In re Motichko

• Decision Date: 27 June 2008
• Docket Number: Bankruptcy No. 05-40662.,Adversary No. 08-04055.
• Parties: In re Timothy MOTICHKO and Cynthia Motichko, Debtors. Timothy Motichko and Cynthia Motichko, Plaintiffs, v. Premium Asset Recovery Corp., Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio

Page 25

395 B.R. 25

In re Timothy MOTICHKO and Cynthia Motichko, Debtors Timothy Motichko and Cynthia Motichko, Plaintiffs, v. Premium Asset Recovery Corp., Defendant.

Bankruptcy No. 05-40662.

Adversary No. 08-04055.

United States Bankruptcy Court, N.D. Ohio.

June 27, 2008.

Philip D. Zuzolo, Zuzolo, Zuzolo, Zuzolo and Zuzolo, Niles, OH, for Debtors/Plaintiffs.

Stephen M. Bales, Ziegler, Metzger, & Miller LLP, Cleveland, OH, for Defendant.

MEMORANDUM OPINION

KAY WOODS, Judge.

Before the Court is Motion to Dismiss this adversary proceeding filed by Defendant Premium Asset Recovery Corp. ("PARC") on May 7, 2008 (Doc. #12), together with Memorandum in Support of Motion to Dismiss ("PARC's Memorandum") (Doc. # 13) (collectively, "Motion to Dismiss"). On March 19, 2008, Debtors Cynthia Motichko and Timothy Motichko (collectively, "Debtors") filed Complaint Seeking Damages in Core and Non-Core Adversary Proceeding for Violation of the Discharge Injunction and Federal Law ("Complaint") (Doc. #1) against PARC. Count I of the Complaint alleges that PARC violated the discharge injunction in 11 U.S.C. § 524. On June 2, 2008, Debtors filed Notice of Partial Dismissal of Adversary Proceeding (Doc. # 17), voluntarily dismissing Counts II and III of the Complaint, and Response Memorandum to Defendants [sic] Motion to Dismiss (Doc. # 18).

This Court has jurisdiction¹ pursuant to 28 U.S.C. § 1334 and the general order of reference (General Order No. 84) entered in this district pursuant to 28 U.S.C. § 157(a). Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and (b)(2)(A), (I), and (O). The following constitutes the Court's findings of fact and conclusions of law pursuant to FED. R. BANKR.P. 7052.

I. STANDARD FOR REVIEW

A party may bring a motion to dismiss for failure to state a claim pursuant to FED.R.CIV.P. 12(b)(6) to test whether a cognizable claim has been pled in the complaint. If a plaintiff fails to state a cognizable claim, the court can dismiss the complaint. To withstand dismissal, the complaint must (i) provide a short and plain statement of the claim that shows the plaintiff is entitled to relief, (ii) give the defendant fair notice of the claim, and (iii) state the grounds upon which the claim rests. See FED.R.CIV.P. 8(a); Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

FED.R.CIV.P. 12(b)(6), which is applicable to this case through FED. R. BANKR.P. 7012, requires that a complaint be dismissed for failure to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007).² The Court of Appeals for the Sixth Circuit noted that

[t]he Supreme Court has recently clarified the law with respect to what a plaintiff must plead in order to survive a Rule 12(b)(6) motion. ... The Court stated that "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Additionally, the Court emphasized that even though a complaint need not contain "detailed" factual allegations, its "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true."

Association of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir.2007) (citing Twombly, 127 S.Ct. at 1964-65) (internal citations omitted) (second alteration in original). See also, Nicholson v. Countrywide Home Loans, No. l:07-CV-3288, 2008 WL 731032, *3, 2008 U.S. Dist. LEXIS 20714, *6 (N.D.Ohio March 17, 2008) ("Accordingly, the claims set forth in a complaint must be plausible, rather than conceivable." (citing Twombly, 127 S.Ct. at 1974)); Boiling v. Correctional Medical Services, No. 07-11752, 2007 WL 3203133, **3-4, 2007 U.S. Dist. LEXIS 80479, *8-9 (E.D.Mich. Oct. 31, 2007) (Noting Twombly "is consistent with the holdings of several prior Sixth Circuit opinions .... [that a complaint] `must contain either direct or inferential allegations regarding all the material elements' .... [and be more than] `a statement of facts that merely creates a suspicion that the pleader might have a right of action.'" (citations omitted)); and Reid v. Purkey, No. 2:06-CV-40, 2007 WL 1703526, **1-2, 2007 U.S. Dist. LEXIS 42761, *4-5 (E.D. Tenn. June 11, 2007) ("While a complain[t] need not contain detailed factual allegations, a pleader has a duty .... to supply, at a minimum, the necessary facts and grounds which will support his right to relief." (citing Twombly, 127 S.Ct. at 1964-65)).

In determining the sufficiency of a complaint, the court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir.2007). "The complaint need not specify all the particularities of the claim, and if the complaint is merely vague or ambiguous, a motion under FED.R.CW.P. 12(e) for a more definite statement is the proper avenue rather than under FED.R.CIVP. 12(b)(6)." Aldridge v. United States, 282 F.Supp.2d. 802, 803 (W.D.Tenn.2003) (citing 5A WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE § 1356 (1990)).

However, "the [c]ourt is not required to accept `sweeping unwarranted averments of fact,'" Official Comm. of Unsecured Creditors v. Austin Fin. Servs., Inc. (In re KDI Holdings, Inc.), 277 B.R. 493, 502 (Bankr.S.D.N.Y.1999) (quoting Haynesworth v. Miller, 820 F.2d 1245, 1254 (D.C.Cir.1987)), or "conclusions of law or unwarranted deduction." KDI Holdings Inc., 277 B.R. at 502 (quoting First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir.1994)); see also Power & Tel. Supply Co., Inc. v. SunTrust Banks, Inc., 447 F.3d 923, 930 (6th Cir. 2006) ("The court need not accept legal conclusions or unwarranted factual inferences as true.").

II. FACTUAL AND PROCEDURAL BACKGROUND

Debtors filed a voluntary joint petition pursuant to chapter 7 of title 11 on February 15, 2005. (Main Case, Doc. # 1.) An order granting Debtors a discharge of their debts was entered on June 15, 2005. (Main Case, Doc. # 7.) The case was closed, and final decree entered, on June 23, 2005. (Main Case, Doc. # 9.) The case was reopened by order on March 17, 2008. (Main Case, Doc. # 12.)

The Complaint alleges that PARC has violated the discharge injunction of § 524 of the Bankruptcy Code. For purposes of this Opinion, the Court accepts the Complaint's allegations as true. Specifically, Debtors allege that PARC acted to collect on a discharged debt³ by means of "harassing phone calls, dunning letters, and malicious credit reporting." (Compl. ¶ 14.) PARC began sending collection notices and making telephone calls to Debtors in November 2006. (Compl. ¶ 15.) During at least one of those telephone calls, Cynthia Motichko "informed the collector that those debts were included in her Bankruptcy." (Id.) Despite this information, Debtors assert that "the collector was rude and used misleading statements including but not limited to that [the debts] were not discharged in bankruptcy and that [Debtors] were still liable for the debts." (Id.) Debtors' counsel sent PARC a cease and desist letter by certified mail, for which PARC signed on December 11, 2006. (Compl. ¶ 16.) PARC resumed collection calls and notices on or about March 21, 2007. (Compl. ¶ 17.) Sometime later PARC began reporting the debt as unpaid on each Debtor's credit file. (Compl. ¶ 18.)

III. ANALYSIS

The Motion to Dismiss asserts three grounds for dismissal: (i) this Court lacks jurisdiction over Counts II and III of the Complaint; (ii) Debtors have failed to state a claim upon which relief can be granted because there is no private right of action for violation of the § 524 injunction; and (iii) Debtors should have brought this action as a motion for contempt rather than an adversary proceeding. Debtors have given notice of dismissal of Counts II and III without prejudice (Doc. # 18), pursuant to FED. R. BANK. P. 7041, leaving only the remaining two issues for the Court's attention.

A Cause of Action

A discharge entered in a chapter 7 case "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) (West 2007). Section 524 of the Bankruptcy Code provides that a discharge operates as an injunction against any action to collect a debt as a personal liability of the debtor. Specifically, subsections (a)(1) and (a)(2) state, in pertinent part:

(a) A discharge in a case under this title —

(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727 ... of this title, whether or not discharge of such debt is waived; [and]

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived;. ...

11 U.S.C. § 524 (West 2007). The purpose of the discharge injunction in § 524 is to effectuate the post-discharge "fresh start" intended by Congress in enacting the Bankruptcy Code.

PARC cites Pertuso v. Ford Motor Credit Co., 233 F.3d 417 (6th Cir.2000) in support of its motion to dismiss. Pertuso does, indeed, establish that § 524 provides no private cause of action in the Sixth Circuit. However, this rule does not prohibit Debtors from bringing the instant adversary proceeding. "Generally, unless debtors are able to bring violations of the injunction to the court's attention, the court is unable to exercise its inherent and statutory powers under 11 U.S.C. § 105...