In re Jefferson, Bankruptcy No. 92-10879
| Decision Date | 14 September 1992 |
| Docket Number | Bankruptcy No. 92-10879,Adv. No. 92-1093. |
| Citation | 144 BR 620 |
| Parties | In re Norman E. JEFFERSON, Debtor. Norman E. JEFFERSON, Plaintiff, v. G. FOX and Filene's (Divisions of May Department Stores Company), Defendants. |
| Court | U.S. Bankruptcy Court — District of Rhode Island |
George M. Prescott, Lincoln, R.I., for debtor/plaintiff.
Jeffrey S. Michaelson, Michaelson & Michaelson, Providence, R.I., for defendants.
Before the Court is the Defendant's Motion to Dismiss the Plaintiff's Complaint, pursuant to Fed.R.Bankr.P. 7012(b), incorporating by reference Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted.
In ruling upon a motion to dismiss, the Court is required to accept the well-pleaded factual allegations of the complaint as true, and to deny the motion "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). With this standard in mind, we consider the averments of the Plaintiff's Complaint:
Count I alleges a violation of the automatic stay, § 362(a)(6), which prohibits "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." Plaintiff alleges that the Defendant1 violated this code section by soliciting the Debtor's reaffirmation of a prepetition unsecured debt, in exchange for the extension of further credit. Specifically, the Debtor avers that "such solicitations violate the automatic stay provisions of the Bankruptcy Code contained in 11 U.S.C. § 362(a)(6)."
Although the Debtor asserts that the solicitation was made both "through his counsel, and directly to him," our examination of the operative document, a letter dated May 1, 1992, belies this allegation. The letter is addressed to Debtor's counsel, with a copy mailed to the Debtor. We rule, in the context of this decision, that the Debtor's receipt of a copy of a letter sent to his attorney does not constitute a "direct" contact by the Defendant, but is merely informational, or an indirect communication at best. Accordingly, we cannot regard this allegation in the Plaintiff's Complaint as "well-pleaded," and it is therefore disregarded for the purpose of our ruling herein.
Count II of the Complaint incorporates by reference the allegations in Count I, and further alleges that as a result of this solicitation "Jefferson the Debtor suffered upset, nervousness, confusion, and trauma upon receipt of the solicitations of Fox and Filene's."
Count III similarly incorporates the averments of Count I, and alleges that these solicitations "created a likelihood of confusion or of misunderstanding on the part of Jefferson." In addition, Count III alleges that this conduct constitutes a violation of "the provisions of the Rhode Island Unfair Trade Practice and Consumer Protection Act," R.I.Gen.Laws §§ 6-13.1-1 et seq.
Count IV seeks to create a class action for "other Debtors in this Judicial District who are similarly situated to Jefferson in that they have received solicitations from Fox and/or Filene's to reaffirm unsecured debts in exchange for a further extension of credit, in violation of 11 U.S.C. § 362(a)(6)."
Accepting the well-pleaded allegations of the Complaint as true, the issue before us boils down to whether the act, by a creditor, of contacting debtor's counsel for the purpose of obtaining the reaffirmation of an unsecured debt, states a claim upon which relief can be granted. For the reasons given below we conclude that such conduct is not actionable, and therefore, we grant the Defendant's Motion to Dismiss.
Likely as a result of the increasing number of consumer bankruptcies filed in Rhode Island in recent years, the subject of reaffirmation, as well as other consumer related bankruptcy issues are "hot topics" in this jurisdiction, judging by the recent deluge of similar complaints and motions. See In re Flynn, 143 B.R. 798 (Bankr. D.R.I.1992); In re Pimental, 142 B.R. 26 (Bankr.D.R.I.1992) These issues also appear to be receiving widespread attention in other courts. See In re Briggs, 143 B.R. 438 (Bankr.E.D.Mich.1992); Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81 (3rd Cir.1988); Morgan Guaranty Trust Co. v. American Savings and Loan Ass'n, 804 F.2d 1487 (9th Cir. 1986), cert. denied, 482 U.S. 929, 107 S.Ct. 3214, 96 L.Ed.2d 701 (1987).
Accordingly, once again2 in an effort to balance the needs and rights of debtors and creditors in bankruptcy, we are called upon, this time, to discuss the appropriate procedure to be followed by parties involved in the reaffirmation process, in a bankruptcy context.
As indicated, the Debtor's Complaint centers around the allegation (derived from a letter dated May 1, 1992, from a representative of Filene's)3 that a creditor's solicitation by mail, directed to Debtor's counsel, regarding the reaffirmation of a dischargeable debt violates § 362(a)(6) of the Bankruptcy Code. Of particular importance to our decision today, is the nature of the communication sent by Filene's to Debtor's counsel. Attached as Exhibit A to the Debtor's Memorandum Opposing the Motion to Dismiss is a copy of the May 1, 1992 letter. For convenience, we restate it here, in pertinent part:
The Debtor argues that it is the mailing of this letter (with copy to Jefferson) which violates § 362(a)(6). Accordingly, we begin our analysis by considering this code section, which provides that the filing of a petition in bankruptcy operates as a stay of:
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
11 U.S.C. § 362(a)(6).
The question whether the solicitation by a creditor of the reaffirmation of a dischargeable debt is encompassed within, or constitutes a violation of § 362(a)(6) has been the subject of considerable litigation. See In re Briggs, 143 B.R. 438 (Bankr. E.D.Mich.1992); Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81; Morgan Guaranty Trust Co. v. American Savings and Loan Ass'n, 804 F.2d 1487.
However, our review of the cases that have considered this issue indicates a fairly uniform pattern of results: that mere requests for payment are not barred by § 362(a)(6), absent coercion or harassment by a creditor. See In re Briggs, 143 B.R. at 452; Morgan Guaranty, 804 F.2d at 1491; In re Sechuan City, Inc., 96 B.R. 37, 43 (Bankr.E.D.Pa.1989); Brown, 851 F.2d at 85. Put another way, these disputes are definitely fact-specific.
Just last month we decided In re Flynn, 143 B.R. 798, where we held that a credit union's direct telephone contact with the Debtor, knowing that she was represented by counsel, and where said contact was for the express purpose of coercing a reaffirmation, was a sanctionable violation of § 362(a)(6). There, we noted that less intrusive means were available to the credit union, the most appealing of which was the transmission of a letter to Debtor's attorney, with a copy to the Debtor.
Not more than two months ago, the Bankruptcy Court for the Eastern District of Michigan, in a seventy-two page opinion, considered the very issue now before us. In re Briggs, 143 B.R. 438. We are in general agreement with Judge Spector's indepth interpretation of this code section, vis-a-vis reaffirmation attempts by pre-petition creditors. Moreover, we specifically agree with, and adopt herein by reference, his conclusion that:
If subsection (a)(6) is construed as prohibiting any actions by the creditor aimed at obtaining the debtor\'s consent to repay a prepetition debt, then the creditor\'s ability to negotiate reaffirmation agreements is essentially destroyed. . . . an interpretation of § 362(a)(6) which prevents creditors from negotiating reaffirmation agreements would significantly impair the bankruptcy process. A deeply rooted principle of American...
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In re Messier
...of law in Rhode Island. Rather than repeat what we have just recently had to say on this subject in Jefferson v. May Department Stores (In re Jefferson), 144 B.R. 620 (Bankr.D.R.I. 1992), we refer the parties to that opinion, and conclude herein that the instant Complaint fails to state a c......