Rosenberg v. Educ. Credit Mgmt. Corp.

MEMORANDUM OPINION AND ORDER

PHILIP M. HALPERN, United States District Judge:

Educational Credit Management Corporation (“Defendant”) appeals from the January 7, 2020 Memorandum Decision and Order Granting Summary Judgment in Favor of Plaintiff and Discharging Debtor's Student Loan Under 11 U.S.C. § 523(a)(8) (“January 7th Order”) issued by Chief Judge Cecelia G. Morris of the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). The January 7th Order: (1) granted summary judgment in favor of Kevin J. Rosenberg (“Plaintiff”); (2) denied Defendant's cross-motion for summary judgment; and (3) discharged the debt owed to Defendant-a single debt, consisting of various student loans consolidated into a single amount (“Student Loan”)-under 11 U.S.C. § 523(a)(8). (See Doc. 1).

Defendant, on January 24, 2020, filed both a notice of appeal challenging the January 7th Order (id.) and a motion for leave to pursue an interlocutory appeal (Doc. 3). On March 4, 2020, Judge Seibel-before whom this appeal proceeded before it was reassigned to this Court on March 17, 2020-granted Defendant leave to appeal the January 7th Order. (Doc. 12).

2

Defendant filed both its opening brief (Doc. 20, “Def. Br.”)^[1] and the appendix of record on appeal (Doc. 21-1, “App'x”)^[2] on May 20, 2020. Plaintiff filed his opposition brief on June 23, 2020 (Doc. 22, “Opp. Br.”)^[3] and the matter was briefed fully with the submission of Defendant's reply brief on July 15, 2020 (Doc. 37, “Reply Br.”).

In addition to the parties' filings, the Court received two amicus curiae briefs and an unauthorized amicus curiae letter from non-party entities arguing that the January 7th Order should be affirmed. The first submission, an unauthorized amicus curiae letter, was filed by the Legal Services NYC Bankruptcy Assistance Project (“NYCBAP”) on June 30, 2020. (Doc. 29, “NYCBAP Ltr.”). The second submission, an amicus curiae brief permitted by Federal Rule of Bankruptcy Procedure 8017(a)(2), was filed by the New York State Department of Financial Services (“NYSDFS”) on July 3, 2020. (Doc. 31; Doc. 53, “NYSDFS Br.”).^[4] The final submission,

3

an amicus curiae brief permitted by Order of the Court, was filed by Veterans Education Services (“VES”) on July 17, 2020. (Doc. 42, “VES Br.”).^[5]

For the reasons set forth below, the January 7th Order is REVERSED insofar as it granted Plaintiff's motion for summary judgment, AFFIRMED insofar as it denied Defendant's cross-motion for summary judgment, and REMANDED for further proceedings not inconsistent with this Memorandum Opinion and Order.

BACKGROUND

Before reaching the substantive analysis at issue in this appeal, the Court recounts first the facts necessary to conduct the extant analysis. Rule 7056-1 of the Local Rules of the United States Bankruptcy Court for the Southern District of New York provides, in relevant part:

Upon any motion for summary judgment pursuant to Bankruptcy Rule 7056, there shall be annexed to the motion a separate short, and concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried. Failure to submit the statement shall constitute grounds for denial of the motion

Local Bankr. R. 7056-1(b). The party opposing such a motion, in a similar fashion, “shall include a correspondingly numbered paragraph responding to each numbered paragraph in the statement of the moving party, and if necessary, additional paragraphs . . . .” Local Bankr. R. 7056-1(c). Notably, “the statement of material facts required to be served . . . shall be deemed admitted for purposes of the motion unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party.” Local Bankr. R. 7056-1(d).

The facts outlined herein are, accordingly, taken from the record and, in substantial part, from Defendant's Response to Plaintiff's Statement of Material Facts Not in Dispute and Counter-

4

Statement of Material Facts as to Which There Exists No Genuine Issue Pursuant to Fed.R.Civ.P. 56(c) and LBR 7056-1 (“Defendant's Counterstatement”). (See App'x at 317-25).^[6]

I. Procedural History

Plaintiff filed a voluntary petition for bankruptcy under Chapter 7 of the United States Bankruptcy Code on March 12, 2018 (“Chapter 7 Proceeding”). See In Re Rosenberg, No.18-BK-35379 (Bankr. S.D.N.Y.), Doc. 1.^[7] Approximately three months after initiating the Chapter 7 Proceeding, on June 18, 2018, Plaintiff filed a parallel adversary proceeding seeking to discharge his student loan debt (“Adversary Proceeding”). See Rosenberg v. NY State Higher Educ. Servs. Corp., No. 18-AP-09023 (Bankr. S.D.N.Y.), Doc. 1.^[8] The Amended Complaint in the Adversary Proceeding presses a single claim which, in its entirety, reads:

Based on the allegations above, this Court should determine that Plaintiff's student loan debt should be discharged under either the Brunner Test or, in the alternative, the ‘Totality of the Circumstances' test

(Adv. Proc., Doc. 5 at 5; see also App'x at 43).

On November 14, 2018, the Bankruptcy Court entered a Consent Order Authorizing Educational Credit Management Corporation to Intervene in Adversary Proceeding Pursuant to

5

Fed. R. Civ. P. 24(a) and (b) and for Related Relief. (App'x at 57-59). That Order allowed Defendant, with Plaintiff's consent, to intervene in the Adversary Proceeding and reflected the parties' agreement that Defendant “in its role as specialized guarantor, has taken assignment, and is the holder, of one (1) federal consolidation loan owed by Plaintiff, with an outstanding principal balance of approximately $214, 093 as of August 9, 2018 . . . and thus is the proper party in interest in this adversary proceeding with respect to the ECMC Loan . . . .” (Id. at 57).

Plaintiff secured a general discharge of his debt in the Chapter 7 Proceeding by Order dated July 26, 2018. (See Bankr. Proc., Doc. 13). About one year later, on August 27, 2019, Plaintiff filed a motion for summary judgment in the Adversary Proceeding seeking “an Order granting discharge of his student loan debt, and granting such other relief as the Court may deem fair and just.” (App'x at 64). On October 8, 2019, Defendant opposed Plaintiff's motion and cross-moved for summary judgment. (See id. at 80-343).^[9] Plaintiff filed a “response” to Defendant's cross-motion on October 22, 2019. (See id. at 344-48). Shortly thereafter, on October 29, 2019, Chief Judge Morris held a conference and directed that additional information concerning the Student Loan be provided. (See Adv. Proc., Doc. 66 (transcript of October 29, 2019 appearance)). Defendant provided the additional information to the Bankruptcy Court by way of a declaration (with exhibits) submitted on November 19, 2019. (See App'x at 349-404).

Less than two months later, on January 7, 2020, the Bankruptcy Court granted Plaintiff's motion, denied Defendant's cross-motion, and-concluding that the debt held by Defendant

6

imposed an undue hardship on Plaintiff-discharged the Student Loan under 11 U.S.C. § 523(a)(8). (Id. at 5-16).^[10] Approximately two weeks later, on January 24, 2020, the Bankruptcy Court issued an Order Granting Summary Judgment in Favor of Plaintiff and Discharging Debtor's Student Loan Under 11 U.S.C. § 523(a)(8). (Adv. Proc., Doc. 72).

II. Plaintiff's Higher Education, Military Service, and Legal Career

Plaintiff is a veteran who financed his higher education, before and after serving in the military, with student loans. Plaintiff received his undergraduate degree in history from the University of Arizona in 1996. (App'x at 88-89, 322; see also id. at 7, 41). His studies at that institution were financed, in part, by student loans. (Id. at 88). After graduating from college, Plaintiff served in the United States Navy for about five years. (Id. at 88, 322; see also id. at 7; Opp. Br. at 4). Following his active-duty service, Plaintiff began his legal studies at Yeshiva University's Benjamin N. Cardozo School of Law (“Cardozo”) in August 2001. (App'x at 88, 322; see also id. at 7; Opp. Br. at 4). His graduate studies, like his undergraduate studies, were financed in part with student loans. (App'x at 109, 322; see also id. at 7; Opp. Br. at 4). Plaintiff graduated from Cardozo with his law degree in December 2004 and sat for the bar in mid-2005.^[11] (Id. at 89, 322). Plaintiff passed the bar and was admitted to practice in both New York and New Jersey, but his law licenses are currently in “retired status.” (Id. at 90, 323).

Following his graduation from Cardozo, Plaintiff worked for about two-and-a-half months as an associate at a law firm in Englewood Cliffs, New Jersey. (Id. at 89, 323). Plaintiff made an

7

annual salary between $55, 000 and $60, 000 in that position. (Id. at 89, 323). When asked about that employment, Plaintiff testified:

I quickly realized that I wasn't - - well, it confirmed what I found in law school, that I didn't - - I wasn't cut out to be [a] lawyer. I couldn't handle working in an office. I wasn't very good at the job. I really hated the job, and it was making me miserable right away

. . . .

I like to be creative, and I felt like my job, was, as you know, was to find what's been done before for the longest period of time . . . being stuck by myself in an office in front of a computer all day long. I didn't find the cases very interesting. I didn't find the work very interesting. You know, I would dread going in in the morning. I would, as soon as I arrived, I looked at the clock to figure when I leave for lunch. I tried to make the lunch