FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
August 5, 2015
NOT FOR PUBLICATION Blaine F. Bates
Clerk
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE TENTH CIRCUIT
IN RE GARY WOODROW BAP No. CO-14-055
FLANDERS, ind. and as officer,
director, shareholder Canyon Quarry
Co., Farmer & Merchants Bank, Great
Northern Land Co., MetroBank, N.A.,
Debtor.
GARY WOODROW FLANDERS, Bankr. No. 98-24779
Adv. No. 13-01456
Plaintiff – Appellant, Chapter 7
v. OPINION *
EVELYN JANE LAWRENCE,
DANIEL A. WEST, Attorney, MOYE
WHITE LLP, and JAMES T.
BURGHARDT,
Defendants – Appellees.
Appeal from the United States Bankruptcy Court
for the District of Colorado
Submitted on the briefs: 1
Before MICHAEL, KARLIN, and HALL, Bankruptcy Judges.
*
This unpublished opinion may be cited for its persuasive value, but is not
precedential, except under the doctrines of law of the case, claim preclusion, and
issue preclusion. 10th Cir. BAP L.R. 8026-6.
1
The parties did not request oral argument, and after examining the briefs
and appellate record, the Court has determined unanimously that oral argument
would not significantly aid in the determination of this appeal. See Fed. R. Bankr.
P. 8019(b)(3). The case is therefore submitted without oral argument.
MICHAEL, Bankruptcy Judge.
“If at first you don’t succeed, try, try, try again.” 2
There are many great American success stories built upon unflinching
stubborn determination in the face of incredible odds. Very few of them,
however, can be found in the annals of litigation history. This case will not alter
the landscape. The debtor in this now 17-year-old Chapter 7 case appeals the
bankruptcy court’s order granting summary judgment in favor of the defendants
on his adversary claims against them for violation of the discharge injunction.
The debtor’s claims relate to marital property and marital debt division orders
entered by a Colorado state court in his divorce proceedings. The bankruptcy
court concluded the debtor’s action was barred for a number of reasons, including
the Rooker-Feldman doctrine, the principle of collateral estoppel or issue
preclusion, and lack of standing. Having reviewed the record and the applicable
law, we affirm the bankruptcy court’s order.
I. INTRODUCTION
In its order granting summary judgment, the bankruptcy court noted that
“[t]his adversary proceeding results from the complicated confluence of
bankruptcy and divorce proceedings.”3 The Colorado court that entered the orders
giving rise to the debtor’s claims described the divorce proceedings as “the most
complex this Court has seen in over 25 years,”4 and also commented that the
debtor contested almost every issue in the case.5 Additionally, the debtor and his
former wife controlled numerous corporate entities involved in the bankruptcy
2
William Edward Hickson (1803–1870).
3
Order Granting Defendants’ Motion for Summary Judgment (“Order”) at 1,
in Appellant’s App. at 228, published at Flanders v. Lawrence (In re Flanders),
517 B.R. 245, 249 (Bankr. D. Colo. 2014).
4
Amended Final Orders at 5, in Appellees’ Supp. App. at 56.
5
Id.
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proceedings that were marital assets with associated marital debt subject to
division by the divorce court. Therefore, before setting forth the specific facts of
the bankruptcy proceedings leading to this appeal, we lay some groundwork by
identifying the parties and their controlled entities, and by briefly previewing
facts that are critical to understanding the debtor’s claims against the defendants
for violation of the discharge injunction.
The plaintiff/appellant in this adversary matter is debtor Gary Woodrow
Flanders (“Flanders”). When Flanders filed his bankruptcy petition, he was
married to defendant/appellee Evelyn Jane Lawrence (“Lawrence”). Lawrence
did not join the petition. Two years after Flanders filed for bankruptcy
protection, Lawrence filed for divorce. The divorce proceedings continued in
Colorado state court for more than eight years. Flanders’ claims in this adversary
proceeding arise out of the divorce proceedings and their interaction with his
bankruptcy case.
The other defendants/appellees are: Daniel A. West (“West”), Lawrence’s
divorce attorney; James T. Burghardt (“Burghardt”), Lawrence’s bankruptcy
counsel; and Moye White LLP (“Moye White”), Burghardt’s law firm
(collectively the “Defendants”). Also involved in the underlying bankruptcy and
divorce litigation are various corporate entities controlled by Flanders and
Lawrence. The two companies wholly owned by Flanders are Great Northern
Land Company and Canyon Quarry Company (the “Flanders Entities”). The
entities wholly owned by Lawrence are Great Northern Transportation Company
(together with its seven wholly owned subsidiaries), and American Rock Products
Corporation (collectively the “Lawrence Entities,” or individually a “Lawrence
Entity”). As of the bankruptcy petition date, there was an outstanding promissory
note made by Flanders and Lawrence to a Lawrence Entity in the amount of
approximately $2 million.
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The interaction of the bankruptcy and divorce proceedings leading to this
appeal results primarily from the following three events. First, the bankruptcy
trustee brought an adversary proceeding against Flanders, Lawrence, and the
Lawrence Entities, alleging various fraudulent conveyances had been made. To
conclude the adversary proceeding against her, Lawrence entered into a
settlement agreement with the trustee and executed a mutual release. Second,
after administration of the bankruptcy estate and payment of all debts in full, a
surplus remained. The Colorado divorce court was then tasked with determining
whether the bankruptcy surplus was marital property subject to division with
Lawrence. The divorce court concluded the surplus was marital property despite
Flanders’ attempt to bar any claim Lawrence might have by arguing she waived it
under the settlement agreement and mutual release in the bankruptcy trustee’s
adversary proceeding. Third, the divorce court entered a monetary judgment
against Flanders that he claims violated the discharge injunction in his bankruptcy
case. According to Flanders, the judgment is the result of the divorce court’s
treatment of a discharged debt. Flanders seriously mischaracterizes the nature
and character of the judgment.
II. BANKRUPTCY PROCEEDINGS 6
Flanders individually filed for Chapter 11 protection in 1998. After
Flanders failed to submit a confirmable Chapter 11 plan, his case was converted
to one under Chapter 7. Jeffrey L. Hill was appointed trustee (“Trustee”).
Trustee subsequently put the Flanders Entities into Chapter 7 bankruptcy and
served as trustee of those estates.
Lawrence filed for divorce from Flanders in October 2000. Shortly
thereafter, Trustee, on behalf of the Flanders and Flanders Entities estates,
6
Unless otherwise indicated, this factual description is taken from the
bankruptcy court’s Order.
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commenced an adversary proceeding against Flanders, Lawrence, and the
Lawrence Entities, alleging fraudulent conveyances had been made (“Trustee’s
Adversary”). Trustee quickly reached settlement with Lawrence and the
Lawrence Entities. The bankruptcy court entered an order approving the
settlement agreement in April 2001 (“Settlement Agreement”). Thereafter,
Lawrence and the Lawrence Entities entered into a mutual release with Trustee
(“Mutual Release”), releasing the bankruptcy estates “from any and all claims and
causes of action that have been made or could have been made in the Adversary
Proceeding.”7 Flanders was not a party to the Settlement Agreement or Mutual
Release, but resolution of the claims against Lawrence and the Lawrence Entities
essentially resolved Trustee’s claims against Flanders.
The Colorado state court entered a divorce decree in December 2001, but
litigation over the division of marital property and marital debt continued.
Meanwhile, the bankruptcy court granted Flanders a discharge in September 2002.
After administering the estate for several years, Trustee filed his final report in
July 2006. Following liquidation of Flanders’ bankruptcy estate and payment of
his unsecured creditors in full, a surplus of approximately $230,000 remained
(“Surplus”). Trustee’s final report indicated the Surplus was to be paid to
Flanders.
The divorce court was informed of the Surplus, but by that time it had been
garnished by the United States Attorney to pay a 2005 Oklahoma federal court
judgment against Flanders in connection with his conviction for bank fraud. The
federal district court instructed the Colorado divorce court to determine whether
the Surplus was marital property. In February 2007, the divorce court entered an
order concluding the Surplus constituted marital property on the basis that
Colorado law presumes property held during marriage is marital property and
7
Mutual Release ¶ 2, at 2, in Appellees’ Supp. App. at 41.
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Flanders had not proven any portion of the Surplus was his separate property.
The divorce court rejected Flanders’ argument that, pursuant to the Settlement
Agreement and Mutual Release executed in Trustee’s Adversary, Lawrence had
waived any claim she might have to the Surplus. Upon request, the Surplus was
transferred to the divorce court’s registry fund.
Flanders’ bankruptcy case was closed in May 2008. Nine months later, the
divorce court issued final orders dividing marital property and marital debt. It
also entered a judgment in excess of $563,000 against Flanders in favor of
Lawrence (the “Judgment”). Flanders contends the Judgment results from the
debt on the $2 million promissory note executed by Flanders and Lawrence in
favor of a Lawrence Entity (“Promissory Note Debt”) that was discharged in his
Chapter 7 case. In truth, the Judgment was comprised primarily of attorneys fees
the divorce court found Flanders should pay as a result of his bad faith litigation
and contribution to delay in the proceedings, all of which were generated post-
petition. 8
Flanders appealed the divorce court’s final orders to the Colorado Court of
Civil Appeals, which affirmed in May 2011, except for a limited remand not
relevant to this appeal.9 Flanders requested rehearing, which was denied in
September 2011. Flanders then petitioned the Colorado Supreme Court for
certiorari, which it denied in January 2013.
Undaunted, Flanders initiated this adversary proceeding in August 2013
asserting the divorce court, at the invitation of the Defendants, made
8
The Judgment was made up of $513,754 in attorneys fees plus one-half of
the differences between assets awarded to Lawrence and those awarded to
Flanders, plus Flanders’ remaining fines and restitution owing to the United
States on account of his felony conviction, minus one-half of the value of the
remaining marital personal property. Order: Corrected Amended Final Orders
¶ 54, in Appellees’ Supp. App. at 74.
9
See Order ¶¶ 25-26, 517 B.R. at 253.
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determinations and rulings regarding division of marital property and marital debt
that violated the discharge injunction provisions of 11 U.S.C. § 524. 10 After
being granted leave by the bankruptcy court, Flanders filed his second amended
complaint (“Complaint”) specifically contending, among other things, that: 1) the
divorce court erroneously concluded the Surplus was marital property because
Lawrence waived any claim to the Surplus via execution of the Settlement
Agreement and Mutual Release in Trustee’s Adversary; 2) the divorce court
improperly treated the Promissory Note Debt as a marital debt; and 3) the divorce
court improperly treated stock in the Flanders Entities and burial plots as marital
property. Flanders argued these assets were part of his bankruptcy estate
abandoned to him when his bankruptcy case was closed.
To remedy the perceived errors on the divorce court’s part, Flanders asked
the bankruptcy court to hold the Defendants in contempt for violation of the § 524
discharge injunction.11 He also sought injunctive and declaratory relief that
would essentially void the divorce court’s orders and prevent the Defendants from
enforcing the Judgment. Flanders requested the bankruptcy court to impose
sanctions, including attorneys fees, and to award consequential damages against
Lawrence in the amount of the Surplus and the Promissory Note Debt, as well as
punitive damages.
In April 2014, Burghardt and Moye White filed a motion to dismiss the
Complaint, or in the alternative, for summary judgment.12 Lawrence and West
10
Unless otherwise indicated, all future statutory references in text are to the
Bankruptcy Code, Title 11 of the United States Code.
11
Apparently, in Flanders’ view, the Defendants’ pursuit and obtainment of
the divorce court’s orders concerning the Surplus and the division of marital
property constituted violations of the discharge injunction.
12
Moye White Defendants’ Motion to Dismiss Plaintiff’s Second Amended
Complaint Pursuant to Fed. R. Civ. P. 12(b)(6) or, in the Alternative, for
Summary Judgment, in Appellant’s App. at 170.
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joined in the motion. The Defendants primarily argued the doctrines of issue
and/or claim preclusion required Flanders’ Complaint to be dismissed in its
entirety. The Defendants also asserted the Rooker-Feldman doctrine deprived the
bankruptcy court of jurisdiction over Flanders’ claims seeking to overturn the
divorce court’s orders, and that Flanders did not have standing to seek damages
for their alleged contempt. They further maintained the bankruptcy court should
apply the equitable doctrine of laches to the Complaint Flanders filed in 2013
because it related to the divorce court’s orders entered in 2007 and 2009, and thus
it was prejudicially untimely. 13
The bankruptcy court agreed with the Defendants that Flanders’ claims
were barred, and on September 16, 2014, entered its order granting the
Defendants’ motion for summary judgment and terminating Flanders’ adversary
proceeding (“Order”). The bankruptcy court concluded that although it could not
revisit factual issues decided by the divorce court to the extent that an exercise of
such jurisdiction would constitute an appeal of state court orders, Flanders’
alleged willful violation of the federal discharge injunction is an independent
claim which it was not barred from adjudicating by virtue of the Rooker-Feldman
doctrine. The bankruptcy court determined that to the extent success on Flanders’
contempt claims required relitigation of issues decided by the divorce court, the
result was governed by principles of issue preclusion.14 The bankruptcy court
ruled that all of the elements of issue preclusion were met. Because Flanders’
claims for violation of the discharge injunction depended upon reversal of factual
adjudications regarding marital property and marital debt by the divorce court,
13
Id. at 14-16, in Appellant’s App. at 183-85.
14
Order, 517 B.R. at 256-58.
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Defendants were entitled to summary judgment. 15
On September 29, 2014, Flanders filed a motion for extension of time to
appeal. The bankruptcy court granted the motion, extending time until October
21, 2014. On October 20, 2014, Flanders timely filed his Notice of Appeal
seeking review by this Court.
III. APPELLATE JURISDICTION
This Court has jurisdiction to hear timely filed appeals from “final
judgments, orders, and decrees” of bankruptcy courts within the Tenth Circuit,
unless one of the parties elects to have the district court hear the appeal. 16
Neither party elected to have this appeal heard by the United States District Court
for the District of Colorado. The parties have therefore consented to appellate
review by this Court.
A decision is considered final “if it ‘ends the litigation on the merits and
leaves nothing for the court to do but execute the judgment.’”17 Here, the
bankruptcy court’s order granting the Defendants summary judgment on Flanders’
Complaint is final for purposes of review because it resolved all claims as to all
parties. 18
15
Id. at 260.
16
28 U.S.C. § 158(a)(1), (b)(1), and (c)(1); Fed. R. Bankr. P. 8001(e) (now at
Fed. R. Bankr. P. 8005, effective Dec. 1, 2014); 10th Cir. BAP L.R. 8001–3 (now
at 10th Cir. BAP L.R. 8005-1, effective Dec. 1, 2014).
17
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (quoting Catlin
v. United States, 324 U.S. 229, 233 (1945)).
18
Order, 517 B.R. at 262.
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IV. STANDARD OF REVIEW
A ruling on summary judgment is reviewed de novo, applying the same
legal standard used by the bankruptcy court.19 Summary judgment is appropriate
and can be upheld only if the pleadings, the discovery and disclosure materials on
file, and any affidavits show that there is no genuine issue as to any material fact
and that the movant is entitled to judgment as a matter of law.20 “In reviewing a
summary judgment motion, the court is to view the record ‘in the light most
favorable to the nonmoving party.’”21 In this appeal, it is clear there were no
disputed material facts. Instead, Flanders disagrees with the bankruptcy court’s
conclusions regarding the Rooker-Feldman doctrine, the principles of issue
preclusion, and standing to bring suit.
V. ANALYSIS
On appeal, Flanders argues the bankruptcy court erroneously granted the
Defendants summary judgment based on the Rooker-Feldman doctrine22 and issue
preclusion.23 The Defendants assert this Court may affirm the bankruptcy court’s
Order on the alternative basis that Flanders is barred by the doctrine of laches
from attempting, through filing this adversary proceeding in 2013, to collaterally
attack state court orders entered in 2007 and 2009. 24
19
E.E.O.C. v. C.R. England, Inc., 644 F.3d 1028, 1037 (10th Cir. 2011);
Kojima v. Grandote Int’l Ltd. Liability Co. (In re Grandote Country Club Co.),
252 F.3d 1146, 1149 (10th Cir. 2001).
20
Fed. R. Civ. P. 56(a), (c); Donner v. Nicklaus, 778 F.3d 857, 876 (10th Cir.
2015).
21
Grandote, 252 F.3d at 1149 (quoting Thournir v. Meyer, 909 F.2d 408, 409
(10th Cir. 1990)).
22
See Appellant’s Opening Brief at 36-49.
23
See id. at 26-35.
24
Answer Brief of Appellees James T. Burghardt and Moye White LLP
(“Answer Brief”) at 4. Lawrence and West both joined in this Answer Brief.
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A. Rooker-Feldman Doctrine
The Rooker-Feldman doctrine implicates jurisdiction and federal courts are
obligated to determine they have jurisdiction before proceeding to the merits of a
case.25 Therefore, the bankruptcy court began its analysis by addressing the
impact of the Rooker-Feldman doctrine on the claims made in Flanders’
Complaint. It held that
to the extent [Flanders] seeks a finding of contempt and sanctions for
Defendants’ alleged willful violation of his discharge injunction, this
is an independent claim which this Court is not barred from
adjudicating by virtue of Rooker-Feldman. By seeking such relief,
[Flanders] is not seeking “review and rejection” of the Divorce
Court’s judgment. Instead, he seeks sanctions for alleged violations
of a federal court injunction. 26
We agree with the bankruptcy court’s conclusion.
The Rooker-Feldman doctrine prevents the “appeal” of a state court
judgment to a federal court other than the United States Supreme Court. It does
so by prohibiting litigants from bringing suit in federal court “complaining of
injuries caused by state-court judgments rendered before [federal] district court
proceedings commenced and inviting district court review and rejection of those
judgments.”27 But the scope of the Rooker-Feldman doctrine is narrow and
confined to cases of the kind from which the doctrine acquired its name: cases
brought by state-court losers that invite federal court review and rejection of the
state court’s judgments. 28
In its 2005 decision in Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 29 the
United States Supreme Court reformulated the Rooker-Feldman doctrine. They
25
Lance v. Coffman, 549 U.S. 437, 439 (2007).
26
Order, 517 B.R. at 256.
27
Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).
28
Id.; Skinner v. Switzer, 562 U.S. 521, 531-32 (2011).
29
544 U.S. 280 (2005).
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did so, in part, because broad construction by some courts had the effect of
“overriding Congress’ conferral of federal-court jurisdiction concurrent with
jurisdiction exercised by state courts,” as well as “superseding the ordinary
application of preclusion law pursuant to 28 U.S.C. § 1738.” 30 The Supreme
Court explained that “[i]f a federal plaintiff ‘present[s] some independent claim,
albeit one that denies a legal conclusion that a state court has reached in a case to
which he was a party . . . , then there is jurisdiction and state law determines
whether the defendant prevails under principles of preclusion.’” 31
Following the Exxon Mobil decision, the United States Court of Appeals for
the Tenth Circuit (“Tenth Circuit”) again emphasized the narrowness of the
Rooker-Feldman doctrine. In Campbell v. City of Spencer,32 the Tenth Circuit
held that when the state-court judgment is not itself at issue, the Rooker-Feldman
doctrine does not prevent a suit in federal court regarding the same subject
matter, or even the same claims, as those presented in the state-court action. 33
Rooker-Feldman does not bar an action just because it seeks relief inconsistent
with, or even ameliorative of, a state-court judgment.34 It bars claims
complaining of injuries caused by wrongfully entered state-court judgments. 35 As
this Court has previously stated, when determining whether the Rooker-Feldman
doctrine applies, “[t]he fundamental and appropriate question to ask is whether
the injury alleged by the federal plaintiff resulted from the state court judgment
30
Id. at 283.
31
Id. at 293 (quoting GASH Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir.
1993)).
32
682 F.3d 1278 (10th Cir. 2012).
33
Id. at 1283.
34
Id. at 1282.
35
Id. at 1283.
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itself or is distinct from that judgment.” 36
In our case, Flanders’ Complaint is long and complicated with eleven
different claims for relief. However, all of Flanders’ claims can be fairly read as
allegations that, at the invitation of the Defendants, the divorce court took actions
in violation of the automatic stay and discharge injunction provisions contained in
the United States Bankruptcy Code. That being the case, Flanders’ Complaint
states independent federal claims, and the Rooker-Feldman doctrine does not bar
federal-court jurisdiction over a state-court judgment that modifies a discharge in
bankruptcy. 37
Rooker-Feldman is not the only doctrine that potentially bars Flanders’
claims. As the bankruptcy court correctly determined, “[t]o the extent that
success on [Flanders’] contempt claims seeks relitigation of issues decided by the
Divorce Court, principles of preclusion will govern the result.” 38 Therefore, we
must proceed to analyze whether the bankruptcy court correctly ruled Flanders’
claims were barred under the rules of issue preclusion.
B. Issue Preclusion
The judicially-created, equitable doctrine of issue preclusion “prevents a
party that has lost the battle over an issue in one lawsuit from relitigating the
same issue in another lawsuit.”39 It “is intended to relieve parties of the cost and
vexation of multiple lawsuits, conserve judicial resources, and, by preventing
36
Hill v. Putvin (In re Putvin), 332 B.R. 619, 623 (10th Cir. BAP 2005)
(quoting State of Mo. ex rel. Nixon v. Audley (In re Audley), 275 B.R. 383, 390
(10th Cir. BAP 2002)).
37
Hamilton v. Herr (In re Hamilton), 540 F.3d 367, 369 (6th Cir. 2008); In re
Pavelich, 229 B.R. 777, 783 (9th Cir. BAP 1999); In re Dabrowski, 257 B.R. 394
(Bankr. S.D.N.Y. 2001). But cf. In re Ferren, 203 F.3d 559 (8th Cir. 2000).
38
Order, 517 B.R. at 256.
39
Melnor, Inc. v. Corey (In re Corey), 583 F.3d 1249, 1251 (10th Cir. 2009).
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inconsistent decisions, encourage reliance on adjudication.”40 Pursuant to the full
faith and credit statute,41 in order to determine the preclusive effect of a state
court judgment, a federal court must refer to the preclusion law of the state in
which such judgment was rendered.42 Here, Colorado law controls the effect of
the divorce court’s orders.
Under Colorado law,
[t]he doctrine [of issue preclusion] applies to bar subsequent
litigation only if (1) the issue sought to be precluded is identical to an
issue actually and necessarily determined in the prior proceeding; (2)
the party against whom estoppel is asserted has been a party to or is
in privity with a party to the prior proceeding; (3) there is a final
judgment on the merits in the prior proceeding; and (4) the party
against whom the doctrine is asserted had a43full and fair opportunity
to litigate the issue in the prior proceeding.
Additionally, the Colorado Supreme Court has indicated that “[e]ven if not
explicitly determined, an issue is nevertheless considered to have been ‘actually’
determined for purposes of collateral estoppel if its resolution is necessarily
implied in an actual determination.” 44
The bankruptcy court correctly concluded the principles of issue preclusion
prevent Flanders from collaterally attacking determinations of the divorce court.
Three of the four issue preclusion requirements set forth above are clearly met
and require only brief discussion. First, Flanders, the party whom the Defendants
assert is estopped, was a party to the prior proceedings. Second, addressing the
definition of finality, the Colorado Supreme Court has concluded that “in order to
40
Nichols v. Board of Cty. Comm’rs, 506 F.3d 962, 967 (10th Cir. 2007)
(quoting Bebo Constr. Co. v. Mattox & O’Brien, P.C., 990 P.2d 78, 84 (Colo.
1999) (citations and internal quotation marks omitted)).
41
28 U.S.C. § 1738.
42
Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985);
Nichols, 506 F.3d at 967.
43
Reynolds v. Cotten, 274 P.3d 540, 543 (Colo. 2012).
44
Id. at 544.
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be accorded preclusive effect, a judgment must be ‘sufficiently firm’ in the sense
that it was not tentative, the parties had an opportunity to be heard, and there was
an opportunity for review.”45 Here, there is no longer an appeal pending with
respect to the divorce court’s orders, and the Colorado Court of Appeals
remanded on a very limited issue not relevant to this appeal. Thus, the divorce
court’s determinations and orders that Flanders seeks to attack are final and can
be given preclusive effect.
Third, with respect to a “full and fair opportunity to litigate,” the Colorado
Supreme Court has held that such requirement inquires
whether the remedies and procedures in the first proceeding are
substantially different from the proceeding in which collateral
estoppel is asserted, whether the party in privity in the first
proceeding has sufficient incentive to vigorously assert or defend the
position of the party against which collateral estoppel is asserted, and
the extent to which the issues are identical. 46
Here, Flanders had sufficient incentive, and did in fact, vigorously litigate all
issues of classification and division of marital property and marital debt before
the divorce court. In its orders, the divorce court stated that “Flanders’ actions in
contesting almost every motion contributed virtually nothing to the marital
estate,” and some of his “actions have been taken in bad faith as he has continued
to present arguments and take up court time with arguments that had been
previously rejected.” 47
Having easily established the presence of three of the four issue preclusion
requirements, we turn our attention to the final requirement: that the issue sought
to be precluded is identical to an issue actually and necessarily determined in the
prior proceeding. This critical requirement is also met here because Flanders’
45
Rantz v. Kaufman, 109 P.3d 132, 141 (Colo. 2005) (quoting Carpenter v.
Young, 773 P.2d 561, 568 (Colo. 1989)).
46
McNichols v. Elk Dance Colorado, LLC, 139 P.3d 660, 669 (Colo. 2006).
47
Amended Final Orders ¶ 47, at 17-18, in Appellees’ Supp. App. at 68-69.
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claims for violation of the bankruptcy discharge injunction are dependent upon
arguments already adjudicated by the divorce court. One of the major factual
issues underlying Flanders’ claims is the effect of Lawrence’s execution of the
Settlement Agreement and Mutual Release in the Trustee’s Adversary. Flanders
argues the divorce court incorrectly designated the Surplus as marital property
subject to division because Lawrence waived any claim she potentially had
pursuant to the terms of the Settlement Agreement and Mutual Release. As the
bankruptcy court correctly found, that factual issue was carefully considered and
ruled on by the divorce court.48 The divorce court specifically concluded that
Lawrence did not waive any claim she may have to the Surplus by executing the
Settlement Agreement and Mutual Release. 49 Therefore, Flanders was not entitled
to litigate the issue again before the bankruptcy court.
A second disputed factual underpinning of Flanders’ claims is the effect of
the divorce court’s classification of the Promissory Note Debt as “marital debt.”
Flanders argues his liability on the debt was discharged in his bankruptcy case,
and somehow believes that its classification as “marital debt” by the divorce court
resulted in an “offset” of a debt as a personal liability of the debtor in violation of
the discharge injunction.50 He further asserts this classification gave rise to the
48
Order, 517 B.R. at 259-60.
49
Id.
50
According to Flanders,
The irrelevant conclusion of the divorce court and the convoluted
manner in which that conclusion was applied against the value of an
asset of the marital estate constituted the collection of a discharged
debt against Flanders by an unlawful offset and as such, the divorce
court’s Order in that regard is void ab initio. The Divorce Court
judgment has therefore “modified” the Bankruptcy Court’s Discharge
regarding Flanders’ former debt to Ms. Lawrence and GNTC, and
said order is therefore void ab initio.
Opening Brief at 19.
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divorce court’s Judgment against him.51 The bankruptcy court found the divorce
court considered the effect of Flanders’ discharge and determined the Promissory
Note Debt was a marital debt that could be considered in determining the division
of marital assets. As a result, the bankruptcy court correctly concluded Flanders
was precluded from relitigating the classification of the Promissory Note Debt as
marital debt in his attempt to establish a discharge violation by the Defendants. 52
Even if the requirements of issue preclusion were not met here, Flanders’
assertion that there has been a violation of the provisions of § 524(a)(2) is wholly
without merit. The Promissory Note Debt may have been discharged, but
contrary to Flanders’ contentions, the divorce court’s orders did not make
Flanders “responsible” in any way for this debt. There is nothing in the divorce
court’s orders that would allow Lawrence or the Lawrence Entity to enforce the
Promissory Note Debt against Flanders, or that has that effect. 53 Instead, the
divorce court only determined that the Promissory Note Debt was “marital debt” 54
for purposes of dividing marital property. 55
51
Appellant’s Opening Brief at 16.
52
Order, 517 B.R. at 260.
53
Again, Flanders’ suggestion that there was an offset of the Promissory Note
Debt that resulted in the Judgment is fiction. The Judgment consists primarily of
the divorce court’s imposition of attorneys fees for his bad faith litigation
conduct.
54
Under Colorado law, marital liabilities include all debts that are acquired
and incurred by a husband and wife during their marriage. In re Marriage of
Jorgenson, 143 P.3d 1169, 1172 (citing In re Marriage of Speirs, 956 P.2d 622
(Colo. App. 1997)). Therefore, the Promissory Note Debt constituted a marital
debt regardless of whether Flanders ever had any personal liability because
Lawrence remained liable on the debt, and the divorce court stated it was
convinced that the $1,900,000 in funds procured from the loan was used by the
parties for marital expenses. Amended Final Orders ¶ 19, at 9, in Appellees’
App. at 60.
55
The bankruptcy court discusses this alternative merits ruling in a footnote
of its Order:
(continued...)
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C. Lack of Standing
The bankruptcy court also addressed Flanders’ assertion that because the
Surplus was property of the bankruptcy estate, the divorce court’s order directing
the funds to be paid to its registry constituted a violation of the automatic stay
provisions of § 362.56 The bankruptcy court first noted that the Surplus was not
property of the estate when the divorce court issued its order, and therefore
pursuant to § 362(c)(1), the automatic stay was no longer applicable. At the time
the divorce court entered its order, the Surplus had been actually or constructively
distributed to Flanders in that it was being held in the registry of the United
States District Court after being garnished for payment of Flanders’ criminal
judgment.57 The bankruptcy court then ruled that, assuming “for the purpose of
the [Defendants’] motion for summary judgment, the [bankruptcy estate surplus]
funds had not been distributed to [Flanders] and remained estate property,
[Flanders] has no standing to request an order declaring the Bankruptcy Surplus
55
(...continued)
The application of the doctrine of issue preclusion is a matter of
equity and a court may decline to apply the doctrine even when the
elements for its application are present. Even had this Court
determined not to apply the doctrine, Debtor would lose on the merits
of this claim. Debtor’s discharge of personal liability on the
promissory note to GNTC only barred collection of the note as a
personal liability of the Debtor. 11 U.S.C. § 524(a)(2). It did not
bar the Divorce Court from characterizing the debt as a marital debt.
The Divorce Court’s analysis of the marital nature of the debt, as
well as the overall property division between Ms. Lawrence and
Debtor, was clearly within the broad discretion of the Divorce Court
to make an equitable distribution of marital property after
considering all relevant factors, including the contributions of each
spouse, the value of property set apart to each spouse, the economic
circumstances of each spouse, and any increase, decrease, or
depletion in the value of any separate property during the marriage.
Order, 517 B.R. at 260-61, n.6 (citation omitted).
56
It does not appear that Flanders made this argument as a “claim for relief”
in his Complaint. Instead his contention is part of his “Factual Allegations
Common to All Counts.” See Complaint ¶ 45, at 10, in Appellant’s App. at 149.
57
Order, 517 B.R. at 261.
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Order void ab initio.”58 The bankruptcy court explained that the trustee, as
representative of the estate, is the proper party to seek redress for an alleged
violation of the automatic stay.59 The bankruptcy court also ruled that the
automatic stay was not in effect as to actions to collect from Flanders because,
pursuant to § 362(c)(2), it had terminated some four years earlier when Flanders
was granted his Chapter 7 discharge. 60
In his Opening Brief on appeal, Flanders generally asserts the bankruptcy
court “erred in its conclusion that Debtor is precluded from arguing all of the
issues that he raised in his Complaint.”61 However, other than such assertion,
Flanders does not make any specific argument regarding the bankruptcy court’s
determination that he did not have standing to pursue alleged violations of the
automatic stay.62 As a result, Flanders is deemed to have waived this issue on
appeal. 63
58
Id.
59
Id. at 261-62.
60
Id. at 262.
61
Appellant’s Opening Brief ¶ 9, at 2.
62
Flanders does argue on appeal that the bankruptcy court erred in concluding
that the divorce court had subject matter jurisdiction to issue orders regarding
after-acquired property. Opening Brief at 54-59. However, the substance of this
argument appears to be simply another incarnation of Flanders’ contention that
the divorce court erroneously interpreted the Settlement Agreement and Mutual
Release, an argument that has already been determined to be subject to issue
preclusion principles.
63
In re Taylor, 737 F.3d 670, 682 n.9 (10th Cir. 2013) (arguments
perfunctorily or inadequately briefed are waived); In re Repine, 536 F.3d 512,
518, n.5 (5th Cir. 2008) (issues not adequately briefed are waived); Sw. Pa.
Growth Alliance v. Browner, 121 F.3d 106, 122 (3d Cir. 1997) (“appellate courts
generally should not address legal issues that the parties have not developed
through proper briefing”).
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D. Laches
In their Answer Brief, the Defendants argue this Court may affirm the
bankruptcy court’s Order on the alternative basis that Flanders is barred by the
doctrine of laches from attempting, through filing this adversary proceeding in
2013, to collaterally attack the Colorado state court orders entered in 2007 and
2009.64 Derived from the principle that “equity aids the vigilant and not those
who slumber on their rights,” the laches defense bars a party’s dilatory claim, 65
when there is: “(1) lack of diligence by the party against whom the defense is
asserted, and (2) prejudice to the party asserting the defense.” 66 Whether the
doctrine of laches bars a particular action or claim is a decision primarily
addressed to the discretion of the trial court. 67
The Defendants raised the issue of laches before the bankruptcy court, but
the Order granting summary judgment does not discuss laches. Thus, the
bankruptcy court rejected, at least implicitly, the doctrine of laches as a basis for
barring Flanders’ Complaint. Given that this Court may not disturb a bankruptcy
court’s ruling on laches in the absence of abuse of discretion,68 and having
already determined that Flanders’ claims are barred by the principles of issue
preclusion, we decline the Defendants’ invitation to address the laches issue on
appeal.
64
Answer Brief of Appellees James T. Burghardt and Moye White LLP
(“Answer Brief”) at 4. Lawrence and West joined in this Answer Brief.
65
Biodiversity Conservation All. v. Jiron, 762 F.3d 1036, 1091 (10th Cir.
2014) (quoting Kansas v. Colorado, 514 U.S. 673, 687 (1995) (quotations
omitted)).
66
Id. (citing Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 121-22
(2002) (quotations omitted)).
67
Id. at 1090 (quoting Burnett v. New York Cent. R.R. Co., 380 U.S. 424, 435
(1965)).
68
Id. (quoting Brunswick Corp. v. Spinit Reel Co., 832 F. 2d 513, 523 (10th
Cir. 1987)).
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VI. CONCLUSION
The Rooker-Feldman doctrine does not prevent the bankruptcy court from
exercising jurisdiction over Flanders’ claims against the Defendants for violation
of the discharge injunction. However, to the extent that a debtor’s claim for
violation of the discharge injunction depends on facts already adjudicated by a
state court, the principles of issue preclusion apply to prevent him from
relitigating them in federal court, thereby maintaining the integrity of the state
court’s orders. In this case, issue preclusion bars Flanders’ causes of action
because the facts essential to his claims have been litigated and adjudicated by the
divorce court. Accordingly, the bankruptcy court’s Order is affirmed. 69
69
Also pending before this court are the Moye White Defendants’ Motion to
Strike Selected Statements in Appellant’s Reply Brief as Unsupported by the
Record (Docket No. 53 filed on June 11, 2015), Appellant’s Motion for Leave to
File Sur-Reply (Docket No. 70, filed on July 8, 2015), as well as numerous
responses and replies to those documents. In light of our decision, we deny the
Motion to Strike and the Motion for Leave as moot.
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