In Re Marcellus A. Maple

• Decision Date: 21 July 2010
• Docket Number: Bankruptcy No. 10-30393-KRH.,Adversary No. 10-03033.
• Citation: 434 B.R. 363
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re Marcellus A. MAPLE and Anet H. Maple, Debtors.Marcellus A. Maple and Anet H. Maple, Plaintiffs,v.Colonial Orthopaedics, Inc., et al., Defendants.

434 B.R. 363

In re Marcellus A. MAPLE and Anet H. Maple, Debtors.

Marcellus A. Maple and Anet H. Maple, Plaintiffs,

v.Colonial Orthopaedics, Inc., et al., Defendants.

Bankruptcy No. 10-30393-KRH.

Adversary No. 10-03033.

United States Bankruptcy Court,

E.D. Virginia,

Richmond Division.

July 21, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Mitchell Goldstein, Krumbein Consumer Legal Services, Inc., Richmond, VA, for Plaintiffs.

Brewster S. Rawls, Rawls & McNelis, PC, Richmond, VA, for Defendants.

MEMORANDUM OPINION

KEVIN R. HUENNEKENS, Bankruptcy Judge.

Before the Court is a motion to dismiss filed by the defendant in this adversary proceeding. Hearing on the motion (the “Hearing”) was held on May 12, 2010, at which time the Court took the matter under advisement. For the reasons set forth below, the Court will deny the motion in part and grant the motion in part.

Procedural Background

On January 22, 2010 (the “Petition Date”), debtors and plaintiffs Marcellus and Anet Maple (the “Plaintiffs”) filed a voluntary petition for relief under Chapter 13 of Title 11 of the United States Code (the “Bankruptcy Code”) in United States Bankruptcy Court for the Eastern District of Virginia. On February 18, 2010, Plaintiffs commenced this adversary proceeding by filing a complaint (the “Complaint”) against one of their creditors, Colonial Orthopaedics, Inc. (the “Defendant”). On March 22, 2010, Defendant filed its Motion to Dismiss Pursuant to Federal Bankruptcy Rule 7012 (the “Motion to Dismiss”) and an accompanying Memorandum in Support of Motion to Dismiss. Defendant seeks to have the Complaint dismissed pursuant to Rule 7012(b)(6) of the Federal Rules of Bankruptcy Procedure ¹ (the “Bankruptcy Rules”) for failure to state a claim upon which relief can be granted.

On April 4, 2010, Plaintiffs filed a Memorandum in Opposition to Defendant's Motion to Dismiss (the “Memorandum in Opposition”). On April 14, 2010, Defendant filed a reply to Plaintiffs' Memorandum in Opposition. At the Hearing, the Court granted Plaintiffs' oral motion to amend the Complaint and indicated that the Court would withhold ruling on the Motion to Dismiss until after an amended complaint was filed. Plaintiffs filed their amended complaint (the “Amended Complaint”) on May 14, 2010.

Jurisdiction and Venue

The Court has subject matter jurisdiction under 28 U.S.C. § 1334 and the general order of reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. Plaintiffs allege that this is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B) and (O). Defendant denies that this is a core proceeding and does not consent to entry of final orders or judgment by this Court. To the extent that certain claims asserted by Plaintiffs may be non-core proceedings as described in 28 U.S.C. § 157(b)(2), such proceedings are “related to” the bankruptcy case and the Court may issue proposed findings of fact and conclusions of law pursuant to 28 U.S.C. § 157(c)(1). As Defendant has requested that the Court grant it the relief presented by its Motion to Dismiss, Defendant is deemed to have consented to entry of a dispositive order in that regard. See 28 U.S.C. § 157(c)(2). Venue is appropriate pursuant to 28 U.S.C. § 1409(a).

The Plaintiffs' Allegations

Plaintiffs allegedly incurred a debt owing to Defendant on June 16, 2009. Following the Petition Date, Defendant timely filed a proof of claim (“Proof of Claim”) in Plaintiffs' bankruptcy case on February 3, 2010. In contravention of the provisions of Bankruptcy Rule 9037, the Proof of Claim contained such personal information as the Plaintiffs' home and work phone numbers, their dates of birth, their social security numbers, the name of their insurance carrier, and their insurance identification numbers. The Proof of Claim also disclosed certain confidential medical information concerning the Plaintiffs. In response to the Proof of Claim, Plaintiffs filed on February 11, 2010 a Motion to Restrict Public Access to Defendant's Proof of Claim (“Motion to Restrict”). The Court entered an order granting the Motion to Restrict on February 17, 2010.

Plaintiffs allege in their Amended Complaint that, while the personal information about them that was improperly disclosed in the Proof of Claim is no longer accessible by the general public through the court's CM/ECF or PACER systems,² it is still available on the internet from other electronic systems that copied from PACER. Plaintiffs claim that they incurred attorney's fees and costs when they were required to file their Motion to Restrict. Plaintiffs also allege they have suffered “embarrassment and distress” (Am. Compl. ¶ 34) and “mental and emotional anguish and distress ... caused by knowing th[eir] information has been made public by” Defendant (Am. Compl. ¶ 97).

Plaintiffs assert five counts in their Amended Complaint: (1) violation of their right to privacy and breach of contract, (2) violations of the Virginia Consumer Protection Act and the Virginia Personal Information Privacy Act, (3) contempt of court and violation of Bankruptcy Rule 9037, (4) violations of the Virginia Health Records Privacy Act and the Health Insurance Portability and Accountability Act, and (5) objections to the Proof of Claim and violations of Bankruptcy Rule 9011 and 18 U.S.C. § 152. Plaintiffs request injunctive relief, damages for mental and emotional anguish and distress, reimbursement of their attorney's fees, the cost of monthly credit monitoring for Plaintiffs' actuarial lives, statutory and punitive damages, sanctions against Defendant, and denial of the Proof of Claim.

CONCLUSIONS OF LAW

Standard of Review

A pleading that states a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Bankr.P. 7008(a)(2). A motion to dismiss under Rule 7012(b)(6) of the Bankruptcy Rules tests the legal sufficiency of the Complaint. See generally Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In ruling on Defendant's Motion to Dismiss, the Court must accept all well-pleaded factual allegations in the Amended Complaint as true and construe the Amended Complaint in a light most favorable to the Plaintiffs. “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.’ ” Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “ ‘[D]etailed factual allegations' ” are not required, but there must be “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). A court need not accept as true unwarranted inferences, unreasonable conclusions, or arguments. See Iqbal, 129 S.Ct. at 1949-51. A complaint must contain “more than labels and conclusions,” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)), and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Dismissal is inappropriate when there exist well-pleaded factual allegations that plausibly give rise to an entitlement to relief. Iqbal, 129 S.Ct. at 1950; see also Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.2008) (holding that a complaint must “allege ‘enough facts to state a claim for relief that is plausible on its face’ ”) (emphasis in original) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

Plaintiffs' First Count: Violation of Right of Privacy and Breach of Contract

In their first count, Plaintiffs allege invasion of privacy, a violation of the privacy provisions of the Health Insurance Portability and Accountability Act of 1996, and breach of contract. While Plaintiffs appear to rely on their breach of contract contention as the basis for their first count in their Memorandum in Opposition, the Court will address all three claims as asserted in Count One of the Amended Complaint.

Invasion of Privacy

Under the common law there are four torts of invasion of privacy: “(1) unreasonable intrusion upon the plaintiff's seclusion ... or into his private affairs; (2) public disclosure of true, embarrassing private facts about the plaintiff; (3) publicity which places the plaintiff in a false light in the public eye; and (4) misappropriation of plaintiff's name or likeness for commercial purposes.” WJLA-TV v. Levin, 264 Va. 140, 564 S.E.2d 383, 395 n. 5 (2002) (citing William L. Prosser The Law of Torts § 117 (4th ed. 1971)). The Virginia General Assembly codified the fourth of these common law torts in 1977. See Va.Code § 8.01-40.³ When it did so, the Virginia General Assembly “implicitly excluded the remaining three as actionable torts in Virginia.” WJLA-TV v. Levin, 564 S.E.2d at 395 (citing Falwell v. Penthouse, 521 F.Supp. 1204, 1206 (W.D.Va.1981)). Plaintiffs do not assert a claim for the misappropriation of their name or likeness for commercial purposes, but rather assert a claim for the public disclosure of true embarrassing factual information about them. As any common law cause of action for such an invasion of privacy has been abrogated under Virginia law, Plaintiffs have failed to state a claim for invasion of privacy.

Violation of Health Insurance Portability and Accountability Act

Congress enacted The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) ⁴ in order to “improve portability and continuity of health insurance coverage in the group and individual markets.” H.R.Rep. No. 104-496, at 1, 66-67 reprinted in 1996 U.S.C.C.A.N. 1865, 1865-66. Recognizing the need to protect patient privacy, HIPAA authorizes the Department of Health and Human Services to promulgate regulations that would protect the...