In re Lenior
| Decision Date | 11 March 1999 |
| Docket Number | Bankruptcy No. 97 B 26087,Adversary No. 98 A 00969. |
| Citation | 231 BR 662 |
| Parties | In re Alice LENIOR, Debtor. Alice Lenior, Plaintiff, v. GE Capital Corporation and Rebecca Penski, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, Tara L. Goodwin, Edelman & Combs, Chicago, IL, for Plaintiff.
David B. Johnson, Bryan Krakauer, Danielle M. Streber, Sidley & Austin, Chicago, IL, for Defendant.
This Adversary case relates to the bankruptcy petition filed by plaintiff-debtor Alice Lenior ("Plaintiff") under Chapter 13 of the Bankruptcy Code. She filed this as a purported class action for herself and others assertedly harmed by defendants' allegedly common practice of filing in Chapter 13 cases secured claims of G.E. Capital knowingly valuing the vehicular security higher than its actual value. The pending Amended Adversary Complaint is pleaded in three counts. Count I asserts that Defendants' conduct has been deceptive and violated the New York Consumer Fraud statute, New York General Business Law § 345. Count II rests upon 11 U.S.C. § 105 and seeks injunctive relief to stop the asserted practice and dollar remedy for all improper claims of the same nature. It also seeks "sanctions against defendants for their wrongful conduct," an order compelling Defendants to amend proofs of claim, a refund of overpayments and expenses, and for award of attorney's fees. Count III rests on a theory of unjust enrichment.
The defendants G.E. Capital Corporation ("GECC") and its "Legal Coordinator" Rebecca Penski (collectively "Defendants") moved to dismiss the Plaintiff's Amended Adversary Complaint ("Complaint"). For the following reasons, their Motion to Dismiss will be allowed to the extent of dismissing Counts I and III. However, Count II will be allowed to stand as an action to seek a "strip down" of the secured claim against Debtor to its actual value (if indeed that claim is inflated) and to recover overpayment, if any. Under that Count, litigation costs may also be recovered through Fed. R. Bankr.P. 9011 if violation of that Rule is found. However, prayers for class relief in Count II will be stricken, and the pending motion of Plaintiff for class certification will be stricken for lack of jurisdiction over the class claims and other reasons discussed hereinbelow.
Defendants move this Court to dismiss Plaintiff's Complaint pursuant to Fed. R.Civ.P. 12(b)(6) made applicable to this proceeding through Fed. R. Bankr.P. 7012. For Defendant to prevail on its motion to dismiss, it must appear from the Amended Complaint that Plaintiff can prove no set of facts which could entitle it to relief. Wolfolk v. Rivera, 729 F.2d 1114, 1116 (7th Cir.1984). When deciding a motion to dismiss, the court must accept well-pleaded allegations of the complaint as true and views allegations in the light most favorable to the non-moving party. Id. Bontkowski v. First National Bank of Cicero, 998 F.2d 459, 461 (7th Cir.1993); Gorski v. Troy, 929 F.2d 1183, 1186 (7th Cir.1991); Janowsky v. U.S., 913 F.2d 393, 395 (7th Cir.1990).
Allegations in the Amended Complaint are considered as true for purposes of this motion.
On November 4, 1995, Plaintiff purchased a new Astro van for the price of $20,022.50. She financed the purchase by means of a retail installment contract that was later assigned to GECC. In 1997, Plaintiff filed for protection under Chapter 13 of the Bankruptcy Code, and her Plan was confirmed on November 20, 1997. GECC (through Penski) filed its proof of claim in Plaintiff's Chapter 13 case. Plaintiff's suit alleges that the proof of claim listed the value of the used van, and also the secured portion of the claim, as $20,464.35, that is to say, an amount greater than the sale price of the van when it was new some two years earlier.
Plaintiff asserts that the collateral value thus claimed appears to consist of the total payments required on the retail installment contract including interest due, minus payments made. Plaintiff contends that this is an improper valuation method. Her Complaint cites two additional examples where GECC filed proofs of claim in the Chapter 13 cases of other debtors, claims that listed used vehicles as being worth more than the initial sales prices for the vehicles. She thereby suggests that GECC engages in a pattern or practice of filing inflated secured claims despite knowledge that the vehicles are worth less.
Plaintiff relies on § 506 of the Bankruptcy Code, Title 11 U.S.C., to show that the amount to be listed in any filed "secured claim" must be the actual value of property that is collateral for the debt. GECC knew, she contends, that the van had not appreciated between the time it was sold to Plaintiff and the time GECC filed its proof of claim, that vehicles of the sort financed by GECC depreciate after sale, and that GECC's agent knew all this when she filed the claim. Plaintiff further alleges that she will be damaged as a result of GECC's conduct, because she will be forced to pay more interest than she would had GECC filed a proper proof of claim. While Plaintiff's Chapter 13 plan provides for 100% payment of both secured and unsecured claims, interest need only be paid in bankruptcy on the secured value of property subject to a secured claim, so the attempt by Defendants to collect interest on the unsecured portion of the GECC claim is said to have been improper.
Defendants make the following arguments to support granting their Motion to Dismiss: (1) Plaintiff asserts no valid claims in her own right; (2) all of her claims are barred by res judicata because the Complaint is an attempt to relitigate the Chapter 13 Plan confirmation hearing; (3) her claim asserted under 11 U.S.C. § 105 should be dismissed because there is no private right of action under that provision; (4) the claim for unjust enrichment should be dismissed; (5) the claim under New York's consumer fraud statute should be dismissed because it is preempted by the Bankruptcy Code; (6) Plaintiff does not allege conduct likely to mislead a reasonable consumer or conduct that actually misled her under the New York statute; and (7) Plaintiff fails adequately to plead injury under the New York statute.
The source of federal jurisdiction over bankruptcy matters is 28 U.S.C. § 1334. That provision grants district courts jurisdiction over bankruptcy cases and proceedings arising in or under Title 11 U.S.C., or related to a bankruptcy case. 28 U.S.C. § 1334.
The District Judges' bankruptcy authority may be delegated to Bankruptcy Judges under 28 U.S.C. § 157. In the Northern District of Illinois, the District Court has provided for such referral to Bankruptcy Judges under Local Rule 2.33(A).
Section 157 does not give bankruptcy judges full judicial power over all matters in which the district courts have jurisdiction under § 1334. With respect to proceedings other than the bankruptcy petition itself, § 157 allocates the jurisdiction created by § 1334 between "core" and "non-core" proceedings. Bankruptcy judges have authority to hear and determine core proceedings "arising under" Title 11 U.S.C. (the Bankruptcy Code) or "arising in" a case under Title 11, and have limited authority to hear and recommend disposition as to non-core proceedings "otherwise related to a case" under Title 11.
In this case, Plaintiff asserts claims not only on her own behalf but on behalf of other class members. Consequently, the jurisdictional inquiry leads to different results for her individual claims and claims asserted on behalf of a putative class.
A non-core proceeding "relates to" a case under Title 11 if the claim "affects the amount of property available for distribution or the allocation of property among creditors." Pettibone Corp. v. Easley, 935 F.2d 120, 123 (7th Cir.1991); Barnett v. Stern, 909 F.2d 973, 981 (7th Cir.1990). Plaintiff's individual claim dispute and possible recovery in this case may well have that effect in bankruptcy. Clearly, therefore, there could be "related" jurisdiction over the Plaintiff's individual recovery sought by her. However, there is no need to speculate about that because core jurisdiction lies over resolution of the GECC claim and objections thereto. 28 U.S.C. § 157(b)(2)(B). Moreover, any request for sanctions under Fed.R.Bankr.P. 9011 lies within this Court's core jurisdiction. In re Memorial Estates, Inc., 950 F.2d 1364, 1369-70 (7th Cir.1991), cert. denied, sub nom. Cemco, Inc. v. Newman, 504 U.S. 986, 112 S.Ct. 2969, 119 L.Ed.2d 589 (1992) ().
The same cannot be said, however, about claims which Plaintiff asserts on behalf of class members asserted to be similarly situated who are debtors in other cases in this and other judicial districts. No core jurisdiction is specified in the statute for such claims. Moreover, class claims will not affect the amount of property available for distribution in this Plaintiff's case, nor will the class claims affect allocation of property among this Plaintiff's creditors. This Court is not a forum for recovery of money that would not be part of the bankruptcy estate or of this Debtor. Wiley v. Mason, 224 B.R. 58, 64 (Bankr.N.D.Ill.1998); Fisher v. Federal Nat'l Mortgage Ass'n., 151 B.R. 895, 897 (Bankr. N.D.Ill.1993) (...
To continue reading
Request your trial