Timely filing of a notice of appeal is a jurisdictional prerequisite and an appellant must at least conform his filing to general adherence to the requirements outlined in Rule 8003(3). In re Dorsey, 2017 U.S. App. LEXIS 16905, No. 16-31085 (5th Cir. Sept. 1, 2017). [Read more…] about Reminder: Timely Notice of Appeal Is Jurisdictional
Isaacs v. DBI-ASG Coinvestor Fund, No. 17-5815 (6th Cir.)
Type: Amicus
Date: September 28, 2017
Description: Whether the Rooker-Feldman doctrine can divest a bankruptcy court of subject matter jurisdiction over causes of action that arise only under the Bankruptcy Code.
Result: Pending
No Jurisdiction over Appeal of District Court Vacation of Confirmation Order
“When a district court vacates a bankruptcy court order confirming a bankruptcy plan and remands for further proceedings, there is no final order sufficient to confer jurisdiction under 28 U.S.C. § 158(d).” Bank of New York Mellon v. Watt, No. 15-35484 (9th Cir. Aug. 16, 2017).
In their bankruptcy plan, Nicholas and Patricia Watt included a provision vesting title to their residence in the mortgagee, Bank of NY, and specifying that “vesting shall not merge or otherwise affect the extent, validity, or priority of any liens on the property.” Bank of NY opposed the mandatory vesting provision and objected to confirmation of the plan. The bankruptcy court confirmed the plan. [Read more…] about No Jurisdiction over Appeal of District Court Vacation of Confirmation Order
Deadline for Revocation of Discharge Not Jurisdictional
The one-year deadline for seeking revocation of a discharge order is not jurisdictional and may therefore be waived. Weil v. Elliott (In re Elliott), No. 16-55359 (9th Cir. June 14, 2017).
When Edward Elliott filed his Chapter 7 bankruptcy petition he failed to mention one important asset: his home. He received a discharge under section 727(a). Fifteen months later, when the trustee discovered the fraudulent nondisclosure, she filed an adversary complaint seeking an order vacating the discharge under section 727(d)(1). Section 727(e)(1) permits a trustee to seek revocation of discharge within one year of the discharge order. Mr. Elliott did not raise the issue of untimeliness in his response to the adversary complaint. The bankruptcy court revoked his discharge. The Bankruptcy Appellate Panel, however, found the one-year filing deadline to be jurisdictional and reversed. Elliott v. Weil (In re Elliott), 529 B.R. 747, 755 (B.A.P. 9th Cir. 2015). On remand, the bankruptcy court dismissed the adversary complaint for lack of jurisdiction. The trustee was permitted direct appeal to the Ninth Circuit. [Read more…] about Deadline for Revocation of Discharge Not Jurisdictional
FDCPA and Discharge Injunction Not Incompatible
An FDCPA claim based on efforts to collect a debt discharged in bankruptcy is not precluded by the Code’s discharge injunction. Barnhill v. FirstPoint, Inc., No.15-892 (M.D. N.C. May 17, 2017).
Lara Barnhill filed a class action complaint in district court alleging that FirstPoint, Inc. and FirstPoint Collection Resources made efforts to collect a debt after her debt had been discharged in chapter 7 bankruptcy in violation of the FDCPA, North Carolina Collection Agency Act (NCCAA). The complaint also made a claim for injunctive relief. FirstPoint moved to dismiss under section 12(b)(1) and (6) for lack of subject matter jurisdiction and for failure to state a claim.
FirstPoint argued that the district court lacked subject matter jurisdiction over the FDCPA and NCCAA claims because both consumer protection laws are preempted by the Bankruptcy Code’s discharge injunction. FirstPoint further argued that Ms. Barnhill failed to allege injury-in-fact and therefore lacked Article III standing.
With respect to the FDCPA, the district court noted that one federal law does not preempt another but that, where they deal with same subject matter one may repeal the other either by express direction by Congress or by implication if the two statutes are irreconcilable.
The Fourth Circuit has not decided the issue of FDCPA and Code compatibility, but the district court agreed with other courts finding that an action based on post-discharge collection efforts may be sustained under both statutes simultaneously [though, in this case, Ms. Barnhill did not include a claim based on violation of the discharge injunction]. The court specifically discussed Garfield v. Ocwen Loan Servicing, LLC, 811 F.3d 86, 89 (2d Cir. 2016), where the Second Circuit distinguished between actions under the FDCPA brought for conduct occurring while the bankruptcy case was open and cases in which the conduct occurred post-discharge. The Garfield court was persuaded that the Code and the FDCPA were compatible in the latter instance in part because, unlike automatic stay violations, the Code does not create a cause of action for violations of the discharge injunction. Furthermore, because the same conduct underlies both causes of action, a creditor can avoid violations of both the FDCPA and the Code by not trying to collect a discharged debt.
Turning to whether the Code preempts the NCCAA, the court explored the doctrines of field preemption, where Congress specifies that a federal law supplants state authority in a particular field, and conflict preemption, where a state law must yield to a federal law with which it actually conflicts. Where states traditionally have the power to create and enforce consumer protection laws, a court will find field preemption only where Congress has made clear that such preemption was its purpose. Because no such indication is found in the Bankruptcy Code, the court turned to whether the NCCAA was preempted as conflicting with the Code. To find such preemption, the Fourth Circuit looks to “whether it is impossible to comply with both the state and federal law or whether the state law presents an obstacle to the accomplishment of the purposes of the federal law.” The court found no such conflict. Violation of the NCCAA was based on the allegation that FirstPoint had attempted to collect an uncollectible debt. The fact that the debt was rendered uncollectible due to bankruptcy discharge, was irrelevant.
The court thus concluded that neither the FDCPA nor the NCCAA claims were preempted or precluded by the Bankruptcy Code.
FirstPoint next argued that Ms. Barnhill had not suffered any “concrete and particularized” injury-in-fact and therefore had no Article III standing to bring this action. While cautioning that generally mere violation of a statute does not satisfy the injury-in-fact requirement in the absence of evidence of its effect on the plaintiff, a “majority of courts have held that FDCPA violations, like the ones asserted in this case, are substantive violations and thus produce ‘concrete injuries’ sufficient to satisfy Article III’s requirement of injury-in-fact.” Furthermore, Ms. Barnhill alleged particularized injury in the form of emotional distress and harm to her credit rating. The court concluded that her allegations were sufficient to withstand a motion to dismiss.
Having found that subject matter jurisdiction survived the 12(b)(1) motion, the court turned to whether the complaint stated a claim for purposes of Rule 12(b)(6). To state a claim for violation of the FDCPA, a plaintiff must show that 1) she has been the object of collection activity, 2) by a debt collector, 3) engaging in conduct that violates the FDCPA. Here, FirstPoint, Inc. drew a distinction between itself and FirstPoint Collection Resources, arguing that unlike its counterpart, FirstPoint, Inc. is not a debt collector, and cannot be held vicariously liable for the conduct of FirstPoint Collection Resources.
Rejecting this argument, the court noted that Ms. Barnhill alleged that both FirstPoint, Inc. and FirstPoint Collection Resources, were debt collectors and that both made efforts to collect the discharged debt. These allegations were sufficient to withstand a motion to dismiss. The fact that FirstPoint, Inc. did not hold a state license to collect debts was not relevant to the inquiry as licensure is not necessary to a finding of an FDCPA violation. As to the conduct giving rise to the FDCPA claim, the court found it was enough that Ms. Barnhill alleged that she received a phone call from the defendants informing her that her discharged debt was owing and in collection and that it was affecting her credit.
For the same reasons, the complaint stated a claim under the NCCAA. The fact that the state law does require a permit for debt collectors did not defeat this claim as the court found that a debt collector acting in violation of the licensing law could still violate the NCCAA.
Finally, the defendants argued that injunctive relief is not available under either the FDCPA or the NCCAA and that claim should, therefore, be dismissed. Without deciding whether the relief sought was available, the court granted the motion to dismiss to the extent that the claim for injunctive relief was presented as a cause of action rather than as a form of remedy.
Debtor/Plaintiffs Overcome Hurdle to Class Certification
Denying the creditor’s motion to dismiss, the bankruptcy court in the Southern District of Texas found that it could exercise jurisdiction over a nationwide class and that the claims, based on abuse of process, satisfied the “core proceeding” requirements of subject matter jurisdiction. Jones v. Atlas Acquisitions, LLC, No. 15-34818, Adv. Proc. No. 16-3235 (Bankr. S.D. Tex. May 19, 2017).
Atlas Acquisitions filed a proof of claim in Katrina Jones’s chapter 13 bankruptcy. It later withdrew the claim. Ms. Jones then filed an adversary complaint on behalf of herself and others similarly situated, alleging “abuse of the bankruptcy system by [Atlas’s] willful and intentional disregard for the requirements for filing legitimate claims in many Chapter 13 cases throughout the country.” Specifically, the complaint alleged that, in accordance with its business model, Atlas routinely filed deficient proofs of claim only to withdraw them when challenged. The First Amended Complaint added Natasha Hill, a chapter 13 debtor in the Bankruptcy Court for the Western District of Louisiana (case no. 15-3166) as a named plaintiff and sought certification as a class action.
Atlas moved to dismiss the class action claims arguing: 1) that a bankruptcy court lacks subject matter jurisdiction under 28 U.S.C. 1334 to certify a nationwide class; 2) that the plaintiffs are not adequate class representatives, and, 3) that the class cannot be certified as a matter of law under the requirements of Rule 23(b)(3).
The court began with section 1334, which confers jurisdiction on the district courts over cases arising under Title 11, and section 157(a) and Texas District Court General Order 2012-6 which provide for referral of such cases to bankruptcy judges.
Relying on Bolin v. Sears, Roebuck & Co., 231, F.3d 970 (5th Cir. 2000), the court rejected Atlas’s initial argument that, while a bankruptcy court may exercise class-wide jurisdiction within its district, it cannot exercise jurisdiction over a nationwide class. In Bolin, the Fifth Circuit, upon finding that the Rule 23(b)(2) requirements for nationwide class certification were not established, did not question the district court’s subject matter jurisdiction over the proposed class and, in fact, remanded to the district court for further proceedings. Where the bankruptcy court’s jurisdiction is coextensive with the district court and where the district court has jurisdiction over a nationwide class of plaintiffs, the bankruptcy court does as well.
The court turned to the strictures on bankruptcy court jurisdiction under which the case must be a “core” proceeding either “arising under,” “arising in,” or “related to” a case under Title 11.
Atlas argued that the abuse of process claims here arose not out of a bankruptcy proceeding but under the court’s inherent authority under section 105(a) and Bankruptcy Rule 3001, and that the plaintiffs’ claims for injunctive and declaratory relief are found in Title 28 rather than Title 11.
The court found that the claims both arose under, and arose in, a case under Title 11. To “arise under” Title 11, the action must involve a substantive right created by the Code or by the Bankruptcy Rules. While section 105(a) does not create substantive rights, it empowers a court to enforce rights created elsewhere in the Code or Rules. Atlas argued that neither Rule 3001 nor injunctive and declaratory relief offered under Title 28, constitute substantive rights under Title 11. The court disagreed, finding that, while many of the Bankruptcy Rules do not create substantive rights, Rule 3001 is not one of them. Rather, Rule 3001(c)(2)(D)(iii) provides that a plaintiff may obtain “appropriate relief,” expenses and attorney’s fees upon a finding that the defendant has failed to attach supporting documentation to a proof of claim. This provision for relief, the court found, is a substantive right under the Bankruptcy Rules. Therefore, the action “arose under” Title 11.
The court also found that it had “arising in” jurisdiction because, on their face, the claims were based on improper filing of a proof of claim under sections 501 and 502 and would “have no existence outside of the bankruptcy.”
Having established its jurisdiction, the court turned to the pleading requirements of Rule 23(a)(4) and (b)(3) to determine whether the complaint stated a claim for relief under Rule 12(b)(6). Atlas argued that Ms. Jones could not be a class representative because she had an inherent conflict of interest between the other class members and her creditors in her personal bankruptcy. In support of this and other propositions, Atlas asked the court to take judicial notice of certain statements included in the record.
The court declined to do so, stating that, where Atlas failed to satisfy the two-pronged test for judicial notice required by Fed. R. Evid. 201(a), it would be premature to make factual findings on Atlas’s arguments without an evidentiary hearing on class certification.
Finally, the court rejected Atlas’s argument that individual issues predominate in this case and that it was therefore inappropriate to certify a class under Rule 23(b)(3). Again, the court found the face of the complaint stated a claim and that the issue of class certification was appropriately dealt with in an evidentiary hearing.
Order On Liability But Not Damages Is Interlocutory
Where the bankruptcy court granted partial summary judgment on the debtor’s complaint for willful violation of the automatic stay, but did not decide damages, the order was interlocutory and the Bankruptcy Appellate Panel lacked jurisdiction over the appeal. Lugo Ruiz v. FirstBank Puerto Rico, No. 17-7 (B.A.P. 1st Cir. April 14, 2017). [Read more…] about Order On Liability But Not Damages Is Interlocutory
District Court Has Original Jurisdiction over 362(k) Claim
A district court has subject matter jurisdiction over a claim under section 362(k) without regard to a standing order referring all bankruptcy-related cases to the bankruptcy courts, and dismissal under FRCP 12(b)(6) is inappropriate where the allegations in the complaint present a plausible explanation for the defendant’s conduct. Houck v. Substitute Trustee Services, No. 13-2326 (4th Cir. July 1, 2015). [Read more…] about District Court Has Original Jurisdiction over 362(k) Claim
Supreme Court Finds Denial of Confirmation not Appealable Order
The Supreme Court unanimously decided today that denial of confirmation is not a final, appealable, order. Bullard v. Blue Hills Bank, 575 U.S. ___, No. 14-116 (U.S. May 4, 2015). [Read more…] about Supreme Court Finds Denial of Confirmation not Appealable Order
Order on Stay Violation Final despite Pending Issue as to Attorney Fee Award
Where the only issue left to be determined was whether the debtor had incurred attorney fees and costs in connection with the creditor’s stay violation, the order finding liability, and determining actual damages was a final, appealable order. USDA v. Sexton (In re Sexton), No. 14-453 (W.D. Va. March 31, 2015). [Read more…] about Order on Stay Violation Final despite Pending Issue as to Attorney Fee Award