Monday, September 15, 2008

"To the extent it is correct"

Recently, the Sixth Circuit decided In re Hamilton, a case involving interesting questions of preclusion, Rooker-Feldman, the Anti-Injunction Act, and discharge in bankruptcy.  Essentially, the bankruptcy court declared some debts discharged.  Later, a state court decided against tthe debtor, interpreting the discharge order to exclude a debt.  The state appellate court affirmed.  After some more procedural wrangling, the debtor returned to ask the bankruptcy court to enjoin execution of the state-court judgment. 

Generally, when there's an alleged exception to the Anti-Injunction Act based on the effect of a federal judgment, the party seeking a federal-court injunction must ask the federal court for the injunction before the state court rules on the issue.  The injunction seeker generally has two options, not three-- (1) she CAN litigate the issue in state court and appeal any adverse ruling (theoretically to the USSCT because the effect of a federal judgment is a federal-enough issue for s1257 jurisdiction); (2) she CAN seek an injunction in federal court under an AIA exception before the state court rules on the effect of the allegedly preclusion/effective federal judgment; (3) but she CANNOT have two bites at the apple by arguing the effect in state court and then resorting to a constructive appeal in federal court if the state court does not buy the preclusion (or effectiveness) argument.

In In re Hamilton, the Sixth Circuit decided that two bites at the apple are available in this context:  "A bankruptcy court can find that a postpetition state court judgment is void despite the full faith and credit normally given to state court judgments."  Although I am admittedly not a bankruptcy scholar, I must tentatively disagree with any "exception" based on the following reasoning:

[A]lthough state courts have unbridled authority to determine the dischargeability of debts, state courts have the authority to interpret a bankruptcy courts discharge order only to the extent that the state court's interpretation is correct.


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