Medical Lien Management v. Dampier ( 2018 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 14, 2018
_________________________________
Elisabeth A. Shumaker
Clerk of Court
In re: BILLY RUSSELL DAMPIER,
JR.,
Debtor.
------------------------------ No. 17-1160
(BAP No. CO-16-020)
MEDICAL LIEN MANAGEMENT, (BAP)
INC.; CREDIT INVESTMENTS,
INC.,
Plaintiffs - Appellees,
v.
BILLY RUSSELL DAMPIER, JR.,
Defendant - Appellant.
_________________________________
ORDER AND JUDGMENT *
_________________________________
Before MATHESON, BACHARACH, and PHILLIPS, Circuit Judges.
_________________________________
*
All parties requested oral argument, but we do not believe that it
would materially help us to decide this appeal. As a result, we are deciding
the appeal based on the briefs. See Fed. R. App. P. 34(a)(2); 10th Cir. R.
34.1(G).
This order and judgment does not constitute binding precedent except
under the doctrines of law of the case, res judicata, and collateral estoppel.
But the order and judgment may be cited for its persuasive value under
Fed. R. App. P. 32.1(a) and 10th Cir. R. 32.1(A).
The bankruptcy court granted summary judgment to Medical Lien
Management, Inc. and Credit Investments, Inc., holding that a Colorado
state court’s order to Mr. Dampier for criminal restitution was not
dischargeable under 11 U.S.C. § 523(a)(7). We affirm.
I. Background
The facts are undisputed. Mr. Dampier was convicted of theft for
stealing from his employers, and the court ordered restitution of
approximately $197,000. The following year, Mr. Dampier filed
bankruptcy, listing his restitution debt. Shortly thereafter, the employers
sought a determination that the restitution obligation was not dischargeable
under § 523(a)(7).
The bankruptcy court held that Mr. Dampier could not discharge the
restitution obligation and granted the employers’ motion for summary
judgment. The Bankruptcy Appellate Panel affirmed.
II. Standard of Review
In this appeal, we engage in de novo review of the bankruptcy court’s
decision, applying the same standard used by the Bankruptcy Appellate
Panel. Jubber v. SMC Elec. Prods., Inc. (In re C.W. Mining Co.), 798 F.3d
983, 986 (10th Cir. 2015). When the bankruptcy court has granted summary
judgment, “we . . . review the record de novo, examining the evidence in
the light most favorable to [the nonmoving party] to determine whether
[the moving party] established that there was no genuine dispute as to any
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material fact and it was entitled to judgment as a matter of law.” Id.
(internal quotation marks omitted).
III. Forfeiture Regarding Statutory Standing
Section 523(a)(7) states in pertinent part: “A discharge under
[Chapter 7] does not discharge an individual debtor from any debt . . . to
the extent such debt 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.” 11 U.S.C. § 523(a)(7).
Mr. Dampier argues that the employers lack standing to pursue an
exception to discharge under § 523(a)(7) because they are not
governmental units. This argument has been forfeited.
On appeal, we generally consider only those arguments that have
been preserved in the debtor’s summary judgment briefs filed in
bankruptcy court. In re C.W. Mining Co., 798 F.3d at 987. An exception
exists for Article III standing, which can be raised at any time. New Eng.
Health Care Emps. Pension Fund v. Woodruff, 512 F.3d 1283, 1288
(10th Cir. 2008). But when the challenge to standing involves a statutory
ground, rather than Article III, the challenge can be forfeited. Niemi v.
Lasshofer, 770 F.3d 1331, 1345 (10th Cir. 2014). Because the debtor’s
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challenge rests on statutory grounds, the challenge has been forfeited. 1
IV. Dischargeability
Mr. Dampier’s challenge is invalid on the merits because his
restitution debt is nondischargeable under Kelly v. Robinson, 479 U.S. 36
(1986), and Troff v. Utah (In re Troff), 488 F.3d 1237 (10th Cir. 2007).
In Kelly the bankruptcy debtor pleaded guilty to larceny based on
wrongful receipt of welfare, and the plea resulted in a prison sentence.
Kelly, 479 U.S. at 38. But the court suspended execution of the sentence
and placed the debtor on probation for five years, ordering her to make
monthly restitution payments to a state agency. Id. at 38-39. Shortly
thereafter, Ms. Robinson filed bankruptcy. Id. at 39.
Although the agency was listed as a creditor, it did not file a proof of
claim or otherwise appear in the bankruptcy proceeding. Id. Ms. Robinson
obtained a discharge, and she made no further restitution payments. Id.
After the probation department informed her that it considered the
restitution obligation nondischargeable, Ms. Robinson sought a declaratory
judgment to determine the issue. Id. at 39-40.
1
Characterization as statutory standing is misleading because the
challenge ultimately involves the availability of private cause of action
under § 523(a)(7). Lexmark Int’l, Inc. v. State Control Components, Inc.,
134 S. Ct. 1377, 1387 n.4 (2014); Safe Streets All. v. Hickenlooper,
859 F.3d 865, 887 (10th Cir. 2017). The availability of a private cause of
action involves the sufficiency of a cause of action rather than the court’s
power to act. Safe Streets All., 859 F.3d at 887.
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The bankruptcy court held that Ms. Robinson’s restitution obligation
was nondischargeable under § 523(a)(7), and the Supreme Court agreed:
“[W]e hold that § 523(a)(7) preserves from discharge any condition a state
criminal court imposes as part of a criminal sentence.” Kelly, 479 U.S. at
40, 50. The Court explained that even though “restitution is forwarded to
the victim,” § 523(a)(7) does not “allow[] the discharge of a criminal
judgment that takes the form of restitution” because “[t]he criminal justice
system is not operated primarily for the benefit of victims, but for the
benefit of society as a whole.” Id. at 52.
The Supreme Court concluded that state law had authorized the
“judge to impose any of eight specified conditions of probation, as well as
any other conditions reasonably related to [the defendant’s] rehabilitation.”
Id. (internal quotation marks omitted). Restitution was among the eight
conditions specified in the statute, which allowed the court to fix the
amount and manner of payment “in an amount [the defendant] can afford to
pay . . . for the loss or damage caused thereby.” Id. (internal quotation
marks omitted). Because the state criminal proceedings focused on “the
State’s interests in rehabilitation and punishment, rather than the victim’s
desire for compensation,” the Court concluded that “restitution orders
imposed in such proceedings operate for the benefit of [a governmental
unit], the State.” Id. at 53 (internal quotation marks omitted).
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In Troff, the debtor pleaded guilty to arson. Troff, 488 F.3d at 1238.
As part his sentence, the Utah state court placed Mr. Troff on probation
and set a probationary requirement to pay $239,696 through monthly
installments. Id. These installments were paid to the state, which
forwarded the payments to the victim. Id. At the end of probation, the
amount of unpaid restitution was converted to a civil judgment in favor of
the victim. Id.
Mr. Troff filed bankruptcy and we held that the debt was not
dischargeable under § 523(a)(7), reasoning that Kelly had clarified that any
obligation would be nondischargeable when it came as part of a criminal
sentence. Id. at 1240. The fact that the restitution payments in Troff were
forwarded to the victim did not alter the fact that they were part of a state
criminal sentence, which prevented discharge under § 523(a)(7). Id. at
1240-41. And the ultimate conversion of the unpaid obligation to a civil
judgment did not change the outcome: “Although this conversion may alter
the consequences for Mr. Troff’s non-payment, it does not change the fact
that the court-imposed restitution was part of his criminal sentence.” Id. at
1241 n.1.
Kelly and Troff squarely apply here, where the restitution obligation
arose from Mr. Dampier’s criminal sentence. See People v. Rogers, 20 P.3d
1238, 1239 (Colo. App. 2000) (holding that “[r]estitution as a condition of
probation is as much a part of a criminal sentence as a fine or other
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penalty”). Because the restitution obligation arose from the criminal
sentence, Kelly and Troff apply and § 523(a)(7) precluded discharge of
Mr. Dampier’s restitution obligation.
V. Conclusion
We conclude that Mr. Dampier forfeited his challenge to the
employers’ statutory standing to contest discharge of the restitution debt.
On the merits, we conclude that discharge of the debt is foreclosed under
11 U.S.C. § 523(a)(7). Thus, we affirm.
Entered for the Court
Robert E. Bacharach
Circuit Judge
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