In re Dunbar

• Decision Date: 21 January 2011
• Docket Number: Adversary No. 4:10–ap–1203.,Bankruptcy No. 4:10–bk–12463.
• Citation: 446 B.R. 306
• Parties: In re Felita L. DUNBAR, Debtor.Felita L. Dunbar, Plaintiffv.Cox Health Alliance, LLC a/k/a Cox Health Center and Cox Health, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

446 B.R. 306

In re Felita L. DUNBAR, Debtor.Felita L. Dunbar, Plaintiff

v.Cox Health Alliance, LLC a/k/a Cox Health Center and Cox Health, Defendant.

Bankruptcy No. 4:10–bk–12463.

Adversary No. 4:10–ap–1203.

United States Bankruptcy Court, E.D. Arkansas,Little Rock Division.

Jan. 21, 2011.

Robert R. Danecki, Attorney at Law, Little Rock, AR, for Plaintiff.

Cox Health Alliance, LLC, Springfield, MO, pro se.Jason C. Smith, Husch Blackwell LLP, Springfield, MO, for Defendant.

MEMORANDUM OPINION AND ORDER GRANTING MOTION TO DISMISS

AUDREY R. EVANS, Bankruptcy Judge.

The Defendant's Motion To Dismiss, brief in support, and the Plaintiff's response and brief, are before the Court. Defendant moves pursuant to Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012 to dismiss the Plaintiff's Complaint Seeking Injunctive Relief, Damages, Disallowance of Claim and Other Relief in a Core Adversary Proceeding. The parties did not request oral argument. The Court has considered all the arguments of the parties, and for the reasons stated below, Defendant's Motion to Dismiss is granted. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). The Court has jurisdiction to enter final orders in this case.¹

FACTS

The Plaintiff filed a voluntary petition for bankruptcy under Chapter 13 on April 6, 2010. On August 9, 2010, the Defendant filed a proof of claim in Plaintiff's case for $1,423.21 in medical services and goods. On August 12, 2010, the Plaintiff filed a Motion to Restrict Public Access to Proof of Claim of Cox Health (Claim # 27) in her case-in-chief, and an Order Granting Motion to Restrict Public Access was entered the same day which caused the proof of claim at issue to be inaccessible to the public.²

Plaintiff filed this adversary proceeding on September 29, 2010, seeking actual and punitive damages, attorneys' fees and costs, and cancellation of the debt owed Defendant because the Defendant included the Plaintiff's date of birth and health information including medical procedure codes and treatment on its proof of claim in violation of the Court's General Order 24 and Federal Rule of Bankruptcy Procedure 9037 which require creditors to redact such private information. The Plaintiff does not allege she has suffered any specific damage based on this disclosure of her private information, other than her emotional distress and attorneys' fees for filing the motion to redact, but maintains that the Plaintiff could potentially suffer identity theft and that her medical records could be misused. Defendant moves to dismiss Plaintiff's complaint for failure to state a claim upon which relief may be granted.

LEGAL STANDARD

The standard for dismissal under Federal Rule of Bankruptcy Procedure 7012(b)(6) is as follows:

A motion to dismiss for failure to state a claim will be granted only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232 (1984); Hughes v. Rowe, 449 U.S. 5, 10, 101 S.Ct. 173, 176 (1980); Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 102 (1957).... In appraising the sufficiency of a complaint for Rule 12(b)(6) purposes, the court must take the well-pleaded allegations of the complaint as true, and construe the complaint, and all reasonable inferences arising therefrom, most favorably to the pleader. Westcott v. Omaha, 901 F.2d 1486, 1488 (8th Cir.1990); Morton v. Becker, 793 F.2d 185, 187 (8th Cir.1986). Nevertheless, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim. See Westcott, [901] F.2d at 1488 (citing Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987)).

In re Russ, 1997 WL 188449, at *1–2 (Bankr.D.Minn. Apr.18, 1997). Further,

When a dispositive issue of law precludes a plaintiff from being entitled to relief regardless of the allegations of fact, the plaintiff might prove, Rule 12(b)(6) authorizes a court to dismiss that plaintiff's claims. Neitzke v. Williams 490 U.S. 319, 326–327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). In order to streamline litigation and dispense with needless discovery and factfinding, courts are required to dismiss legal claims that are destined to fail regardless of whether they are nearly viable. Neitzke, 490 U.S. at 326–27, 109 S.Ct. 1827 (stating “[n]othing in Rule 12(b)(6) confines its sweep to claims of law which are obviously insupportable.... [A] claim must be dismissed, without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one.”).

Ray v. American Airlines, Inc., 2008 WL 3992644, *3 (W.D.Ark.2008).

DISCUSSION

In moving to dismiss Plaintiff's complaint for failure to state a claim upon which relief may be granted, Defendant asserts: (1) that an objection to claim pursuant to 11 U.S.C. § 105(a) is not a recognized cause of action, and that in any case, the filing of an unredacted proof of claim is not cause for disallowing an otherwise valid claim; (2) that there is no private right of action affording Plaintiff relief under the Health Insurance Portability and Accountability Act (“HIPAA”) (a point Plaintiff concedes); (3) that federal procedural rules requiring creditors to redact private data do not create private rights of action; (4) that the appropriate remedy for a violation of Federal Rule of Bankruptcy Procedure 9037 is redaction or restriction to public access rather than damages, and the claim at issue in this case has already been restricted; and (5) that Plaintiff failed to plead a sufficient invasion of privacy claim under Arkansas law. Each cause of action will be addressed below except the HIPAA cause of action since Plaintiff concedes in her Complaint and in her response to the Defendant's Motion to Dismiss that there is no cause of action arising from a violation of HIPAA.

Plaintiff's First Cause of Action: Objection to Claim

Plaintiff's first cause of action alleges that Defendant intentionally revealed to the general public the Plaintiff's private and sensitive data, nonpublic information and Individually Identifiable Health Information (as defined by HIPAA) in violation of the Court's General Order 24 and Federal Rule of Bankruptcy Procedure 9037 (both of which require the redaction of personal data identifiers), and that the Defendant should be sanctioned for disclosing such information under 11 U.S.C. § 105. Plaintiff asserts such sanctions should include the striking of the Defendant's claim with no opportunity to file a replacement claim, the cancellation of the debt owed Defendant, and an award of the Plaintiff's attorney fees and expenses for filing the objection to claim. Defendant maintains that there is no private right of action under 11 U.S.C. § 105, and that regardless of whether the Plaintiff can raise § 105 as a cause of action, the filing of an un-redacted proof of claim is not one of the statutory grounds for disallowing an otherwise valid claim pursuant to § 502(a).

Defendant is correct that 11 U.S.C. § 105(a) does not create a private cause of action. See In re Davis, 430 B.R. 902, 907 (Bankr.D.Colo.2010). However, because § 105(a) grants the Court the power to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code],” the Court may use § 105(a) to redress violations of its general orders, the Bankruptcy Code, or the Bankruptcy Rules through a contempt proceeding. In fact, General Order 24 specifically provides that the Court may issue an Order to Show Cause for noncompliance with its Order. As the court in Davis stated, “... while 11 U.S.C. § 105(a) provides a means by which the Court may redress grievances such as Plaintiff's [claims stemming from an unredacted proof of claim], it does not afford private cause of action nor does it assert a proper basis for striking a claim pursuant to 11 U.S.C. § 502.” Id. at 907–908 (emphasis in original). See also In re Joubert, 411 F.3d 452, 454–55 (3rd Cir.2005); In re Dairy Mart Convenience Stores, Inc., 351 F.3d 86, 92 (2nd Cir.2003). Accordingly, although the Court could treat the Plaintiff's first cause of action as a request for the Court to take action under § 105(a), appropriate circumstances for such sanctions are not present in this case, as will be discussed in more detail in the contempt section below.

An objection to claim is properly considered under 11 U.S.C. § 502, rather than § 105(a). Section 502 provides that a claim shall be allowed “except to the extent that” the claim falls into at least one of the nine enumerated exceptions listed in subparagraphs (1) through (9). If an objection does not set forth one of the exceptions set forth in § 502(b), the claim is to be allowed. See Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443, 452, 127 S.Ct. 1199, 1205, 167 L.Ed.2d 178 (2007) (setting forth presumption “that claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed”). There is no provision in § 502(b) for disallowing un-redacted claims. See In re Barnhart, 2010 WL 724703 (Bankr.N.D.W.Va.2010); In re Cordier, 2009 WL 890604, *3 (Bankr.D.Conn.2009) (citing Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443, 449, 127 S.Ct. 1199, 1204, 167 L.Ed.2d 178 (2007)); French v. American General Financial Services (In re French), 401 B.R. 295 (Bankr.E.D.Tenn.2009). Accordingly, the Plaintiff's First Cause of Action which seeks disallowance of the Defendant's claim based solely on its failure to redact fails to state a claim for relief and must be dismissed.

Plaintiff's Third and Fourth Causes of Action: Contempt of Court

Plaintiff's third cause of action, titled ...