“interpret[ations] by the district and bankruptcy courts in Missouri” have acknowledged that Benn “require[s] a state statutory basis for bankruptcy exemptions”
How later courts described this case
- “interpret[ations] by the district and bankruptcy courts in Missouri” have acknowledged that Benn “require[s] a state statutory basis for bankruptcy exemptions”
Written by the judges who cited it.
The opinion
United States Court of Appeals
For the Eighth Circuit
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No. 24-1666
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In re: Robert Edward Dewey Shoults, Jr.; Kristina Marie Shoults
lllllllllllllllllllllDebtors
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Robert Edward Dewey Shoults, Jr.; Kristina Marie Shoults
lllllllllllllllllllllAppellants
v.
Tracy A. Brown
Chapter 7 Trustee
lllllllllllllllllll Trustee Appellee
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Submitted: January 14, 2025
Filed: July 15, 2025
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Before LOKEN, ARNOLD, and KELLY, Circuit Judges.
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LOKEN, Circuit Judge.
In December 2020, Robert and Kristina Shoults (“Debtors”) filed a petition for
relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court
for the Eastern District of Missouri. In June 2021, the Debtors amended their
schedule, claiming that a pre-petition, contingent, unliquidated personal injury tort
claim against a third party is exempt under Missouri common law and Missouri
Revised Statutes § 513.427. Tracy A. Brown, the Chapter 7 Trustee, objected to the
exemption. The bankruptcy court disallowed the exemption, the district court1
affirmed, and the Debtors appeal. As the second court reviewing the bankruptcy
court’s decision, we apply the same standard of review as the district court --
reviewing findings of fact for clear error and conclusions of law de novo. PIRS Cap.,
LLC v. Williams, 54 F.4th 1050, 1053 (8th Cir. 2022). We affirm.
I.
In general, a federal bankruptcy estate consists of all the debtor’s legal or
equitable interests in property. 11 U.S.C. § 541(a). The Bankruptcy Reform Act of
1978 provides a uniform scheme allowing debtors to exempt certain property from
the bankruptcy estate that the debtors can retain for a “fresh start” after the
bankruptcy proceeding. In re Benn, 491 F.3d 811, 813 (8th Cir. 2007) (Benn); see
11 U.S.C. § 522(d) (listing property that may be exempted). States may opt out of
this common scheme and create their own exemptions. 11 U.S.C. § 522(b)(2).
Missouri expressly opted out of the federal § 522(d) exemptions in § 513.427 of the
Missouri Revised Statutes, restricting Missouri residents “to the exemptions available
under Missouri law and under federal statutes other than section 11 U.S.C. § 522(d).”
In re Wallerstedt, 930 F.2d 630, 631 n.1 (8th Cir.1991).
Section 513.427 of the Missouri Revised Statutes provides that Missouri
debtors seeking relief under the federal Bankruptcy Code “shall be permitted to
exempt from property of the estate any property that is exempt from attachment and
execution under the law of the state of Missouri or under federal law, other than . . .
1
The Honorable Ronnie L. White, United States District Judge for the Eastern
District of Missouri, affirming the March 31, 2023 Order of the Honorable Bonnie
L. Clair, United States Bankruptcy Judge for the Eastern District of Missouri.
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Section 522(d).” In Benn, we rejected the debtor’s argument that tax refunds still in
the government’s custody are exempt because they are not in the list of the kinds of
property that are exempt from attachment in Missouri Revised Statutes § 513.430.
We held that Missouri debtors may only exempt property “where another Missouri
statute specifies that certain property is exempt.” Benn, 491 F.3d at 814. Section
513.427 is merely an “opt-out” statute; it “announces no new exemptions under
Missouri law.” Id. at 813-14. We explained, “[e]xemption’ is a term of art in
bankruptcy, and . . . while exemption may mean different things in different contexts,
in the context of 11 U.S.C. § 522, it refers to laws enacted by the legislative branch
which explicitly identify property that judgment-debtors can keep away from
creditors for reasons of public policy.” Id. at 814 (cleaned up).
Following Benn, we held in In re Abdul-Rahim that “personal injury or tort
claims, unliquidated or otherwise,” are neither exempted under Missouri state law nor
federal law outside of § 522’s exemptions. 720 F.3d 710, 712 (8th Cir. 2013) (Abdul-
Rahim). We reaffirmed “that section 513.427 is an opt out rather than an exemption
statute” and held that “unless In re Benn is overruled en banc or by the Supreme
Court, it remains binding precedent, and is directly applicable” to whether “an
unliquidated tort claim can be exempted from the bankruptcy estate.” Id. at 712, 714.
The bankruptcy court and the district court sustained the trustee’s objection and
disallowed the exemption, concluding our decisions in Benn and Abdul-Rahim are
controlling precedents and rejecting the Debtors’ contention that they were
overturned by the Supreme Court in Rodriguez v. FDIC, 589 U.S. 132 (2020). That
is the issue on appeal.
II.
Like the debtors in Abdul-Rahim, “Debtors argue that under Missouri law, they
are or should be allowed to exempt an unliquidated personal injury claim . . . .” Id.
at 712. They argue Abdul-Rahim “incorrectly expanded” our “narrow” holding in
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Benn that only addressed the applicability of § 513.427 under § 522(d) to exemptions
of federal tax refunds under Missouri law. This argument mirrors the debtors’
assertions in Abdul-Rahim “that In re Benn’s holding is narrow and stands only for
the proposition that Missouri Revised Statute § 513.427 does not create an exemption
for tax refunds.” Id. at 713.
“It is a cardinal rule in our circuit that one panel is bound by the decision of a
prior panel.” United States v. Rethford, 85 F.4th 895, 897 (8th Cir. 2023) (quotation
omitted). We expressly held in Abdul-Rahim that the language in Benn -- that
Debtors call dicta -- “is an integral part of In re Benn’s analysis” and therefore
“unless In re Benn is overruled en banc or by the Supreme Court, it remains binding
precedent, and is directly applicable to the issues in this case.” 720 F.3d at 714. We
otherwise must reject Debtors’ arguments that Abdul-Rahim misinterpreted Benn and
violated the Erie doctrine in requiring a state statutory basis for bankruptcy
exemptions other than the opt-out language in § 513.427. Id. at 712, 714 n.4, citing
U.S. Tr. Co. of N.Y. v. Zelle, 191 F.2d 822, 825 (8th Cir.1951).
Benn and Abdul-Rahim have not been overruled or even questioned by our
court en banc. Thus, this appeal turns on Debtors’ contention that the Supreme
Court’s decision in Rodriguez “effectively overturns this Court’s decision in
Abdul-Rahim and abrogates this Court’s decision in Benn.”
The Court in Rodriguez addressed a different issue, one that had divided other
circuits -- whether federal common law or state law should determine the right to a
distribution of federal tax refund payments owed to a group of corporate entities that
file consolidated returns. Many federal courts, in the absence of federal statutory or
IRS guidance, followed a “general rule” created by the Ninth Circuit in In re Bob
Richards Chrysler-Plymouth Corp., 473 F.2d 262, 265 (9th Cir. 1973) -- absent a tax
allocation agreement between the group members, the refund belonged to the member
responsible for the losses that led to it. But the Sixth Circuit disagreed, ruling that
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“federal common law constitutes an unusual exercise of lawmaking which should be
indulged . . . only when there is a significant conflict between some federal policy or
interest and the use of state law.” Rodriguez, 589 U.S. at 135, quoting FDIC v.
AmFin Fin. Corp., 757 F.3d 530, 535 (6th Cir. 2014). The Supreme Court granted
certiorari and, agreeing with the Sixth Circuit, abrogated the “Bob Richards rule” and
remanded the Rodriguez case to the Tenth Circuit. The unanimous Supreme Court
explained:
We took this case only to underscore the care federal courts should
exercise before taking up an invitation to try their hand at common
lawmaking. Bob Richards made the mistake of moving too quickly past
important threshold questions at the heart of our separation of powers.
[Our opinion] supplies no rule of decision, only a cautionary tale.
Id. at 138.
The Court’s explanation makes it clear that Rodriguez did not overrule or
abrogate our controlling precedents in Benn and Abul-Rahim, We disagree with
Debtors that Benn and Abul-Rahim represent an invalid exercise of federal common
lawmaking. As the bankruptcy court explained, federal common lawmaking
compris[es] a process of judicial, rather than legislative, lawmaking in
the absence of applicable state law. Rodriguez, 140 S. Ct. at 717. The
case at bar involves interpretation and review of actual Missouri state
statutes. Moreover, Rodriguez never mentions issues similar to the opt-
out state exemption language involved in Benn and Abul-Rahim, much
less the rulings in those cases.
Rodriguez serves as an important reminder for federal courts to guard against
creating federal common law on an issue governed by state law. But it did not decide
“how this case should be resolved under state law,” 589 U.S. at 138, and which state
statutes would govern the exemption issue, the key question in this case. Rodriguez
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did not even address how federal courts should interpret ambiguous or unsettled state
law that governs an issue of federal statutory law implicating important federal issues,
here, whether property is exempt from a federal bankruptcy debtor’s estate.
In Benn we construed Missouri Revised Statute § 513.427 and applied that
interpretation to the incorporation of state law in 11 U.S.C. § 522. To repeat what we
held in Benn, “‘exemption’ is a term of art” in federal bankruptcy statutes that “refers
to laws enacted by the legislative branch which explicitly identify property” that may
be exempted. 491 F.3d at 814 (emphasis added). This is the interpretation of
entwined federal and state statutes, not federal common lawmaking. See Abdul-
Rahim, 720 F.3d at 713 (“interpret[ations] by the district and bankruptcy courts in
Missouri” have acknowledged that Benn “require[s] a state statutory basis for
bankruptcy exemptions”). “[T]he Missouri legislature has apparently declined the
opportunity to amend its exemption statute, section 513.430, to add unliquidated
personal injury claims, even in light of the numerous Missouri bankruptcy court
decisions precluding such claims from exemption.” Id. at 714. Rodriguez did not
alter this landscape.
Because our controlling precedents remain intact, they continue to be binding.
For these reasons, the district court did not err in affirming the bankruptcy court’s
Order denying Debtors’ claim to exempt the pre-petition unliquidated tort claim from
their bankruptcy estate. Accordingly, we affirm.
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