Tingling v. Educ. Credit Mgmt. Corp.

T
20-757-bk
Tingling v. Educ. Credit Mgmt. Corp.




                                         In the
             United States Court of Appeals
                            for the Second Circuit


                                 AUGUST TERM 2020

                                       No. 20-757-bk




                                  In re Janet Tingling,
                                         Debtor.



                                   JANET TINGLING,
                                   Debtor-Appellant,

                                            v.

EDUCATIONAL CREDIT MANAGEMENT CORPORATION, UNITED STATES
DEPARTMENT OF EDUCATION, AMERICAN EDUCATION SERVICES, GREAT
     LAKES EDUCATIONAL LOAN SERVICES, INC., NELNET INC.,
                    Defendants-Appellees,

                              NAVIENT CORPORATION,
                                   Defendant.
           On Appeal from the United States District Court
                for the Eastern District of New York



                        ARGUED: MARCH 2, 2021
                        DECIDED: MARCH 11, 2021



Before: CABRANES, RAGGI, and SULLIVAN, Circuit Judges.




       Debtor-Appellant Janet Tingling (“Tingling”) appeals from a
judgment of the United States District Court for the Eastern District of
New York (Joanna Seybert, Judge), affirming an order of the United
States Bankruptcy Court for the Eastern District of New York (Alan S.
Trust, Bankruptcy Judge) denying Tingling’s request to discharge her
educational loans pursuant to 11 U.S.C. § 523(a)(8). Two questions are
presented on this appeal: (1) whether the Bankruptcy Court abused its
discretion when it based its Pretrial Order on a joint pretrial
memorandum, which was agreed to and approved by all parties on
July 31, 2018; and (2) whether Tingling established that she would face
an “undue hardship” if her student loans were not discharged.

       We hold that the Bankruptcy Court did not abuse its discretion
in basing its Pretrial Order on the joint pretrial memorandum edited
by both parties. Further, it was not an abuse of discretion to disallow
Tingling from unilaterally modifying that joint pretrial memorandum,
as the interests of justice in this case did not so require. Lastly, we hold
that Tingling failed to make the factual showing to establish “undue
hardship” under Brunner v. N.Y. State Higher Educ. Servs. Corp., 

831 F.2d 395

, 396 (2d Cir. 1987), as would be required to discharge her




                                     2
educational loans. Accordingly, we AFFIRM the District Court’s
judgment.



                         JONATHAN A. ROSENBERG, Jonathan
                         Rosenberg, PLLC, Brooklyn, NY., for
                         Debtor-Appellant Janet Tingling.

                         MICHAEL E. KREUN (Kenneth L. Baum, on the
                         brief), Hackensack, NJ, for Defendant-
                         Appellee Educational Credit Management
                         Corp.

                         MARY M. DICKMAN, Assistant United States
                         Attorney (Varuni Nelson, Assistant United
                         States Attorney, on the brief), Eastern District
                         of New York, Brooklyn, NY, for Defendant-
                         Appellee United States Department of
                         Education.



JOSÉ A. CABRANES, Circuit Judge:

      Debtor-Appellant Janet Tingling (“Tingling”) appeals from a
January 31, 2020 judgment of the United States District Court for the
Eastern District of New York (Joanna Seybert, Judge), affirming an
order of the United States Bankruptcy Court for the Eastern District of
New York (Alan S. Trust, Bankruptcy Judge), denying Tingling’s
request to discharge her educational loans pursuant to 11 U.S.C.
§ 523(a)(8). Two questions are presented on this appeal: (1) whether
the Bankruptcy Court abused its discretion when it based its Pretrial
Order on the joint pretrial memorandum, which was agreed to and
approved by all parties on July 31, 2018; and (2) whether Tingling




                                   3
established that she would face an “undue hardship” if her student
loans were not discharged.

       We hold that the Bankruptcy Court did not abuse its discretion
in basing its Pretrial Order on the joint pretrial memorandum dated
July 31, 2018. Nor was it an abuse of discretion for the Bankruptcy
Court to not permit Tingling to unilaterally modify that joint pretrial
memorandum, as the interests of justice in this case did not so require.
Lastly, we hold that Tingling failed to make the factual showing to
establish “undue hardship” under Brunner v. N.Y. State Higher Educ.
Servs. Corp., 

831 F.2d 395

, 396 (2d Cir. 1987), as would be required to
discharge her educational loans. Accordingly, we AFFIRM the District
Court’s judgment.

                                 I. BACKGROUND

       In August 2016, Tingling sought relief from her student debt by
filing a complaint against student loan holder United States
Department of Education (“DOE”) and others. 1 On consent of the
parties, the Bankruptcy Court granted the motion of Educational
Credit Management Corporation (“ECMC”) to intervene as the
assignee of eight of the loans. On April 15, 2019, the Bankruptcy Court
entered a final judgment, holding that Tingling’s student loans were
nondischargeable and that Tingling had failed to prove undue
hardship. 2 Tingling appealed to the District Court, which affirmed the
Bankruptcy Court’s judgment on January 31, 2020. The District Court
further held that the Bankruptcy Court did not abuse its discretion
when it adopted the July 31, 2018 joint pretrial memorandum as the

       1  Tingling was originally represented by counsel but requested that her
attorney be removed from her suit in February 2017. She then proceeded pro se for
the rest of the adversary proceeding before the Bankruptcy Court.
       2   See 11 U.S.C. § 523(a)(8).




                                        4
basis for its Pretrial Order and declined to incorporate Tingling’s later
unilateral revisions. 3

                                   II. DISCUSSION

       The District Court operated as an appellate court in its review of
the Bankruptcy Court’s judgment, and we too, in turn, engage in
plenary, or de novo, review of the District Court’s decision. 4 We thus
apply the same standard of review that the District Court employed,
reviewing “the bankruptcy court’s findings of fact for clear error and
its legal determinations de novo.” 5 But we review the discretionary
rulings of a bankruptcy court, including its determination that certain
facts or issues must be excluded from trial on the basis of a pretrial
order, for abuse of discretion. 6


        3   Tingling v. U.S. Dep’t of Educ., 

611 B.R. 710

, 722 (E.D.N.Y. 2020).
        4In re Anderson, 

884 F.3d 382

, 387 (2d Cir. 2018); see also In re Manville Forest
Prods. Corp., 

896 F.2d 1384

, 1388 (2d Cir. 1990).
        

5Anderson, 884 F.3d at 387

(citing In re U.S. Lines, Inc., 

197 F.3d 631

, 640–41
(2d Cir. 1999)). In addition, we are “free to affirm an appealed decision on any
ground which finds support in the record, regardless of the ground upon which the
trial court relied.” McCall v. Pataki, 

232 F.3d 321

, 323 (2d Cir. 2000) (internal
quotation marks omitted).
        6 In re Dana Corp., 

574 F.3d 129

, 145 (2d Cir. 2009); see United States v. Park,

758 F.3d 193

, 199–200 (2d Cir. 2014) (explaining that “abuse of discretion” is a
“distinctive term of art that is not meant as a derogatory statement about the district
judge whose decision is found wanting.”); Clark v. Pennsylvania R.R. Co., 

328 F.2d 591

, 594 (2d Cir. 1964) (“[A] ruling amending the pre-trial order or permitting a
departure by any party from his pre-trial statement may be reviewed for abuse of
discretion.”); Madison Consultants v. Fed. Deposit Ins. Corp., 

710 F.2d 57

, 62 n.3 (2d
Cir. 1983) (“[P]ermission to amend a pretrial order is to be granted when ‘the
interests of justice make such a course desirable.’” (quoting 

Clark, 328 F.2d at 594

));
Laguna v. Am. Exp. Isbrandtsen Lines, Inc., 

439 F.2d 97

, 101–02 (2d Cir. 1971)).




                                             5
      On appeal Tingling argues that she was deprived of due process
because the Bankruptcy Court accepted the joint pretrial
memorandum as agreed to and approved by all parties on July 31, 2018
and ultimately adopted it as the Bankruptcy Court’s Pretrial Order,
while declining to adopt other versions of the pretrial memorandum
submitted unilaterally by Tingling in the interim.

       We do not agree. On July 31, 2018, after the parties failed to
comply with an order of the Bankruptcy Court requiring them to
together submit a joint pretrial memorandum in advance of a pretrial
conference, the Bankruptcy Court directed the parties to confer in an
adjoining conference room and to submit a single, joint pretrial
memorandum. From that conference came the hand-marked joint
pretrial memorandum here at issue, identifying stipulated facts and
matters disputed by Tingling. The Bankruptcy Court found the hand-
marked joint pretrial memorandum acceptable and directed that it be
docketed, and that the parties submit a “clean” version. App’x 65. But
Tingling subsequently filed additional “joint” pretrial memoranda.
Nevertheless, the Bankruptcy Court’s Pretrial Order ultimately
adopted the “clean” version of the hand-marked joint pretrial
memorandum agreed to and approved by the parties on July 31, 2018. 7

       In challenging the Bankruptcy Court’s decision, Tingling argues
that she was coerced into stipulating to material facts in the marked-
up joint pretrial memorandum of July 31, 2018, including (1) ECMC’s
standing to sue, (2) lack of medical issues relevant to her hardship
claims, and (3) accuracy of loan amounts.



       7  A pretrial order “supersede[s] all prior pleadings and control[s] the
subsequent course of the action.” Rockwell Int’l Corp. v. United States, 

549 U.S. 457

,
474 (2007) (internal quotation marks and citations omitted) (quoting Fed. R. Civ. P.
16(e), applicable to the Bankruptcy Court through Fed. R. Bankr. P. 7016).




                                          6
       After reviewing the record, we agree with the District Court that
the Bankruptcy Court did not abuse its discretion in adopting the joint
pretrial memorandum of July 31, 2018 as the basis of the Bankruptcy
Court’s Pretrial Order. 8 Nor did the Bankruptcy Court abuse its
discretion in precluding Tingling’s later unilaterally revised versions.

       It is well established that “[t]he agreements and stipulations
made at th[e] final [pretrial] conference will control the trial.” 9 Further,
“[t]he decision to permit amendment of the proposed joint pretrial
order rests within the discretion of the Court and should be granted
when ‘the interests of justice make such a course desirable.’” 10 While
the Bankruptcy Court need not “view[] such modification with
hostility,” its determination should balance “the need for doing justice
on the merits between the parties . . . against the need for maintaining
orderly and efficient procedural arrangements.” 11 We are mindful of
the difficulties faced by pro se litigants, but in these circumstances, we
find no “coercion”—much less a violation of due process—in the series
of hearings held and orders issued by the Bankruptcy Court, which
culminated in its Pretrial Order adopting the joint pretrial
memorandum agreed to and approved by all parties on July 31, 2018.

      Tingling next argues that the Bankruptcy Court erred in its
application of the so-called Brunner test in considering the
dischargeability of her education debt. She further submits that the



      8   See 

Tingling, 611 B.R. at 722

.
      9  Fed. R. Civ. P. 16, Advisory Committee Notes, 1983 Amendment,
Subdivision (d).
      10   Madison 

Consultants, 710 F.2d at 62

n.3.
      11   

Laguna, 439 F.2d at 101

–02.




                                           7
Brunner test has, over time, become too high a burden for debtors to
satisfy.

       We do not agree. “Student loans are presumptively
nondischargeable in bankruptcy.” 12 However, pursuant to 11 U.S.C.
§ 523(a)(8), a student loan can be discharged if repayment of the debt
will impose an undue hardship on the debtor and the debtor’s
dependents. 13 Thus, a debtor who claims “undue hardship” to defeat
the statutory presumption against a student loan discharge must make
the following specific factual showing by a preponderance of the
evidence:

        (1) that the debtor cannot maintain, based on current
        income and expenses, a “minimal” standard of living for
        herself and her dependents if forced to repay the loans;
        (2) that additional circumstances exist indicating that this
        state of affairs is likely to persist for a significant portion
        of the repayment period of the student loans; and (3) that
        the debtor has made good faith efforts to repay the
        loans. 14



        12Easterling v. Collecto, Inc., 

692 F.3d 229

, 231 (2d Cir. 2012) (citing 11 U.S.C.
§ 523(a)(8)).
        13See United Student Aid Funds, Inc. v. Espinosa¸ 

559 U.S. 260

, 277 & n.13
(2010) (“Section 523(a)(8) renders student loan debt presumptively
nondischargeable ‘unless’ a determination of undue hardship is made”); Tennessee
Student Assistance Corp. v. Hood, 

541 U.S. 440

, 450 (2004) (noting that “Section
523(a)(8) is self-executing,” such that “[u]nless the debtor affirmatively secures a
hardship determination, the discharge order will not include a student loan debt”).
        

14Brunner, 831 F.2d at 396

; see also Grogan v. Garner, 

498 U.S. 279

, 291 (1991)
(holding that “the standard of proof for the dischargeability exceptions in 11 U.S.C.
§ 523(a) is the ordinary preponderance-of-the-evidence standard”).




                                            8
This so-called Brunner test reflects the Section 523(a)(8) statutory
scheme exhibiting “clear congressional intent . . . to make the discharge
of student loans more difficult than that of other nonexcepted
debt . . . .” 15

        In this case, the Bankruptcy Court found that Tingling failed to
satisfy any of the three Brunner prongs. For the reasons explained in
the District Court’s thorough Memorandum and Order, we agree.
First, the record shows that Tingling’s income (which exceeded federal
poverty levels) and expenses allow her to make loan repayments while
maintaining a minimal standard of living. Further, Tingling failed to
undertake steps to improve her overall financial condition and reduce
her discretionary expenses.

       As for the second Brunner prong, Tingling is of relatively young
age (52 years old), in good health, possesses two graduate degrees in
healthcare administration, lacks dependents, and, by all indications, is
able to maintain her current level of income. Tingling not only
stipulated in the Pretrial Order that she had no medical or
psychological disabilities, but she also introduced no corroborating
evidence into the record that a recently diagnosed tumor affected her
ability to continue working full-time.

       Finally, turning to the third Brunner prong, Tingling failed to
avail herself of repayment options available for the ECMC loans and
put no discernible good faith effort into either negotiating or repaying
the DOE loans. Specifically, although Tingling was eligible to
consolidate her loans and enter into one of two available income-based
repayment programs, Tingling never did so. In addition, Tingling
received tax refunds totaling an average of over $4,000 each year for



      15   

Brunner, 831 F.2d at 396

.




                                       9
the years 2014 through 2017, but she put no portion of these refunds
toward her student debt.

      Given the record, it was not error for the Bankruptcy Court to
conclude that Tingling had not carried her burden to prove by a
preponderance of the evidence that she satisfied any of the three
Brunner prongs.


                         III. CONCLUSION

      To summarize, we hold as follows:

      (1) The Bankruptcy Court did not err, much less abuse its
          discretion, when it based its Pretrial Order on the joint
          pretrial memorandum agreed to and approved by the parties
          on July 31, 2018 at a pretrial conference held for that purpose.
          Further, it was not error, or an abuse of discretion, to
          disallow Tingling’s unilateral modifications of the joint
          pretrial memorandum, inasmuch as the interests of justice in
          this case did not so require.

      (2) Tingling failed to make the factual showing to establish
          “undue hardship” under the Brunner test, as would be
          required to allow the discharge of her educational loans.

     For the foregoing reasons, we AFFIRM the District Court’s
judgment.




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