Richard A. Hazelton v. Board of Regents for the Unive ( 2020 )


Menu:
  •                               In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________________
    No. 19-1405
    RICHARD A. HAZELTON
    and KELLY J. HAZELTON,
    Appellees,
    v.
    THE BOARD OF REGENTS FOR THE
    UNIVERSITY OF WISCONSIN SYSTEM
    AND ITS UNIVERSITY OF WISCONSIN-STOUT,
    Appellant.
    ____________________
    Appeal from the United States District Court
    for the Western District of Wisconsin.
    No. 18-cv-159-jdp — James D. Peterson, Chief Judge.
    ____________________
    ARGUED NOVEMBER 8, 2019 — DECIDED MARCH 16, 2020
    ____________________
    Before RIPPLE, ROVNER, and SYKES, Circuit Judges.
    SYKES, Circuit Judge. Richard and Kelly Hazelton asked a
    bankruptcy court to sanction the University of Wisconsin-
    Stout for collecting an educational debt after their debts
    were discharged in Chapter 7 bankruptcy. The bankruptcy
    2                                                  No. 19-1405
    judge held that the debt was a nondischargeable student
    loan, so UW-Stout did not violate the discharge injunction.
    The district court reversed, concluding that the debt was not
    a student loan and thus was not excluded from the bank-
    ruptcy discharge. The district judge remanded to the bank-
    ruptcy court for further proceedings on the question of
    sanctions.
    UW-Stout asks us to review the district court’s order. We
    cannot do so. Our jurisdiction in bankruptcy cases under
    28 U.S.C. § 158(d)(1) is limited to appeals from final district-
    court orders that resolve “discrete disputes” within the
    bankruptcy case. Bullard v. Blue Hills Bank, 
    135 S. Ct. 1686
    ,
    1692 (2015). The dispute at issue here is whether UW-Stout
    should be sanctioned for violating the discharge injunction.
    The district court did not resolve that dispute. Rather, the
    judge decided a subsidiary legal issue and remanded to the
    bankruptcy court for resolution of the sanctions dispute.
    Accordingly, we lack jurisdiction and must dismiss the
    appeal.
    I. Background
    In 2008 Kelly Hazelton began her studies at the Universi-
    ty of Wisconsin-Stout. As part of the enrollment process, she
    and her husband, Richard, signed a document titled
    Payment Plan Agreement/Email Authorization. The docu-
    ment sets forth “credit terms” for the payment of tuition by
    students who choose to use the Partial Payment Plan. The
    Partial Payment Plan permits a student to defer tuition
    payments for the fall and spring semesters, with interest to
    accrue on the unpaid balance at an annual rate of 18%.
    No. 19-1405                                                 3
    Kelly withdrew from school in 2011 but re-enrolled in
    2014 and registered for classes in the summer 2015 term. She
    eventually completed her degree but did not pay her tuition
    bill. Because she owed back tuition, UW-Stout withheld her
    degree.
    In 2016 the Hazeltons filed a Chapter 7 bankruptcy peti-
    tion and received a discharge later that same year. Although
    UW-Stout was notified of the discharge, the school collected
    the tuition debt for the summer 2015 term by intercepting
    the Hazeltons’ 2016 income-tax refund. UW-Stout then
    granted Kelly her degree.
    The Hazeltons reopened their bankruptcy case and
    moved for sanctions against UW-Stout for violating the
    discharge injunction. The bankruptcy judge determined that
    the debt was a student loan and therefore was not subject to
    discharge. She reasoned that money did not need to change
    hands for a loan to take place. She also relied on language in
    the tuition-payment agreement referring to “credit” and an
    18% annual interest rate on unpaid tuition. For these reasons
    the judge classified the debt as a nondischargeable student
    loan and denied the motion for sanctions.
    The district judge reversed, holding that the debt to UW-
    Stout was indistinguishable from the tuition debt at issue in
    In re Chambers, 
    348 F.3d 650
    (7th Cir. 2003). There we held
    that nonpayment of tuition qualifies as a nondischargeable
    student loan under 11 U.S.C. § 523(a)(8) only if funds have
    changed hands or the school has extended credit. 
    Id. at 657.
    The judge noted that no funds had changed hands in the
    Hazeltons’ case, nor was there an extension of credit: alt-
    hough the tuition-payment agreement permitted a student
    to defer payment for the fall or spring semesters, it did not
    4                                                           No. 19-1405
    permit deferral of payment for a summer term. Accordingly,
    the judge held that the Hazeltons’ debt to UW-Stout was not
    excluded from the discharge. He remanded the case to the
    bankruptcy court to decide whether sanctions should be
    imposed, and if so, in what amount.
    II. Discussion
    We begin, as we must, with the question of our jurisdic-
    tion. Ball v. City of Indianapolis, 
    760 F.3d 636
    , 640 (7th Cir.
    2014). When a district court sits in a bankruptcy-appellate
    capacity, the source of our jurisdiction to review the judge’s
    order is 28 U.S.C. § 158(d)(1). That statute provides: “The
    courts of appeals shall have jurisdiction of appeals from all
    final decisions, judgments, order, and decrees entered under
    subsections (a) and (b) of this section.” As relevant here,
    subsection (a) gives the district courts “jurisdiction to hear
    appeals … from final judgments, orders, and decrees … of
    bankruptcy judges entered in cases and proceedings referred
    to the bankruptcy judges under section 157 of this title.” 28
    U.S.C. § 158(a)(1). 1
    The Supreme Court has explained that § 158 authorizes
    appeal as of right from “orders in bankruptcy cases … if
    they finally dispose of discrete disputes within the larger
    [bankruptcy] case.” 
    Bullard, 135 S. Ct. at 1692
    (quotation
    marks omitted). The rationale for this more flexible approach
    1 Two other provisions in subsection (a) address the district court’s
    jurisdiction to review nonfinal orders of the bankruptcy court. See 28
    U.S.C. § 158(a)(2) (conferring jurisdiction to hear appeals from interlocu-
    tory orders increasing or reducing certain time periods); 
    id. § 158(a)(3)
    (addressing review of interlocutory orders by leave of court). Subsection
    (b) addresses the judicial council’s authority to establish a bankruptcy
    appellate panel. These provisions are not at issue here.
    No. 19-1405                                                   5
    to finality in the bankruptcy context is that “[a] bankruptcy
    case involves an aggregation of individual controversies,
    many of which would exist as stand-alone lawsuits.” 
    Id. (quotation marks
    omitted). However, when the order in
    question does not finally resolve a discrete dispute and
    “[t]he parties’ rights and obligations remain unsettled,” the
    order lacks sufficient finality to support appellate jurisdic-
    tion. 
    Id. at 1693.
        The district court had jurisdiction under § 158(a)(1) to
    hear the Hazeltons’ appeal. The bankruptcy judge denied
    their motion for sanctions against UW-Stout, fully and
    finally resolving that dispute. Our jurisdiction to hear UW-
    Stout’s appeal under § 158(d)(1) is another matter. The
    district judge did not finally resolve the sanctions dispute.
    Rather, he decided a subsidiary legal issue embedded within
    the sanctions dispute and remanded to the bankruptcy court
    to determine whether sanctions are warranted. His order
    resolved a discrete issue; it did not resolve the sanctions
    dispute.
    Our decision in In re Ferguson is instructive on this point.
    In that case, a junior creditor asked the bankruptcy court to
    order marshaling: “When a senior creditor can seek repay-
    ment from sources A and B, and a junior creditor from only
    B, marshaling under Illinois law allows a court to order the
    senior creditor to recover from A so long as that wouldn’t
    harm the senior creditor.” In re Ferguson, 
    834 F.3d 795
    , 797
    (7th Cir. 2016). The bankruptcy court approved the request,
    but the district court reversed and remanded to the bank-
    ruptcy court. 
    Id. at 798.
    The junior creditor appealed the
    district court’s order.
    6                                                 No. 19-1405
    We dismissed the appeal for lack of jurisdiction, holding
    that under Bullard, a district court’s order in a bankruptcy
    appeal “is not final, and therefore is not appealable, unless
    only ministerial acts remain for the bankruptcy court.” 
    Id. We noted
    that on remand the bankruptcy court would have
    more than ministerial acts to perform: the bankruptcy judge
    had to determine how to divide the estate among the credi-
    tors. We explained that although the district court had
    finally resolved the issue of marshaling, “the dispute—Who
    gets how much money?—remains open.” 
    Id. at 800.
    Under
    those circumstances, the district court’s order was not an
    appealable final decision under § 158(d)(1). 
    Id. The same
    reasoning applies here. The dispute between
    the Hazeltons and UW-Stout is whether sanctions are war-
    ranted for violation of the discharge injunction, and if so, in
    what amount. The district judge’s order did not finally
    resolve that dispute. The judge decided only that the tuition
    debt was not excluded from the Chapter 7 discharge. That
    ruling leaves several nonministerial tasks for the bankruptcy
    court on remand. The bankruptcy judge must decide wheth-
    er UW-Stout had an objectively reasonable basis to conclude
    that its conduct was lawful under the discharge order. See
    Taggart v. Lorenzen, 
    139 S. Ct. 1795
    , 1801–02 (2019). If it did
    not—if indeed there was “no fair ground of doubt” that the
    discharge order prohibited UW-Stout from intercepting the
    Hazeltons’ 2016 income-tax refund—then the bankruptcy
    judge must decide the appropriate sanction. 
    Id. at 1799.
    Until
    the bankruptcy judge decides these remedial questions,
    “[t]he parties’ rights and obligations remain unsettled.”
    
    Bullard, 135 S. Ct. at 1693
    .
    No. 19-1405                                                  7
    In short, the district judge’s order resolving the issue of
    dischargeability doesn’t finally resolve the sanctions dispute.
    We lack jurisdiction to hear this appeal.
    DISMISSED
    

Document Info

Docket Number: 19-1405

Judges: Sykes

Filed Date: 3/16/2020

Precedential Status: Precedential

Modified Date: 3/16/2020