Love v. Scott (In Re Love)
442 B.R. 868
Bankr. M.D. Tenn.2011Background
- Debtor Love filed Chapter 7 on June 12, 2008 and received a discharge on October 17, 2008; TBPR was listed as a creditor.
- Love owes TBPR over $24,693.66 for disciplinary-proceeding costs including transcripts, court reporters, hearing room rental, and attorney time.
- Disciplinary history includes multiple licenses suspensions and sanctions; reinstatement conditions required payment of past costs.
- Tenn. Supreme Court Rule 9, § 24.3 and related rules require costs be assessed in disciplinary actions and paid as a condition to reinstatement.
- Love sought to avoid paying prepetition disciplinary costs arguing they were dischargeable as compensation for pecuniary loss under § 523(a)(7); TBPR argued costs are penalties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TBPR costs are nondischargeable under § 523(a)(7). | Love contends costs are compensatory for pecuniary loss and discharged. | TBPR contends costs are penalties to deter misconduct and rehabilitate; nondischargeable. | No; costs are dischargeable as compensation, not penalties. |
| Whether Tennessee disciplinary costs fall within the 523(a)(7) framework as compensation or punishment. | Costs are compensatory under Tennessee rules. | Costs are punitive sanctions to deter conduct. | Costs are compensatory under Tennessee Rule 9 and thus dischargeable. |
| What governs dischargeability given Taggart, Findley, and Kelly precedents. | Kelly framework applies; costs not non-dischargeable. | Taggart/Findley suggest penalties may be nondischargeable. | Taggart/Findley distinctions do not apply; costs are dischargeable. |
Key Cases Cited
- Kelly v. Robinson, 479 U.S. 36 (1986) (restitution not dischargeable under § 523(a)(7); state interests emphasized)
- State Bar of California v. Taggart, 249 F.3d 987 (9th Cir.2001) (costs in attorney discipline treated as penalties in some contexts)
- In re Findley, 593 F.3d 1048 (9th Cir.2010) (amended Cal. Bus. & Prof. Code; penalties for discipline can be nondischargeable under § 523(a)(7))
- Hughes v. Sanders, 469 F.3d 475 (6th Cir.2006) (Kelly applied; context matters; not all sanctions are compensatory)
- In re Hollis, 810 F.2d 106 (6th Cir.1987) (probation costs treated as nondischargeable under § 523(a)(7) in a criminal context)