Lee v. McCardle (880 F.3d 1207, 2018)

MORITZ, Circuit Judge.

Plaintiffs Adrian and Angela Lee asked the bankruptcy court to declare that the automatic stay in Adam and Jennifer Pee-ples’ bankruptcy case applies to a separate lawsuit Adrian Lee filed in state court against defendant Scott McCardle. The Lees also .asserted that the automatic stay prevented McCardle from collecting attorney’s fees levied against Adrian Lee in that state-court lawsuit. The Lees further sought damages against McCardle for willfully violating the automatic stay. The bankruptcy court found—and the district court agreed—that the automatic stay didn’t apply to the' state-court lawsuit. Thus, it granted summary judgment to McCardle. The Lees appeal, arguing that the district court erred in ruling that the automatic stay didn’t apply. We don’t reach this question; instead, we vacate the district court’s judgment against Angela Lee because she lacks Article III standing to bring this lawsuit-, and we affirm summary judgment against Adrian Lee because his claims don’t fall within the Bankruptcy Code’s zone of interests.

I

In 2012, the Lees -obtained a default judgment against the Peepleses for unpaid rent and waste. In 2013, they obtained a second default judgment against the Pee-pleses for fraud. The Lees then sought to collect on those judgments by garnishing distributions that the Jack and Ruth McCardle Trust (the Trust) allegedly owed Adam Peeples. Trustee Scott McCardle responded that Adam Peeples was only an inconsequential beneficiary of the trust who wasn’t owed any distributions. Adrian Lee then sued Scott McCardle in Utah state court, both individually and in Scott McCardle’s capacity as trustee, essentially alleging that Scott McCardle’s undue influence over Ruth McCardle prompted her to disinherit Adam Peeples in a memorandum amending the Trust. Thus, Lee asserted that the memorandum must be rescinded and that the Trust owed Adam Peeples overdue distributions dating back to Ruth McCardle’s death in 2009. Lee sought to collect these distributions as Peeples’ judgment creditor.

The state court dismissed the lawsuit because it determined Lee didn’t have standing and, alternatively, the claims were time-barred. The state court further ordered Lee to pay McCardle attorney’s fees and left the case open to determine those fees. The Peepleses filed their bankruptcy petition while the state court was calculating fees. Lee then argued that the automatic stay triggered by the Peepleses’ bankruptcy petition covered his lawsuit against McCardle arid moved to stay further proceedings. The state court denied the motion and entered judgment assessing $41,889 in attorney’s fees against Lee.

The Lees initiated this adversarial proceeding against McCardle in the Peeples-es’ bankruptcy case a week before the state court entered final judgment. The Lees sought (1) a declaratory judgment to confirm that the automatic stay applied to the state-court lawsuit and (2) damages from McCardle for willfully violating the automatic stay. The Lees moved for partial summary judgment on the declaratory judgment and the issue of McCardle’s liability for violating the automatic .stay. But they reserved the issue of damages for trial. McCardle filed a cross-motion for full summary judgment. The bankruptcy court held that the automatic stay didn’t apply to the state-court lawsuit because Lee had asserted claims- against McCardle, not Adam Peeples. Thus, the bankruptcy court denied the Lees’ motion and granted McCardle’s. The Lees appealed to the district court, which affirmed for substantially the same reasons the bankruptcy court provided in its order.

II

When hearing an appeal from a district court’s review of a bankruptcy-court order, “we independently review the bankruptcy court’s decision, applying the same standard as the ... district court.” Jubber v. SMC Elec. Prods., Inc. (In re C.W. Min. Co.), 798 F.3d 983, 986 (10th Cir. 2015). We review bankruptcy-court orders granting summary judgment in adversarial proceedings de novo, id., and affirm if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Fed. R. Bankr. P. 7056 (applying Rule 56 to adversarial proceedings). The scope of the automatic stay is a question of law that we review de novo regardless of the case’s posture. Johnson v. Smith (In re Johnson), 575 F.3d 1079, 1082 (10th Cir. 2009). We also review jurisdictional questions de novo. In re Special Grand Jury 89-2, 450 F.3d 1159, 1170 (10th Cir. 2006).

A

Initially, we must address whether Angela Lee has Article III standing to bring this appeal. Article' III standing is jurisdictional; thus, “where the record reveals a colorable standing issue, we have a ‘duty to undertake an independent examination’ (sua sponte if necessary) of that issue.” United States v. Ramos, 695 F.3d 1035, 1046 (10th Cir. 2012) (quoting Morgan v. McCotter, 365 F.3d 882, 887 (10th Cir. 2004)). Article III standing requires that a “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, - U.S. -, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). The plaintiff bears the burden of “demonstrat[ing] that these requirements are met” and must do so “before a federal court can review the merits of a case.” Petrella v. Brownback, 697 F.3d 1285, 1293 (10th Cir. 2012).

We discern no plausible basis for Angela Lee to assert Article III standing here. The Lees’ alleged injury is the attorney’s fees the state court assessed against Adrian Lee. But Adrian Lee was the sole plaintiff in the state-court lawsuit, and the state court entered .judgment for attorney’s. fees against Adrian Lee alone. McCardle alluded to this issue in his response brief on appeal, but the Lees made no attempt in their reply brief to explain what injury in fact Angela Lee could have suffered. Nor did they address Angela Lee’s standing at oral argument.' Because the Lees fail to demonstrate Angela Lee’s standing to bring this case, we vacate the judgment against her below and remand to the district court with directions to dismiss her claims. See Colo. Outfitters Ass’n v. Hickenlooper, 823 F.3d 537, 544 (10th Cir. 2016) (declining to consider arguments in favor of standing that the plaintiff failed to “adequately brief[ ]”); id. at 554-55 (vacating order granting summary judgment and remanding with directions to dismiss for lack of jurisdiction where plaintiffs failed to establish Article III standing to bring claims).

B

Next, we address McCardle’s assertion that Adrian Lee’s claims fall outside the zone of interests protected by the automatic stay. Although traditionally viewed as a prudential- or statutory-standing requirement, the zone-of-interests doctrine isn’t actually a matter of standing at all; instead, it merely asks whether a particular federal cause of action “encompasses a particular plaintiffs claim.” Lexmark Int’l v. Static Control Components, Inc., - U.S. -, 134 S.Ct. 1377, 1387, 188 L.Ed.2d 392 (2014); see also United States v. Wells, 873 F.3d 1241, 1261 (10th Cir. 2017) (“[T]he question that courts have misguidedly used the term ‘standing' to describe ... is really whether a particular litigant is a member of a class that Congress has authorized to sue .... ”). To answer this question, “we presume that a statute ordinarily provides a cause of action ‘only to plaintiffs whose interests fall within the zone of interests protected by the law invoked.’” Bank of Am. Corp. v. City of Miami, - U.S. -, 137 S.Ct. 1296, 1302, 197 L.Ed.2d 678 (2017) (quoting Lexmark, 134 S.Ct. at 1388); see also Lexmark, 134 S.Ct. at 1388 (“Congress is presumed to ‘legislat[e] against the background of the zone-of-interests limitation, “which applies unless it is expressly negated.’ ” (quoting Bennett v. Spear, 520 U.S. 154, 163, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997))).

There’s no single test to determine whether a cause of action falls within a statute’s zone of interests; rather “the breadth of the zone of interests varies according to the provisions of law at issue.” Bennett, 520 U.S. at 163, 117 S.Ct. 1154. Thus, in the context of the Administrative Procedures Act (APA), under which zone-of-interests issues often arise, the Supreme Court has “said that the test ‘forecloses suit only when a plaintiffs “interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that” ’ Congress authorized that plaintiff to sue.” Lexmark, 134 S.Ct. at 1389 (quoting Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567 U.S. 209, 225, 132 S.Ct. 2199, 183 L.Ed.2d 211 (2012)). But “what comes within the zone of interests of a statute for purposes of obtaining judicial review of administrative action under the ‘generous review provisions’ of the APA may not do so for other purposes.” Id. (quoting Bennett, 520 U.S. at 163, 117 S.Ct. 1154). We must therefore “us[e] traditional tools of statutory interpretation” to decide whether a claim falls within a particular statute’s zone of interests. Id. at 1387.

With this understanding of the zone-of-interests doctrine, we analyze whether Lee’s claims fall within the Bankruptcy Code’s zone of interests. Lee asserts two distinct claims: (1) a claim for a declaratory judgment pronouncing that 11 U.S.C. § 362(a) automatically stayed the state-court lawsuit and (2) a claim for damages under 11 U.S.C. § 362(k) for McCardle’s willful violation of that automatic stay. We analyze these claims separately because these two subsections of § 362 don’t necessarily share the same zone of interests.

1

Section 362(a) imposes an automatic stay when a debtor files a bankruptcy petition. In relevant part, this stay prevents, “the