In re: Evan Brian Crocker, also known as Haas Legal, P.L.L.C. Debtor
NAVIENT SOLUTIONS, L.L.C.; NAVIENT CREDIT FINANCE CORPORATION, Appellants EVAN BRIAN CROCKER, on behalf of themselves and all those similarly situated, also known as Haas Legal, P.L.L.C, formerly known as Evan Brian Haas: MICHAEL SHAHBAZI, on behalf of themselves and all those similarly situated, formerly known as Montana Shahbazi; WENDY L. LANDES, on behalf of themselves and all those similarly situated; RAEGENA SEITZ-MOULDS, on behalf of themselves and all those similarly situated, Appellees
from the United States District Court for the Southern
District of Texas
STEWART, SOUTHWICK and ENGELHARDT, Circuit Judges.
H. SOUTHWICK, CIRCUIT JUDGE
individual in Texas and another in Virginia separately
obtained loans from the same lender to pay education
expenses. Both later filed for bankruptcy in their respective
states. In time, orders of discharge were entered. One of the
discharged debtors then filed suit against the lender in the
same Bankruptcy Court of the Southern District of Texas that
had ordered the discharge of his debts. Later, the Virginia
debtor joined the Texas suit. The suit seeks to certify a
nationwide class of those who claim their education-loan
debts were validly discharged but from whom this lender
continues to demand payment. A declaratory judgment,
injunction, and damages are sought.
lender filed a motion for summary judgment, arguing
bankruptcy courts cannot enforce the injunctions arising from
discharge orders entered by courts in other judicial
districts, and these private-education-loan debts are
statutorily excepted from discharge. The bankruptcy court
held the opposite as to both, then certified the two holdings
for interlocutory appeal.
conclude that a bankruptcy court does not have authority to
enforce the discharge injunctions entered in other districts.
On the other hand, we agree with the bankruptcy court that
the particular education loans involved here are not
statutorily excepted from discharge. The cause is REMANDED.
AND PROCEDURAL HISTORY
2009, Evan Crocker obtained a $15, 000 loan to fund his bar
examination preparation. The lender was a subsidiary of SLM
Corporation, d/b/a Sallie Mae, which is a for-profit, public
corporation whose loans are not part of any governmental loan
program. The loan documents informed Crocker that his
repayment obligation "may not be dischargeable in
bankruptcy." Crocker's loan was transferred to SLM
Education Credit Finance Corporation, which subsequently
became Navient Credit Finance Corporation. In the complaint,
Navient Solutions is said to be the entity pursuing
collection. We will not differentiate among Navient entities
in our discussion.
2015, Crocker filed for voluntary Chapter 7 bankruptcy in the
United States Bankruptcy Court for the Southern District of
Texas. He scheduled his bar-study loan claim as an
"Educational . . . Private loan" and did not
dispute the debt. In February 2016, the court granted him a
discharge under 11 U.S.C. § 727, informed him that
"[m]ost debts are covered by the discharge, but not
all," and closed his case.
Shahbazi has a similar story. In 2002, Shahbazi obtained an
$11, 658.99 loan from Sallie Mae for tuition and expenses
while he attended a technical school. He was given notice
that his loan was "an education loan that must be
repaid." Exactly how Navient obtained its interest is
unclear to us, but it is servicing this loan.
2011, Shahbazi filed for voluntary Chapter 7 bankruptcy in
the United States Bankruptcy Court for the Eastern District
of Virginia. He scheduled his Sallie Mae loan as a
"Student Loan" and did not dispute the debt. In
December 2011, the court granted him a discharge and closed
his bankruptcy proceeding. This discharge order specifically
listed "Debts for most student loans" as not being
alleged that after both discharges, Navient had both of these
plaintiffs contacted frequently by telephone and email to
demand repayment. In August 2016, Crocker filed an adversary
proceeding against Navient in the Bankruptcy Court for the
Southern District of Texas, the same court that had granted
him a discharge. He sought (1) a declaratory judgment that
his private education debt had been discharged; (2) entry of
judgment holding Navient in contempt for violating the
injunction arising from his discharge; and (3) a temporary
injunction. The court entered an agreed preliminary
injunction on August 18, 2016, barring Navient from pursuing
collection until further order.
with Shahbazi as an additional plaintiff, filed an amended
complaint, seeking to certify a nationwide class of those who
(1) obtained prepetition private education loans from Navient
or related companies to cover expenses at an institution not
accredited under Title IV; (2) later filed for bankruptcy and
were issued discharge orders; (3) have never reaffirmed their
prepetition private education loan debt; and (4) are being
induced to pay their allegedly discharged private education
loans. Damages were now also sought.
moved for summary judgment on these claims, arguing that a
bankruptcy court has no jurisdiction to interpret and enforce
discharge orders entered by courts in other judicial
districts and that the plaintiffs' education loans were
nondischargeable. The bankruptcy court denied the motion in
March 2018. It rejected that the general rule giving
an issuing court sole authority to enforce its own
injunctions applied to the automatic injunction created by
statute when a bankruptcy court grants a discharge under 11
U.S.C. § 727. The court also determined that the kind of
loans for educational purposes relevant here, which the
parties refer to as "private loans," were not
within the ambit of the Bankruptcy Code's bar on the
discharge of some student loans. See 11 U.S.C.
same order, the bankruptcy court first authorized an
interlocutory appeal, then certified the order for direct
appeal to this court, eschewing the usual initial appellate
review by a district court. A bankruptcy court may certify a
ruling for direct review by a circuit court of appeals when,
among other reasons, it "involves a question of law as
to which there is no controlling decision" by that
circuit court or the Supreme Court, or because an appeal at
that stage in the proceedings "may materially advance
the progress of the case." 28 U.S.C. §
158(d)(2)(A)(i), (iii). If a bankruptcy court so certifies,
the circuit court of appeals then exercises its discretion.
§ 158(d)(2)(A). A motions panel of this court granted
the unopposed motion to authorize the appeal.
review "grants and denials of summary judgment de
novo. Summary judgment is appropriate when 'there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.'" Lyda
Swinterton Builders, Inc. v. Okla. Sur. Co., 903 F.3d
435, 444 (5th Cir. 2018) (quoting Fed.R.Civ.P. 56). Federal
Rule of Civil Procedure 56 is incorporated into the Federal
Rules of Bankruptcy Procedure. Fed.R.Bankr.P. 7056.
has two principal contentions on appeal. The first is that
the bankruptcy court either has no jurisdiction to enforce
the statutory injunctions arising from a bankruptcy discharge
that another bankruptcy court ordered, or at least for
prudential reasons may not do so. Second, Navient contends
that the plaintiffs' education loans are within the
category of loans that under the Bankruptcy Code are
are no meaningful factual issues presented to us. Instead, we
have legal issues of statutory interpretation. We now turn to
Authority to enforce a Section 524 discharge order entered by
a bankruptcy court in another judicial district
broad brush, these proceedings concern two closed Chapter 7
bankruptcies in which generic discharges, i.e.,
discharges not specifying the discharged debts, were issued
at completion. A discharge "operates as an
injunction" against an extensive list of actions that a
creditor might take to collect on the discharged debt. 11
U.S.C. § 524(a)(2), (3). The discharge is a
"substantive right," and that right is "often
enforced by a motion for contempt, but [it is] also
enforceable through a declaratory judgment action."
Nat'l Gypsum Co. v. NGC Settlement Tr. & Asbestos
Claims Mgmt. Corp. (In re Nat'l Gypsum
Co.), 118 F.3d 1056, 1063 (5th Cir. 1997) (citations
omitted). The declaratory judgment was sought in National
Gypsum by the opening of an adversary proceeding in the
bankruptcy court that had granted the debtor's discharge.
Id. at 1060. Indeed, Federal Rule of Bankruptcy
Procedure 7001(6) states that an adversary proceeding is,
among other things, "a proceeding to determine the
dischargeability of a debt."
an available procedure under National Gypsum is a
declaratory judgment action. A violation of the declaratory
judgment will lead to its own remedies such as "damages
or an injunction." United Teacher Assocs. Ins. Co.
v. Union Labor Life Ins. Co., 414 F.3d 558, 570 (5th
Cir. 2005); see also 28 U.S.C. § 2202. The
issue for us is identifying the proper court or courts in
which such an action can be brought. May a bankruptcy court
other than the one that granted the discharge enforce the
closest this circuit has come to answering the question is to
hold, in the class action context, that a bankruptcy judge in
the Southern District of Texas may exercise 'jurisdiction
over claims that arise in other cases administered by other
judges" in the same judicial district. Wilborn v.
Wells Fargo Bank, N.A. (In re Wilborn), 609
F.3d 748, 753 (5th Cir. 2010). The Wilborn court
only briefly discussed the issue of enforcing an injunction
arising from the discharge order of a different bankruptcy
court in the same district. In the present proceedings, the
bankruptcy court's understanding of its authority
extended well beyond its home district. The question of a
bankruptcy judge's injunctive reach within its own
district has not been answered.
plaintiff-debtors received general discharges in bankruptcy.
Central to the dispute is that Congress has excepted from
discharge, among other categories of debt, certain types of
student-loan debt. 11 U.S.C. § 523(a)(8). We will deal
with the issue of dischargeability in the second part of our
opinion and will wait to quote the relevant statute until
already summarized that the bankruptcy court at this stage
answered only two questions. The first answer we review is
the "yes" the court gave to the question of whether
a bankruptcy court in a judicial district other than the one
in which the discharge was entered has authority to interpret
the discharge and enforce the injunction. The court rejected
Navient's argument that the general rule should apply
that the court issuing an injunction is the only one that can
enforce it through contempt proceedings. The bankruptcy court
first held that general rule was inapplicable because no
discretion or individual judgment is exercised in creating
the injunction. The form order used for the discharges for
the initial two plaintiffs here does not even mention an
injunction. The injunction instead arises from this statutory
command: "A discharge in a case under this title . . .
operates as an injunction against the commencement or
continuation of an action." § 524(a). Because there
is "no subjective thought process that requires
deference nor is there any risk of misinterpretation of a
particular judge's reasoning," the bankruptcy court
concluded that the general limitation on enforcement of
injunctions only by the issuing court was inapplicable. The
court did not cite any case authority to support its
analysis. The basic point was that the bankruptcy statutes
themselves make clear that no purpose is served by requiring
a return to the issuing court to interpret a discharge
of course, disagrees that discharge injunctions should be
treated differently than others. A principal authority it
cites is one of this court's precedents dealing with
non-bankruptcy injunctions. There, Chief Judge Charles Clark
explained in the context of a claim of securities fraud that
"[e]nforcement of an injunction through a contempt
proceeding must occur in the issuing jurisdiction because
contempt is an affront to the court issuing the order."
Waffenschmidt v. MacKay, 763 F.2d 711, 716 (5th Cir.
1985). A bankruptcy court does continue to have jurisdiction
to enforce its orders, and that jurisdiction remains even
after the bankruptcy case is closed. See, e.g., Galaz v.
Katona, 841 F.3d 316, 322 (5th Cir. 2016). The issue for
us arises because Galaz and other Fifth Circuit
precedents do not hold that authority is exclusive in the
original court. Navient also argues that regardless of
jurisdiction, there are prudential reasons supporting its
appellate brief recounts the background for an injunction
that arises from a discharge, drawing from a scholarly
article. Charles Jordan Tabb, The Historical Evolution of
the Bankruptcy Discharge, 65 Am. Bankr. L. J. 325
(1991). We look at parts of the background in order to
understand how a bankruptcy discharge was enforced before a
statute was enacted that imposed an injunction. Importantly,
we also consider whether another part of the same statutory
enactment arguably created a right of enforcement of the
injunction by "foreign" courts. If so, then its
repeal in 1978 has some meaning.
was no statutory injunction arising from a discharge until
1970. Id. at 326 n.3. A House Report on 1970
bankruptcy legislation explained problems with prior law,
including the harassment of debtors:
The present discharge provisions of the Bankruptcy Act
authorize the bankruptcy court to determine the right to a
discharge, but do not give the bankruptcy court express
jurisdiction to determine the effect of the discharge. . . .
Under present practice, if a bankrupt is sued in State court
on a discharged debt, the State court may determine whether
the debt in question was or was not discharged. In other
words, the jurisdiction over the granting and the enforcing
of a discharge is divided, with the result that debtors are
frequently harassed and coerced by creditors into paying
debts that may have been discharged.
H.R. Rep. No. 91-1502, at 3 (1970).
1970 legislation was adopted and provided for an injunction:
f. An order of discharge shall-
(1) declare that any judgment theretofore or thereafter
obtained in any other court is null and void . . .; and
(2) enjoin all creditors whose debts are discharged from
thereafter instituting or continuing any action or employing
any process to collect such debts as personal liabilities of
Act of Oct. 29, 1970, Pub. L. No. 91-467, § 3, 84 Stat.
990, 991 (amending Section 14 of the 1898 Bankruptcy Code,
codified as 11 U.S.C. § 32(f)).
statutory detailing of the injunction that results from a
discharge has been revised, but the meaning for our purposes
is the same: the discharge "operates as an injunction
against the commencement or continuation of an ...