Verizon Wireless Pers. Commc'ns, LP v. Bateman

• Decision Date: 08 February 2019
• Docket Number: Case No. 2D18-161
• Citation: 264 So.3d 345
• Parties: VERIZON WIRELESS PERSONAL COMMUNICATIONS, LP, Appellant, v. Christopher BATEMAN, Appellee.
• Court: Florida District Court of Appeals

264 So.3d 345

VERIZON WIRELESS PERSONAL COMMUNICATIONS, LP, Appellant,

v.Christopher BATEMAN, Appellee.

Case No. 2D18-161

District Court of Appeal of Florida, Second District.

Opinion filed February 8, 2019

R. Eric Bilik, Emily Y. Rottmann, and Daniel Mahfood of McGuire Woods LLP, Jacksonville, for Appellant.

Katherine Earle Yanes and Brandon K. Breslow of Kynes, Markman & Felman, P.A., Tampa; and Brian L. Shrader and Gus M. Centrone of Dunlap Bennett & Ludwig, PLLC, Tampa, for Appellee.

LaROSE, Chief Judge.

Verizon Wireless Personal Communications, LP, challenges the trial court's nonfinal order denying its motion to compel arbitration. We have jurisdiction. See Fla. R. App. P. 9.030(b)(1)(B) ; 9.130(a)(3)(C)(iv). Because Christopher Bateman's statutory claims are not arbitrable, we affirm.¹

I. Procedural and Factual Background

In 2011, Mr. Bateman obtained cell phone service from Verizon. Mr. Bateman agreed to the terms of Verizon's Customer Agreement. The Customer Agreement included an arbitration provision and stated that Verizon could unilaterally change the Customer Agreement at any time. Verizon revised the arbitration provision in 2012. The revised provision states, in relevant part, as follows:

YOU AND VERIZON WIRELESS BOTH AGREE TO RESOLVE DISPUTES ONLY BY ARBITRATION OR IN SMALL CLAIMS COURT.... WE ALSO BOTH AGREE THAT:

(1) THE FEDERAL ARBITRATION ACT APPLIES TO THIS AGREEMENT. EXCEPT FOR SMALL CLAIMS COURT CASES THAT QUALIFY, ANY DISPUTE THAT IN ANY WAY RELATES TO OR ARISES OUT OF THIS AGREEMENT OR FROM ANY EQUIPMENT, PRODUCTS AND SERVICES YOU RECEIVE FROM US (OR FROM ANY ADVERTISING FOR ANY SUCH PRODUCTS OR SERVICES) WILL BE RESOLVED BY ONE OR MORE NEUTRAL ARBITRATORS BEFORE THE AMERICAN ARBITRATION ASSOCIATION ("AAA") OR BETTER BUSINESS BUREAU ("BBB"). YOU CAN ALSO BRING ANY ISSUES YOU MAY HAVE TO THE ATTENTION OF FEDERAL, STATE, OR LOCAL GOVERNMENT AGENCIES, AND IF THE LAW ALLOWS, THEY CAN SEEK RELIEF AGAINST US FOR YOU.

....

(3) THIS AGREEMENT DOESN'T ALLOW CLASS OR COLLECTIVE ARBITRATIONS EVEN IF THE AAA OR BBB PROCEDURES OR RULES WOULD. NOTWITHSTANDING ANY OTHER PROVISION OF THISAGREEMENT, THE ARBITRATOR MAY AWARD MONEY OR INJUNCTIVE RELIEF ONLY IN FAVOR OF THE INDIVIDUAL PARTY SEEKING RELIEF AND ONLY TO THE EXTENT NECESSARY TO PROVIDE RELIEF WARRANTED BY THAT PARTY'S INDIVIDUAL CLAIM. NO CLASS OR REPRESENTATIVE OR PRIVATE ATTORNEY GENERAL THEORIES OF LIABILITY OR PRAYERS FOR RELIEF MAY BE MAINTAINED IN ANY ARBITRATION HELD UNDER THIS AGREEMENT.

Mr. Bateman cancelled his Verizon service in March 2013. A little more than a year later, Mr. Bateman filed a chapter 7 bankruptcy petition. He identified Verizon as a general unsecured creditor for $ 481. In August 2014, the bankruptcy court discharged Mr. Bateman's debts, including the Verizon debt, under 11 U.S.C. § 727 (2012). As a result, Verizon was prohibited from trying to collect the discharged debt from Mr. Bateman. See 11 U.S.C. § 524(a).

After the bankruptcy discharge, Verizon allegedly hired a debt collector, Convergent Outsourcing, Inc., to send Mr. Bateman a debt collection notice. In mid-January 2015, Convergent sent a notice telling Mr. Bateman that he owed Verizon $ 568.02 but that Convergent would settle the claim for about $ 200.

Mr. Bateman sued Verizon and Convergent in federal district court, alleging that Verizon violated the Florida Consumer Collection Practices Act (FCCPA), and that Convergent violated the FCCPA and the Federal Debt Collection Practices Act (FDCPA). See Bateman v. Verizon Wireless Pers. Commc'ns LP, No. 8:15-cv-02096–JDW–AEP (M.D. Fla. 2015). After Mr. Bateman voluntarily dismissed his federal claim, the district court dismissed the action for lack of subject matter jurisdiction.

Mr. Bateman then sued Verizon in state court. He alleged that Verizon attempted to collect a debt previously discharged in the bankruptcy court, in violation of the FCCPA, section 559.72(7), (9), and (18), Florida Statutes (2014).² Mr. Bateman sought to proceed on a class-action basis. Verizon moved to compel arbitration. See 9 U.S.C. § 2 (2012) ; Fla. R. Civ. P. 1.140(b)(1). The trial court denied Verizon's motion, citing Seifert v. U.S. Home Corp., 750 So.2d 633, 639 (Fla. 1999), and Harrier v. Verizon Wireless Pers. Communications LP (Harrier I ), No. 8:12-CV-1588-T-30AEP, 2012 WL 3655355 (M.D. Fla.), reconsideration denied, Harrier v. Verizon Wireless Pers. Commc'ns LP (Harrier II ), 903 F.Supp.2d 1281 (M.D. Fla. 2012). The trial court found that Harrier I was "analogous to this action and particularity persuasive."

Mr. Bateman also filed class claims in the bankruptcy court, seeking to hold Verizon in contempt for allegedly violating the discharge order. Verizon unsuccessfully tried to stay the bankruptcy claims and compel arbitration. In reBateman, 585 B.R. 618, 630 (Bankr. M.D. Fla. 2018).

II. Analysis

We review the trial court's order de novo. See Sherwood v. Slazinski, 162 So.3d 229, 231 (Fla. 2d DCA 2015).

A. Whether the Customer Agreement Survived the Bankruptcy Discharge

Verizon argues that the trial court erroneously relied on Harrier I because its reasoning that a bankruptcy discharge renders the Customer Agreement—and related arbitration provision—unenforceable "in the absence of a reaffirmation agreement" is inconsistent with bankruptcy law. See 2012 WL 3655355, at *1. More specifically, Verizon asserts that, "[c]ontrary to Harrier I's erroneous reasoning, it is axiomatic that bankruptcy discharges only ... the debtor's personal liability on a claim for payment ..., not underlying contracts." Verizon further argues that the trial court erred by failing to "address the settled concept of severability, under which [Mr.] Bateman's agreement to arbitrate would survive even if his bankruptcy discharge somehow invalidated the Customer Agreement as a whole."

Mr. Bateman maintains that the trial court properly relied on Harrier I because the "better-reasoned and more persuasive weight of authority" holds that "a contractual arbitration provision is enforceable after a bankruptcy only if the contract was reaffirmed in the bankruptcy" pursuant to § 524(c).³ Mr. Bateman contends that the concept of severability is not applicable here because "the issue is neither the validity of the underlying contract nor the validity of the arbitration clause it contains."

Recently, the United States Bankruptcy Court for the Middle District of Florida disagreed with the reasoning in Harrier I, holding that the arbitration provision survived Mr. Bateman's chapter 7 discharge, even though he did not reaffirm his debt with Verizon. In re Bateman, 585 B.R. at 625 n.24.⁴ We find In re Bateman highly persuasive.

As the bankruptcy court explained, "the effect of a chapter 7 discharge is simply to relieve the debtor of personal liability" for a debt. Id. at 625 (citing Johnson v. Home State Bank, 501 U.S. 78, 83-84, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991) (explaining that a chapter 7 discharge "extinguishes only‘the personal liability of the debtor’ " and holding that the underlying lien does not disappear with a discharge) ); see also 11 U.S.C. § 727(b) (providing that chapter 7 discharge relieves "the debtor from all debts that arose before" the discharge order and "any liability on a claim" that arose before the commencement of the bankruptcy). The court further explained that, contrary to Harrier I's reading of § 524(c), the statute "instructs how to create a valid and enforceable reaffirmation agreement," and "does not speak to the original contract between the debtor and the creditor." In re Bateman, 585 B.R. at 625. "[N]othing in [§] 524 expands the discharge granted under [§] 727" to discharge the entire contract. In re Bateman, 585 B.R. at 625. The single case cited in Harrier I recognized that § 524 applied to the reaffirmation agreement, not the underlying contract. See Jones v. Springfield City Sch. Credit Union, 6 B.R. 336, 338 (Bankr. S.D. Ohio 1980) ("[ Section] 524 now establishes parameters for reaffirmation agreements by court approval under very limited circumstances.").

Thus, the bankruptcy discharge "does not extinguish the underlying debt" itself. In re Scantling, 465 B.R. 671, 678 (Bankr. M.D. Fla. 2012), aff'd, 754 F.3d 1323 (11th Cir. 2014). The debt still exists and can be collected through other modes of enforcing a claim. See Deutsche Bank Tr. Co. Ams. v. Nash, 136 So.3d 1267, 1269 (Fla. 2d DCA 2014) (holding that the bankruptcy discharge eliminated personal liability, not in rem liability); see also 11 U.S.C. § 524(e) ("Except as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.").

Florida courts are in accord. See, e.g., Can Fin., LLC v. Krazmien, 253 So.3d 8, 11 (Fla. 4th DCA 2018) ("The terms of the note and mortgage remained intact, as a bankruptcy discharge ‘extinguishes only the personal liability of the debtor.’ " (quoting Johnson, 501 U.S. at 83, 111 S.Ct. 2150 ) ). It follows that the discharge does not extinguish an otherwise binding contract underlying the debt. See In re Bateman, 585 B.R. at 625 ; Williams v. Navient Sols., LLC, 564 B.R. 770, 775 (Bankr. S.D. Fla. 2017) ("[A] discharge entered under § 727 relieves a debtor only of his or her personal obligations on debts that existed on the petition date. The entry of a chapter 7 discharge does not vitiate the effectiveness of an otherwise binding agreement to arbitrate matters relating to a claim that may or may not be subject to the discharge."); cf. Gadomski v. Wells Fargo Bank N.A., 281 F.Supp.3d 1015, 1019 (E.D. Cal. 2018) ("The Ninth Circuit has stated that a bankruptcy discharge does not mean the whole contract has been merged into the judgment.").

Furthermore, a bankruptcy discharge does not extinguish the arbitration provision in the Customer Agreement because the obligation to arbitrate is not a "debt" or "claim" as...