Ricketson v. Florida Department of Environmental Protection (In Re Ricketson)

Citations: 190 B.R. 684; 9 Fla. L. Weekly Fed. B 253; 1995 Bankr. LEXIS 1853; 1995 WL 770641Docket: Bankruptcy No. 93-765-BKC-3P7. Adv. No. 95-241

Court: United States Bankruptcy Court, M.D. Florida; December 18, 1995; Us Bankruptcy; United States Bankruptcy Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Patricia Ricketson and Harry Ricketson filed for Chapter 7 bankruptcy on February 19, 1993. The Florida Department of Environmental Protection (DEP) was listed as a creditor. Prior to the bankruptcy, on December 22, 1989, DEP sued Ricketson for environmental violations, resulting in a final judgment against her for $75,000 in civil penalties on September 22, 1994. Ricketson claimed these penalties were dischargeable under 11 U.S.C. § 523(a)(7)(B) and filed a motion for partial summary judgment regarding this claim. Additionally, she alleged that DEP violated 11 U.S.C. § 524 by continuing the lawsuit after the bankruptcy discharge and not recognizing the automatic stay. DEP countered with a motion to dismiss, arguing that Ricketson's claims were barred by res judicata and that bankruptcy protections did not apply to governmental actions. The court must determine whether to grant Ricketson's motion for summary judgment and whether to dismiss DEP's motion.

Ricketson's Motion for Summary Judgment on Count I of the Complaint seeks a judicial determination based on the absence of genuine issues of material fact, as outlined by Federal Rules of Civil Procedure and Bankruptcy Procedure. The burden rests on Ricketson to demonstrate that no material factual disputes exist. Since the facts are undisputed, the Court’s focus is on the legal interpretation of 11 U.S.C. § 523(a)(7)(B), specifically whether it pertains exclusively to tax penalties or can extend to other governmental penalties.

Section 523(a)(7) states that certain debts, including fines and penalties payable to governmental units that do not compensate for actual pecuniary loss, are non-dischargeable in bankruptcy, with a specific mention of tax penalties. The Court notes that neither the Bankruptcy Court for the Middle District of Florida, the Eleventh Circuit, nor the Supreme Court has ruled on the applicability of subsection 523(a)(7)(B) beyond tax penalties.

In examining prior case law, the Court references *In re Daugherty*, which concluded that subsection 523(a)(7)(B) is limited to tax penalties, reasoning that the statutory structure confines the three-year limitation to tax-related debts. Conversely, the *In re Corbly* decision indicated that non-tax penalties could fall under subsection 523(a)(7)(B), as there is no explicit statutory language restricting its application to tax penalties. Lastly, the *Seals* case reaffirmed that subsection 523(a)(7)(B) applies solely to tax penalties. The Court intends to follow these precedents in determining the applicability of the statute in Ricketson's case.

The court in Hemingway determined that the costs awarded to the Attorney General against a debtor do not fall under the category of "fine, penalty, or forfeiture" as defined by 11 U.S.C. § 523(a)(7)(B). The court noted that this subsection typically pertains to tax-related penalties rather than civil costs, aligning with legal commentary indicating that the statute is specific to tax fines and penalties. Ricketson contends that the $75,000 civil penalties imposed by DEP are not dischargeable under § 523(a)(7)(B) since they are related to events occurring over three years prior to his bankruptcy filing. The court concluded that § 523(a)(7)(B) applies only to tax penalties and dismissed Count I of Ricketson's complaint.

Regarding DEP's motion to dismiss the adversary proceeding, the court evaluated two arguments: the doctrine of res judicata and failure to state a claim. The court rejected the res judicata argument, noting that the state court's Final Judgment did not address Ricketson's dischargeability defense, allowing this claim to proceed. Additionally, the court found that dismissals for failure to state a claim are disfavored and that DEP did not demonstrate the legal insufficiency of Ricketson's claims. Therefore, both the motion to dismiss based on res judicata and the motion for failure to state a claim were denied.

Count II of the complaint alleges that the Department of Environmental Protection (DEP) violated 11 U.S.C. § 524 by pursuing litigation against Ricketson despite the automatic stay and discharge. DEP argues that it is not bound by these provisions as the penalties are non-dischargeable. The Court finds Ricketson's complaint legally sufficient, ruling that DEP has failed to demonstrate its insufficiency. Consequently, DEP's Motion to Dismiss Count II is denied. Conversely, Ricketson's Motion for Partial Summary Judgment on Count I is denied and Count I is dismissed, as 11 U.S.C. § 523(a)(7)(B) pertains only to tax-related fines and penalties. The Court orders DEP to file an answer to Count II within 20 days and schedules a pre-trial conference for January 31, 1996.