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MATTHEWS v. EDUCATIONAL CREDIT MANAGEMENT CORP.
449 B.R. 265 (2011)
Pamela MATTHEWS, Appellant/Plaintiff
v.
EDUCATIONAL CREDIT MANAGEMENT CORP., Appellee/Defendant.
Civil Action No. 5:10-cv-00232-KS.
United States District Court, E.D. Kentucky, Central Division at Lexington.
March 4, 2011.
Adam R. Kegley, Edward Michael King, Frost Brown Todd LLC, Lexington, KY, Anthony Lavell Brown, Educational Credit Management Corporation, St. Paul, MN, Jeffrey S. Rosenstiel, Frost Brown Todd LLC, Cincinnati, OH, for Appellee/Defendant.
OPINION & ORDERKARL S. FORESTER, Senior District Judge. This matter is before the Court on appeal from the June 3, 2010 Order of the United States Bankruptcy Court for the Eastern District of Kentucky granting judgment in favor of the Defendant-Appellee, Educational Credit Management Corporation ("Defendant"). Rather than pursue her appeal before the Bankruptcy Appellate Panel of the Sixth Circuit Court of Appeals, Plaintiff-Appellant Pamela Ileen Matthews ("Plaintiff") elected to have her appeal heard before this Court. I. RELEVANT FACTS AND PROCEDURAL HISTORY On March 29, 2009 (the "Petition Date"), Plaintiff filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Kentucky, Lexington Division. The case was subsequently converted from a Chapter 11 case to a Chapter 7 case on June 1, 2009. On July 17, 2009, Plaintiff initiated an adversary proceeding against Sallie Mae, Inc. ("Sallie Mae") seeking to discharge certain student loan obligations. [BR# 1].1 A default judgment was entered against Sallie Mae on September 11, 2009. [BR# 11]. On September 17, 2009, Defendant filed a motion seeking to intervene in Plaintiff's adversary proceeding against Sallie Mae as "the assignee of certain student loan debt formerly owed by [Plaintiff] to Michigan Higher Education Student Loan Authority ("MHESLA"), as guarantor." [BR# 16 at ¶¶ 2, 3]. Defendant also stated that Plaintiff's identification of Sallie Mae as the holder of her student loan indebtedness was erroneous, as Sallie Mae was never the holder of Plaintiff's debt. [Id. ¶ 4]. Plaintiff objected to Defendant's motion to intervene on various grounds, including that the contractual basis upon which Defendant asserted a right to intervene in the case was invalid. [BR# 17]. After a hearing, the Bankruptcy Court entered an Order granting Defendant's motion to intervene on October
26, 2009. [BR# 28]. On January 31, 2010, Plaintiff filed a motion to dismiss Defendant, again challenging Defendant's standing. After a hearing, the Bankruptcy Court entered an Order denying Plaintiff's motion. [BR# 45]. On April 5, 2010, Plaintiff filed a motion for summary judgment, challenging Defendant's standing for a third time. [BR# 47]. After a hearing, the Bankruptcy Court entered an Order denying Plaintiff's motion for summary judgment. [BR# 57]. Although defeated three times, Plaintiff refused to give up and on May 26, 2010, filed a motion for judgment as a matter of law, challenging Defendant's standing yet again. [BR# 75]. After a hearing, the Bankruptcy Court entered an Order denying Plaintiff's motion. [BR# 91]. On May 27, 2010, the matter was tried in front of the Bankruptcy Court. On June 3, 2010, the Bankruptcy Court entered an Order entering judgment in favor of Defendant. [BR# 92]. In its Order (the "Judgment"), the Court found that Plaintiff failed to meet the first two prongs of the test set forth in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir.1987), as adopted in the Sixth Circuit by Tirch v. Pennsylvania Higher Education Assistance Agency, 409 F.3d 677, 682 (6th Cir. 2005) and Oyler v. Educational Credit Management Corp., 397 F.3d 382 (6th Cir. 2005).2 The Judgment did not address the issue of Defendant's standing, although the Judgment did specifically incorporate by reference the Bankruptcy Court's findings and conclusions provided to the parties from the bench at the conclusion of the May 27, 2010 trial. Although these findings and conclusions mostly addressed the undue hardship issue, at the trial, the Bankruptcy Court briefly addressed Plaintiff's motion for judgment as a matter of law and reaffirmed its prior rulings that Defendant does have standing in the case and that it was proper to allow Defendant to intervene as assignee of the guarantor. [BR# 104 at p. 7-8]. After ruling on the motion orally, the Bankruptcy Court requested that counsel tender an order overruling the motion for judgment as a matter of law. The Bankruptcy Court entered this Order on June 3, 2010. [BR# 91]. On June 10, 2010, Plaintiff filed a Notice of Appeal with the Bankruptcy Court. [BR# 94; DE #1]. In her Notice of Appeal, Plaintiff specifies that she is appealing "from the judgment, order, or decree of the bankruptcy judge (judgment denying Plaintiff undue hardship discharge of student loan indebtedness pursuant to 523(8)(a) of the United States Bankruptcy Code entered in this adversary proceeding on the third (3rd) day of June, 2010 [sic]." Plaintiff attached the Judgment to her Notice of Appeal. Plaintiff's Notice does not refer to any of the Bankruptcy Court's prior orders on Plaintiff's various motions challenging Defendant's standing. However, on June 24, 2010, as required by Federal Rule of Bankruptcy Procedure 8006, Plaintiff filed a Statement of Issues on Appeal with the Bankruptcy Court identifying the issues to be presented on appeal. [BR# 99]. In her Statement of Issues on Appeal, Plaintiff identifies issues related to her previous challenges to Defendant's standing.
1. Docket entries for pleadings filed in Plaintiff's adversary proceeding are hereinafter referred to as "BR# ___." Docket entries for pleadings filed with this Court shall be referred to as "DE# ___."
2. Brunner requires a debtor seeking a partial discharge of student loans due to "undue hardship" to make the following three-part showing: "(1) that the debtor cannot maintain, based on current income and expenses, a `minimal' standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans." Brunner, 831 F.2d at 396.
3. With respect to Plaintiff's argument that she had no obligation to know the existence of or the identity of the true guarantors of her loan, the Court notes that Plaintiff did not raise this argument until filing her reply to Defendant's supplemental brief. As this argument was not raised in Plaintiff's initial brief, Plaintiff deprived Defendant of an opportunity to respond. Thus, the Court finds it inappropriate to consider this argument. U.S. v. Demjanjuk, 367 F.3d 623, 638 (6th Cir.2004) (claims asserted for the first time in reply brief are beyond the scope of the appellate court's review); Aetna Cas. and Sur. Co. v. Leahey Constr. Co., 219 F.3d 519, 545 (6th Cir.2000).
4. To the extent that any of Plaintiff's arguments presented in her appellate briefs were not presented to the Bankruptcy Court, "[i]t is well-settled that, absent exceptional circumstances, a court of appeals will not consider an argument by an appellant that was not presented to or considered by the trial court." Estate of Quirk v. Commissioner of Internal Revenue, 928 F.2d 751, 757-58 (6th Cir. 1991). As explained in Quirk:
Propounding new arguments on appeal in attempting to prompt us to reverse the trial court—arguments never considered by the trial court—is not only somewhat devious, it undermines important judicial values. The rule disciplines and preserves the respective functions of the trial and appellate courts. If the rule were otherwise, we would be usurping the role of the first-level trial court with respect to the newly raised issue rather than reviewing the trial court's actions. By thus obliterating any application of a standard of review, which may be more stringent than a de novo consideration of the issue, the parties could affect their chances of victory merely by calculating at which level to better pursue their theory. Moreover, the opposing party would be effectively denied appellate review of the newly addressed issue, save in the rare instances of Supreme Court review. In order to preserve the integrity of the appellate structure, we should not be considered a "second shot" forum, a forum where secondary, back-up theories may be mounted for the first time.
Id. at 758 (quoting Anschutz Land & Livestock Co., Inc. v. Union Pacific Railroad Co., 820 F.2d 338, 344 at n. 5 (10th Cir. 1987)).
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