On direct interlocutory appeal, the Fifth Circuit found that courts may not use their contempt powers to enforce discharge orders issued by other courts outside their judicial districts. The court also held that the private student loans at issue were not subject to section 523(a)(8)(A)(ii)’s nondischargeability provision because that provision applies only to educational benefits where, as in the case of grants or scholarships, the obligation to repay is conditional. Crocker v. Navient Solutions LLC, No. 18-20254 (5th Cir. Oct. 22, 2019). [Read more…] about Bankruptcy Court May Not Enforce Discharge Order from Other District
Bankruptcy Court Clarifies Authentication Standard in Motions for Summary Judgment
The Bankruptcy Court for the District of Delaware recently clarified the authentication standard for an exhibit attached to a motion for summary judgment. The court examined the change in Fed.R.Civ.P. 56(c)(4) in 2010 (made applicable to bankruptcy proceedings in Fed.R.Bankr.P. 7056 and applicable to all contested matters in Fed.R.Bankr.P. 9014(c)).
This case involves a corporate Chapter 7 bankruptcy. The Trustee is holding a large tax refund of approximately $5.5 million and two creditors claimed priority in disbursement. In support of its summary judgment motion creditor 1 relied upon a declaration with 29 exhibits and sub-exhibits signed by an employee from creditor 1’s parent company. Creditor 2 moved to strike the employee’s declaration and its exhibits for failing to meet the requirements in Fed.R.Civ.P. 56(c).
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United States v. West, No. 18-2116 (W.D. Tenn.)
Type: Amicus
Date: July 16, 2018
Description: Whether the district court has jurisdiction over an appeal of denial of student loan lender’s motion for summary judgment.
Result: Pending
Rooker-Feldman No Bar to Exercise of Trustee’s Strong-Arm Power
The Sixth Circuit agreed with the position advanced in NACBA / NCBRC’s amicus brief that the Rooker-Feldman doctrine does not preclude application of the trustee’s strong-arm power to avoid a lien notwithstanding a state court judgment of foreclosure. Isaacs v. DBI-ASG Coinvestor Fund III, LLC (In re Isaacs), No. 17-5815 (6th Cir. July 18, 2018).
Linda Isaacs and her husband entered into a mortgage agreement with GMAC Mortgage Corporation. The contract provided in the “description of security” that “By signing this Mortgage, we hereby mortgage, grant and convey [the collateral],” and, in the “priority of advances” section, that “The lien of this Mortgage will attach on the date this mortgage is recorded.” Shortly after signing the agreement, Ms. Isaacs filed for Chapter 7 bankruptcy. She scheduled GMAC as a secured creditor, not realizing that it had not yet recorded the mortgage. GMAC recorded the mortgage while the automatic stay was in effect. Ten years after Ms. Isaacs obtained her Chapter 7 discharge, the successor to GMAC sought an order of foreclosure against the Isaacs. The state court issued a default order of foreclosure, and one day before the scheduled sale, Ms. Isaacs filed for Chapter 13 bankruptcy. [Read more…] about Rooker-Feldman No Bar to Exercise of Trustee’s Strong-Arm Power
Court Properly Declined to Compel Arbitration of Educational Loan Issue
Potential discharge of an educational loan is a core bankruptcy proceeding over which the bankruptcy court may exercise jurisdiction despite an arbitration clause in the lending agreement. Navient Solutions v. Farmer, No. 17-764 (W.D. Wash. Oct. 16, 2017).
In her Chapter 7 bankruptcy, Janay Farmer sought to discharge a loan she had taken out to finance her post-graduation bar examination. The lender, Navient, moved to compel arbitration by the terms of the lending agreement. Reasoning that the issue of treatment of the loan was a core bankruptcy matter, the bankruptcy court found that it had discretion to exercise jurisdiction over the case. In re Farmer, 567 B.R. 895 (Bankr. W.D. Wash. 2017). [Read more…] about Court Properly Declined to Compel Arbitration of Educational Loan Issue
Reminder: Timely Notice of Appeal Is Jurisdictional
Timely filing of a notice of appeal is a jurisdictional prerequisite and an appellant must at least conform his filing to general adherence to the requirements outlined in Rule 8003(3). In re Dorsey, 2017 U.S. App. LEXIS 16905, No. 16-31085 (5th Cir. Sept. 1, 2017). [Read more…] about Reminder: Timely Notice of Appeal Is Jurisdictional
Isaacs v. DBI-ASG Coinvestor Fund, No. 17-5815 (6th Cir.)
Type: Amicus
Date: September 28, 2017
Description: Whether the Rooker-Feldman doctrine can divest a bankruptcy court of subject matter jurisdiction over causes of action that arise only under the Bankruptcy Code.
Result: Pending
No Jurisdiction over Appeal of District Court Vacation of Confirmation Order
“When a district court vacates a bankruptcy court order confirming a bankruptcy plan and remands for further proceedings, there is no final order sufficient to confer jurisdiction under 28 U.S.C. § 158(d).” Bank of New York Mellon v. Watt, No. 15-35484 (9th Cir. Aug. 16, 2017).
In their bankruptcy plan, Nicholas and Patricia Watt included a provision vesting title to their residence in the mortgagee, Bank of NY, and specifying that “vesting shall not merge or otherwise affect the extent, validity, or priority of any liens on the property.” Bank of NY opposed the mandatory vesting provision and objected to confirmation of the plan. The bankruptcy court confirmed the plan. [Read more…] about No Jurisdiction over Appeal of District Court Vacation of Confirmation Order
Deadline for Revocation of Discharge Not Jurisdictional
The one-year deadline for seeking revocation of a discharge order is not jurisdictional and may therefore be waived. Weil v. Elliott (In re Elliott), No. 16-55359 (9th Cir. June 14, 2017).
When Edward Elliott filed his Chapter 7 bankruptcy petition he failed to mention one important asset: his home. He received a discharge under section 727(a). Fifteen months later, when the trustee discovered the fraudulent nondisclosure, she filed an adversary complaint seeking an order vacating the discharge under section 727(d)(1). Section 727(e)(1) permits a trustee to seek revocation of discharge within one year of the discharge order. Mr. Elliott did not raise the issue of untimeliness in his response to the adversary complaint. The bankruptcy court revoked his discharge. The Bankruptcy Appellate Panel, however, found the one-year filing deadline to be jurisdictional and reversed. Elliott v. Weil (In re Elliott), 529 B.R. 747, 755 (B.A.P. 9th Cir. 2015). On remand, the bankruptcy court dismissed the adversary complaint for lack of jurisdiction. The trustee was permitted direct appeal to the Ninth Circuit. [Read more…] about Deadline for Revocation of Discharge Not Jurisdictional
FDCPA and Discharge Injunction Not Incompatible
An FDCPA claim based on efforts to collect a debt discharged in bankruptcy is not precluded by the Code’s discharge injunction. Barnhill v. FirstPoint, Inc., No.15-892 (M.D. N.C. May 17, 2017).
Lara Barnhill filed a class action complaint in district court alleging that FirstPoint, Inc. and FirstPoint Collection Resources made efforts to collect a debt after her debt had been discharged in chapter 7 bankruptcy in violation of the FDCPA, North Carolina Collection Agency Act (NCCAA). The complaint also made a claim for injunctive relief. FirstPoint moved to dismiss under section 12(b)(1) and (6) for lack of subject matter jurisdiction and for failure to state a claim.
FirstPoint argued that the district court lacked subject matter jurisdiction over the FDCPA and NCCAA claims because both consumer protection laws are preempted by the Bankruptcy Code’s discharge injunction. FirstPoint further argued that Ms. Barnhill failed to allege injury-in-fact and therefore lacked Article III standing.
With respect to the FDCPA, the district court noted that one federal law does not preempt another but that, where they deal with same subject matter one may repeal the other either by express direction by Congress or by implication if the two statutes are irreconcilable.
The Fourth Circuit has not decided the issue of FDCPA and Code compatibility, but the district court agreed with other courts finding that an action based on post-discharge collection efforts may be sustained under both statutes simultaneously [though, in this case, Ms. Barnhill did not include a claim based on violation of the discharge injunction]. The court specifically discussed Garfield v. Ocwen Loan Servicing, LLC, 811 F.3d 86, 89 (2d Cir. 2016), where the Second Circuit distinguished between actions under the FDCPA brought for conduct occurring while the bankruptcy case was open and cases in which the conduct occurred post-discharge. The Garfield court was persuaded that the Code and the FDCPA were compatible in the latter instance in part because, unlike automatic stay violations, the Code does not create a cause of action for violations of the discharge injunction. Furthermore, because the same conduct underlies both causes of action, a creditor can avoid violations of both the FDCPA and the Code by not trying to collect a discharged debt.
Turning to whether the Code preempts the NCCAA, the court explored the doctrines of field preemption, where Congress specifies that a federal law supplants state authority in a particular field, and conflict preemption, where a state law must yield to a federal law with which it actually conflicts. Where states traditionally have the power to create and enforce consumer protection laws, a court will find field preemption only where Congress has made clear that such preemption was its purpose. Because no such indication is found in the Bankruptcy Code, the court turned to whether the NCCAA was preempted as conflicting with the Code. To find such preemption, the Fourth Circuit looks to “whether it is impossible to comply with both the state and federal law or whether the state law presents an obstacle to the accomplishment of the purposes of the federal law.” The court found no such conflict. Violation of the NCCAA was based on the allegation that FirstPoint had attempted to collect an uncollectible debt. The fact that the debt was rendered uncollectible due to bankruptcy discharge, was irrelevant.
The court thus concluded that neither the FDCPA nor the NCCAA claims were preempted or precluded by the Bankruptcy Code.
FirstPoint next argued that Ms. Barnhill had not suffered any “concrete and particularized” injury-in-fact and therefore had no Article III standing to bring this action. While cautioning that generally mere violation of a statute does not satisfy the injury-in-fact requirement in the absence of evidence of its effect on the plaintiff, a “majority of courts have held that FDCPA violations, like the ones asserted in this case, are substantive violations and thus produce ‘concrete injuries’ sufficient to satisfy Article III’s requirement of injury-in-fact.” Furthermore, Ms. Barnhill alleged particularized injury in the form of emotional distress and harm to her credit rating. The court concluded that her allegations were sufficient to withstand a motion to dismiss.
Having found that subject matter jurisdiction survived the 12(b)(1) motion, the court turned to whether the complaint stated a claim for purposes of Rule 12(b)(6). To state a claim for violation of the FDCPA, a plaintiff must show that 1) she has been the object of collection activity, 2) by a debt collector, 3) engaging in conduct that violates the FDCPA. Here, FirstPoint, Inc. drew a distinction between itself and FirstPoint Collection Resources, arguing that unlike its counterpart, FirstPoint, Inc. is not a debt collector, and cannot be held vicariously liable for the conduct of FirstPoint Collection Resources.
Rejecting this argument, the court noted that Ms. Barnhill alleged that both FirstPoint, Inc. and FirstPoint Collection Resources, were debt collectors and that both made efforts to collect the discharged debt. These allegations were sufficient to withstand a motion to dismiss. The fact that FirstPoint, Inc. did not hold a state license to collect debts was not relevant to the inquiry as licensure is not necessary to a finding of an FDCPA violation. As to the conduct giving rise to the FDCPA claim, the court found it was enough that Ms. Barnhill alleged that she received a phone call from the defendants informing her that her discharged debt was owing and in collection and that it was affecting her credit.
For the same reasons, the complaint stated a claim under the NCCAA. The fact that the state law does require a permit for debt collectors did not defeat this claim as the court found that a debt collector acting in violation of the licensing law could still violate the NCCAA.
Finally, the defendants argued that injunctive relief is not available under either the FDCPA or the NCCAA and that claim should, therefore, be dismissed. Without deciding whether the relief sought was available, the court granted the motion to dismiss to the extent that the claim for injunctive relief was presented as a cause of action rather than as a form of remedy.