220 F. Supp. 3d 860
N.D. Ill.2016Background
- Bednar filed bankruptcy on November 29, 2014; his bankruptcy plan proposed surrender of a mortgage held by PNC and serviced by SPS.
- The bankruptcy court lifted the automatic stay as to SPS so it could pursue foreclosure; PNC sold the property on December 18, 2015.
- On February 1, 2016, a state-court Order Approving Report of Sale and Distribution was entered showing a $3,480.28 personal deficiency judgment against Bednar while his bankruptcy case remained pending.
- Bednar did not object in bankruptcy; instead he amended his bankruptcy schedules to disclose a potential stay-violation claim and received a discharge three days later.
- Bednar sued PNC and SPS in district court under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), alleging emotional distress and time consulting counsel from the entry of the deficiency judgment; PNC later moved to vacate the judgment.
- Defendants moved to dismiss under Rule 12(b)(6), arguing (1) the ICFA claim is preempted by the Bankruptcy Code, and (2) Bednar failed to plead actual (economic) damages; the court granted the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ICFA claim premised on a bankruptcy stay violation is preempted by the Bankruptcy Code | Bednar contends state consumer-fraud remedies are available for harm caused by the entry of the deficiency judgment | PNC and SPS argue the claim arises solely from a bankruptcy stay violation and is therefore preempted by the Code and its remedial scheme | Court: Claim is preempted because it depends on the Bankruptcy Code’s stay and duplicates the federal remedial framework |
| Whether Randolph undermines preemption authority relied on by defendants | Bednar relies on Randolph to argue bankruptcy does not preempt analogous state claims | Defendants say Randolph addressed repeal between federal statutes, not preemption of state law, and is inapposite | Court: Randolph does not alter preemption analysis; prior preemption precedents remain persuasive |
| Whether Bednar pleaded actual damages under the ICFA | Bednar alleges emotional distress and time spent consulting counsel (costs of bringing this suit) | Defendants argue emotional distress is non-compensable under ICFA and litigation costs here are not cognizable as actual economic injury | Court: Emotional distress alone is insufficient; time/costs spent bringing this suit do not plausibly allege calculable actual damages; claim fails on damages ground too |
| Whether court needed to reach additional defenses (e.g., standing) | Bednar did not advance additional defenses in opposing dismissal | Defendants raised other arguments but focused on preemption and damages | Court: Dismissed on preemption and failure to plead actual damages; other defenses not decided |
Key Cases Cited
- MSR Exploration, Ltd. v. Meridian Oil Co., 74 F.3d 910 (9th Cir. 1996) (Bankruptcy Code preempts state-law suits that rely exclusively on misconduct occurring in bankruptcy proceedings)
- Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004) (addressed statutory repeal between federal statutes; not controlling for state-law preemption questions)
- Nelson v. Welch (In re Repository Techs., Inc.), 601 F.3d 710 (7th Cir. 2010) (recognizing significant preemptive force of bankruptcy statutes)
- Price v. Rochford, 947 F.2d 829 (7th Cir. 1991) (debtor may pursue a §362(h)/§362(k) remedy for stay violations even after bankruptcy termination)
- Knox v. Sunstar Acceptance Corp. (In re Knox), 237 B.R. 687 (Bankr. N.D. Ill. 1999) (ICFA claims premised on bankruptcy claims can be preempted where the Code provides the remedy)
- Grant-Hall v. Cavalry Portfolio Servs., LLC, 856 F. Supp. 2d 929 (N.D. Ill. 2012) (time and money spent defending preexisting debt-collection suits can constitute actual damages under ICFA)