IN RE; D. ERIK VON KIEL
Filing
13
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE CYNTHIA M. RUFE ON 8/7/2013. 8/9/2013 ENTERED AND COPIES E-MAILED; AND MAILED TO PRO SE PARTIES. (ems)
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
____________________________________
:
IN RE: D. ERIK VON KIEL,
:
____________________________________:
D. ERIK VON KIEL,
:
CIVIL ACTION NO. 12-4345
Appellant,
:
:
v.
:
BANKRUPTCY NO. 10-21364
:
DEPARTMENT OF HEALTH AND
:
HUMAN SERVICES, and UNITED
:
STATES DEPARTMENT OF JUSTICE, :
Appellees.
:
MEMORANDUM OPINION
RUFE, J.
AUGUST 7, 2013
Debtor-Appellant, D. Erik von Kiel, appeals pro se from the Bankruptcy Court’s order
dated June 19, 2012. Having considered fully the briefs and the record on appeal, and having
determined that oral argument is not necessary in this case,1 the Court will affirm the order of the
Bankruptcy Court for the following reasons.
I.
BACKGROUND
On May 6, 2010, Debtor filed a voluntary bankruptcy petition under Chapter 7 of the
United States Bankruptcy Code2 in the Bankruptcy Court for the Eastern District of
Pennsylvania.3 On November 9, 2010, Debtor filed his first adversary complaint against
Appellee, the United States Department of Health and Human Services (“HHS”), seeking to
discharge his Health Education Assistance Loans (“HEAL loans”).4 This complaint was
1
Fed. R. Bankr. P. 8012.
2
11 U.S.C. §§ 701-784.
3
Bankr. E.D. Pa. Pet. No. 10-21364, Doc. No. 1.
4
Bankr. E.D. Pa. Adversary Proceeding No. 10-2146, Doc. No. 1.
dismissed and then re-filed as fifteen-count complaint against, among others, Appellees HHS and
the Department of Justice on February 17, 2011.5 Nine of the fifteen counts were dismissed,
leaving Counts One through Six asserted against Appellees only; these six counts were addressed
in the Bankruptcy Court’s June 19, 2012 Opinion that is the subject of this appeal. The June 19
Opinion resolved cross-motions for summary judgment and the accompanying order entered
summary judgment in favor of Appellees.6 This timely filed appeal followed.
II.
JURISDICTIONAL STATEMENT
Bankruptcy courts have jurisdiction to hear and determine all core proceedings under
Title 11 of the United States Code.7 An adversary proceeding seeking to discharge a debtor’s
student loans under 11 U.S.C. § 523(a)(8) is a core proceeding under 28 U.S.C. § 157(b)(2)(I);
therefore, the Bankruptcy Court had jurisdiction under this section to consider and decide the
parties’ cross-motions for summary judgment in the underlying adversary proceeding. This
Court has jurisdiction to review the Bankruptcy Court’s decision pursuant to 28 U.S.C. § 158(a).8
III.
STANDARD OF REVIEW
A district court reviews a bankruptcy court’s “order granting summary judgment de
novo.”9 “Factual findings are reviewed for clear error.”10 “A bankruptcy court may
grant summary judgment in an adversary proceeding . . . [if the movant] show[s] that there is no
5
Bankr. E.D. Pa. Adversary Proceeding No. 11-2022, Doc. No. 1.
6
Bankr. E.D. Pa. Adversary Proceeding No. 11-2022, Doc. Nos. 113, 114.
7
28 U.S.C. §§ 157(b)(1) and (b)(2).
8
In re Michael, 699 F.3d 305, 308 n.2 (3d Cir. 2012).
9
In re Harvard Indus. Inc., 568 F.3d 444, 449-50 (3d Cir. 2009).
10
Id.
2
genuine [dispute] as to any material fact and [the movant] is entitled to judgment as a matter of
law.”11
IV.
STATEMENT OF FACTS
Deferring to the Bankruptcy Court’s credibility determinations, this Court has reviewed
the Bankruptcy Court’s factual findings for clear error and finds none. The following facts are
taken from the Bankruptcy Court’s June 19, 2012 Opinion granting summary judgment in favor
of Appellees. Since the Court writes primarily for the parties who are familiar with the facts at
issue, the Court recounts herein only those facts necessary to give context to its decision.12
Debtor attended medical school in the 1980s, and financed his education using HEAL
loans, insured by the United States Government under the Public Health Service Act.13 Debtor
borrowed money from the First Eastern Bank and First American Bank, N.A., debts that were
later purchased by the Student Loan Marketing Association (Sallie Mae, Inc.) (Claim I), and
from the Pennsylvania Higher Education Assistance Agency (“PHEAA”) (Claim II). Upon
completion of medical school and related internships, Debtor began making payments on both
groups of loans in May 1989, and he continued to do so until 1998.
When Debtor stopped making payments, both PHEAA and Sallie Mae declared Debtor in
default and each filed a complaint against him in the Lehigh County Court of Common Pleas.
As a result, two civil judgments totaling about $187,000, were entered against Debtor on August
3, 1999 and November 20, 2000. The judgments were registered under Debtor’s alias, D.O.
11
In re Atamian, 300 F. App’x 175, 176-77 (3d Cir. 2008) (quoting Fed. R. Civ. P. 56(c); Fed. R. Bankr.
P. 7056) (alterations reflect new summary judgment language).
12
See In re Myers, 491 F.3d 120, 126 (3d Cir. 2007) (“The Bankruptcy Court is best positioned to assess
the facts, particularly those related to credibility and purpose.”).
13
42 U.S.C. §292f-p.
3
Dennis W. Fluck, in the United States District Court for the Eastern District of Pennsylvania on
September 19, 2002.14 The United States began collection efforts in 2006, applying for and
obtaining writs of garnishment from Debtor’s employer. By Order dated April 23, 2010, the
Honorable Petrese B. Tucker of this Court ordered Debtor’s employer to pay 25% of Debtor’s
net earnings to the United States.15 Less than two weeks later, Debtor filed his Bankruptcy
Petition.16
On October 13, 2010, the United States Trustee timely filed a complaint in the
Bankruptcy Court (docketed as a separate adversary proceeding), objecting to Debtor’s discharge
on three independent statutory grounds.17 In its January 5, 2012 Opinion denying debtor’s
discharge in this separate adversary proceeding, the Bankruptcy Court found that Debtor’s
bankruptcy petition “constitute[d] Debtor's ill-concealed and back-door attempt to avoid Judge
Tucker’s decision,” and the reach of his creditors in general.18 The Bankruptcy Court entered
judgment in favor of the United States Trustee and Appellees thereafter filed a motion for
summary judgment in the related adversary proceeding at issue in this appeal.19 Debtor
responded by filing a cross-filed a motion for summary judgment.20 The Bankruptcy Court
entered summary judgment in favor of Appellees on all six counts.
14
Misc. No. 02-234, Doc. No. 1 (Hon. Petrese B. Tucker, presiding).
15
Misc. No. 02-234, Doc. No. 22.
16
Bankr. E.D. Pa. Pet. No. 10-21364, Doc. No. 1.
17
Bankr. E.D. Pa. Adversary Proceeding No. 10-2136, Doc. No. 1.
18
Bankr. No. 10-2136, Doc. No. 33 at 5.
19
Bankr. No. 11-2022, Doc. No. 93.
20
Bankr. No. 11-2022, Doc. No. 100.
4
Of relevance to the Bankruptcy Court’s decision is Debtor’s earlier, related bankruptcy
proceeding. On September 9, 1991, Debtor and his wife filed a Chapter 7 bankruptcy petition
also in the United States Bankruptcy Court for the Eastern District of Pennsylvania.21 Debtor
was granted a discharge by order entered February 18, 1993.22 Debtor did not file any adversary
complaints with regard to this proceeding.23
Also of relevance to this appeal, is a related appeal of the Bankruptcy Court’s January 5,
2012 general denial of discharge. As stated, on January 5, 2012, the Bankruptcy Court denied
Debtor’s discharge based on its finding that “Debtor is engaged in a fraudulent scheme to evade
taxes and frustrate his creditors.”24 Debtor appealed the decision to this Court.25 This Court
affirmed the denial of discharge, finding that there was ample support in the record for the
Bankruptcy Court’s finding that Debtor fraudulently concealed his assets.26 In reaching this
decision, the Court wrote:
Here, the record clearly supports the Bankruptcy Court’s finding that Debtor
concealed property belonging to, or at the very least controlled by him with the
intent to hinder his creditors. Despite his income of more than $150,000, his
receipt of W-2s, his control over the TLM account to which most of the $150,000
income was transferred, and the fact that this income, or an equivalent sum of
money, was used to pay Debtor’s personal and family expenses, Debtor
maintained that he has little to no income or assets. Debtor’s claimed that the
income he earned from PrimeCare was not his property is belied by his actions,
which show attempts to conceal income and assets, and to move his property
beyond the reach of his creditors.
21
Bankr. E.D. Pa. Pet. No. 91-23203, Doc. No. 1.
22
Bankr. No. 91-23203, Doc. No. 34.
23
See generally Bankr. No. 91-23203.
24
Bankr. No. 10-2136, Doc. No. 33 at 15.
25
Civ. A. No. 12-972, Doc. No. 1.
26
Civ. A. No. 12-972, Doc. No. 16.
5
The Court notes factual evidence of a close relationship between Debtor and
IAL and the Debtor and TLM, the use of a second social security number,
Debtor’s arranging for his income to be passed through more than one account
though ultimately the funds were used by Debtor, Debtor’s attempt to transfer the
home he owned jointly with his estranged wife to her sole ownership, Debtor’s
attempt to disclaim knowledge of his financial affairs by using a power of
attorney and failing to keep records of his transactions, and Debtor’s receipt and
use of $13,000 in “gift” money from IAL every month to pay personal and family
expenses. The Bankruptcy Court did not find Debtor and his “ignorance” credible
and this Court defers to this credibility determination, which is supported by other
facts of record.27
V.
DEBTOR’S APPEAL
Debtor challenges the entirety of the Bankruptcy Court’s findings that supported the entry
of summary judgment in Appellee’s favor.28 He argues that: (1) the Bankruptcy Court erred in
holding that Debtor’s HEAL Loans were not discharged in his 1991 bankruptcy case; (2) the
Bankruptcy Court erred in holding that the Rooker-Feldman Doctrine and Claim Preclusion
prohibited it from exercising jurisdiction over certain claims; (3) the Bankruptcy Court erred in
finding that that the general denial of discharge in Debtor’s bankruptcy proceedings rendered
certain claims moot; (4) the Bankruptcy Court erred in prohibiting Robert MacWray from
representing, counseling, or assisting Debtor in the proceedings; and (5) Debtor’s right to a jury
trial was violated.
A.
Count 4
Count 4 of the underlying adversary complaint, labeled “Loan Discharged in Bankruptcy
Already,” alleges that the HEAL loans were discharged in Debtor’s 1991 bankruptcy case. The
Bankruptcy Court found that the HEAL loans were not discharged in the 1991 case and granted
27
Id. at 11-12.
28
The Court liberally construes Debtor’s pro se filings and in doing so, interprets these filings as raising
five issues on appeal. The first three are interpreted as general objections to the Bankruptcy Court’s ruling regarding
the substance of the claims at issue in the summary judgment motions (Counts 1-6 of the adversary complaint), and
are grouped in the same way they were grouped by the Bankruptcy Court. The last two issues are more specific
objections, which Debtor raises with regard to the underlying proceedings and are addressed separately.
6
summary judgment in favor of Appellee on this count. The Bankruptcy Court’s finding was not
in error.
At the time of Debtor’s discharge, HEAL loans were automatically excepted from
discharge unless a debtor filed an adversary complaint requesting that the loans be discharged,
and established, inter alia, “that the nondischarge of such debt would be unconscionable.”29
Debtor did not file an adversary complaint seeking discharge of his HEAL loans in the 1991
Bankruptcy proceedings.30 Thus, these loans were not discharged in Debtor’s 1991 proceedings,
and the Bankruptcy Court was correct in finding that Appellees were entitled to summary
judgment in their favor on Count 4.
B.
Counts 1, 2, 3, and 6
In Counts 1, 2, 3, and 6 of his underlying adversary complaint, Debtor argues that the
state court judgments entered against him in the Lehigh County Court of Common Pleas are
void because the HEAL loans were discharged in the 1991 Bankruptcy case. The
Bankruptcy Court found that the Rooker-Feldman Doctrine31 and the doctrine of claim
29
42 U.S.C. § 294f(g)(2) (now renumbered as 42 U.S.C. § 292f(g)(2)); United States v. Rushing, 287 B.R.
343, 351 (D.N.J. 2002).
30
See generally Bankr. No. 91-23203.
31
The Rooker-Feldman Doctrine, “which takes its name from two Supreme Court cases, generally
withholds jurisdiction of federal courts (save the United States Supreme Court) over state judgments, as they are
more appropriately appealed within the state judiciary.” Ellington v. Cortes, No. 13-1528, 2013 WL 3822161, at *2 3 (3d Cir. July 25, 2013) (citing D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker v. Fid. Trust
Co., 263 U.S. 413 (1923)). The Doctrine applies when four requirements are met: “(1) the federal plaintiff lost in
state court; (2) the plaintiff ‘complain[s] of injuries caused by [the] state-court judgments’; (3) those judgments were
rendered before the federal suit was filed; and (4) the plaintiff is inviting the district court to review and reject the
state judgments.” Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 166 (3d Cir. 2010)
(quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)). The August 3, 1999 and
November 20, 2000, Leigh County judgments were entered against Debtor, before Debtor’s bankruptcy petition was
filed, and in the underlying adversary complaint, Debtor claims injury arising out of these judgments and asks that
they be declared void. Therefore, the claims in Counts 1, 2, 3, and 6 meet all four requirements and the Bankruptcy
Court was correct in concluding that the doctrine barred Debtor’s claims.
7
preclusion32 barred Debtor’s challenge to the state court judgments, and that Debtor’s
argument that the “Dabrowski exception”33 applied failed because it was based on the
mistaken assumption that the HEAL loans were discharged in the 1991 bankruptcy
proceeding.
In his appeal, Debtor challenges the Bankruptcy Court’s rejection of the Dabrowski
exception to Rooker-Feldman and other preclusionary rules. Dabrowski held that RookerFeldman does not apply to state court judgments that are void because of a bankruptcy
discharge.34 Debtor argues that the 1991 discharge of his HEAL loans renders the state court
judgments void and thus, his claims are not barred by Rooker-Feldman. However, because, as
stated above, Debtor’s HEAL loans were not discharged in the 1991 bankruptcy case, the state
court judgments are not void by virtue of this discharge and the Bankruptcy Court correctly
concluded that Counts 1, 2, 3, and 6 are barred by Rooker-Feldman.
32
“Res judicata, also known as claim preclusion, bars a party from initiating a second suit against the same
adversary based on the same ‘cause of action’ as the first suit. A party seeking to invoke res judicata must establish
three elements: (1) a final judgment on the merits in a prior suit involving (2) the same parties or their privies and
(3) a subsequent suit based on the same cause of action. The doctrine of res judicata bars not only claims that were
brought in a previous action, but also claims that could have been brought.” Duhaney v. Att’y Gen. of U.S., 621
F.3d 340, 347 (3d Cir. 2010) (internal quotation marks and citiations omitted). The Bankruptcy Court held that
Counts 1, 2, 3, and 6 “seek to litigate claims that could have been raised in the underlying state court actions,”
“involve the same parties or their privies and the same causes of action that were involved in the underlying state
court actions,” and the final judgments that were entered in those cases were entered “by courts of competent
jurisdiction.” Bankr. No. 11-2022, Doc. No. 114 at 17. Because the Court finds that the Rooker-Feldman Doctrine
bars the claims at issue, whether the Bankruptcy Court’s conclusion on this point was in error is of no moment,
particularly because Debtor does not appear to challenge the court’s conclusion in this regard.
33
In re Dabrowski, 257 B.R. 394 (Bankr. S.D.N.Y. 2001).
34
Id. at 406.
8
C.
Count 535
Count 5 of the adversary complaint sought a determination that Debtor’s HEAL loans are
dischargeable in bankruptcy under 42 U.S.C. §292f(g). The Bankruptcy Court held that
Appellees were entitled to summary judgment on this claim, finding that “[w]hen a general
discharge is denied under Section 727,” as it was here by virtue of the January 5, 2012 Opinion,
“issues regarding exceptions to discharge of specific debts under Section 523 or 42 U.S.C.
§ 292f(g) become moot.”36
Title 42, United States Code, section 292f(g) provides that HEAL loans may be
discharged in bankruptcy if a debtor establishes, inter alia, that “nondischarge of [the] debt
would be unconscionable.”37 Since, by opinion and order dated January 5, 2012, the Bankruptcy
Court denied discharge generally, it follows that discharge of specific debts pursuant to § 292f(g)
would not be warranted. Additionally, the Courts notes that given the findings of the Bankruptcy
Court, which were affirmed on appeal by this Court in a related proceeding,38 there is no basis
for a finding that discharge of Debtor’s HEAL loans is warranted under § 292f(g).
D.
The Appearance of Robert MacWray in the Bankruptcy Proceedings
Debtor asserts that the Bankruptcy Court violated his constitutional rights by prohibiting
Robert MacWray from appearing on Debtor’s behalf in the bankruptcy proceedings. The
Bankruptcy Court did not err in prohibiting Mr. MacWray from attempting to act as Debtor’s
35
The Court is unable to discern Debtor’s specific objection with regard to this Count. Consequently, the
Court considers the substance of the claim and the Bankruptcy Court’s conclusion in this regard.
36
Bankr. No. 11-2022, Doc. No. 114 at 21.
37
42 U.S.C. § 292f(g)(2).
38
Civ. A. No. 12-972, Doc. No. 16.
9
attorney in the proceedings as Mr. MacWray is not a licensed attorney authorized to practice law
in Pennsylvania.
E.
Denial of Demand for a Jury Trial
Debtor argues that the Bankruptcy Court deprived him of his constitutional right to a jury
trial by granting Appellees’ motion for summary judgment without acknowledging his jury
demand.39 “As the Supreme Court held, over one hundred years ago, a summary judgment
proceeding does not deprive the losing party of its Seventh Amendment right to a jury trial.”40
VI.
CONCLUSION
For the foregoing reasons, the Court finds that Debtor’s appeal lacks merit. Accordingly,
the Court will affirm the June 19, 2012 Order of the Bankruptcy Court.
An appropriate Order follows.
39
See Debtor’s Initial Brief [Doc. No. 4] at 4. In his brief, Debtor writes: “These issues included
satisfying the plaintiff’s concern of confliction of interest including financial gain of defendant (US government
entity) and the fact that the judge is also a government employee (defendant/defendant attorney, the judge and the
US trustee attorney all our federal employees/entities against a pro se litigant and also financially it is the judge’s
employer who gains or loses financially if defendant versus the plaintiff wins the case.” Id. (quoted as in original).
To the extent Debtor is asserting a conflict of interest in these proceedings because Appellees and the Court are both
“federal employees/entities,” the Court refers to its May 22, 2013 Order denying his Motion to Recuse. Doc. No.
12.
40
Conklin v. Anthou, 495 F. App’x 257, 261 (3d Cir. 2012) (quoting Santa Barbara Capital Mgmt. v.
Neilson, 525 F.3d 805, 811 (9th Cir. 2008) (citing Fid. & Deposit Co. of Md. v. United States, 187 U.S. 315, 319–21
(1902)); see also Novak v. Posten Taxi Inc., 386 F. App’x 276, 279 (3d Cir. 2010) (quoting In re TMI Litig., 193
F.3d 613, 725 (3d Cir. 1999)) (“We reject Novak’s argument that he was denied his right to a trial, as
summary judgment does not violate the Seventh Amendment right to a jury trial ‘so long as the person having the
right to the jury trial is an actual participant in the summary judgment proceeding.’”).
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