Court Opinion

ID: 9518797
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:02:13.884275+00
Date Added: 2024-06-11T12:36:19.854088
License: Public Domain

BOHANON, Bankruptcy Judge,
Concurring in Part and Dissenting in Part.
I concur in the part of the majority’s decision that affirms the trial court’s declaratory judgment that the Debtor’s debt to Dr. Lang is excepted from her discharge. I must dissent, however, from that part of the decision affirming the trial court’s award of a money judgment on the excepted debt.1
The majority states that there is a “broad congressional grant of jurisdiction given to bankruptcy courts under 28 U.S.C. § 157 ... to award money damages in a § 523(a) proceeding.” Majority Opinion at 22. This polemic, however, is simply beyond the limited grant of bankruptcy jurisdiction to the federal district courts and transgresses the narrow boundaries of their jurisdiction over bankruptcy cases. It also conflicts with our admonition to not “read jurisdictional statutes broadly.” Finley v. United States, 490 U.S. 545, 549, 109 S.Ct. 2003, 104 L.Ed.2d 593 (1989).
Federal bankruptcy jurisdiction is found in 28 U.S.C. § 1334(a), which grants the district courts “original and exclusive jurisdiction of all cases under title 11.” The only part of this adversary proceeding that arises under title 11 is the complaint that the debt be excepted from the discharge. There is federal jurisdiction over it because section 1334(b) allows the district courts to decide “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” There is no question but that a complaint based on 11 U.S.C. § 523(a)(2) arises under title 11. It begs sound reason, however, to go on and say that a state law suit for damages arises in or relates to the bankruptcy case. Dr. Lang’s suit for damages against the Debtor is totally separate and distinct *521from the bankruptcy case. It is purely a state law claim, having no relation to title 11 and has its own existence regardless of the bankruptcy petition. The issue of whether or not Dr. Lang is entitled to damages is a state law matter, and whether the Debtor can discharge that debt in bankruptcy is a federal law matter. The state law claim for damages certainly doesn’t arise under title 11, nor does it arise in or relate to the bankruptcy case, for it is totally independent of both title 11 and the case.
I must also specifically mention my disagreement with the majority’s conclusion that 28 U.S.C. § 157(a) is a jurisdiction granting statute. That section deals only with procedures and the referral of title 11 cases to the bankruptcy courts. One must look exclusively to 28 U.S.C. § 1334(a) for the grant of jurisdiction which is placed in the district, not bankruptcy, courts. It is nice to postulate, as do cases cited by the majority, that the federal district and bankruptcy courts ought to have jurisdiction to award money damages out of equitable concerns for judicial efficiency, but Congress clearly didn’t see fit to usurp the state courts in that regard. And, in any event, it certainly isn’t uncommon for trials to be bifurcated to deal with issues of liability and damages separately.
The majority also insinuates that the doctrine of law of the case applies, Majority Opinion at 21 n. 18, referring to Lang v. Lang (In re Lang), 166 B.R. 964 (D.Utah 1994), where earlier in this adversary proceeding Dr. Lang moved to withdraw the reference to the bankruptcy court in order to try his complaint to a jury in the district court. In denying this request the district court concluded that Dr. Lang’s complaint against Ms. Lang constituted a claim against the bankruptcy estate, and therefore, he waived any right to have the reference withdrawn and a jury trial. It is elemental that for an issue, of fact or law, to be precluded in a subsequent case it must have been actually litigated and determined. See Restatement of the Law (Second) of Judgments § 27 (1982). The district court did not consider subject matter jurisdiction under 28 U.S.C. § 1334(a). It dealt only with reference to the bankruptcy court under 11 U.S.C. § 157(a), which is not an issue before us. All the decision holds is that because he filed a proof of claim Dr. Lang waived any right to have the reference withdrawn under section 157(d). Any implication in the district court decision that section 157(a) confers jurisdiction is dictum and “[t]he actual-decision requirement means that dictum is not the law of the case, just as actual decision does not support issue preclusion unless [the] decision was necessary to support the judgment.” 18B Wright & Miller § 4478, at 664-67.
Additionally, Dr. Lang’s waiver of the right to a jury trial can’t be considered a waiver of jurisdiction, for “the parties cannot waive lack of jurisdiction by express consent, or by conduct, or even by estop-pel; the subject matter jurisdiction of the federal courts is too basic a concern to the judicial system to be left to the whims and tactical concerns of the litigants.” 13 Wright & Miller § 3522, at 66-68. Therefore, the earlier ruling is not the “law of the case,” and I remain obligated to investigate the want of subject matter jurisdiction.
If the majority is correct when it concludes that Congress granted such broad powers to the federal courts over bankruptcy cases, where then does that jurisdiction end? What if the creditor, in a complaint under section 523(a), seeks to join a non-debtor, third-party defendant who may be a joint obligor with the debt- or? Could it then be said that the dispute between the creditor and this unrelated *522third party arises from or relates to the bankruptcy case even though it has no nexus with the case?
As another example when a creditor requests relief from the automatic stay under 11 U.S.C. § 362(d) there plainly is an issue arising under title 11. If the relief is granted in the bankruptcy case the creditor then goes to the appropriate nonbank-ruptcy forum to enforce its contract or foreclose its lien. Under the scheme advanced by the majority wouldn’t the creditor, once the automatic stay is modified, then bring the complaint to enforce its state law rights in the district court and does that suit to enforce contract remedies arise under title 11? If so, could the district court refer that issue to the bankruptcy court?
If a debtor’s discharge is denied under 11 U.S.C. § 727 would the creditors then bring their suits to enforce their state law claims for damages in the district court? Is that case any different from one where a creditor whose debt is excepted from the discharge under 11 U.S.C. § 523(a) enforces its state law claim for damages in the federal court? That is the judgment affirmed by the majority today.
What if confirmation of a plan of reorganization is denied under 11 U.S.C. § 1129? Would all the creditors then bring their state law claims against the debtor in the federal court?
One could conceive other paradigms ad infinitum, and the district courts would become courts of general jurisdiction, ostensibly under the limited grant found in section 1334(a). They then would try a multitude of traditional state law claims merely because a debtor happens to file a bankruptcy petition. The subject matter jurisdiction of the district courts simply doesn’t reach this far and in arriving at their conclusion the majority, and the courts they cite, misunderstand the distinct differences between 28 U.S.C. §§ 1334(a) and 157(a). They each have separate meanings and serve separate functions. Section 1334 grants jurisdiction over title 11 cases to the district courts, and section 157 allows those courts to refer those cases to the bankruptcy courts, under certain limitations and circumstances.2 Section 157 doesn’t confer jurisdiction at all, and there is no congressional enactment granting jurisdiction in the bankruptcy courts.
While not directly addressed by the majority, some discussion of supplemental jurisdiction, once referred to as pendent or ancillary jurisdiction, in the federal courts is a propos. In United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), the Court explored this concept and held that in certain cases federal jurisdiction, which otherwise might not exist, could be found if a state law claim is ancillary to the federal jurisdictional basis.
Subsequently, in 1990, Congress passed 28 U.S.C. § 1367, entitled “Supplemental jurisdiction.” In pertinent part this statute provides that:
(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have *523original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
At first reading, one might conclude that this enactment now grants jurisdiction to the district courts and, by referral, the bankruptcy courts, to enter a money judgment on Dr. Lang’s complaint. Such, however, isn’t the case. In the first place, the explicit language of section 1367(a) says that it applies “[ejxcept as ... provided otherwise by Federal statute....” In the case of bankruptcy cases the exception is found in 28 U.S.C. § 1334(a), which is the “exclusive” grant of bankruptcy jurisdiction. See 18B Wright & Miller § 3523.1, at 175 (“Under Section 1367(a), supplemental jurisdiction does not apply if the federal statute forming the basis of original jurisdiction makes contrary provisions.”).
In Walker v. Cadle Co. (In re Walker), 51 F.3d 562 (5th Cir.1995), the court concluded that section 1367 supplemental jurisdiction does not extend to a cross-claim by a creditor against an unrelated third party for contribution and indemnity in a case before the bankruptcy judge. The decision says that “even assuming that a district court could exercise jurisdiction supplemental to its bankruptcy jurisdiction described in 28 U.S.C. § 1334, there is nothing in the jurisdictional statutes to indicate that the district court could refer such a case to the bankruptcy court.” 51 F.3d at 573. We’re in the same situation here. See First Omni Bank, N.A. v. Thrall (In re Thrall), 196 B.R. 959, 969 n. 8 (Bankr.D.Colo.1996) (quoting Walker, 51 F.3d at 573). It is not necessary to reach the issue of whether the district court could award damages to Dr. Lang under section 1367, for that has not occurred.
I have already discussed similar reasons why bankruptcy jurisdiction is limited to only allowing entry of declaratory judgments on dischargeability complaints, and there is no reason to repeat them here. See Porter Capital Corp. v. Hamilton (In re Hamilton), 282 B.R. 22 (Bankr.W.D.Okla.2002).
Accordingly, I dissent from the portion of the majority’s decision that affirms the trial court’s award of any money damages and would remand the proceeding with instructions that the bankruptcy court enter a judgment limited to the declaration that the debt, whatever it may be, is excepted from the Debtor’s discharge. The parties then would be free to litigate the damages issue in the appropriate nonbank-ruptcy forum and raise whatever state law claims and defenses that may be relevant.

. While neither party has raised any issue of subject matter jurisdiction it is hornbook law that "a federal court, whether trial or appellate, is obliged to notice on its own motion the want of its own jurisdiction, or the lower court's lack of subject matter jurisdiction when a case is on appeal.” 13 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3522, at 70 (2d ed.1984) (hereinafter Wright & Miller).

. This two step scheme of granting title 11 jurisdiction to the district courts under section 1334(a) and then allowing them to refer those cases to the bankruptcy courts under section 157(a) was put in place by the Bankruptcy Amendments and Federal Judgeship Act of 1984 in order to deal with the constitutional infirmities announced by the Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). See generally 1 Collier on Bankruptcy ¶ 3.01 (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev.2002).