Eisenberg v. Swain

233 A.3d 13

Michael D.J. EISENBERG, Appellant,

v.Shirley SWAIN, Appellee.

No. 19-CV-189

District of Columbia Court of Appeals.

Submitted April 23, 2020

Decided July 30, 2020

Michael D.J. Eisenberg, pro se.

Shirley Swain, pro se.

Before Fisher, Easterly, and Deahl, Associate Judges.

Deahl, Associate Judge:

Michael D.J. Eisenberg was awarded $7,800 in unpaid attorney's fees against his former client, Shirley Swain. After garnishing $1,499 of Ms. Swain's wages, Mr. Eisenberg learned that she had received a discharge of debt through a Chapter 7 bankruptcy filing in the United States Bankruptcy Court for the Western District of Virginia. The Superior Court ordered Mr. Eisenberg to return the garnished wages to Ms. Swain until a decision was reached on whether his judgment against her was included in the bankruptcy discharge. Mr. Eisenberg did not comply. The Superior Court then issued an order that included three rulings: (1) it ruled that Ms. Swain's debt to Mr. Eisenberg had been discharged, (2) it held Mr. Eisenberg in contempt of court for his failure to return the garnished wages, and (3) it rejected Mr. Eisenberg's request to add Ms. Swain's bankruptcy attorney as a defendant in the underlying breach of contract case after Mr. Eisenberg alleged that Ms. Swain's attorney had conspired with her to defraud Mr. Eisenberg. Mr. Eisenberg now challenges each of those rulings. We detect no error and affirm.

I.

In April 2011, Shirley Swain retained Michael D.J. Eisenberg as her counsel in a matter against her employer, the Department of Veterans Affairs, before the Equal Employment Opportunity Commission. Ms. Swain agreed to pay Mr. Eisenberg a true retainer and a contingency fee in exchange for representation. In April 2012, Ms. Swain entered into a confidential settlement agreement with the Department of Veterans Affairs, pursuant to which they paid Mr. Eisenberg $48,000 and Ms. Swain $35,000.

After receiving his $48,000 payment from Ms. Swain's employer, Mr. Eisenberg maintained that he was still owed $7,800: $7,000 of Ms. Swain's $35,000 share of the settlement (reflecting a 20% portion of her award in contingency fees, in addition to the $48,000 he had already collected) along with an additional $800 in unpaid retainer. In July 2012, Mr. Eisenberg contacted Ms. Swain and requested the outstanding payment. According to Mr. Eisenberg, Ms. Swain acknowledged that she owed the money, but informed him that she had deposited the funds into her own bank account. In August 2012, Ms. Swain notified Mr. Eisenberg that she did not have the funds to pay him. Mr. Eisenberg promptly filed a lawsuit in Superior Court alleging breach of contract and quantum meruit and requesting damages in the amount of $7,800 plus interest. In response, Ms. Swain did not dispute that she owed Mr. Eisenberg $7,800, though she claimed that she was under the initial impression that all payments were satisfied by the $48,000 sum Mr. Eisenberg received from the settlement and the $2,200 she had already paid in retainer fees. In addition, Ms. Swain maintained that she was not able to pay Mr. Eisenberg $7,800 and that Mr. Eisenberg had repeatedly refused to enter into a payment plan.

While Mr. Eisenberg's motion for summary judgment was pending before the trial court, Ms. Swain filed for Chapter 13 bankruptcy in the United States Bankruptcy Court for the Western District of Virginia, and the Superior Court proceedings were stayed. In June 2015, Ms. Swain's Chapter 13 bankruptcy case was dismissed, and the trial court proceedings continued. In September 2015, Judge Dixon granted summary judgment for Mr. Eisenberg on the basis that Ms. Swain did not contest that she owed the $7,800 and neither Mr. Eisenberg's refusal to accept a payment plan nor Ms. Swain's inability to pay the full amount was sufficient to create a material dispute of fact regarding the underlying contractual breach.

Mr. Eisenberg tried to collect the $7,800 judgment from Ms. Swain by hiring a collection agency called Accounts Receivable but was unsuccessful. In April 2016, Mr. Eisenberg obtained a writ of attachment allowing him to garnish Ms. Swain's wages directly from her employer.

In July 2016, Ms. Swain initiated a second bankruptcy proceeding in the United States Bankruptcy Court for the Western District of Virginia, this time under Chapter 7. Ms. Swain included the debt she owed to Mr. Eisenberg in her filings but listed the creditor as Accounts Receivable, Mr. Eisenberg's collection company, rather than Mr. Eisenberg himself. As a result, Mr. Eisenberg was not notified of Ms. Swain's bankruptcy filing until October 2016, when he received a letter from Ms. Swain's bankruptcy attorney asserting that Ms. Swain's debts had been discharged. By that time, Mr. Eisenberg had garnished a total of $1,499 in wages from Ms. Swain. After receiving notification of the bankruptcy discharge, Mr. Eisenberg filed a motion to stay garnishment in the Superior Court. In November 2016, the Superior Court granted Mr. Eisenberg's motion and vacated the writ of attachment. In an accompanying certificate issued by the clerk of the court, Mr. Eisenberg was instructed to return all funds he had obtained through garnishment to Ms. Swain.

In January 2017, Mr. Eisenberg filed a motion to stay the return of garnished funds. He argued that although the court "ordered the moneys be returned to Ms. Swain," he had not exhausted his legal remedies in bankruptcy court and the $1,499 should be kept in his trust account "in order to assure that the moneys are protected and the status quo is maintained." Judge Florence Y. Pan denied Mr. Eisenberg's motion and directed him to comply with the previous order by relinquishing the garnished funds. Specifically, Judge Pan found that Mr. Eisenberg was "not entitled to garnishment at [the] time, and it would be unjust to allow [Mr. Eisenberg] to retain [Ms. Swain]’s money pending the outcome of [Ms. Swain]’s bankruptcy matter."

Mr. Eisenberg still refused to return the garnished funds to Ms. Swain. In February 2018, Mr. Eisenberg brought a motion in bankruptcy court to reopen Ms. Swain's Chapter 7 case, arguing that his debt should not have been discharged because he was not listed as a creditor and thus he was not notified of his opportunity to dispute the discharge. The bankruptcy court concluded that the listing of Accounts Receivable as a creditor was not sufficient to apprise Mr. Eisenberg of the bankruptcy proceedings and that he was not provided with notice of his right to contest the discharge of the debt. It nonetheless declined to reopen the bankruptcy proceeding, finding that the Superior Court was better positioned to determine whether the debt at issue had been discharged.

In accordance with the bankruptcy court's order, Mr. Eisenberg filed a motion in Superior Court to reopen the breach of contract case for a determination regarding the discharge of the debt. Judge Pan held a hearing on December 3, 2018. At this hearing, Judge Pan learned that in the nearly two years since Mr. Eisenberg had been ordered to return Ms. Swain's garnished wages, he had instead held the money in his trust account. Judge Pan asked for further briefing on the discharge of the debt and issued an order to show cause why Mr. Eisenberg should not be held in contempt for failing to comply with the court's February 23, 2017, order requiring him to return the $1,499 to Ms. Swain. Both parties submitted briefing on the discharge of the debt and the propriety of holding Mr. Eisenberg in contempt. In addition, Mr. Eisenberg filed a motion to join Ms. Swain's bankruptcy attorney, Easter P. Moses, as a defendant in the breach of contract case. Judge Pan held another hearing on February 25, 2019, and issued an oral ruling followed by a written order. Judge Pan found that Ms. Swain's debt to Mr. Eisenberg had been discharged, held Mr. Eisenberg in contempt for violating a court order, and denied Mr. Eisenberg's motion to join Mr. Moses as a defendant. Judge Pan issued sanctions for Mr. Eisenberg's contempt in the form of compensatory damages, ordering Mr. Eisenberg to pay Ms. Swain $978.22 in addition to the $1,499 in garnished wages, which he was instructed to return "forthwith."

II.

We begin with the core question at issue: whether Ms. Swain's $7,800 debt to Mr. Eisenberg was subject to the discharge order of the United States Bankruptcy Court for the Western District of Virginia. We agree with the trial court that it was.

When a discharge is issued in a Chapter 7 no-asset bankruptcy case, it encompasses "all debts that arose before the date of the order for relief." 11 U.S.C. § 727(b) (2018). This includes both scheduled and unscheduled debts unless the debt itself was incurred fraudulently or maliciously, per 11 U.S.C. § 523(a)(2), (4), or (6).¹ See 11 U.S.C. § 523(a)(3)(B) ; Judd v. Wolfe , 78 F.3d 110, 113–14 (3d Cir. 1996) ; In re Rollison , 579 B.R. 67, 72 (Bankr. W.D. Va. 2018). Because of the broad and retroactive language of § 727(b), "all of a debtor's prepetition debts—both those scheduled and those not scheduled—are discharged upon entry of the discharge order." In re Rollison , 579 B.R. at 71–72 ; In re Davis , No. 18-12412-JDL, 2019 WL 2511756, at *2 (Bankr. W.D. Okla. June 17, 2019) ("[A] debt which was not scheduled in a chapter 7 no-asset case is subject to the discharge order unless it is a debt of the kind specified in section 523(a)(2), (4), or (6).") (citing Rollison , 579 B.R. at 72 ). When a question arises after the issuance of a discharge regarding whether a particular unscheduled debt falls within a § 523(a) exemption, it does not require reopening the bankruptcy case. Rollison , 579 B.R. at 75. This is because "the relief sought from the court by the parties after the case has closed is not an order to discharge the debt, but rather a declaratory order that the debt was or was not already discharged." In re Keenom , 231 B.R. 116, 125 (Bankr. M.D. Ga. 1999). Seeing no need to...