Ohai v. Delta Cmty. Credit Union (In re Ohai)

• Docket Number: 12-65475-WLH,Adversary Proceeding 23-5041-WLH
• Decision Date: 23 August 2023
• Parties: IN RE: EMMANUEL OHAI, Debtor. v. DELTA COMMUNITY CREDIT UNION, PNC BANK NATIONAL ASSOCIATION, INC., DEAN ENGLE & PARK TREE INVESTMENTS, LLC, PARK TREE 20 INVESTMENTS, LLC, FCI LENDER SERVICES, INC., DANIEL I. SINGER & SINGER LAW GROUP, PHILLIP L. JAUREGUI D/B/A JAUREGUI & LINDSAY LLC, MICHAEL W. LINDSEY D/B/A, JAUREGUI & LINDSEY, LLC, MICROBILT CORPORATION, Defendants. EMMANUEL OHAI, Plaintiff,
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia

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IN RE: EMMANUEL OHAI, Debtor.

EMMANUEL OHAI, Plaintiff,
v.
DELTA COMMUNITY CREDIT UNION, PNC BANK NATIONAL ASSOCIATION, INC., DEAN ENGLE & PARK TREE INVESTMENTS, LLC, PARK TREE 20 INVESTMENTS, LLC, FCI LENDER SERVICES, INC., DANIEL I. SINGER & SINGER LAW GROUP, PHILLIP L. JAUREGUI D/B/A JAUREGUI & LINDSAY LLC, MICHAEL W. LINDSEY D/B/A, JAUREGUI & LINDSEY, LLC, MICROBILT CORPORATION, Defendants.

No. 12-65475-WLH

Adversary Proceeding No. 23-5041-WLH

United States Bankruptcy Court, N.D. Georgia, Atlanta Division

August 23, 2023

CHAPTER 7

ORDER ON MICROBILT CORPORATION'S MOTION TO DISMISS

Wendy L. Hagenau U.S. Bankruptcy Court Judge

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THIS MATTER is before the Court on the Motion to Dismiss Complaint filed by MicroBilt Corporation ("MicroBilt") (Doc. No. 18) (the "Motion"), and Plaintiff's response thereto (Doc. No. 22). The Court has subject matter jurisdiction over Plaintiff's claims pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a), and the claim of violating the discharge injunction is a core proceeding under 28 U.S.C. § 157(b)(2)(A) & (O). See In re Golden, 630 B.R. 896, 920 (Bankr. E.D.N.Y. 2021) (it is axiomatic that this Court has subject matter jurisdiction to consider such core matters); In re Harlan, 402 B.R. 703, 710 (Bankr. W.D. Va. 2009).

I. FACTS

Plaintiff and his now ex-wife purchased their primary residence at 2715 Tradd Court, Snellville, Georgia (the "Tradd Property") in April 2006 and executed a note and security deed in favor of Delta Commercial Credit Union ("Delta") (the "Tradd Mortgage Loan"). In March 2008, Plaintiff and his now ex-wife obtained a home equity loan in the amount of $46,000 from Delta, secured by a second security deed on the Tradd Property (the "Tradd HELOC"). Plaintiff and his now ex-wife defaulted on the Tradd HELOC in 2010. The Tradd HELOC was subsequently sold by Delta and, in May 2017, it was sold again to Park Tree Investments 20, LLC, with Park Tree Investments, LLC ("PTI") as its servicing agent. In April 2018, Plaintiff received notice that the servicer was now FCI Lender Services, Inc. on behalf of Park Tree Investments 20, LLC.

In the meantime, on June 20, 2012, Plaintiff and his now ex-wife filed a petition under Chapter 7 of the Bankruptcy Code. On Schedule D, Delta was listed as holding two secured claims: one for $98,352.00 and another for $39,615.00, both secured by the Tradd Property. The Chapter 7 Trustee, Janet G. Watts, conducted the 341 meeting of creditors on July 17, 2012, and filed a Report of No Distribution on August 16, 2012. The bankruptcy case was closed and discharged on

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October 5, 2012 (Bankr. Doc. No. 14). ^[1]

On January 28, 2019 and February 3, 2020, MicroBilt obtained Plaintiff's consumer reports from Experian and/or Equifax (Doc. No. 1, Ex Y). Plaintiff disputed the inquiries, and MicroBilt informed Plaintiff the reports were pulled at the request of PTI. When PTI failed to respond to MicroBilt's request for verification of authority, MicroBilt removed the inquiries.

District Court Litigation

On May 26, 2020, Plaintiff filed a complaint in the United States District Court for the Northern District of Georgia, Ohai v. Delta Community Credit Union et al Civil Action No. 1:20-cv-02220-SCJ-JEM, against MicroBilt and others alleging violations of the Fair Credit Reporting Act (the "FCRA"), Equal Credit Opportunity Act (the "ECOA"), the Fair Debt Collection Practices Act (the "FDCPA"), the Georgia Fair Business Practices Act (the "GFBPA"), invasion of privacy, and "defamation-libel". The original complaint did not allege a violation of the automatic stay or discharge injunction. Plaintiff filed an amended complaint (District Court Doc. No. 11) on June 15, 2020. It claimed MicroBilt violated the FCRA, the GFBPA, and the discharge injunction.

Plaintiff sought to further amend his complaint and filed a Motion for Leave to File the Second Amended Complaint (District Court Doc. No. 108). The court ultimately denied Plaintiff's request to amend the complaint (District Court Doc. No. 149), but the court granted the motion "to the extent that Plaintiff seeks to dismiss his claim for a bankruptcy discharge injunction." Accordingly, the court ruled the First Amended Complaint (District Court Doc. No. 11)-without claim XI regarding the discharge injunction-was the operative complaint (District Court Doc. No. 149 at 45-46.)

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At this point, then, neither the automatic stay nor the discharge injunction were at issue in the District Court.

MicroBilt filed a motion to dismiss the complaint. The District Court dismissed Plaintiff's claims for invasion of privacy and violations of the GFBPA but denied it as to the count under the FCRA, concluding the allegations that MicroBilt failed to investigate Plaintiff's dispute were enough to allege a violation of the FCRA (District Court Doc. No. 236). MicroBilt sought reconsideration of the order denying its motion to dismiss (District Court Doc. No. 241), which the District Court denied (District Court Doc. No. 290).

MicroBilt filed a motion to stay the District Court proceedings pending resolution of this adversary proceeding. The District Court deemed it proper for discovery to move forward and denied the request (District Court Doc. No. 302). Accordingly, Plaintiff's claim under the FCRA remains pending against MicroBilt in the District Court.

Adversary Proceeding

Plaintiff filed a complaint against MicroBilt, certain mortgage holders, and certain debt collectors on March 29, 2023. Plaintiff alleges the "hard inquiries" on his credit report were not authorized because he had been discharged in his bankruptcy case. Plaintiff claims the inquiries by MicroBilt on behalf of PTI were in furtherance of PTI's attempt to collect a discharged debt and therefore violated the discharge injunction.

The Motion was filed on May 22, 2023 and alleges MicroBilt could not have violated the discharge injunction because it did not know of the discharge until receiving a letter from Plaintiff after the inquiries. Moreover, MicroBilt alleges it did not violate the FCRA or the discharge injunction and obtaining Plaintiff's credit report is not a discharge violation. Finally, it asserts Plaintiff's claim is barred by the FCRA statute of limitations.

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II. LAW

A. Motion to Dismiss for Failure to State a Claim

MicroBilt seeks dismissal of the complaint pursuant to Federal Rule of Bankruptcy Procedure 12(b)(6), made applicable by Federal Rule of Bankruptcy Procedure 7012, for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). A complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007)). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.

While the plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully," Iqbal, 556 U.S. at 678, the purpose of a motion to dismiss is not to resolve disputed facts or decide the merits of a case. Rather, the purpose of a motion to dismiss is to ensure that the plaintiff has provided notice of the grounds which entitle him to relief. Twombly, 550 U.S. at 561. The facts alleged must be taken as true, and dismissal is inappropriate merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits. Official Comm. of Unsecured Creditors of Tousa, Inc. v. Technical Olympic, S.A. (In re Tousa), 437 B.R. 447, 452 (Bankr. S.D. Fla. 2010) (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)).

B. Discharge Injunction

Section 524 governs a debtor's discharge in bankruptcy. It provides that a bankruptcy discharge, among other things:

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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(a)(2). "The discharge injunction is like a permanent extension of the automatic stay under 11 U.S.C. § 362(a) of the Bankruptcy Code and thus, includes all types of collection activity such as: letters, phone calls, threats of criminal proceedings or other adverse actions brought about with the purpose of debt repayment." In re McConnie Navarro, 563 B.R. 127, 141 (Bankr. D.P.R. 2017) (citation omitted).

Pursuant to section 105, a bankruptcy court may enforce the discharge injunction and "order damages if the circumstances so require." Id. Sanctions for violations of the discharge injunction are in the nature of civil contempt. Id. The Supreme Court has held that a bankruptcy court may "impose civil contempt sanctions when there is no objectively reasonable basis for concluding that the creditor's conduct might be lawful under the discharge order." Taggart v. Lorenzen, 139 S.Ct. 1795, 1801 (2019). In Taggart, the Supreme Court explained that means "there is no fair ground of doubt as to whether the [discharge] order barred the creditor's conduct." Id. at 1799. To meet this standard, the party that violated the discharge injunction must have acted with knowledge of it. In re Cowan, 2020 WL 7330049, at *6 (Bankr. N.D.Ga. Dec. 11, 2020) (citing In re Milani, 2020 WL 5551990, at *5 (Bankr. N.D.Ga. Sept. 16, 2020)). Further, to discern whether an act is one to collect a debt, courts consider whether the conduct objectively had the practical effect of improperly coercing payment of a discharged debt. In re Minech, 632 B.R. 274, 282 (Bankr. W.D. Pa. 2021); Roth, 935 F.3d at 1278-79 (emphasis in original) (the court must determine "whether the objective effect of [the...