Sweeping Bankruptcy Court Rejection of DOMA

BY ARTHUR S. LEONARD | In a highly unusual action, 20 federal 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 jointly filed by a same-sex married couple.

The judges found that granting the motion would deny the couple’s equal protection rights under the Fifth Amendment of the US Constitution.

Twenty judges in California find equal protection violation in barring gay couple’s joint petition

The June 13 ruling regarding the bankruptcy petition of Gene Douglas Balas and Carlos A. Morales, pending before Bankruptcy Judge Thomas B. Donovan, holds that Section 3 of the Defense of Marriage Act (DOMA), which denies federal recognition to marriages by same-sex couples, is unconstitutional when evaluated in the context of the federal Bankruptcy Code.

Los Angeles attorney Robert J. Pfister of the firm of Klee, Tuchin, Bogdanoff & Stern, which represents Balas and Morales, noted that the ruling came from the overwhelming majority of bankruptcy judges in California’s Central District –– 20 out of 24 –– which encompasses the Los Angeles metropolitan area and surrounding counties. That district has the highest volume of consumer bankruptcy cases in the nation, and is home to thousands of same-sex couples who wed during the five months prior to Proposition 8’s enactment and whose marriages remain valid. That is a crucial point, since the Balas/ Morales decision rested on their marriage –– which took place in August 2008 –– being valid under California law.

The Bankruptcy Code allows two debtors to jointly file a bankruptcy petition only if they are married to each other.

The judges’ ruling noted that the two men sought bankruptcy protection after “numerous episodes of illness, hospitalization, and extended periods of unemployment.” The US trustee, who represents the government's interest in bankruptcy proceedings, filed a motion to dismiss the petition based on DOMA.

The court noted that apart from the DOMA issue, the two men had satisfied all the other “trustee objections” to their petition. Their proposed plan for reorganizing their finances “is eligible for confirmation but for the pending Motion to Dismiss.”

According to the court, the House Bipartisan Legal Advisory Group, the Republican-dominated panel that stepped up to defend DOMA after the Obama Justice Department stated it would no longer defend the 1996 statute’s constitutionality, made a last-minute oral request to delay the hearing on the motion to dismiss so it could decide whether it would attempt to intervene. Balas and Morales did not object, but apparently the House failed to follow up in a timely way.

The judges found the government's “non-response to the Debtors' challenges” to be “noteworthy.”

The ability of same-sex married couples to file a joint bankruptcy petition has become a recurring issue. Early last month, Bankruptcy Judge Cecelia G. Morris of the Southern District of New York rejected a trustee’s motion to dismiss, but found it was not necessary to consider DOMA’s constitutionality since the motion failed to address the grounds for doing so under the Bankruptcy Code. As a practical matter, she ruled, granting the motion would simply require that everyone involved in the case re-do the substantial amount of work already completed.

On May 31, Bankruptcy Judge Michael S. McManus of the Eastern District of California issued a similar opinion, again sidestepping the DOMA question.

Perhaps in reaction to this repetitiveness, Judge Donovan and his colleagues decided to go the extra step and tackle DOMA head-on, producing a scholarly opinion that gave great weight to Attorney General Eric Holder's February 23 letter to House Speaker John Boehner explaining the Justice Department’s new position on the law’s constitutionality.

In that letter, Holder contended that discrimination based on sexual orientation merits “heightened scrutiny,” a standard of judicial review under which the law in question is presumed unconstitutional unless the government presents very strong policy justifications for it. Holder concluded that DOMA’s Section 3 cannot survive that standard of review.

Although the Justice Department is no longer defending Section 3, until it is repealed it is bound to enforce it, which is why US trustees continue challenging joint bankruptcy petitions by married same-sex couples.

The Central District’s bankruptcy judges not only endorsed Holder’s view, they also cited binding precedent from the 9th Circuit, in which they serve, from Major Margaret Witt’s successful challenge to the Air Force’s discharge of her under Don’t Ask, Don’t Tell. In that case, the 9th Circuit Court of Appeals said that heightened scrutiny was appropriate and that the government could not meet that standard in defending the discharge. (That case has been settled, and the government will not appeal.)

Pointing to the 9th Circuit’s “direction” in the Witt case, the judges found that dismissing the Balas-Morales bankruptcy petition would not advance any of the “governmental interests” identified in the legislative history of DOMA as it moved through Congress in 1996. Indeed, there is no evidence Congress considered the practical implications –– or even the possibility –– of DOMA denying married same-sex couples the ability to file a joint bankruptcy petition.

After carefully examining how sexual orientation discrimination meets the criteria for heightened judicial scrutiny, the bankruptcy judges hedged their bets, concluding that even under a less demanding test –– putting the burden on the challengers to show that the government has not rational basis for DOMA’s application in the bankruptcy context –– the law would fail.

In laying out its analysis, the court offered an extraordinarily passionate criticism of Congress’ passage of DOMA.

“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,” the court wrote. “To do so violates the Debtors' right to equal protection of those laws embodied in the due process clause of the Fifth Amendment.”

Concluding its opinion, the court cited Supreme Court Justice William O. Douglas' majority opinion in Griswold v. Connecticut, the 1965 decision that struck down a ban on the sale of contraceptives to married adults.

“We deal with a right of privacy older than the Bill of Rights –– older than our political parties, older than our school system,” Douglas wrote. “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 association for as noble a purpose as any.”

The court wrote, “No one expressed the Debtors' view as pertinent to this simple bankruptcy case more eloquently and profoundly than Justice William O. Douglas.”

It will now be interesting to see whether Boehner and his majority in the House Advisory Group decide to attempt an appeal to the 9th Circuit, a court that recently upheld the application of heightened scrutiny in the Witt Don’t Ask, Don’t Tell case. One suspects that the 9th Circuit is not the place where the House Republican leadership would want this issue decided.