Grabis v. Navient Solutions, LLC et al

NOT FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	: 	Chapter 7
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Michael Grabis, 	: 	Case No. 13-10669-JLG
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Debtor. 	:
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Michael Grabis, 	:
: 	Adv. Pro. No. 15-01420-JLG
Plaintiff, 	:
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v. 	:
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Navient Solutions, LLC, et al., 	:
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Defendants. 	:
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APPEARANCES:
MICHAEL GRABIS
1 Hays Drive
Morristown, NJ 07960
Plaintiff-Debtor, pro se
PAUL J. HOOTEN
Paul J. Hooten & Associates
5505 Nesconset Highway, Suite 203
Mt. Sinai, NY 11706
Attorney for Defendant-Navient Solutions, LLC
KENNETH L. BAUM
167 Main Street
Hackensack, NJ 07601
Attorney for Defendant-ECMC Inc.
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MEMORANDUM DECISION AND ORDER RESOLVING DEBTOR’S MOTION
TO AMEND CAPTION
Michael Grabis is the chapter 7 debtor in this no-asset chapter 7 case (the “Debtor”). In
July 2013, he reopened this case to bring an adversary proceeding to discharge his student loan
debt. In December 2015, he commenced this action for that purpose by filing a complaint
(which he has amended several times). The matter before the Court is the Debtor’s motion
pursuant to section 107(b)(2) of the Bankruptcy Code, 11 U.S.C. § 107(b)(2), to change the
caption of this adversary proceeding by substituting the Debtor’s initials, “M.G.”, for his name in
the caption of the case and the case docket sheet. See AP ECF No. 107 (the “Motion”). 1 For the
reasons stated herein, the Motion is denied.
Jurisdiction
This Court has jurisdiction over the Motion pursuant to 28 U.S.C. §§ 1334(a) and 157(a)
and the Amended Standing Order of Referral of Cases to Bankruptcy Judges of the United States
District Court for the Southern District of New York (M-431), dated January 31, 2012 (Preska,
C.J.). This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
Facts
On March 5, 2013, the Debtor, through counsel, filed a voluntary petition for relief under
chapter 7 of the Bankruptcy Code in this Court. See ECF No. 1. On April 8, 2013, the chapter 7
trustee of the Debtor’s estate issued his “Report of No Distribution” in this chapter 7 case. See
ECF No. 6. On June 11, 2013, the Court entered an “Order of Discharge and Order of Final
Decree,” and closed the case. ECF No. 8. On July 31, 2013, the Debtor, acting pro se, filed a
motion to reopen his case to file an adversary proceeding to discharge his student loan debt. See
1 	“AP ECF No.” refers to a document filed of record in this adversary proceeding (15-01420 (JLG)). “ECF No.”
refers to a document filed of record in the Debtor’s chapter 7 case (13-10669 (JLG)).
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ECF No. 10. The Court granted the motion. See ECF No. 12. On December 15, 2015, the
Debtor commenced this adversary proceeding by filing a complaint for the discharge of his
student loan debt. See AP ECF No. 1. In that complaint, the Debtor did not cite to any statute or
legal authority in support of his claim for relief. However, in the Adversary Proceeding Cover
Sheet accompanying the complaint, the Debtor (i) described his “Cause of Action” as “an
adversary [proceeding] for the discharge of my student loans per my rights for a fresh start under
the U.S. Bankruptcy Code for Chapter 7[,] [§] 523(a)(8);” and (ii) specified that the “Nature of
Suit” is an action seeking relief under sections 523(a)(2), (4) and (8) of the Bankruptcy Code.2
As discussed below, the Debtor erroneously included the references to sections 523(a)(2) and
(a)(4). With leave of the Court, on May 5, 2016, the Debtor filed an amended complaint in
which, without limitation, he alleged in support of his request that his student loan debt be
discharged, that he was seeking relief against the defendants under sections 523(a)(2), 523(a)(4)
and 523(a)(8) of the Bankruptcy Code. See AP ECF No. 23. 3 On May 31, 2016, again with
leave of the Court, the Debtor amended his complaint to delete any references to sections
523(a)(2) and 523(a)(4). See AP ECF No. 34. On September 25, 2017, with leave of the Court,
2 As relevant, the Adversary Proceeding Cover Sheet includes boxes associated with claims for relief under
miscellaneous provisions of the Bankruptcy Code. The Debtor checked the boxes associated with the following
claims:
62-Dischargeability - §523(a)(2), false pretenses, false representation,
actual fraud
67-Dischargeability - §523(a)(4), fraud as fiduciary, embezzlement, larceny
63-Dischargeability - §523(a)(8), student loan
3 	The complaint amended and superseded an amended complaint filed by the Debtor on April 15, 2016. See AP
ECF No. 18. That complaint sought relief only under section 523(a)(8) of the Bankruptcy Code. Id.
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the Debtor filed his “Third Adversary Complaint for Discharge of Student Loans” (the “Third
Complaint”). See AP ECF No. 84. That is the operative complaint in this action.
Under section 727(b) of the Bankruptcy Code, a debtor is discharged from all debts that
arose prior to the order for relief, “except as provided in § 523.” 11 U.S.C. § 727(b). In turn,
section 523 states that the discharge under section 727 “does not discharge an individual debtor
from any debt [described in §§ 523(a)(1) – (19)].” 11 U.S.C. § 523(a). Section 523(a)(8)
governs the discharge of student loan debt. It provides, in substance, that student loans that are
within the scope of that section are not discharged in bankruptcy, unless the debtor can
demonstrate that not excepting such debt from discharge would impose an undue hardship on the
debtor or the debtor’s dependents. See 11 U.S.C. § 523(a)(8). “Section 523(a)(8) is ‘self-
executing.’” Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 450, 124 S. Ct. 1905,
1912, 158 L. Ed. 2d 764 (2004) (citations omitted). “Unless the debtor affirmatively secures a
hardship determination, the discharge order will not include a student loan debt.” Id. (citations
omitted). Thus, an individual debtor seeking to discharge his student loan debt must initiate an
action to obtain relief under section 523(a)(8), as the Debtor has done here. Sections 523(a)(2)
and (a)(4) of the Bankruptcy Code have no bearing on the discharge of student loan debt. Those
provisions address the dischargeability of certain so-called “intentional tort debts.” They include
(i) debts for money, property, services, or an extension, renewal or refinancing of credit, to the
extent obtained, without limitation, by false pretenses, a false representation, or actual fraud
(§523(a)(2)); and (ii) debts for fraud or defalcation while acting in a fiduciary capacity,
embezzlement, or larceny (§523(a)(4)). If properly scheduled, claims under sections 523(a)(2)
and (4) are automatically discharged in an individual debtor’s case, unless the creditor timely
files a complaint challenging the discharge of those claims. See 11 U.S.C. § 523(c)(1) ; Fed. R.
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Bankr. P. 4007(c); see generally Massa v. Addona (In re Massa), 187 F.3d 292, 295-96 (2d Cir.
1999) (“A debt that is scheduled pursuant to §521(l) and Federal Rules of Bankruptcy Procedure
1007(a) and (b)(1) is discharged unless the debt is excepted from discharge under one of the
exceptions set forth in § 523(a).”). Thus, there is a negative connotation associated with
litigation under sections 523(a)(2) and (a)(4) because complaints under those sections are
brought against debtors by creditors that are the victims of the debtors’ fraud, embezzlement or
similar intentional torts. The Debtor plainly erroneously included references to sections
523(a)(2) and (a)(4) in his Adversary Proceeding Cover Sheet.
The Third Complaint makes it clear that the Debtor is seeking relief only under section
523(a)(8) of the Bankruptcy Code. See Third Complaint [AP ECF No. 84]. 4 	The Debtor has
amended the Adversary Proceeding Cover Sheet to delete any reference to sections 523(a)(2) or
(a)(4). See Amended Adversary Proceeding Cover Sheet [AP ECF No. 116]. The amended
cover sheet reflects that the “Nature of Suit” is an action to discharge the Debtor’s student loan
debt under section 523(a)(8) of the Bankruptcy Code. The Court’s docket sheet for this
adversary proceeding – which is available through the PACER system – likewise reflects that the
“Nature[s] of Suit” is “63 Dischargeability – 523(a)(8), student loan[.]” It makes no mention of
sections 523(a)(2) and (a)(4).
The Debtor’s problem is that the information on the internet (as opposed to the Court’s
docket) about his lawsuit has not been updated to reflect that sections 523(a)(2) and (a)(4) are not
4 	In support of the Third Complaint, the Debtor alleges, in substance, that while pursuing his undergraduate
degree in business at Lafayette College, he borrowed close to $100,000 in both federal and private student loans,
that such debt had grown to more than $180,000, and that repayment of that debt presents an undue hardship to him
in his effort to obtain a “fresh start” through his bankruptcy case. See Third Complaint at 1. He explains that he
filed his adversary proceeding “as an addition to my core bankruptcy proceeding to discharge my student loans
under [Bankruptcy] Rule 4007(b), l1 U.S.C [§] 523(a)(8), as per my rights to a ‘fresh start’ under the U.S.
Bankruptcy Code.” Id.
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at issue in the Debtor’s complaint. The Debtor asserts that when a party conducts a basic internet
search using the name “Michael Grabis,” the first “result” is a report of this adversary proceeding
(“Grabis v. Sallie Mae Servicing, et al.”). It is not this Court’s official docket report. Rather, it
is the product of a docket reporting service that monitors the federal district and bankruptcy court
PACER dockets. The Debtor says that notwithstanding that the Third Complaint, the Amended
Adversary Cover Sheet and the Court’s docket now correctly reflect that the Debtor is seeking
relief only under section 523(a)(8) of the Bankruptcy Code, and do not mention sections
523(a)(2) or (a)(4), the report opens to a page that states, in part, that the “Nature of Suit” is:
67 Bankruptcy - Dischargeability - §523(a)(4), fraud as fiduciary,
embezzlement, larceny
62 Bankruptcy - Dischargeability - §523(a)(2), false pretenses, false
representation, actual fraud
63 Bankruptcy - Dischargeability - §523(a)(8), student loan
As such, it reflects the information that the Debtor mistakenly included in the Adversary
Proceeding Cover Sheet, not the information contained in the Third Complaint and the Amended
Adversary Proceeding Cover Sheet.
The Debtor maintains that he is being irreparably damaged by this internet report because
prospective employers and others who see this information incorrectly conclude that there is a
“nefarious” aspect to this adversary proceeding. He explains that:
I continue to seek employment and this adversary proceeding appearance on the
internet has continued to destroy personal relationships I counted on for my
search. Some of these relationships are over 30 years old and were invaluable and
irreplaceable. People I have known personally for the majority of my life will
now not speak to me over what the [sic] see next to my name on the internet.
Prospective employers for menial work have mentioned this lawsuit as a
disqualification for employment. Many of these people clearly believe there is a
nefarious aspect to this case.
Motion at 2. In the Motion, as supplemented by his comments on the record, the Debtor seeks an
order of this Court substituting his initials – “M.G.” – for his name in the caption of this
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adversary proceeding and the adversary proceeding docket sheet. He is clear that the relief he is
seeking is limited to the adversary proceeding, and that he is not seeking similar relief with
respect to the docket of his Chapter 7 case. He maintains that the relief he is seeking “would
simply allow [me] to maintain my first impression when meeting prospective employers and
maintain in their mind[s] the lack of possibility of a client misconstruing my name in association
with the reputation of their business.” Motion at 1. He says that his “request is fair and removes
nothing from the document and maintains all information for public knowledge.” Id. at 2.
Discussion
Section 107(a) of the Bankruptcy Code provides that “a paper filed in a case under this
title and the dockets of a bankruptcy court are public records and open to examination by an
entity at reasonable times without charge.” 11 U.S.C. § 107(a). Section 107(b)(2) provides an
exception to that general rule. It states, in relevant part, that “[o]n request of a party in interest,
the bankruptcy court shall, and on the bankruptcy court’s own motion, the bankruptcy court may
– protect a person with respect to scandalous or defamatory matter contained in a paper filed in a
case under this title.” 11 U.S.C. § 107(b)(2).5 Thus, this provision focuses on the information
contained in documents filed of record in a bankruptcy case. In re Apex Oil Co., 101 B.R 92, 98
(Bankr. E.D. Mo. 1989)(“The plain language of § 107 establishes standards only for those
documents which are filed with the bankruptcy court.”).6 For these purposes, the term
5 	Section 107(b)(1) “protect[s] an entity with respect to a trade secret or confidential research, development, or
commercial information[.]” 11 U.S.C. § 107(b)(1). It has no application to the Motion.
6 	Bankruptcy Rule 9018 implements the protection provided by § 107(b), as follows:
On motion or on its own initiative, with or without notice, the court may make any order which
justice requires (1) to protect the estate or any entity in respect of a trade secret or other
confidential research, development, or commercial information, (2) to protect any entity against
scandalous or defamatory matter contained in any paper filed in a case under the Code, or (3) to
protect governmental matters that are made confidential by statute or regulation. If an order is
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“defamatory” encompasses statements in bankruptcy court pleadings that are untrue, or
potentially untrue. See, e.g., In re Food Mgmt. Grp., LLC, 359 B.R. 560-61 (Bankr. S.D.N.Y.
2007) (finding that protection extends only to untrue statements); In re Gitto Glob. Corp., 422
F.3d 1, 16 (1st Cir. 2005) (concluding that the “defamatory” standard includes material that is
potentially untrue). In construing section 107(b)(2), courts apply the term “scandalous” to “any
allegation that unnecessarily reflects on the moral character of an individual or states anything in
repulsive language that detracts from the dignity of the court.” In re Anthracite Capital, Inc.,
492 B.R. 162, 175 (Bankr. S.D.N.Y. 2013); see also Food Mgmt. Grp., 359 B.R. 543 at n.16
(noting that “‘[s]candalous’ matter generally means ‘any allegation that unnecessarily reflects on
the moral character of an individual or states anything in repulsive language that detracts from
the dignity of the court.’” (quoting 2 J AMES WM. M OORE ET AL ., M OORE ’ S FEDERAL PRACTICE §
12.37[3] (3d ed. 2006)). For the Debtor to demonstrate a right to relief under section 107(b)(2),
he must first establish that a document or documents of record, or to be filed of record, contain
“scandalous or defamatory” matters. If he makes that showing, the Court shall “protect” him,
although the statute is silent as to the nature of that protection. See, e.g., Gitto Glob. Corp., 422
F.3d 1 at 9 (“It is true that § 107(b)(2) speaks of protection in general terms rather than of
wholesale sealing, and that courts must therefore exercise some discretion in determining what
form of protection to grant.”).
As support, the Debtor cites In re L.K., No. 1-05-13887, 2009 WL 1955455 (Bankr.
E.D.N.Y. July 6, 2009). In that case, a chapter 7 debtor sued her lender and obtained a judgment
entered under this rule without notice, any entity affected thereby may move to vacate or modify
the order, and after a hearing on notice the court shall determine the motion.
Fed. R. Bankr. P. 9018.
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discharging her student loan debt pursuant to section 523(a)(8) of the Bankruptcy Code. The
bankruptcy court’s Decision and Order granting that relief contained personal information
including the debtor’s address, salary and employment history, as well as “extremely personal”
medical information. Id. at *2. The latter included “diagnoses of severe depression and
psychiatric treatment.” Id. The debtor believed that publication of that information would make
it very difficult for her to obtain employment. Id. Accordingly, she moved the bankruptcy court
to reopen her case to seal her records and amend the title of the decision in the adversary
proceeding to substitute her initials “L.K.”, for her name. Id. at *1. The bankruptcy court found
that the debtor’s personal information, including the medical information, “does not rise to the
level of ‘scandalous or defamatory’ under 11 U.S.C. § 107(b)(2) to warrant the sealing of all
court records in the Chapter 7 case and Adversary Proceeding.” Id. at * 2. Still, the court
“recognize[d] that a stigma is attached to mental illness and the publication of the debtor’s full
name w[would] likely be a detriment to the debtor’s attempts at future employment.” Id. For
that reason, the court found that the “most appropriate remedy under the circumstances[,]” was
for all references to the full name of the debtor to be replaced with the initials, “L.K.,” in the
Decision and Order resolving the motion to reopen, the Adversary Proceeding, and the Decision
and Order in the Adversary Proceeding – including the captions of those documents.7
This case is distinguishable from In re L.K. There, the information at issue was confined
to the bankruptcy court’s Decision and Order. It had not been widely circulated and the
bankruptcy court determined that limiting the publication of the Decision and Order through the
substitution of the debtor’s initials, “L.K.,” for her full name, in the caption of the Adversary
7 	Specifically, the court “order[ed] that the caption of this Decision and Order, the caption of the Adversary
Proceeding and the Decision and Order in the Adversary Proceeding and all references to the full name of the debtor
in each of those documents . . . be amended to ‘L.K.’” 2009 WL 1955455 at *2.
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Proceeding, protected the debtor from potential prejudice that might flow from the information
contained in the Decision and Order. L.K. is inapposite when applied to the circumstances of the
case at hand. The Debtor has amended the Adversary Proceeding Cover Sheet to provide that in
his complaint, he is seeking relief only under section 523(a)(8) of the Bankruptcy Code. The
court’s docket sheet (available on PACER) reflects that information. It does not mention
sections 523(a)(2) or (a)(4). Thus, in contrast to the debtor in L.K., who sought to resolve an
issue relating to the contents of the pleadings before the Court, the Debtor is attempting to
resolve an internet reporting issue (which apparently was accurate when posted). In this regard,
the Debtor seeks relief beyond the scope of section 107(b)(2). Moreover, notwithstanding the
internet report, the Debtor can demonstrate to third parties that sections 523(a)(2) and (4) have
no application in this adversary proceeding, and that there is no “nefarious” aspect to this
litigation.
Conclusion
Based on the foregoing, the Motion is DENIED.
IT IS SO ORDERED.
Dated: New York, New York
November 20, 2018 	/s/ James L. Garrity, Jr.
United States Bankruptcy Judge
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