In re Reyes, Bankruptcy No. 96-10402. Adversary No. 98-1064.
| Decision Date | 13 July 1999 |
| Docket Number | Bankruptcy No. 96-10402. Adversary No. 98-1064. |
| Citation | 238 BR 507 |
| Parties | In re Vivian REYES, Debtor. Vivian Reyes, Plaintiff, v. FCC National Bank, Defendant. |
| Court | U.S. Bankruptcy Court — District of Rhode Island |
Christopher Lefebvre, Law Office of Claude Lefebvre & Sons, Pawtucket, RI, for debtor/plaintiff.
Robert D. Fine, Robert Berkelhammer, Chace Ruttenberg & Freedman, Providence, RI, John A.D. Gilmore, Richard L. Levine, Hill & Barlow, Boston, MA, for defendant.
DECISION AND ORDER
The Defendant, FCC National Bank ("FCC"), moves to dismiss the captioned Adversary Proceeding, arguing that Counts I and II, alleging violations of the discharge injunction, 11 U.S.C. § 524(a), should be dismissed on the ground that no private right of action was created in the enactment of that Section; and that Count III, which alleges a state law cause of action that FCC was unjustly enriched, is pre-empted by the Bankruptcy Code. Upon consideration, Counts I and II are DISMISSED for the reasons argued by FCC, and for reasons of our own, we dismiss Count III.
Upon consideration of the arguments and for the reasons argued by FCC, which are adopted and incorporated herein by reference, (see Memorandum of FCC National Bank in support of its Motion to Dismiss, Docket # 8, Reply Memo. of FCC National Bank to Vivian Reyes' Response in oppo. to Defendant's Motion to Dismiss, Docket #, and Supp.Mem. of FCC National Bank in further support of its Motion to Dismiss, Docket #, copies of which are attached hereto as Appendix A.), In re Mayhew, 223 B.R. 849, 857-58 (D.R.I. 1998),1 we conclude that a proceeding to remedy a violation of the discharge injunction pursuant to 11 U.S.C. § 524(a) must be one for contempt, as there is no express or implied right of action under that Section. Accordingly, FCC's Motion to Dismiss Counts I and II of the Complaint is GRANTED, and the Debtor has fifteen (15) days within which to file an appropriate pleading consistent with this opinion.
COUNT III
Although we disagree with FCC's argument on the preemption issue, Count III is nevertheless dismissed, on the ground that this Court lacks subject matter jurisdiction over the claim.2 See Community Bank v. Boone (In re Boone), 52 F.3d 958, 960 (11th Cir.1995), (the bankruptcy court dismissed state law causes of action that were factually intertwined with the core bankruptcy claims, on the ground that the bankruptcy court lacked jurisdiction even under the expansive "related to" provisions for jurisdiction). Here, since the asserted state law claims arose post-petition, these causes of action are not property of this estate, never will be, and any monetary recovery will not benefit creditors. See also Goldstein v. Marine Midland Bank (In re Goldstein), 201 B.R. 1, 5 (Bankr.D.Me.1996).
Enter Judgment consistent with this decision.
APPENDIX A
MEMORANDUM OF FCC NATIONAL BANK IN SUPPORT OF ITS MOTION TO DISMISS
This is the second effort of the plaintiff Vivian Reyes to bring a putative class action against FCC National Bank ("FCC") based on a reaffirmation agreement ("Reaffirmation Agreement") that she voluntarily entered into with FCC in connection with personal Bankruptcy proceedings initiated by her in the Bankruptcy Court of the District of Rhode Island. Plaintiff's first effort, a complaint brought in the United States District Court for the Northern District of Illinois, Eastern Division (No. 97-C-6946) ended in dismissal. Plaintiff's second effort should fair no better. Her complaint contains three counts: Counts I and II allege that the Reaffirmation Agreement and FCC's collection of money pursuant to it violates 11 U.S.C. Section 524. Count III alleges that FCC's collection of money pursuant to the Reaffirmation Agreement constitutes unjust enrichment under state law. Plaintiff's complaint on its face fails to state any claim upon which relief can be granted and should be dismissed pursuant to Bankruptcy Rule 7012. Count I and II should be dismissed because there is no private right of action for alleged violations of Section 524 of the Bankruptcy Code. Her sole remedy is an action for civil contempt. Count III must be dismissed because the claim is preempted by the Bankruptcy Code.
The complaint, read in a favorable light to plaintiff as is her due under the law relating to Rule 7012 motions and assuming for purposes of this motion only, the truth of its allegations, alleges as follows:
On February 12, 1996, plaintiff Vivian Reyes filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in the Bankruptcy Court of the District of Rhode Island, In Re Reyes, 96-10402 (Bankr.D.R.I.). See Complaint ("Compl.") ¶ 9. She was represented by counsel in the Bankruptcy proceeding. Compl. ¶ 12. In the Bankruptcy proceeding, plaintiff listed an obligation for a debt owed to FCC for the purchase of goods for personal use. Compl. ¶ 10. FCC is one of the largest issuers of credit cards in the United States. Compl. ¶ 5. Before the discharge order was issued in May, FCC mailed to Reyes the Reaffirmation Agreement which she executed. A copy of the Reaffirmation Agreement is attached as Exhibit A to the complaint and dated May 31, 1996. In the Reaffirmation Agreement plaintiff acknowledged that she had been advised of her right to rescind the Reaffirmation Agreement within 60 days of its filing in Court or "prior to discharge, whichever occurs later." See Compl.Ex. A. Plaintiff alleges "on information and belief" (and FCC disputes) that the Reaffirmation Agreement was not thereafter filed in Court. Compl. ¶ 13. An order of discharge was entered on July 2, 1996. Compl.Ex. B. Finally, plaintiff alleges that the Reaffirmation Agreement does not comply with the provision of 11 U.S.C. Section 524(c) and that plaintiff has made payments to FCC pursuant to the Reaffirmation Agreement. Comp. ¶¶ 14, 15 and Ex. C.
In Count I, plaintiff alleges that FCC violated 11 U.S.C. Section 524(c) by "willfully violating specific Bankruptcy Code provisions governing and limiting the permissible post-petition reaffirmation of debt." Compl. ¶ 36. Plaintiff seeks injunctive and monetary relief.
In Count II, plaintiff alleges that FCC, by seeking to collect debt incurred prior to her bankruptcy petition, has violated 11 U.S.C. Section 524(a)(2). Plaintiff seeks monetary and injunctive relief. In Count III plaintiff asserts a state law claim for unjust enrichment and seeks recovery of money she paid FCC pursuant to the Reaffirmation Agreement.
Plaintiff seeks to bring this action on behalf of herself and a purposed nationwide class of former debtors allegedly with claims similar to her who entered into reaffirmation agreements with FCC within a five year period preceding the filing of this action or made a payment pursuant to such an agreement within a six year period preceding the filing of this action.1
Based on allegations similar to those discussed above, in October 1997, plaintiff brought a putative class action against FCC in the United States District Court for the Northern District of Illinois (Docket No. 97 C 6946). In that action, Counts I and II and V were the same as Counts I, II and III in this action. However, in Counts III and IV plaintiff also alleged violations of RICO and in Count VI a violation of the Illinois Consumer Fraud statute. The FCC moved to dismiss the Illinois action pursuant to Rule 12(b)(6) on a variety of grounds, including the lack of subject matter jurisdiction over a Rhode Island bankruptcy Court's discharge order and the lack of a private right of action under Section 524 of the Bankruptcy Code. The motion was fully briefed and the Court (Leinenweber, J) thereafter dismissed the entire action on May 8, 1998. A copy of the Court's Order is attached hereto as Exhibit A.
The Court dismissed the RICO counts with prejudice. The Court held that plaintiff's Section 524 claims should be resolved in the Bankruptcy Court, observing that a discharge order has the force of an injunction and that plaintiff was "essentially asking this Court to hold FCC in contempt of another Court's injunction." Accordingly, the court dismissed these counts without prejudice. However, the Court said that "Section 524 does not expressly provide for damages and attorneys fees and costs or create a private right of action" (emphasis added) and that plaintiff's potential claim in Bankruptcy Court was for civil contempt. See Ex. A, p. 2. Notwithstanding this trenchant observation by the Court, plaintiff proceeded with this private action based on Section 524.2
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