In re Torres

• Decision Date: 03 May 2007
• Docket Number: Bankruptcy No. 04-13404(RDD).,Bankruptcy No. 05-11409 (RDD).,Adversary No. 06-01576 (RDD).,Adversary No. 06-01917(RDD).
• Citation: In re Torres, 367 B.R. 478 (Bankr. S.D.N.Y. 2007)
• Parties: In re Yvette R. TORRES, Debtor. Yvette R. Torres, Plaintiff, v. Chase Bank USA, N.A., Defendant In re Ariadna Mateo, Debtor. Ariadna Mateo, Plaintiff v. Chase Bank USA, N.A. and PRA III, LLC.
• Court: U.S. Bankruptcy Court — Southern District of New York

367 B.R. 478

In re Yvette R. TORRES, Debtor.

Yvette R. Torres, Plaintiff, v. Chase Bank USA, N.A., Defendant

In re Ariadna Mateo, Debtor.

Ariadna Mateo, Plaintiff v. Chase Bank USA, N.A. and PRA III, LLC.

Bankruptcy No. 05-11409 (RDD).

Bankruptcy No. 04-13404(RDD).

Adversary No. 06-01576 (RDD).

Adversary No. 06-01917(RDD).

United States Bankruptcy Court, S.D. New York.

May 3, 2007.

COPYRIGHT MATERIAL OMITTED

FleischmanLaw, P.C., by Jay S. Fleischman, Esq., New York City, for plaintiffs, Yvette Torres and Ariadna Mateo.

Simmons, Jannace & Stagg, L.L.P., by Thomas E. Stagg, Esq., and Jacqueline M. Della Chiesa, Esq., Syosset, for defendant, Chase Bank USA, NA.

MEMORANDUM OF DECISION ON CHASE BANK USA, N.A.'S MOTION TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS UNDER FED. R. BANKR. P. 7012

ROBERT D. DRAIN, Bankruptcy Judge.

Chase Bank USA, N.A. ("Chase") has moved in the Torres proceeding for judgment on the pleadings under Fed.R.Civ.P. 12(c) and in the Mateo proceeding to dismiss the complaint under Fed.R.Civ.P. 12(b)(6), each incorporated by Fed. Bankr.R. 7012.¹

The plaintiffs allege that Chase has violated the discharge injunction under section 524(a)(2) of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., by refusing to update its disclosure to credit reporting agencies to note the effect of the plaintiffs' discharges on the enforceability of their unsecured debts to Chase. Bankruptcy Code section 524(a)(2) provides, in relevant part,

A discharge in a case under this title ... 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.

11 U.S.C. § 524(a)(2).

The plaintiffs allege that, notwithstanding their attempts to cause their credit reports to be updated, the reports continue to show their obligations to Chase as "past due" and/or "charged off," with no notation that the debts have been affected by bankruptcy. The plaintiffs allege that Chase's refusal to update the information that it previously provided to the credit reporting agencies regarding their outstanding debts will cause end users of the credit reports to conclude that the plaintiffs still owe an enforceable debt to Chase, thus adversely affecting the plaintiffs' credit scores and ability to obtain new credit. Given Chase's refusal (which continues to date) to update the information it provided to the credit reporting agencies, the plaintiffs contend that the only way to change their credit reports (other than by starting these proceedings) is to pay their debts in derogation of their discharges, a consequence, they contend, that Chase understands and intends.

Based on the same factual allegations, Ms. Torres' amended complaint also claims that Chase has violated the Fair Credit Reporting Act ("FCRA"), specifically 15 U.S.C. §§ 1681s-2(a)(1)(A) and 2(b), and both plaintiffs assert that Chase is liable for defamation.

Jurisdiction,

There is no question that the plaintiffs' claims to enforce Bankruptcy Code section 524(a)(2)'s discharge injunction are core proceedings "arising under" the Bankruptcy Code (an individual chapter 7 debtor is accorded no more important protection than his or her discharge under section 524(a) of the Bankruptcy Code), over which this Court has subject matter jurisdiction pursuant to the District Court's July 20, 1984 general order of reference. See 28 U.S.C. § 157(b)(1), (2)(O); 28 U.S.C. § 1334(b); Lohmeyer v. Alvin's Jewelers (In re Lohmeyer), 365 B.R. 746, 749 (Bankr.N.D.Ohio 2007).

However, the Court lacks subject matter jurisdiction over the defamation claims and Ms. Torres' FCRA claim.² The plaintiffs contend that these claims are "related to" to their chapter 7 cases for purposes of 28 U.S.C. § 1334(b), but the plaintiffs, having received their discharges in these fully administered chapter 7 cases, seek damages for themselves, not their estates. Because, therefore, the proceedings will not affect the bankruptcy estates, they do not fall within the parameters of "related to" jurisdiction articulated in Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984), which at least since In re Cuyahoga Equip. Corp., 980 F.2d 110, 114 (2d Cir.1992), generally have been applied in this Circuit. See Fernicola v. General Motors Acceptance Corp., 2002 U.S. Dist. LEXIS 25164, at *7-9 (N.D.N.Y. Dec. 12, 2002) (bankruptcy court would not have "related to" jurisdiction over FCRA claim, among others, when outcome of the proceeding will not affect the estate); Vogt v. Dynamic Recovery Servs. (In re Vogt), 257 B.R. 65, 68 (Bankr.D.Col.2000) (same). See also Csondor v. Weinstein, Treiger & Riley, P.S. (In re Csondor), 309 B.R. 124, 129-30 (Bankr.E.D.Pa.2004) (declining to find "related to" jurisdiction over claim under Fair Debt Collections Practices Act, 15 U.S.C. §§ 1692 et seq. ("FDCPA"), because the estate would not benefit from a recovery); Goldstein v. Marine Midland Bank, N.A. (In re Goldstein), 201 B.R. 1, 5 (Bankr.D.Me.1996) (same).³

Nor does this Court, whose jurisdiction is prescribed by 28 U.S.C. § 1334 and the District Court's general order of reference, have supplementary jurisdiction to adjudicate the plaintiffs' defamation and FCRA claims under 28 U.S.C. § 1367. Enron Corp. v. Citigroup, Inc. (In re Enron Corp.). 353 B.R. 51, 63 (Bankr.S.D.N.Y. 2006) (distinguishing Klein v. Civale & Trovato, Inc. (In re Lionel Corp.), 29 F.3d 88, 92 (2d Cir.1994)); In re Goldstein, 201 B.R. at 6-7; Masterwear Corp. v. Rubin Baum Levin Constant & Friedman (In re Masterwear Corp.), 241 B.R. 511, 517 n. 6 (Bankr.S.D.N.Y.1999) ("Assuming that the district court can exercise supplemental jurisdiction when it has original bankruptcy jurisdiction, it never referred its supplemental jurisdiction to the bankruptcy court, and section 157(a) would not authorize it anyway. In fact, the district court could no more refer its supplemental jurisdiction than it could refer its copyright, criminal or diversity jurisdiction."). But see Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 1189, 1195 (9th Cir. 2005).

Therefore, the plaintiffs' defamation claims and Ms. Torres' FCRA claim should be dismissed because of the Court's lack of subject matter jurisdiction.

Discussion

A. Standard on Motion to Dismiss. A complaint may be dismissed under Fed. R.Civ.P. 12(b)(6) only if it appears beyond doubt that the plaintiff would not be entitled to any type of relief even if the complaint's factual allegations were proven. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Harsco Corp. v. Segui, 91 F.3d 337, 341 (2d Cir. 1996). The court consequently must assume the truth of the complaint's factual allegations, drawing all reasonable inferences in the plaintiffs favor. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Harsco Corp. v. Segui, 91 F.3d at 341.

However, the court is not bound to accept as true a legal conclusion couched as a factual allegation, Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); rather, to withstand a motion to dismiss, the complaint and other documents that the court may consider⁴ must contain sufficiently specific factual allegations to support a claim. Friedl v. City of New York, 210 F.3d 79, 85-86 (2d Cir. 2000). On the other hand, "[a]lthough bald assertions and conclusions of law are insufficient, the pleading standard is nonetheless a liberal one." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir.1998). Under Fed.R.Civ.P. 8(a) (which is incorporated by Fed. R. Bankr.P. 7008 and applies to a claim asserted under Bankruptcy Code section 524(a), which does not trigger the need to comply with Fed.R.Civ.P. 9), the complaint need set forth only a short and plain statement sufficient to provide fair notice of the claim and the grounds upon which it rests. Conley v. Gibson, 355 U.S. at 47, 78 S.Ct. 99. The simplicity required by Rule 8 recognizes the ample opportunity, if a sufficient factual basis has been alleged, afforded by the Federal Rules for discovery and other pre-trial procedures. Id. at 47-48, 78 S.Ct. 99.

In ruling on a motion to dismiss, the court evaluates the complaint's legal feasibility; it does not weigh the evidence that may be offered to support or defeat it. Cooper v. Parsky, 140 F.3d at 440. The issue "is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996).

The same standards apply to consideration of a motion to dismiss on the pleadings under Fed.R.Civ.P. 12(c). Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 363 (2d Cir.2005). That is, the allegations in the complaint should be construed liberally in the plaintiffs favor, and the complaint should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that would entitle her to relief. Ad-Hoc Committee of Baruch Black & Hispanic Alumni Ass'n v. Bernard M. Baruch College, 835 F.2d 980, 982 (2d Cir.1987).

B. The Complaints' Allegations. The complaints' basic allegations were summarized above. More specifically, each plaintiff alleges that she is a consumer within the meaning of the FCRA, see 15 U.S.C. § 1681a(c) and (b),⁵ who when she filed her chapter 7 case owed Chase an unsecured debt. Chase also is alleged to have received actual notice of the chapter 7 cases and of the plaintiffs' discharge under Bankruptcy Code section 524(a). It is further alleged that neither plaintiff entered into an agreement under section 524(c) of the Bankruptcy Code reaffirming her debt to Chase or had her debt to Chase declared non-dischargeable under section 523(a) of the Bankruptcy Code. As a matter of law, therefore, the Court may infer that Chase no longer has the right to enforce the plaintiffs' debts.

Each complaint alleges, nevertheless, that after the issuance of her discharge...