Caterina Biondo v. Gold, Lange, Majoros & Smalarz ( 2023 )

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 23a0023p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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IN RE: CATERINA BIONDO,
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Debtor. │
___________________________________________ │
CATERINA BIONDO, > No. 22-1666
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Appellant, │
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v. │
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GOLD, LANGE, MAJOROS & SMALARZ, P.C., │
Appellee. │
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Appeal from the United States District Court for the Eastern District of Michigan at Port Huron;
No. 21-cv-11462—Robert H. Cleland, District Judge.
United States Bankruptcy Court for the Eastern District of Michigan at Detroit;
No. 18-bk-49025—Thomas J. Tucker, Bankruptcy Judge.
Decided and Filed: February 8, 2023
Before: SUTTON, Chief Judge; SILER and MATHIS, Circuit Judges.
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COUNSEL
ON BRIEF: James C. Warr, JAMES C. WARR & ASSOCIATES, PLC, Southfield, Michigan,
for Appellant. Elias T. Majoros, GOLD, LANGE, MAJOROS & SMALARZ, P.C., Southfield,
Michigan, for Appellee.
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OPINION
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SUTTON, Chief Judge. Caterina Biondo objects to $2,880 in fees awarded to attorneys
in her bankruptcy. The bankruptcy court rebuffed her objection, reasoning that the fees
No. 22-1666 Biondo v. Gold, Lange, Majoros & Smalarz, P.C. Page 2
compensated the attorneys for services reasonably likely to benefit Biondo’s bankruptcy estate.
We affirm.
I.
Biondo sought bankruptcy relief under Chapter 7 in June 2018. The bankruptcy court
appointed Stuart Gold to serve as trustee of Biondo’s estate. Gold’s law firm, Gold, Lange,
Majoros & Smalarz, P.C., represented Gold.
Before the bankruptcy filing, Biondo experienced an automobile accident. Her
bankruptcy papers listed “[a]uto accident,” valuation “[u]nknown,” as a “[c]laim[]” that Biondo
held “against third parties.” R. 4 at 26–27. Biondo sought exemptions for the claim totaling
$35,648.74, meaning that she sought to prevent (“exempt”) that sum from being distributed to
her creditors. The key exemption dealt with “payment[s]” she received “on account of personal
bodily injury, not including pain and suffering or compensation for actual pecuniary loss.”
11 U.S.C. § 522(d)(11)(D). It sought to protect $23,675, the statutory maximum at the time.
Revision of Certain Dollar Amounts in the Bankruptcy Code, 81 Fed. Reg. 8748, 8748 (Feb. 22,
2016).
Gold did not object to the exemptions. He retained another law firm, Ratton Law Group,
P.C., to pursue Biondo’s claim. Ratton sued Biondo’s insurer, Progressive Marathon Insurance
Company, and the driver who had hit Biondo’s car, Christine Peterson. After a few months,
Progressive settled its case for $48,500. Peterson settled her case for $70,000. Progressive’s
settlement dealt with Biondo’s medical expenses, attorney’s fees, “lost wages,” and all “other
forms of economic or non-economic loss.” R.4 at 96–97. Peterson’s settlement covered “pain
and suffering.” Id. at 69.
In the bankruptcy court, Biondo argued that $23,675 of the settlement proceeds remained
exempt under § 522(d)(11)(D). She added that, because Gold failed to object to her exemptions
within the time prescribed by the Bankruptcy Rules, he forfeited any opportunity to say
otherwise. When Gold did not agree, Biondo moved to compel Gold to release the full $23,675.
Gold opposed the motion, and the parties later settled.
No. 22-1666 Biondo v. Gold, Lange, Majoros & Smalarz, P.C. Page 3
Gold’s firm sought $2,880 in fees for its work opposing the motion to compel release of
the money. Biondo objected, arguing that the firm’s services did not count as “reasonably likely
to benefit [Biondo’s] estate or necessary to the administration of the case.” Id. at 194. The
bankruptcy court disagreed and awarded the fees. Biondo appealed to the district court, which
dismissed her appeal as equitably moot.
II.
A bankruptcy court “may award . . . reasonable compensation” to a bankruptcy trustee’s
attorneys. 11 U.S.C. § 330(a)(1)(A). “[T]he court shall not allow compensation for . . . services
that were not” (1) “reasonably likely to benefit the debtor’s estate” or (2) “necessary to the
administration of the case.” Id. § 330(a)(4)(A)(ii). We review fee awards for abuse of
discretion. In re Vill. Apothecary, Inc., 45 F.4th 940, 946 (6th Cir. 2022).
As Biondo sees it, Gold raised groundless legal arguments in the bankruptcy court,
making it unlikely his services would benefit her estate. That framing of the appeal prompts two
questions, see United States v. Sineneng-Smith, 140 S. Ct. 1575, 1579 (2020): Did Gold have
reasonable arguments that the Progressive and Peterson settlements fell outside § 522(d)(11)(D)?
And, even if he did, did Gold forfeit his objection by failing to raise it on time?
The answers to both questions favor Gold. Start with the first question. Section
522(d)(11)(D) exempts payments “on account of personal bodily injury” from distribution to
creditors in bankruptcy. But it excludes from that exemption payments for pain and suffering
and for pecuniary losses, and courts typically read it to exclude payments for medical bills too.
11 U.S.C. § 522(d)(11)(D); see 4 Henry J. Sommer & Richard Levin, Collier on Bankruptcy
¶ 522.09[11] (16th ed. 2022). That put the Peterson settlement outside § 522(d)(11)(D), as every
dollar of it paid Biondo for pain and suffering. And it opened the Progressive settlement to
attack as well. That settlement covered Biondo’s medical bills, her attorney’s fees, and lost
wages. It did not mention bodily injuries. Gold did not act unreasonably in asking whether
§ 522(d)(11)(D) covered Biondo’s settlements.
No. 22-1666 Biondo v. Gold, Lange, Majoros & Smalarz, P.C. Page 4
Turn to the second question. A trustee forfeits objections to exemptions if he fails to
raise them on time. Taylor v. Freeland & Kronz, 503 U.S. 638, 642 (1992). The clock begins to
tick when a debtor “claims” an exemption. 11 U.S.C. § 522(l); see Schwab v. Reilly, 560 U.S.
770, 782–85 (2010). We have yet to decide what “claims” means for purposes of § 522(l), but
many cases, though not all of them, say that a debtor “claims” an exemption when she
unambiguously identifies particular property as exempt. Moldo v. Clark (In re Clark), 266 B.R.
163, 170 (9th Cir. B.A.P. 2001); see Barroso-Herrans v. Lugo-Mender (In re Barroso-Herrans),
524 F.3d 341, 345 (1st Cir. 2008). In construing claims, we presume that debtors “act lawfully
and with knowledge of the law.” Schwab, 560 U.S. at 790.
These authorities made it reasonably likely that Biondo never claimed exemptions in her
settlements and that Gold, as a result, never forfeited his objections. Begin with the settlements.
The Progressive and Peterson settlements dealt with harms beyond bodily injuries, at least
arguably. Thus Biondo never exempted them, and Gold forfeited nothing, if Biondo’s initial
“claims” covered only bodily injury payments. Suppose, by analogy, that Biondo had claimed
exemptions in “recoveries for personal bodily injuries, and nothing else.” Then Gold’s objection
would remain alive. Biondo’s claim, true enough, would trigger § 522(l) as for bodily injury
recoveries. But, given the premise of Gold’s objection, the Progressive and Peterson recoveries
would fall outside Biondo’s claim—in the “nothing else” category.
Meanwhile, Biondo’s claim did cover bodily injuries only, or so Gold could have argued.
Consider Biondo’s bankruptcy filings. When Biondo filed for bankruptcy, she valued her
accident payouts as “unknown” and claimed $23,675 under § 522(d)(11)(D). That left
ambiguity. Had Biondo claimed a $23,675 exemption no matter what, even if she recovered
only $1 from her lawsuits? Or had she exempted her first $23,675 in recoveries, even if every
dollar dealt with pain and suffering? Or had she only exempted the first $23,675 she might
recover for her bodily injuries? The first option seems absurd, and Biondo’s filings shed little
light as to the other two possibilities. When Gold picked the third option over the second, he did
not act unreasonably, particularly given the principle that only unambiguous exemptions trigger
§ 522(l). See Clark, 266 B.R. at 170.
No. 22-1666 Biondo v. Gold, Lange, Majoros & Smalarz, P.C. Page 5
Context confirms that conclusion. When debtors claim rights under specific provisions
of the Bankruptcy Code, we usually read their claims to cohere with those provisions rather than
conflict with them. Consider a parallel example. Suppose a debtor claims a $1,000 exemption
under 11 U.S.C. § 522(d)(3), which covers “household furnishings,” in “the contents of [his]
bedroom.” And suppose that the debtor’s bedroom contains a bed, a chair, and a safe full of
cash. Has the debtor claimed an exemption in his safe? Surely not. In context, “bedroom
contents” means “bedroom contents that fall within § 522(d)(3),” including the bed and chair but
not the safe. The same holds true today. Biondo’s claim for $23,675 plausibly covered such
settlement proceeds as might fall within § 522(d)(11)(D), not anything broader.
Relevant caselaw also helps Gold. Mercer v. Monzack, for instance, features similar facts
and comes out Gold’s way. 53 F.3d 1 (1st Cir. 1995). A debtor claimed “100%” exemptions in
“[d]isability” and “future earnings” payouts from a “possible personal injury settlement.” Id. at 1
& n.1. When the potential settlement became actual, the trustee objected that no exemption
applied, as the settlement did not compensate the debtor for disabilities or lost future earnings.
Id. at 1–2. The First Circuit held that the trustee had not forfeited his objection by waiting to
make it. By claiming “100%” exemptions based on “[d]isability” and “future earnings,” it
reasoned, the debtor had not claimed 100% exemptions in his settlement. He had claimed 100%
exemptions in recoveries for disabilities and lost future earnings, which the settlement did not
cover. Id. at 3–4. So too here. Biondo claimed $23,675 in personal injury exemptions—but
because Biondo’s settlements did not deal with personal injuries, her claim (at least arguably) did
not cover them.
Last but not least, important bankruptcy principles buttress Gold’s position. Trustees
rarely know the details of Chapter 7 debtors’ assets from the start, and the Bankruptcy Rules do
not give them much time to dig before the time for objections expires. That makes it crucial
“that trustees . . . be able to determine precisely whether a listed asset is validly exempt simply
by reading a debtor’s schedules.” Hyman v. Plotkin (In re Hyman), 967 F.2d 1316, 1319 n.6 (9th
Cir. 1992). Reading Biondo’s claim broadly, however, would frustrate that objective. It would
punish Biondo’s trustee for not knowing the unknowable—that Biondo’s recoveries from her
nascent auto accident case would not include $23,675 in damages for personal bodily injury. We
No. 22-1666 Biondo v. Gold, Lange, Majoros & Smalarz, P.C. Page 6
recognize that Biondo had competing interests in claiming her exemptions promptly, but it is
hard to see why that interest justifies exemptions falling outside the Bankruptcy Code’s
boundaries. Cf. Schwab, 560 U.S. at 789–95 & nn.16–17.
Biondo pushes back. She notes that the Mercer debtor divided his settlement proceeds
into different categories of damages and claimed a percentage of his settlement rather than a
dollar value. Those differences may make Mercer distinguishable, but they would not compel a
court to distinguish it and do not render Gold’s broader reading of the case unreasonable. Nor do
those distinctions respond to the principle, of which Mercer is but one application, that
exemptions should be unambiguous and should be read to conform with the law. See, e.g.,
Schwab, 560 U.S. at 790 n.17.
Biondo adds that car accidents often involve pain and suffering, such that Gold should
have anticipated such a claim under her exemption. Her conclusion does not follow from her
premises. Even if Biondo’s recoveries from her automobile accident involved pain and
suffering, Biondo did not unambiguously claim that she would seek to exempt all of those
recoveries—only those recoveries as § 522(d)(11)(D) permitted her to exempt. Recall the
bedroom analogy. Bedrooms often contain items besides household furnishings, but it does not
follow that a debtor who claims exemptions in “the contents of his bedroom” exempts non-
furnishing items (safes full of cash) from his estate. Nor must a trustee object to such
exemptions immediately to protect the estate’s rights.
Biondo continues that Ratton’s own complaint sought damages for pain and suffering on
Biondo’s behalf. But Ratton filed its complaint more than a month after Biondo filed for
bankruptcy. The question at any rate is not whether Gold knew or should have known that
Biondo would recoup compensation for pain and suffering. The question is whether Gold knew
or should have known that Biondo had claimed exemptions in such compensation, or whether, as
the Bankruptcy Code required, Biondo had claimed exemptions only in the subset of such
compensation that fell within § 522(d)(11)(D). The latter position was plausible, making Gold’s
objection plausible too.
No. 22-1666 Biondo v. Gold, Lange, Majoros & Smalarz, P.C. Page 7
Biondo observes that Gold could have avoided this problem by lodging a prophylactic
objection to her exemption at the outset. True, but irrelevant. That Gold could have lodged a
prophylactic objection did not obligate him to do so. Plus, prophylactic objections can slow
down bankruptcies and waste judicial resources. Schwab, 560 U.S. at 792 n.18.
The bankruptcy court did not abuse its discretion in granting the request for fees.
III.
The district court independently ruled that this case had become equitably moot. If the
district court thought this case had become constitutionally moot, we would be obliged to
consider the point, as constitutional mootness implicates our jurisdiction. Chafin v. Chafin,
568 U.S. 165, 172 (2013). But equitable mootness lacks traditional mootness’s constitutional
pedigree, and it does not go to our jurisdiction. Curreys of Neb., Inc. v. United Producers, Inc.
(In re United Producers, Inc.), 526 F.3d 942, 947 (6th Cir. 2008). As a result, we need not
consider equitable mootness today.
We affirm.