Opinion
Case No. 5:19-cv-244-TKW/MJF
2021-03-30
Elton R. RUSS, Plaintiff, v. JACKSON COUNTY SCHOOL BOARD, Defendant.
Elton R. Russ, Dothan, AL, Pro Se. Cameron Henry Carstens, James Joseph Dean, Bob Lynn Harris, Messer Caparello & Self PA, Tallahassee, FL, for Defendant.
Elton R. Russ, Dothan, AL, Pro Se.
Cameron Henry Carstens, James Joseph Dean, Bob Lynn Harris, Messer Caparello & Self PA, Tallahassee, FL, for Defendant.
ORDER
Michael J. Frank, United States Magistrate Judge
In this employment discrimination case, Defendant Jackson County School Board ("the Board") argues that the court should dismiss this action because Plaintiff Elton R. Russ is not the real party in interest. As explained below, however, under Rule 17(a)(3), a federal court must first afford the real party in interest an opportunity to ratify, join, or be substituted into the action.
I. BACKGROUND
A. The Board's Decision Not to Employ Russ
The factual background is derived from Russ's first amended complaint. Russ alleges that around August 2018, a "panel" interviewed him for an assistant-principal position at the Marianna Middle School located in Marianna, Florida. On August 2, 2018, Larry Moore, the Jackson County School District Superintendent, told Russ that he would recommend that Russ be hired. Later that same day, Russ met with the principal of the Mariana Middle School to discuss Russ's duties. Someone provided Russ with keys to the Marianna Middle School and afforded Russ an opportunity to move his belongings into his new office. Additionally, between August 3, 2018, and August 6, 2018, Russ completed pre-employment paperwork and the required drug screening.
Although Russ does not specifically allege that the Board extended a formal offer of employment, he alleges that on August 6, 2018, Moore rescinded the job offer. Moore informed Russ that a parent alleged that Russ had committed "acts of moral turpitude" while employed at a school in Dothan, Alabama. Russ alleges, however, that the Board rescinded its offer of employment because of his race and his sex. He alleges claims of race discrimination, sex discrimination, and retaliation in violation of Title VII of the Civil Rights Act of 1964, and a claim of race discrimination in violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution.
B. Russ's Chapter 7 Bankruptcy Case
On October 30, 2018, in the U.S. Bankruptcy Court for the Middle District of Alabama—while Russ already had a bankruptcy petition under Chapter 13 pending—Russ filed a petition for relief under Chapter 7 of the Bankruptcy Code. In re Estate of Russ , No. 18-11931 (M.D. Ala. Oct. 30, 2018); (Docs. 17-2, 17-4). As a debtor, Russ had an obligation to disclose to the Bankruptcy Court his assets. See 11 U.S.C. § 541(a)(1). A debtor's obligation to disclose property of the bankruptcy estate extends to claims and causes of action which accrued prior to filing the bankruptcy petition. United States ex rel. Spicer v. Westbrook , 751 F.3d 354, 361-62 (5th Cir. 2014) (holding that debtors must disclose "all pending and potential claims"). Indeed, Schedule A/B of Russ's Chapter 7 bankruptcy petition specifically asked Russ if he had any "Claims against third parties, whether or not you have filed a lawsuit or made a demand for payment; Examples : Accidents, employment disputes, insurance claims, or rights to sue." (Doc. 17-2 at 13 ¶ 33). Russ selected "no," thereby indicating that he did not have any claims against third parties.
"A Chapter 13 bankruptcy—sometimes called a ‘wage earners plan’—enables a debtor with a regular income to repay all or part of his debts, typically over a three- to five-year period." Microf LLC v. Cumbess , 960 F.3d 1325, 1330 (11th Cir. 2020). A Chapter 7 bankruptcy, in contrast, requires a debtor to liquidate his assets to pay creditors. In re Diaz , 972 F.3d 713, 717 (5th Cir. 2020).
This court takes judicial notice of Russ's bankruptcy petition and schedules and the docket sheet for his bankruptcy case, which are public records of the U.S. Bankruptcy Court for the Middle District of Alabama. Under Federal Rule of Evidence 201(b), a court may "take judicial notice of facts that are not subject to reasonable dispute because they are capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Bryant v. Avado Brands, Inc. , 187 F.3d 1271, 1278 (11th Cir. 1999). Because Russ was the debtor, he should have received copies of these documents. Regardless, the documents can be obtained from the clerk of the court of the U.S. Bankruptcy Court for the Middle District of Alabama.
On December 27, 2018—while Russ's Chapter 7 bankruptcy case was still pending—Russ filed a charge of discrimination with the Florida Commission of Human Relations and the U.S. Equal Employment Opportunity Commission. In that charge of discrimination, Russ alleged that the Jackson County school district discriminated against him—on the basis of his race, his disability, and his child's disability—when it rescinded its offer of employment. Although Russ clearly was asserting claims of employment discrimination, there is no record of Russ having notified the Bankruptcy Court about these claims. Indeed, Russ does not dispute this.
If the Bankruptcy Court had learned of Russ's omissions and determined that he had deliberately omitted to disclose all of his assets, the court could have denied Russ a discharge of his debts. See Chalik v. Moorefield , 748 F.2d 616, 618-19 (11th Cir. 1984) ; In re Raiford , 695 F.2d 521, 522 (11th Cir. 1983).
On December 10, 2018, the trustee of Russ's bankruptcy estate filed a "Report of No Distribution" stating that he had "neither received any property nor paid any money on account of this estate; that [he] made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law...." The trustee indicated that Russ had debts of approximately $251,172.54, which would be discharged.
On February 19, 2019, the Bankruptcy Court discharged Russ's debts and issued an "Order of Discharge." The Bankruptcy Court also entered an order stating that Russ's estate was "fully administered," that the trustee was discharged, and that Russ's Chapter 7 case was closed.
II. DISCUSSION
The Board argues that Russ's employment-discrimination claims are assets of his bankruptcy estate, and, therefore, Russ lacks "standing" to pursue these claims insofar as the trustee of Russ's bankruptcy estate is the only person who can assert such claims. In essence, the Board argues that Russ is not the real party in interest.
A. Real Party in Interest Under Rule 17(a)
Under Rule 17 of the Federal Rules of Civil Procedure, a defendant may assert as an affirmative defense that the plaintiff is not the real party in interest. Addax Energy SA v. M/V Yasa H. Mulla , 987 F.3d 80, 85 (4th Cir. 2021) ; Norris v. Causey , 869 F.3d 360, 367 (5th Cir. 2017). Rule 17(a) of the Federal Rules of Civil Procedure states that an "action must be prosecuted in the name of the real party in interest." Fed. R. Civ. P. 17(a). Under Rule 17, the real party in interest is "the person who, according to the governing substantive law, is entitled to enforce the right" in question. 6A CHARLES ALAN WRIGHT , ET AL. , FEDERAL PRACTICE AND PROCEDURE § 1543 at 475 (3d ed. 2010). Thus, Rule 17(a) requires "that the complaint be brought in the name of the party to whom that claim belongs or the party who, according to the governing substantive law, is entitled to enforce the right." Rawoof v. Texor Petroleum Co. , 521 F.3d 750, 756 (7th Cir. 2008) ; Oscar Gruss & Son, Inc. v. Hollander , 337 F.3d 186, 193 (2d Cir. 2003).
The primary purpose of the Rule is to protect the defendant against a subsequent action by the party actually entitled to recover, thereby ensuring that a defendant will not be subject to multiple lawsuits. RK Co. v. See , 622 F.3d 846, 850 (7th Cir. 2010) ; Gogolin & Stelter v. Karn's Auto Imports, Inc. , 886 F.2d 100, 102 (5th Cir. 1989) ; Celanese Corp. of Am. v. John Clark Indus. , 214 F.2d 551, 556 (5th Cir. 1954) ; Fed. R. Civ. P. 17(a) advisory committee's notes 1966 amendment (noting that the function of Rule 17(a) "is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the judgment will have its proper effect as res judicata").
The original purpose of Rule 17 was to afford subrogees and assignees the right to sue in their own names. See Virginia Elec. & Power Co. v. Westinghouse Elec. Corp. , 485 F.2d 78, 84 (4th Cir. 1973) ; United Federation of Postal Clerks, AFL-CIO v. Watson , 409 F.2d 462, 470 n.34 (D.C. Cir. 1969).
B. Treatment of Causes of Action and Unliquidated Claims
"When a debtor files a Chapter 7 petition, his assets, with specified exemptions, are immediately transferred to a bankruptcy estate." Harris v. Viegelahn , 575 U.S. 510, 513, 135 S. Ct. 1829, 1835, 191 L.Ed.2d 783 (2015) (citing 11 U.S.C. § 541(a)(1) ); City of Chicago, Ill. v. Fulton , 592 U.S. ––––, 141 S. Ct. 585, 589, 208 L.Ed.2d 384 (2021) (noting that filing a bankruptcy petition " ‘creates an estate’ that, with some exceptions, comprises ‘all legal or equitable interests of the debtor in property as of the commencement of the case’ ") (quoting 11 U.S.C. § 541(a) ). Among other things, the commencement of a Chapter 7 bankruptcy "extinguishes a debtor's legal rights and interests in any pending litigation, and transfers those rights to the trustee, acting on behalf of the bankruptcy estate." Moses v. Howard Univ. Hosp. , 606 F.3d 789, 795 (D.C. Cir. 2010). To facilitate a lawful distribution of a debtor's assets, a Chapter 7 debtor is required to disclose to the bankruptcy court any assets he possesses. See 11 U.S.C. § 541(a)(1) ; see Cusano v. Klein , 264 F.3d 936, 945 (9th Cir. 2001) (noting that the Bankruptcy Code places an "affirmative duty" on the debtor to note any assets on a schedule).
Indeed, section 541, the relevant provision, "is intended to include in the estate any property made available to the estate by other provisions of the Bankruptcy Code." United States v. Whiting Pools, Inc. , 462 U.S. 198, 205, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983). Section 541(a)(1) "is all-encompassing, and Congress meant for it to be construed commensurately." In re Mortgage Am. Corp. , 714 F.2d 1266, 1274 (5th Cir. 1983). Under section 541(a)(1), the debtor's bankruptcy estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Section 541 of the Bankruptcy Code provides that virtually all of a debtor's assets, both tangible and intangible, vest in the bankruptcy estate upon the filing of a bankruptcy petition. 11 U.S.C. § 541(a)(1) ; Slater v. United States Steel Corporation , 871 F.3d 1174, 1178 (11th Cir. 2017) ("When a debtor files a Chapter 7 petition, his asserts, subject to certain exemptions, are immediately transferred to a bankruptcy estate.")
"The Bankruptcy Code defines a bankrupt's estate broadly to encompass all kinds of property, including intangibles," causes of action, and claims. Integrated Sols., Inc. v. Serv. Support Specialties, Inc. , 124 F.3d 487, 490 (3d Cir. 1997). Under the Bankruptcy Code, the term "claim" includes the "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured ...." 11 U.S.C. § 101(5)(A). In so defining the term "claim" Congress intended to "adopt the broadest available definition" of the word. See Johnson v. Home State Bank , 501 U.S. 78, 83, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991).
The bankruptcy estate's property includes claims and causes of action. Biesek v. Soo Line R.R. Co. , 440 F.3d 410, 413 (7th Cir. 2006) ("Pre-bankruptcy claims are part of debtors’ estates ...."); In re Polis , 217 F.3d 899, 902 (7th Cir. 2000) ("Legal claims are assets ...."); Browning Mfg. v. Mims (In re Coastal Plains, Inc. ), 179 F.3d 197, 207-08 (5th Cir. 1999) (holding that a debtor has duty to disclose all potential causes of action); Schert-Cibolo-Universal City v. Wright (In re Educators Grp. Health Trust ), 25 F.3d 1281, 1283 (5th Cir. 1994) (holding that the property of bankruptcy estate includes causes of action); In re Cottrell , 876 F.2d 540, 542-43 (6th Cir. 1989) (holding that a personal injury action was estate property); Tignor v. Parkinson , 729 F.2d 977, 980-81 (4th Cir. 1984) (holding that an unliquidated personal injury claim was property of the bankruptcy estate). This includes claims under Title VII of the Civil Rights Act of 1964 and claims brought pursuant to 42 U.S.C. § 1983. Parker v. Wendy's Intern., Inc. , 365 F.3d 1268, 1272 (11th Cir. 2004).
Property of the bankruptcy estate includes all "causes of action belonging to the debtor at the commencement of the bankruptcy case." Parker , 365 F.3d at 1272 (citing Barger v. City of Cartersville, Ga. , 348 F.3d 1289, 1292 (11th Cir. 2003) ); Mauerhan v. Wagner Corp. , 649 F.3d 1180, 1184 n.3 (10th Cir. 2011) ("When an individual files for bankruptcy, all interests of the debtor become property of the bankruptcy estate, including causes of action."); Turner v. Cook , 362 F.3d 1219, 1226 (9th Cir. 2004) (holding that causes of action are among the legal and equitable interests that become property of the bankruptcy estate); Wischan v. Adler (In re Wischan ), 77 F.3d 875, 877 (5th Cir. 1996) (holding that causes of action for personal injuries were property of the bankruptcy estate when the claims accrued prior to the debtor filing his bankruptcy petition); Sierra Switchboard Co., v. Westinghouse Elec. Corp. , 789 F.2d 705, 709 (9th Cir. 1986) (noting that "regardless of whether a personal injury claim is transferable or assignable under state law, such claims become part of the bankruptcy estate under § 541"); Miller v. Shallowford Cmty. Hosp. Inc. , 767 F.2d 1556, 1559 (11th Cir. 1985) (noting that "causes of action existing at the time of the commencement of the bankruptcy action" are property of the debtor's bankruptcy estate and "the trustee in bankruptcy succeeds to all causes of action held by the debtor at the time the bankruptcy petition is filed").
"A cause of action need not be formally filed prior to the commencement of a bankruptcy case to become property of the estate." Feist v. Consol. Freightways Corp. , 100 F. Supp. 2d 273, 274 (E.D. Pa. 1999), aff'd , 216 F.3d 1075 (3d Cir. 2000). A cause of action becomes part of a bankruptcy estate at least if it accrued before the debtor filed his bankruptcy petition, even if the debtor had not yet commenced a civil action to vindicate his claims. Wissman v. Pittsburgh Nat'l Bank , 942 F.2d 867, 869 (4th Cir. 1991) (holding that a "possible claim" not pending at time of filing of bankruptcy petition became property of the estate upon filing of petition); Miller , 767 F.2d at 1561 (holding that a cause of action for personal injury protection insurance existed at time of filing of bankruptcy petition, even though the debtor had not filed a lawsuit); Lawrence v. Jackson Mack Sales, Inc. , 837 F. Supp. 771, 779 (S.D. Miss. 1992) (noting that causes of action "need not be formally filed prior to the commencement of a bankruptcy case to become property of the bankruptcy estate ..." and "a cause of action belonging to a debtor that existed at the time of the filing of a bankruptcy petition becomes property of the bankruptcy estate and may only be prosecuted by the trustee of the bankruptcy estate").
Here, Russ asserts claims under Title VII and the Equal Protection Clause of the Fourteenth Amendment. Title VII and Equal-Protection claims accrue "whenever an individual is directly and adversely affected by the discriminatory practices of the defendant." United States v. Ga. Power , 474 F.2d 906, 925 (5th Cir. 1973) (discussing Title VII claims). When alleged discriminatory actions resulted in a termination, the cause of action accrues at that point because the plaintiff is directly and adversely affected at that point. See Baxley v. Pediatric Servs. of Am., Inc. , 147 F. App'x 59, 60 (11th Cir. 2005) (determining that because the plaintiff's employment-discrimination claims arose on the date of her termination, two months prior to the filing of her bankruptcy petition, they were part of the bankruptcy estate); accord Auday v. Wet Seal Retail, Inc. , 698 F.3d 902, 904 (6th Cir. 2012) (holding that plaintiff's employment-discrimination claim accrued on the date she was terminated, "and became the property of her estate when she filed for bankruptcy four days later"); Kleven v. Walgreen Co. , 373 F. App'x 608, 610 (7th Cir. 2010) (holding that plaintiff's Title VII claim accrued on the date she received notice of her termination three months before she filed for bankruptcy, and therefore it was part of the estate); see Fahs Const. Grp. v. Gray , 725 F.3d 289, 292 (2d Cir. 2013) (stating that an Equal Protection claim "accrues when the plaintiff knew or should have known of the disparate treatment"). Likewise, a failure to hire claim accrues at least when the plaintiff is notified of the adverse employment decision. EEOC v. Joe's Stone Crabs, Inc. , 296 F.3d 1265, 1272 (11th Cir. 2002) ; see Nat'l R.R. Passenger Corp. v. Morgan , 536 U.S. 101, 114, 122 S.Ct. 2061, 153 L.Ed.2d 106 (2002) (noting that accrual of claims based on "discrete acts" such as "refusal to hire are easy to identify").
In this case, Russ alleges that the Board rescinded its offer of employment on August 6, 2018. Thus, Russ's discrimination claims accrued on that date. Regardless, his claims certainly had accrued by December 27, 2018, the date that Russ filed a charge of discrimination with the Florida Commission of Human Relations and the U.S. Equal Employment Opportunity Commission. As noted above, in that charge of discrimination, Russ alleged that the Jackson County school district discriminated against him—on the basis of his race, his disability, and his child's disability—when it rescinded its offer of employment. Russ's claims, therefore, accrued during the pendency of his Chapter 7 case and before the Bankruptcy Court discharged his debts on February 19, 2019. Accordingly, Russ's causes of action for discrimination were components of his bankruptcy estate. C. The Bankruptcy Trustee is the Real Party in Interest
"Once an asset becomes part of the bankruptcy estate, all rights held by the debtor in the asset are extinguished unless the asset is abandoned back to the debtor pursuant to § 554 of the Bankruptcy Code." Parker , 365 F.3d at 1272 (citing 11 U.S.C. § 554(a) - (c) ). After the bankruptcy case has been closed, "property of the estate that is not abandoned under § 554 and that is not administered in the bankruptcy proceedings remains the property of the estate." Id. (citing 11 U.S.C. § 554(d) ); Martineau v. Wier , 934 F.3d 385, 391 (4th Cir. 2019) (stating that "in the context of a Chapter 7 bankruptcy, it is the bankruptcy trustee and not the debtor who is the real party in interest with respect to property of the estate, with the right to bring any legal claims that belong to the estate"). "Because a Chapter 7 debtor forfeits his prepetition assets to the estate, only the Chapter 7 trustee, not the debtor, has standing to pursue a civil legal claim unless the trustee abandons the asset, which then returns the claim to the possession and control of the debtor." Slater , 871 F.3d at 1180 (citations omitted).
There is nothing in the record to indicate that the trustee abandoned Russ's employment discrimination claims. Proper abandonment would have entailed the trustee providing notice to Russ's creditors and, if any objected to abandonment of these claims, the bankruptcy court would have been required to hold a hearing. See Auday , 698 F.3d at 905 (citing 11 U.S.C. § 554(a) ).
Of course, a bankruptcy trustee may abandon worthless or inconsequential claims. 11 U.S.C. § 554 ; see Auday , 698 F.3d at 905 (noting that the trustee "could have abandoned the claim," which would have returned it to the debtor); Biesek , 440 F.3d at 413 (noting that a bankruptcy trustee "may abandon worthless or low value assets, including legal claims").
A bankruptcy "trustee, as the representative of the bankruptcy estate, is the proper party in interest, and is the only party" who can prosecute causes of action belonging to the estate. Parker , 365 F.3d at 1272 ; Wieburg v. GTE Southwest Inc. , 272 F.3d 302, 306 (5th Cir. 2001) ("Because the claims are property of the bankruptcy estate, the Trustee is the real party in interest with exclusive standing to assert them."); Jones v. Harrell , 858 F.2d 667, 669 (11th Cir. 1988) ("A trustee in bankruptcy succeeds to all causes of action held by the debtor at the time the bankruptcy petition is filed."); Miller , 767 F.2d at 1559, 1561 (holding that trustee in bankruptcy succeeds to all causes of action held by the debtor and debtor could not pursue those causes of actions); Feist , 100 F. Supp. 2d at 274 ("After a claim becomes part of the bankruptcy estate, only the bankruptcy trustee, as representative of the estate, has the authority to prosecute or settle the cause of action.").
A debtor's failure to list a claim or cause of action "on a bankruptcy schedule leaves that interest in the bankruptcy estate." Parker , 365 F.3d at 1272 ; Baxley , 147 F. App'x at 60 ; Vreugdenhill v. Navistar Int'l Transp. Corp. , 950 F.2d 524, 525-26 (8th Cir. 1991). Thus, although Russ's Chapter 7 estate has been fully administered, the discrimination claims remain part of the bankruptcy estate. Parker , 365 F.3d at 1272 ; Baxley , 147 F. App'x at 60 ; Vreugdenhill , 950 F.2d at 525-26 ; see Wieburg , 272 F.3d at 306-07 ; Bauer v. Com. Union Bank , 859 F.2d 438, 441-42 (6th Cir. 1988). Accordingly, the bankruptcy "trustee, as the representative of the bankruptcy estate, is the proper party in interest, and is the only party with standing to prosecute causes of action belonging to the estate." Parker , 365 F.3d at 1272 ; Baxley , 147 F. App'x at 60. Accordingly, Russ is not the real party in interest. D. Affording The Trustee an Opportunity to Ratify, Join, or Substitute
The Board argues that, because Russ is not the real party in interest, this action should be dismissed. Dismissal, of course, would result in forfeiture of Russ's claims.
Rule 17(a)(3) clearly states that a "court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action." Rule 17(a)(3) ; Weissman v. Weener , 12 F.3d 84, 87 (7th Cir. 1993) (noting that Rule 17(a) requires a court to afford the real party in interest a reasonable time to cure the defect before the case is dismissed). The purpose of this provision is to ensure that a civil action is not dismissed simply for want of the proper party. See Klein v. Qlik Techs., Inc. , 906 F.3d 215, 226 (2d Cir. 2018). When forfeiture of a claim is a distinct possibility, a court may commit reversible error if it fails to provide the real party in interest an opportunity to ratify, join, or substitute. See Jones v. Las Vegas Metro. Police Dep't , 873 F.3d 1123, 1128-29 (9th Cir. 2017) (reversing summary judgment when the district court failed to substitute the real party in interest); Wieburg , 272 F.3d at 306 (holding that the district court erred when it failed to allow the trustee of plaintiff's bankruptcy estate an opportunity to join the case as the real party in interest); Jaramillo v. Burkhart , 999 F.2d 1241, 1246 (8th Cir. 1993) (reversing dismissal after the district court failed to provide a reasonable opportunity for substitution of the real party in interest); Kilbourn v. West. Sur. Co. , 187 F.2d 567, 571-72 (10th Cir. 1951) (reversing summary judgment so that real party in interest could be substituted).
Because the trustee of Russ's bankruptcy estate presumably was unaware of Russ's claims and likely is unaware of this civil action, pursuant to Rule 17(a)(3), this court must afford the trustee notice and a reasonable opportunity to "ratify, join, or be substituted into the action." Of course, nothing compels the trustee to take any of these courses of action, and the trustee may determine that the claims are not worth pursuing. But that is a decision for the trustee to make.
III. CONCLUSION
For the reasons set forth above, it is ORDERED that the clerk of the court shall forward to William C. Carn, III, Bankruptcy Trustee for the United States Bankruptcy Court for the Middle District of Alabama, Russ's first amended complaint and this order. This court shall afford the trustee THIRTY (30) DAYS from the date of this order to pursue ratification, joinder, substitution, or none of these courses of action. After 30 days, if the trustee has not pursued ratification, joinder, or substitution, this court would presume that the trustee has elected not to pursue any of those options, and this court then would address Defendant's motion to dismiss.