In re Jorge

• Decision Date: 26 May 2017
• Docket Number: CASE NUMBER 15–41949
• Citation: 568 B.R. 25
• Parties: IN RE: David A. JORGE, Jr. and Natasha D. Jorge, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

568 B.R. 25

IN RE: David A. JORGE, Jr. and Natasha D. Jorge, Debtors.

CASE NUMBER 15–41949

United States Bankruptcy Court, N.D. Ohio.

Signed May 26, 2017

Philip D. Zuzolo, Zuzolo Law Offices, LLC, Niles, OH, for Debtor.

MEMORANDUM OPINION REGARDING MOTION TO COMPEL ARBITRATION

Kay Woods, United States Bankruptcy Judge

Before the Court is Defendant's Motion to Compel Arbitration and Stay Related Contested Matter ("Arbitration Motion") (Doc. 44) filed by Cellco Partnership d/b/a Verizon Wireless ("Verizon") on April 24, 2017. Verizon seeks an order staying this Court's further consideration of the Motion for Contempt (Doc. 29) filed by Debtors David A. Jorge, Jr. and Natasha D. Jorge on October 27, 2016 and compelling the Debtors to arbitrate the Motion for Contempt. On May 18, 2017, the Debtors filed Debtors' Response in Opposition to Verizon Wireless' [sic] Motion to Compel Arbitration ("Debtors' Response") (Doc. 45), in which the Debtors oppose arbitration of the Motion for Contempt.

This Court has jurisdiction pursuant to 28 U.S.C. § 1334 and General Order No. 2012–7 entered in this district pursuant to 28 U.S.C. § 157(a). Venue in this Court is proper pursuant to 28 U.S.C. §§ 1391(b), 1408, and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). The following constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.

For the reasons set forth below, the Court will deny the Arbitration Motion.

I. BACKGROUND

On October 23, 2015 ("Petition Date"), the Debtors filed a voluntary petition pursuant to chapter 7 of Title 11 of the United States Code ("Bankruptcy Code"). The filing of a bankruptcy petition operates as an automatic stay against specified collection efforts pursuant to 11 U.S.C. § 362.

The Debtors listed "Verizon" as a creditor with a pre-petition general unsecured claim of $797.39. (Doc. 1 at 32.) On March 4, 2016, the Court entered Order of Discharge (Doc. 24), which granted the Debtors a discharge pursuant to 11 U.S.C. § 727. A discharge in bankruptcy provides a debtor with an automatic injunction against specified collection efforts pursuant to 11 U.S.C. § 524.

In the Motion for Contempt, the Debtors allege that Verizon violated the automatic stay in 11 U.S.C. § 362 and the discharge injunction in 11 U.S.C. § 524, as set forth below.

The Motion for Contempt contains the following allegations regarding Verizon's violations of the automatic stay in 11 U.S.C. § 362. On or around around January 28, 2016, Verizon sent correspondence to the Debtors seeking payment of $497.89 because the Debtors' wireless services account was past due. Approximately one month later, on or about February 24, 2016, Verizon sent correspondence to the Debtors seeking payment in excess of $1,000.00. Verizon sent no less than four letters to the Debtors seeking collection of a pre-petition debt. In addition to sending these letters to the Debtors, Verizon called the Debtors no less than 27 times between January 28, 2016 and February 13, 2016. The Debtors informed Verizon about their bankruptcy filing and that the Verizon claim was included therein. In order to cease receiving collection calls from Verizon, the Debtors changed to a different wireless services provider in February 2016.

The Motion for Contempt contains the following allegations regarding Verizon's violations of the discharge injunction in 11 U.S.C. § 524. Between April 4, 2016 and June 6, 2016, Verizon utilized two separate collection agencies—The CBE Group, Inc. ("CBE") and Convergent Outsourcing, Inc. ("Convergent")—to attempt to collect the discharged debt. CBE, as agent for Verizon, sent the Debtors correspondence dated April 4, 2016 seeking payment of a past due balance of $1,104.55. Convergent, as agent for Verizon, sent the Debtors correspondence dated June 6, 2016 stating that the Debtors owed $1,203.95, but Convergent would accept $963.16 in settlement of the claim. Because CBE and Convergent sent correspondence to the Debtors after entry of the Order of Discharge, the Debtors assert that Verizon's conduct in utilizing these collection agencies violated the discharge injunction.

On February 9, 2017, Verizon filed Response of Cellco Partnership d/b/a Verizon Wireless to Debtors' Motion for Contempt ("Verizon's Response") (Doc. 35), which includes the following allegations. Prior to the Petition Date, the Debtors entered into two contracts with Verizon: (i) a wireless services agreement, which covered four lines; and (ii) a separate agreement for wireless devices. Prior to the Petition Date, the Debtors removed two lines from the wireless services agreement, leaving two lines with Verizon. Verizon did not receive proper notice of the Debtors' bankruptcy filing because the Debtors sent notice to Verizon at a payment lock box. Despite the Debtors' improper notice, on November 12, 2015, Verizon issued the Debtors a credit of $834.97 for pre-petition charges, leaving an account balance of $0.00 as of that date.

Beginning with the invoice dated December 7, 2015, all charges invoiced to the Debtors were incurred post-petition. The Debtors never terminated their account with Verizon and never indicated that they wanted to stop receiving wireless services from Verizon after the Petition Date. Based on 11 U.S.C. § 365(d)(1), Verizon could not terminate the Debtors' contract until 60 days after the Petition Date.¹ Notwithstanding 11 U.S.C. § 365(d)(1), Verizon "believ[ed] that the Debtors intended to maintain their post-petition services." (Verizon's Resp. ¶ 12.) Verizon admits that it attempted to collect from the Debtors beginning in January 2016, but it asserts that such collection efforts were only for charges that the Debtors incurred post-petition.

The Court held a hearing on the Motion for Contempt on April 20, 2017, at which appeared Ashley R. Hall, Esq. on behalf of the Debtors and Anthony J. DeGirolamo, Esq. on behalf of Verizon. At the hearing, it became apparent that the Motion for Contempt could not be resolved without the presentation of evidence. Accordingly, the Court scheduled the issues of whether Verizon willfully violated the automatic stay and the discharge injunction for an evidentiary hearing on July 19, 2017. (See Doc. 42.) The Court also set June 22, 2017 as the deadline for the completion of all discovery.

II. ARGUMENTS OF THE PARTIES

A. Verizon's Argument for Arbitration

Verizon alleges that, prior to the Petition Date, Debtor David A. Jorge entered into a contract with Verizon for multiple lines of wireless telecommunications services ("Contract"). Verizon further alleges that the Contract "contained a valid and binding agreement to arbitrate claims ‘arising out of or relating to’ the contract." (Arbitration Mot. at 2.)

In addition to filing the Motion for Contempt, Verizon asserts that the Debtors also filed an action in the Court of Common Pleas for Mahoning County, Ohio, Case No. 2016 CV 03347 ("State Court Action"). The State Court Action seeks monetary damages from Verizon for violations of the Telephone Consumer Protection Act and invasion of privacy by intrusion upon seclusion. Verizon asserts that the claims in the State Court Action are based on the same conduct set forth in the Motion for Contempt and come within the scope of the arbitration clause in the Contract. Verizon states that it has served a written demand upon the Debtors' counsel to arbitrate the disputes in the State Court Action.

Verizon's arguments for compelling arbitration, as set forth in the Arbitration Motion, can be summarized as follows:

1. The Contract between Verizon and Mr. Jorge is supported by sufficient consideration;

2. The Contract contains an arbitration clause that covers any dispute that in any way relates to or arises out of the Contract or from any services Mr. Jorge receives from Verizon;

3. The arbitration clause is valid and enforceable;4. The Contract is for wireless telecommunications services;

5. Wireless telecommunications services involve interstate commerce;

6. The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq ., applies to contracts involving interstate commerce;

7. The Debtors' claims for violations of the automatic stay and the discharge injunction fall within the scope of the arbitration clause; and

8. The Debtors' claims for violations of the automatic stay and the discharge injunction are core proceedings, but this Court should exercise its discretion to compel arbitration because (i) the automatic stay is no longer in effect; and (ii) the discharge injunction remains in effect.

B. The Debtors' Argument Against Arbitration

The Debtors make no arguments concerning the validity of the pre-petition Contract, but argue that the arbitration clause in not valid because (i) the arbitration clause was rendered unenforceable after the Debtors received their discharge; and (ii) they did not sign a reaffirmation agreement to reaffirm the Contract. The Debtors also contend that, even if the arbitration clause is enforceable, the Arbitration Motion should be denied because this Court is the most appropriate forum to determine whether Verizon violated the automatic stay and the discharge injunction because (i) the discharge injunction is a court order; and (ii) Mrs. Jorge is not a party to the Contract with Verizon, so her claims cannot be subject to the arbitration clause. In addition, the Debtors state that, on April 27, 2017, they voluntarily dismissed the State Court Action without prejudice.

III. ANALYSIS

In cases where the FAA applies, Verizon argues that a court must determine if arbitration of the particular dispute is appropriate.

First, the Court must decide whether the agreement, by its terms, reaches Mr. Jorge's claims. This step involves two separate inquiries: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of the agreement. Second, the Court must determine whether any "legal constraints

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