USCA11 Case: 20-12267 Date Filed: 06/02/2021 Page: 1 of 9
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 20-12267
Non-Argument Calendar
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D.C. Docket No. 1:17-cv-03018-AT,
Bkcy No. 1:09-bk-90842-WLH
In re: JOSEPHINE GRADDY,
Debtor.
_________________________________________________________________
JOSEPHINE GRADDY,
Plaintiff-Appellant,
versus
EDUCATIONAL CREDIT MANAGEMENT CORPORATION,
Defendant-Appellee.
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Appeal from the United States District Court
for the Northern District of Georgia
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(June 2, 2021)
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Before NEWSOM, GRANT, and ANDERSON, Circuit Judges.
PER CURIAM:
Plaintiff Josephine Graddy holds multiple degrees, and all that schooling
was expensive. Under
11 U.S.C. § 523(a)(8), her student loans are not
dischargeable unless excepting them from discharge would cause “undue
hardship.” The bankruptcy court found, and the district court agreed, that her
Chapter 7 bankruptcy discharge did not rid her of those loans. Graddy appeals, but
it is her burden to show undue hardship. Because she never did so, we affirm.
I.
Graddy attended New York University School of Law from 1994 to 1997.
After graduating, she went into prosecution in New York City, but at $35,000 a
year the income was not enough for New York City, especially considering her
debt. After she became pregnant with twins, Graddy moved to Georgia, where her
family was, and for two-and-a-half years in Homerville she was only able to get, in
her words, “a little bit of work.” Thereafter, Graddy worked for various law firms,
until she decided she “had to change careers” and entered a master’s program in
cinematic arts at the University of Southern California. She graduated from that
program in 2008, but the harsh economic climate meant that she had to return to
Georgia, where her then-fiancé and now husband was living. And since then, she
has worked in various legal jobs.
Whether from school or otherwise, Graddy ended up owing a substantial
amount of money. The parties dispute exactly how much Graddy owes, what the
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money was used for, and to whom she owes it, but one thing is beyond dispute: in
her own words, Graddy “owe[s] student loan debt to somebody.” And when
Graddy initially filed for bankruptcy in 2009, she didn’t seek to discharge those
loans. She changed her mind, however, which is why she filed a motion to reopen
this bankruptcy case in 2015.
The problem for Graddy was that, according to the Bankruptcy Code, her
“educational benefit” loans were not dischargeable “unless excepting such debt
from discharge . . . would impose an undue hardship on the debtor and the debtor’s
dependents.”
11 U.S.C. § 523(a)(8). She filed a complaint, seeking to show that
her student loans would impose sufficient hardship. Her complaint asserted that
some of the loans, “owed to or serviced by Educational Credit Management
Corporation . . . , were incurred to pay expenses incurred in obtaining a degree
from the University of Southern California in 2009,” and made various statements
alleging that their repayment would be an undue hardship. ECMC answered the
complaint a month later.
ECMC asserted that it was owed about $389,000 in school loan debts by
Graddy. To prove this, ECMC produced loan histories obtained from third parties
and relied on its litigation specialist to provide the foundation to those third-party
documents—the idea being to introduce these documents as business records.
Graddy deposed the litigation specialist, who did not always know exactly how the
third party who had compiled the loan history did so.
After considering the trial evidence (including the third-party documents),
the bankruptcy court found that Graddy’s student loans were non-dischargeable.
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First, the court considered that Graddy had an average monthly income of around
$8,600, and that the Pay As You Earn program would require Graddy to pay $673
at most per month for a $389,000 debt. Second, the court found that Graddy “has
found adequate employment with both of her degrees,” and did not show that she
would be unable to repay her student loans in the future. And third, the court
found that Graddy did not show that she had made a good faith effort to repay her
student loans.
Graddy appealed to the district court. She appealed the bankruptcy court’s
consideration of the factors above. She also argued that the bankruptcy court
improperly relieved ECMC of its burden of proof in showing that there is a non-
dischargeable debt. As for discovery, she contended that the bankruptcy court
improperly admitted third-party documents as evidence and that ECMC did not
comply with proper discovery procedures. Finally, Graddy claimed that the
alleged errors amounted to a violation of due process.
The district court affirmed. It first found that the bankruptcy court’s
handling of the parties’ disclosures did not constitute reversible error. The district
court then found that the third-party documents establishing the amount of student
loan debt were properly admitted, but that in any event ECMC “did not have to
prove the amount of the debt to meet its initial burden.” And the district court
found that Graddy did not show clear error for all three of the undue burden
factors—which is what would be required to entitle her to reversal. In particular,
the district court held that, even if the bankruptcy court was wrong to use the
PAYE program as the standard for repaying the debt, it did not err in its findings as
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to her ability to pay in the future and her good faith in attempting to repay the debt.
As for Graddy’s due process argument, the district court found that she waived it
by not raising it at the bankruptcy court.
This appeal follows.
II.
On appeal of a district court’s affirmance of a bankruptcy order, “we review
the bankruptcy court’s decision.” In re Mosley,
494 F.3d 1320, 1324 (11th Cir.
2007). We review the bankruptcy court’s factual findings for clear error and its
legal conclusions de novo.
Id. And we review that court’s evidentiary rulings for
abuse of discretion, and only overturn those rulings if the defendants have shown
that they had a “substantial prejudicial effect.” In re Int’l Mgmt. Assocs., LLC,
781
F.3d 1262, 1265 (11th Cir. 2015) (quoting Adams v. Austal, U.S.A., L.L.C.,
754
F.3d 1240, 1248 (11th Cir. 2014)).
III.
A.
“The Bankruptcy Code provides that student loans generally are not to be
discharged.” Mosley,
494 F.3d at 1324. And, as Graddy said in the bankruptcy
court, she “definitely took out student loans.” There is a “narrow exception” for
when “excepting such debt from discharge” would “impose an undue hardship on
the debtor and the debtor’s dependents.”
Id. (quotations omitted).
In In re Cox, this Circuit adopted the test from Brunner v. New York State
Higher Education Services Corporation,
831 F.2d 395 (2d Cir. 1987), for
determining whether a debtor has proved undue hardship. In re Cox,
338 F.3d
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1238, 1241–42 (11th Cir. 2003). The Brunner test requires the debtor to show:
“(1) that the debtor cannot maintain, based on current income and expenses, a
‘minimal’ standard of living for herself and her dependents if forced to repay the
loans; (2) that additional circumstances exist indicating that this state of affairs is
likely to persist for a significant portion of the repayment period of the student
loans; and (3) that the debtor has made good faith efforts to repay the loans.”
Id. at
1241 (quoting Brunner,
831 F.2d at 396). The debtor must prove by a
preponderance of the evidence that all three Brunner factors are met. Mosley,
494
F.3d at 1324.
Because neither party disputes the existence of a student loan under
§ 523(a)(8), the question before us is whether Graddy has carried her burden. And
this Circuit has previously noted that “the bankruptcy court’s conclusion that
repayment of the student loans would impose an undue hardship” is “a mixed
question of law and fact.” Id. In order to prevail, Graddy would have to show, by
a preponderance of the evidence, that all three Brunner factors weigh in her favor.
Id.
She fails to do so. She provides no controlling case law to show an error of
law in the bankruptcy court’s conclusion that she “failed to prove circumstances
indicating a future inability to make payments on her student loans.” And she fails
to reckon with the stringent nature of our standard—the inability to pay “must be
likely to continue for a significant time, such that there is a certainty of
hopelessness that the debtor will be able to repay the loans within the repayment
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period.” Mosley,
494 F.3d at 1326 (internal quotation marks and citations
omitted).
Even if Graddy were to persuade us that the evidence she raised on this point
was more convincing than the bankruptcy court thought it was, that is not enough
for reversal. A factual finding is not clearly erroneous unless “this court, after
reviewing all of the evidence, is left with the definite and firm conviction that a
mistake has been committed.” Cox, 338 F.3d at 1241 (alterations adopted)
(quoting Lykes Bros., Inc. v. U.S. Army Corps of Eng’rs,
64 F.3d 630, 634 (11th
Cir. 1995)). The bankruptcy court considered her work history, her employability,
and her home and car ownership in reaching its conclusion. We cannot say that
this was insufficient evidence to find a lack of “certainty of hopelessness.”1
Because Graddy has not shown reversible error on the second Brunner
factor, we need not consider the other two.
B.
Graddy also argues that the district court should have excluded some of the
documents brought forward by ECMC based on an assortment of discovery and
evidentiary claims, including the lack of initial disclosures, the alleged failure to
bring various loan histories thirty days before trial, and the admission of third-party
documents. She contends that these deficiencies made this case a trial by ambush.
And in connection with those claims, she argues that the district court’s alleged
1
Graddy argues at length that ECMC had the burden of showing the amount of her student loans
in this proceeding. But she never provides any controlling law to support that assertion. And, as
ECMC notes, and as the district court observed in its order, the bankruptcy court only ruled that
her loans were non-dischargeable—it granted no judgment as to the actual amount of the loans.
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failures in its discovery and evidentiary rulings amounted to a violation of due
process. For Graddy to prevail, these failures, if failures at all, must excuse her
inability to show an entitlement to discharge. They do not.
First, to the extent that Graddy claims error in the admission of loan
histories or third-party documents, any error would be harmless. Those documents
were used to show the amount of debt Graddy owed to ECMC—and as mentioned
earlier, ECMC was not required to show that. And what is more, the number
arrived at—about $389,000—was, according to Graddy, “exponentially higher”
than the real figure. But a higher number would only have strengthened her case to
show that exemption from discharge would cause “undue hardship.” That is not
the sort of prejudice that would mandate reversal.
Second, Graddy has failed to show the sort of prejudice or surprise that
would support her claim that the court proceedings were a trial by ambush. Cf.
Wammock v. Celotex Corp.,
793 F.2d 1518, 1527 (11th Cir. 1986) (finding no
“trial by ambush” where there was “neither prejudice nor surprise” from admitting
the contested deposition testimony). Both the initial and pretrial disclosures are the
sorts of matters that the trial court has leeway in handling. See, e.g., Fed. R. Civ.
P. 26(a)(1)(A) (initial disclosures are required except “as otherwise stipulated or
ordered by the court”); id. 26(a)(3)(B) (pretrial disclosures must be made at least
30 days before trial “[u]nless the court orders otherwise”). And as the bankruptcy
court noted, the process here was “almost like a rolling discovery” given the
difficulty of retrieving some of the documents. Graddy has not shown error in the
bankruptcy court’s management of the case. Cf. Wammock,
793 F.2d at 1527 (no
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trial by ambush even though “perhaps the trial was not conducted under optimal
conditions”).
And third, to the extent Graddy argues that the above alleged errors
collectively amount to a violation of due process, she is not entitled to relief for
dressing up old claims in constitutional garb. She does add an argument that the
bankruptcy court’s refusal to grant her motion to compel discovery was error. But
that argument fails for the same reason as her others do—the “trial court’s exercise
of discretion regarding discovery orders will be sustained absent a finding of abuse
of that discretion to the prejudice of a party.” Comm. Union Ins. Co. v. Westrope,
730 F.2d 729, 731 (11th Cir. 1984) (quoting Hastings v. N.E. Indep. Sch. Dist.,
615
F.2d 628, 631 (5th Cir. 1980)). Graddy has not shown that any of these alleged
errors prejudiced her or that the bankruptcy court abused its discretion.
IV.
We are sympathetic to Graddy’s plight, but the Bankruptcy Code does not
ordinarily offer respite for situations like hers. Because Graddy failed to meet her
burden of showing undue hardship, the district court’s judgment is AFFIRMED.
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