Hobbs v. State of Arizona (In re Hobbs)

In re Hobbs, BAP No. AZ-15-1397-LJuF (9th Cir. B.A.P. Oct. 13, 2016). Not for publication.
In a 523 action, the Rooker-Feldman doctrine bars a debtor’s attack on a state-court judgment’s culpability determination.
Procedural context:
Arizona brought a state-court action against debtor, Emma Hobbs, and her husband, both individually and as a marital community, and others. The state court entered a judgment imposing civil penalties on all the defendants, including Ms. Hobbs personally. In her chapter 7 case, the bankruptcy court found that the judgment was nondischargeable under 523(a)(7) as a debt for a civil penalty. On appeal, the BAP affirmed.
The judgment imposed joint and several liability on all the defendants, including Ms. Hobbs personally, for civil penalties. But that relief was not consistent with the evidence presented or arguments that the state, as plaintiff, made to the state court. Instead, the judgment appeared to be the result of a drafting error; the evidence and argument supported a finding of culpability against the marital estate of Ms. Hobbs and her husband (as well as others), but not against her personally. The state’s lawyers have a duty to correct the mistake, which would terminate her personal liability . But the Rooker-Feldman doctrine bars the bankruptcy court from reviewing the state-court’s culpability determination in the context of a nondischargeability action.
William J. Lafferty, III, Meredith A. Jury (Chief Judge), and Robert J. Faris, Bankruptcy Appellate Judges.

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