Adrian J. Lee; Angela Lynn Noyes Lee, Plaintiffs Counter Defendants-Appellants, v. Scott J. McCardle, individually and as trustee of the Jack and Ruth McCardle Trust, Defendant Counterclaimant-Appellee.
No. 17-4046
United States Court of Appeals, Tenth Circuit.
Filed January 26, 2018
881 F.3d 1207
Before LUCERO, BACHARACH, and MORITZ, Circuit Judges.
In sum, due to the public interests and federalism concerns, continued enforcement of the consent decrees is warranted only to the extent Defendants are in current violation of federal law or have reached only fleeting compliance. We remand so the district court can make up-to-date findings and determine whether Defendants are currently violating class members’ rights under the Fourteenth Amendment and the Rehabilitation Act. On remand, the district court should conduct the necessary proceedings to develop a record that would allow it to make this determination. If the court then concludes Defendants are not violating class members’ rights under federal law, the court should assess the durability of that compliance. In the event that Defendants have implemented a durable remedy, the court should next address whether vacatur of all pertinent orders and termination of this case is appropriate.
III. CONCLUSION
We VACATE the district court‘s June 2016 Order and REMAND so the court can make appropriate findings and conclusions and then reassess the equities under
court decree. See Horne, 557 U.S. at 450, 129 S.Ct. 2579 (stating that “federal-court decrees exceed appropriate limits if they are aimed at eliminating a condition that does not violate [federal law] or does not flow from such a violation” (quoting Milliken v. Bradley, 433 U.S. 267, 282, 97 S.Ct. 2749, 53 L.Ed.2d 745 (1977))). But even a decree that is within appropriate bounds may be vacated where changed circumstances make prospective enforcement of the decree no longer equitable and where the movant has attained compliance with federal law.
Adrian J. Lee, Holladay, Utah, pro se and for Co-Appellant.
Daniel K. Brough, Bennett Tueller Johnson & Deere, Salt Lake City, Utah
MORITZ, Circuit Judge.
Plaintiffs Adrian and Angela Lee1 asked the bankruptcy court to declare that the automatic stay in Adam and Jennifer Peeples’ bankruptcy case applies to a separate lawsuit Adrian Lee filed in state court against defendant Scott McCardle. The Lees also asserted that the automatic stay prevented McCardle from collecting attorney‘s fees levied against Adrian Lee in that state-court lawsuit. The Lees further sought damages against McCardle for willfully violating the automatic stay. The bankruptcy court found—and the district court agreed—that the automatic stay didn‘t apply to the state-court lawsuit. Thus, it granted summary judgment to McCardle. The Lees appeal, arguing that the district court erred in ruling that the automatic stay didn‘t apply. We don‘t reach this question; instead, we vacate the district court‘s judgment against Angela Lee because she lacks Article III standing to bring this lawsuit, and we affirm summary judgment against Adrian Lee because his claims don‘t fall within the Bankruptcy Code‘s zone of interests.
I
In 2012, the Lees obtained a default judgment against the Peepleses for unpaid rent and waste. In 2013, they obtained a second default judgment against the Peepleses for fraud. The Lees then sought to collect on those judgments by garnishing distributions that the Jack and Ruth McCardle Trust (the Trust) allegedly owed Adam Peeples. Trustee Scott McCardle responded that Adam Peeples was only an inconsequential beneficiary of the trust who wasn‘t owed any distributions. Adrian Lee then sued Scott McCardle in Utah state court, both individually and in Scott McCardle‘s capacity as trustee, essentially alleging that Scott McCardle‘s undue influence over Ruth McCardle prompted her to disinherit Adam Peeples in a memorandum amending the Trust. Thus, Lee asserted that the memorandum must be rescinded and that the Trust owed Adam Peeples overdue distributions dating back to Ruth McCardle‘s death in 2009. Lee sought to collect these distributions as Peeples’ judgment creditor.
The state court dismissed the lawsuit because it determined Lee didn‘t have standing and, alternatively, the claims were time-barred. The state court further ordered Lee to pay McCardle attorney‘s fees and left the case open to determine those fees. The Peepleses filed their bankruptcy petition while the state court was calculating fees. Lee then argued that the automatic stay triggered by the Peepleses’ bankruptcy petition covered his lawsuit against McCardle and moved to stay further proceedings. The state court denied the motion and entered judgment assessing $41,889 in attorney‘s fees against Lee.
The Lees initiated this adversarial proceeding against McCardle in the Peepleses’ bankruptcy case a week before the state court entered final judgment. The Lees sought (1) a declaratory judgment to confirm that the automatic stay applied to the state-court lawsuit and (2) damages from McCardle for willfully violating the automatic stay. The Lees moved for partial summary judgment on the declaratory judgment and the issue of McCardle‘s liability for violating the automatic stay. But
II
When hearing an appeal from a district court‘s review of a bankruptcy-court order, “we independently review the bankruptcy court‘s decision, applying the same standard as the ... district court.” Jubber v. SMC Elec. Prods., Inc. (In re C.W. Min. Co.), 798 F.3d 983, 986 (10th Cir. 2015). We review bankruptcy-court orders granting summary judgment in adversarial proceedings de novo, id., and affirm if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
A
Initially, we must address whether Angela Lee has Article III standing to bring this appeal. Article III standing is jurisdictional; thus, “where the record reveals a colorable standing issue, we have a ‘duty to undertake an independent examination’ (sua sponte if necessary) of that issue.” United States v. Ramos, 695 F.3d 1035, 1046 (10th Cir. 2012) (quoting Morgan v. McCotter, 365 F.3d 882, 887 (10th Cir. 2004)). Article III standing requires that a “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, — U.S. —, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). The plaintiff bears the burden of “demonstrat[ing] that these requirements are met” and must do so “before a federal court can review the merits of a case.” Petrella v. Brownback, 697 F.3d 1285, 1293 (10th Cir. 2012).
We discern no plausible basis for Angela Lee to assert Article III standing here. The Lees’ alleged injury is the attorney‘s fees the state court assessed against Adrian Lee. But Adrian Lee was the sole plaintiff in the state-court lawsuit, and the state court entered judgment for attorney‘s fees against Adrian Lee alone. McCardle alluded to this issue in his response brief on appeal, but the Lees made no attempt in their reply brief to explain what injury in fact Angela Lee could have suffered. Nor did they address Angela Lee‘s standing at oral argument. Because the Lees fail to demonstrate Angela Lee‘s standing to bring this case, we vacate the judgment against her below and remand to the district court with directions to dismiss her claims. See Colo. Outfitters Ass‘n v. Hickenlooper, 823 F.3d 537, 544 (10th Cir. 2016) (declining to consider arguments in favor of standing that the plaintiff failed to “adequately brief[ ]“); id. at 554-55 (vacating order granting summary judgment and remanding with directions to dismiss for
B
Next, we address McCardle‘s assertion that Adrian Lee‘s claims fall outside the zone of interests protected by the automatic stay.3 Although traditionally viewed as a prudential- or statutory-standing requirement, the zone-of-interests doctrine isn‘t actually a matter of standing at all; instead, it merely asks whether a particular federal cause of action “encompasses a particular plaintiff‘s claim.” Lexmark Int‘l, Inc. v. Static Control Components, Inc., — U.S. —, 134 S.Ct. 1377, 1387, 188 L.Ed.2d 392 (2014); see also United States v. Wells, 873 F.3d 1241, 1261 (10th Cir. 2017) (“[T]he question that courts have misguidedly used the term ‘standing’ to describe ... is really whether a particular litigant is a member of a class that Congress has authorized to sue ....“). To answer this question, “we presume that a statute ordinarily provides a cause of action ‘only to plaintiffs whose interests fall within the zone of interests protected by the law invoked.‘” Bank of Am. Corp. v. City of Miami, — U.S. —, 137 S.Ct. 1296, 1302, 197 L.Ed.2d 678 (2017) (quoting Lexmark, 134 S.Ct. at 1388); see also Lexmark, 134 S.Ct. at 1388 (“Congress is presumed to ‘legislat[e] against the background of the zone-of-interests limitation, which applies unless it is expressly negated.‘” (quoting Bennett v. Spear, 520 U.S. 154, 163, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997))).
There‘s no single test to determine whether a cause of action falls within a statute‘s zone of interests; rather “the breadth of the zone of interests varies according to the provisions of law at issue.” Bennett, 520 U.S. at 163, 117 S.Ct. 1154. Thus, in the context of the Administrative Procedures Act (APA), under which zone-of-interests issues often arise, the Supreme Court has “said that the test ‘forecloses suit only when a plaintiff‘s “interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that” Congress authorized that plaintiff to sue.‘” Lexmark, 134 S.Ct. at 1389 (quoting Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567 U.S. 209, 225, 132 S.Ct. 2199, 183 L.Ed.2d 211 (2012)). But “what comes within the zone of interests of a statute for purposes of obtaining judicial review of administrative action under the ‘generous review provisions’ of the APA may not do so for other purposes.” Id. (quoting Bennett, 520 U.S. at 163, 117 S.Ct. 1154). We must therefore “us[e] traditional tools of statutory interpretation” to decide whether a claim falls within a particular statute‘s zone of interests. Id. at 1387.
With this understanding of the zone-of-interests doctrine, we analyze whether Lee‘s claims fall within the Bankruptcy Code‘s zone of interests. Lee asserts two distinct claims: (1) a claim for a declaratory judgment pronouncing that
We impose a “stringent” zone-of-interests requirement (although we‘ve previously referred to it simply as a “standing requirement” instead) for appeals from bankruptcy-court orders. Nintendo Co., Ltd. v. Alpex Comput. Corp. (In re Alpex Comput. Corp.), 71 F.3d 353, 357 n.6 (10th Cir. 1995). Generally, appellants must show that “the order [appealed from] diminishes their property, increases their burdens, or impairs their rights.” Lopez v. Behles (In re Am. Ready Mix, Inc.), 14 F.3d 1497, 1500 (10th Cir. 1994) (alteration in original) (quoting GMAC v. Dykes (In re Dykes), 10 F.3d 184, 187 (3d Cir. 1993)). Although Lee arguably meets this general standard, our case law holds that the automatic stay‘s zone of interests is even more limited.
Specifically, in Lopez, we held that an unsecured creditor couldn‘t appeal an order lifting the automatic stay to allow a secured creditor to foreclose on the debtor‘s real property because the harms the creditor alleged didn‘t fall within
The facts of this case present an even more compelling basis than did the facts of Lopez for concluding that the party challenging the automatic stay hasn‘t asserted a harm within
Moreover, Lee doesn‘t suggest that remedying his injury will benefit the bankruptcy estate. Instead, he responds that his declaratory-judgment claim must fall within the automatic stay‘s zone of interests because otherwise he has no redress for his injury (i.e. the state-court judgment). But this isn‘t the case: Lee‘s injury is the state court‘s assessment of attorney‘s fees against him and he may appeal that order in state court. In any event, Lee‘s ability to redress his injury is irrelevant to the zone-of-interests analysis. The very point of the zone-of-interests doctrine is that not every injury traceable to the violation of a federal statute is remediable in the federal courts. See Clarke v. Sec. Indus. Ass‘n, 479 U.S. 388, 395-96, 107 S.Ct. 750, 93 L.Ed.2d 757 (1987) (describing zone-of-interests doctrine as limiting causes of action where Congress didn‘t “intend[ ] to allow suit by every person suffering injury in fact” from statutory violation). An injury in fact that is traceable to the defendant‘s actions is already a necessary condition for Article III standing. See Spokeo, 136 S.Ct. at 1547. If we accept Lee‘s argument, then there could never be a case in which a plaintiff meets Article III‘s standing requirements but fails the zone-of-interests test; the test for Article III standing would swallow the zone-of-interests doctrine. Cf. Thompson v. N. Am. Stainless, LP, 562 U.S. 170, 177, 131 S.Ct. 863, 178 L.Ed.2d 694 (2011) (construing Title VII‘s zone of interests “more narrowly than the outer boundaries of Article III“).
At oral argument, Lee further argued that he must necessarily have the power to enforce the automatic stay because otherwise no one could. This isn‘t true either; the bankruptcy trustee could have enforced the automatic stay if doing so were in the estate‘s interest. And the bankruptcy trustee‘s decision not to enforce the automatic stay precisely illustrates the zone-of-interests doctrine‘s application here: to the extent that the bankruptcy trustee concludes that enforcing the automatic stay wouldn‘t benefit the estate, doing so would further no congressional purpose. Lee certainly doesn‘t suggest that Congress created the automatic stay to allow creditors to avoid judgments for attorney‘s fees they incurred while attempting to collect their debts. Cf. Magnoni, 867 F.2d at 560 (“The appellants’ cause of action under section 362 is a disingenuous attempt to use the Bankruptcy Code to their advantage.“). We therefore conclude that
2
Whether Lee‘s claim for damages falls within
We read “individual” in
As we explained above, the automatic stay is for the benefit of the estate. But the term “individual” at least suggests that
As explained above, Lee may be the Peepleses’ creditor, but McCardle‘s alleged automatic-stay violation didn‘t harm him in that capacity. Lee‘s claim for damages therefore falls outside of
* * *
The interests that led Congress to create the automatic stay simply aren‘t harmed when a state court assesses attorney‘s fees against a creditor. Because devoting further attention to Adrian Lee‘s claims wouldn‘t further congressional policy, those claims aren‘t within the automatic stay‘s zone of interests and therefore he may not assert them. We thus affirm the district court‘s judgment against Adrian Lee. But because Angela Lee hasn‘t established that she has Article III standing, we vacate the district court‘s judgment against her and remand with instructions to dismiss her claims for lack of jurisdiction.