Green Point Credit, LLC v. McLean (In Re McLean)
794 F.3d 1313
| 11th Cir. | 2015Background
- Deborah and Eric McLean previously received a Chapter 7 discharge in 2009 for an $11,018 deficiency owed to Green Tree; Green Tree received electronic notice of that discharge.
- In 2012 the McLeans filed a second Chapter 13 petition and did not list Green Tree; Green Tree nevertheless filed a proof of claim in that new case for the previously discharged deficiency.
- The proof of claim caused the trustee’s projected plan payments to increase; the McLeans alleged emotional distress and objected to the claim and then filed an adversary complaint alleging violation of 11 U.S.C. § 524(a)(2).
- Green Tree withdrew the proof of claim four days after the adversary complaint and admitted the filing was an automated-system error.
- The bankruptcy court found contempt, awarded emotional-distress compensatory damages and $50,000 in non‑compensatory (labeled “coercive”) sanctions; the district court affirmed. Green Tree appealed.
- The Eleventh Circuit affirmed that filing the proof of claim violated § 524(a)(2) but vacated the non‑compensatory sanctions (as punitive, requiring greater process) and vacated the compensatory award for reconsideration under the Lodge standard; remanded with instructions (including converting the adversary to a contested matter).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the bankruptcy court have jurisdiction to enforce the discharge injunction from the prior case in the McLeans’ new case? | McLeans proceeded in same district and judge; sought contempt relief in current case. | Green Tree argued enforcement belongs only to the court that issued the discharge order (question over case-number identity). | Court held the Middle District of Alabama bankruptcy court had jurisdiction to enforce the discharge injunction arising from the prior case (contumacious act is contempt against the tribunal). |
| Does filing a proof of claim in a later bankruptcy for a debt discharged in an earlier case violate 11 U.S.C. § 524(a)(2)? | McLeans: filing a proof of claim for a discharged debt exerts pressure (e.g., increased plan payments) and thus violates § 524(a)(2). | Green Tree: a proof of claim is a claim against the estate (not the debtor personally); procedural protections (objection process) mean it does not violate § 524(a)(2). | Court held § 524(a)(2) forbids acts whose objective effect is to pressure a debtor to repay a discharged debt; filing such a proof of claim violated the discharge injunction here. |
| Were the $50,000 non‑compensatory sanctions proper as coercive contempt? | McLeans: sanctions necessary to coerce systemic corrections and protect others. | Green Tree: it withdrew the claim (purged contempt); a flat fine after withdrawal is punitive and requires criminal-contempt protections. | Court held the sanctions were punitive in effect (no ongoing contempt to purge, public‑oriented goal, fixed fine), so they must be vacated for lack of required due process. |
| Was the compensatory award for emotional distress proper and supported? | McLeans: suffered significant emotional distress caused by the erroneous claim; entitled to compensatory damages. | Green Tree: contested evidentiary basis/amount. | Court held bankruptcy courts may award emotional‑distress damages but vacated the award and remanded for reconsideration under the Lodge standard (significant distress, clear proof, causal link). |
Key Cases Cited
- Fisher Island Invs., Inc. v. Solby+Westbrae Partners, 778 F.3d 1172 (11th Cir.) (standard of review and procedural context)
- Alderwoods Grp., Inc. v. Garcia, 682 F.3d 958 (11th Cir.) (contempt enforcement and tribunal authority)
- Jove Eng’g, Inc. v. Internal Revenue Serv., 92 F.3d 1539 (11th Cir.) (use of inherent powers and contempt analysis)
- Hardy v. United States ex rel. Internal Revenue Serv. (In re Hardy), 97 F.3d 1384 (11th Cir.) (bankruptcy courts’ sanction authority under § 105)
- Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir.) (proofs of claim as a means to collect in bankruptcy)
- Lodge v. Kondaur Capital Corp., 750 F.3d 1263 (11th Cir.) (standard for emotional‑distress damages for bankruptcy violations)
- Int’l Union, United Mine Workers v. Bagwell, 512 U.S. 821 (U.S.) (distinguishing civil coercive contempt from punitive criminal contempt)
- Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787 (U.S.) (purpose of contempt power to vindicate judicial authority)
- Solow v. Kalikow (In re Kalikow), 602 F.3d 82 (2d Cir.) (pressure‑to‑repay test for § 524(a)(2))
- Paul v. Iglehart (In re Paul), 534 F.3d 1303 (10th Cir.) (objective effect/pressure test under § 524(a)(2))