Nationstar waived its right to argue that the court could not address the merits of the debtor’s discharge injunction case before ruling on class certification, and several of Nationstar’s post-discharge communications violated the injunction. Forson v. Nationstar Mortgage, LLC., No. 08-61001, Adv. Proc. No. 15-2137 (Bankr. S.D. Ohio March 21, 2018).
Terry Lee Forson reopened his chapter 13 bankruptcy and filed an adversary complaint against Nationstar Mortgage LLC, alleging violation of the discharge injunction, section 524(a)(2), based on Nationstar’s continued collection activities post-discharge. Contending that Nationstar’s conduct was part of an ongoing business practice, Mr. Forson sought class certification. He filed a motion for summary judgment to which Nationstar objected, arguing that, under the one-way rule, the court could not address the merits of the case until it had made a finding with respect to class certification.
The court disagreed finding that Nationstar waived its right to have the class action certification question answered prior to a decision on the merits in the Plaintiff’s motion for summary judgment by failing to object to the court’s proposed schedule when asked for input at a pretrial conference. Furthermore, over a year elapsed between the conference and the motion for summary judgment during which time Mr. Forson relied on the court’s litigation schedule.
The court turned to the merits beginning with the premise that because the discharge injunction has no enforcement provision, its ability to sanction an offending creditor arises out of its contempt power. Under Sixth Circuit case law, to demonstrate violation of the discharge injunction, a plaintiff must show by clear and convincing evidence both that the defendant attempted to collect a debt against the plaintiff personally in violation of the court’s discharge order, and that the defendant had actual knowledge of the discharge order.
The court found that Nationstar violated the discharge order when it sent him regular post-discharge statements indicating the Note was delinquent despite the discharge order in which the court found all mortgage payments current and any amounts in excess of the mortgage, including fees and interest, discharged.
The court also found letters Nationstar sent to Mr. Forson were an attempt to collect a discharged debt. Specifically, one of the letters notified Mr. Forson of a delinquent post-discharge amount and demanded payment of past-due amounts before the current delinquency would be corrected. That letter further threatened foreclosure and negative credit reporting. The second letter simply stated an amount due which could be none other than past-due amounts subject to the injunction which, in the absence of countervailing evidence from Nationstar, the court concluded was a second attempt at prohibited collection.
A phone call from Nationstar informing Mr. Forson of a delinquency, which the court found was nonexistent, was a further attempt at collection. Other phone calls were less clear. With respect to a telephone call initiated by Mr. Forson in which the Nationstar representative informed him of a delinquency of over $11,000, the court found a genuine issue of fact concerning whether that was a collection attempt or was simply a communication providing information at Mr. Forson’s request. Similarly, a follow-up phone call was unclear as to its purpose.
With respect to actual knowledge of the discharge order, Nationstar asserted that it never received a copy of the order even though it was sent to the Noticing Address that Nationstar provided to the court and which had been used throughout the bankruptcy. That, in addition to the facts that Mr. Forson called Nationstar after his discharge to inform it of the order, and that Nationstar included an acknowledgement of the bankruptcy discharge in one of its letters to Mr. Forson, persuaded the court that Nationstar had actual knowledge of the bankruptcy.
The court granted Mr. Forson’s motion for summary judgment.
Forson Bankr SD Ohio March 2018
Tags: Class Certification, discharge injunction
