Judge Rejects DOMA As Bar To Joint Bankruptcy Filing By Gay Couple

In In re Sommers and Caggano, Bankruptcy Judge (in the Southern District of New York) Cecilia Morris denied the United States Trustee's motion to dismiss the joint bankruptcy petition of a gay couple, who were married in Vermont, on DOMA grounds. The judge wrote:

[T]he constitutionality of DOMA has been questioned by two cases filed in the district courts of this Circuit. [cites omitted] The Department of Justice also concluded that DOMA would not withstand constitutional analysis under heightened scrutiny. See Letter from Tony West to Judge Barbara S. Jones (Feb. 24, 2011) [. . .] (containing as an attachment Letter from Eric H. Holder, Jr. to John A. Boehner (Feb. 23, 2011)). In Windsor v. United States, which is currently pending in the Southern District of New York, the Assistant Attorney General filed a letter stating that "heightened scrutiny is the appropriate standard of review for classifications of sexual orientation" and that "[s]ection 3 of DOMA may not be constitutionally applied to same-sex couples whose marriages are legally recognized under state law; and that the Department will cease its defense of Section 3 in such cases." See Letter from Tony West to Judge Barbara S. Jones (Feb. 24, 2011) (Docket No. 10), Windsor v. United States, No. 1:10-cv-8435 (S.D.N.Y.).

[MORE . . .]

The Court will not conduct its own constitutional analysis of the Act since the issue is not before the Court and has not been briefed by the parties. Nevertheless, "[t]he court has substantial discretion in ruling on a motion to dismiss under section 707(a), and in exercising that discretion must consider any extenuating circumstances, as well as the interests of the various parties." Collier on Bankruptcy P 707.03 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.) (emphasis added); see also In re Atlas Supply Corp., 857 F.2d 1061 (5th Cir. 1988) (stating that a court may be guided by equitable principals in determining a motion to dismiss). One extenuating circumstance that the Court finds relevant is that the United States Department of Justice, acting under the instruction of the Attorney General and the President of the United States, argues that "DOMA may not be constitutionally applied to same-sex couples" and has stopped defending the law in cases pending in this Circuit. See Letter from Tony West to Judge Barbara S. Jones (Feb. 24, 2011) (Docket No. 10), Windsor v. United States, No. 1:10-cv­8435 (S.D.N.Y.); see also Pedersen v. OPM, No. 3:10-cv-1750 (D. Conn.). In this case, the United States Trustee, who is appointed by the Attorney General pursuant to 28 U.S.C. §581, appears to defend the law and yet has offered nothing more than a restatement of the language of DOMA. The mere existence of DOMA is not sufficient to remove the duty imposed on this Court by section 707(a) to find "cause" prior to dismissing the case. See 11 U.S.C. §707(a).

When dismissal of a case is not premised upon one of the enumerated reasons set forth in 707(a), the Second Circuit requires a case-by-case analysis to determine "whether dismissal would be in the best interest of all parties in interest." In re Dinova, 212 B.R. 437, 442 (B.A.P. 2d Cir. 1997) (emphasis added) (quoting In re Price, 211 B.R. 170, 172 (Bankr. M.D. Pa. 1997) ("A motion to dismiss is a serious matter affecting the rights of the debtor and all creditors. At a hearing on a motion to dismiss, the court is required to consider the impact the dismissal will have on the various entities and ascertain which direction satisfies the best interest of all parties.").

Here, the Trustee has failed to convince the Court that dismissal is in the best interests of all parties. Section 302 is a means of jointly administering the Debtors' estates "to the benefit of both the debtors and their creditors." In re Malone, 50 B.R. at 3 (quoting S. Rep. No. 989, 95th Cong., 2d Sess. 32 (1978)). Dismissal is not in the best interests of the Debtors, who would lose the benefit of their fresh start and would incur greater administrative costs if they sever their petition and file a second case. The record is absent of allegations of bad faith, hidden assets, or attempts to stall collection by the Debtors, factors normally considered by courts in deciding whether or not to dismiss. See Dinova, 212 B.R. at 442. The Debtors' joint case has substantially progressed; they reaffirmed mortgage and vehicle debt and appeared at the meeting of creditors. Dismissing or severing the case at this stage, would duplicate work and costs for the Debtors, the creditors, the Trustee, and the Court.

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  • Display: Sort:
    Interesting, thanks (none / 0) (#1)
    by andgarden on Fri May 13, 2011 at 12:44:50 PM EST

    Very interesting. But will the denial (none / 0) (#2)
    by oculus on Fri May 13, 2011 at 12:58:40 PM EST
    of the motion withstand appeal?  

    I can't comment on this case (none / 0) (#3)
    by Big Tent Democrat on Fri May 13, 2011 at 01:00:35 PM EST
    because I know a lot of folks in the US Trustee's office.

    Joint Bankruptcy (none / 0) (#4)
    by Demi Moaned on Fri May 13, 2011 at 01:01:06 PM EST
    Ah, I had never heard of that before. Another thing we're fighting for: The Right to Go Bust Together!

    I think the Equal Protection argument (none / 0) (#5)
    by andgarden on Fri May 13, 2011 at 01:35:07 PM EST
    stands out here.

    bankruptcy is federal (none / 0) (#6)
    by diogenes on Fri May 13, 2011 at 06:04:38 PM EST
    Does this mean that if a couple is married in Vermont and wants the privileges of filing federal tax returns as married, that the state definition of marriage carries?  Or that estates of gay couples who are married in Vermont are taxed as if they were married with the spousal exemption?  Or that the spouse of a gay or lesbian partner can sue to obtain a higher social security benefit as sometimes happens with straight married spouses?

    Yes. Before DOMA, (5.00 / 1) (#7)
    by Peter G on Fri May 13, 2011 at 11:51:03 PM EST
    the federal government - in bankruptcy court, tax law, Social Security, and other contexts - respected and deferred to the varying state law definitions and standards for marriage.  After DOMA's unconstitutionality is finally recognized, or it is repealed, that will be the state of things again.