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Flanders v. Lawrence, 15-1327 (2016)

Court: Court of Appeals for the Tenth Circuit Number: 15-1327 Visitors: 25
Filed: Aug. 05, 2016
Latest Update: Mar. 03, 2020
Summary: FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit FOR THE TENTH CIRCUIT August 5, 2016 _ Elisabeth A. Shumaker Clerk of Court In re: GARY WOODROW FLANDERS, individually and as officer, director, shareholder Canyon Quarry Co., Farmer & Merchants Bank, Great Northern Land Co., MetroBank, N.A., Debtor. - GARY WOODROW FLANDERS, Plaintiff - Appellant, No. 15-1327 v. (BAP No. 14-055-CO) (Bankruptcy Appellate Panel) EVELYN JANE LAWRENCE; DANIEL A. WEST; MOYE WHITE LLP; J
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                                                             FILED
                                                 United States Court of Appeals
                  UNITED STATES COURT OF APPEALS         Tenth Circuit

                          FOR THE TENTH CIRCUIT                       August 5, 2016
                          _________________________________
                                                                   Elisabeth A. Shumaker
                                                                       Clerk of Court
In re: GARY WOODROW
FLANDERS, individually and as
officer, director, shareholder
Canyon Quarry Co., Farmer &
Merchants Bank, Great Northern
Land Co., MetroBank, N.A.,

        Debtor.

------------------------------

GARY WOODROW FLANDERS,

        Plaintiff - Appellant,
                                                       No. 15-1327
v.                                                 (BAP No. 14-055-CO)
                                                (Bankruptcy Appellate Panel)
EVELYN JANE LAWRENCE;
DANIEL A. WEST; MOYE WHITE
LLP; JAMES T. BURGHARDT,

        Defendants - Appellees.
                       _________________________________

                           ORDER AND JUDGMENT *
                           _________________________________


*
      The parties have not asked for oral argument, and we conclude that
oral argument would not materially aid our consideration of the appeal. See
Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). Thus, we have decided the
appeal based on the briefs.

      Our order and judgment does not constitute binding precedent, except
under the doctrines of law of the case, res judicata, and collateral estoppel.
It may be cited, however, for its persuasive value under Fed. R. App. P.
32.1 and 10th Cir. R. 32.1.
Before BRISCOE, BACHARACH, and McHUGH, Circuit Judges.
                  _________________________________

      This case grew out of two other cases. One was in state court, where

Mr. Gary Flanders and his wife, Ms. Evelyn Lawrence, divorced. The other

case was in bankruptcy court, where Mr. Flanders was discharged from his

pre-petition debts. In the present action, Mr. Flanders sues Ms. Lawrence

and her attorneys, alleging that the state court erroneously divided marital

assets.

      The bankruptcy court granted summary judgment to Ms. Lawrence

and her attorneys, concluding that the Rooker-Feldman doctrine precluded

jurisdiction over some of the claims, that other claims were subject to issue

preclusion, and that Mr. Flanders either lacked standing to pursue, or

simply lost on, the rest of his claims. The Tenth Circuit Bankruptcy

Appellate Panel affirmed, and Mr. Flanders appeals. We conclude that each

claim fails based on the Rooker-Feldman doctrine, issue preclusion, or lack

of standing. 1

I.    The Bankruptcy and Divorce Proceedings

      Mr. Flanders filed for bankruptcy in 1998. Two years later, divorce

proceedings began in Colorado state court. The bankruptcy trustee then


1
     The defendants also asserted laches as a defense. Given our
disposition, however, we decline to reach that issue.

                                      2
filed an adversary proceeding to assert fraudulent-transfer claims against

Mr. Flanders, Ms. Lawrence, and a number of entities that Ms. Lawrence

owned or controlled, including the Great Northern Transportation

Company. In 2001, the trustee entered into a settlement agreement with

Ms. Lawrence and her entities, releasing the bankruptcy estates “from any

and all claims and causes of action that have been made or could have been

made in the Adversary Proceeding, whether known or unknown, from the

beginning of the world, to the date of [the] Release.” R. at 341.

      Mr. Flanders received a Chapter 7 discharge in 2002. This discharge

(1) “void[ed] any judgment at any time obtained, to the extent that such

judgment [was] a determination of the personal liability of [Mr. Flanders]

with respect to any debt discharged,” and (2) “operate[d] as an injunction

against the commencement or continuation of an action, the employment of

process, or an act, to collect, recover or offset any such debt as a personal

liability of [Mr. Flanders].” 11 U.S.C. § 524(a)(1)–(2).

      In 2007, it became apparent that Mr. Flanders’s bankruptcy estate

would enjoy a surplus of roughly $231,000. The expectation of a surplus

led the federal district court to ask the state court to determine how much

of the bankruptcy surplus would have been considered marital property.

Mr. Flanders argued in state court that the settlement agreement and

bankruptcy discharge had precluded any award to Ms. Lawrence from the

                                      3
bankruptcy surplus. The state court disagreed, finding that the surplus

constituted marital property. The state court ultimately awarded judgment

to Ms. Lawrence for $563,822.




      Mr. Flanders appealed. The Colorado Court of Appeals affirmed on

most grounds but vacated and remanded for further findings on one issue

not relevant to the matters now before this court. The Colorado Supreme

Court denied Mr. Flanders’s petition for a writ of certiorari.

      Mr. Flanders then filed an adversary proceeding in his bankruptcy

case. There he asserted eleven claims against Ms. Lawrence, her divorce

attorney (Daniel West), her bankruptcy attorney (James Burghardt), and

her bankruptcy attorney’s law firm (Moye White LLP). In these claims, Mr.

Flanders alleged that (1) the state court’s orders had been void ab initio,

(2) the state court had made erroneous factual findings and legal

conclusions, and (3) the defendants had acted in contempt of the discharge

injunction and in breach of the settlement and release agreements by

asserting pre-petition claims in state court. In the background section of



                                      4
the second amended complaint, Mr. Flanders also alleged violation of the

bankruptcy court’s automatic stay.

      The bankruptcy court ruled that the Rooker-Feldman doctrine

prevented rejection of the state court’s factual findings, but not

Mr. Flanders’s request for a finding of contempt or sanctions for willfully

violating the discharge injunction. Ultimately, however, the bankruptcy

court determined that those claims were subject to issue preclusion because

they required the parties to relitigate the effect of the discharge.

      In addition, the bankruptcy court addressed Mr. Flanders’s arguments

that the state court’s findings had been void ab initio. In part, Mr. Flanders

argued that the state court had violated the automatic stay and the

discharge injunction. According to the bankruptcy court, both of these

arguments were invalid, but for different reasons. Reliance on the

discharge injunction was impermissible because of issue preclusion;

reliance on the automatic stay was impermissible because Mr. Flanders

lacked standing to assert the claim.

      The Bankruptcy Appellate Panel affirmed. It concluded that the

Rooker-Feldman doctrine did not apply because none of Mr. Flanders’s

claims asked the bankruptcy court to review the state-court judgments. The

Bankruptcy Appellate Panel then affirmed based on issue preclusion and

lack of standing.

                                       5
II.    Standard of Review

       We review the bankruptcy court’s decision rather than the

Bankruptcy Appellate Panel’s. Alderete v. Educ. Credit Mgmt. Corp. (In re

Alderete), 
412 F.3d 1200
, 1204 (10th Cir. 2005). In reviewing the

bankruptcy court’s grant of summary judgment, we apply the de novo

standard. Spears v. St. Paul Ins. Co. (In re Ben Kennedy & Assocs.),

40 F.3d 318
, 319 (10th Cir. 1994). Under this standard, we view the

evidence favorably to Mr. Flanders. Gen. Elec. Capital Corp. v. Manager

of Revenue & Exofficio Treasurer (In re W. Pac. Airlines, Inc.), 
273 F.3d 1288
, 1291 (10th Cir. 2001). 2

III.   Mr. Flanders has forfeited his argument that the bankruptcy
       court used the wrong version of the bankruptcy code.

       According to Mr. Flanders, the bankruptcy court erred by using the

current version of 11 U.S.C. § 523 rather than the version that had been in

effect when his bankruptcy petition was filed. Mr. Flanders claims that if

the earlier statutory version had been used, the bankruptcy court would

have concluded that his debt to Great Northern Transportation Co. had

been discharged and that the bankruptcy court had enjoyed exclusive

jurisdiction over dischargeability.

2
      Because Mr. Flanders proceeds pro se, we liberally construe his
filings but do not act as his advocate. See Yang v. Archuleta, 
525 F.3d 925
,
927 n.1 (10th Cir. 2008).

                                      6
       Prior to this appeal, Mr. Flanders had not questioned the bankruptcy

court’s or the Bankruptcy Appellate Panel’s reliance on the current

statutory version. Thus, we consider this argument forfeited. See Foster v.

Hill (In re Foster), 
188 F.3d 1259
, 1264 n.5 (10th Cir. 1999) (holding that

an appeal point was forfeited because the litigant failed to make the same

argument when appealing from the bankruptcy court to the district court).

        Mr. Flanders points out that

            he raised other challenges to the state court’s jurisdiction and

            in his adversary complaint, he mentioned one of the relevant
             statutes, referred to Ms. Lawrence’s obligation to file a § 523
             complaint, and asked the bankruptcy court to resolve his claims
             using applicable bankruptcy law.

But these steps were insufficient to avoid forfeiture, for they did not alert

the bankruptcy court to the need to consider the prior version of the

statute. 3

       Mr. Flanders contends that the issue is jurisdictional, requiring

consideration notwithstanding a forfeiture. See, e.g., Daigle v. Shell Oil

Co., 
972 F.2d 1527
, 1539 (10th Cir. 1992). We reject this contention. In

3
      Ordinarily we can consider forfeited arguments under the plain-error
standard. Richison v. Ernest Grp., Inc., 
634 F.3d 1123
, 1128 (10th Cir.
2011). But Mr. Flanders has not argued plain error. As a result, we decline
to consider whether use of the current statutory version would constitute
plain error. See 
id. at 1130-31
(stating that the failure to argue for plain
error “surely marks the end of the road” for an argument that had been
forfeited).

                                       7
our view, the jurisdictional nature of the underlying argument does not

insulate the issue from forfeiture, for this exception is confined to

forfeited jurisdictional arguments made during the pendency of the action

in which jurisdiction is at issue. Here, Mr. Flanders brings a collateral

attack on the jurisdiction of a different court. See Ins. Corp. of Ir. v.

Compagnie des Bauxites de Guinee, 
456 U.S. 694
, 702 n.9 (1982) (“A

party that has had an opportunity to litigate the question of subject-matter

jurisdiction may not . . . reopen that question in a collateral attack upon an

adverse judgment.”). Thus, the jurisdictional nature of the issue does not

preclude a forfeiture.

IV.   The Rooker-Feldman doctrine bars Mr. Flanders’s claims that
      allege injury caused by the state court’s rulings.

      The defendants argue that the Rooker-Feldman doctrine precludes

consideration of Mr. Flanders’s claims. We agree with respect to the

claims that seek invalidation of the state court’s rulings.

      A.    Mr. Flanders did not waive his arguments on the Rooker-
            Feldman doctrine.

      In their dispositive motion, the defendants argued that relief is

precluded by the Rooker-Feldman doctrine. The Bankruptcy Appellate

Panel did not agree, and Mr. Flanders did not discuss the Rooker-Feldman

doctrine in his opening brief. In responding to that brief, however, the

defendants argued that

                                       8
          the Rooker-Feldman doctrine presents an alternative ground for
           dismissal and

          Mr. Flanders waived the issue by declining to address the
           Rooker-Feldman issue in his opening brief.

     We do not regard the issue as waived. “When an appellee raises in its

answer brief an alternative ground for affirmance, the appellant is entitled

to respond in its reply brief.” United States v. Brown, 
348 F.3d 1200
, 1213

(10th Cir. 2003). But even if the issue had been waived, we could address

it sua sponte. The Rooker-Feldman doctrine involves subject-matter

jurisdiction, which the court can raise on its own. See PJ ex rel. Jensen v.

Wagner, 
603 F.3d 1182
, 1193 (10th Cir. 2010) (stating that the Rooker-

Feldman doctrine involves subject-matter jurisdiction); Gonzales v. Thaler,

__ U.S. __, 
132 S. Ct. 641
, 648 (2012) (sua sponte consideration of

requirements that involve subject-matter jurisdiction).

     B.    The Rooker-Feldman doctrine precludes jurisdiction of Mr.
           Flanders’s claims that seek invalidation of the state court’s
           rulings.

     Under the Rooker-Feldman doctrine, one cannot complain in federal

court of an injury caused by a judgment rendered in state court. Exxon




                                      9
Mobil Corp. v. Saudi Basic Indus. Corp., 
544 U.S. 280
, 284 (2005). 4 Some

of Mr. Flanders’s claims involve this sort of complaint.

      The Rooker-Feldman doctrine does not bar an independent claim

even if the claim had already been rejected in state court. 
Id. at 293.
In

that situation, the outcome is governed by state-law preclusion principles

rather than the Rooker-Feldman doctrine. 
Id. In the
second amended complaint, Mr. Flanders identified eleven

claims. But as Mr. Flanders stated in the introduction to the complaint, all

involved “a collateral attack on a state court judgment.” R. at 801 (“This

adversary proceeding constitutes a collateral attack on two State Court

judgments that are void by law ab initio.” (footnote omitted)).

      Ordinarily, collateral attacks on a state-court judgment are barred by

the Rooker-Feldman doctrine. Erlandson v. Northglenn Mun. Ct., 
528 F.3d 4
       The Rooker-Feldman doctrine applies only if the state-court
proceedings became final before the federal proceedings began. Exxon
Mobil 
Corp., 544 U.S. at 284
. The bankruptcy court concluded that because
the Colorado Supreme Court had denied review on the issues relevant to
Mr. Flanders’s adversary case, the state-court proceedings had become
final for Rooker-Feldman purposes even though the action was remanded
on an unrelated matter of state law. Mr. Flanders does not question the
finality of the state-court proceedings, and we agree with the bankruptcy
court’s conclusion that there was sufficient finality for Rooker-
Feldman purposes. See Guttman v. Khalsa, 
446 F.3d 1027
, 1032 n.2
(10th Cir. 2006) (defining finality to include when the state courts have
finally resolved all federal questions and only state-law or factual
questions remain).

                                      10
785, 789 (10th Cir. 2008). Nonetheless, we independently consider each

claim against the backdrop of the Rooker-Feldman doctrine. 5

     Though Mr. Flanders has identified eleven discrete claims, they

overlap in substance. Eight of the claims (1-4, 6-7, and 10-11) are based on

alleged violations of the bankruptcy discharge. And two of the claims (8-9)

involve contempt and sanctions. Two other claims (1 and 4) are based, at

least in part, on alleged breaches of the settlement agreement.

     1.    The Rooker-Feldman doctrine precludes consideration of the
           claims to invalidate the state-court rulings by invoking the
           bankruptcy discharge, but does not preclude consideration
           of other claims.

     In eight of the claims, Mr. Flanders alleges that the state court

deprived him of the value of his bankruptcy discharge. This contention


5
      Some courts have found an exception to Rooker-Feldman when a
state court wrongly construes a bankruptcy court’s discharge order. See,
e.g., Hamilton v. Herr (In re Hamilton), 
540 F.3d 367
, 373-75 (6th Cir.
2008) (holding that “a state court judgment that modifies a discharge in
bankruptcy is void ab initio and the Rooker-Feldman doctrine would not
bar federal court jurisdiction”); Pavelich v. McCormick, Barstow,
Sheppard, Wayte & Carruth LLP (In re Pavelich), 
229 B.R. 777
, 783-84
(B.A.P. 9th Cir. 1999) (substantially the same); cf. Ellis v. Consol. Diesel
Elec. Corp., 
894 F.2d 371
, 372 (10th Cir. 1990) (recognizing “that any
action taken in violation of the [automatic bankruptcy] stay is void and
without effect”). Other courts, however, have declined to recognize such
an exception. See, e.g., Ferren v. Searcy Winnelson Co. (In re Ferren),
203 F.3d 559
, 559-60 (8th Cir. 2000); In re Candidus, 
327 B.R. 112
, 119
(Bankr. E.D.N.Y. 2005); In re Toussaint, 
259 B.R. 96
, 102-03 (Bankr.
E.D.N.C. 2000). We follow our precedents, which have not recognized
such an exception.

                                     11
grows out of the state court’s characterization of Great Northern

Transportation Co. as a marital asset to be awarded to Ms. Lawrence.

Before the divorce or the beginning of bankruptcy proceedings, Mr.

Flanders and Ms. Lawrence signed promissory notes to Great Northern in

exchange for roughly $2 million.




But the bankruptcy court discharged Mr. Flanders’s debt under his

promissory note.




                                     12
     The state court did not question the discharge. 6 But in valuing Great

Northern as a marital asset, the state court considered Mr. Flanders’s

failure to pay on his promissory note to Great Northern.

     According to Mr. Flanders, the state court’s valuation of Great

Northern effectively nullified any benefit from the bankruptcy discharge.

6
       The state court characterized the Great Northern debt as “an account
receivable from Ms. Lawrence.” R. at 361. This statement reflects
recognition of Mr. Flanders’s discharge as encompassing his personal
liability on the Great Northern note. Thus, the state court implicitly
concluded that Mr. Flanders’s liability on the Great Northern note had been
discharged in bankruptcy.

                                     13
The state court assessed ownership of Great Northern as a liability, in part

because Mr. Flanders had not paid on his promissory note. Based on this

valuation of Great Northern, the state court allegedly required Mr.

Flanders to pay his ex-wife more than he would otherwise have had to pay.

      To determine the applicability of the Rooker-Feldman doctrine, we

focus on the relief sought by Mr. Flanders. See PJ ex rel. Jensen v.

Wagner, 
603 F.3d 1182
, 1193 (10th Cir. 2010) (“[O]ur recent Rooker-

Feldman jurisprudence has emphasized the relief sought by federal-court

plaintiffs.”). In the second amended complaint, Mr. Flanders asked the

bankruptcy court to grant declaratory relief nullifying the state court’s

orders. For example, Mr. Flanders’s eleventh claim for relief requested an

order declaring that

           “the State Court’s Orders recorded February 10, 2009 and June
            22, 2009, offsetting the $2 Million Commercial Promissory
            Note owed by Lawrence to [Great Northern Transportation Co.]
            against the value of [Great Northern], and correspondingly,
            against the valuation of the Marital Estate, constitutes an
            attempt to collect and recover one half of that amount ($1
            Million) from Flanders, and is a violation of the Discharge
            Order of September 4, 2002, and the State Court orders to the
            contrary are void ab initio in these regards”;

           “the State Court’s decision to delete or omit $3,148,843.84 of
            accrued interest, owed by Lawrence to [Great Northern], from
            the valuation of [Great Northern], and correspondingly, from
            the valuation of the Marital Estate, constitutes an attempt to
            collect and recover by offset a discharged pre-petition debt of
            Flanders, and the State Court’s orders to the contrary are void
            ab initio in these regards”;
                                      14
           “the State Courts [sic] Order of February 7, 2007, is void ab
            initio, as Lawrence’s pre-petition claim to those funds was lost
            by her failure to assert such a claim in the bankruptcy, and thus
            any such claim was discharged by this Court’s Discharge Order
            of September 4, 2002”; and

           “the State Court’s Orders recorded February 10, 2009 and June
            22, 2009, claiming the Net Equity assets remaining at the end
            of the bankruptcy case, specifically the [Great Northern Land
            Co.] stock, [Canyon Quarry Co.] stock, and 6 burial lots,
            constitute a pre-petition claim, and are void ab initio in these
            regards, as those assets are not marital property, but rather, are
            Flanders’ post-petition, after-acquired assets acquired from the
            Net Equity of the Bankruptcy Estate.”

R. at 824-25 (footnote & boldface omitted).

      These requests trigger the Rooker-Feldman doctrine, for they depend

on a finding that the state court erred and entail relief from the erroneous

orders. See Mann v. Boatright, 
477 F.3d 1140
, 1147 (10th Cir. 2007)

(holding that a claim for a declaratory judgment, which sought

nullification of a probate court’s orders, is “precisely the type[] of claim[]

encompassed by the Rooker-Feldman doctrine”); Ebel v. Ebel (In re Ebel),

139 F. App’x 26 (10th Cir. 2005). 7


7
      Though our opinion in In re Ebel is not precedential, it is instructive.
There a couple divorced and the husband filed bankruptcy. 139 F. App’x at
27-28. While the bankruptcy proceedings remained pending, the state court
divided the marital property. 
Id. at 28.
The divorcing husband objected and
asked the federal court to vacate the state court’s division of property,
contending that it had been based on a void stipulation and had involved a
denial of due process. 
Id. at 28.
We held that this contention was
                                                                    (continued)
                                      15
      Other requests do not facially require relief from the state court’s

orders. For example, Mr. Flanders sought

           restitution from Ms. Lawrence for benefits she had obtained in
            state court by asserting claims that had been discharged in
            bankruptcy court,

           issuance of contempt and sanctions for pursuing claims
            discharged in bankruptcy court, and

           injunctions against further collection efforts based on claims
            discharged in bankruptcy court.

Id. at 821-25.
These requests are inconsistent with the state court’s orders,

as discussed below. But that inconsistency does not trigger the Rooker-

Feldman doctrine. See Campbell v. City of Spencer, 
682 F.3d 1278
, 1283

(10th Cir. 2012) (stating that a federal claim is not precluded by the

Rooker-Feldman doctrine solely because the claim requests relief

inconsistent with a state-court judgment).

      We gave a similar example in Bolden v. City of Topeka, 
441 F.3d 1129
(10th Cir. 2006):

      To illustrate, say a father was deprived of custody of his child
      by a state-court judgment. If he files suit in federal court,
      seeking to invalidate the state-court judgment on the ground
      that the state-court proceedings deprived him of due process or
      that the judgment was otherwise contrary to federal law, his
      suit would be barred by Rooker-Feldman; the suit usurps the
      Supreme Court’s exclusive appellate jurisdiction because it

unreviewable because the husband’s challenge to the state court’s division
of property fell under the Rooker-Feldman doctrine. 
Id. at 29.
                                      16
      seeks to set aside the judgment based on a review of the prior
      proceedings. If, however, the father simply brought suit in
      federal court seeking custody of his child, without raising any
      complaint about the state-court proceedings, Rooker-Feldman
      cannot be invoked; his federal claim would have been the same
      even in the absence of the state-court judgment. A myriad of
      doctrines, including res judicata, would almost certainly bar the
      suit. But because he is not seeking to overturn a state-court
      judgment, Rooker-Feldman is inapplicable, regardless of
      whether a favorable judgment in federal court would be
      inconsistent with that judgment and would “deny a legal
      conclusion that the state court has 
reached.” 441 F.3d at 1145
(brackets omitted) (quoting Exxon 
Mobil, 544 U.S. at 293
).

      Our case involves a state court’s division of property in a divorce

rather than an award of child custody. But the principle is equally

applicable. While some of Mr. Flanders’s claims are for relief from the

state court’s orders themselves, other claims could theoretically proceed

independently of the state court’s orders. All of these claims are

inconsistent with the divorce court’s orders, but the Rooker-Feldman

doctrine bars only those claims seeking relief from those orders, like the

claims seeking relief from the child-custody orders in the Bolden

illustration. See Loubser v. Thacker, 
440 F.3d 439
, 441-42 (7th Cir. 2006)

(holding that the Rooker-Feldman doctrine did not preclude a claim for

damages based on wrongdoing that had led to an erroneous judgment in a

divorce proceeding).


                                     17
      2.       The Rooker-Feldman doctrine precludes consideration of the
               claims that seek to invalidate the state-court rulings based
               on a breach of the settlement agreement.

      Similarly, the Rooker-Feldman doctrine precludes consideration of

some, but not all, of the claims involving alleged breaches of the

settlement agreement. In the bankruptcy proceedings, Ms. Lawrence settled

litigation against the trustee. In the present suit, Mr. Flanders claims that

the defendants breached the settlement agreement and that the state court

allowed the breaches to take place. As a result, Mr. Flanders seeks

remedies directed at both the defendants and the state court.

      Some of these remedies were targeted to Ms. Lawrence based on her

alleged breach of the settlement agreement, such as a declaratory judgment

stating that

              “Lawrence’s claim to $231,789.70 of surplus cash, part of the
               Net Equity in the Bankruptcy Estate, and or against Flanders,
               was a pre-petition claim that had been released by the
               Settlement Agreement and the Mutual Release”;

              “Lawrence’s $1 Million pre-petition contribution claim against
               Flanders toward her $2 Million Promissory Note obligation to
               [Great Northern Transportation Co.], which was accomplished
               by an offset against Flanders’ share of the Marital Estate, is a
               claim that had been released under both the Settlement
               Agreement and the Mutual Release”;

              “Lawrence’s $1,574,421.91 pre-petition contribution claim
               against Flanders for half of the accrued interest on the Note
               through June 22, 2009, which was accomplished by deleting the
               accrued interest on the Note from the valuation of [Great
               Northern Transportation Co.], functioned as an offset against

                                        18
           Flanders’ share of the Marital Estate, and is a pre-petition
           claim that had been released under . . . the Settlement
           Agreement and the Mutual Release”; and

          “Lawrence’s claim to 1000 shares of Great Northern Land
           Company stock, 1000 shares of Canyon Quarry Company stock,
           and 6 of 8 burial plots at the Evergreen Cemetery as marital
           assets are pre-petition claims that had been released under both
           the Settlement Agreement and the Mutual Release.”

R. at 165-66 (footnote & boldface omitted).

     Though relief to Mr. Flanders would conflict with the state court’s

rulings, this conflict is not enough to trigger the Rooker-Feldman doctrine.

See p. 16, above. These claims are akin to a claimant’s federal action for

child custody after being rebuffed in state court. In Bolden, we explained

that these claims would fall outside of the Rooker-Feldman doctrine. See

pp. 16-17, above. The same is true of Mr. Flanders’s claims involving

breach of the settlement agreement after being rebuffed in state court.

     But these are not all of Mr. Flanders’s claims. In others, Mr.

Flanders asks the bankruptcy court to overturn the state court’s rulings.

For example, Mr. Flanders asks for a declaratory judgment providing that

          the state court lacked “jurisdiction to make any determination
           as to ‘the performance or interpretation of the Settlement
           Agreement’” and

          “the State Court’s orders recorded February 10, 2009 and June
           22, 2009, claiming the Net Equity assets remaining at the end
           of the bankruptcy case, specifically the [Great Northern Land
           Co.] and [Canyon Quarry Co.] stock, and 6 burial lots,
           constitute a pre-petition claim and are void ab initio in those

                                     19
             regards, as those assets are not marital property, but rather, are
             Flanders’ post-petition, after-acquired assets acquired from the
             Net Equity of the Bankruptcy Estate.”

R. at 825.

      Through these claims, Mr. Flanders seeks invalidation of the state

court’s orders. These claims are akin to a request for a federal court to

invalidate a child-custody order, which we said in Bolden would trigger the

Rooker-Feldman doctrine. See pp. 16-17, above. Under this doctrine, we

cannot entertain Mr. Flanders’s request for invalidation of the state court’s

orders.

                                     * * *

      These conclusions leave some claims for violation of the automatic

stay and discharge order, breach of the settlement agreement, contempt,

and sanctions.

V.    Issue preclusion forecloses relief on Mr. Flanders’s remaining
      claims, which involve violation of the discharge order, breach of
      the settlement agreement, contempt, and sanctions.

      Mr. Flanders claims that the defendants violated the discharge order,

breached the settlement agreement, and acted in a way that was

contemptuous and sanctionable. We conclude that these claims are barred

by issue preclusion because their success would require the parties to

relitigate issues that the state court already decided.



                                       20
     To determine the preclusive effect of a state-court judgment in a later

federal action, we look to the preclusion law of the forum state. Marrese v.

Am. Acad. of Orthopaedic Surgeons, 
470 U.S. 373
, 380 (1985). Colorado is

the forum state; and under Colorado law,

     [i]ssue preclusion bars relitigation of an issue if: (1) the issue
     sought to be precluded is identical to an issue actually
     determined in the prior proceeding; (2) the party against whom
     estoppel is asserted has been a party to or is in privity with a
     party to the prior proceeding; (3) there is a final judgment on
     the merits in the prior proceeding; and (4) the party against
     whom the doctrine is asserted had a full and fair opportunity to
     litigate the issue in the prior proceeding.
Sunny Acres Villa, Inc. v. Cooper, 
25 P.3d 44
, 47 (Colo. 2001).

     The bankruptcy court correctly concluded that these requirements

were met with respect to two key issues:

     1.       whether the settlement agreement released Ms. Lawrence’s
              claims to the property remaining after the conclusion of
              Mr. Flanders’s bankruptcy case and

     2.       whether Mr. Flanders’s discharge prevented the state court
              from considering his promissory note when valuing and
              dividing the marital property.

See R. at 900-02.

     In the state-court proceedings, Mr. Flanders contended that the

settlement agreement precluded award of the bankruptcy surplus to Ms.

Lawrence. See 
id. at 348.
The state court expressly rejected this

contention:


                                      21
      Mr. Frank [Mr. Flanders’s attorney in state court] argues that
      the Settlement Agreement and Mutual Release between Ms.
      Flanders and the Bankruptcy Trustee in 2001 operated to
      release any claim she might have to the surplus. The Court has
      carefully read and reviewed those documents and concludes
      that they did not release any claim Ms. [Flanders] might have
      to the surplus. Bankruptcy surpluses are returned to the debtor,
      in this case Mr. Flanders. At the time the bankruptcy was filed
      the parties were married thus the assets that went into the
      Bankruptcy estate were marital property and any surplus
      coming out is marital property. The Release specifically related
      only to claims that could have been raised in the adversary
      proceeding that had been filed against Ms. Flanders by the
      Trustee. The adversary proceeding claims related to fourteen
      different claims for relief including fraudulent conveyance
      claims against both Mr. Flanders and Ms. Flanders. The Court
      further concludes that a bankruptcy surplus does not exist with
      certainty until the bankruptcy is completed and all creditors
      and interest paid.

Id. The court
repeated this holding in a subsequent order:

      In addition [Mr. Flanders] argues that the Settlement
      Agreement of March 23, 2001 and Mutual Release of April 30,
      2001 that settled the bankruptcy adversary proceeding that
      alleged fraudulent transfer claims against Mr. Flanders, Ms.
      [Flanders] and their companies acted to discharge any
      responsibility he might have for any debts. This Court
      disagrees. The Bankruptcy court did not have jurisdiction over
      the entire marital estate. Further it appears that most of the
      remaining debt occurred after Mr. Flanders’ [sic] filed
      bankruptcy in October 1998.

Id. at 357.
      Mr. Flanders has repackaged the same contention through four

allegations in his second amended complaint:




                                     22
     1.    The state court’s order “constituted a breach of the Settlement
           Agreement and Mutual Release, for lack of Divorce Court
           jurisdiction in this matter.”

     2.    The state court’s order was “void ab initio” because “the
           Settlement Agreement of March 23, 2001 reserved jurisdiction
           to the Federal Bankruptcy Court regarding matters of ‘the
           performance or interpretation of the Settlement Agreement.’”

     3.    The assets awarded to Ms. Lawrence could not constitute
           marital property because “the [bankruptcy court] approved both
           the Settlement Agreement and the Mutual Release, releasing all
           claims against the Bankruptcy Estate . . . .”

     4.    “The State Court, acting upon Lawrence’s claims, allegations,
           and arguments, granted all 4 of Lawrence’s invalid claims, in
           complete disregard of the Discharge Injunction, Settlement
           Agreement and the Mutual Release, despite the fact that the
           State Court approved each of these agreements, the result of
           which produced State Court orders that were a nullity and void
           ab initio.”

Id. at 810,
818, 820 (citation & emphasis omitted).

     The same is true of Mr. Flanders’s claims involving the discharge

order. Here, too, Mr. Flanders argued in state court that Ms. Lawrence’s

claims would require violation of the bankruptcy court’s discharge order.

Id. at 357
(“Mr. Flanders has also argued that since all his debts were

discharged by the Bankruptcy Court, he is not responsible for any of the

remaining debt in the marriage.”). 8 The state court disagreed, reasoning


8
      The record on appeal does not contain the parties’ filings in the state
district court. As a result, we must depend on the state district court’s
orders to ascertain what the parties argued.

                                     23
that the bankruptcy court lacked jurisdiction over the entire marital estate.

Id. Mr. Flanders
renews the claim here, arguing that the state court’s

division of property “was . . . a violation of [the bankruptcy court’s]

Discharge Injunction.” 
Id. at 150;
see also 
id. at 160
(alleging that the

state court’s division of property was “clearly an attempt to collect on a

discharged debt”). The issue here is identical to the one decided in state

court, triggering issue preclusion. 9

      Mr. Flanders argues that issue preclusion does not apply because the

bankruptcy court had exclusive jurisdiction on the issue of

dischargeability. This argument is based on a misunderstanding of Mr.

Flanders’s claims and the state court’s orders. The state court did not

purport to decide whether any debts were dischargeable, for

dischargeability had already been determined in the bankruptcy

proceedings. The state court was called upon to interpret the effect of the

discharge on the marital division of property. Mr. Flanders does not

suggest that the bankruptcy court had exclusive jurisdiction to interpret the

effect of a discharge order. See State Fin. Co. v. Morrow, 
216 F.2d 676
,

679 (10th Cir. 1954) (“[T]he right to a discharge and the effect of a

9
      Although identity of issues is only one of the four elements of issue
preclusion, there is no doubt that the other three elements are met here.

                                        24
discharge are entirely distinct propositions.” (internal quotation marks

omitted)). 10

      When the state court set out to divide assets, Mr. Flanders argued

that the discharge order prevented any award to Ms. Lawrence. In

addressing Mr. Flanders’s argument, the state court had to interpret the

effect of the bankruptcy court’s discharge order. That interpretation is

entitled to issue-preclusive effect here even if the antecedent determination

of dischargeability had fallen within the bankruptcy court’s exclusive

jurisdiction. Thus, Mr. Flanders cannot relitigate the same argument here.

See Rally Hill Prods., Inc. v. Bursack (In re Bursack), 
65 F.3d 51
, 53 (6th

Cir. 1995) (stating that the bankruptcy court’s exclusive jurisdiction does

not alter the rule requiring preclusive effect to state-court judgments).


10
      In his second amended complaint and his appellate briefs, Mr.
Flanders characterizes the state court’s orders as “void ab initio” because
they violated the discharge order. This characterization is incorrect. The
state court clearly had jurisdiction over the division of property between
Mr. Flanders and Ms. Lawrence. If Mr. Flanders is correct on his
underlying claims, the state court’s division of property might have been
erroneous, but that error would not render the orders void. See Union Joint
Stock Land Bank of Detroit v. Byerly, 
310 U.S. 1
, 7-8 (1940) (stating that
the district court’s erroneous application of a statute, which governed
administration of a bankruptcy estate, rendered the order voidable (rather
than void) and could not be attacked collaterally in a subsequent state-
court action); see also FDIC v. Shearson-American Express, Inc., 
996 F.2d 493
, 498 (1st Cir. 1993) (stating that even if a court had erred in finding
no violation of a bankruptcy court’s automatic stay, the finding would be
“entitled to respect” and invulnerable to collateral attack).

                                      25
VI.   Mr. Flanders forfeited his argument that the bankruptcy court
      had erred in determining that he lacked standing to allege
      violation of the automatic stay.

      Mr. Flanders argues that the bankruptcy court erred in determining

that he lacked standing to assert that the state-court orders violated the

automatic stay. But he admits that he did not raise this issue before the

Bankruptcy Appellate Panel. As a result, this issue was not preserved. See

pp. 6-8, above. 11

VII. Disposition

      The bankruptcy court and Bankruptcy Appellate Panel concluded that

the defendants were entitled to summary judgment. We too conclude that

Mr. Flanders’s claims fail as a matter of law, but summary judgment is not

the correct disposition for the claims invalidated based on the Rooker-

Feldman doctrine or lack of standing. These are defects precluding subject-

matter jurisdiction. See PJ ex rel. Jensen v. Wagner, 
603 F.3d 1182
, 1193

(10th Cir. 2010) (Rooker-Feldman doctrine); Cornhusker Cas. Co. v. Skaj,

786 F.3d 842
, 851 (10th Cir. 2015) (standing). For such jurisdictional

defects, summary judgment is ordinarily improper. See 10A Charles Alan


11
      Unlike the general exception to forfeiture for belated arguments that
a district court or this court lacks subject-matter jurisdiction, we generally
do not consider unpreserved arguments in favor of subject-matter
jurisdiction. United States ex rel. Ramseyer v. Century Healthcare Corp.,
90 F.3d 1514
, 1518 n.2 (10th Cir. 1996).

                                      26
Wright, Arthur R. Miller, Mary Kay Kane, Fed. Practice and Procedure,

§ 2713, at 235 (3d ed. 1998) (“In general, courts have ruled that summary

judgment is an inappropriate vehicle for raising a question concerning the

courts[’] subject-matter jurisdiction . . . .”), quoted with approval in

Shikles v. Sprint/United Mgt. Co., 
426 F.3d 1304
, 1317-18 (10th Cir.

2005). Instead, these claims should have been dismissed without prejudice.

See Garman v. Campbell Cty. Sch. Dist. No. 1, 
630 F.3d 977
, 985 (10th

Cir. 2010) (“[A] dismissal for lack of subject matter jurisdiction is without

prejudice and does not have a preclusive effect.”). Thus, we remand with

instructions to dismiss these claims without prejudice. See 
Shikles, 426 F.3d at 1318
(“When a district court correctly determines that it lacks

subject matter jurisdiction over a case, but incorrectly determines that the

lack of subject matter jurisdiction justifies the entry of summary judgment,

we have vacated the judgment and remanded the case to the district court

for entry of an order dismissing the case.”). In all other respects, we

affirm.


                                    Entered for the Court



                                    Robert E. Bacharach
                                    Circuit Judge



                                      27

Source:  CourtListener

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