In re Killian, C/A No. 05-14629-HB (Bankr. S.C. 7/23/2009)

• Decision Date: 23 July 2009
• Docket Number: Adv. Pro. No. 08-80250-HB.,C/A No. 05-14629-HB.
• Court: U.S. Bankruptcy Court — District of South Carolina
• Parties: In re, William Edward Killian and Rose Mary Killian, Chapter 13, Debtor(s). William Edward Killian, Rose Mary Killian, Plaintiff(s), v. Green Tree Servicing, LLC, Defendant(s).

Page 1

In re, William Edward Killian and Rose Mary Killian, Chapter 13, Debtor(s).

William Edward Killian, Rose Mary Killian, Plaintiff(s), v. Green Tree Servicing, LLC, Defendant(s).

C/A No. 05-14629-HB.

Adv. Pro. No. 08-80250-HB.

United States Bankruptcy Court, D. South Carolina.

July 23, 2009.

ORDER

HELEN ELIZABETH BURRIS, Bankruptcy Judge

THIS MATTER comes before the Court on the Motion of Green Tree Servicing, LLC ("Green Tree"), to dismiss this adversary pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable to this proceeding by Rule 7012 of the Federal Rules of Bankruptcy Procedure. In this lawsuit Plaintiffs allege that Defendant, in violation of applicable authorities, placed personal information on the Court's public records that could have been viewed by anyone with internet access. Plaintiffs allege that as a result they have been exposed to an increased risk of Financial, Criminal and Medical Identity Theft, and Identity Cloning. Plaintiffs request injunctive relief, damages, and other relief from this Court.

To render a decision on the 12(b)(6) Motion the undersigned considered the Court's procedures for creating, maintaining, and accessing its public records,¹ and the allegations of the Complaint set forth below:

The Court has personal and subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1334, this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2), and venue is proper pursuant to 28 U.S.C. §§ 1391 and 1409.

To maintain its public records, this Court utilizes the Case Management/Electronic Case Filing system (CM/ECF) for filing and retaining court documents.² The Court's public records are primarily filed and exclusively retained electronically.³ The public records in question are available for viewing by any party that visits the clerk's office, or any party with internet access that has a login and password to the Court's CM/ECF filing system and/or the Public Access to Court Electronic Records (Pacer) service.⁴

Anyone can register for Pacer access. Viewing this Court's public records on Pacer requires the following: a computer with internet access; a javascript enabled web browser; and completion of the registration form to obtain a login and password.⁵ Pacer users must seek information from the Pacer website and pay a fee, and may view documents from any court that participates in that service. A Pacer user's access to any public file is documented by the Pacer system and billing process, which is charged at $.08 per page.

Access to CM/ECF is more restrictive. A login and password to this service must be obtained from a particular court and access is granted to that court's records only. In this Court, only attorneys admitted to practice before the United States District Court for this district, attorneys admitted pro hac vice to the Court, and limited attorney and non-attorney registrants who seek to file proofs of claim or reaffirmation agreements are granted access. CM/ECF registrants may search and view information from this Court's electronic files, may file documents with this Court as a result of that access, and receive communication and notice from this Court via an e-mail address provided with their registration.⁶

When a document is filed on the Court's public records, various parties are entitled to and/or receive notice of that filing, which is transmitted either electronically or by conventional methods such as U.S. Mail. Currently electronic transmissions, called Notices of Electronic Filing ("NEFs"), are sent to the email address provided by the CM/ECF filer.⁷ NEFs include a link to the actual document filed that can be accessed, without a password or login, for a period of fifteen days. The transmission of these NEFs is recorded and archived by the Court. The email recipient can view the document by opening the email and accessing the document via the link provided, and may print or electronically save the same. There is no official tracking to determine who gains access to the document via the link contained in the email once it leaves the Court.⁸

Plaintiffs William Edward Killian and Rose Mary Killian filed a chapter 13 bankruptcy petition on October 16, 2005, listing Defendant Green Tree as a mortgage creditor. On November 2, 2005, Green Tree, a non-attorney filer with a valid CM/ECF password and login, filed a proof of claim in this case on the Court's public records, attaching a copy of a February 1999 Retail Installment Contract evidencing the mortgage debt scheduled by the Killians. That attachment included the Killians' social security numbers, full account number, and legal names. This document could immediately be viewed by CM/ECF and Pacer participants. An electronic NEF and link to view the document was also transmitted to a limited number of CM/ECF registrants.⁹

On July 30, 2008, Green Tree, through its attorney and his valid CM/ECF password and login, electronically filed a Motion for relief from stay, making that document part of the Court's public records, and attaching the above referenced document that again included the Killians' social security numbers, full account numbers, and legal names. This Motion and its attachment could be immediately viewed by CM/ECF and Pacer participants. An electronic NEF and link to view the document was transmitted to at least ten different email addresses per the Court's records. Later on July 30, 2008, the Killians filed a motion to restrict public access to the image of these two documents and the motion was granted on August 4, 2008. After that time, the Court disabled electronic access to the document to all parties that do not have a court login.¹⁰

The Complaint alleges that Green Tree intentionally communicated or otherwise made the Killians' sensitive and personal nonpublic information available to the public by placing that information on the Court's public records in violation of the standard of care set by the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801, et. seq.; 11 U.S.C. § 107(c); Local Bankruptcy Rule 9029-1; Privacy Policy of the U.S. District Court for the District of South Carolina; The E-Government Act of 2002; 44 U.S.C. §§ 3500, et. seq.; Federal Rule of Bankruptcy Procedure 9037; Federal Rule of Civil Procedure 5.2; and others.

The Killians' Complaint requests relief based on the following causes of action: (1) Violations of the Gramm-Leach-Bliley Act; (2) Contempt of Court for violation of Federal District Court and Bankruptcy Court Orders and Policies Against Disclosure of Personal Identifiers and Sensitive Data; (3) Contempt of Court and Violation of 11 U.S.C. § 107(c) and Federal Rule of Bankruptcy Procedure 9037 Failure to Redact Nonpublic Information; (4) State Law Negligence; and (5) Violation of the S.C. Unfair Trade Practices Act ("SCUPTA").

The Complaint summarily states under the First Cause of Action only that Plaintiffs have suffered actual damages, mental anguish and emotional distress and injury. Under the SCUTPA cause of action Plaintiffs seek an award of damages, including actual damages, punitive damages, treble damages, statutory penalties, costs and attorney fees. In the general description of damages applicable to all causes of action titled "Actual Damages Incurred" the Killians allege that they "have been exposed to an increased risk of identity theft" and in order to insure protection from this increased risk they "need to incur expenses for credit monitoring services. . . . The current reasonable rate for credit monitoring services is approximately twenty-five dollars ($25.00) per debtor per month. This cost includes insurance to cover the cost of any actual identity theft that may occur while the credit monitoring services are in place." The Complaint alleges that this will be necessary for the rest of the Killians' natural lives. The Complaint also alleges that the Killians are entitled to reimbursement for attorney fees and costs in the prosecution of this matter.

The Killians further demand that the Court address Defendant's conduct, including a request to "order Defendant to examine all proofs of claim or other documents filed with this Court" for any like violations and "redact all of those documents and refile them with this court, and then . . . send written notice to all parties whose nonpublic information was improperly disclosed so that they can take appropriate action."

DISCUSSION AND CONCLUSIONS OF LAW

Federal Rule of Civil Procedure 12(b)(6) permits a party to move for dismissal if the opposing party fails to state a claim for which relief can be granted. The purpose of such a motion is to test the sufficiency of the complaint. Graves v. Horry-Georgetown Technical College, 512 F.Supp.2d 413, 421 (D.S.C. 2007). "[A] Rule 12(b)(6) motion should only be granted if, after accepting all well-pleaded allegations in the plaintiff's complaint as true and drawing all reasonable factual inferences from those facts in the plaintiff's favor, it appears certain that the plaintiff cannot prove any set of facts in support of his claim entitling him to relief." Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). A complaint requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Id.

S.C. Unfair Trade Practices Act

The Killians argue that Defendant's unlawful publication of their nonpublic personal information violated the SCUTPA standards provided by In re Brown, 270 B.R. 43 (Bankr. D.S.C. 2001). The Brown case states that a SCUTPA claim requires a showing "(1) that the defendant engaged in an unlawful trade practice, (2) that the plaintiff suffered actual, ascertainable damages as a result of the defendant's use of the unlawful trade practice, and (3) that the...