Court Opinion

ID: 2708816
Source: CourtListenerOpinion
Date Created: 2014-08-05 15:06:11.940591+00
Date Added: 2024-06-11T13:24:21.927829
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                         To be cited only in accordance with
                                  Fed. R. App. P. 32.1

                United States Court of Appeals
                                For the Seventh Circuit
                                Chicago, Illinois 60604

                               Submitted March 12, 2014*
                                Decided March 12, 2014

                                         Before

                         WILLIAM J. BAUER, Circuit Judge

                         DANIEL A. MANION, Circuit Judge

                         ILANA DIAMOND ROVNER, Circuit Judge

No. 13-3256

NIKKI LEE,                                        Appeal from the United States District
     Defendant–Appellant,                         Court for the Eastern District of
                                                  Wisconsin.
      v.
                                                  No. 13-CV-00126
LELAND G. CHRISTENSON II,
    Plaintiff–Appellee.                           Lynn Adelman,
                                                  Judge.

                                       ORDER

        After Nikki Lee filed for bankruptcy, Leland Christenson (one of his creditors)
initiated an adversary proceeding against him based on a state-law claim of fraud. The
bankruptcy judge determined the size of the debt, ruled that it was nondischargeable,
and entered a money judgment against Lee. More than two years later, Lee moved
under Federal Rule of Civil Procedure 60(b)(4) to reopen the case, arguing that the

      *
       After examining the briefs and the record, we have concluded that oral
argument is unnecessary. Thus the appeal is submitted on the briefs and record.
See FED. R. APP. P. 34(a)(2).
No. 13-3256                                                                           Page 2

Supreme Court’s decision in Stern v. Marshall, 131 S. Ct. 2594 (2011), rendered the
judgment void. The bankruptcy court denied the motion, and the district court
affirmed. Because the bankruptcy court had sufficient authority to enter judgment, we
affirm the ruling of the district court.

        Lee filed for Chapter 7 bankruptcy in 2008, listing Christenson as a potential
creditor because Christenson was suing Lee in state court. Christenson then initiated an
adversary proceeding, asking the bankruptcy court to rule that Lee’s liability for his
state-law claim was nondischargeable under 11 U.S.C. § 523(a)(2)(A) as a debt obtained
by fraud, and to enter judgment on the claim. After a trial, the bankruptcy judge
determined the magnitude of the debt, ruled that it was procured by fraud and thus
nondischargeable, and entered judgment against Lee in the amount of $44,289.84. The
adversary proceeding and bankruptcy case closed in June 2010.

       More than a year later, the U.S. Trustee successfully moved to reopen Lee’s
bankruptcy case to administer assets that Lee had concealed during the earlier
proceedings. Lee then moved under Federal Rule of Civil Procedure 60(b)(4)—made
applicable to bankruptcy proceedings by Bankruptcy Rule 9024—to vacate the
bankruptcy court’s judgment on Christenson’s state-law claim. He contended that the
judgment was void under Stern. Stern held that a bankruptcy court has no constitutional
authority to decide a debtor’s state-law counterclaim against a creditor if ruling on the
creditor’s proof of claim does not also resolve the counterclaim. See Stern, 131 S. Ct. at
2620. Under Stern, Lee argued, the bankruptcy court should not have resolved
Christenson’s fraud claim when it determined the claim’s dischargeability; the fraud
claim, he contended, should have been litigated in state court. The bankruptcy court
denied the motion, concluding that Stern had no bearing on a bankruptcy court’s
authority to decide a state-law claim when also deciding its dischargeability.

       Lee appealed this decision to the district court, which affirmed the bankruptcy
court’s decision. The district court observed that the judgment against Lee would be
void only if there were no arguable basis for the bankruptcy court’s authority to enter
its judgment. But, the court pointed out, this circuit’s pre-Stern precedent permitted a
bankruptcy court to enter judgment on a creditor’s state-law claim when determining
the dischargeability of a debt, see In re Hallahan, 936 F.2d 1496, 1508 (7th Cir. 1991), and
Stern did not expressly overrule this precedent. Therefore, the court concluded, the
bankruptcy court had arguable jurisdiction.

      On appeal, Lee maintains that, under Stern, the bankruptcy court lacked the
authority to enter the money judgment against him, but for two reasons we agree with
No. 13-3256                                                                            Page 3

the district court that the judgment must stand. First, when a party uses Rule 60(b)(4) to
collaterally attack a judgment as void because of a jurisdictional defect, relief is
available “only for the exceptional case in which the court that rendered judgment
lacked even an ‘arguable basis’ for jurisdiction.” United Student Aid Funds, Inc. v.
Espinosa, 559 U.S. 260, 271 (2010); see United States v. Tittjung, 235 F.3d 330, 335 (7th Cir.
2000) (“Only when the jurisdictional error is ‘egregious’ will courts treat the judgment
as void.”). Stern limits a bankruptcy court’s power to decide a debtor’s state-law
counterclaim against a creditor when resolving the creditor’s proof of claim. But it is
unclear whether Stern also restricts a bankruptcy court’s power to resolve a creditor’s
state-law claim when the court decides whether that claim is nondischargeable. Without
clarity on that issue, the bankruptcy court had at least arguable jurisdiction to decide
Christenson’s state-law claim, and the district court correctly ruled that the judgment is
not void.

        Second, even if Stern concerned the issue in this case, Lee does not explain how
the Court’s decision—rendered a year after the close of Lee’s bankruptcy case and
adversary proceeding—could apply retroactively to the judgment here. “[R]elief under
Rule 60(b) is proper only under extraordinary circumstances,” and “legal developments
after a judgment becomes final do not qualify as extraordinary.” Hill v. Rios, 722 F.3d
937, 938 (7th Cir. 2013); see Shah v. Holder, 736 F.3d 1125, 1127 (7th Cir. 2013) (“District
courts cannot use Rule 60(b)(6) to apply new decisions retroactively to closed civil
cases.”). As the district court correctly observed and as Lee does not contest, the
bankruptcy court’s exercise of jurisdiction was correct at the time of its decision.
See In re Hallahan, 936 F.2d at 1508. If Lee disagreed with that exercise of jurisdiction, his
remedy was to appeal directly—as the litigants in Stern did. Accordingly, the court
properly denied Lee’s motion for this reason as well.

         Apart from his jurisdictional arguments, Lee also contends that the bankruptcy
court should have reopened the judgment because, he asserts, Christenson’s fraud claim
against him is not a “debt” under the bankruptcy code, so the judgment is void. But this
argument is frivolous because “[t]he Bankruptcy Code defines ‘debt’ very broadly as
‘liability on a claim,’ and ‘claim’ very broadly, as any ‘right to payment,’ whether
liquidated or unliquidated, disputed or undisputed, legal or equitable.” McClellan v.
Cantrell, 217 F.3d 890, 895 (7th Cir. 2000) (citations omitted) (quoting 11 U.S.C. § 101(5),
(12)).

                                                                                AFFIRMED.