20 Bankruptcy Judges Issue Joint Opinion Holding DOMA Section 3 Unconstitutional as Applied to Bankruptcy Cases

In a most unusual action, twenty U.S. Bankruptcy Judges in the Central District of California have joined together in an opinion denying a motion by the United States Trustee to dismiss a bankruptcy petition that was jointly filed by a same-sex married couple, holding that to grant the motion would deny the petitioners' equal protection rights under the 5th Amendment of the United States Constitution.  The June 13 ruling in In re Gene Douglas Balas and Carlos A. Morales, 2011 Westlaw 2312169, Case No. 2:11-bk-17831 TD (pending before Bankruptcy Judge Thomas B. Donovan), holds that Section 3 of the Defense of Marriage Act, 1 U.S.C. sec. 7, is unconstitutional when evaluated in the context of the joint spousal filing provision, section 302(a) of the U.S. Bankruptcy Code. 

This action by the court takes on added significance, according to Los Angeles attorney Robert J. Pfister of the firm of Klee, Tuchin, Bogdanoff & Stern LLP, which represents Balas and Morales, because the twenty judges represent the overwhelming majority of bankruptcy judges in the Central District of California (20 out of 24), and that district, which encompasses the Los Angeles metropolitan area and surrounding counties, has the highest volume of consumer bankruptcy cases of any federal district. 

Thousands of same-sex married couples reside within that district, as a result of the availability of same-sex marriages in California during a period of approximately 5 months in 2008 prior to the enactment of Proposition 8, and a subsequent ruling by the California Supreme Court holding that marriages lawfully contracted anywhere during that time period will be recognized as valid in California.  This is a crucial point, since the Balas/Morales decision is based on the proposition that the petitioners' marriage is valid under state law.

Under Section 302(a) of the Bankruptcy Code, two debtors may jointly file a bankruptcy petition if they are married to each other, and under no other circumstance.  The logic of this is that a married couple is a legal unit which jointly holds property and assumes debt, so it makes total sense as a policy matter to have both spouses joined in a bankruptcy petition to sort out their debts and adopt a plan to satisfy their creditors.  Under Section 3 of the Defense of Marriage Act of 1996, however, only marriages of different-sex couples are recognized for all purposes of federal law.  Balas and Morales were married in California on August 20, 2008 and remain married. They filed their joint bankruptcy petition on February 24, 2011.  "The Debtors came to this court seeking to restructure and repay their debts under Chapter 13 of the Bankruptcy Code following numerous episodes of illness, hospitalization and extended periods of unemployment," wrote the court.  

The United States Trustee, an operative of the U.S. Department of Justice whose role is to represent the government's interest in bankruptcy proceedings, filed a motion to dismiss the petition on the ground that Section 302(a) could not be satisfied because the marriage may not be recognized by the federal court due to DOMA Section 3.  The court pointed out that apart from the issue of DOMA, "All trustee objections to confirmation were satisfied by the Debtors at the May 17 hearing on the Motion to Dismiss, and the Debtors' proposed plan of reorganization currently is eligible for confirmation but for the pending Motion to Dismiss."  In other words, this case is ready to be concluded on the merits, and the only thing standing in its way is the trustee's motion to dismiss. 

The court noted that there was a last minute oral request by the House Bipartisan Legal Advisory Group to delay the hearing on the motion to dismiss in order to decide whether to intervene to defend DOMA Section 3. The Debtors didn't object and the court granted the request, but apparently there was no timely follow-up submission from the House (or the attorney it has retained to defend DOMA, former Solicitor General Paul Clement), and the court deemed the government's "non-response to the Debtors' challenges" to be "noteworthy."

This has become a recurring issue.  Just last month, U.S. Bankruptcy Judge Cecelia G. Morris of the Southern District of New York rejected a similar motion by the trustee in In re Somers, No. 10-38296, 2011 WL 1709839, on May 4, finding it unnecessary to rule on the constitutionality of DOMA Section 3 because she concluded that the trustee's motion did not address any of the grounds articulated in the bankruptcy statute for granting such a motion, and that as a practical matter it made no sense to grant the motion, which would require refiling individual petitions by the debtors and essentially re-doing everything that had been done in the case up to that point.  Then, on May 31, U.S. Bankruptcy Judge Michael S. McManus of the U.S. Bankruptcy Court for the Eastern District of California issued a similar opinion in In re Ziviello-Howell, Case No. 11-22706 (E.D.Cal.), again refraining from ruling on the constitutionality of DOMA and following Judge Morris's lead, stressing that the trustee's motion to dismiss came much too late in the case, which was ready to be concluded at that point.

Perhaps reacting to the repetitive nature of this issue, Judge Donovan and his colleagues decided to go the extra step and tackle the DOMA issue head-on.  They produced a scholarly opinion, in which they gave great weight to Attorney General Eric Holder's February 23, 2011, letter to House Speaker John Boehner setting out the Justice Department's analysis of the constitutionality of Section 3 of DOMA.  In that letter, Holder contended that discrimination based on sexual orientation merits "heightened scrutiny," a standard of judicial review under which the challenged discriminatory law is presumed unconstitutional unless the government presents very strong policy justifications for it.  Furthermore, Holder opined that Section 3 cannot survive that standard of judicial review.  President Obama, a former constitutional law professor at the University of Chicago, agreed with Holder's analysis, leading the Justice Department to announce that it would no longer defend Section 3 against constitutional challenges, leaving it up to Congress to decide whether to intervene to defend the statute in particular cases.  However, until Congress repeals Section 3 or an appellate court definitively declares it unconstitutional, the Justice Department is bound to continue enforcing it, thus these repeated motions by the U.S. Trustee to reject joint bankruptcy petitions by married same-sex couples.

The bankruptcy judges in the Central District of California found Holder's analysis persuasive, writing, "The Holder Letter demonstrates that DOMA cannot withstand heightened scrutiny."  They also referred to precedent in the 9th Circuit, which would be binding on them, from Witt v. Department of the Air Force, in which the court of appeals ruled that heightened scrutiny should be applied to the Don't Ask, Don't Tell military policy as it related to the discharge of Major Witt, and the district court subsequently found last fall that the government could not justify her discharge under that standard.  (The Witt case recently settled, and will not be appealed further.) 

"Following the direction of the Ninth Circuit in Witt," wrote the bankruptcy judges, "the court here discerns no valid, defensible governmental interest advanced by dismissing the Debtors' bankruptcy case or requiring, as the Motion to Dismiss suggests, that the Debtors consent [under the duress of DOMA] to 'voluntarily sever their joint petition by a date certain.'  The Debtors are lawfully married and are otherwise fully qualified to be joint debtors pursuant to sec. 302(a) of the Bankruptcy Code." The court concluded that dismissing the joint petition would not advance any of the "governmental interests" that were identified in the legislative history of DOMA as the official reasons why Congress enacted the statute in 1996.  Indeed, considering those reasons in the context of a bankruptcy proceeding points up, yet again, how Congress abrogated its duty to engage in rational policy-making when it passed the statute, as the justifications bear no rational relationship to the bankruptcy process, and there is no indication anywhere in the legislative history that Congress gave any thought to whether it made sense as a matter of policy to deprive same-sex couples legally married under state law of the ability to file joint bankruptcy petitions.

"The court hereby adopts the Holder Letter and the Debtors' Opposition.  Both succinctly and cogently analyze the issues on this Motion to Dismiss."  The court then engaged in a detailed, point-by-point discussion of the various factors that federal courts use to decide whether a form of discrimination merits heightened scrutiny, concluding that sexual orientation meets those tests, but hedging its bets, the court also concluded that Section 3's application in a bankruptcy context would even fail the less demanding "rational basis" test. 

The court then launched into an unusually passionate criticism of Congress's handling of the issue.  "Although individual members of Congress have every right to express their views and the views of their constituents with respect to their religious beliefs and principles and their personal standards of who may marry whom, this court cannot conclude that Congress is entitled to solemnize such views in the laws of this nation in disregard of the views, legal status and living arrangements of a significant segment of our citizenry that includes the Debtors in this case.  To do so violates the Debtors' right to equal protection of those laws embodied in the due process clause of the Fifth Amendment.  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 found unconvincing both the justifications specified in the 1996 legislative record, and the new make-weight arguments that had been advanced by the Justice Department to defend DOMA last year in the Gill case, then pending in the U.S. District Court in Boston, arguments that DOJ now says it will no longer make after they had been decisively rejected by U.S. District Judge Tauro last summer in that case, and found unworthy by DOJ attorneys charged with preparing a defense to new challenges to DOMA filed in U.S. District Courts in Connecticut and New York.

Interestingly, the court concluded its analysis by quoting from one of the seminal U.S. Supreme Court cases on the constitutional right of privacy within the context of marriage, Justice William O. Douglas's opinion for the Court in Griswold v. Connecticut, 381 U.S. 479 (1965), in which the Court struck down a Connecticut law that banned the sale or distribution of contraceptives to married adults for the purpose of allowing them to have sex without fear of pregnancy.  Wrote Douglas then, describing the institution of marriage:  "We deal with a right of privacy older than the Bill of Rights — older than our political parties, older than our school system.  Marriage is a coming together for better or for worse, hopefully enduring, and intimate to the degree of being sacred.  It is an association that promotes a way of life, not causes; a harmony in living, not in political faiths; a bilateral loyalty, not commercial or social projects.  Yet it is an assocation for as noble a purpose as any involved in our prior decisions."  The bankruptcy judge said, "No one expressed the Debtors' view as pertinent to this simple bankruptcy case more eloquently and profoundly than Justice William O. Douglas" in that quoted passage.

So twenty bankruptcy judges in California have now joined with a handful of other federal trial judges around the country to throw down the gauntlet to Congress and reject the authority of Section 3 of DOMA as a basis to discriminate against same-sex married couples.  It will be interesting to see whether Speaker Boehner and his majority in the House Advisory Group (which consists of the Speaker plus the top two officials from each party in the House) decides to attempt to appeal this ruling to the 9th Circuit, a court before which is pending the appeal from former District Judge Vaughan Walker's decision last summer holding California Proposition 8 unconstitutional, a court that recently upheld the application of heightened scrutiny to the discharge of a highly valued Air Force nurse who happened to be a lesbian, and a court that is still considering the government's appeal of a federal court decision declaring the DADT policy facially unconstitutional, even in the wake of Congress's passage last December of a statute that provisionally repealed that policy.  One suspects that the 9th Circuit is not the place where the House Republican leadership would want this issue to be decided.