No. 53 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. October 2011
Bankruptcy Courts Prove Surprisingly Hostile to “Defense of Marriage” Act
By John T. Hundley, Jhundley@lotsharp.com, 618-242-0246
The federal “Defense of Marriage” Act, Pub. L. 104-199, 110 Stat. 2419, codified in pertinent part at 1 U.S.C. § 7 (“DOMA”), has received an unpleasant welcome from an unexpected quarter – the nation’s bankruptcy courts.
That act defines the term “spouse” for purposes of federal law as “a person of the opposite sex who is a husband or a wife.” It also defines “marriage” as “only a legal union between one man and one woman as husband and wife.”
DOMA has raised its head in bankruptcy proceedings by virtue of 11 U.S.C. § 302(a), which permits filing of a joint bankruptcy petition “by an individual that may be a debtor under such chapter and such individual’s spouse.” Although President Obama has ordered the Executive Branch to stop enforcing DOMA, in at least two recent cases personnel from the office of the United States Trustee (“UST”) have moved to dismiss joint bankruptcy petitions filed by gay and lesbian married couples. In re Somers, 448 B.R. 677 (Bankr. S.D.N.Y. 2011), and In re Balas, 449 B.R. 567 (Bankr. C.D. Cal. 2011).
In Somers, the debtors were legally married in a Vermont ceremony and shortly thereafter filed a joint petition under Chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 701 et seq.). The UST moved to dismiss “for cause” under 11 U.S.C. § 707(a). Although DOMA bears little resemblance to the express “cause” grounds stated in § 707(a), the court noted those grounds are “illustrative, not exhaustive,” and declined to reject the motion on that ground. It also said that In re Favre, also known as In re Allen, 186 B.R. 769 (Bankr. N.D. Ga. 1995), had appeared to say that if a legally-married, same-sex couple were involved, a joint petition would be proper, but Favre was a pre-DOMA case and such comments were dicta, so Favre was not controlling.
While the bankruptcy court thus had to move to the merits, it declined to undertake the full-fledged review of the validity of DOMA which the Balas court subsequently issued. Instead, Somers viewed the motion before it as involving a degree of discretion. Citing a leading bankruptcy treatise, it said a court exercising discretion under § 707(a) “must consider any extenuating circumstances as well as the interests of various parties.” It found that the interests of neither debtors nor creditors would be served by dismissal or severance (in part because the bankruptcy case had proceeded a significant way on its course through Chapter 7), and it said that the facts that the Executive Branch was no longer defending DOMA and that the UST provided no significant supporting rationale in the instant case were important “extenuating circumstances” supporting denial of the UST’s motion.
If Somers thus was equivocal, Balas was not, characterizing the case as “about equality, regardless of gender or sexual orientation, for two people”. The 20 signatory judges gave DOMA a constitutional review and found it wanting.
In Balas, a gay couple, married under former California law, filed for protection under Chapter 13 of the Bankruptcy Code (11 U.S.C. §§ 1301 et seq.). The UST moved to dismiss for “cause” under 11 U.S.C. § 1307(c). Again, his DOMA challenge bore little resemblance to the examples of “cause” stated in the statute. Again, however, the court did not rely upon the novelty of the challenge to preclude it.
Instead, the court proceeded to an equal protection analysis (the Equal Protection Clause of the 14th Amendment (“EPC”) having been held applicable to the federal government under the Due Process Clause of the 5th Amendment in numerous prior cases). Agreeing with a statement by Attorney General Eric Holder that classifications based on sexual orientation should be subject to heightened judicial scrutiny under the EPC, the court found DOMA wanting under heightened scrutiny for several reasons.
First, under heightened scrutiny, a court must examine “actual [governmental] purposes, not rationalizations for actions in fact differently grounded”. The court found that the legislative record underlying DOMA is filled with “stereotype-based thinking and animus the Equal Protection Clause is designed to guard against.”
Second, the court said that under heightened scrutiny the government was obligated to demonstrate that a justification exists for application of the challenged policy in the particular case. The court found no valid governmental purpose to be advanced by dismissal of the bankruptcy case or severance of the debtors before it.
Third, the court found that sexual orientation was an appropriate classification to be given heightened scrutiny. Treating sexual orientation as a “defining and immutable characteristic,” causing lesbians and gays to face “significant political obstacles . . . irrelevant to an individual’s ability to society,” the court said homosexuality should be treated like other “suspect classifications” which are accorded heightened scrutiny by the courts.
Fourth, the court held that DOMA could not survive even the lowest standard of review imposed under the EPC – that the challenged policy have some “rational basis” to a permissible governmental purpose. “This court cannot conclude from the evidence or the record in this case that any valid governmental interest is advanced by DOMA as applied to the Debtors”, the court ruled.
Accordingly, the motion to dismiss the Chapter 13 case was denied.
Not all bankruptcy courts have been so inhospitable to the act. In re Kandu, 315 B.R. 123 (Bankr. W.D. Wash. 2004), enforced it in the case of a lesbian couple married under British Columbia law. Although much of the opinion’s reasoning would support DOMA in any case, Kandu can be distinguished because it fails to raise the issues of federalism which arise when a court is asked to use DOMA to disregard a state’s law.
Balas and Somers are attracting considerable attention. Look for more cases to raise these issues as the nation’s current economic problems continue for persons of all sexual orientations.
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