Cohen v. Cohen (In re Cohen)

Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
2 years 2 months ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

BAP No. CC-23-1057-CFL (9th Circuit, Dec 13,2023) Not Published

Tag(s):

Ruling:

The U.S. Bankruptcy Appellate Panel of the Ninth Circuit held a bankruptcy court properly granted a motion to clarify or amend a prior order granting stay relief when the debtor's spouse, at a state family court's request, sought to clarify the issues she could litigate in the family court proceeding. While claims against the debtor/appellant under 11 U.S.C. § 523(a)(2), (4), and (6) were time-barred, a family court may consider evidence of wrongful conduct when adjudicating issues related to a dissolution proceeding, which may lead to a debt falling under § 523(a)(15).

Procedural context:

The BAP considered two issues in resolving the debtor/appellant's appeal: whether the bankruptcy court properly (1) exercised its discretion in granting a motion to clarify or amend a prior stay relief order under FRBP 9024 (even though the movant invoked "FRBP 7060(b)(6)" (a non-existent rule)) based on a state court's request for clarification; and (2) determined stay relief should be granted to allow the movant to investigate issues in the family court that overlap with issues typically associated with claims under 11 U.S.C. § 523(a)(2), (4), and (6), even though claims under those subsections were time-barred.

Facts:

Debtor Scott Cohen and his wife, Carla Cohen, were engaged in a marital dissolution proceeding in California family court when Debtor filed a chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Central District of California. As of the petition date, the family court had not distributed the parties' marital property. Ms. Cohen and the chapter 7 trustee stipulated that Ms. Cohen had unliquidated claims against Debtor which the trustee preferred to be liquidated in the family court, and that Ms. Cohen should have additional time to liquidate the value of her claims. Ms. Cohen then filed a proof of claim in an "unknown" amount and sought relief from the automatic stay so she and Debtor could conclude the family court proceedings. The bankruptcy court granted Ms. Cohen stay relief to pursue against Debtor "claims for child support, spousal support, and equalization payments, i.e., claims which fall under either . . . [11 U.S.C. §] 523(a)(5) or [§] 523(a)(15)” but did not grant relief to “pursue tort claims beyond the scope of [§§] 523(a)(5) or 523(a)(15)” as the deadline to file claims under 11 U.S.C. §§ 523(a)(2), (4), and (6) had passed. The parties re-engaged in the family court but disputes arose about the issues Ms. Cohen could pursue without violating the automatic stay. The family court thus asked the parties to seek clarification from the bankruptcy court as to the scope of the stay relief granted. Ms. Cohen moved the bankruptcy court for a "comfort order" or "relief under FRBP 7060(b)(6)" to confirm she could litigate in the family court whether Debtor had concealed assets, engaged in improper business conduct, breached his fiduciary duties to Ms. Cohen, or committed similar misconduct. Debtor opposed the motion. The new judge assigned to the bankruptcy case denied relief without prejudice but invited Ms. Cohen to file a new stay relief motion explaining how the issues she sought to pursue in state court fell within the ambit of § 523(a)(15). Ms. Cohen instead filed an amended renewed motion for clarification of the prior order. The bankruptcy court issued a tentative opinion granting relief to Ms. Cohen, held a hearing, and then entered an order granting Ms. Cohen's motion. Debtor timely appealed.

Judge(s):

CORBIT, FARIS, and LAFFERTY

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