Whitehouse v. LaRoche

United States Court of Appeals
For the First Circuit

No. 00-1127

SHELDON WHITEHOUSE, Attorney General,
STATE OF RHODE ISLAND, and
JAN REITSMA, Director of the Rhode Island
Department of Environmental Management,

Plaintiffs, Appellants,

v.

DAVID LAROCHE, ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ronald R. Lagueux, U.S. District Judge]

Before

Torruella, Circuit Judge,

Campbell and Cyr, Senior Circuit Judges,

Terence J. Tierney, Assistant Attorney General, with whom
Gary Powers, Deputy Chief Legal Counsel, Department of
Environmental Management, was on brief for appellants.
Barry J. Kusinitz for appellee David LaRoche.
January 17, 2002
 CYR, Senior Circuit Judge. This appeal by the Rhode

Island Attorney General and the Director of the Rhode Island

Department of Environmental Management challenges various

rulings which prompted the district court to hold that appellee

David LaRoche's obligations to the State of Rhode Island, for

its costs in remediating water contamination on property owned

by LaRoche and for related civil penalties, were expunged by the

chapter 7 discharge subsequently obtained by LaRoche. We vacate

and remand, with directions that judgment enter for appellants.

I

BACKGROUND

In 1988, appellants joined in citizen lawsuits brought

against LaRoche in the United States District Court for the

District of Rhode Island, claiming violations of the Clean Water

Act ("CWA"), 33 U.S.C. § 1251 et seq., and the Rhode Island

Water Pollution Control Act ("RIWPCA"), R.I. Gen. Laws § 46-12-1

et seq. (the "CWA/RIWPCA action"). Ultimately, the district

court entered partial summary judgment for appellants, after

determining that LaRoche had known, prior to purchasing the

property, that its faulty septic system was polluting an

adjacent river. See Friends of Sakonnet v. Dutra, 738 F. Supp.

623 (D.R.I. 1990). The amount of the remedial damages award

against LaRoche remained unresolved.

3
 Creditors instituted involuntary chapter 11

reorganization proceedings against LaRoche in January 1991; the

order for relief was entered in February 1991, see In re

LaRoche, 969 F.2d 1299, 1300 (1st Cir. 1992), and the chapter 11

trustee was appointed on June 4, 1991.

Meanwhile, the parties had negotiated a settlement of

all the remedial issues in the CWA/RIWPCA action pending before

the federal district court. Whereupon the district court

entered a consent decree, which stated, inter alia: "The

intention of the parties is to resolve any pending disputes

arising out of this matter. The only responsibilities and

obligations that will survive are those set forth in this

Stipulation."

In due course, a special master was appointed to

marshal a settlement fund from the State and the former owners

of the LaRoche property for the purpose of acquiring an adjacent

tract of land upon which to construct a new waste water

collection and treatment facility. Any excess acreage, over and

above that required for the new facility, was to be sold to

cover related project costs.

LaRoche agreed to reimburse the State for any

"shortfall amount," defined as the difference between ninety

percent of the cost of the new waste water collection and

4
treatment facility and the net proceeds from the sale of any

excess acreage. In addition, LaRoche promised to "affirm his

obligation to pay the [shortfall amount], to the extent then

unpaid, as a debt not discharged in any bankruptcy proceeding in

which he is the bankrupt whether now pending or hereafter

filed."1 Finally, LaRoche pledged to "procure an order of the

United States Bankruptcy Court for the District of Rhode Island

in [his involuntary bankruptcy proceeding] affirming his

obligation to pay the [shortfall amount] and to perform his

other obligations hereunder."

All parties agreed to proceed "expeditiously" and "in

good faith" with their respective obligations under the consent

decree, which further provided as follows:

LaRoche hereby agrees to the imposition of a
civil penalty under the Rhode Island Water
Pollution Control Act and regulations issued
thereunder equal to the [shortfall amount].
DEM and the Attorney General agree that the

1
By negative inference, from Federal Rule of Bankruptcy
Procedure 4008 ("A motion by the debtor for approval of a
reaffirmation agreement shall be filed before or at the
hearing."), only the chapter 7 debtor may request bankruptcy
court approval of a reaffirmation agreement. See BankBoston v.
Claflin (In re Claflin), 249 B.R. 840, 843 (B.A.P. 1st Cir.
2000); In re Carlos, 215 B.R. 52, 61 (Bankr. C.D. Cal. 1997); In
re Newsome, 3 B.R. 626, 629 (Bankr. D. W. Va. 1980) ("[T]o
permit creditors to make applications for reaffirmations would
contravene the intent of Congress and permit in many instances
the very acts the Congress sought to condemn."); 4 Lawrence P.
King, Collier on Bankruptcy ¶ 524.04, at 524-30 (citing Fed. R.
Bankr. P. 4008).

5
 imposition of such civil penalty will be
stayed for so long as LaRoche complies with
his obligations under Section II.3.C of this
Stipulation [viz., to seek reaffirmation of
his obligation to pay this debt in his
involuntary bankruptcy case] and/or for so
long as any order procured from the
Bankruptcy Court under Section II.3.D [ viz.,
an order approving LaRoche's reaffirmation
of his prepetition debt] remains in effect.
LaRoche specifically agrees that the civil
penalty imposed hereunder constitutes a debt
for a fine, penalty or forfeiture payable to
and for the benefit of a governmental unit,
is not compensation for actual pecuniary
loss and is specifically non-dischargeable
under 11 U.S.C. [§] 523(a)(7).

(Emphasis added.) The district court explicitly retained

"continuing jurisdiction over this Stipulation and the

performance of the parties hereto."

Although LaRoche was granted a chapter 7 discharge, see

11 U.S.C. § 727,2 on March 3, 1995, it was more than two years

later, on April 10, 1997, before he finally submitted a motion

to reaffirm the "shortfall amount" indebtedness.

Following a hearing which appellants elected not to

attend, the bankruptcy court rejected the motion to reaffirm

submitted by LaRoche.3 At the same time, the bankruptcy court

2The chapter 11 proceeding was converted to chapter 7 on
August 1, 1994.
3Although the basis for the denial by the bankruptcy court
is not disclosed in the record on appeal, the parties are in
agreement that the ruling was grounded in the United States
Trustee's objection that the motion to reaffirm was untimely.

6
expressed concern that its rejection of the motion to reaffirm

might obstruct the State's efforts to recover the "shortfall

amount." Accordingly, the bankruptcy court directed that its

order — rejecting LaRoche's motion to reaffirm the "shortfall

amount" indebtedness — be served upon all parties to the

CWA/RIWPCA consent decree and "[t]hat all entities who oppose

the entry of this Order shall have ten (10) days from the entry

of this Order within which to file a motion under Fed. R. Bankr.

P. 9023 to alter and amend this Order."

Appellants elected not to submit a Rule 9023 motion,

opting instead for a motion before the district court (which had

retained jurisdiction over the CWA/RIWPCA consent decree)

seeking a judicial declaration that LaRoche had breached the

reaffirmation agreement, thereby rendering himself liable for

the alternative civil penalty in a sum equal to the "shortfall

amount," estimated at more than one million dollars. LaRoche

responded that (i) the consent decree was void and unenforceable

due to appellants' failure to comply with the prerequisites to

reaffirmation, see Bankruptcy Code § 524(c), 11 U.S.C. § 524(c),

and (ii) consequently, the general discharge he was granted

See Fed. R. Bankr. P. 4008 (stating that hearing on application
to reaffirm prepetition debt is to be held within 30 days of
order granting or denying general discharge). For present
purposes, we accept their characterization.

7
relieved him of all liabilities, including those asserted by

appellants.

For their part, appellants argued that the consent

decree itself expressly defined the civil penalty imposed upon

LaRoche as a fine payable to and for the benefit of a

governmental unit, rather than as compensation for actual

pecuniary loss. Accordingly, appellants contended, the civil

penalty imposed against LaRoche was rendered nondischargeable as

a matter of law. See id. § 523(a)(7).

In due course, the district court determined that the

characterization which the consent decree ascribed to the

LaRoche indebtedness for the civil penalty in the shortfall

amount — viz., a nondischargeable "civil penalty" — was not

conclusive. Consequently, the district court opined, in order

to safeguard their rights it was incumbent upon appellants not

only to have submitted a proof of claim, but also to have

commenced an adversary proceeding to obtain a bankruptcy court

ruling that the LaRoche indebtedness for the shortfall amount

was a nondischargeable civil penalty. Failing that, the

district court reasoned, the general discharge in bankruptcy

granted LaRoche in the bankruptcy court presumptively discharged

the civil penalty in the "shortfall amount" as contemplated by

the CWA/RIWPCA consent decree.

8
 II

DISCUSSION

Appellants contend that the explicit language employed

in the CWA/RIWPCA consent decree — triggering a contingent

"civil penalty" if and whenever LaRoche were to default on his

obligation to procure bankruptcy court approval of the

reaffirmation agreement relating to the "shortfall amount"

indebtedness to appellants — rendered the civil penalty

nondischargeable under Bankruptcy Code § 523(a)(7), 11 U.S.C. §

523(a)(7). Accordingly, appellants insist, the interpretation

the district court ascribed to the CWA/RIWPCA consent decree

contravened the "law of the case" doctrine, which "makes binding

upon a court a ruling made [in] the same . . . level [of court]

during prior stages of the same litigation." Lacy v. Gardino,

791 F.2d 980, 984 (1st Cir. 1986).

The district court ruling — viz., that appellants

failed either to establish or preserve their entitlement to a

judicial determination that their claim was excepted from

discharge — presents us with a mixed question of law and fact

subject to de novo review. See, e.g., Warfel v. City of

Saratoga, 268 B.R. 205, 209 (B.A.P. 9th Cir. 2001) (noting that

dischargeability exceptions under § 523(a)(7) normally turn upon

whether undisputed facts fit pertinent legal rule). Similarly,

9
a judicial interpretation of the terms of a consent decree is

subject to plenary review. See Braxton v. United States, 500

U.S. 344, 350 (1991).

Bankruptcy Code § 523(a)(7) excepts from discharge in

bankruptcy any debt "for a fine, penalty, or forfeiture payable

to and for the benefit of a governmental unit, [which] is not

compensation for actual pecuniary loss." 11 U.S.C. § 523(a)(7).

Thus, in order to establish that the instant consent decree

imposed a nondischargeable obligation upon LaRoche, appellants

needed to establish that their claim was based on (i) a "fine,

penalty, or forfeiture," (ii) "payable to and for the benefit of

a governmental unit," and (iii) "not compensation for actual

pecuniary loss." Id. Were appellants required to relitigate

the dischargeability issue de novo, there may well have been

substantial impediments to overcome. We explain.

Although Bankruptcy Code § 523(a)(7) applies both to

civil and criminal penalties, see U.S. Dep't of Hous. & Urban

Dev. v. Cost Control Mktg. & Sales Mgmt. of Va., Inc., 64 F.3d

920, 927-28 (4th Cir. 1995), in order to qualify for a

dischargeability exception under subsection 523(a)(7), normally

the particular penalty must serve some "punitive" or

"rehabilitative" governmental aim, rather than a purely

10
compensatory purpose. See Kelly v. Robinson, 479 U.S. 36, 52

(1986).

Appellants contend that these civil penalties, imposed

pursuant to Rhode Island law, see R.I. Gen. Laws § 46-12-13,

were designed to deter and remediate environmental

contamination, a particularly important governmental function

implemented under the State's police and regulatory powers.

Moreover, appellants argue, LaRoche potentially was exposed to

fines up to $25,000 per day, a sum which bears neither any

obvious nor essential correlation to the amount needed to

compensate the State for its actual response costs.

On the other hand, there can be no question but that

the consent decree itself explicitly equates the amount of these

civil penalties with the "shortfall amount," which in turn

plainly was designed to reimburse the State for its actual

losses, neither more nor less. Appellants respond, however,

that their decision to calculate the punitive fines under that

convenient methodology cannot deprive these civil penalties of

their "punitive" nature. See, e.g., State Bar of Mich. v. Doerr

(In re Doerr), 185 B.R. 533, 536-37 (Bankr. W.D. Mich. 1995).

We need not resolve these issues, however, since the CWA/RIWPCA

consent decree itself disposes of the contention that

11
appellants' claim is excepted from discharge under Bankruptcy

Code § 523(a)(7).

First, the district court erred, as a matter of law,

in ruling that appellants forfeited their rights by not

commencing a timely adversary proceeding to determine the

dischargeability of these debts while the LaRoche bankruptcy

proceeding was pending. Normally, the Bankruptcy Code enables

a debtor to obtain a discharge "from all debts that arose before

the date of the order for relief." Bankruptcy Code § 727(b);

see also id. § 524(a). Any claim for environmental

contamination asserted against LaRoche plainly arose prior to

the chapter 11 petition. See id. § 101(5) (defining "claim" as

a "right to payment, whether or not such right is reduced to

judgment, . . . fixed, [or] contingent"). Consequently, absent

exceptional circumstances not present here, any liability

incurred for environmental contamination would have been

extinguished by the discharge in bankruptcy LaRoche obtained in

1995.

On the other hand, under the terms of the consent

decree, LaRoche became liable to appellants for two distinct

debts: the "shortfall amount" and the contingent civil penalty.

Thus, as appellants correctly point out, the present case

implicates two distinct dischargeability "exceptions."

12
 First, a debtor represented by counsel may reaffirm any

lawful debt by entering into a written reaffirmation agreement

which strictly comports with the criteria prescribed in

Bankruptcy Code § 524(c). The mandated criteria require that

the reaffirmation agreement (i) be executed before the

subsection 727(a) discharge has been granted; (ii) be in

consideration for a dischargeable debt, whether or not the

debtor waived discharge of the debt; (iii) include clear and

conspicuous statements that the debtor may rescind the

reaffirmation agreement at any time prior to the granting of the

general discharge, or within sixty days after the execution of

the reaffirmation agreement, whichever occurs later, and that

reaffirmation is neither required by the Bankruptcy Code nor by

nonbankruptcy law; (iv) be filed with the bankruptcy court; and

(v) be accompanied by an affidavit of the debtor's attorney

attesting that the debtor was fully advised of the legal

consequences of the reaffirmation agreement, that the debtor

executed the reaffirmation agreement knowingly and voluntarily,

and that the reaffirmation agreement would not cause the debtor

"undue [e.g., financial] hardship." Id. § 524(c).4

4
These detailed prophylactic measures were designed to
protect unwitting debtors from creditors bent on coercing
reaffirmations in relation to otherwise dischargeable
prepetition debts, see In re Turner, 156 F.3d 713, 718 (7th Cir.
1998) ("A reaffirmation agreement is the only vehicle through

13
 An entirely voluntary, fully informed reaffirmation

agreement meeting the demanding requirements of Bankruptcy Code

§ 524 enables a creditor to undertake all lawful efforts to

recover a reaffirmed debt as though no petition in bankruptcy

had been filed. See Ripple v. Boston Whaler Fin. Servs. (In re

Ripple), 242 B.R. 60, 64 (Bankr. M.D. Fla. 1999). Otherwise, a

reaffirmation agreement is void and unenforceable. See Bessette

v. Avco Fin. Servs., 230 F.3d 439, 443-44 (1st Cir. 2000); see

also Bassett v. Am. Gen. Fin., Inc. (In re Bassett), 255 B.R.

747, 751 (B.A.P. 9th Cir. 2000).

The consent decree in the instant case required that

LaRoche submit a motion to reaffirm only the non-"penalty" debt

for the "shortfall amount" ("non-penalty shortfall debt").

which a dischargeable debt can survive a Chapter 7 discharge.")
(citation omitted; emphasis added), a practice which would
undermine fundamentally the central "fresh start" policy served
by the discharge in bankruptcy. See Bessette v. Avco Fin.
Servs., 230 F.3d 439, 443-44 (1st Cir. 2000), cert. denied, 121
S. Ct. 2016 (2001); In re Melendez, 235 B.R. 173, 186 (Bankr. D.
Mass. 1999); see also Airlines Reporting Corp. v. Mascoll (In re
Mascoll), 246 B.R. 697, 700-01 (Bankr. D.D.C. 2000).
Thus, it is immaterial that the CWA/RIWPCA consent decree
did not employ the term "reaffirmation agreement." Bankruptcy
Code § 524 "grew out of a long history of coercive and deceptive
actions by creditors to secure reaffirmation of discharged
debts. The subsections have been applied strictly by courts to
carry out their remedial purposes and to ensure that they are
not evaded by agreements which, though not labeled as
reaffirmations, have the effect of waiving protections of the
discharge." 4 Collier on Bankruptcy ¶ 524.04, at 524-30
(emphasis added).

14
Unlike the contingent civil penalty, which was stayed, the "non-

penalty shortfall debt" presumptively constituted a

dischargeable debt; that is, one which could not be excepted

from discharge unless LaRoche entered into a valid agreement to

reaffirm it.

Second, and altogether apart from whether a particular

reaffirmation agreement is enforceable, an eligible creditor may

be entitled to invoke any one or more among the sixteen

exceptions to discharge enumerated in Bankruptcy Code § 523(a).

In this connection, appellants once again posit that the

alternative civil penalty contemplated by the CWA/RIWPCA consent

decree came within an exception to discharge, since it "is for

a fine, penalty or forfeiture payable to and for the benefit of

a governmental unit, and is not compensation for actual

pecuniary loss." Bankruptcy Code § 523(a)(7); 11 U.S.C. §

523(a)(7).

Unlike motions to reaffirm, which may be filed only by

debtors, see supra note 1, either a debtor or a creditor may

commence an adversary proceeding to determine the

dischargeability vel non of a debt under subsection 523(a). See

Galbreath v. Ill. Dep't. of Rev. (In re Galbreath), 83 B.R. 549,

551 (Bankr. S.D. Ill. 1988) (citing Fed. R. Bankr. P. 4007(a)

and 7001(6)). The fundamental "fresh start" policy underlying

15
the Bankruptcy Code requires that the exceptions to discharge

prescribed in subsection 523(a) be narrowly construed by the

courts, and established by a preponderance of the evidence by

the claimant asserting the dischargeability exception. See

Grogan v. Garner, 498 U.S. 279, 286-87 (1991); Seton Hall Univ.

v. Van Ess (In re Van Ess), 186 B.R. 375, 377-78 (Bankr. D.N.J.

1994).

Although Bankruptcy Code sections 523 and 524

frequently overlap in application, each entails discrete

criteria and procedures pertinent to the instant case. The

LaRoche reaffirmation agreement purported to serve two distinct

ends: (A) LaRoche promised to submit a subsection 524(c) motion

to "confirm" (viz., reaffirm) the prepetition obligation to

reimburse appellants for the "shortfall amount," presumably

because that indebtedness (i) had not yet been converted to a

contingent civil "fine" or penalty; (ii) would not qualify for

an exception to discharge under subsection 523(a)(7); and (iii)

presumptively would be covered by a general discharge in

bankruptcy; and (B) the reaffirmation agreement explicitly

stipulated that should LaRoche default on his reaffirmation

agreement with regard to the "shortfall amount," the "shortfall

amount" would become a nondischargeable civil penalty under

subsection 523(a)(7).

16
 Appellants correctly refrain from contending that the

first component of the CWA/RIWPCA consent decree (i.e., the

reaffirmation provision relating to the "shortfall amount") is

enforceable, since the consent decree did not include the

requisite clear and conspicuous statement either informing

LaRoche that he could rescind the reaffirmation agreement or

that reaffirmation was not obligatory under either the

Bankruptcy Code or applicable nonbankruptcy law. Moreover, the

debt reaffirmation provision contained no representation that

reaffirmation would not cause LaRoche "undue hardship."

Accordingly, even if a timely motion to reaffirm the "shortfall

amount" indebtedness had been submitted by LaRoche, see supra

note 3, it would not have been allowable.

Yet the district court ruled as well that appellants'

right to recover the civil penalty had been forfeited

irretrievably — after the bankruptcy court rejected the LaRoche

motion to reaffirm — due to either (i) their deliberate refusal

to intervene in the reaffirmation proceeding for the purpose of

submitting a motion to amend the bankruptcy court order

disallowing the reaffirmation, but see supra note 1, and/or (ii)

their failure to commence an adversary proceeding to obtain a

judicial determination that the contingent civil penalty

asserted against LaRoche was nondischargeable under Bankruptcy

17
Code § 523(a)(7). These district court rulings constituted

reversible error.

A creditor intent on establishing that its claim is

excepted from discharge, i.e., nondischargeable under Bankruptcy

Code § 523(a)(2), (4), (6) or (15), must commence a timely

adversary proceeding to determine dischargeability vel non;

otherwise, the nondischargeability issue is deemed waived. See

11 U.S.C. § 523(c)(1) (prescribing that creditor asserting

nondischargeability, under Bankruptcy Code § 523(a)(2), (4), (6)

or (15), must litigate issue in bankruptcy court, or else the

"debtor shall be discharged from [the] debt"); In re Walker, 195

B.R. 187, 190 n.3, 195 (Bankr. D.N.H. 1996); 4 Collier on

Bankruptcy ¶ 523.26, at 523-11.

On the other hand, creditors relying upon any of the

twelve other exceptions to discharge prescribed in Bankruptcy

Code § 523(a), including subsection 523(a)(7), may seek a

nondischargeability determination in the bankruptcy court, but

are not required to do so. See In re Walker, 195 B.R. at 195;

Fed. R. Bankr. P. 4007(a) ("A debtor or any creditor may file a

complaint to obtain a determination of the dischargeability of

any debt."). Thus, bankruptcy courts and nonbankruptcy courts

alike are vested with concurrent jurisdiction over

nondischargeability proceedings arising under Bankruptcy Code §

18
523(a)(7). Consequently, at their option, creditors seeking a

nondischargeability determination need not submit to the

jurisdiction of the bankruptcy court, but instead may invoke the

jurisdiction of any appropriate nonbankruptcy forum either

before or after the bankruptcy proceeding has been closed. See,

e.g., In re Walker, 195 B.R. at 203-04; Royal Am. Oil & Gas Co.

v. Szafranski (In re Szafranski), 147 B.R. 976, 981 (Bankr. N.D.

Okla. 1992); Fed. R. Bankr. P. 4007(b) ("A complaint other than

under § 523(c) may be filed at any time.")5

At the time the bankruptcy court disallowed LaRoche's

motion to reaffirm the indebtedness relating to the "shortfall

amount," the most extensive conceivable scope of its ruling

would have been that any attempt to reaffirm the indebtedness

for the "shortfall amount" — the one and only issue LaRoche was

contractually obligated to raise — was a nullity. Thus, the

bankruptcy court ruling stands only for the proposition that the

reaffirmation effort undertaken by LaRoche did not render the

"shortfall amount" indebtedness de facto "nondischargeable."

See In re Ripple, 242 B.R. at 64 (noting that where

reaffirmation agreement meets rigorous § 524 requirements,

5
Assuming arguendo that LaRoche might have opted to "remove"
the case from the nonbankruptcy forum to the bankruptcy court,
see In re Galbreath, 83 B.R. at 551, he did not elect to do so.

19
creditor may recover reaffirmed debt as though debtor never

filed bankruptcy petition).

As appellants correctly point out, the bankruptcy court

ruling which disallowed the motion to reaffirm filed by LaRoche

never purported to resolve the altogether distinct matter

relating to the dischargeability of the contingent civil penalty

under Bankruptcy Code § 523(a)(7). And since LaRoche commenced

no adversary proceeding relating to the dischargeability of the

contingent civil penalty, appellants were free to forego their

own adversary proceeding. Consequently, their decision not to

intervene, notwithstanding the bankruptcy court's invitation,

did not forfeit their right to litigate the subsection 523(a)(7)

nondischargeability issue at some later date in an appropriate

nonbankruptcy forum, viz., the United States District Court for

the District of Rhode Island, which had retained jurisdiction

for the purpose of monitoring the implementation of the

CWA/RIWPCA consent decree.

Accordingly, at the present juncture this appeal

reduces to two principal issues: (i) whether the CWA/RIWPCA

consent decree constituted either a binding contractual

agreement between the parties or a controlling judicial

determination — in or by a nonbankruptcy forum possessing

concurrent jurisdiction — that the contingent civil penalty

20
imposed upon LaRoche is nondischargeable under Bankruptcy Code

§ 523(a)(7); and (ii) if not, whether the district court ruling

that the civil penalty is dischargeable should be affirmed on

other grounds apparent from the record on appeal, see

Spenlinhauer v. O'Donnell, 261 F.3d 113, 117 (1st Cir. 2001),

or, (iii) whether the record on appeal is sufficiently developed

to enable a de novo determination by this court, as to whether

appellants are entitled to assert their claim to a

nondischargeability exception under subsection 523(a)(7), see

Warfel, 268 B.R. at 209, thereby obviating a remand.

The CWA/RIWPCA consent decree unambiguously expunged

whatever prospective legal entitlement LaRoche may have had to

receive a discharge from the civil penalty.6 To be sure, on rare

occasions courts have either declined on public policy grounds

to enforce prebankruptcy waivers of a discharge in bankruptcy,

or have ruled that prebankruptcy waivers must strictly comport

with the reaffirmation requirements prescribed by Bankruptcy

Code § 524(c). See, e.g., Hayhoe v. Cole (In re Cole), 226 B.R.

647, 652-53 (B.A.P. 9th Cir. 1998); In re Mascoll, 246 B.R. at

6A consent decree is a hybrid, consisting of a contractual
agreement among the parties to the dispute, as well as a
judicial imprimitur enforceable through the contempt power. See
Martin v. Wilks, 490 U.S. 755, 788 n.27 (1989). In all events,
the question as to whether LaRoche waived any contention
relating to the dischargeability of the civil penalty poses a
legal issue subject to de novo review. See id.

21
700-01; In re James, 120 B.R. 582, 585-86 (Bankr. W.D. Okla.

1990); In re Hirte, 71 B.R. 249, 250 (Bankr. D. Ore. 1986); cf.

In re Catron, 186 B.R. 194, 196 (Bankr. E.D. Va. 1995)

(extending same rule to postpetition waiver of discharge

obtained in nonbankruptcy forum, such as state court).

Nevertheless, these decisions invariably involved the

four "waivable" exceptions to discharge identified in Bankruptcy

Code § 523(a)(2), (4), (6), and (15), over which the bankruptcy

court exercises exclusive jurisdiction. See In re Cole, 226

B.R. at 649, 653, 656 (explicitly justifying its holding on

ground that "bankruptcy courts have exclusive jurisdiction to

determine the dischargeability of claims arising under §

523(a)(2)," and refusing to accord collateral estoppel effect to

stipulated judgment because state court which entered it clearly

lacked jurisdiction to determine underlying facts necessary to

resolve § 523(a) issue); In re Mascoll, 246 B.R. at 701, 706 (§

523(a)(2)); In re James, 120 B.R. at 584 (§ 523(a)(2)); In re

Hirte, 71 B.R. at 250 (noting that claimant's

nondischargeability complaint was time-barred by § 523(c)).7

7
Since the present case involved no waiver of the general
discharge, Bankruptcy Code § 727(10) — which requires that the
debtor obtain the bankruptcy court's approval to waive a general
discharge during the bankruptcy proceeding, see 11 U.S.C. §
727(10) — is inapposite.

22
 Where an asserted exception to discharge relies upon

none of the four waivable exceptions to discharge, however, the

jurisdiction of the bankruptcy court is concurrent, hence

nonexclusive. And since any creditor may opt to litigate, in an

appropriate nonbankruptcy forum, its asserted entitlement to an

exception from discharge, a debtor's voluntary waiver of

objection to such a dischargeability exception in a

nonbankruptcy forum would appear to offend no established policy

fostered by the Bankruptcy Code. See Saler v. Saler (In re

Saler), 205 B.R. 737, 746-47 (Bankr. E.D. Pa. 1997) (holding

that debtor's earlier settlement of nondischargeability

litigation of § 523(a)(5) exemption did not constitute

"reaffirmation"; consequently, § 524(c), by its terms, held

inapplicable), aff'd, 217 B.R. 166 (E.D. Pa. 1998); see also

Pope v. Wagner (In re Pope), 209 B.R. 1015, 1019 (Bankr. N.D.

Ga. 1997); cf. In re Cole, 226 B.R. at 652 (distinguishing Saler

on this ground). 8 Thus, we can discern no sound reason that

LaRoche, like any other litigant who knowingly and voluntarily

8
The Saler court aptly noted that even if the provisions of
§ 523(a) were not so plain, Congress was then considering an
amendment to § 524(c), which would explicitly permit debtors to
enter into prepetition settlements of these nondischargeability
claims; the Saler court also cited relevant legislative history
relating to the current version of § 524(c), suggesting the same
congressional intent. See In re Saler, 205 B.R. at 747-48
(citing 9 Bankruptcy Law Reptr. (BNA), No. 5, 124, at 139 (Jan.
30, 1997)).

23
stipulates to judgment, should not be bound by the obligations

undertaken in the consent decree, which obligations plainly

constituted the consideration that prompted appellants to settle

their nondischargeability action against him.9

Furthermore, even assuming LaRoche may have realized

some perceived advantage had he litigated the

nondischargeability issue in the bankruptcy court, presumably he

was free in 1991 either to "remove" the nondischargeability

action to the bankruptcy court, see supra note 5, or to commence

an adversary proceeding for a declaratory judgment that the debt

did not qualify for subsection 523(a)(7) treatment, see Fed. R.

Bankr. 4007(a). Nevertheless, LaRoche did neither, preferring

instead to wait six years before complying with his promise to

provide the "expeditious" and good faith reaffirmation agreement

required under the 1991 consent decree. Cf. Richardson v.

Chrysler First Fin. Servs. Corp. (In re Richardson), 102 B.R.

254, 256 (Bankr. M.D. Fla. 1989) (determining that though

reaffirmation agreement was unenforceable under § 524(c), debtor

9
For present purposes, we need not determine whether LaRoche
was either contractually bound or judicially estopped, e.g., by
res judicata, collateral estoppel, or the "law of the case"
doctrine. See, e.g., In re Saler, 205 B.R. at 744 n.5 (noting
that earlier consent decree, whose terms were sufficiently
detailed, may have been entitled to collateral estoppel effect,
thereby barring litigation of factual matters in subsequent
nondischargeability litigation).

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was estopped from asserting unenforceability where creditor

reasonably refrained from filing timely § 523(a)(2) adversary

proceeding in reliance on debtor's earlier waiver).

Accordingly, in the present circumstances we need not

consider whether appellants may have been entitled to a

nondischargeability determination with regard to the civil

penalty under Bankruptcy Code § 523(a)(7), nor whether any such

civil penalty qualified for a nondischargeability exception as

"compensation for actual pecuniary loss" sustained by

appellants. Consequently, we announce no sweeping rule of law

regarding the validity of prepetition waivers of discharge,

especially since these matters are almost invariably best

assessed on a case-by-case basis. Instead, we conclude that

because the district court plainly possessed concurrent

jurisdiction over the subsection 523(a)(7) dischargeability

issue in 1991, when it approved the consent decree, LaRoche

cannot now be heard to contend that the general discharge he was

granted in 1995 relieved him of liability for the civil penalty.

Accordingly, the district court judgment is vacated and

the case is remanded for the entry of judgment for appellants;

costs to be borne by appellees.

SO ORDERED.

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