In re Keeler

• Decision Date: 04 May 2009
• Docket Number: Bankruptcy No. 08-14079bf,Adversary No. 08-0334bf
• Citation: 440 B.R. 354
• Parties: In re Jesse KEELER, Debtor Jesse Keeler, debtor, Plaintiff v. PRA Receivables Management, LLC and Portfolio Recovery Associates, Inc., Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

440 B.R. 354 In re Jesse KEELER, Debtor Jesse Keeler, debtor, Plaintiff v. PRA Receivables Management, LLC and Portfolio Recovery Associates, Inc., Defendants. Bankruptcy No. 08-14079bf. Adversary No. 08-0334bf. United States Bankruptcy Court, E.D. Pennsylvania. May 4, 2009.

Vicki Ann Piontek, Piontek Law Office, Lansdale, PA, for Plaintiff.

Thomas R. Dominczyk, Maurice & Needleman, PC, Flemington, NJ, for Defendants.

MEMORANDUM OPINION

BRUCE FOX, Bankruptcy Judge.

Mr. Jesse Keeler, the debtor in this chapter 13 bankruptcy case, commenced the above-captioned adversary proceeding against defendants PRA Receivables Management, LLC and Portfolio Recovery Associates, Inc. The complaint filed consists of four counts against the defendants jointly. The debtor seeks actual damages, statutory damages, attorney fees, punitive damages, and various forms of equitable relief.

As will be discussed, the kernel of the complaint is that the two defendants routinely purchase "stale" credit card debt from credit card companies, and then file proofs of claim (for the face amount of the debt, with interest) in bankruptcy cases, such as this one, although the defendants know or should know that the claims are barred by the applicable statute of limitations.

Presently before me is the defendants' motion to dismiss all counts of the complaint for failure to state a cause of action. They contend that, even if the debtor's factual allegations are true, he is not entitled to any monetary or equitable relief. The defendants argue that, although the statute of limitations may have run on their claim, they still hold a valid debt, as the assignee of an unpaid contractual obligation, that entitles them to file a proof of claim in the debtor's chapter 13 bankruptcy case. Moreover, the defendants also contend that two causes of action raised by the debtor are barred by the doctrines of preemption or preclusion.

Upon review of the parties' memoranda and oral argument, I agree, for the reasons to follow, that this adversary proceeding must be dismissed.

I.

A.

The complaint alleges relatively few facts.

On or about July 10, 2008, an unsecured proof of claim was filed in this chapter 13 case by defendant PRA Receivables Management LLC "as agent of Portfolio Recovery Associates, LLC successor in interest to First Union National Bank (Corestates Bank)." This proof of claim, docketed as claim # 1, asserted an unsecured claim in the amount of $3,230.55, based upon credit card usage. Complaint, ¶ 14 (Exhibit A).

Attached to Portfolio's proof of claim was a "supplemental account summary." This summary revealed the following:

PRA Receivables Management, LLC as agent of Portfolio Recovery Assocs., successor in interest to FIRST UNION NATIONAL BANK/(CORESTATES BANK). The account was purchased from FIRST UNION NATIONAL BANK on 4/28/2000.

* * *

Acct. # : * * * * * *7993

Acct. Type: Credit Card

Date of Loan: 10/6/1994

Charge off Date: 10/23/1995

Last Payment Date: 2/13/1995

Balance at Filing Date: $3,230.55

Exhibit A.

The debtor alleges in his complaint that "[d]efendant(s) routinely take(s) assignment of consumer accounts for Debtors who file Chapter 13 Bankruptcy Petitions. Defendant(s) then file(s) proofs of claim on such assigned accounts." Complaint, ¶ 13. Moreover, "[t]he aforementioned proof of claim was/were clearly outside of the applicable statute of limitations, and were therefore legally unenforceable claims." Id., ¶ 15. The debtor also asserts that the defendants knew or should have known that the statute of limitations had expired when they filed the proof of claim. In addition, the debtor avers that the defendants' conduct in this case is typical of their actions in other bankruptcy cases.

After the filing of this complaint, Portfolio's proof of claim # 1 was withdrawn, upon motion, without opposition from the debtor pursuant to Fed. R. Bankr.P. 3006.

B.

Based upon these facts, the debtor raises four causes of action.

In Count One, the debtor contends that the defendants violated 11 U.S.C. §§ 105(a), 502 and 524 by filing a proof of claim that defendants knew or should have known was "legally unenforceable" due to the expiration of the relevant statute of limitations. He seeks an injunction against such future filings; attorneys' fees for bringing this proceeding; requiring the defendants to "disgorge and return to the chapter 13 trustee all monies received from out of stat [sic] proofs of claims"; appointing an independent auditor to investigate the practices of the defendants in filing time-barred proofs of claim; directing the defendants to withdraw any improper claims still pending before the court; ordering defendants to reimburse all trustees, debtors and debtors' counsel for out-of-pocket expenses incurred in contesting time-barred proofs of claim; and requiring defendants to reimburse trustees for costs arising from the need to re-administer any disgorged monies as discussed above.¹

In Count Two, the debtor asserts that the defendants' actions also violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq., because they attempted to collect on a consumer debt against the debtor by "filing proofs of claims that are clearly outside the applicable statute of limitations and thus legally unenforceable." Complaint, ¶ 29. Count Two seeks $1,000 in statutory damages under the FDCPA.

In Count Three, the debtor contends that the defendants' actions violated "Pennsylvania's Fair Trade Extension Uniformity as Act [sic]," (PFCEUA), 73 PS §§ 2270 et seq. , as well as Pennsylvania's Unfair Trade and Consumer Protection Law (PUTCL), 73 PS §§ 201 et seq. , by "attempt[ing] to collect a consumer debt where the debt collector hand [sic] no legal right to collect such debt." Complaint, ¶ 32. The debtor demands $100 in statutory damages under PFCEUA and PUTCL.

Finally, Count Four avers that defendants have also violated 28 U.S.C. § 1927 by their "intentional filing of improper proofs of claims" which "unreasonably and vexatiously multiplied the proceedings in Plaintiff's Bankruptcy Proceeding," Complaint, ¶ 36, and that "Defendant(s) engaged in a pattern of filing improper proofs of claims, having knowledge thatsuch claims were improper at the time the proof(s) of claim(s) were filed. Such conduct plagues the Bankruptcy Court as wells [sic] as debtors, other claimants, attorneys, judges and clerk." Complaint, ¶ 39.

In addition to the relief previously mentioned, the debtor seeks attorneys' fees incurred in objecting to the time-barred proofs of claim, attorneys' fees incurred in litigating this adversary proceeding, monetary sanctions equal to the amount of Portfolio's proof of claim, as well as punitive damages in the amount of $20,000.

II.

The defendants seek to dismiss all four counts of the complaint under Fed. R. Bankr.P. 7012, which procedural rule incorporates, inter alia, Fed.R.Civ.P. 12(b)(6). Motions by defendants under the standard established by Fed.R.Civ.P. 12(b)(6) essentially test the legal sufficiency of the factual allegations contained within a plaintiff's complaint. See Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993). Whether the chapter 13 debtor in his complaint has sufficiently stated a cause of action is governed by Federal Rule of Bankruptcy Procedure 7008, which incorporates Fed.R.Civ.P. 8. Rule 8 integrates a notice pleading standard, which "requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the ... claim is and the grounds upon which it rests.' " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir.2008). The Supreme Court recently emphasized that while a complaint need not include detailed factual allegations, it does need to go beyond "a formulaic recitation of the elements of a cause of action...." Twombly, 127 S.Ct. at 1965. "Factual allegations must be enough to raise a right to relief above the speculative level." Id.

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Specific facts are not necessary; the statement need only " 'give the defendant fair notice of what the ... claim is and the grounds upon which it rests.' " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929, ---- (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In addition, when ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint. Bell Atlantic Corp., supra, at 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929....

Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (citations omitted). Not only are the allegations in the complaint accepted as true in determining whether the plaintiff has stated a cause of action, but those averments must be construed in a light most favorable to the plaintiff. See, e.g., Phillips v. County of Allegheny, 515 F.3d at 233.

Therefore, in ruling upon a Rule 12(b)(6) motion, the trial court's role is limited to determining whether, based upon the allegations of the complaint accepted as true with all reasonable inferences, the plaintiff is entitled to offer evidence in support of the claims, and not whether the plaintiff will ultimately prevail upon the merits. See, e.g., Unite Nat'l Retirement Fund v. Rosal Sportswear, Inc., 2007 WL 2713051, at *4 (M.D.Pa.2007). The Rule 8 pleading standard merely requires that the plaintiff allege sufficient facts to warrant engagingin discovery. As the Third Circuit recently explained:

The Supreme Court's Twombly formulation of the pleading standard can be summed up thus: "stating ... a claim requires a complaint with enough factual matter (taken

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