In re Lohmeyer, Bankruptcy No. 03-37774.

• Decision Date: 13 March 2007
• Docket Number: Adversary No. 06-3458.,Bankruptcy No. 03-37774.
• Citation: 365 B.R. 746
• Parties: In re Philip W. LOHMEYER Deaanne M. Lohmeyer, Debtors. Philip W. Lohmeyer Deeanne M. Lohmeyer, Plaintiffs, v. Alvin's Jewelers, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

365 B.R. 746

In re Philip W. LOHMEYER Deaanne M. Lohmeyer, Debtors Philip W. Lohmeyer Deeanne M. Lohmeyer, Plaintiffs, v. Alvin's Jewelers, Defendant.

Bankruptcy No. 03-37774.

Adversary No. 06-3458.

United States Bankruptcy Court, N.D. Ohio, Western Division.

March 13, 2007.

Donald R. Harris, Sandusky, OH, for Plaintiffs.

Scott D. Fink, Weltman, Weinberg & Reis Co., L.P.A., Cleveland, OH, for Defendant.

MEMORANDUM OF DECISION AND ORDER RE MOTION TO DISMISS AND AMENDMENT OF COMPLAINT

MARY ANN WHIPPLE, Bankruptcy Judge.

Alvin's Jeweler's ("Defendant") is before this court on its Motion to Dismiss [Doc # 4] this adversary proceeding. Defendant contends that the complaint should be dismissed for failure to state a claim under Fed.R.Civ.P. 12(b)(6), applicable to this proceeding through Fed. "R. Bankr.P. 7012(b). After reviewing the motion and the opposing memorandum filed by Plaintiffs Philip W. Lohmeyer and Deeanne M Lohmeyer ("Plaintiffs"), the court will hold the motion in abeyance and allow Plaintiffs leave to amend the complaint, absent which the Motion to Dismiss will be granted.

Plaintiffs were the Debtors in underlying Chapter 7 Case 03-37774 in this court. They filed the complaint in this adversary proceeding on August 19, 2006. [Doc # 1]. No answer has been filed and no discovery has occurred due to the filing of the motion to dismiss. The court has jurisdiction over Plaintiffs' underlying Chapter 7 case and this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and the general order of reference entered in this district. See 28 U.S.C. § 157(a). Proceedings relating to the bankruptcy discharge and the adjustment of the debtor-creditor relationship are core proceedings that this court may hear and decide. 28 U.S.C. § 157(b)(1) and (b)(2)(J) and (0). Defendant argues without citing any cases that the court does not have jurisdiction over this adversary proceeding in the absence of the underlying Chapter 7 case being reopened. The court disagrees. As other courts have determined, "the fact that a case is or is not closed merely relates to its administrative status, which does not affect a bankruptcy court's jurisdiction to determine matters relevant to the case." In re Taylor, 216 B.R. 515, 521-22 (Bankr.E.D.Pa.1998); Singleton v. Wells Fargo Bank, NA, 269 B.R. 270, 276 (Bankr.D.R.I.2001)(citing long list of authorities for the same proposition), reed on other grounds, 284 B.R. 322 (D.R.I. 2002); Sterling Vision, Inc. v. Sterling Optical Corp. (In re Sterling Optical Corp.), 302 B.R. 792, 808 (Bankr.S.D.N.Y. 2003); Geruschat v. Ernst & Young, LLP (In re Earned Capital Corp.), 331 B.R. 208, 217 (Bankr.W.D.Pa.2005).

The complaint is a mixture of factual allegations appropriate to a complaint [¶¶ 1, 2, 3, 4, 6 (first three sentences)] and mostly speaking legal argument [¶¶ 5, 6(last three sentences and footnote), 7-11] generally inappropriate to a complaint under the basic rules of pleading set forth in Fed. R. Bankr. P. 7008 and Fed.R.Civ.P. 8.¹ There are four exhibits attached to the complaint. They become part of the complaint for pleading purposes under Fed. R. Bankr.P. 7010 and Fed.R.Civ.P. 10(c).

The court discerns the following factual allegations from the complaint and the attached exhibits: Plaintiffs filed a voluntary petition for relief in the underlying Chapter 7 Case No. 03-37774 on September 29, 2003. Plaintiffs scheduled Defendant as an unsecured creditor owed $1,493.70 on their Schedule F. [Ex. A]. Defendant was given notice of the commencement of the Chapter 7 case by notice mailed on October 3, 2003, c/o a law firm in Cleveland, Ohio. [Ex. B]. Defendant did not object to the dischargeability of Plaintiffs' debt to it and Plaintiffs received their Chapter 7 discharge on February 26, 2004. [Complaint ¶ 4, Ex. D]. Defendant was notified of the discharge c/o the same law firm in Cleveland, Ohio. Id. Plaintiffs aver that Defendant has continued to report to or failed to update the status of the balance due with credit reporting agencies post-discharge as shown by an alleged credit report for Plaintiff Philip Lohmeyer [Ex. C]. Page 1 of 8, only, of a document from an entity called Credit Infonet and titled Consumer Liability Report is attached as Exhibit C and incorporated into the pleading averments in support of this allegation. The date on the document is "Ordered On" and "Completed On" on April 4, 2006. The Applicant Name is only. Philip Lohmeyer. The entry for Alvin's Jeweler's shows a Date Opened /Date Last Reported of 04-96/ 08-03. Under one column captioned Current Balance the number $1,493 appears. The contact information for Defendant on the document is an address in Solon, Ohio that is different than the address scheduled by Plaintiffs in their Chapter 7 at which notice was given to Alvin's Jeweler's. Plaintiffs allege that Defendant has continued reporting the debt [Complaint ¶¶ 4, 6 (second sentence)] and that the continued reporting of this debt as a liability of Plaintiffs or the failure to update its status is an effort to continue collection of the debt notwithstanding their Chapter 7 discharge. [Complaint, ¶ 6 (third sentence)].

The demand for judgment in the complaint as required by Fed. R. Bankr.P. 7008 and Fed.R.Civ.P. 8(a) refers to Bankruptcy Code section number 11 U.S.C. §§ 524 and 727. The ad damnum clause seeks an injunction, and compensatory damages of more than $5,000, punitive damages, and legal fees.

The standard for granting a motion to dismiss at the pleading stage is hard to meet. Case law is replete with references to such motions as disfavored and rarely granted. See, e.g, Sosa v. Coleman, 646 F.2d 991, 993 (5th Cir.1981). As one court put it, the threshold of sufficiency to which a complaint is held at the motion to dismiss stage is "exceedingly low." United States v. Baxter Int'l, Inc., 345 F.3d 866, 881 (11th Cir.2003). For Defendant to prevail on its Motion to Dismiss under Rule 12(b)(6), it must "appear beyond doubt that the Plaintiff[s] can prove no set of facts in support of [their] claim which would entitle [them] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), see also Crane & Shovel Sales Corp. v. Bucyrus-Erie Co., 854 F.2d 802, 807. (6th Cir.1988). When considering a motion to dismiss, the court is bound to view the record in a light most favorable to the plaintiffs and assume as true any facts presented by the plaintiffs. Murphy v. Sofamor Danek Group, Inc. (In re Sofamor Danek Group, Inc.), 123 F.3d 394, 400 (6th Cir.1997).

Plaintiffs' factual allegations attempt to state a cause of action for violation of the discharge injunction of 11 U.S.C. § 524. A Chapter 7 bankruptcy discharge "discharges the debtor from all debts that arose before the date of the order for relief under this chapter...." 11 U.S.C. § 727(b). In order to effectuate the "fresh start" intended by the grant of a discharge in bankruptcy, Congress provided that a discharge "operates as an injunction against an act, to collect, recover or offset any such debt [discharged under section 727] as a personal liability of the debtor, whether or not discharge of such debt is waived." 11 U.S.C. § 524(a)(2).

In this case, Plaintiffs allege that Defendant's continued reporting of or failure to update their account after their Chapter 7 discharge with a balance of $1,493.70 is an effort to collect the debt in violation of the discharge injunction. In the Sixth Circuit there is no statutory private right of action for damages under 11 U.S.C. § 524 or 11 U.S.C. § 105 for violation of the discharge injunction. Pertuso v. Ford Motor Co., 233 F.3d 417, 421-23 (6th Cir.2000). However, violation of the discharge injunction does expose a creditor to potential contempt of court. Id.; Cox v. Zale Del., Inc., 239 F.3d 910, 916 (7th Cir.2001). "A creditor who undertakes to collect a discharged debt from a debtor violates the discharge injunction and is in contempt of the court that issued the discharge order." Fonner v. Overdorf (In re Fonner), 262 B.R. 350, 358 (Bankr. W.D.Pa.2001).² If the contempt is established the injured party may be able to recover damages as a sanction for the contempt. Chambers v. GreenPoint Credit (In re Chambers), 324 B.R. 326, 329 (Bankr.N.D.Ohio 2005).

In asking for dismissal of this claim at the pleading stage, Defendant overstates the law involving the interplay between credit reporting and violation of the discharge injunction. The only case upon which Defendant relies is a decision rendered by another judge of this court. Irby v. Fashion Bug, (In re Irby), 337 B.R. 293, 295 (Bankr.N.D.Ohio 2005). Contrary to Defendant's argument, Irby acknowledges that there are certain situations in which reporting a debt can be considered an act sufficient to violate the discharge injunction, "if the act of reporting a debt was undertaken for the specific purpose of coercing the debtor into paying the debt, a violation of the discharge injunction could be established." Id. While Irby held that there was not a violation of the discharge injunction in that case, the key reasoning applicable to the current case is the possibility that simply reporting a debt may be a violation of the discharge injunction depending on the purpose and circumstances of the report. The decision in Irby was rendered in the context of default judgment where plaintiffs were put to their proofs, fell back on the complaint and were found to be lacking by the court.

Notably the post-discharge document attached to the complaint in this case does show a debt owed to Defendant by Plaintiff Philip Lohmeyer with Current Balance of $1.493. It does in fact suggest to a reviewer that Plaintiff Philip Lohmeyer has personal liability for the debt with a "Current Balance" of $1,493 as of April 4, 2006, at a time when he in fact no longer had any personal liability to Defendant due to his discharge more than two years earlier. If Plaintiff Philip Lohmeyer can prove...