In re Beck, Bankruptcy No. 98-11845DWS.

• Decision Date: 06 August 2002
• Docket Number: Bankruptcy No. 98-11845DWS.,Adversary No. 01-0384.
• Citation: 283 B.R. 163
• Parties: In re Richard M. BECK and Mary Ann Beck, Debtors. Richard M. Beck, on Behalf of Himself and All Others Similarly Situated, Plaintiff, v. Gold Key Lease, Inc., Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

283 B.R. 163

In re Richard M. BECK and Mary Ann Beck, Debtors Richard M. Beck, on Behalf of Himself and All Others Similarly Situated, Plaintiff, v. Gold Key Lease, Inc., Defendant.

Bankruptcy No. 98-11845DWS.

Adversary No. 01-0384.

United States Bankruptcy Court, E.D. Pennsylvania.

August 6, 2002.

Joseph C. Kohn, Kohn, Swift & Graf, P.C., Philadelphia, PA, Robert F. Mitsch, St. Paul, MN, for Plaintiff.

Stephen G. Harvey, Pepper Hamilton, LLP, Philadelphia, PA, Donald J. Querio, San Francisco, CA, for Defendant.

Dave P. Adams, Philadelphia, PA, United States Trustee.

OPINION

DIANE WEISS SIGMUND, Bankruptcy Judge.

Before the Court is the motion ("Motion") of defendant Gold Key Lease, Inc. ("Gold Key") to strike class claims for lack of subject matter jurisdiction.¹ In the motion, Gold Key contends that the claim of Plaintiff, Richard Beck ("Plaintiff") for contempt of the discharge injunction, 11 U.S.C. § 524, cannot be adjudicated as a nationwide class action because only the court which has issued an injunction has the authority to enforce it. Plaintiff opposes the Motion asserting that unlike a traditional injunction, the discharge injunction is a statutory injunction which is the same from court to court and as such, there is no impediment to this court's enforcement of same without regard to the court that has issued it. Upon consideration and for the reasons set forth below, I grant Gold Key's Motion in part.

BACKGROUND

On February 12, 1998, Plaintiff and his wife (collectively referred to as "Debtors") filed a Voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code. Beck v. Gold Key Lease, Inc. (In re Beck), 272 B.R. 112, 115 (Bankr.E.D.Pa.2002) ("Beck I") Approximately four months later, Debtors received a discharge in their bankruptcy case.² Id. Later the same month, their bankruptcy case was closed, and the trustee was discharged, having fully administered this no-asset case. Id.

On January 4, 2001, Plaintiff commenced the instant adversary proceeding against Gold Key by filing a complaint (the "Complaint") in the United States District Court for the Eastern District of Pennsylvania. Id. The facts underlying the Complaint are as follows:

(i) Plaintiff entered into an automobile lease (the "Lease"), dated November 14, 1996, covering a 1995 Chrysler Sebring (the "Vehicle")

(ii) Gold Key is the holder of the Lease;

(iii) The Lease, which was for a two year period ending on November 14, 1998, required Plaintiff to make twenty-four monthly payments of $341.54 and a final payment, at Plaintiff's option, of either (a) $18,300.74 plus applicable taxes or fees to purchase the Vehicle or (b) an amount equal to 15 cents for each mile in excess of 24,000 miles shown on the odometer;³ (iv) Prior to filing for bankruptcy, Plaintiff made the monthly payments due under the Lease;

(v) After filing for bankruptcy, Plaintiff retained possession of the Vehicle and continued making the payments due under the Lease;

(vi) On or about December 7, 1998, following the end of the Lease term on November 14, 1998, Plaintiff returned the Vehicle to Gold Key;

(vii) Shortly thereafter, Gold Key sent Plaintiff a final invoice on the Lease in the amount of $4,394.09 for excess miles driven on the Vehicle;

(viii) Plaintiff paid part of the amount listed on the invoice;

(ix) A balance remains due and owing on the $4,394.09 which Gold Key tried to collect; and

(x) Gold Key never sought or obtained a reaffirmation agreement from Plaintiff.

See id. at 114-117. In Counts I and II of the Complaint,⁴ Plaintiff alleged that Gold Key willfully violated 11 U.S.C. § 524(c) and 11 U.S.C. § 524(a), respectively.⁵

Gold Key subsequently filed a motion to dismiss. Rather than adjudicating the motion, District Judge Robreno referred Counts I and II of the Complaint to this Court for disposition in Debtors' bankruptcy case.⁶ Id. at 116. I subsequently issued an Order reopening Debtors' bankruptcy case and directing that an adversary number be issued to the above-captioned action. Thereafter, Gold Key filed its renewed motion to dismiss, asserting that no private cause of action exists under § 524. Id. After the hearing on its dismissal motion, Gold Key requested the opportunity to supplement its motion to assert as an additional ground for dismissal that its claim for excess mileage under the Lease is a post-petition claim not subject to the discharge injunction of § 524(a) or the reaffirmation requirements of § 524(c). Id. at 116-17. Plaintiff did not object to the request, and I granted it. Id. at 117.

After the parties submitted briefs on the issue of whether the excess mileage charges were dischargeable, I decided the dismissal motion. I concluded that Gold Key's claim for excess mileage constituted a discharged claim but that the sole remedy for a violation of § 524 is contempt and that no private right of action exists under that Code provision. Id. at 118-130. Based on these conclusions, I granted the dismissal motion as to Count I but denied the motion as to Count II, finding that since Plaintiff had pled contempt as an alternate ground for recovery, dismissal of that count would be improper. Id. at 131.

Gold Key subsequently filed an answer to the Complaint after which a status conference was held. The parties agreed that Gold Key's Status Conference Statement which asserts that this action cannot proceed as a class action because this Court "lacks the authority to examine the discharge injunctions of bankruptcy courts nationwide" would be treated as a motion to dismiss for lack of jurisdiction. See supra n. 1. Pursuant to a briefing schedule, Plaintiff submitted a memorandum of law in opposition to Gold Key's Motion, see Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Strike Class Claims for Lack of Subject Matter Jurisdiction ("Plaintiff's Brief"), to which Gold Key filed a reply, see Gold Key Lease, Inc.'s Reply Memorandum on the Court's Authority to Enforce Discharge Orders Issued by Other Courts ("Gold Key's Reply"). Shortly thereafter, a hearing on the Motion was held. At the conclusion of the hearing, I took the matter under advisement.

DISCUSSION

Pursuant to 11 U.S.C. § 524(a),⁷ a discharge operates as a permanent injunction against actions to recover debts subject to the discharge. In re Behrens, 900 F.2d 97, 98 (7th Cir.1990); Internal Revenue Service v. Germaine, 152 B.R. 619, 623 (9th Cir. BAP 1993); Molloy v. Primus Automotive Financial Services, 247 B.R. 804, 815 (C.D.Cal.2000). The injunction is evidenced in this case by an order that states, inter alia, that "All creditors whose debts are discharged by this order ... are enjoined from instituting or continuing any action or employing any process or engaging in any act to collect such debts as personal liabilities of the above named debtor." Doc. No. 14.⁸ That order, which takes the same form in each case, is "BY THE COURT" and bears the name of the judge who presided over the bankruptcy case. Id. Gold Key's Motion raises the narrow issue of whether this Court has authority to hold Gold Key in contempt for violating discharge injunctions issued not only by this Court but by bankruptcy courts nationwide.

As a general principle of law, only the court which issues an injunction has the authority to enforce it. Gold Key accurately cites United States Supreme Court and Circuit Court authority for this proposition,⁹ see Motion at 2, which Plaintiff does not refute. The rationale for this rule is articulated by the Fifth Circuit Court of Appeals in Waffenschmidt v. MacKay, 763 F.2d 711 (5th Cir.1985):

Enforcement of an injunction through a contempt proceeding must occur in the issuing jurisdiction because contempt is an affront to the court issuing the order.¹⁰ See, e.g., Leman [v. Krentler-Arnold Hinge Last Co.], supra, 284 U.S. [448] at 452, 52 S.Ct. 238 at 240 [76 L.Ed. 389 (1932)] (Disobedience constituted contempt of the court which entered the decree....); Wilson v. United States, 26 F.2d 215, 218 (8th Cir.1928); Bedgood v. Cleland, 554 F.Supp. 513, 517 (D.Minn.1982).

[T]he power of a court to make an order carries with it the equal power to punish for a disobedience of that order, and the inquiry as to the question of disobedience has been, from time immemorial, the special function of the [ordering] court.... To submit the question of disobedience to another tribunal, be it a jury or another court, would operate to deprive the proceeding of half its efficiency.... [T]he sole adjudication of contempts, and the punishments thereof [belong] exclusively ... to each respective court.

In re Debs, 158 U.S. 564, 594-95, 15 S.Ct. 900, 910, 39 L.Ed. 1092 (1895) (citations omitted).

Gold Key contends that this general principle applies to discharge injunctions. Advocating the opposite view, Plaintiff asserts that Gold Key's argument has been "routinely rejected by courts throughout the United States."¹¹ Plaintiff's Brief at 9. According to Plaintiff, the basis for the rejection is that the discharge injunction is "exactly the same for each and every debtor throughout the country." Id. Because it is not "individually crafted" like a traditional injunction, he contends that there should be no barrier to my enforcing another court's order. Id. As authority for his position, Plaintiff cites the following three cases: Cox v. Zale Delaware, Inc., 239 F.3d 910 (7th Cir.2001); Bessette v. Avco Financial Services, Inc., 230 F.3d 439 (1st Cir.2000), cert. denied, 532 U.S. 1048, 121 S.Ct. 2016, 149 L.Ed.2d 1018 (2001); and an unpublished decision in In re Heath, No. 88-42576 (Bankr.N.D.Miss. October 31, 1997).¹²

In Cox, the debtor paid the balance due on a discharged debt pursuant to the terms of a reaffirmation agreement which he subsequently learned was unenforceable and void because it had not been filed as required by 11 U.S.C. § 524(c)(3). He filed a class action suit seeking to rescind the agreement (and those of the...