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Smith v. Capital One Bank (USA), N. A.

United States Court of Appeals, Seventh Circuit

December 22, 2016

Karen Smith, Plaintiff-Appellant,
v.
Capital One Bank (USA), N. A. and Kohn Law Firm S.C., Defendants-Appellees.

          Argued November 4, 2016

         Appeals from the United States District Court for the Eastern District of Wisconsin. Nos. 15-CV-0849 and 15-CV-0851 - Lynn Adelman, Judge.

          Before Flaum and Kanne, Circuit Judges, and MAGNUS-Stinson, District Judge. [*]

          Flaum, Circuit Judge.

         Plaintiff-appellant Karen Smith filed for bankruptcy. During the course of the bankruptcy proceedings, defendant-appellee Capital One Bank USA, N.A. ("Capital One"), represented by defendant-appellee Kohn Law Firm S.C. ("Kohn"), filed suit against Smith's husband to collect on a credit card debt he owed. Appellant Smith initiated an adversary proceeding in the bankruptcy court, alleging that appellees had violated the co-debtor stay of 11 U.S.C. § 1301. The bankruptcy court granted summary judgment for appellant Smith, holding that Capital One's lawsuit against Smith's husband had violated the co-debtor stay due to the operation of Wisconsin marital law, Wis.Stat. § 766.55, which makes marital property available to satisfy certain kinds of debts. On interlocutory appeal, the district court reversed the bankruptcy court, holding that the co-debtor stay did not apply despite the application of Wisconsin marital law. We affirm.

         I. Background

         Appellant Smith filed for bankruptcy under Chapter 13 in July 2011. Prior to that, Smith's husband had obtained a Capital One credit card that he used for consumer debts for the Smith family. Smith's husband did not join Smith's bankruptcy petition and Smith did not list him (or anyone else) as a co-debtor.[1] In December 2011, the bankruptcy court confirmed Smith's Chapter 13 plan.

         In July 2014, during Smith's repayment period under her bankruptcy plan, Capital One, through Kohn, sued Smith's husband in Wisconsin state court over amounts owed on his credit card account. Capital One received judgment in its favor in August 2014, but has not attempted to enforce the judgment.

         In February 2015, Smith initiated an adversary proceeding in bankruptcy court against appellees. She brought six causes of action, alleging violations of the co-debtor stay, 11 U.S.C. § 1301(a); the Wisconsin Consumer Act, Wis.Stat. §427.104; and the Fair Debt Collection Practices Act, 15 U.S.C. § 1692(d)-(e). All of Smith's claims rested on the theory that Smith's husband's credit card debt was covered by the co-debtor stay due to the operation of Wisconsin marital law, Wis.Stat. § 766.55, and that Capital One and Kohn had violated the co-debtor stay by suing Smith's husband.

         In April 2015, Smith moved for summary judgment. The bankruptcy court granted Smith's motion, holding that "the Capital One debt is a debt of the Debtor [appellant Smith] subject to the co-debtor stay."

         Capital One and Kohn sought and obtained leave for an interlocutory appeal to the district court. The district court held that the husband's credit card debt was not Smith's consumer debt, reversed the bankruptcy court, and remanded the case back to the bankruptcy court to enter judgment in appellees' favor. The court concluded that "consumer debt of the debtor, " as used in § 1301(a), does not include a debt for which the debtor is not personally liable but that may be satisfied from the debtor's interest in marital property. Though the district court's order remanded the case to the bankruptcy court, the former's decision effectively ended Smith's action, since all of her claims depended on the application of the co-debtor stay rule. Smith now appeals that decision.

         II. Discussion

         This Court has jurisdiction over appeals from final district court decisions. 28 U.S.C. § 158(d)(1). In the bankruptcy context, both the bankruptcy court decision and the district court decision must be final. In re Behrens, 900 F.2d 97, 99 (7th Cir. 1990). Though "a district court's decision on appeal from a bankruptcy court's interlocutory order is generally not regarded as final and appealable'' id., a "district court's decision on a bankruptcy court's interlocutory order may leave nothing for the bankruptcy court to do, and thus transform the bankruptcy court's interlocutory order into a final appealable order, " id. n.1 (citing In re Cash Currency Exch., Inc., 762 F.2d 542, 545 n.3 (7th Cir. 1985)); see also In re Jartran, 886 F.2d 859, 861 (7th Cir. 1989) ("[A] district court order remanding the case to the bankruptcy court may qualify as final if all that remains to do on remand is a purely ... ministerial task ... ."). In this case, the district court's reversal of the bankruptcy court's grant of summary judgment foreclosed all of Smith's causes of action and left nothing for the bankruptcy court to do except enter judgment in appellees' favor. Therefore, we may review the district court's decision.

         We review a summary judgment decision de novo, with factual inferences construed in favor of the non-moving party. Chi. Reg'l Council of Carpenters Pension Fund v. ...


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