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P.O. Box 251551
Woodbury, Minnesota 55125-6551
   

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Reiland v. Sullivan: US District Court : CIVIL PROCEDURE | BANKRUPTCY - vacatur despite volluntary settlement, because state not a party to contract mooting question

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 08-923(DSD)
Civil No. 08-924(DSD)
Mary Reiland,
Debtor/Appellant,
State of Minnesota,
Interested Party/
Appellant,
v.
Patti J. Sullivan,
Trustee/Appellee.
Alan E. Brown, Esq., Kenneth Corey-Edstrom, Esq. and
Larkin, Hoffman, Daly & Lindgren, 7900 Xerxes Avenue
South, Suite 1500, Minneapolis, MN 55431, counsel for
Mary Reiland.
Chad A. Kelsch, Esq. and Leonard, OBrien, Spencer, Gale
& Sayre, 100 South Fifth Street, Suite 2500, Minneapolis,
MN 55402, counsel for Patti J. Sullivan.
Daniel L. Abelson, Minnesota Attorney Generals Office,
Suite 1100, 445 Minnesota Street, St. Paul, MN 55101,
counsel for State of Minnesota.
This matter is before the court on appellant State of
Minnesotas (State) unopposed motion to vacate the bankruptcy
courts November 1, 2007, and February 28, 2008, orders. Based on
a review of the file, record and proceedings herein, the court
grants the States motion.
On October 4, 2005, debtor Mary Reiland (Debtor) filed a
voluntary petition for relief under chapter 7 of the United States
2
Bankruptcy Code. Debtor received a discharge on January 18, 2006,
pursuant to 11 U.S.C. 727. In Schedule B of her petition, Debtor
disclosed that she is the beneficiary of a Disability Income Policy
(Policy) issued by Massachusetts Mutual Life Insurance Company,
and in Schedule C she claimed her income from the Policy as exempt
under Minnesota Statutes 550.39. Trustee Patti J. Sullivan
(Trustee) objected to Debtors claimed exemption asserting that
550.39 violates the Minnesota Constitution. On July 27, 2006,
the bankruptcy court issued a Notice and Certification of Challenge
to Constitutionality of State Exemption pursuant to 28 U.S.C.
2403(b), thus permitting the State to move to intervene as an
interested party. The bankruptcy court granted the States motion
on August 18, 2006.
On November 1, 2007, the bankruptcy court sustained Trustees
objection, holding that 550.39 violated article I, section 12 of
the Minnesota Constitution. On February 28, 2008, the bankruptcy
court denied the State and Debtors motion for relief from the
November 1 order. Debtor and the State appealed the bankruptcy
courts orders to this court on March 3, 2008, and the State moved
to certify a legal question to the Minnesota Supreme Court on April
7, 2008. The court certified the following question on May 14,
2008:
Is Minnesota Statutes 550.39 valid under the
Minnesota Constitution where the amount of
disability payments exempted by the statute is
limited by the common law and the nature of a
3
disability insurance contract to an amount
less than or equal to the insureds predisability
salary?
(Doc. No. 18.) The Minnesota Supreme Court accepted the certified
question on June 3, 2008. Soon thereafter, Debtor and Trustee
settled the underlying bankruptcy proceeding and the bankruptcy
court approved the settlement. As a result, the Minnesota Supreme
Court vacated the June 3 order and declined the certification
request on September 17, 2008. On September 22, 2008, the State
moved this court to vacate the bankruptcy courts orders ruling on
the constitutionality of 550.39.
The Debtors and Trustees settlement of the underlying
bankruptcy proceeding renders this action moot. See United States
Parole Commn v. Geraghty, 445 U.S. 388, 396 (1980)(mootness occurs
when the issues presented are no longer live or the parties lack
a legally cognizable interest in the outcome (internal citations
omitted)). Vacatur is appropriate where a controversy presented
for review has become moot due to circumstances unattributable to
any of the parties. U.S. Bancorp Mortgage Co. v. Bonner Mall
Pship, 513 U.S. 18, 23 (1994) (quoting Karcher v. May, 484 U.S.
72, 83 (1987)). Thus, vacatur is ordinarily inappropriate where
mootness results from settlement because the losing party has
voluntarily forfeited [its] legal remedy by the ordinary processes
of appeal ... thereby surrendering [its] claim to the equitable
remedy of vacatur. Id. at 25. In this case, however, because the
4
State was not a party to the settlement that rendered this action
moot, the court determines that vacatur is appropriate.
Accordingly, IT IS HEREBY ORDERED that the States motion to vacate
is granted, [Civ. No. 08-923 Doc. No. 25; Civ. No. 08-924 Doc. No.
20] and the bankruptcy courts November 1, 2007, and February 28,
2008, orders are vacated.
LET JUDGMENT BE ENTERED ACCORDINGLY
Dated: November 12, 2008
s/David S. Doty
David S. Doty, Judge
United States District Court
 

 
 
 

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