In re Schatz

• Decision Date: 25 July 2011
• Docket Number: Bankruptcy No. 5:10–bk–05293 RNO.,Adversary No. 5:10–ap–00440 RNO.
• Citation: 452 B.R. 544
• Parties: In re David Charles SCHATZ, Jr., Debtor.David Charles Schatz, Jr., and Tracy L. Schatz, Plaintiffsv.Chase Home Finance, Defendant.
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

452 B.R. 544

In re David Charles SCHATZ, Jr., Debtor.David Charles Schatz, Jr., and Tracy L. Schatz, Plaintiffs

v.Chase Home Finance, Defendant.

Bankruptcy No. 5:10–bk–05293 RNO.

Adversary No. 5:10–ap–00440 RNO.

United States Bankruptcy Court, M.D. Pennsylvania.

July 25, 2011.

John Piazza, III, Piazza & Associates, Williamsport, PA, for Plaintiff.Andrew K. Stutzman, Stradley Ronon Stevens & Young LLP, Philadelphia, PA, for Defendant.

OPINION ¹

ROBERT N. OPEL II, Bankruptcy Judge.

Presently pending before the Court is the Defendant's Motion to Dismiss the Plaintiffs' Complaint which alleges: (I) violation of the automatic stay pursuant to 11 U.S.C. § 362(k) ²; (II) violation of the Pennsylvania Fair Trade Extension Uniformity Act 73 P.S. § 2270.1 and the Pennsylvania Unfair Trade and Consumer Protection Act 73 P.S. § 201; (III) violation of the Fair Debt Collection Practices Act; and, (IV) injury to a class of which the Plaintiffs are representative plaintiffs. Defendant, Chase Home Finance, filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). For the reasons stated herein, I will grant the Defendant's Motion to Dismiss as to Count I of the Complaint for failure to state a claim upon which relief can be granted. I will also dismiss Counts II–IV for lack of subject-matter jurisdiction.

I. Jurisdiction

The Court has jurisdiction over Count I of the Complaint pursuant to 28 U.S.C. § 1334 and § 157(b)(1) & (2)(A)(B) as it is a core proceeding under 28 U.S.C. § 157(b). However, the Court does not have jurisdiction as to Counts II–IV and, therefore, dismisses these Counts for lack of jurisdiction.

II. Facts and Procedural History

On June 26, 2010, the Debtor, David Charles Schatz, Jr. (“Debtor”), filed his Chapter 13 bankruptcy. On June 30, 2010, the Defendant, Chase Home Finance (“Defendant” or “Chase”), was served with the Notice of 341 Meeting of Creditors in the Debtor's case. The Plaintiffs in this case, David Charles Schatz, Jr. and Tracy L. Schatz (“Plaintiffs” or “Schatzes”) received a mortgage loan statement (the “Statement”) ³, from the Defendant dated July 31, 2010. The Debtor's Chapter 13 Plan was confirmed on September 24, 2010. The Schatzes commenced this Adversary Proceeding by filing a Complaint on November 29, 2010. In the Complaint, the Plaintiffs allege (I) violation of the automatic stay pursuant to 11 U.S.C. § 362(k); (II) violation of the Pennsylvania Fair Trade Extension Uniformity Act 73 P.S. § 2270.1 and the Pennsylvania Unfair Trade and Consumer Protection Act 73 P.S. § 201; (III) violation of the Fair Debt Collection Practices Act; and, (IV) injury to a class of which the Plaintiffs are representative plaintiffs. A copy of the Statement in question was attached as Exhibit D to the Plaintiffs' Complaint at Docket No. 1. On May 27, 2011, the Defendant filed a Motion to Dismiss all Counts of the Complaint at Docket No. 10. On the same date, Chase filed its Brief in support of the Motion to Dismiss. On May 31, 2011, an Order was entered by the Court ordering the Plaintiffs' reply brief be filed within 21 days of the Order. As of the date of this Opinion, which is well beyond the 21–day deadline, Plaintiffs have failed to file a reply brief.

In the Motion to Dismiss, Chase does not deny sending the Statement to the Schatzes. However, Chase argues that doing so did not violate the automatic stay since the Statement did not state a payment was overdue, did not demand payment, did not provide a due date, and did not threaten any action for non-payment. Def.'s Mot. to Dismiss ¶¶ 3, 6. Chase further argues that since the Statement was not an attempt to collect a pre-petition debt, Count I of the Complaint should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Chase asserts this Court lacks subject-matter jurisdiction over Counts II–IV and these Counts should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1). Chase argues there is a lack of subject-matter jurisdiction because the claims do not arise under Title 11 and are not related to the Debtor's bankruptcy case. Def.'s Mot. to Dismiss ¶ 7.

III. DiscussionA. Motion to Dismiss Count I for Failure to State a Claim Upon which Relief can be Granted Violation of the Automatic Stay

1. Standards Applicable to Motions to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted Under F.R.B.P. 7012(b)(6)

If a complaint fails to state a claim upon which relief can be granted, then the complaint shall be dismissed upon motion of a defendant. Fed. R. Bankr.P. 7012(b)(6). The complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief”. Fed.R.Civ.P. 8(a), made applicable by Fed. R. Bankr.P. 7008. Factual allegations in the complaint should be treated as true and construed in the light most favorable to the non-moving party. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1410 (3d Cir.1991). The United States Supreme Court has held:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the “grounds” of his “entitle[ment] to relief” requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level ...

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964–65, 167 L.Ed.2d 929 (2007) (internal citations omitted). In Twombly, the Supreme Court went on to hold that a complaint must state plausible entitlement to relief.

Some two years later, the Supreme Court clarified Twombly in the case of Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In Ashcroft, the Court explained:

Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.... Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not “show[n]”—“that the pleader is entitled to relief”.

Ashcroft, 129 S.Ct. at 1949–50 (internal citations omitted).

2. Overview of the Automatic Stay

The Plaintiffs' Complaint alleges that Chase violated the automatic stay under § 362 when Chase sent the Statement to the Schatzes' address after the Debtor had filed his Chapter 13 bankruptcy petition. Immediately upon filing bankruptcy, a debtor's estate gains certain protections outlined in § 362(a). Generally, these provisions prohibit specific actions by creditors against the debtor or the property of the debtor.

At issue in the current matter is § 362(a)(6) which prohibits “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title.” 11 U.S.C. § 362(a)(6). Section 362 also imposes consequences for certain violations of the automatic stay.

If a creditor willfully violates the automatic stay, § 362(k) allows a debtor to recover for “actual damages, including costs and attorney's fees, and, in appropriate circumstances, may recover punitive damages.” 11 U.S.C. § 362(k)(1) ⁴. However, in order to recover damages, the debtor must be able to prove that the creditor willfully violated the automatic stay. 11 U.S.C. § 362(k)(1) (emphasis added). “Willfulness does not require that the creditor intend to violate the automatic stay provision, rather it requires that the acts which violate the stay be intentional.” In re Lansdale Family Restaurants, Inc., 977 F.2d 826, 829 (3d Cir.1992). To prove a willful violation, a plaintiff must show that the creditor had knowledge of the automatic stay. Id. (citing In re University Medical Center, 973 F.2d 1065 (3d Cir.1992)). Thus, a debtor need not show that a creditor had the specific intent of violating the automatic stay, but rather must show the creditor took certain actions, after having knowledge of the automatic stay, which had the effect of violating the automatic stay, even if unintentional. See In re Nixon, 419 B.R. 281, 288 (Bankr.E.D.Pa.2009).

I also note that Tracy L. Schatz is listed as a co-Plaintiff in this Adversary Proceeding. However, she is not a debtor in any bankruptcy proceeding pending in this Court. The subject Chapter 13 case was filed by David Charles Schatz, Jr., alone. I find that no bankruptcy automatic stay was in effect regarding Tracy L. Schatz when the Statement was sent by Chase.

3. Conclusion—The Statement sent to the Debtor was not a violation of the automatic stay and the Court will grant the Motion to Dismiss

Having determined that I have jurisdiction under 28 U.S.C. § 157 as to Count I of the Complaint, I now must decide if the Statement sent by Chase was an attempt to collect a pre-petition debt in violation of the automatic stay under § 362(a)(6). Chase does not deny sending the Statement to the Schatzes on July 31, 2010, nor does it deny having knowledge of the bankruptcy filing of June 26, 2010, when the Statement was sent. I find that Chase had notice of the bankruptcy filing when it mailed the Statement to the Schatzes.

Chase alleges that sending the Statement was not a violation of the automatic stay. However, the Schatzes' Complaint alleges:

12. Defendant intentionally bypassed Plaintiffs' attorney and contacted Plaintiffs directly regarding the...