In Re Lon McGhan AKA Lon L. McGhan Fdba Envirotrend, Inc. Fdba McGhan Management, Debtor. Lon McGhan v. Jason Rutz

Appellee Jason Rutz was a listed creditor in his stepfather’s — -appellant Lon McGhan — bankruptcy proceedings. Rutz, a minor at the time, did not file a complaint of nondischargeability in those proceedings. As a result, the bankruptcy court issued an order discharging Rutz’s claim and issued a permanent injunction barring Rutz from collecting on the debt. After Rutz attained maturity, he nonetheless filed a civil action against McGhan to collect on the discharged debt. Over McGhan’s objections, the state court in which that action was filed ruled that Rutz’s action could proceed because Rutz had inadequate notice of the earlier bankruptcy proceedings. Arguing that only the bankruptcy court had jurisdiction to resolve that question, McGhan then moved the bankruptcy court to reopen his bankruptcy case to review the state court’s decision. The bankruptcy court denied the motion, reasoning that McGhan’s desire to relitigate an issue already heard in state court was insufficient cause to reopen the case. We reverse. Relying on Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074 (9th Cir.2000) (en banc), we hold that state courts lack jurisdiction to determine whether a…