Marshall v. PNC Bank, N.A. (In re Marshall)

• Decision Date: 24 September 2012
• Docket Number: Adversary No. 10–1046.,Bankruptcy No. 09–10657.
• Parties: In re Sandra L. MARSHALL, Debtor. Sandra L. Marshall, Plaintiff v. PNC Bank, N.A., Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

491 B.R. 217

In re Sandra L. MARSHALL, Debtor.Sandra L. Marshall, Plaintiff

v.PNC Bank, N.A., Defendant.

Bankruptcy No. 09–10657.

Adversary No. 10–1046.

United States Bankruptcy Court,

S.D. Ohio,

Western Division.

Sept. 24, 2012.

Jeffrey S. Goldenberg, Christian A. Jenkins, Todd Naylor, Cincinnati, OH, Paul J. Minnillo, Minnillo & Jenkins, Co., LPA, Cincinnati, OH, for Plaintiff.

Reginald W. Jackson, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, Anthony Lynn Osterlund, Vorys, Sater, Seymour and Pease LLP, Cincinnati, OH, for Defendant.

ORDER REGARDING MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT

BETH A. BUCHANAN, Bankruptcy Judge.

The debtor initiated an adversary proceeding in this Court asserting that the bank purposefully and systematically attempted to collect debts discharged in bankruptcy from the debtor and a putative class of similarly situated debtors in violation of both the United States Bankruptcy Code and the Fair Debt Collection Practices Act. The bank contends that the cause of action alleged by the debtor under the United States Bankruptcy Code should be dismissed because asserting such claim in an adversary proceeding constitutes an impermissible private right of action and because the complaint fails to allege facts demonstrating clear and convincing evidence of damages necessary to sustain such a claim. The bank maintains that the cause of action alleged by the debtor under the Fair Debt Collection Practices Act should be dismissed because the United States Bankruptcy Code precludes the debtor from asserting such a claim and further argues that this Court lacks subject matter jurisdiction over the Fair Debt Collection Practices Act claim.

This Court concludes that while the debtor's Fair Debt Collection Practices Act claim is not precluded by the United States Bankruptcy Code, this Court nonetheless either lacks jurisdiction over such claim or declines to exercise jurisdiction over such claim. With respect to the debtor's cause of action under the United States Bankruptcy Code, this Court concludes that such claim may not be asserted as a private right of action in an adversary proceeding, but rather must be asserted in a contested matter as a claim for contempt.

Rather than immediately dismissing the debtor's complaint, this Court will provide the debtor with the opportunity to withdraw the cause of action alleged by the debtor under the United States Bankruptcy Code and reassert it as a contested matter and, if the debtor so elects, to file a motion to withdraw the reference with respect to both the contested matter and the adversary proceeding. This Court does not reach the bank's allegation regarding the adequacy of the facts pled with respect to the debtor's cause of action under the United States Bankruptcy Code because it is premature to do so at this time pending the reassertion of such claim as a contested matter and a determination by the District Court regarding whether such claim will be heard by this Court or by the District Court.

I. Background

This matter is before this Court on PNC Bank, N.A.'s (the “ Bank ”) Motion to Dismiss Plaintiff's First Amended Complaint [Docket Number 27] (the “ Motion to Dismiss ”), Debtor Sandra L. Marshall's (the “ Debtor ”) Memorandum in Opposition [Docket Number 31] (the “ Response ”), the Bank's Reply in Support of its Motion to Dismiss [Docket Number 34], the Bank's Supplemental Authority [Docket Number 40], and the Debtor's Supplemental Authority [Docket Number 41].

The Debtor initiated this adversary proceeding (the “ Adversary Proceeding ”)against the Bank on March 16, 2010 by way of a complaint styled as a “Class Action Complaint” (the “ Complaint ”).The Complaint contained one cause of action on behalf of the debtor and a putative class of similarly situated debtors for violations of the discharge injunction of 11 U.S.C. § 524(a)(2) of the United States Bankruptcy Code (the “ Bankruptcy Claim ”)and one cause of action on behalf of the debtor and a putative class of similarly situated debtors for violations of 15 U.S.C. § 1692 et seq. (the “ FDCPA Claim ”), otherwise known as the Fair Debt Collection Practices Act (the “ FDCPA ”).

The parties entered into a series of stipulations extending the time for the Bank to move, answer or otherwise plead in response to the Complaint so that the parties could explore settlement possibilities. The parties agreed to a mediation that was to begin on January 18, 2011. A week before the mediation was to begin, the Bank instead filed a motion to dismiss the Complaint. The Debtor filed a response and an unopposed motion for leave to file an amended complaint. The Bank withdrew its motion to dismiss and the Debtor filed an amended complaint, styled as an “Amended Class Action Complaint” (the “ Amended Complaint ”). As described by the Debtor in the Response, the Amended Complaint did not add any new claims, rather the Amended Complaint added additional factual support for the original claims based on preliminary discovery that occurred during the time in which the parties were pursing settlement. Thereafter, the parties submitted the instant filings.

The essence of the Debtor's Amended Complaint is that the Bank knowingly and purposefully attempted to collect debts discharged in bankruptcy from the Debtor and individuals similarly situated to the Debtor who had obtained a discharge in bankruptcy and who had not reaffirmed their debts. Specifically, the Debtor asserts that the Bank attempted to collect debts from the Debtor that were discharged in her bankruptcy by placing telephone calls to her and by sending her standardized form correspondence requesting payment on the discharged debt and statements indicating that the Debtor's account with the Bank was past due and that she was incurring late fees. Based on limited preliminary discovery, the Debtor further contends that the Bank maintains a bankruptcy sub-group that systematically assigns certain accounts that have been discharged in bankruptcy to a “discharged bankruptcy queue.” The Debtor alleges that the Bank somehow believes that debtors whose accounts are assigned to the “discharged bankruptcy queue” have consented to be subjected to collection efforts notwithstanding the fact that the debtors have not reaffirmed the debts. The Debtor maintains that accounts assigned to the “bankruptcy discharge queue” are turned over to debt collectors employed by the Bank—but who do not work within the bankruptcy group—whose role it is to call and write debtors in an effort to obtain payment on discharged debts. The Debtor alleges, upon information and belief, that these debt collectors are not specially trained to understand the limitations imposed by a bankruptcy discharge injunction. The Debtor further alleges that the Bank, under various names, not only seeks to collect obligations owed to the Bank but also seeks to collect obligations owed to third parties on such parties' behalf. As a result of these alleged contemptuous and unlawful practices of attempting to collect discharged debts, the Debtor maintains that the Bank has received substantial payments to which it is not lawfully entitled.

II. Legal AnalysisA. Standard Of Review

The Bank maintains that the FDCPA Claim should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (the “ Civil Rules ”) ¹ because the Bankruptcy Code ² precludes the Debtor from asserting such a claim and further argues that this Court lacks subject matter jurisdiction over the FDCPA Claim warranting dismissal pursuant to Civil Rule 12(b)(1). The Bank contends that the Bankruptcy Claim should be dismissed pursuant to Civil Rule 12(b)(6) because asserting such claim in an adversary proceeding, rather than as a motion for contempt, constitutes an impermissible private right of action and because the Amended Complaint fails to allege facts demonstrating clear and convincing evidence of damages necessary to support a claim for contempt.

The plaintiff has the burden of proving jurisdiction in order to survive a Civil Rule 12(b)(1) motion to dismiss, Rogers v. Stratton Industries, Inc., 798 F.2d 913, 915 (6th Cir.1986), while the defendant bears the burden of demonstrating that the plaintiff has failed to state a claim for relief warranting dismissal under Civil Rule 12(b)(6). Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir.2007).

The standard governing a motion to dismiss under Civil Rule 12(b)(1) depends on whether the party seeking dismissal “makes a facial or factual attack on the plaintiff's complaint.” See Bavelis v. Doukas (In re Bavelis), 453 B.R. 832, 850 (Bankr.S.D.Ohio 2011) (internal quotations and citations omitted).

A facial attack on the subject matter jurisdiction alleged by the complaint merely questions the sufficiency of the pleading. In reviewing such a facial attack, a trial court takes the allegations in the complaint as true, which is a similar safeguard employed under 12(b)(6) motions to dismiss. On the other hand, when a court reviews a complaint under a factual attack, ... no presumptive truthfulness applies to the factual allegations.... When facts presented to the [trial] court give rise to a factual controversy, the [trial] court must therefore weigh the conflicting evidence to arrive at the factual predicate that subject matter jurisdiction exists or does not exist. In reviewing [a motion asserting a factual attack on the subject matter jurisdiction], a trial court has wide discretion to allow affidavits, documents and even a limited evidentiary hearing to resolve disputed jurisdictional facts.

Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir.1990) (emphasis in original).

In this case, the Bank's Civil Rule 12(b)(1) ground for dismissal of the FDCPA Claim represents a facial challenge to this Court's subject matter jurisdiction because it raises a purely legal issue regarding the interaction of two federal acts. See Patton v....