Richard W. Gannett v. Henri Antoine Erkelens

• Court: Court of Appeals for the Eleventh Circuit
• Decided: September 12, 2018
• Docket: 17-11352
• Status: Unpublished

Opinion

Case: 17-11352 Date Filed: 09/12/2018 Page: 1 of 10

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 17-11352 Non-Argument Calendar ________________________

D.C. Docket Nos. 3:14-cv-01345-TJC; 3:13-bkc-04191-PMG

In re:

HENRI ANTONIE ERKELENS, III,

Debtor. __________________________________________________________________

RICHARD W. GANNETT,

Plaintiff - Appellant,

versus

HENRI ANTONIE ERKELENS,

Defendant - Appellee.

________________________

Appeal from the United States District Court for the Middle District of Florida ________________________

(September 12, 2018) Case: 17-11352 Date Filed: 09/12/2018 Page: 2 of 10

Before JORDAN, JILL PRYOR and FAY, Circuit Judges.

PER CURIAM:

The issue in this appeal is whether Richard Gannett, an attorney proceeding

pro se, is precluded from relitigating the dischargeability of a debt that a former

client assigned to him. As part of a divorce settlement, Tammie Erkelens—

Gannett’s former client—received a money judgment against her former husband,

Henri Erkelens. When Henri later filed for bankruptcy in Massachusetts, Tammie

hired Gannett to represent her in an adversary proceeding challenging the

dischargeability of the money judgment. After over a year of litigation and on the

eve of trial, communication between Gannett and Tammie broke down. The

Massachusetts bankruptcy court permitted Gannett to withdraw as Tammie’s

counsel and then entered judgment against her for failure to prosecute when she

failed to appear for trial.

Tammie and Gannett later reached a settlement agreement regarding

Gannett’s unpaid legal fees, whereby Tammie assigned to Gannett 50% of her

money judgment against Henri in exchange for his forgiveness of the remaining

unpaid fees. Meanwhile, Henri filed for bankruptcy for a second time in Florida.

Gannett then filed a proof of claim in Henri’s new bankruptcy case for the portion

of the money judgment that Tammie had assigned to him. The Florida bankruptcy

court disallowed Gannett’s claim, concluding that the judgment against Tammie

2 Case: 17-11352 Date Filed: 09/12/2018 Page: 3 of 10

and resulting discharge order in the Massachusetts bankruptcy case precluded

Gannett from relitigating whether the money judgment was dischargeable. The

district court affirmed the bankruptcy court’s decision, and Gannett appealed.

After careful review, we affirm.

I. BACKGROUND

Tammie and Henri divorced in 2006. Two years later, Tammie obtained a

$265,500 money judgment against Henri for failure to pay her according to the

terms of their consent divorce judgment. Henri then filed for Chapter 11

bankruptcy in the District of Massachusetts. Tammie, represented by Gannett,

filed an adversary complaint against Henri claiming that the obligations arising

from the consent divorce judgment, including the money judgment, were non-

dischargeable under 11 U.S.C. §§ 523(a)(5) and 523(a)(15) because they arose out

of a divorce.1

Tammie and Henri litigated the dischargeability of Henri’s obligations for

over a year; the parties engaged in discovery, and Tammie moved for summary

judgment, which the Massachusetts bankruptcy court denied. The case was then

set for trial. Shortly before the trial date, Gannett filed a motion to withdraw as

1 These provisions prohibit a debtor from discharging “domestic support obligation[s],” 11 U.S.C. § 523(a)(5), and debts that are not domestic support obligations but that are nonetheless owed “to a . . . former spouse . . . that [are] incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit,” id. § 523(a)(15). 3 Case: 17-11352 Date Filed: 09/12/2018 Page: 4 of 10

Tammie’s counsel. Gannett appeared in court on the trial date, and the

Massachusetts bankruptcy court granted his motion to withdraw based on

Tammie’s “failure to cooperate with her counsel.” Doc. 22 at 22 (capitalization

omitted). 2 Tammie did not appear. The Massachusetts bankruptcy court then

entered judgment against Tammie “on all [c]ounts” in light of her “fail[ure] to

appear and prosecute [the] adversary proceeding.” Doc. 1-10 at 15. Henri’s

Chapter 11 case was converted to Chapter 7, and he received a Chapter 7

discharge.

Several years later, Tammie filed for bankruptcy in the Middle District of

Florida. Gannett filed an adversary complaint against Tammie challenging the

dischargeability of the attorney’s fees she owed him for his representation of her in

Henri’s Massachusetts bankruptcy case. After mediation, Gannett and Tammie

entered into a settlement agreement in which Tammie assigned to Gannett 50% of

her interest in the $265,500 money judgment against Henri in exchange for “full

satisfaction of the pending adversary action” concerning Gannett’s legal fees. Doc.

1-10 at 7. The Florida bankruptcy court approved this settlement agreement.

In the meantime, Henri filed a new bankruptcy case in the same court where

Tammie had filed—the Middle District of Florida. Gannett filed a proof of claim

in Henri’s new case for domestic support obligations in the amount of $132,750,

2 Citations to “Doc. #” refer to numbered entries on the district court’s docket. 4 Case: 17-11352 Date Filed: 09/12/2018 Page: 5 of 10

which represented the portion of the money judgment that Tammie had assigned to

him. Henri objected to Gannett’s proof of claim, arguing that the debt had been

discharged in Henri’s Massachusetts bankruptcy case after judgment against

Tammie and a discharge order were entered in that case.

The Florida bankruptcy court sustained Henri’s objection and disallowed

Gannett’s claim. It concluded that: (1) the money judgment had been “determined

to be dischargeable” in Henri’s Massachusetts bankruptcy case, (2) the money

judgment had been discharged, and (3) “[t]he dischargeability determination

[could] not be relitigated.” Doc. 1-5 at 4. The district court affirmed the Florida

bankruptcy court’s order, and Gannett appealed to this Court.

II. STANDARD OF REVIEW

As the second court of review of a bankruptcy court’s order, we examine

independently the bankruptcy court’s factual and legal determinations, employing

the same standards of review as the district court. In re Mitchell, 633 F.3d 1319,

1326 (11th Cir. 2011). We review the bankruptcy court’s factual findings for clear

error and its legal conclusions de novo. Id. We may affirm for any reason

supported by the record, even if it was not relied upon or even considered by the

district court or the bankruptcy court. See United States v. Chitwood, 676 F.3d

971, 975 (11th Cir. 2012).

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III. DISCUSSION

This appeal requires us to consider the preclusive effect of the Massachusetts

bankruptcy court’s judgment against Tammie and Henri’s subsequent discharge

order. “The preclusive effect of a judgment is defined by claim preclusion and

issue preclusion.” Taylor v. Sturgell, 553 U.S. 880, 892 (2008). “Under the

doctrine of claim preclusion, a final judgment forecloses successive litigation of

the very same claim, whether or not relitigation of the claim raises the same issues

as the earlier suit.” Id. (internal quotation marks omitted). “Issue preclusion, in

contrast, bars successive litigation of an issue of fact or law actually litigated and

resolved in a valid court determination essential to the prior judgment, even if the

issue recurs in the context of a different claim.” Id. (internal quotation marks

omitted).

Although the Florida bankruptcy court did not specify what type of

preclusion it was applying, Gannett’s arguments on appeal are based on issue

preclusion.3 He argues that issue preclusion cannot apply because the

dischargeability of the money judgment was not “actually litigated” in the

Massachussets bankruptcy court. See In re Bush, 62 F.3d 1319, 1322 (11th Cir.

1995) (“[F]or a party to be estopped from relitigating an issue regarding the

dischargeability of a debt . . . [t]he bankruptcy issue [must have been] actually

3 Gannett’s brief includes a few references to res judicata—which could refer to claim preclusion—but, substantively, his arguments sound in issue preclusion alone. 6 Case: 17-11352 Date Filed: 09/12/2018 Page: 7 of 10

litigated in the prior action.”). We need not decide whether issue preclusion

applies, however, because we conclude that claim preclusion bars Gannett from

enforcing the money judgment against Henri.

The doctrine of claim preclusion bars a subsequent claim when (1) a court of

competent jurisdiction (2) has rendered a final judgment on the merits (3) in a prior

action between identical parties or those in privity with them, and (4) the same

cause of action is involved in both cases. See Ragsdale v. Rubbermaid, Inc., 193

F.3d 1235, 1238 (11th Cir. 1999). Before explaining why the elements of claim

preclusion are satisfied here, we pause to discuss the nature of the Massachusetts

bankruptcy court’s judgment disposing of Tammie’s adversary proceeding. The

Florida bankruptcy court characterized the Massachusetts bankruptcy court’s order

entering judgment against Tammie as a default judgment. It then concluded that

the order barred Gannett from relitigating the dischargeability of the money

judgment because “the general rule of preclusion may apply in later cases, even if

the prior dischargeability determination involved a default judgment.” Doc. 1-5 at

3.

We disagree with the Florida bankruptcy court’s characterization of the

Massachusetts bankruptcy court’s order entering judgment against Tammie as a

default judgment. Default judgments typically are entered against defendants, yet

Tammie was the plaintiff in her adversary action against Henri. See Fed. R. Civ. P.

7 Case: 17-11352 Date Filed: 09/12/2018 Page: 8 of 10

55(a) (“When a party against whom a judgment for affirmative relief is sought has

failed to plead or otherwise defend . . . the clerk must enter the party’s default.”

(emphasis added)); see also Fed. R. Bankr. P. 7055 (“Rule 55 [of the Federal Rules

of Civil Procedure] applies in adversary proceedings.”). Even though the

Massachusetts bankruptcy court said that Tammie was “defaulted,” it did so only

because she had “failed to appear and prosecute [her] adversary proceeding.” Doc.

1-10 at 15. This language tracks Federal Rule of Civil Procedure 41(b), which

permits the involuntary dismissal of an action upon the plaintiff’s “fail[ure] to

prosecute.”4 We therefore conclude that the Massachusetts bankruptcy court’s

order was a dismissal for failure to prosecute under Rule 41(b), not a default

judgment under Rule 55.

The issue we must decide, then, is whether the dismissal of Tammie’s

adversary proceeding for failure to prosecute followed by entry of the discharge

order precludes Gannett from relitigating the dischargeability of the money

judgment. We conclude that it does because all four requirements of claim

preclusion are met here. First, there is no dispute that the Massachusetts

bankruptcy court had subject matter jurisdiction over Henri’s bankruptcy case and

Tammie’s adversary proceeding against him. Second, the dismissal of Tammie’s

adversary proceeding against Henri served as a final judgment on the merits

4 Like Rule 55, Rule 41 applies in adversary proceedings. See Fed. R. Bankr. P. 7041. 8 Case: 17-11352 Date Filed: 09/12/2018 Page: 9 of 10

because dismissals for failure to prosecute may serve as judgments with preclusive

effect. See Bierman v. Tampa Elec. Co., 604 F.2d 929, 930-31 (5th Cir. 1979)

(holding that a prior dismissal for “want of prosecution” operated as an

“adjudication on the merits” giving rise to claim preclusion);5 Bragg v. Flint Bd. of

Educ., 570 F.3d 775, 776 (6th Cir. 2009) (same). Third, the “identical parties”

element is satisfied here as a result of privity: even though the dispute at issue in

this case involves Gannett instead of Tammie, Gannett is in privity with Tammie

as a result of her assignment to him of 50% of the money judgment. See Taylor,

553 U.S. at 894 (observing that nonparty preclusion may be justified by certain

substantive legal relationships, including the relationship between an assignee and

an assignor). Fourth, the same “cause of action” was at issue in Tammie’s

adversary proceeding as is at issue here. When evaluating the cause of action

requirement of claim preclusion, we must compare the “substance of the actions,

not their form.” Ragsdale, 193 F.3d at 1239 (internal quotation marks omitted).

By filing a proof of claim in Henri’s Florida bankruptcy, Gannett was attempting

to enforce the money judgment against Henri. The same was true in Tammie’s

adversary action against Henri in which she sought to have the money judgment

declared non-dischargeable. In “substance,” then, this appeal arises from the same

5 In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc), we adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981. 9 Case: 17-11352 Date Filed: 09/12/2018 Page: 10 of 10

“cause of action” that Tammie raised in her adversary proceeding. Because all

four requirements of claim preclusion are met here, the bankruptcy court did not

err in disallowing Gannett’s claim. 6

IV. CONCLUSION

For the foregoing reasons, we affirm the district court’s order affirming the

bankruptcy court’s order sustaining Henri’s objection and disallowing Gannett’s

claim.

AFFIRMED.

6 Gannett also argues for the first time on appeal that the Florida bankruptcy court was judicially estopped from disallowing his claim because the same judge who disallowed his claim also approved his settlement agreement with Tammie and therefore was aware that his claim was the sole consideration for the settlement agreement. We reject this argument for two reasons. First, Gannett waived it by failing to raise it before the district court. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1331 (11th Cir. 2004). Second, Gannett’s argument fails on the merits. Judicial estoppel is intended to protect the integrity of the judicial process “by prohibiting parties from deliberately changing positions according to the exigencies of the moment.” Slater v. U.S. Steel Corp., 871 F.3d 1174, 1180 (11th Cir. 2017) (en banc) (emphasis added) (internal quotation marks omitted). Judicial estoppel applies only to parties; it cannot operate against the Florida bankruptcy court. 10