A debtor has a private right of action to enforce bankruptcy’s anti-discrimination provision and may recover damages under the court’s authority under section 105. Johnston v. Speedway, LLC, 2021 WL 1662725 (W.D. Va. April 28, 2021) (case no. 7:21-cv-100).
The plaintiff, Michael Johnston, worked as an assistant manager at Speedway for eight years, but fell on hard times and found himself homeless and living out of his car. He filed for chapter 13 bankruptcy. Speedway learned of the bankruptcy and fired him, citing as the reason that he was a risk for stealing from the cash register. The plaintiff filed an adversary proceeding in his bankruptcy case alleging discrimination under section 525(b), and seeking reinstatement, compensatory and punitive damages, and attorney’s fees. The case was later withdrawn from the bankruptcy court and transferred to district court. Speedway moved to dismiss.
Section 525(b) prohibits an employer from discharging an employee solely because the employee filed for bankruptcy. Speedway argued, however, that the plaintiff failed to state a claim because section 525(b) does not authorize a private right of action for its violation.
Citing Alexander v. Sandoval, 532 U.S. 275, 286 (2001), the court considered whether Congress included “rights-creating language” in the anti-discrimination statute. It found that section 525(b) “explicitly confer[s] a right directly on a class of persons that includes the plaintiff, who alleges wrongful termination on account of his Chapter 13 bankruptcy petition.” Further, though the statute does not explicitly grant a private right of action for its enforcement, Congress did not preclude such action by providing for a different method of enforcement. The court concluded that the plaintiff had a private right of action and that he may be entitled to damages under the court’s section 105 authority to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Federal Bankruptcy Code].”
The court denied Speedway’s motion to dismiss that claim.
The court declined to address Speedway’s argument that even if section 525(b) authorizes a private right of action, it does not allow for emotional distress or punitive damages, or an award of attorney fees. The court found the issue of damages inappropriate for determination on a motion to dismiss.
Tags: 525(b), discrimination
