A bankruptcy filing doesn’t wipe out the debtor’s obligation to pay attorney fees in a child-custody case, the U.S. Court of Appeals for the Sixth Circuit has ruled. 

On October 10, a unanimous panel of the court affirmed a ruling by Judge Stephen Murphy III of the Eastern District of Michigan that Patrick Rugiero pay $100,000 in fees to Antonietta DiNardo. The appeals court determined that the fee award was a domestic support obligation. Also, a result, the attorney fees are not dischargeable.

The litigants are the unmarried parents of two children. In their child-custody case, the Wayne County Circuit Court issued two orders for Rugiero to pay DiNardo’s attorney fees. The court ordered Rugiero to pay $20,000 in May 2010 and $80,000 in November 2010. By the time of the second award, DiNardo had racked up $184,697 in attorney fees in the case.

In January 2011, Rugiero filed for Chapter 13 bankruptcy reorganization in the Eastern District of Michigan. He later converted the case to a Chapter 7 bankruptcy liquidation. Rugiero asked the bankruptcy court to stay the state court rulings.

In March 2011, the bankruptcy court denied Rugiero’s motion on the ground that it fell under the domestic-support exception to the Bankruptcy Code’s automatic stay of a debtor’s other court cases. The bankruptcy court also ruled that it had no power under the Rooker-Feldman doctrine—a civil procedure rule that stems from two Supreme Court cases—to declare the debts nondischargeable.

Murphy affirmed the bankruptcy court on both grounds in November 2011, and Rugiero appealed.

Circuit Judge Jeffrey Sutton wrote the opinion in Rugiero v. DiNardo,  joined by judges Richard Allen Griffin and Helene White.

Sutton wrote, “the federal bankruptcy and district courts thought that the Rooker-Feldman doctrine divested the federal courts of jurisdiction to decide whether the debts were dischargeable. That is not right. This doctrine prevents litigants from collaterally attacking final state court orders by filing new federal claims.”

He added, “Despite the Rooker-Feldman confusion, the bankruptcy and district courts correctly held that the fee awards amounted to domestic support obligations. As a result, they determined that the automatic stay did not apply to the state court proceedings, and their holdings necessarily implied that those debts are non-dischargeable.”

Sutton noted that the panel looked at “traditional state law indicia” of support obligations to determine whether the fee awards are support payments. Sutton endorsed the state court’s analysis of the relative capacities of DiNardo and Rugiero to pay the fees.

“[W]hen courts have held that fee awards do not amount to domestic support obligations, that was because the state court’s orders failed to tie the awards to the creditor spouse’s financial needs,” Sutton observed.

Rugiero’s lawyer, Timothy Graves, an associate at Allard & Fish in Detroit, did not respond to requests for comment.

Julia Perkins, a partner at Jaffe, Raitt, Heuer & Weiss in Southfield, Mich., and one of DiNardo’s lawyers, said, “If a litigant is in need of attorney’s fees in order to protect her rights to custody and parenting time, the courts are going to uphold that. That’s why we’re ecstatic about this ruling although not surprised.”

Eric Novetsky, an associate at Jaffe Raitt who also represents DiNardo, said, “The court agrees that the attorneys’ fees were in the nature of support, whereas otherwise a litigious boyfriend could make life difficult [for a woman seeking custody].”

Sheri Qualters can be contacted at squalters@alm.com.