Core Nature of Dischargeability Proceedings
- Equitable Character: Actions to deny discharge under 11 U.S.C. § 727 or except debts from discharge under § 523 are core proceedings under 28 U.S.C. § 157(b)(2)(I) and (J). They are inherently equitable, as they involve the bankruptcy court's traditional role in determining a debtor's eligibility for a "fresh start" (Local Loan Co. v. Hunt, 292 U.S. 234 (1934)). The Eleventh Circuit has consistently treated these as equitable, with no Seventh Amendment right to a jury trial (see, e.g., In re St. Laurent, 991 F.2d 672 (11th Cir. 1993), affirming core jurisdiction over dischargeability without mentioning jury rights; In re BenShot, LLC v. 2 Monkey Trading, LLC, 108 F.4th 1341 (11th Cir. 2024), addressing § 523(a)(6) nondischargeability of jury-awarded damages from a prior proceeding without suggesting jury rights in the adversary itself).
- No Jury Right in Pure Dischargeability Actions: Courts in the Eleventh Circuit have explicitly held there is no constitutional right to a jury trial in § 523 proceedings, even when they involve fraud or willful injury claims (In re Kane, 470 B.R. 902 (Bankr. S.D. Fla. 2012) (striking jury demand in § 523(a)(2) and (6) action); In re Yanks, 2015 WL 1267968 (Bankr. S.D. Fla. 2015) (no jury right in § 523 action requiring determination of unliquidated debt amount)). This aligns with other circuits (e.g., In re Hallahan, 936 F.2d 1496 (7th Cir. 1991); In re McLaren, 3 F.3d 958 (6th Cir. 1993)).
Impact of Claims for Monetary and Punitive Damages
- Damages Do Not Trigger Jury Rights: Although the complaint seeks exception from discharge for "debts arising from the fraudulent scheme" including "compensatory damages, punitive damages, attorneys’ fees, and/or interest" (Counts Three–Five), this does not create a jury right. The primary relief is a declaration of nondischargeability, which is equitable. Any incidental determination of liability or damages (e.g., to liquidate the debt) remains part of the equitable process (Cohen v. de la Cruz, 523 U.S. 213 (1998), holding entire fraud-based debts, including punitives, nondischargeable under § 523(a)(2)(A) without jury implications; In re Britton, 950 F.2d 1456 (9th Cir. 1991), analogous reasoning applied in Eleventh Circuit cases like BenShot).
- Footnote Clarification: The complaint's footnote 2 expressly states the plaintiff seeks only a nondischargeability judgment here and will liquidate damages "in a separate forum." This reinforces the proceeding's equitable focus, avoiding any need for the bankruptcy court to award damages (which might otherwise raise hybrid legal/equitable issues). Bankruptcy courts in the Eleventh Circuit decline to enter money judgments in such cases if unnecessary (In re Kane, supra).
State-Law Claims (Fraudulent Transfer and Tortious Interference)
- Integrated into Equitable Framework: The state-law bases (e.g., AUVTA fraudulent transfers in Count Three; interference with charging order in Counts Four–Five, framed as willful/malicious injury under § 523(a)(6)) do not create independent legal claims warranting a jury. They are subsumed into the dischargeability analysis, which requires proving elements like fraud or intent but does not transform the action into one "at common law" under the Seventh Amendment (Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), distinguishing fraudulent conveyance actions against non-claimants from core equitable matters like dischargeability).
- Distinction from Granfinanciera: Unlike Granfinanciera (jury right for standalone fraudulent conveyance recovery under § 548 against a non-claim-filing creditor), here the debtor invoked bankruptcy jurisdiction by filing the petition, submitting to equity (Langenkamp v. Culp, 498 U.S. 42 (1990)). The claims are not avoidance actions but discharge exceptions, so no jury right attaches (In re Yanks, supra, rejecting jury demand despite state-law fraud elements).
Limited Circumstances for Jury Trial
- Consent Required: Under 28 U.S.C. § 157(e), a bankruptcy judge may conduct a jury trial only with all parties' express consent and district court designation. Absent consent, no jury is available in core proceedings (In re Jackson, 90 B.R. 126 (Bankr. E.D. Pa. 1988), cited approvingly in Eleventh Circuit contexts).
- Potential Withdrawal or Abstention: If the state-law claims dominate, the debtor could move for withdrawal to district court (28 U.S.C. § 157(d)) or abstention (28 U.S.C. § 1334(c)), where jury rights might apply to legal issues. However, this is discretionary and rare for core § 523/727 actions (In re St. Laurent, supra).
In summary, under Eleventh Circuit precedent, the debtor has no constitutional or statutory right to a jury trial here, as the proceeding is equitable despite the damages references and state-law underpinnings. The debtor could demand one only with plaintiff's consent or via withdrawal/abstention, but success is unlikely given the core nature.