615 B.R. 31
S.D.N.Y.2020Background:
- Debtor Bret S. DiBattista received a Chapter 7 discharge in 2009; mortgage lien remained on his Newburgh property.
- Countrywide assigned the loan in 2018 to MTGLQ Investors, L.P.; Selene Finance LP began servicing the loan and, on 9/12/2018, sent a "Validation of Debt" letter that listed a past-due balance and included an inconspicuous bankruptcy disclaimer.
- Between Nov. 2018 and Jan. 2019 Selene placed over 30 calls to DiBattista and family and began reporting the mortgage as past due to credit bureaus; Debtor learned of the reporting in Jan. 2019.
- Debtor’s counsel sent a cease-and-desist on Jan. 22, 2019; Selene continued three calls after receipt and did not delete its credit reporting until ~43 days later.
- Bankruptcy Court held Selene in contempt under 11 U.S.C. § 524(a)(2) and § 105, awarded $9,046.60 in fees and $17,500 (labeled "punitive" in the order) for calls/credit reporting; Selene appealed.
- District Court (Seibel, J.) affirmed contempt and the $9,046.60 fee award, but vacated and remanded the $17,500 award for clarification whether it was punitive or compensatory and for recalculation/explanation.
Issues:
| Issue | Plaintiff's Argument (DiBattista) | Defendant's Argument (Selene) | Held |
|---|---|---|---|
| Whether Selene violated the bankruptcy discharge (§ 524) | Selene made collection attempts (debt-validation letter, 30+ calls, credit reporting) after discharge and after counsel’s cease-and-desist; conduct violated the discharge | Calls were to determine borrower’s intentions and notices were informational; reporting was corrected promptly when notified | Affirmed: record shows no "fair ground of doubt" — calls, letter and post‑discharge reporting constituted prohibited collection efforts and violated § 524 |
| Standard for civil contempt under discharge injunction | Movant must show creditor had knowledge and willfully violated discharge | Argues lack of willfulness and that Taggart protects objectively reasonable conduct | Court applied Taggart: contempt may be imposed when there is no objectively reasonable basis to conclude conduct is lawful; willfulness not required; contempt finding not clearly erroneous |
| Whether post‑discharge reporting alone violates § 524 | Reporting a discharged debt as past due is misleading and can injure debtor; coupled here with collection efforts it violated § 524(a)(2) | Furnisher argues mere failure to update or isolated reporting post‑discharge is not per se violation; many cases allow correction duty only where prior report predated discharge | Held: where a furnisher affirmatively reports a debt as delinquent after discharge — especially together with collection letters/calls — it can violate the discharge injunction; bankruptcy court’s finding upheld |
| Appropriateness and nature of monetary sanctions | Seeks fees, emotional/actual damages and per‑call damages; argued $500 per call permissible | Selene contends punitive award improper and court must clarify basis; argues delay in cure was reasonable | Court affirmed fee award ($9,046.60) but vacated/remanded the $17,500 award to clarify whether it is punitive or compensatory and to explain calculation; remand for reconsideration of damages only |
Key Cases Cited
- Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (adopts objective "fair ground of doubt" standard for civil contempt under a bankruptcy discharge; willfulness not required)
- In re Haemmerle, 529 B.R. 17 (Bankr. E.D.N.Y. 2015) (upholding per‑call contempt sanctions for repeated collection calls after discharge)
- Solow v. Kalikow (In re Kalikow), 602 F.3d 82 (2d Cir. 2010) (bankruptcy‑court sanctions reviewed for abuse of discretion)
- R2 Invs., LDC v. Charter Commc’ns, Inc. (In re Charter Commc’ns, Inc.), 691 F.3d 476 (2d Cir. 2012) (standard of appellate review: factual findings for clear error, legal conclusions de novo)
- Torres v. Chase Bank USA, N.A. (In re Torres), 367 B.R. 478 (Bankr. S.D.N.Y. 2007) (credit reporting after discharge can be actionable; courts may distinguish based on surrounding collection conduct)