Tuesday, April 4, 2006

Case Law Development: Concurrent Jurisdiction of State Court and Bankruptcy Court over Divorce

The US District Court for the Eastern District of Michigan unravelled a jurisdictional knot in a ccase involving a receiver appointed by the state court to oversee sale of a marital home as part of a divorce judgment.  The divorce decree also provided that if either party filed for bankruptcy, and that if it was determined that any obligation owed to the other party was dischargeable, then the unpaid amount would be automatically converted to non-dischargeable domestic support.

Husband thereafter filed a bankruptcy petition. The receiver moved for fees in the state court action, which the court granted, finding that these were non-dischargeable debts in the nature of domestic support.  The court also ordered that Husband direct his disability check to the receiver to pay for child support arrearages.  Husband then filed a motion in the bankruptcy action asking the court to find that the receiver was in contempt for violating the automatic stay.

The district court affirmed the bankruptcy court's denial of that motion.  The court emphasized that the state court has concurrent jurisdiction regarding determinations of dischargeability pursuant to 11 U.S.C. § 523(a)(5), and that collection of child support from property that is not property of the estate is excepted from the automatic stay pursuant to 11 U.S.C. § 362(b)(2)(B).  Moreover, the court emphasized that, even if the state court was wrong in its determination of non-dischargeability, the Rooker Feldman doctrine prohibited the district court's review of that determination:

"Regardless of whether the state court's ruling that found the receiver's fees non-dischargeable because they were in the nature of support was correct or not, the state court had jurisdiction to make that decision. An erroneous interpretation of the law does not divest a court of jurisdiction to make the erroneous decision. Therefore, because the state court had concurrent jurisdiction over areas of domestic support, the Rooker-Feldman doctrine bars collateral attack or appellate review of state court decisions, even if erroneous. If Appellant wishes to appeal the state court decision granting non-dischargeable status to the receiver's fees, he must do so in the state court system."

In re Moxon, 2006 U.S. Dist. LEXIS 14893 (E.D. Mich. March 30, 2006)(bgf)

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