                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-20-2004

In Re: Peter Martin
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-3111




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Recommended Citation
"In Re: Peter Martin " (2004). 2004 Decisions. Paper 802.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/802


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                                                                      NOT PRECEDENTIAL

                         UNITED STATES COURT OF APPEALS
                              FOR THE THIRD CIRCUIT
                                   ___________

                                       No. 03-3111
                                       ___________

                                 IN RE: PETER MARTIN,

                                              Debtor

            ELISSA ENAX, formerly known as ELISSA MARTIN; ERIK MARTIN;
                   LIEBOWITZ, LIEBOWITZ & STERN, ESQUIRES

                                             v.

                                     PETER MARTIN

                               ROBERT B. WASSERMAN,

                                              Trustee

              Elissa Enax, Erik Martin and Liebowitz, Liebowitz & Stern, Esqs.,

                                           Appellants
                                      ___________

           ON APPEAL FROM THE UNITED STATES DISTRICT COURT
                     FOR THE DISTRICT OF NEW JERSEY
                              (D.C. No. 02-cv-04471)
                District Judge: Honorable Dickinson R. Debevoise
                                  ___________

                       Submitted Under Third Circuit LAR 34.1(a)
                                   March 12, 2004

                  BEFORE: SLOVITER, NYGAARD, Circuit Judges.
                          and SHADUR,* District Judge.



*       Honorable Milton I. Shadur, Senior District Judge for the United States District
Court for the Northern District of Illinois, sitting by designation.
                                     (Filed April 20, 2004)

                                          ___________

                                  OPINION OF THE COURT
                                       ___________


SHADUR, District Judge.

                        Elissa Enax (formerly Elissa Martin) (“Elissa”), Erik Martin (“Erik”)

and the law firm of Liebowitz, Liebowitz & Stern (“Liebowitz Firm”) want Peter Martin

(“Peter”) to pay them for pre-petition claims that they argue should not have been

discharged in Peter's Chapter 7 bankruptcy. 1 After the Bankruptcy Court ruled that

Elissa, Erik, and Liebowitz Firm were barred under claim preclusion principles from

challenging the discharge of their claims, the District Court affirmed that ruling on

appeal. After reviewing the parties' submissions, we agree with the courts below and also

affirm.

                 Although we write primarily for the parties, a fairly extended outline of the

factual background is needed to focus the issues before us. After Elissa and Peter were

divorced in 1997, on January 9, 1998 the state divorce court entered a $70,000 judgment

against Peter for Elissa's attorneys' fees. It stated in the course of that judgment:

          This award of counsel fees is in the nature of alimony and shall not be
          dischargeable in bankruptcy.



          1
         We refer to the individual parties by their first names because Erik and Peter still
share the last name Martin, though Elissa no longer does.

                                                2
       In April 1998 Peter filed for bankruptcy and listed the attorneys' fees as well as a

$12,500 indebtedness to Erik (also at issue in this appeal) as unsecured claims to be

discharged in bankruptcy. On July 6, 1998 Elissa and Erik filed an adversary complaint

in the Bankruptcy Court, seeking a determination that their claims were not dischargeable

under 11 U.S.C. §523(a)(2) and (5). But they failed to conduct discovery or otherwise

advance their claim, so in March 1999 Peter moved to dismiss the adversary proceeding.

On April 20, 1999, upon receiving a stipulation of dismissal by all parties involved, the

Bankruptcy Court granted Peter's motion and dismissed the adversary proceeding with

prejudice.

       After their federal complaint was dismissed, Elissa and Erik went back to state

court to file a malpractice action against the attorney who had represented them in the

adversary proceeding, but the state court dismissed that action. In doing so the state court

ruled that Elissa and Erik had suffered no harm because, in its view, the award for

attorneys' fees was not dischargeable despite the Bankruptcy Court's order to the contrary.

       Elissa and Erik did not take an appeal from that dismissal. Instead they sought and

obtained a writ of execution, based on the state court decision and the ruling in the earlier

divorce proceeding, to collect on the $70,000 judgment. On May 20, 2002 Peter

responded by moving to reopen his bankruptcy case and to hold Elissa, Erik and

Liebowitz Firm in contempt for violating the discharge injunction. In return Elissa, Erik

and Liebowitz Firm filed their own motion, asking the Bankruptcy Court (1) to vacate the



                                              3
judgment that had discharged their claims and (2) to rule that their claims were not in fact

dischargeable.

       As mentioned at the outset of ths opinion, the Bankruptcy Court ruled in Peter's

favor and against Elissa, Erik and Liebowitz Firm, although it chose not to impose any

sanctions for their failure to comply with the discharge injunction. That was followed by

the District Court's affirmance and this timely appeal.

       We review the District Court's legal determination of dischargeability de novo (In

re Kiwi Int'l Air Lines, Inc., 344 F.3d 311, 316 (3d Cir. 2003)) and its refusal to vacate

the discharge for abuse of discretion (In re Staffer, 306 F.3d 967, 971 (9th Cir. 2002); cf.

Brown v. Philadelphia Housing Auth., 350 F.3d 338, 342 (3d Cir. 2003), a comparable

holding as to Fed. R. Civ. P. 60(b) denials in a nonbankruptcy context). Under those

standards we conclude that the District Court correctly applied the doctrine of claim

preclusion2 to bar Elissa, Erik and Liebowitz Firm from relitigating the dischargeability of

their claims (In re Continental Airlines, Inc., 279 F.3d 226, 232 (3d Cir. 2002);

Restatement (Second) of Judgments §17 (1982)). Despite their efforts to obfuscate the

issue on this appeal, it is plain to see that Elissa, Erik and Liebowitz Firm had the

untrammeled ability to challenge the dischargeability of their claims in the adversary

proceeding that they themselves had initiated. Instead they failed to conduct discovery




       2
          We employ that term in preference to the older and less precise “res judicata”
(Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1989)).

                                              4
and eventually consented to a dismissal with prejudice. As for their current arguments

(1) that the state court's pre-petition determination could and should have been given

preclusive effect and (2) that Peter somehow mischaracterized the claims in his

bankruptcy schedule, Elissa, Erik and Liebowitz Firm had the full opportunity to make

and advance those arguments in their own adversary proceeding. Their failure to pursue

their claim then prevents them from asserting it now.3

       In part the District Court examined and rejected the further contention that the

Rooker-Feldman doctrine (D.C. Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983);

Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923)) stripped the Bankruptcy Court of

jurisdiction to decide the dischargeability issue. It ruled that the state court determination

was invalid because the state court lacked authority to make a dischargeability

determination before a bankruptcy petition was filed and that in any event the lack of

subject matter jurisdiction would not justify vacating the dischargeability determination at

such a late date. Although we agree that Rooker-Feldman did not bar the Bankruptcy

Court from considering the adversary complaint, we arrive at that conclusion in a way

that does not require us to get into the other issues discussed by the District Court.

       Rooker-Feldman principles prohibit any federal court other than the Supreme




       3
          Elissa, Erik and Liebowitz Firm also claim that the state court malpractice
action should somehow control this case, but of course the decision there could have no
binding effect on Peter because he was not a party to that lawsuit (Allen v. McCurry, 449
U.S. 90, 94–96 (1980)).

                                              5
Court from reviewing a state court decision directly (Gulla v. N. Strabane Township, 146

F.3d 168, 171 (3d Cir. 1998)). But that doctrine comes into play only where a party seeks

relief that challenges the state court decision directly. FOCUS v. Allegheny County

Court of Common Pleas, 75 F.3d 834, 840 (3d Cir. 1996)) puts it this way:

       When a plaintiff seeks to litigate a claim in a federal court, the existence of a state
       court judgment in another case bars the federal proceeding under Rooker-Feldman
       only when entertaining the federal court claim would be equivalent of an appellate
       review of that order. For that reason, Rooker-Feldman applies only when in order
       to grant the federal plaintiff the relief sought, the federal court must determine that
       the state court judgment was erroneously entered or must take action that would
       render that judgment ineffectual.

       Of course the Elissa-Erik-Liebowitz Firm adversary complaint did not seek to

overturn the state court judgment or call into question any part of its ruling. Quite to the

contrary, they sought to use the state court judgment to obtain a nondischargeability order

based on their perception of issue or claim preclusion principles. Nothing in their

adversary complaint suggested that the Bankruptcy Court would have to review and

overturn the state court judgment to grant the relief that Elissa, Erik and Liebowitz Firm

sought. So Rooker-Feldman obviously would not apply in that sense.

       Instead any potential application of Rooker-Feldman principles must be examined

in terms of Peter's position in the parties' multi-forum battles: For him to have prevailed

on the merits in the Elissa-Erik-Liebowitz Firm adversary proceeding, he would have had

to urge rejection of the divorce court's statement of nondischargeability. And that

contention would have implicated Rooker-Feldman concerns. But that area of possible



                                              6
tension need not be resolved for either or both of two reasons:

              1. Because the divorce court spoke before any bankruptcy case had been

       filed, it may have been without power to opine as to dischargeability vel non.4

              2. Effectiveness or lack of effectiveness of the divorce court declaration

       was directly at issue in the bankruptcy court adversary proceeding. And that

       creates the prospect that the with-prejudice dismissal of that proceeding precludes

       a second attempt to cover the same ground.

In this instance the ensuing analysis demonstrates the conclusiveness of that second

reason, so that we need not address the first.

       Because it is plain that the Bankruptcy Court had jurisdiction to entertain their

adversary complaint, Elissa, Erik and Liebowitz Firm are forced to argue that the

Bankruptcy Court should have vacated the discharge, or at least should not have given the

adversary proceeding preclusive effect, because their attorney was acting without

authority in stipulating to its dismissal. They are of course correct in asserting that an

attorney cannot dismiss a case without the client's consent (Assocs. Discount Corp. v.

Goldman, 524 F.2d 1051, 1053 (3d Cir. 1975)). But that argument comes too late, as well




       4
            Every reported decision that has considered the question whether a decision as
to dischargeability of a debt may be made before a bankruptcy case has been filed has
answered that question “no.” But because none of those decisions was rendered at the
appellate level (so that they are nonprecedential by definition) and because resolution of
that issue is unnecessary to our decision, we eschew further consideration of those
holdings.

                                                 7
as being inadequately tendered.

       Not only do Elissa, Erik and Liebowitz Firm ignore the strict one-year limitation

period for revoking discharge set by 11 U.S.C. §727(e) (and implemented by Fed. R.

Bankr. P. (“Rule”) 9024), but they also fail to present any evidence at all to support their

contention. Rather than focusing on what Rule 9024 requires, they discuss the New

Jersey Rules of Court, which of course have no bearing on the Bankruptcy Court. In

short, with no proof before it, and without any attempt having been made to satisfy the

requirements of Rule 9024, the Bankruptcy Court surely did not abuse its discretion by

denying the motion to vacate the discharge. Indeed, the Bankruptcy Court would have

committed reversible error had it granted the motion.

                                         Conclusion

       We find that the Bankruptcy Court (and hence the District Court) correctly held

that Elissa, Erik and Liebowitz Firm were barred from relitigating the issue of

dischargeability of their claims before the Bankruptcy Court under the doctrine of claim

preclusion. We also hold that neither the Bankruptcy Court nor the District Court

committed an abuse of discretion when each refused to vacate the discharge order. We

therefore affirm.




                                              8
