In re

Fietz), 852 F.2d 455, 457 (9th Cir. 1988) (cleaned up) (quoting Pacor, Inc. v.

Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).

      Notwithstanding the broad scope of “related to” jurisdiction,

“bankruptcy courts have no jurisdiction over proceedings that have no

effect on the estate of the debtor.” Celotex Corp. v. Edwards, 514 U.S. 300, 308

& n.6 (1995). Once a chapter 7 bankruptcy estate has been fully

administered, most new adversary proceedings brought after that point fall

beyond the scope of “related to” jurisdiction precisely because there is no

bankruptcy estate left for the new adversary proceeding to impact. See, e.g.,

                                         7
Holcomb v. Altagen (In re Holcomb), BAP No. CC-17-1268-KuTaS, 2018 WL

1976526, at *7 (9th Cir. BAP Apr. 25, 2018); In re Ketscher, Case No. 12-17088,

2014 WL 2615177, at *1-2 (Bankr. E.D. Cal. June 5, 2014); Ng v. Sterling Pac.

Lending, Inc. (In re Ng), Case No. 10-61392 RLE, 2011 WL 6133183, at *8

(Bankr. N.D. Cal. Dec. 8, 2011).4

       Gutierrez’s collection method claim had absolutely no impact on his

fully administered and formerly closed bankruptcy case. He merely sought

to invoke non-bankruptcy law to restrict or prohibit the manner in which

ODOC collected a nondischargeable debt.

       Gutierrez attempts to argue that the bankruptcy court’s “related to”

jurisdiction should be measured at an earlier time — before the full

administration of his bankruptcy case. But the law is settled that

jurisdiction is measured at the time the adversary proceeding is

commenced. See In re Casamont Invs., Ltd., 196 B.R. at 521 (citing In re Fietz,

852 F.2d at 457 at n.2).

       In short, the bankruptcy court correctly determined that it did not

have “related to” jurisdiction over the surviving collection method claim

Gutierrez asserted in his adversary proceeding.

       4There are exceptions to this rule. See, e.g., McCowan v. Fraley (In re McCowan),
296 B.R. 1, 3–4 (9th Cir. BAP 2003); see also § 554(d) (providing that estate assets neither
abandoned nor administered before closure of the case remain property of the estate).
But none of these exceptions apply to Gutierrez’s adversary proceeding.
                                              8
B.    The bankruptcy court did not abuse its discretion by not retaining
      jurisdiction over the collection method claim.

      Gutierrez also argues that the bankruptcy court should have

“retained” jurisdiction over his non-bankruptcy claim. See Aplt’s Opn. Br.

at 4-5. Citing Rodriguez v. Volpentesta (In re Volpentesta), 187 B.R. 261, 270

(Bankr. N.D. Ill. 1995), he contends that the bankruptcy court was obligated

to consider judicial economy, fairness and convenience to the parties, and

the degree of difficulty of the related legal issue involved. See also In re

Casamont Invs., Ltd., 196 B.R. at 521.

      These decisions consider whether to retain jurisdiction over an

existing adversary case after the underlying bankruptcy case is dismissed.

But Gutierrez’s bankruptcy case was not dismissed. It was fully

administered and closed well before he filed the adversary proceeding.

Casamont, and similar cases, do not apply when the bankruptcy case has

been fully disposed of before the adversary proceeding is commenced. See

Sea Hawk Seafoods, Inc. v. Alaska (In re Valdez Fisheries Dev. Ass’n), 439 F.3d

545, 547-49 (9th Cir. 2006). Because Gutierrez’s bankruptcy was closed

when he commenced his adversary proceeding, the bankruptcy court never

had jurisdiction over the collection method claim. Put bluntly, there never

was any jurisdiction over that claim for the court to retain, so it did not

abuse its discretion by dismissing the claim.

      Gutierrez seems to argue that the bankruptcy court should have

considered retaining jurisdiction over the collection method claim because

                                         9
it indisputably had jurisdiction over his dischargeability claim. Assuming

without deciding that the bankruptcy court had the discretion to retain

jurisdiction over the collection method claim based on some sort of theory

of supplemental jurisdiction, Gutierrez has not persuaded us that the

bankruptcy court abused that discretion. Applying the factors considered

in Casamont as suggested by Gutierrez, the record abundantly

demonstrates that dismissal was warranted. Litigants cannot manufacture

bankruptcy jurisdiction over a non-bankruptcy claim by including that

claim together with a specious bankruptcy claim well after the underlying

bankruptcy case has been administered.

                             CONCLUSION

     For the reasons set forth above, we AFFIRM the bankruptcy court’s

adversary proceeding dismissal order.

                                     10