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Permissive Bankruptcy Abstention and Domestic Relations

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The interaction between bankruptcy and domestic relations law is complex and misunderstood. Bankruptcy is not intended to interfere with the operation of state domestic relations law. Accordingly, Bankruptcy Code §362(b)(2) contains an exception to the automatic stay for certain domestic-relations matters. Moreover, Bankruptcy Code §§523(a)(5) and 523(a)(15) render certain domestic obligations non-dischargeable. A bankruptcy court is not permitted to revise a state domestic relation decree.1 Nevertheless, a disgruntled litigant might file a bankruptcy petition as a litigation tactic in an attempt to thwart a pending state court domestic relations action.

Permissive Abstention Generally

Judicial Code 28 U.S.C. §1334(c) governs abstention in bankruptcy cases.2 Judicial Code 28 U.S.C. §1334(c)(1) grants a bankruptcy court discretion as to whether it will adjudicate certain matters, providing a basis for permissive abstention.3 Abstention is considered an extraordinary and narrow exception to a federal court's duty to adjudicate matters properly within its jurisdiction.4 The U.S. Court of Appeals for the Seventh Circuit has employed the following factors to determine whether a motion for permissive abstention should be granted:

  1. the effect or lack thereof on the efficient administration of the estate if a court recommends abstention
  2. the extent to which state law issues predominate over bankruptcy issues
  3. the difficulty or unsettled nature of the applicable law
  4. the presence of a related proceeding commenced in state court or other non-bankruptcy court
  5. the jurisdictional basis, if any, other than 28 U.S.C. §1334
  6. the degree of relatedness or remoteness of the proceeding to the main bankruptcy case
  7. the substance rather than form of an asserted "core" proceeding
  8. the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court
  9. the burden of (the bankruptcy court's) docket
  10. the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties
  11. the existence of a right to a jury trial and
  12. the presence in the proceeding of non-debtor parties.5

Permissive Abstention in Bankruptcy Cases Involving Domestic-relations Issues

1. Decisions Granting Abstention Motions. Federal courts are loathe to become immersed in disputes concerning domestic-relations issues.6 Accordingly, federal courts have granted motions for permissive abstention in bankruptcy cases that involve domestic-relations issues.7

The leading case involving abstention and domestic relations is Carver v. Carver.8 In February 1989, the debtor filed for chapter 13. On March 10, 1989, the debtor's ex-spouse filed a contempt action in family court for non-payment of support. The family court held the debtor in contempt for non-payment of support, and it sentenced him to six months in jail. Following his release, the debtor sought to have his ex-spouse and her attorneys held in contempt for violating the automatic stay. The bankruptcy court ruled in favor of the debtor, and the district court affirmed the bankruptcy court.

The Eleventh Circuit Court of Appeals held that the bankruptcy court should have abstained, and it vacated the judgment of the bankruptcy court.9 The Eleventh Circuit ruled that the federal abstention doctrine concerning domestic-relations matters applied in bankruptcy cases.10 The court opined that the bankruptcy court should have abstained from adjudicating the motion for contempt;11 the policies underlying the automatic stay were not served by a contempt proceeding.12 Additionally, the debtor lacked clean hands, and he was not entitled to equitable relief.13 Indeed, the Eleventh Circuit found that the debtor was attempting to use the bankruptcy process as a weapon, and therefore abuse the bankruptcy process.14

Another relevant case is Greene v. Wilson-Greene (In re Greene).15 There, the debtor commenced an adversary proceeding against his former spouse, and the fourth count in the complaint sought a determination that a support obligation was dischargeable under Bankruptcy Code §523(a)(5). The debtor alleged that the support order was dischargeable because it was entered contrary to state and federal laws requiring a hearing and a blood test. The court ruled that abstention was appropriate as to the fourth count of the complaint.16 The bankruptcy court stated:

It is clear to me that even if I were to hold that I was not bound by the paternity determination implicit in the support order, I would still be compelled to abstain from ruling on the debtor's dischargeability claim because it would require me to render a paternity decision. I have no doubt that I am required to abstain from making such a decision because to do otherwise would take the bankruptcy court deep into this realm of domestic-relations law, an area which is beyond the charter of this federal court [Carver, 954 F.2d at 1578]. The issue of when blood testing should be employed to determine paternity is governed by an intricate layer of state law under which an array of factors are used to make paternity determinations through various presumptions and estoppel devices [see, generally, Martin v. Martin, 710 A.2d 61, 63-64 (Pa. Super. 1998) (discussing the use of presumptions of paternity under Pennsylvania law); Ruth F. v. Robert B., 456 (Pa. Super. 398, 402-08, 690 A.2d) 1171, 1173-76 (1997) (discussing use and application of Pennsylvania doctrine of paternity by estoppel)]. The debtor's claim that he has been deprived of due process by being denied blood testing does not make it any more amenable to the jurisdiction of this court.17

The court was also concerned that the debtor was engaging in forum-shopping.18


Footnotes

1 See In re Harrell, 754 F.2d 902 (11th Cir. 1985). Return to article

2 Judicial Code 28 U.S.C. §1334(c) states:

(c)(1) Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with state courts or respect for state law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
(2) Upon timely motion of a party in a proceeding based upon a state law claim or state law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a state forum of appropriate jurisdiction.
28 U.S.C. §1334(c). Return to article

3 In re Dennis, 218 B.R. 52, 54 (Bankr. E.D. Ark. 1997); 28 U.S.C. §1334(c)(1). This article focuses on permissive abstention because most abstention controversies involving domestic-relations issues concern permissive abstention. For a thorough discussion of permissive abstention in bankruptcy, see Block-Lieb, Susan, "Permissive Bankruptcy Abstention," 76 Wash. U. L. Q. 791 (1998). Return to article

4 Eastern Air Lines Inc. v. International Assoc. of Machinists & Aerospace Workers (In re Ionosphere Clubs Inc.), 108 B.R. 951, 954 (Bankr. S.D.N.Y. 1989). Return to article

5 In re Chicago, Milwaukee, St. Paul & Pacific R.R. Co., 6 F.3d 1184, 1189 (7th Cir. 1993). The Seventh Circuit Court of Appeals also stated:

Courts should apply these factors flexibly, for their relevance and importance will vary with the particular circumstances of each case, and no one factor is necessarily determinative. At the same time, because §1334(c)(1) is concerned with comity and respect for state law, whether a case involves unsettled issues of state law is always significant. See Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 483, 60 S.Ct. 628, 630, 84 L.Ed. 876 (1940); Pan Am., 950 F.2d at 846; see, also, In re L & S Indus. Inc., 989 F.2d 929, 935 (7th Cir.1993) ("Under bankruptcy law, the presence of a state law issue is not enough to warrant permissive abstention, but it nevertheless is a significant consideration."); In re United Sec. & Communications Inc., 93 B.R. 945, 960 (Bankr. S.D. Ohio 1988); H.R. Rep. No. 595, 95th Cong., 1st Sess. 51 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6012.
Id. Return to article

6 One court has stated:

Traditionally, the federal courts have been wary of becoming embroiled in family-law matters. For that reason, federal courts generally abstain from deciding diversity "cases involving divorce and alimony, child custody, visitations rights, establishment of paternity, child support and enforcement of separation or divorce decrees still subject to state court modification." Ingram v. Hayes, 866 F.2d 368, 369 (11th Cir. 1988); see, also, Crouch v. Crouch, 566 F.2d 486, 487 (5th Cir.1978). See, generally, Simms v. Simms, 175 U.S. 162, 20 S.Ct. 58, 44 L.Ed. 115 (1899) (the subject of domestic relations belongs to state, not federal, law). "The reasons for federal abstention in these cases are apparent—the strong state interest in domestic-relations matters, the competence of state courts in settling family disputes, the possibility of incompatible federal and state court decrees in cases of continuing judicial supervision by the state, and the problem of congested dockets in federal courts." Crouch, 566 F.2d at 487 (footnote omitted).
Carver v. Carver, 954 F.2d 1573, 1578 (11th Cir. 1992), cert denied, 506 U.S. 986 (1992). Return to article

7 E.g., Carver v. Carver, 954 F.2d 1573 (11th Cir. 1992), cert denied, 506 U.S. 986 (1992); In re Dennis, 218 B.R. 52 (Bankr. E.D. Ark. 1997); Greene v. Wilson-Greene (In re Greene), __B.R.__ (Bankr. E.D. Pa. 1999) 1999 WL 138905, aff'd., __F.3d__ (E.D. Pa. 1999) 1999 WL 689711. Return to article

8 954 F.2d 1573 (11th Cir. 1992), cert denied, 506 U.S. 986 (1992). Return to article

9 Id. at 1580. Return to article

10 The court stated:

Although to this point the domestic relations exception has been applied only to diversity jurisdiction or federal question jurisdiction which would require adjudication of domestic affairs [see Ingram, 866 F.2d at 369-72], the concerns underlying this abstention doctrine are also present in bankruptcy. The state interest in ensuring that dependents are adequately provided for is certainly strong. Decisions which involve alimony or child support, generally under continuing supervision by the state courts, could require the bankruptcy court to second-guess the state court on such matters and could produce conflicting court decrees, further aggravating an already delicate situation. Nor was it "the 'intent of the new Bankruptcy Code to convert the bankruptcy courts into family or domestic-relations courts—courts that would in turn, willy-nilly, modify divorce decrees of state courts insofar as these courts had previously fixed the amount of alimony and child-support obligations of debtors.'" [Caswell, 757 F.2d at 610-11 (quoting In re Garrison, 5 B.R. 256, 260 (Bankr. E.D. Mich. 1980))]. "It is appropriate for bankruptcy courts to avoid incursions into family-law matters 'out of consideration of court economy, judicial restraint, and deference to our state court brethren and their established expertise in such matters.'" [In re MacDonald, 755 F.2d at 717-19 (quoting In re Graham, 14 B.R. 246, 248 (Bankr. W.D. Ky. 1981))].
Id. at 1579. Return to article

11 Id. at 1580. Return to article

12 The court stated:

First, the purposes underlying the automatic-stay provision would not be served by such a damage award. Mr. Carver's other creditors were not harmed by the actions of appellants because under the chapter 13 plan filed by Mr. Carver, the arrearages were to be paid in full from property of the estate. Moreover, although Mr. Carver ultimately paid the required amount to obtain his release from jail, those funds were borrowed from his new father-in-law and did not come from property of the estate.
Id. Return to article

13 The court stated:

Further, although Mr. Carver was subjected to a suit while seeking bankruptcy protection, and was even jailed, much of this situation was of his own making. This was not the first time Mr. Carver was not current on his mortgage obligation. Once before, Paulette Carver sought to have him held in contempt in order to force him to pay the arrearages. The family court was lenient that time, and merely ordered him to bring the mortgage current. Mr. Carver was clearly jailed as much for his repeated disregard for the orders of the family court as for the purpose of obtaining the arrearages. [Transcript of Trial, Bankr. S.D. Ga., R.Exh. at 36 (testimony of Hon. Peter R. Nuessle, judge of the Family Court, Second Judicial Circuit of South Carolina)]. Under such circumstances, the interests of comity weigh heavily in favor of abstention.
Id. Return to article

14 The court declared:

Moreover, it is clear that the bankruptcy court in this case was being used as a weapon in the ongoing dispute between Edward and Paulette Carver. When Mr. Carver filed for bankruptcy protection, neither his ex-wife nor her attorney were notified; Mr. Pearce learned of the filing purely by accident. Because Mr. Pearce was not notified and was not able, despite repeated efforts, to obtain from Mr. Carver's attorney a copy of the chapter 13 plan filed in another state, appellants did not know at the time of the contempt hearing whether the arrearages were covered by the plan. When the court gave Mr. Carver ample opportunity to explain his side of the situation, Mr. Carver did not raise the fact of his pending bankruptcy petition, nor did he inform the court that his chapter 13 plan covered the arrearages. To the contrary, he stated that he was attempting to borrow the money to cover the arrearages [FN11]. Nor apparently was any motion raising the issue of his pending bankruptcy petition filed on his behalf during the seven and one-half days he spent in jail. Nevertheless, after paying the required $8,792.48 and being released from jail, Mr. Carver, through his bankruptcy attorney, filed a motion for damages for willful violation of the automatic stay. The outcome of that motion was that appellants were fined over $18,000, substantially more than Mr. Carver was required by the family court to pay in arrearages and fees and likely a significant burden on Mr. Carver's dependents. We find that result to be inappropriate and hold that under these circumstances the bankruptcy court should have abstained from consideration of Mr. Carver's claim for damages for violation of the automatic stay.
Id. Return to article

15 __B.R.__ (Bankr. E.D. Pa. 1999) 1999 WL 138905, aff'd., __F.3d__ (E.D. Pa. 1999) 1999 WL 689711. Return to article

16 Id. at 7-9. Return to article

17 Id. at 9. Return to article

18 Id. Return to article

Journal Date: 
Thursday, February 1, 2001
Bankruptcy Rule: 

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