Calderon v. Bank of Am. Corp. (In re Calderon)

• Decision Date: 01 July 2013
• Docket Number: Bankruptcy No. 4:11–BK–12628.,Adversary No. 4:12–AP–01005.
• Citation: 497 B.R. 558
• Parties: In re Stephanie A. CALDERON, Debtor. Stephanie A. Calderon f/k/a Stephanie A. Pollard v. Bank of America Corporation and Bank of America, N.A.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

497 B.R. 558

In re Stephanie A. CALDERON, Debtor.Stephanie A. Calderon f/k/a Stephanie A. Pollard

v.Bank of America Corporation and Bank of America, N.A.

Bankruptcy No. 4:11–BK–12628.

Adversary No. 4:12–AP–01005.

United States Bankruptcy Court,

E.D. Arkansas,

Little Rock Division.

July 1, 2013.

Robert R. Danecki, Attorney at Law, Little Rock, AR, for Debtor and Stephanie A. Calderon f/k/a Stephanie A. Pollard.

Judy Simmons Henry, Wright, Lindsey & Jennings, Little Rock, AR, for Bank of America Corporation and Bank of America, N.A.

ORDER DENYING JURY DEMAND

AUDREY R. EVANS, Bankruptcy Judge.

Now before the Court is a Demand for Trial by Jury filed by the Defendant, Bank of America, N.A. (“BANA”). (Dkt. No. 59). The Plaintiff, Stephanie A. Calderon, filed a voluntary Chapter 13 bankruptcy petition on April 21, 2011. She then filed an adversary complaint against various entities, alleging that they had willfully violated the automatic stay. The Plaintiff amended her complaint on January 23, 2013, to name BANA as a defendant. She seeks actual damages, punitive damages, and attorney's fees under 11 U.S.C. § 362(k)(1).¹

On April 4, 2013, the Defendant moved to withdraw the reference to the District Court. The Defendant maintained that because it requested a jury trial and did not consent to the Bankruptcy Court conducting one pursuant to 28 U.S.C. § 157(e), mandatory withdrawal of the reference was required under subsection 157(d). On May 2, 2013, the District Court entered an order, concluding that withdrawal of the reference was discretionary and declining to withdraw the reference until the Bankruptcy Court determined whether the Defendant was entitled to a jury trial. Stephanie A. Calderon v. Bank of Am. Corp., No. 4:13MC00005 KGB (E.D.Ark. May 2, 2012).

Because bankruptcy courts are Article I courts (or legislative courts) under the United States Constitution, Congress may proscribe the cases and circumstances in which a bankruptcy judge may conduct a jury trial.² In § 157(e) of the Judicial Code, Congress provides that:

If the right to a jury trial applies in a proceeding that may be heard under this section by a bankruptcy judge, the bankruptcy judge may conduct the jury trial if specially designated to exercise such jurisdiction by the district court and with the express consent of all the parties.

28 U.S.C. § 157(e); see alsoFed. R. Bankr.P. 9015(b). The District Court for the Eastern District of Arkansas has authorized the Bankruptcy Court to conduct jury trials. See E.D. Ark., Gen. Order No. 44 (effect. Nov. 13, 1995); see also Loc. Bankr.R. 9015–1. However, the Defendant has not consented to having the Bankruptcy Court conduct a jury trial. Therefore, if the Defendant were entitled to a jury trial, it would be held in the District Court. For the reasons discussed below, the Defendant's jury trial demand is denied.

ANALYSIS

The Defendant argues that it is entitled to a jury trial on the Plaintiff's § 362(k)(1) action under the Seventh Amendment of the United States Constitution. In its Brief in Support of its Motion to Withdraw the Reference of the Adversary Proceeding, the Defendant contends that it is constitutionally guaranteed a right to jury trial because the Plaintiff's action is a legal action, the action does not assert a “public right,” and the Defendant has not filed a proof of claim in the Plaintiff's bankruptcy case. (Dkt. No. 71). The Plaintiff maintains that a § 362(k)(1) action is an equitable action or, alternatively, that her action asserts a “public right” which does not entitle the Defendant to a jury trial.

The right to a jury trial is preserved by the Seventh Amendment to the Constitution of the United States. The Seventh Amendment provides “[i]n suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved....” U.S. Const. amend. VII. “The Seventh Amendment protects a litigant's right to a jury trial only if a cause of action is legal in nature and involves a matter of ‘private right.’ ” Granfinanciera v. Nordberg, 492 U.S. 33, 42 n. 4, 109 S.Ct. 2782, 2790 n. 4, 106 L.Ed.2d 26 (1989). In Granfinanciera, the Supreme Court set forth the following analysis to determine whether a party has the right to a jury trial under the Seventh Amendment:

First, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature. The second stage of this analysis is more important than the first.

492 U.S. at 42, 109 S.Ct. at 2790 (internal quotations and citations omitted). “If, on balance, these two factors indicate that a party is entitled to a jury trial under the Seventh Amendment” the court must then determine if the claim asserts a “public” as opposed to a “private” right. 492 U.S. at 42, 109 S.Ct. at 2790, n. 4. Under the public rights analysis, a court “must decide whether Congress may assign and has assigned resolution of the relevant claim to a non-Article III adjudicative body that does not use a jury as factfinder.” 492 U.S. at 42, 109 S.Ct. at 2790. Accordingly, after analyzing whether an action is one at common law ( i.e., whether it is based on 18th Century English law and is legal as opposed to equitable in nature), the Court must then determine whether the action asserts a private or a public right.

There Was No Cause of Action For a Violation of an Automatic Bankruptcy Stay in 18th Century England

The Defendant has cited no case law or other evidence to support the contention that there was anything resembling an automatic stay—let alone an action for its violation—in eighteenth century England. This is not surprising. At least one court has determined that a § 362(k)(1) action lacks a historical analogue in English common law. Gecker v. Gierczyk (In re Glenn), 359 B.R. 200, 203 (Bankr.N.D.Ill.2006), appeal denied,No. ADV. 04A4493, 2006 WL 2252529 (N.D.Ill. Aug. 3, 2006). Moreover, a review of the history of bankruptcy law in the United States indicates that the concept of an automatic stay and an action for its violation are relatively new. The automatic stay only came into statutory fruition as part of the enactment of the Bankruptcy Code in 1978. In re Benalcazar, 283 B.R. 514, 520 (Bankr.N.D.Ill.2002). Under the prior Bankruptcy Acts, judges had to issue injunctions to protect property from leaving what today would be called the bankruptcy estate. See id. (discussing history of the automatic stay). The Bankruptcy Code eliminated this cumbersome procedure in § 362(a) which stays an array of collection activities when a bankruptcy petition is filed. Section 362(k)(1), formerly § 362(h),³ is only 29 years old. Enacted by Congress as part of the Bankruptcy Amendments and Federal Judgeship Act of 1984,⁴ “ section 362(k)(1) creates a cause of action that was [simply] unknown to the common law....” In re Glenn, 359 B.R. at 202;see also In re Valley Steel Prods. Co., Inc., 147 B.R. 189, 192 (Bankr.E.D.Mo.1992) (“Unlike the fraudulent conveyance actions in Granfinanciera, a breach of the automatic stay does not resemble a state-law or common law claim.”).

A Stay Violation Action Might Seek Legal Relief

The Defendant's argument that it is constitutionally entitled to a jury trial is largely based on the second prong of the Granfinanciera analysis. Specifically, the Defendant contends that because the Plaintiff seeks actual and punitive damages ( i.e., money damages), the Plaintiff's action seeks “legal” rather than “equitable” relief.

“Generally, an action for money damages was ‘the traditional form of relief offered in the courts of law.’ ” Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 570, 110 S.Ct. 1339, 1347, 108 L.Ed.2d 519 (1990) (quoting Curtis v. Loether, 415 U.S. 189, 196, 94 S.Ct. 1005, 1009, 39 L.Ed.2d 260 (1974)). Additionally, “[r]emedies intended to punish culpable individuals, as opposed to those intended simply to extract compensation or restore the status quo, were issued by courts of law, not courts of equity.” Tull v. United States, 481 U.S. 412, 422, 107 S.Ct. 1831, 1838, 95 L.Ed.2d 365 (1987). Thus, for example, the Supreme Court held in Curtis v. Loether, that actual and punitive damages sought for a statutory violation of the Civil Rights Act of 1968, was a request for legal rather than equitable relief. 415 U.S. 189, 196, 94 S.Ct. 1005, 1009, 39 L.Ed.2d 260 (1974).

However, the Supreme Court has never “go[ne][so] far as to say that any award of monetary relief must necessarily be ‘legal’ relief.” Curtis, 415 U.S. at 196, 94 S.Ct. at 1009. “First, a monetary award may be an equitable remedy if the award is ‘restitutionary’ in nature, ‘such as in actions for disgorgement of improper profits.’ ” Hopkins v. Saunders, 199 F.3d 968, 977 (8th Cir.1999) (quoting Terry, 494 U.S. at 570, 110 S.Ct. at 1348);see also Great–W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 229–30, 122 S.Ct. 708, 723, 151 L.Ed.2d 635 (2002) (Ginsburg, J., dissenting) (collecting cases). “Second, a monetary award may be deemed an equitable remedy if the award is ‘incidental to or intertwined with injunctive relief.’ ” Hopkins, 199 F.3d at 977 (quoting Terry, 494 U.S. at 571, 110 S.Ct. at 1348). The Plaintiff clearly seeks monetary relief which renders her action legal in nature unless one of the two exceptions delineated by the Supreme Court applies.

Neither the actual damages nor the punitive damages sought by the Plaintiff can be properly characterized as restitutionary. A restitutionary award returns a defendant's wrongful gains to the plaintiff. See Great–W. Life, 534 U.S. at 230, 122 S.Ct. 708 (Ginsburg, J., dissenting); see also Bentley v. Arlee Home Fashions, Inc., 861 F.Supp. 65, 68 (E.D.Ark.1994) ( “The main purpose of a damages award is some type of compensation for Plaintiff's loss—contrasted with restitution...