794 F.3d 1313 (11th Cir. 2015), 14-14002, In re McLean

Docket Nº:14-14002
Citation:794 F.3d 1313
Opinion Judge:JILL PRYOR, Circuit Judge
Party Name:In re: ERIC ALLEN MCLEAN, DEBORAH DIANNE MCLEAN, Debtors. v. ERIC ALLEN MCLEAN, DEBORAH DIANNE MCLEAN, Defendants - Appellees GREEN POINT CREDIT, LLC, GREEN TREE SERVICING LLC, Plaintiffs - Appellants,
Attorney:For Green Point Credit, LLC, Green Tree Servicing LLC, Plaintiffs - Appellants: Robert Austin Huffaker Jr., J. Evans Bailey, Rushton Stakely Johnston & Garrett, PA, Montgomery, AL; Paul Joseph Spina III, Spina & Lavelle, PC, Birmingham, AL. For Eric Allen Mclean, Deborah Dianne Mclean, Defendants...
Judge Panel:Before ED CARNES, Chief Judge, JILL PRYOR and BLACK, Circuit Judges.
Case Date:July 23, 2015
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
SUMMARY

Green Tree appealed the district court's judgment concerning an adversary proceeding that debtors filed against Green Tree in the bankruptcy court. The district court affirmed the bankruptcy court’s ruling that Green Tree violated the discharge injunction under 11 U.S.C. 524(a)(2) by filing a proof of claim in debtors’ instant bankruptcy proceeding to collect a debt that was discharged in their... (see full summary)

 
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794 F.3d 1313 (11th Cir. 2015)

In re: ERIC ALLEN MCLEAN, DEBORAH DIANNE MCLEAN, Debtors.

GREEN POINT CREDIT, LLC, GREEN TREE SERVICING LLC, Plaintiffs - Appellants,

v.

ERIC ALLEN MCLEAN, DEBORAH DIANNE MCLEAN, Defendants - Appellees

No. 14-14002

United States Court of Appeals, Eleventh Circuit

July 23, 2015

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Appeal from the United States District Court for the Middle District of Alabama. D.C. Docket No. 1:13-cv-00925-WKW. Bankruptcy No. 12-bkc-11045-WRS.

For Green Point Credit, LLC, Green Tree Servicing LLC, Plaintiffs - Appellants: Robert Austin Huffaker Jr., J. Evans Bailey, Rushton Stakely Johnston & Garrett, PA, Montgomery, AL; Paul Joseph Spina III, Spina & Lavelle, PC, Birmingham, AL.

For Eric Allen Mclean, Deborah Dianne Mclean, Defendants - Appellees: Nicholas Heath Wooten, Nick Wooten, LLC, Auburn, AL.

Before ED CARNES, Chief Judge, JILL PRYOR and BLACK, Circuit Judges.

OPINION

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JILL PRYOR, Circuit Judge

Green Point Credit, LLC and Green Tree Servicing LLC (collectively, " Green Tree" ) appeal the judgment the district court entered in its role as bankruptcy appellate court concerning an adversary proceeding that debtors Deborah and Eric McLean filed against Green Tree in the bankruptcy court. The district court affirmed the bankruptcy court's ruling that Green Tree violated the discharge injunction under 11 U.S.C. § 524(a)(2) by filing a proof of claim in the McLeans' instant bankruptcy proceeding to collect a debt that was discharged in their previous bankruptcy proceeding. The order also affirmed the bankruptcy court's award of both compensatory and non-compensatory sanctions to the McLeans.

This appeal presents a novel question: whether a creditor violates the discharge injunction under § 524(a)(2) by filing a proof of claim in a bankruptcy proceeding to collect a debt that was discharged in a previous bankruptcy proceeding. Green Tree asks us to answer this question in the negative or, in the alternative, to vacate the compensatory sanctions for lack of evidentiary foundation and the non-compensatory sanctions for being impermissibly punitive. After careful review, and with the benefit of oral argument, we conclude that Green Tree violated the discharge injunction; however, we vacate both monetary awards and remand to the district court with instructions to vacate and remand to the bankruptcy court.

I.

The McLeans have twice met Green Tree in bankruptcy court. Their first encounter began in 2006, when the McLeans listed Green Tree as an unsecured creditor in their Chapter 13 petition in the Bankruptcy Court for the Middle District of Alabama. The bankruptcy court converted the petition to a Chapter 7 petition and subsequently discharged the debt, a deficiency of $11,018.00 on a sales contract for a mobile home, in its January 2009 discharge order. Green Tree received electronic notice of the discharge.

In June 2012, the McLeans filed a second Chapter 13 petition in the same bankruptcy court. This petition did not list Green Tree as a creditor. Despite the 2009 discharge order, Green Tree filed a proof of claim in the second proceeding for a debt in the amount of $11,018.03, representing the same deficiency that Green Tree had sought to recover in the McLeans' first proceeding. The McLeans learned of this filing in a letter from the bankruptcy court informing them that their projected bankruptcy plan payments were going to double because of the filing.1 According to the McLeans, this revised projection caused them emotional distress because they were unable to make the increased payments and expected to lose

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all their possessions as a result. The McLeans objected to the proof of claim on December 13, 2012 on the basis that the debt previously had been discharged.

On January 7, 2013, before the bankruptcy court ruled on the objection, the McLeans initiated an adversary proceeding against Green Tree with a complaint alleging that Green Tree's proof of claim violated 11 U.S.C. § 524(a)(2), which provides that a discharge order operates as an injunction against further debt collection activities by creditors. Four days after the McLeans filed their complaint, Green Tree withdrew its proof of claim. Green Tree has since acknowledged that it filed the proof of claim in error, due to the failure of its automated electronic system to recognize that the McLeans' debt had been discharged. Still, the McLeans sought to recover actual damages for the emotional distress that the proof of claim caused before it was withdrawn and sanctions befitting of Green Tree's misconduct. The bankruptcy court sustained the McLeans' objection in the bankruptcy proceeding on January 16, 2013. After a trial in the adversary proceeding, the bankruptcy court found in favor of the McLeans, ruling that Green Tree violated the discharge injunction. The bankruptcy court awarded the McLeans compensatory sanctions for their emotional distress and a non-compensatory award that it labeled " coercive sanctions," which were designed to encourage Green Tree to correct any defects in its automated systems that could cause another such violation.

Green Tree appealed to the district court, which affirmed the bankruptcy court's judgment. The district court agreed with each of the bankruptcy court's conclusions but took care to address the risk that the non-compensatory sanctions, which the bankruptcy court imposed after Green Tree withdrew its offending proof of claim, might have been of a punitive, rather than coercive, nature. Finding Green Tree acted with reckless disregard of the risk of violating the discharge injunction, the district court concluded that, even if there remained no contempt that Green Tree could have corrected before the bankruptcy court imposed them, the sanctions could be upheld as punitive. This appeal followed.

II.

" Where the district court [sitting as an appellate court] affirms the bankruptcy court's order, we review the bankruptcy court's decision." Fisher Island Ltd. v. Solby+Westbrae Partners (In re Fisher Island Invs., Inc.), 778 F.3d 1172, 1189 (11th Cir. 2015). " Like the district court, we review the bankruptcy court's findings of fact for clear error and the court's conclusions of law and mixed questions of law and fact de novo." Christopher v. Cox (In re Cox), 493 F.3d 1336, 1340 n.9 (11th Cir. 2007) (per curiam). " Although neither party submitted briefs on the issue, it is a duty of this Court to determine whether it has jurisdiction over a particular matter, even if doing so raises the issue sua sponte. We review jurisdictional issues de novo." Walden v. Walker (In re Walker), 515 F.3d 1204, 1210 (11th Cir. 2008) (citation omitted).

III.

As a preliminary matter, we first must address whether the bankruptcy court had jurisdiction over the McLeans' adversary proceeding and whether we, in turn, have jurisdiction to entertain this appeal. Before oral argument, we raised sua sponte the question whether the bankruptcy court acted within its jurisdiction by enforcing the discharge injunction arising from the McLeans' previous bankruptcy case. It is settled that " the court that issued the injunctive order alone possesses

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the power to enforce compliance with and punish contempt of that order," and this " power to sanction contempt is jurisdictional." Alderwoods Grp., Inc. v. Garcia, 682 F.3d 958, 970 (11th Cir. 2012); see also Cox v. Zale Del., Inc., 239 F.3d 910, 917 (7th Cir. 2001) (" [A]ffirmative relief can be sought only in the bankruptcy court that issued the discharge." ). The question our precedent does not answer is how broadly we are to construe the identity of the " court" that has the power to enforce the discharge injunction. Although the McLeans brought the instant bankruptcy petition in the same district as the case that gave rise to the discharge injunction -- and, incidentally, the same judge presided over both proceedings -- our concern was that the bankruptcy court might have acted beyond its jurisdiction in enforcing the discharge injunction issued under a different case number. See Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 509 (9th Cir. 2002) (holding that there is no private right of action to enforce the discharge injunction and explaining that Congress intended to leave " enforcement to the bankruptcy judge whose discharge order gave rise to the injunction" ).

We resolve our concern by recognizing that the purpose of a court's contempt power is in part to " ensur[e] that the Judiciary has a means to vindicate its own authority," not simply to enforce rulings in individual proceedings. Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 796, 107 S.Ct. 2124, 95 L.Ed.2d 740 (1987). The violation of an injunction is a contempt against an entire court insofar as it flouts the court's basic authority to preserve order and administer justice. See id. at 798; Alderwoods Grp., 682 F.3d at 969-71. Accordingly, any court--bankruptcy court included -- has inherent powers to punish contempt against it, as a means of protecting itself as an institution. See Jove Eng'g, Inc. v. Internal Revenue Serv., 92 F.3d 1539, 1553 (11th Cir. 1996).2

Here, we need not rely on the bankruptcy court's inherent powers to find jurisdiction because bankruptcy courts also possess a statutory...

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