Court Opinion

ID: 4209961
Source: CourtListenerOpinion
Date Created: 2017-10-06 18:01:00.295745+00
Date Added: 2024-06-11T13:26:00.241661
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 17a0560n.06

                                          No. 16-2439

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

In re: AMY ROSENFELD,                       )
                                                                                FILED
                                                                           Oct 06, 2017
                                            )
           Debtor.                          )                         DEBORAH S. HUNT, Clerk
                                            )
___________________________________________ )                  ON APPEAL FROM THE
                                            )                  UNITED STATES DISTRICT
JOEL ROSENFELD,                             )                  COURT FOR THE EASTERN
                                            )                  DISTRICT OF MICHIGAN
           Appellant,                       )
                                            )
v.                                          )                  OPINION
                                            )
AMY ROSENFELD,                              )
                                            )
           Appellee.                        )

       Before: BOGGS, BATCHELDER, and BUSH, Circuit Judges.

       JOHN K. BUSH, Circuit Judge. Joel Rosenfeld appeals the dismissal of an adversary

proceeding that he brought in bankruptcy court against his ex-wife Amy Rosenfeld, a debtor in

bankruptcy. The bankruptcy court dismissed Joel’s adversary proceeding for lack of standing.

The district court affirmed that dismissal. We now review the bankruptcy court de novo, and for

the reasons that follow, we affirm.

                                                I

       In May 2013, after two years of contentious litigation that included eleven days of trial,

the Oakland County Circuit Court granted a divorce to Amy and Joel Rosenfeld. Among other

things, the court awarded Amy and Joel joint legal custody of their three minor children, granted

Amy primary physical custody of the children, and awarded Amy the marital home. But in
No. 16-2439, In re Rosenfeld

January 2014, because of an allegedly severe mold contamination in the home, Joel sought and

received an order preventing Amy from living in the marital home while she had physical

custody of the children. In September 2014, Joel alleged that Amy had moved the children back

into the marital home despite the continued presence of the mold, so Joel filed a motion to hold

Amy in contempt. Joel also sought attorney’s fees relating to the filing of that motion, and he

sought exclusive physical custody of the children until the mold problem was remediated.

       Eight days after Joel filed his motion for contempt, Amy filed for Chapter 7 bankruptcy

relief in the bankruptcy court for the Eastern District of Michigan. The state court subsequently

issued an order granting Joel’s motion to hold Amy in contempt but postponing its decision on

attorney’s fees and other sanctions.

       According to Joel, Amy “is using the bankruptcy process as a means to obtain a more

favorable outcome on the issues of spousal and child support,” and Amy is merely “portraying

herself as ‘bankrupt’ . . . to gain hundreds of thousands of dollars in additional support

payments.” So, to stop Amy from receiving a discharge in bankruptcy, Joel filed an adversary

proceeding against Amy in bankruptcy court, claiming that Amy should be denied a discharge

under 11 U.S.C. § 727, a provision of the Bankruptcy Code that bars a court from granting a

discharge to a debtor who has committed any of a number of wrongs, such as knowingly or

fraudulently making a false oath or false claim in connection with the bankruptcy proceeding, or

who has failed satisfactorily to explain “any loss of assets or deficiency of assets to meet the

debtor’s liabilities.” Joel alleged that Amy made various misstatements in her bankruptcy filings

and in her testimony during the bankruptcy proceedings, such as undervaluing her engagement

ring, failing to explain the loss of her engagement ring, failing to disclose self-employment

                                               2
No. 16-2439, In re Rosenfeld

income of approximately $1,000 per month, and failing to disclose her repayment of a loan that

her father had made to her.

       The bankruptcy court issued a show-cause order requiring Joel to show why that court

should not dismiss his adversary proceeding for lack of subject-matter jurisdiction. As the

bankruptcy court explained, Joel had not even alleged that he was one of Amy’s creditors, let

alone that he was a creditor as to any of Amy’s debts that would be dischargeable in bankruptcy

such that he would have an interest in forestalling a discharge. The court reasoned that Amy’s

debts to Joel, if any existed, would instead be non-dischargeable under either

11 U.S.C. § 523(a)(5) (debts “for a domestic support obligation”) or § 523(a)(15) (debts

“incurred by the debtor in the course of a divorce or separation or in connection with a separation

agreement, divorce decree or other order of a court of record”). “Thus, whether there is a debt or

is not a debt, in either case,” the court reasoned, “it appears that even if [Joel] were successful in

this § 727(a) action, he would gain nothing for himself, beyond what he already has.” In short,

the bankruptcy court asserted that Joel lacked standing to bring an adversary proceeding in the

bankruptcy court.

       Joel promptly filed a “proof of claim” in the bankruptcy court asserting that he was

indeed Amy’s creditor as to three debts: (1) Amy’s indemnification of Joel for claims related to

the marital home; (2) Amy’s obligation to give Joel his 50% share of certain marital property;

and (3) Joel’s claim for attorney’s fees arising from the contempt proceeding against Amy. Joel

conceded that the first two of these debts arose “under the [divorce] Judgment,” but argued that

the third debt arose not from the judgment of divorce itself but rather from Amy’s violation of

the divorce court’s subsequent order requiring her not to live with the children in the marital

home. Thus, Joel argued, he had standing to bring his adversary proceeding because at least

                                                  3
No. 16-2439, In re Rosenfeld

some “portion of [his] claim [was] in fact dischargeable.” Alternatively, Joel argued that even if

he was not Amy’s creditor as to any of her dischargeable debts, he should still have standing to

pursue his claim because “(1) the entire creditor body, (2) the federal judicial system, and (3) the

people of the United States have a vested interest” in denying Amy a discharge under

11 U.S.C. § 727.

       The bankruptcy court dismissed Joel’s adversary proceeding for lack of standing for

substantially the same reasons that it stated in its show-cause order. The court held that, even if

Amy owed Joel a debt arising from her violation of the divorce court’s post-judgment order, such

a debt would still be non-dischargeable under 11 U.S.C. § 523(a)(15) because it was

“incurred . . . in connection with” the divorce decree. And Joel could not show that a case or

controversy existed because Amy’s discharge in bankruptcy would not legally impair any of the

alleged debts as to which Joel might have been Amy’s creditor. Additionally, the court observed

that basic principles of constitutional law prevented Joel from bringing his claim based only on

alleged harms to other creditors, the federal judiciary, or the American people. See Warth v.

Seldin, 422 U.S. 490, 499 (1975) (“[W]hen the asserted harm is a ‘generalized grievance’ shared

in substantially equal measure by all or a large class of citizens, that harm alone normally does

not warrant exercise of jurisdiction.”).

       Joel timely appealed, and the district court affirmed the bankruptcy court’s dismissal of

Joel’s adversary proceeding. Rosenfeld v. Rosenfeld (In re Rosenfeld), 558 B.R. 825, 831 (E.D.

Mich. 2016) (affirming In re Rosenfeld, 535 B.R. 186 (Bankr. E.D. Mich. 2015)). Joel now

seeks further review in our court. Joel has apparently declined to pursue his argument that Amy

owes him a dischargeable debt, see Appellant’s Br. 16–25, focusing instead on his second

argument, which is that he has standing to bring an adversary proceeding against Amy even if all

                                                 4
No. 16-2439, In re Rosenfeld

the debts that she might owe him are non-dischargeable. Joel argues, as he argued below, that

11 U.S.C. § 727 “is punitive in nature and not merely remedial.” Appellant’s Br. 19. Joel argues

that § 727’s “primary purpose is to punish a debtor, even though its consequences may, in some

cases, provide relief to a creditor.” Ibid. Thus, any case-or-controversy requirement is satisfied,

Joel argues, because Joel has alleged that Amy has made fraudulent statements in her bankruptcy

proceeding for which she should be punished by denying her a discharge in bankruptcy. Id. at

21.

                                                 II

       “When reviewing an order of a bankruptcy court on appeal from a decision of a district

court, we review the bankruptcy court’s order directly and give no deference to the district

court’s decision.” Grant v. Granader (In re Granader), 657 F. App’x 554, 556 (6th Cir. 2016)

(quoting Chase Manhattan Mortg. Corp. v. Shapiro (In re Lee), 530 F.3d 458, 463 (6th Cir.

2008)). We review the bankruptcy court’s conclusions of law de novo. Parker v. Goodman (In

re Parker), 499 F.3d 616, 620 (6th Cir. 2007).

       Federal courts are courts of limited jurisdiction and may decide only “cases” and

“controversies.” U.S. Const. art. III § 2; see Muskrat v. United States, 219 U.S. 346, 356 (1911).

The requirement that a plaintiff must have standing to bring an action in a federal court is

“rooted in the traditional understanding of a case or controversy.” Spokeo, Inc. v. Robins, 136 S.

Ct. 1540, 1547 (2016). At a minimum, to have standing, a plaintiff must allege an actual or

imminent injury that is traceable to the defendant and likely to be redressable by the court. See

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).           And the case-or-controversy

requirements of Article III apply to adversary proceedings brought in bankruptcy courts, even

                                                 5
No. 16-2439, In re Rosenfeld

though bankruptcy courts are not Article III courts themselves. See Stevenson v. J.C. Bradford

& Co. (In re Cannon), 277 F.3d 838, 852–54 (6th Cir. 2002).

       Here, the bankruptcy court was right to dismiss Joel’s adversary proceeding for lack of

standing. Even if Amy owed debts to Joel, if those debts were non-dischargeable (as the

bankruptcy court held that they would be under 11 U.S.C. § 523, a conclusion that Joel does not

now challenge), then Joel has no personal stake in whether Amy receives a discharge in

bankruptcy. Contrary to Joel’s arguments otherwise, federal courts—ours, the district court, and

the bankruptcy court alike—lack constitutional authority to adjudicate a “generalized grievance.”

Warth, 422 U.S. at 499. And Joel’s claim that creditors at large, the federal judiciary, or the

American people have an interest in denying Amy a discharge is a hornbook example of a

generalized grievance.

       Joel’s argument that he has standing because of the punitive purpose underlying

11 U.S.C. § 727 is also misplaced. Even when a federal statute allows a private individual to

bring an action against a party for violating the statute—such as the Fair Credit Reporting Act,

15 U.S.C. § 1681, which imposes punitive damages for willful violations—the plaintiff must still

have suffered a concrete and particularized injury in order to have standing to sue. See Beaudry

v. TeleCheck Servs., Inc., 579 F.3d 702, 705–08 (6th Cir. 2009). Thus, even if Amy is a debtor

whose discharge is barred under 11 U.S.C. § 727, and even if the purpose of denying a discharge

under § 727 is punitive,1 Joel lacks standing to assert that statute against her.

                                                       III

       Accordingly, we AFFIRM the bankruptcy court’s dismissal of Joel’s § 727 adversary

proceeding.

       1
           We need not determine whether the primary purpose underlying 11 U.S.C. § 727 is punitive.

                                                        6