567 B.R. 667
Bankr. D.N.H.2017Background
- Debtors Randall and Sharon Todt received Chapter 7 discharges on January 26, 2012; they did not reaffirm their mortgage and did not intend to keep the house.
- Saxon serviced the loan, transferred servicing to Ocwen in April 2012; BONY was the noteholder and ultimately acquired the property at foreclosure.
- From April 2012 through December 2013 Ocwen sent 21 monthly statements showing large past-due amounts and detachable payment coupons; many statements contained boilerplate bankruptcy-disclaimer language.
- Ocwen and/or BONY sent additional post-foreclosure communications in 2014 (insurance demand, escrow analyses, solicitation letter) despite foreclosure occurring December 16, 2013.
- Debtors reopened their bankruptcy in 2015 and sued for willful violation of the § 524(a)(2) discharge injunction; court previously entered default against Saxon but declined default judgment.
- At trial the court found Ocwen/BONY had notice of the discharge; court assessed whether their communications were objectively coercive attempts to collect discharged debt and awarded damages and fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post-discharge monthly statements and related communications violated the § 524(a)(2) discharge injunction | Statements and letters demanded payment and coerced Debtors despite discharge and foreclosure; § 524(j) does not shield these communications | Statements were informational and included bankruptcy disclaimers; § 524(j) permits ordinary-course requests for periodic payments by secured creditors | Court held 21 monthly statements (Apr 2012–Dec 2013) and five post-foreclosure communications (2014) violated § 524(a)(2); § 524(j) did not apply because statements sought past-due amounts and foreclosure in rem relief was being pursued |
| Whether credit-reporting constituted a violation | Debtors argued reporting showed negative balance in 2015 and coerced payment | Defendants disputed being source of inaccurate online report and challenged causation | Court declined to find a violation: evidence did not show Ocwen/BONY caused the inaccurate report or intended coercion |
| Whether Debtors proved entitlement to actual/emotional damages for the violations | Debtors sought emotional-distress damages for ongoing harassment; presented medical and coworker corroboration | Defendants contested severity/causation and argued conduct not egregious enough for significant damages | Court found sufficient corroborated emotional distress and awarded $500 per violation for 26 communications ($13,000 total) |
| Whether attorneys' fees and punitive damages should be awarded | Debtors sought full attorneys' fees and punitive damages | Defendants opposed or disputed reasonableness/necessity | Court awarded attorney’s fees under lodestar reduced for excessive/duplicative billing: $30,000 plus $1,077.07 expenses; denied punitive damages |
Key Cases Cited
- Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439 (1st Cir. 2000) (bankruptcy court may enforce § 524 discharge injunction and award damages)
- Bates v. CitiMortgage, Inc., 844 F.3d 300 (1st Cir. 2016) (elements and objective-standard analysis for discharge-injunction violations)
- Canning v. Beneficial Me., Inc., 706 F.3d 64 (1st Cir. 2013) (broad scope of the discharge injunction)
- Diamond v. Premier Capital, Inc., 346 F.3d 224 (1st Cir. 2003) (consider immediateness and context when assessing coercive effect)
- Nosek (In re Nosek), 544 F.3d 34 (1st Cir. 2008) ( § 105 contempt and sanctioning power to enforce discharge injunction)
- Best v. Nationstar Mortg., LLC (In re Best), 540 B.R. 1 (1st Cir. BAP 2015) (scope of discharge and § 524(j) safe-harbor for ordinary-course periodic payments)