The United States of America v. Henricks, Catherine

Filing 13

ORDER dismissing 2 Bankruptcy Appeal without prejudice for lack of jurisdiction. Signed by District Judge James D. Peterson on 11/22/2022. (arw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

UNITED STATES OF AMERICA,
OPINION and ORDER
Appellant,
v.

21-cv-517-jdp

CATHERINE HENRICKS,
Appellee.

The United States appeals a bankruptcy court order granting in part appellee Catherine
Henricks’s motion for contempt and sanctions. Catherine’s ex-husband, John Henricks, is not
a party to this case, but his criminal proceedings are relevant to this appeal. For clarity, the
court will refer to the Henrickses by their first names.
The bankruptcy court concluded that the government had committed violations of the
automatic stay and discharge injunction. But it did not determine the amount of Catherine’s
damages or attorney fees. It appeared that the bankruptcy court’s order was not final, which
would mean that this court did not have jurisdiction over this appeal. See 28 U.S.C.
§ 158(a)(1). The court directed the parties to show cause why the appeal should not be
dismissed for lack of jurisdiction. Dkt. 10.
The court has received the parties’ submissions. Catherine does not object to dismissal.
Dkt. 12. The government contends that jurisdiction is proper because a bankruptcy court order
on the merits of a sanctions motion is final even if the court did not set the amount of an
attorney fee award. Dkt. 11. But the bankruptcy court did not address the issue of whether
Catherine was entitled to other types of damages, so it did not fully resolve the parties’ dispute.
The court will dismiss the appeal without prejudice.

BACKGROUND
This case has a long and complicated history, spanning proceedings in four separate
courts over eight years. But only a few facts are relevant to the jurisdictional issue. This appeal
arises out of the United States’ efforts to recover restitution for crimes committed by John
Henricks, the ex-husband of appellee Catherine Henricks. Three of the government’s actions
are relevant here. First, in 2014 the government filed a motion for default in John’s criminal
case asking the court to order that restitution be paid from a tax refund and retirement account
that belonged, in part, to Catherine. Second, in 2015 the government filed a motion in John’s
criminal case contending that Catherine did not have a legitimate interest in the refund or
retirement account on the ground that John’s criminal activities had unjustly enriched the
Henricks’ marital estate. Third, in 2020 the government refused to void its restitution lien on
Catherine’s home in Amherst, Wisconsin, on the ground that its lien attached to John’s
property interest in the home.
In 2021, Catherine filed a motion for contempt and sanctions against the government
in bankruptcy court, contending that those actions were improper attempts to collect
Catherine’s debts. Catherine’s sanctions motion requested attorney fees and actual damages
for the alleged violations. See In re Catherine A. Henricks, No. 14-12042, Dkt. 138 at 2. The
parties agreed to bifurcate proceedings so that the bankruptcy court could determine liability
before taking up the issue of damages. See Dkt. 2-2, at 32. The bankruptcy court concluded
that the government violated the automatic stay by seeking restitution from Catherine’s tax
refund and retirement account in its motion for default in John’s criminal case. It also
concluded that the government violated the discharge injunction by pursuing an unjust
enrichment claim against Catherine and by refusing to remove its restitution lien on her home.

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The court avoided the restitution lien and scheduled a hearing on Catherine’s “entitlement to
and the amount of attorneys’ fees.” Dkt. 2-1, at 2. Before that hearing took place, the
government appealed to this court.

ANALYSIS
The finality of an order in a bankruptcy case is “considerably more flexible than an
ordinary civil appeal.” In re Smith, 582 F.3d 767, 776 (7th Cir. 2009). A bankruptcy order is
considered final for purposes of appeal when it “definitively resolves a discrete dispute within
the larger case.” Id. Orders deciding a discrete issue within a dispute do not necessarily
terminate the entire dispute. See In re Comdisco, Inc., 538 F.3d 647, 651 (7th Cir. 2008). An
order resolves a dispute if the order would have been final had the dispute been brought as a
stand-alone case. Id. In the context of a motion for contempt and sanctions, a bankruptcy
court’s order determining that a creditor violated the automatic stay or discharge injunction is
not final until the court has determined the appropriate sanction. See Hazelton v. Bd of Regents
for the Univ. of Wis. Sys., 952 F.3d 914, 918 (7th Cir. 2020). Accordingly, an order deciding
the merits of a sanctions motion is not final if the court has not set a damages award. See id.;
In re Behrens, 900 F.2d 97, 100 (7th Cir. 1990).
The government contends that the bankruptcy court’s order was final because the only
issue it did not resolve was the amount of Catherine’s attorney fee award. It cites Budinich v.
Becton Dickinson and Co., 486 U.S. 196, 202–03 (1988), for the proposition that a decision on
the merits is a final decision even if the award or amount of attorney’s fees for the litigation
remains to be determined. This is the case even if the statute or contract giving rise to the fee
claim treats the award of fees as part of the case’s merits. See id. at 202; see also Ray Haluch

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Gravel Co. v. Cent. Pension Fund of the Int’l Union of Operating Eng’rs, 571 U.S. 177, 185–86
(2014). Budinich was about appeals from district court rulings under 28 U.S.C. § 1291, not
appeals from bankruptcy court rulings brought under 28 U.S.C. § 158. But several courts of
appeals have applied Budinich to bankruptcy cases on the ground that the same standards
should govern adversary proceedings in bankruptcy and ordinary civil actions. See In re Torres,
432 F.3d 20, 23 (1st Cir. 2005); In re Porto, 645 F.3d 1294, (11th Cir. 2011) (collecting cases).
The Seventh Circuit has not addressed whether Budinich applies to bankruptcy cases. But given
the similarity between a standalone civil case and an adversary proceeding within a bankruptcy
case, it makes sense to apply Budinich to this appeal.
But even under Budinich, the bankruptcy court’s order in this case was not final because
it did not resolve the issue of whether Catherine was entitled to damages other than attorney
fees.1 The bankruptcy court determined that the government had violated the automatic stay
and discharge injunction, but its order did not address Catherine’s request for actual damages.
Catherine didn’t specify what her actual damages were in her motion for sanctions, and the
parties did not brief the issue in the bankruptcy court. But Catherine contends in this appeal
that she is entitled to damages for emotional distress. Dkt. 8, at 21.
The government contends that the only issue left to resolve was the amount of an
attorney fee award because the court scheduled a hearing on Catherine’s “entitlement to and
the amount of attorney fees,” Dkt. 2-1, but it did not schedule a hearing on other types of

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Catherine’s brief suggests that she seeks fees for time spent contesting the government’s
motions in John’s criminal case. See Dkt. 8, at 21. Those fees may fall outside the rule in
Budinich because they were not incurred as part of the bankruptcy litigation. But the
bankruptcy court didn’t specify whether it planned to award those fees, so this court will not
dismiss the appeal on that ground.

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damages. But a ruling that Catherine may be entitled to attorney fees is different from a ruling
that she is not entitled to other forms of relief. The court’s opinion does not suggest that it
meant to foreclose an award of actual damages. The court twice noted that the parties had not
been heard on the question of damages. Dkt. 2-2, at 32, 44. Moreover, the government’s
briefing on appeal in this court raised arguments about Catherine’s entitlement to damages
that the bankruptcy court did not address in its order, see Dkt. 7, at 47, which shows that there
was more left for the court to resolve than the amount of an attorney fee award.
Because the bankruptcy court did not determine whether Catherine was entitled to
damages, this case is distinguishable from the cases cited by the government. In In re Empresas
Martínez Valentín Corp., 948 F.3d 448, 452 (1st Cir. 2020), the bankruptcy court’s sanctions
order was appealable because it awarded the movant damages and “otherwise disposed of all
claims and issues in the case, save for [the movant’s] request for costs and attorneys’ fees.” And
in In re Asset Enhancement, Inc., No. 21-60777-CIV-SMITH, 2022 WL 1311113, at *4 (S.D.
Fla. Mar. 28, 2022), the court concluded that a bankruptcy court order was final because it
denied the movant’s request for punitive damages and “addressed every area of [the movant’s]
prayer of relief except for [its] request for reasonable attorney’s fees and costs.” Here, the
bankruptcy court did not address Catherine’s request for actual damages, so its order did not
dispose of all of her requests for relief.
The government also contends that the bankruptcy court’s decision to avoid the
restitution lien on Catherine’s home is itself an appealable final order. But the validity of the
restitution lien is part of the larger dispute about whether the government’s actions violated
the discharge injunction and, if so, the proper remedy for those violations. For the reasons
stated above, that dispute has not been fully resolved. This court does not have jurisdiction

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over orders that decide discrete issues within a single dispute. Because the bankruptcy court
did not determine the appropriate remedy for the government’s violations, its order was not
final. This appeal must be dismissed for lack of jurisdiction.

ORDER
IT IS ORDERED that this appeal is DISMISSED without prejudice for lack of
jurisdiction.
Entered November 22, 2022.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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