In re Atwood

• Decision Date: 07 April 2011
• Docket Number: Bankruptcy No. 10–13259 J.,Adversary No. 10–1145 J.
• Citation: 452 B.R. 249
• Court: U.S. Bankruptcy Court — District of New Mexico
• Parties: In re Patricia M. ATWOOD, Debtor.Patricia M. Atwood, Plaintiff,v.GE Money Bank, General Electric Capital Corporation, Law Offices of Farrell & Seldin, and Barry A. Seldin, Defendants.

452 B.R. 249

In re Patricia M. ATWOOD, Debtor.Patricia M. Atwood, Plaintiff,

v.GE Money Bank, General Electric Capital Corporation, Law Offices of Farrell & Seldin, and Barry A. Seldin, Defendants.

Bankruptcy No. 10–13259 J.

Adversary No. 10–1145 J.

United States Bankruptcy Court, D. New Mexico.

April 7, 2011.

Deborah M. DeMack, Albuquerque, NM, for Plaintiff.Jack Brant, Albuquerque, NM, for Defendants.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on Defendants' Motion to Dismiss Plaintiffs' Second, Third and Fourth Claim[s] for Failure to State a Claim Upon which Relief can be Granted (“Motion to Dismiss”) filed by and through Defendants' counsel of record, Law Office of Jack Brant, P.C. (Jack Brant). Plaintiff filed this adversary proceeding against Defendants based on allegations of improper debt collection activity in violation of the following: 1) the automatic stay imposed by 11 U.S.C. § 362 of the Bankruptcy Code; 2) the Fair Debt Collections Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”); 3) the New Mexico Unfair Practices Act, N.M.S.A.1978 § 57–12–1, et seq. (“NM–UPA”); and 4) the New Mexico common law for unfair debt collection.¹ Defendants assert that Plaintiff's exclusive remedy for the actions she complains of is provided under 11 U.S.C. § 362(k) ² such that Plaintiff cannot also maintain causes of action under the FDCPA, the NM–UPA, or the New Mexico common law premised on the same allegations.

After considering the relevant case law and being otherwise sufficiently informed, the Court finds that, while it is possible to maintain separate causes of action for alleged violations of the automatic stay and for alleged violations of the FDCPA, the Court lacks jurisdiction over Plaintiff's alleged claims under the FDCPA and her state law causes of action because resolution of those claims could have no impact on the bankruptcy estate. Consequently, the Court will dismiss Plaintiff's Second, Third, and Fourth Claims asserted in the Complaint for lack of subject matter jurisdiction.

DISCUSSION

I. Whether the Bankruptcy Code Provides the Exclusive Remedy for Alleged Post–Petition Collection Activity ³

Defendants assert that Plaintiff's exclusive remedy for the Defendants' alleged post-petition collection activities is provided under the Bankruptcy Code such that Plaintiff cannot also maintain a claim under the FDCPA premised on the same conduct. There is a split in circuit court authority on this issue.⁴

In Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, the debtors alleged that the creditor violated the discharge injunction and the FDCPA by attempting to collect a debt that had been discharged in bankruptcy.⁵ The Walls court held that the debtor could not pursue a claim for violation of the discharge injunction and for violation of the FDCPA, finding that the Bankruptcy Code precludes a simultaneous claim under the FDCPA. 276 F.3d at 510. Because the debtor's FDCPA claim was based on the creditor's alleged violation of the discharge injunction, the court would necessarily have to consider bankruptcy issues in order to resolve the debtors' FDCPA claim. Id. Thus, the Walls court reasoned that because the Bankruptcy Code provides its own remedy for violations of the discharge injunction, allowing a simultaneous claim under the FDCPA based on an alleged violation of 11 U.S.C. § 524 would enable the debtor to “circumvent the remedial scheme of the [Bankruptcy] Code.” Id.

In Randolph, the Seventh Circuit reached the opposite conclusion when it examined the question of whether a debtor could pursue a claim under the FDCPA when the alleged actions that formed the basis of the debtor's claim under the FDCPA would constitute a willful stay violation under 11 U.S.C. § 362 of the Bankruptcy Code. The Seventh Circuit compared the FDCPA and 11 U.S.C. § 362(h) ⁶ side by side and found that while the two statutes overlap, “[i]t is easy to enforce both statutes, and any debt collector can comply with both simultaneously.” Randolph, 368 F.3d at 730. Thus the Randolph court rejected the argument that the Bankruptcy Code provides a comprehensive remedial scheme and found that the Bankruptcy Code did not “work an implied repeal of FDCPA” so that the debtor could maintain a claim under the FDCP based on a post-bankruptcy demand for payment. Id. at 732.

The Court is persuaded by the reasoning of the Seventh Circuit.⁷ The FDCPA and the willful stay violation provision under the Bankruptcy Code are both aimed at inappropriate debt-collection activity; yet they have different standards and different remedies.⁸ Both statutes are enforceable because “the ‘operational differences' between the statutes do not ‘add up to irreconcilable conflict.’ ” ⁹ Enforcement of the automatic stay provisions under the Bankruptcy Code is not Plaintiff's exclusive remedy for collection activity that could also constitute a violation of the FDCPA. ¹⁰ However, as explained below, this Court lacks jurisdiction over Plaintiff's claims under the FDCPA and state law.

II. The Court Lacks Jurisdiction Over Plaintiff's FDCPA and State Law Causes of Action

A Court must satisfy itself that is has subject matter jurisdiction regardless of whether a party has asserted lack of subject matter jurisdiction.¹¹ The Court evaluates its subject matter jurisdiction in accordance with 28 U.S.C. § 1334. That section provides:

the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

28 U.S.C. § 1334(b).

Bankruptcy courts are referred cases under title 11, and proceedings arising under title 11 or arising in or related to a case under title 11, by the district court. 28 U.S.C. § 157(a). The congressional grant of jurisdiction to the bankruptcy court under this section is limited. ¹² Bankruptcy judges may hear all core proceedings arising under title 11, or arising in a case under title 11, as well as non-core proceedings that are otherwise “related to” a case under title 11. ¹³ “Core” proceedings are proceedings that involve rights created by bankruptcy law or matters that arise in a bankruptcy case.¹⁴ Core proceedings also include proceedings otherwise defined as “core proceedings” under 28 U.S.C. § 157(b)(2). “Non-core” proceedings can exist independently from the bankruptcy case and do not invoke substantive rights created under applicable bankruptcy law.¹⁵

The factual allegations contained in Plaintiff's Complaint concern Defendants' post-petition actions in serving upon Plaintiff a summons and complaint from a pre-petition debt collection action initiated in state court despite having actual notice of Plaintiff's pending bankruptcy case.¹⁶ Claims for damages under 11 U.S.C. § 362(k) based on alleged actions taken post-petition in violation of the automatic stay fall squarely within this Court's core jurisdiction.¹⁷ Plaintiff's claims under the FDCPA, the NM–UPA, and New Mexico common law do not raise substantive rights created under bankruptcy law, can exist independently of a pending bankruptcy case, and are not otherwise defined as core proceedings under 28 U.S.C. § 157(b)(2).¹⁸ Thus, for the Court to have jurisdiction over those claims, they must fall within the Court's non-core, “related-to” jurisdiction.

Most courts that have considered this issue have found that the bankruptcy court does not have subject matter jurisdiction over a Chapter 7 debtor's post-petition claims for violation of the FDCPA.¹⁹ This Court agrees. The test for determining whether the bankruptcy court has, non-core, “related-to” jurisdiction over a proceeding is “ ‘whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.’ ” ²⁰ A factual nexus between the alleged conduct and the Plaintiff's bankruptcy case is insufficient, in and of itself, to confer “related to” jurisdiction on the Bankruptcy Court to hear a claim under the FDCPA.²¹

Here, Plaintiff's factual assertions in support of her claims under the FDCPA, the NM–UPA and New Mexico common law relate to post-petition actions. Therefore, such claims do not constitute property of her bankruptcy estate, and any recovery, should she prevail on these claims, would have no conceivable impact on the administration of her Chapter 7 bankruptcy estate.²² These claims, therefore, do not fall within the Court's limited, “related to” non-core jurisdiction. The Court will dismiss Plaintiff's Second, Third, and Fourth claims in the Complaint due to a lack of subject matter jurisdiction. An order consistent with this Memorandum will be entered.

1. See Complaint for Damages for Violations of the Automatic Stay, Fair Debt Collections Practices Act and Unfair Practices Act (“Complaint”), Docket No. 1.

2. Section 362(k) provides, in relevant part:

[A]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.

11 U.S.C. § 362(k)(1).

3. Because two federal statutes are at issue, the issue is not whether pre-emption prevents Plaintiff from proceeding under the FDCPA. Randolph v. IMBS, Inc., 368 F.3d 726, 730 (7th Cir.2004) (explaining that “[o]ne federal statute does not preempt another[,]” and stating further that “[w]hen two federal statutes address the same subject in different ways, the right question is whether one implicitly repeals the other ...”) (citations omitted).

4. Compare Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir.2002) (holding that debtor's remedy for alleged violations of the discharge injunction is found under the Bankruptcy Code so that debtor could not also pursue a claim under the FDCPA) with Randolph, 368 F.3d at 732 (finding that 11 U.S.C. § 362 and the FDCPA overlap, but are not incompatible so that the Bankruptcy Code does not...