F IL E D
United States Court of Appeals
Tenth Circuit
PU BL ISH April 11, 2008
Elisabeth A. Shumaker
U N IT E D ST A T E S C O U R T O F A PP E A L S Clerk of Court
FO R T H E T E N T H C IR C U IT
SH A U N A E. SM ITH ,
Plaintiff-Appellant,
v. No. 06-6331
DA VID R OC KETT; LIND SEY
W ILLIS–A N D REWS; C LA RK &
ROCKETT PC; ROCK PILE LLC;
ALLIED PHYSICIA NS GROUP IN C.;
B REN T D . SIEM EN S; B REN T D.
SIEM EN S INC; JERRY J. DUNLA P,
II,
Defendants-Appellees.
A PPE A L FR O M T H E U N IT ED ST A T ES D IST R IC T C O U R T
FO R T H E W E ST E R N D IST R IC T O F O K L A H O M A
(D .C . N o. 06–C V –492–M )
Nancy A. Zerr (G arvin A. Isaacs with her on the briefs), G arvin A. Isaacs, Inc.,
Oklahoma City, Oklahoma, for Plaintiff-Appellant Shauna E. Smith.
Joseph B. M iner, Little, M iner & Petersen, Oklahoma City, Oklahoma, for
Defendants-A ppellees D avid Rockett, Lindsey W illis-A ndrews, Clark & Rockett,
P.C., and Rock Pile, L.L.C., and James A. Slayton, Oklahoma City, Oklahoma, for
Defendants-Appellees Allied Physicians Group, Inc., Brent D. Siemens, Inc., and
Brent D. Siemens, and Jerry J. Dulap, II, Oklahoma City, Oklahoma, for
Defendant-Appellee Jerry J. Dunlap, II.
Before O ’B R IE N , M cK A Y , and H O L M E S, Circuit Judges.
M cK A Y , Circuit Judge.
Plaintiff Shauna Smith filed a civil complaint in the district court alleging a
violation of the Fair Debt Collections Practices Act, 15 U.S.C. §§ 1692-1692p,
and various state law claims against Defendants. The district court held that
Plaintiff lacked standing to file this case because her Chapter 13 bankruptcy case
was still pending at the time of filing. Plaintiff appeals the dismissal of her
complaint for lack of standing.
Plaintiff asserts that she first knew of the causes of action asserted in this
complaint on M ay 5, 2005. Plaintiff filed her Chapter 13 bankruptcy petition on
October 13, 2005, and she filed this civil complaint on M ay 4, 2006. On M ay 19,
2006, the bankruptcy court dismissed Plaintiff’s bankruptcy case with prejudice.
The district court dismissed the instant case for lack of standing on August 11,
2006. Plaintiff subsequently filed a motion to alter or amend judgment, which
was denied by the district court on October 2, 2006. Plaintiff timely filed her
notice of appeal on October 30, 2006.
“W e review questions of standing de novo and construe the complaint in
favor of the plaintiff, accepting as true all material allegations.” Catron County
Bd. of Comm’rs, N.M . v. U.S. Fish & Wildlife Serv. 75 F.3d 1429, 1433 (10th Cir.
1996) (citations omitted). Standing is assessed as of the time the action was
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commenced. Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n.5 (1992).
The district court “dismissed this action simply based on the fact that
[Plaintiff’s] bankruptcy case was pending at the time she filed this action and,
consequently, [P]laintiff lacked standing to file it.” (R. Doc. 61 at 2.) The
district court supported this decision with citations to cases holding that the
bankruptcy trustee in a Chapter 7 case has exclusive standing to assert claims
belonging to the bankruptcy estate. See, e.g., Vidal v. Doral Bank Corp., 363 F.
Supp. 2d 19, 22 (D.P.R. 2005). Similarly, in their brief on appeal Defendants cite
to several cases involving Chapter 7 proceedings and to the statutory provision
defining the duties of a Chapter 7 trustee, 11 U.S.C. § 704(a)(1), in support of
their argument that the trustee in Plaintiff’s bankruptcy case had exclusive
standing to bring the instant complaint.
However, Plaintiff’s bankruptcy case was brought under Chapter 13, not
Chapter 7. In a Chapter 13 case, unlike a Chapter 7 case, the debtor remains in
possession of the property of the estate. See 11 U.S.C. § 1306(b). The duties of a
Chapter 13 trustee differ from those of a Chapter 7 trustee, compare 11 U.S.C. §
1302(b) with 11 U.S.C. § 704(a), while a Chapter 13 debtor has many of the same
rights and powers as a Chapter 7 trustee, see 11 U.S.C. § 1303.
Because of these differences between Chapter 7 and Chapter 13
bankruptcies, the four circuit courts to consider this issue have all concluded that
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Chapter 13 debtors have standing to bring claims in their own name on behalf of
the bankruptcy estate. 1 See Crosby v. M onroe County, 394 F.3d 1328, 1331 n.2
(11th Cir. 2004); Cable v. Ivy Tech State College, 200 F.3d 467, 472-74 (7th Cir.
1999); Olick v. Parker & Parsley Petroleum Co., 145 F.3d 513, 515-16 (2d Cir.
1998); M aritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1209 n.2 (3d
Cir. 1992); see also Autos, Inc. v. Gowin, 244 F. App’x 885, 899 (10th Cir. 2007)
(citing this authority and concluding that Chapter 13 debtor had standing to
pursue claim on benefit of estate). “It would frustrate the essential purpose of §
1306 to grant the debtor possession of the chose in action yet prohibit him from
pursuing it for the benefit [of] the estate.” Cable, 200 F.3d at 473; see also In re
Bowker, 245 B.R. 192, 200 (Bankr. N.J. 2000) (explaining other practical reasons
why debtor rather than trustee should have standing to pursue litigation on behalf
of Chapter 13 bankruptcy estate).
This conclusion is supported by the legislative history of the bankruptcy
provisions: “Both the House of Representatives and Senate floor managers of the
Uniform Law on Bankruptcies, Pub. L. No. 95-598 (1978), stated that . . .
‘although Section [323] is not specified in section 1303, certainly it is intended
1
Inexplicably, Plaintiff failed to discuss this persuasive authority in her
filings to the district court and in her brief on appeal, citing only to Olick v.
Parker & Parsley Petroleum Co., 145 F.3d 513 (2d Cir. 1998), and failing to
clearly explain how that case supported her argument that she had standing.
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that the [Chapter 13] debtor has the power to sue and be sued.’” Olick, 145 F.3d
at 516 (first alteration in original) (quoting 124 Cong. Rec. H11, 106 (statement
of Rep. Edwards); 124 Cong. Rec. S17, 423 (statement of Sen. DeConcini). Rule
6009 of the Federal Rules of Bankruptcy Procedure also supports the conclusion
that the Chapter 13 debtor has standing to bring a civil complaint: “W ith or
without court approval, the trustee or debtor in possession may prosecute or may
enter an appearance and defend any pending action or proceeding by or against
the debtor, or commence and prosecute any action or proceeding in behalf of the
estate before any tribunal.” Fed. R. Bankr. P. 6009 (emphasis added). 2
W e find this authority persuasive. W e therefore hold that Plaintiff, as a
Chapter 13 debtor, had standing to file this complaint on behalf of the bankruptcy
estate. Because the district court did not address any of the alternative grounds
for dismissal asserted by Defendants, we decline to address those issues for the
first time on appeal, leaving them for the district court to consider on remand. 3
2
W e recognize that “debtor in possession” is a term of art found only in the
Chapter 11 context. However, “the Chapter 13 debtor has been considered
analogous to Chapter 11, which grants the debtor full authority as representative
of the estate typical of a trustee.” Cable, 200 F.3d at 472 (citation omitted); see
Campion v. Credit Bureau Servs., 206 F.R.D. 663, 669 (E.D. W ash. 2001).
3
Plaintiff also appeals the denial of her motion for substitution and motion
for the court to take judicial notice of Defendant David Rockett’s probate case
follow ing his death on August 19, 2006. The district court held that these
motions were moot because the court had already dismissed Plaintiff’s complaint
for lack of standing. Because we reverse the court’s dismissal of the complaint,
(continued...)
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W e note that Plaintiff’s bankruptcy case was dismissed with prejudice
approximately two w eeks after she filed her complaint in this case. Defendants’
argument that the dismissal of Plaintiff’s bankruptcy case precludes any further
bankruptcy proceedings may need to be addressed in the proceedings on remand,
given our conclusion that Plaintiff had standing in her capacity as a Chapter 13
debtor rather than in her individual capacity. W e conclude that it would be best
to leave this argument to be considered in the first instance by the bankruptcy
court, if necessary. See In re Gorski, 766 F.2d 723, 728 n.4 (2d Cir. 1985)
(argument, raised for first time on appeal, that bankruptcy court would not have
authority to reopen case dismissed based on debtor’s noncompliance with plan
“need not be answered here and may be pressed on remand”). If the district court
decides that none of the alternative grounds for dismissal asserted by Defendants
apply, the bankruptcy court should determine whether it would be permissible and
appropriate to reopen Plaintiff’s bankruptcy case. The bankruptcy court may also
determine whether sanctions w ould be appropriate for Plaintiff’s alleged failure to
disclose these causes of action in her bankruptcy schedule. If the bankruptcy
court concludes that the bankruptcy case should not be reopened, the district court
should determine w hether, as Defendants argue, Plaintiff permanently lost
3
(...continued)
we vacate the court’s denial of these motions and direct the court to reconsider
them on remand.
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possession of these causes of action under 11 U.S.C. § 554(d) because she failed
to properly list them in her bankruptcy schedule.
W e R EV ER SE and R E M A N D .
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06-6331, Smith v. Rockett
O ’B rien, J., dissenting.
The majority has assembled an impressive list of cases concluding a
Chapter 13 debtor has the capacity to sue on behalf of the bankruptcy estate
without court supervision. (M ajority Op. at 4.) Perhaps it is shoveling sand
against the tide, but I think we should do more than find and follow non-binding
cases. Such decisions are appealing only to the extent of their power to
persuade. 1 I am not persuaded and, thus, dissent.
The common thread in the cases cited by the majority reveals two bases for
concluding a Chapter 13 debtor has capacity to sue: legislative history and Rule
6009 of the Federal Rules of Bankruptcy Procedure. But the legislative history is
utterly at odds w ith statutory text and the Rule 6009 rationale is more legerdemain
than reason. This result is contrary to the plain language of the bankruptcy code
and is not sanctioned by bankruptcy rules. And giving a Chapter 13 debtor an
expansive right to self help, independent of and untethered to oversight by the
bankruptcy court, is unwarranted and unwise.
A. Legislative H istory
All seem to agree on one thing— the bankruptcy code does not expressly
give a Chapter 13 debtor capacity to sue in her own name as a representative of
the estate. That should end the debate, but the cases cited by the majority have
1
Gravitas, dignitas, pietas.
read such a provision into the bankruptcy code, implementing, they say,
congressional intent. Doing so ignores the preeminent canon of statutory
construction— we “presume that a legislature says in a statute what it means and
means in a statute what it says there.” Conn. Nat’l Bank v. Germ ain, 503 U.S.
249, 253-54 (1992). Are first principles best honored in their breach? It is
perverse logic to conclude Congress meant what it did not say. 2
“W hen the w ords of a statute are unambiguous . . . this first canon is also
the last: judicial inquiry is complete.” Id. at 254 (quotations omitted). The claim
here is not that the statutory text is ambiguous, but that Congressional silence
adds meaning to what was not said. How, with no text, does one divine sub
silentio meaning; by reference to structure, context or related statutory
2
The only thing we know for certain both Houses of
Congress (and the President, if he signed the legislation)
agreed upon is the text. Legislative history can never
produce a “pellucidly clear” picture . . . of what a law
was “intended” to mean, for the simple reason that it is
never voted upon-or ordinarily even seen or heard-by the
“intending” law giving entity, which consists of both
Houses of Congress and the President (if he did not veto
the bill). Thus, what judges believe Congress “meant”
(apart from the text) has a disturbing but entirely
unsurprising tendency to be whatever judges think
Congress must have meant, i.e., should have meant.
Zuni Pub. Sch. Dist. No. 89 v. Dep’t of Educ., 127 S.Ct. 1534, 1556 (2007)
(Scalia, J., dissenting) (citations omitted).
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provisions? 3 No; the majority retreats to legislative history of the most dubious
kind!
The source of the supposed congressional “intent” comes from statements
made by House and Senate floor managers, who conceded the statute does not
give a Chapter 13 debtor capacity to sue but, nevertheless, said Congress intended
that result. (M ajority Op. at 4.) Classic ipse dixit. That 2 of the 535 members of
Congress speak for the body is contrary to another accepted canon of statutory
construction; statutory language, not embellishments by individual legislators,
controls. See Chrysler Corp. v. Brown, 441 U.S. 281, 311 (1979) (“The remarks
of a single legislator, even the sponsor, are not controlling in analyzing legislative
history.”). Legislative history might in some instances inform the statutory
construction debate. This is not such an instance. If it were, the history we have
is worthless.
B. Bankruptcy Rule 6009
A debtor’s potential causes of action become the property of the bankruptcy
estate, along with all of her other assets, when a Chapter 13 petition is filed. See
11 U.S.C. § 541(a)(1). The bankruptcy trustee, as representative of the estate, is
expressly given the capacity to pursue such causes of action by suit on behalf of
3
“[T]o determine the scope of . . . § 1367, . . . we must examine the
statute’s text in light of context, structure, and related statutory provisions.”
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 558 (2005).
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the estate. See 11 U.S.C. § 323(a), (b). 4 The only other entity given such power
is a “debtor in possession.” Bankruptcy Rule 6009 provides: “W ith or without
court approval, the trustee or debtor in possession may prosecute or may enter an
appearance and defend any pending action or proceeding by or against the debtor,
or commence and prosecute any action or proceeding in behalf of the estate
before any tribunal.” (Emphasis added). Cases cited by the majority have seized
upon the “debtor in possession” language to imply 5 a capacity to sue by a Chapter
13 debtor. But a Chapter 13 debtor is not a “debtor in possession.”
The term “debtor in possession” is a term of art with limited applicability.
It is defined and used in Chapter 11 (reorganization). See, e.g., 11 U.S.C. §§
1101, 1105, 1107. It is also used in Chapter 12 (family farmer or fisherman with
regular income). See 11 U.S.C. §§ 1202-04. Notably it is not mentioned in
Chapter 13 (individuals with regular income) or Chapter 7 (liquidation).
The defining statute provides: “In this chapter [Chapter 11] -- (1) ‘debtor
in possession’ means debtor except when a person that has qualified under
section 322 of this title is serving as trustee in the case.” 11 U.S.C. § 1101(1)
4
The bankruptcy code specifically applies § 323 to cases under Chapter 13.
See 11 U.S.C. § 103(a).
5
W hen the statutory text is barren one need only reach into the judicial tool
box for a good pair of “impliers.”
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(emphasis added). 6 From that language two things are clear: 1) the definition
applies to Chapter 11 cases, but not to Chapter 13 cases, and 2) even where the
definition applies there is an exception— there can be no “debtor in possession”
when a trustee has been appointed. Typically there is no trustee in a Chapter 11
case. 7 11 U.S.C. § 1104-05; 7 C OLLIER ON B ANKRUPTCY ¶ 1100.06[1]. A trustee
is always appointed in a Chapter 13 case. 11 U.S.C. § 1302(a); 1 C OLLIER ON
B ANKRUPTCY ¶ 1.03[6]. Even if the definition were to be extended to Chapter 13
cases, its applicability is swallowed by the exception.
Form follows function. A Chapter 13 case (individual with regular income)
6
The Federal Rules of Bankruptcy Procedure use this same definition. See
Fed. R. Bankr. P. 9001 (“The definitions of words and phrases in . . . § 1101 . . .
govern their use in these rules.”). The bankruptcy code makes clear the definition
found in § 1101 applies to cases under Chapter 11 not Chapter 13. See 11 U.S.C.
§ 103(g) (“Except as provided in [11 U.S.C. § 901], [11 U.S.C. §§ 1101 through
1146] apply only in a case under [Chapter 11].”); 11 U.S.C. § 103(i) (“Chapter 13
of this title applies only in a case under such chapter.”); see also B LACK ’ S L AW
D ICTIONARY 412 (7th ed. 1999) (defining “debtor in possession” in the
bankruptcy context as “[a] Chapter 11 or 12 debtor that continues to operate its
business as a fiduciary to the bankruptcy estate.”).
7
The bankruptcy court can, for good cause or if in the interests of
creditors, require a trustee be appointed in a Chapter 11 case. 11 U.S.C. §
1104(a). For example, in In Re Lowenschuss, the Ninth Circuit affirmed the
appointment of a trustee for cause under § 1104(a) based upon the debtor in
possession’s prepetition transfer of assets from Pennsylvania to Nevada and his
moving from Pennsylvania to Nevada to avoid the jurisdiction of Pennsylvania.
171 F.3d 673, 685 (9th Cir. 1999). The United States Trustee is the appointing
authority, but may not serve as the Chapter 11 Trustee. 11 U.S.C. § 1104(d). The
United States Trustee exercises administrative authority and general oversight in
Chapter 11 cases. 1 C OLLIER ON B ANKRUPTCY ¶ 6.01[1][c], [4][b].
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does not present a circumstance beyond the ken of a trustee. On the other hand, a
trustee is not familiar with and perhaps less equipped to run a business (including
a farming or fishing business) than the business debtor. So the debtor is
permitted to continue to operate the business as a “debtor in possession” (but
under court supervision and with fiduciary obligations to the court and creditors)
with the goal of emerging from the process as a going concern. Purpose thus
drives the rights a “debtor in possession” has been permitted under Chapters 11
and 12. Such a debtor may “prosecute any action . . . in behalf of the estate
before any tribunal.” Fed. R. Bankr. P. 6009. A “debtor in possession,” w ith
limited exceptions, retains all the rights and duties of a trustee. See 11 U.S.C. §§
1107(a), 1203. In this capacity, the “debtor in possession” has fiduciary
responsibilities to his creditors and is administratively supervised by the United
States Trustee. See In re Am ericana Expressways, Inc., 133 F.3d 752, 756 (10th
Cir. 1997). Additionally, a committee of creditors in a Chapter 11 case is
assembled to ensure the creditors’ interests are adequately represented. See 11
U.S.C. §§ 1102, 1103.
A Chapter 11 “debtor in possession” is unlike a Chapter 13 debtor who
merely “remain[s] in possession” of all property of the estate. 11 U.S.C. §
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1306(b). 8 In a Chapter 13 case the trustee is the principle administrator of the
estate serving “the interests of all creditors primarily by collecting payments from
debtors and disbursing them to creditors.” In re M addox, 15 F.3d 1347, 1355 (5th
Cir. 1994). 11 U.S.C. § 1302 “grants the [C]hapter 13 trustee various powers to
ensure that such collections and disbursements occur equitably, according to the
dictates of Congress.” Id. The Chapter 13 debtor is limited to enumerated rights
exclusive of the trustee under 11 U.S.C. § 1303, namely court supervised rights to
use, sell or lease property of the estate. See 11 U.S.C. § 363(b),(d)-(f), (l); see
also 11 U.S.C. § 102(1); Fed. R. Bankr. P. 2002. The practical differences in
administering Chapter 11 and 12 cases on the one hand and Chapter 13 cases on
the other hand are important because they explain why the statute limits “debtor
in possession” to Chapter 11 and Chapter 12 cases.
C. Policy
Allowing a Chapter 13 debtor an unsupervised self help remedy may be
visited by unintended consequences, even abuse. In Andersen v.
8
11 U.S.C. § 1327 (b) provides: “Except as otherwise provided in the plan
or the order confirming the plan, the confirmation of a plan vests all of the
property of the estate in the debtor.” W hether that provision is sufficient to give
a Chapter 13 debtor the capacity to sue post plan is an open question. But it does
not impact this case because Smith’s plan was never confirmed. See In re Smith,
Case No. 05-26930 (Bankr. W .D. Okla. 2005) (Doc. No. 32 filed M ay 19, 2006)
(“It is therefore ordered that confirmation is denied and the case is dismissed with
prejudice . . . .”).
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UNIPAC-NEBHELP (In re Anderson), we allowed a student to establish “undue
hardship” for purposes of 11 U.S.C. 523(a)(8) by simply submitting language in a
proposed Chapter 13 plan, despite the fact Rule 7001(6) of the Federal Rules of
Bankruptcy Procedure required debtors to prove undue hardship in an adversary
proceeding. 179 F.3d 1253 (10th Cir. 1999). This unfortunate practice, known as
“discharge-by-declaration,” was allowed in this circuit for several years. Other
circuits recognized the problem and refused to adopt the Andersen holding. See
Whelton v. Educ. Credit M gmt. Corp., 432 F.3d 150 (2d Cir. 2005); In re Ruehle,
412 F.3d 679 (6th Cir. 2005); In re Hanson, 397 F.3d 482 (7th Cir. 2005); In re
Banks, 299 F.3d 296 (4th Cir. 2002). W e finally arrested the abuse in an en banc
opinion. In re Mersnam m, 505 F.3d 1033 (10th Cir. 2007) (en banc). This case
has all the earmarks of another Andersen. If Congress determines the risk of
unsupervised self help litigation by Chapter 13 debtors is justified by offsetting
benefits it should say so. Judges are ill equipped to make such a policy
determination.
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