Question

Does the longstanding existence of a custom—in this case, the nominal amount of the fee charged by a college for a transcript—mean that it cannot change?

Answer 1

Before EASTERBROOK, Chief choose, and RIPPLE and timber, Circuit Judges.Patricia k. Hammel, legal professional (argued), Herrick, Kasdorf, Dymzarov & Vetzner, Madison, WI, for Debtor-Appellee. Thomas L. Shriner, Jr., attorney (argue), Foley & Lardner, Milwaukee, WI, for Appellant. Tara A. Twomey, attorney, Carmel, CA, Amicus Curiae.
This case presents a single question:Does a university violate the bankruptcy Code's automatic keep or discharge injunction by way of refusing to furnish a transcript considering the fact that pre-petition debt stays unpaid?

Stefanie Kim Kuehn, an artwork trainer, enrolled in a two-yr master's degree software at Cardinal Stritch college. She took advantage of the school's pay-as-you-go plan but stopped paying midway through the first yr. The college however allowed her to take tests, receive grades, and signal up for new courses. She completed all of the work required for a master's measure, which the institution awarded. however when Kuehn asked for a transcript-the proof vital to obtain an develop in salary from her institution district-the college refused in view that she owed greater than $6,000 in tuition.

Unwilling to pay her debt to the school-although the develop in her revenue would duvet the entire tuition in lower than two years, and she would have borrowed in opposition to that increase-and unable to acquire a transcript without fee, Kuehn filed a bankruptcy petition listing the tuition as a creditor. (Kuehn's legal professional had instructed her that the tuition would have got to furnish her a transcript if she filed for chapter.) at the same time the case was once pending Kuehn again requested a transcript, and the school once more refused to furnish one. After the chapter court docket issued an order discharging her debt to the tuition, 11 united statesC. 727, Kuehn once more asked for a transcript and as earlier than agreed to pay the transcript rate, however not the tutoring. again the school refused. Kuehn contends that the pre-discharge refusal violated the chapter Code's computerized stay, 11 americaC. 362(a), and the later one the discharge injunction, 11 americaC. 524(a), in view that the refusals were acts to accumulate her unpaid debt. bankruptcy choose Martin ordered the university to provide a transcript and pay damages and attorneys' fees. The district court affirmed.2007 WL 5118398, 2007 U.S. Dist. LEXIS 88191 (W.D.Wis. Nov. 30, 2007). It followed In re merchant, 958 F.2nd 738, 741 (6th Cir.1992), the one appellate resolution on the area-but, unluckily, an unreasoned one.

Section 362(a)(6) prohibits pre-petition collectors from taking any act to collect, check, or get better a claim in opposition to the debtor that arose earlier than [the filing of a bankruptcy petition]except the bankruptcy continuing is closed or pushed aside.section 524(a)(2) operates as an injunction towards an act, to accumulate discharged debt] as a private legal responsibility of the debtor different subsections prohibit using legal approach to acquire, imposing a pre-petition judgment, or exercising manipulate over the property of the debtor. See 362(a)(1)-(3), 524(a)(1)-(three). Kuehn argues that the university violated these sections when it refused to provide her transcript. in keeping with her, considering a transcript has no intrinsic worth to the institution, a refusal to furnish one must be an act to acquire. The tuition concedes that its coverage is designed to set off pupils to pay their lessons, nevertheless it maintains that an act to collec for the intent of the bankruptcy Code is limited to a confident step, reminiscent of repossessing a automobile. A passive failure to do what the debtor wants just isn't an act the institution submits. The school treats the transcript as a product that it is not obliged to sell to someone with whom it now not wants to do business.

If Kuehn had tried to purchase a transcript on credit score, and the school, having been burned once, proved unwilling to make a different loan, this could be an easy case. Sections 362(a) and 524(a)(2) apply handiest when a creditor acts to gather a pre-petition or discharged debt. despite the fact that the failure to repay a debt explanations right into a credit score rating, using a credit rating is forward-looking. knowledge collectors don't forget creditworthiness to assess the wisdom of future transactions, not to acquire unpaid debts. some other entity finding out whether or not to extend credit score would do not forget Kuehn's failure to pay, and the university may just do the identical.

other sections of the chapter Code set out some instances where creditors won't bear in mind a debtor's prior bankruptcy submitting. See eleven u.S.A.C. 366 (utilities would possibly not refuse services if the debtor supplies adequate assurance of fee within 20 days); 11 united statesC. 525 (anti-discrimination provision applicable to employers and government entities). otherwise, however, the previous day's failure to pay is a right foundation for tomorrow's refusal to prolong credit. The reasonable credit Reporting Act permits bankruptcy filings to appear on customer reviews for 10 years from the date of discharge. See 15 united statesC. 1681c. It follows that within 10 years from the date of discharge a prospective creditor may just keep in mind discharged money owed in deciding on creditworthiness.

but Kuehn is willing to pay upfront for a transcript of her grades, and the college's handiest intent for balking is to induce her to pay for the schooling-yet that debt has been discharged. The university contends that it does now not have a contractual responsibility to furnish a transcript and that, with out an duty, a passive refusal to deal can't be an act to collect. It depends on residents bank of Maryland v. Strumpf, 516 U.S. Sixteen, 116 S.Ct. 286, 133 L.Ed.2nd 258 (1995), which it says establishes that refusal to deal can not be an act to accumulate. Strumpf held that a bank didn't violate the automatic stay through placing a maintain on a checking account whilst asking the chapter court to carry the stay, in order that the financial institution could set off the account's stability in opposition to an duty the debtor owed to the bank. The courtroom concluded that a keep designed to hold the status quo at the same time the bankruptcy court docket considers the request does now not violate 362. See 516 U.S. At 21, 116 S.Ct. 286. this does not suggest that the bank might maintain the account blocked no matter what happened in the bankruptcy, and even after a discharge. The court docket concluded that the financial institution's lengthen used to be no longer an act to accumulate for the reason that it had a correct under state legislation, a right preserved via the bankruptcy Code, to activate the checking-account balance in opposition to the debt to the bank. That proper could be undercut if the automatic stay authorized the debtor to empty the checking account while the bank's fingers were tied. but money owed to a university cannot be spark off towards a transcript of grades-the 2 items usually are not of equivalent character, see Boston & Maine Corp. V. Chicago Pacific Corp., 785 F.2nd 562 (seventh Cir.1986)-and the institution's refusal will not be designed to come up with the money for time for judicial selection.

The district courtroom applied what a few courts have dubbed a coercive results test: a creditor acts to collect a debt if it acts or fails to behave, in a coercive manner, with the sole cause of amassing that debt. This test cannot be located within the Code, and situations to which it applies might be infrequent, due to the fact that most acts or disasters to behave have a couple of purposes, similar to minimizing danger headquartered on creditworthiness. A rational creditor does itself no favors through refusing to have interaction in future transactions when the debtor pays cash. See In re Kmart Corp., 359 F.3d 866, 873 (7th Cir.2004). If the creditor has competitors, the debtor will deal with them and the creditor loses revenue. If the creditor has market vigour within the items or services being sold, it'll maximize its revenue by means of environment a monopoly rate for future transactions, now not by looking to acquire a debt. Pursuing bygones is a certain option to lower future gains. If the institution just isn't obligated to provide Kuehn a transcript,At oral argument we requested the college if it might cost Kuehn a large sum (say, 25% of the earnings develop she stands to obtain from her supplier) for a transcript. It responded that it might not. That answer undermines its position that it has no obligation to provide a transcript to Kuehn. A provider of goods and services typically is free to charge whatever the market will bear. We would now not in finding any laws or regulations limiting the rate of institution transcripts. So why does the college suppose that the rate for a transcript need to be nominal, restricted to the expenses of printing and certifying the grades? maybe the answer is that offering a transcript is an implicit a part of the academic contract, included by the price for the direction hours, and that Kuehn as a result has a contract or property right for which she has already paid. (well, she hasn't paid, but her duty to do so has been discharged, so it involves the equal factor.) The college are not able to cost Kuehn extra if the price for guideline covers transcripts too. Then the university's refusal to certify a transcript of Kuehn's grades can be an act to acquire the discharged debt and would violate each the automatic keep and the discharge injunction. See In re UAL Corp., 412 F.3d 775, 778 (seventh Cir.2005).

well, then, does Kuehn have a property interest because a certified transcript is a component of the package deal of items and services that a institution presents in exchange for training? Property interests are created and defined by using state legislation until a federal legislation requires an additional result. Butner v. U.S., 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2nd 136 (1979). Nothing within the chapter Code creates or alters property rights in grades or the proper to obtain a transcript. different federal legislation addresses privacy considerations however not property pursuits. See 20 united states of americaC. 1232g (household educational Rights and privateness Act). What stay are state statutes and fashioned legislation. See Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972).

Just one federal courtroom of appeals (and no state supreme court docket) has considered whether or not a current or former pupil has a property right to acquire a transcript. Juras v. Aman assortment provider, Inc., 829 F.Second 739 (ninth Cir.1987), concluded that Montana's statutory definition of property does not supply students property rights in transcripts. Montana defines property possession as the right of a number of persons to possess and use [a thing] to the exclusion of others.Mont.Code 70-1-a hundred and one. The court concluded that when you consider that a tuition creates, continues, and possesses the grade report to the exclusion of others it is the proprietor of the professional transcript. The ninth circuit's conclusion is questionable. Universities in Montana are restricted with the aid of both state and federal law in what they are able to do with a scholar's grades. Mont.Code 20-25-515 says that a institution shall release a student's academic file when requested by using the scholar. This feels like a rule that the pupil has a property interest within the knowledge, even though the school additionally may just use the information.(Shared property rights are original. each landlord and tenant have property pursuits within the premises. Or feel of land discipline to an easement for transit.) however, right or wrong, Juras is unhelpful-Cardinal Stritch college is located in Wisconsin, whose law does now not define property rights within the identical way as Montana.