LYNN ADELMAN, District Judge.
Before me now are two bankruptcy adversary proceedings in which the plaintiffs allege that Aurora Health Care, Inc., ("Aurora") violated a Wisconsin statute prohibiting the unauthorized release of health-care records, Wis. Stat. § 146.82. The plaintiffs' claims are in federal court because Aurora made the allegedly unauthorized releases when it filed its proofs of claim in the plaintiffs' bankruptcy cases. Before being assigned to me, the two matters were proceeding in the bankruptcy court pursuant to 28 U.S.C. § 157(a) and the general order of this court referring all bankruptcy matters to the bankruptcy court. While the proceedings were in the bankruptcy court, that court granted Aurora's motions for summary judgment. The Seventh Circuit then granted the plaintiffs permission to take a direct appeal under 28 U.S.C. § 158(d)(2). However, before the Seventh Circuit decided the appeal, the Supreme Court decided Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), in which it held that bankruptcy judges cannot enter final
The two adversary proceedings before me are the "Ortiz" adversary proceeding, E.D. Wis. Bankr.Case No. 09-2199, and the "Bembenek" adversary proceeding, E.D. Wis. Bankr.Case No. 09-2469. These two proceedings are associated with five different bankruptcy cases: (1) In re Ortiz, E.D. Wis. Bankr.Case No. 07-22466; (2) In re Lindsey, E.D. Wis. Bankr.Case No. 08-27374; (3) In re Jones, E.D. Wis. Bankr.Case No. 07-25336; (4) In re Bembenek, E.D. Wis. Bankr.Case No. 07-30280; and (5) In re Dandridge, E.D. Wis. Bankr.Case No. 08-23680. Rene Ortiz, Douglas Lynn Lindsey, and Valerie Jones are the plaintiffs in the Ortiz adversary proceeding.
The underlying facts are relatively simple. Each plaintiff filed for bankruptcy under Chapter 13. In each Chapter 13 case, Aurora filed a proof of claim relating to the debtor's outstanding medical bills pursuant to Federal Rule of Bankruptcy Procedure 3001, to which it attached an itemized list of all services that it had provided to the debtor. This list contains a brief description of each service and enables a reader to identify the medical conditions for which the debtor was treated. Once a proof of claim is filed in a bankruptcy case, it can be viewed by any member of the general public. The plaintiffs contend that Aurora's actions constituted violations of Wis. Stat. § 146.82. They bring their claims under Wis. Stat. § 146.84(1), which creates private causes of action for violations of Wis. Stat. § 146.82.
After Aurora filed its proofs of claim in the Ortiz, Lindsey, and Jones bankruptcies, the debtors in those cases joined together and initiated the Ortiz adversary proceeding. Around the same time, Bembenek and Dandridge filed a complaint in Milwaukee County Circuit Court against Aurora based on Aurora's having released their health-care records when it filed its proofs of claim in their bankruptcy cases. Aurora removed the Bembenek and Dandridge case to the bankruptcy court under 28 U.S.C. § 1452, and it became the Bembenek adversary proceeding.
In the Ortiz adversary proceeding, Aurora filed a motion to dismiss in which it argued that the plaintiffs had failed to
On March 10, 2010, Aurora filed motions for summary judgment in both Ortiz and Bembenek. It argued that it was entitled to summary judgment on three independent grounds. First, Aurora argued that the plaintiffs were judicially estopped from pursuing their claims because they had failed to disclose them as assets in their bankruptcy cases. Second, Aurora argued that it was entitled to summary judgment based on Wisconsin's litigation privilege, which, Aurora argued, precludes liability for statements made in judicial proceedings. Third, Aurora argued that a plaintiff is entitled to relief under Wis. Stat. § 146.84(1) only if he or she can prove actual damages, and that in the present case no plaintiff could prove actual damages. The bankruptcy court denied summary judgment based on judicial estoppel and the litigation privilege but granted it on the ground that the plaintiffs were required to prove actual damages but had failed to do so. As already discussed, the Seventh Circuit granted the plaintiffs permission to take a direct appeal of the bankruptcy court's summary-judgment decision but, after Stern v. Marshall, determined that it lacked jurisdiction to decide the appeal and remanded the case to the bankruptcy court. The bankruptcy court then converted its summary-judgment decision into proposed findings of fact and conclusions of law and submitted them to this court.
The plaintiffs and Aurora have filed objections to the proposed findings and conclusions. The plaintiffs object to them insofar as they recommended that this court grant summary judgment to Aurora on the ground that the plaintiffs were required to prove actual damages but had failed to do so. The plaintiffs also raise two "procedural" objections. First, they object to the bankruptcy court's decision to issue proposed findings and conclusions in the first place, arguing that the Bankruptcy Code does not permit bankruptcy courts to enter proposed findings and conclusions in "core" proceedings, which these adversary proceedings are. Second, the plaintiffs argue that if the adversary proceedings are recharacterized as "non-core" proceedings, then this court is required to abstain from hearing them under the mandatory abstention provision found in 28 U.S.C. § 1334(c)(2).
Aurora objects to the proposed findings and conclusions insofar as they recommended that this court find that the plaintiffs are not judicially estopped from pursuing their claims. Aurora also raises the issue that the bankruptcy court rejected at the motion-to-dismiss stage of the Ortiz adversary proceeding — that the release of the plaintiffs' health-care records fell within the statutory exception relating to billing, collection or payment of claims.
The plaintiffs object to the bankruptcy court's decision to submit proposed
In any event, even if the bankruptcy court exceeded its statutory authority in submitting proposed findings and conclusions, that would not make any difference in the present case. The proposed findings and conclusions are merely recommendations, to which I owe no deference, and so they do not prejudice the plaintiffs' rights in any way. 28 U.S.C. § 157(c)(1); Institut Pasteur & Genetic Sys. Corp. v. Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), 186 F.3d 1356, 1364 n. 4 (Fed.Cir.1999) (noting that district court owes no deference to bankruptcy court's proposed findings of fact and conclusions of law). Although the plaintiffs ask that I "disregard" the proposed findings and conclusions, doing so would have no practical effect, since I owe no deference to the bankruptcy court's recommendations in the first place. Whether I consider the proposed findings and conclusions or disregard them, the end result is the same: I must make an independent decision on the matters before me.
Next, the plaintiffs argue that I must abstain from hearing these proceedings
(Emphasis added.) The Seventh Circuit has found that the present adversary proceedings involve causes of action "arising in" cases under title 11, Ortiz, 665 F.3d at 911-12, and so under the terms of § 1334(c)(2) that I have emphasized above, abstention is not required.
The plaintiffs argue that, despite the language in § 1334(c)(2), I must abstain because the bankruptcy court, in submitting proposed findings of fact and conclusions of law, followed the procedures for non-core matters (which include matters that are only "related to a case under title 11"). However, the bankruptcy court's decision to submit proposed findings and conclusions does not somehow transform claims arising in cases under title 11 into ones that are only related to cases under title 11. No matter what the bankruptcy court did, these are still core proceedings and the plaintiffs' claims are still claims arising in cases under title 11.
The plaintiffs might argue that Congress would want mandatory abstention to apply to proceedings arising in cases under title 11 in which, because of Stern, bankruptcy judges may not enter final judgment. However, mandatory abstention concerns whether the entire district court, which includes the bankruptcy court as a "unit" of the district court, see 28 U.S.C. § 151, must abstain from hearing a particular proceeding in favor of a state forum. Because mandatory abstention concerns the allocation of authority among state and federal courts, not the allocation of authority among federal judges, there is no reason to think that Congress would want mandatory abstention to turn on whether the federal judge who will enter final judgment on a state-law claim is a bankruptcy judge or a district judge. Thus, even after Stern, abstention is not required in any proceeding involving claims arising in cases under title 11.
Accordingly, I conclude that abstention is not required and will turn to the merits.
Aurora argues that it is entitled to summary judgment because the plaintiffs' claims are barred by judicial estoppel. Judicial estoppel is a doctrine that prevents a litigant from prevailing twice on opposing legal theories. See, e.g., Fed. Commc'ns Comm'n v. Airadigm Commc'ns, Inc. (In re Airadigm Commc'ns, Inc.), 616 F.3d 642, 661 (7th Cir.2010). Under the doctrine, a litigant who convinces a court to accept his or her position cannot in later proceedings repudiate that position and advance an inconsistent one. Id. The purpose of the doctrine is to protect the integrity of the judicial process — to avoid the appearance that a court has been misled. Id. Because judicial estoppel is intended to prevent improper use of the courts, it is an equitable doctrine invoked by a court at its discretion. New Hampshire v. Maine, 532 U.S. 742,
In arguing that judicial estoppel bars the plaintiffs' claims, Aurora relies on cases applying the doctrine to cases in which a debtor in bankruptcy denies owning a claim and then later, after the bankruptcy is over, attempts to pursue that claim. See, e.g., Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7th Cir.2006). A legal claim (or chose in action) is an asset, and if that asset is part of the debtor's estate, the debtor must disclose it during the bankruptcy so that it may be administered along with the debtor's other assets for the benefit of the creditors. The cases hold that if the debtor conceals the claim during the bankruptcy and prevents the creditors from obtaining any benefits from the claim, she cannot after the bankruptcy is over pursue the claim on her own behalf. Id. Applying judicial estoppel in such circumstances "raises the cost of lying" and thereby encourages debtors to be truthful in their bankruptcy filings. Id. (quoting Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1428 (7th Cir.1993)).
Aurora argues that the principles discussed above apply in the present case because the plaintiffs did not disclose their claims as assets on their bankruptcy schedules. The bankruptcy schedules Aurora is referring to are the schedules listing all the property that a debtor owns. A debtor attaches such schedules to a bankruptcy petition at the time it is filed. The schedules ask the debtor to identify all personal property, including "[o]ther contingent and unliquidated claims of every nature." See, e.g., Ortiz Bankruptcy Petition, Schedule B, line 21. When the plaintiffs filed their petitions, they did not list their claims against Aurora — which are contingent and unliquidated claims — on their schedules. Of course, that was because at that time the plaintiffs' claims against Aurora did not yet exist, since Aurora had not yet filed the proofs of claim containing the debtors' health-care records. However, according to Aurora, the plaintiffs were under a duty to amend their schedules to disclose property that they acquired after the filing of their petitions,
Aurora's argument can be fairly characterized as a "gotcha" argument, and it is obvious that the purposes of the judicial-estoppel doctrine would not be served by applying it here. The plaintiffs, in failing to disclose their claims on their bankruptcy schedules, were not lying, attempting to hide assets from the bankruptcy court or their creditors, or otherwise making improper use of the judicial system. As far as the record reveals, the plaintiffs did not even realize that they had claims against Aurora under Wis. Stat. § 146.82 until long after the bankruptcy court confirmed their plans, and Aurora does not suggest that the plaintiffs should be penalized for failing to discover their claims before confirmation.
Aurora next argues that it did not violate Wis. Stat. § 146.82 because its actions fell within what I will call the "billing and collection" exception to the statute. That exception provides that health-care records may be "released upon request without informed consent ... [t]o the extent that the records are needed for billing, collection or payment of claims." Wis. Stat. § 146.82(2)(a)3. Aurora argues that it needed to release the plaintiffs' records in order to comply with the Federal Rules of Bankruptcy Procedure.
Federal Rule of Bankruptcy Procedure 3001, which prescribes the form and content of a proof of claim, states that when a claim is "based on a writing, the original or a duplicate shall be filed with the proof of claim." Rule 3001 also requires that the proof of claim "conform substantially to the appropriate Official Form," which in this case is Official Form 10. When Aurora filed its proofs of claim in the Ortiz and Jones bankruptcies, it used the April 2007 version of Official Form 10, which was the current version at the time. That version contained the following instruction:
In the detailed instructions that accompanied the form, the supporting-documents requirement was explained as follows:
Official Form 10 was amended in December 2007, and when Aurora filed its proofs of claim in the Lindsey, Bembenek and Dandridge bankruptcies, it used that version. The amendment changed the instructions to Official Form 10 regarding supporting documents. The following instruction appeared on the form itself:
The definition of "redacted" on the reverse side of the form read as follows:
In December 2008, after Aurora submitted the proofs of claim at issue in the present proceedings, Official Form 10 was amended again, and this time filers were instructed to not disclose confidential health-care information. The form as it exists today reads as follows:
(Emphasis added.) The definition of "redacted" in the current version of the form states as follows:
(Emphasis added.)
Aurora contends that the Bankruptcy Rules and the versions of Official Form 10 in effect at the time it filed its proofs of claim required it to attach itemized lists of the services it provided to the plaintiffs, and that therefore the release of
Aurora contends that because the instructions to Official Form 10 did not mention the possibility of redacting medical information from supporting documents until December 2008 — after Aurora filed
Aurora also argues that the billing-and-collection exception authorizes the release of health-care records even if the release is not absolutely necessary to billing, collection or payment of a claim. Insofar as Aurora is arguing that a custodian of health-care records need not go to unreasonable lengths to keep information confidential during billing and collection of a claim, it might be right. For example, the statute might not require a health-care provider to comb through a twenty-page itemized invoice before releasing it to a collections agency to make sure that it does not contain a few charges that have already been paid and that the collections agency does not "need" to see. However, in the present case, Aurora did not have to go to unreasonable lengths in order to prevent the release of the plaintiffs' health-care records to the general public. It could have simply redacted the descriptions of the services altogether or filed the attachments under seal. Thus, although a release might not need to be absolutely necessary in order to qualify for the billing-and-collection exception, that does not help Aurora here. Aurora could have easily released the records to the bankruptcy court and the other litigants without also releasing them to the general public. Accordingly, Aurora is not entitled to summary judgment based on the billing-and-collection exception to Wis. Stat. § 146.82.
The plaintiffs bring their claims under Wis. Stat. § 146.84(1), which provides causes of action for violations of Wis. Stat. § 146.82.
Wis. Stat. § 146.84(1)(b). Aurora argues that because the plaintiffs have not incurred "actual damages" as a result of the violations of Wis. Stat. § 146.82 — and by "actual damages," Aurora seems to mean things such as lost wages or medical expenses — they are not "person[s] injured as a result of the violation," and therefore are not entitled to recover anything under Wis. Stat. § 146.84(1)(b). The plaintiffs argue that they are persons injured and are entitled to recover even if they cannot prove actual damages.
To resolve the parties' dispute, I must interpret Wis. Stat. § 146.84(1)(b). When interpreting a state statute, a federal court applies the same principles of statutory construction that a state court
Before addressing the parties' arguments, it is important to point out that, in ordinary legal usage, there is a distinction between "injury" and "damages." "Injury" is "[t]he violation of another's legal right, for which the law provides a remedy; a wrong or injustice." Black's Law Dictionary 789 (7th ed. 1999). In this sense, "injury" is similar to the term "damage," which means "loss or injury to person or property." Id. at 393. "Damages," on the other hand, are the sum of money which a person injured is entitled to receive from the wrongdoer as compensation for the injury. Id. There is thus a distinction between "injury" or "damage" on the one hand, and "damages" on the other. See Bryan A. Garner, A Dictionary of Modern Legal Usage 243 (2d ed. 1995) ("[T]he word `damage,' meaning `loss, injury, or deterioration,' is to be distinguished from its plural, — `damages,' — which means a compensation in money for a loss or damage." (Internal quotation marks omitted)). Garner gives the following sentence as an example of the distinction: "After actual damage is shown it is unnecessary to show its money extent to sustain a judgment for exemplary damages." Id.; see also Hennekens v. Hoerl, 160 Wis.2d 144, 153-54, 465 N.W.2d 812 (1991).
Aurora, in arguing that the plaintiffs are not "persons injured," points out that the plaintiffs have not incurred any monetary losses as a result of Aurora's violations of Wis. Stat. § 146.82, such as lost wages or medical expenses. However, it does not follow from the fact that the plaintiffs have not incurred any monetary losses that they have not been injured. As the Wisconsin Supreme Court has recognized:
Hennekens, 160 Wis.2d at 153-54, 465 N.W.2d 812. In the present case, Wis. Stat. § 146.82 gives a person a legal right against an unauthorized release of his or her health-care records. Thus, an unauthorized release of health-care records is itself an injury to the person whose records were released, even if that release does not produce a contemporaneous monetary loss. It follows that the plaintiffs suffered injuries when Aurora released their health-care records to the general public by filing them on the bankruptcy court's public docket. Accordingly, the plaintiffs are "person[s] injured" within the meaning of Wis. Stat. § 146.84(1)(b).
Although the plaintiffs have been injured, they might not be able to prove actual damages. That is, they might not be able to express their injuries in terms of money. In the bankruptcy court, the
The text of Wis. Stat. § 146.84(1)(b) states that a person who violates Wis. Stat. § 146.82 (or Wis. Stat. § 146.83) "shall be liable" to any "person injured" by the violation for "actual damages to that person, exemplary damages of not more than $25,000 and costs and reasonable actual attorney fees." As already discussed, the plaintiffs are persons injured by Aurora's violations of Wis. Stat. § 146.82. By the plain text of the statute, then, Aurora is liable for actual damages, exemplary damages, and costs and attorney fees. The text does not contain any indication that a person injured must prove actual damages before the violator is liable for exemplary damages, costs and attorney fees. To the contrary, the use of the coordinating conjunction "and" makes clear that liability for any of the items enumerated does not depend on the person injured having proved that he or she is entitled to recover any of the other items. See Friendship Vill. of Greater Milwaukee, Inc. v. City of Milwaukee, 194 Wis.2d 787, 793-94, 535 N.W.2d 111 (Ct.App.1995) ("[t]he purpose of a coordinating conjunction is to link words of equal importance"). Thus, a plaintiff may recover exemplary damages, costs and attorneys fees even if he or she cannot prove actual damages, just like a plaintiff who proceeds pro se may recover actual damages, exemplary damages and costs, even though he or she will not be able to prove actual attorney fees. The violator's liability for each item is independent of the plaintiff's having incurred or being able to prove the others.
Aurora argues that interpreting the statute to allow the recovery of exemplary damages without proof of actual damages would be inconsistent with a Wisconsin common-law rule stating that exemplary damages generally may not be awarded in the absence of proof of actual damages. See Jacque v. Steenberg Homes, Inc., 209 Wis.2d 605, 614-15, 563 N.W.2d 154 (1997) (noting that general rule under Wisconsin common law is that punitive damages are not available in the absence of compensatory damages). However, the right and cause of action at issue in these proceedings were created by statute, and the text of the statute does not indicate an intent to incorporate the general common-law rule. Moreover, the Wisconsin common law recognizes that, in some cases, such as those involving an intentional trespass to land, exemplary or punitive damages may be awarded even in the absence of provable actual damages. Id. at 621, 563 N.W.2d 154. In these cases, the violation of the
Jacque, 209 Wis.2d at 616, 563 N.W.2d 154. The right at issue in the present proceedings is very similar in relevant respects to the right to exclude others from land at issue in a trespass case. Like a trespass to land, an unauthorized release of health-care records is unlikely to cause much monetary harm, yet, as evidenced by the existence of Wis. Stat. § 146.82, it is the kind of act that society finds offensive and wants to deter. Indeed, a third party reading your health-care records without your permission is not that different from a third party watching you eat dinner through your window — both involve an invasion of privacy. Thus, the text of Wis. Stat. § 146.84(1)(b) is not inconsistent with the common law's approach to awarding punitive damages in the absence of actual damages.
Finally, Aurora argues that the legislative history of Wis. Stat. § 146.84 establishes that an award of actual damages is a prerequisite to recovery. The legislative history on which Aurora relies consists of a partial veto exercised by Governor Tommy Thompson in 1991 and a veto message in which he explains his decision to exercise his partial-veto power. The bill containing the language that became Wis. Stat. § 146.84(1)(b), as passed by the legislature in 1991, stated in relevant part as follows:
1991 A.B. 91, 1991 Wis. Act 39 (emphasis added). Governor Thompson used his partial-veto power to strike the emphasized language (along with other language that does not need to be discussed here), and he made the following statement in his veto message:
Veto Message on 1991 A.B. 91, 1991 Wis. Act 39, at p. 33. Aurora contends that this legislative history shows that a person may not maintain a cause of action under Wis. Stat. § 146.84(1)(b) unless he or she can prove actual damages.
As already noted, when the text of a statute is clear, the court may not use legislative history for any reason other than to confirm or verify a plain-meaning interpretation — the court may not use "extrinsic sources of interpretation to vary or contradict the plain meaning of a statute." Kalal, 271 Wis.2d at 666-67, 681 N.W.2d 110. Here, as already discussed, the text of the statute as it appears today is clear,
Accordingly, the plaintiffs are entitled to proceed with their claims even if they cannot prove actual damages.
For the reasons stated above, I will not adopt the bankruptcy court's recommendation that Aurora's motions for summary judgment be granted. Instead, I conclude that those motions must be denied. Because this means that these proceedings will continue, I will withdraw the reference pursuant to 28 U.S.C. § 157(d).
Accordingly,