Lohmeyer v. Alvin's Jewelers (In Re Lohmeyer)Lohmeyer v. Alvin's Jewelers (In Re Lohmeyer)
MEMORANDUM OF DECISION AND ORDER RE MOTION TO DISMISS AND AMENDMENT OF COMPLAINT
Alvin’s Jeweler’s (“Defendant”) is before this court on its Motion to Dismiss [Doc #4] this adversary proceeding. Defendant contends that the complaint should be dismissed for failure to state a claim under Fed.R.Civ.P. 12(b)(6), applicable to this proceeding through Fed. R. Bankr.P. 7012(b). After reviewing the motion and the opposing memorandum filed by Plaintiffs Philip W. Lohmeyer and Deeanne M.
Plaintiffs were the Debtors in underlying Chapter 7 Case 03-37774 in this court. They filed the complaint in this adversary proceeding on August 19, 2006. [Doc #1]. No answer has been filed and no discovery has occurred due to the filing of the motion to dismiss. The court has jurisdiction over Plaintiffs’ underlying Chapter 7 case and this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and the general order of reference entered in this district.
See
28 U.S.C. § 157(a). Proceedings relating to the bankruptcy discharge and the adjustment of the debt- or-creditor relationship are core proceedings that this court may hear and decide. 28 U.S.C. § 157(b)(1) and (b)(2)(J) and (0). Defendant argues without citing any cases that the court does not have jurisdiction over this adversary proceeding in the absence of the underlying Chapter 7 case being reopened. The court disagrees. As other courts have determined, “the fact that a case is or is not closed merely relates to its administrative status, which does not affect a bankruptcy court’s jurisdiction to determine matters relevant to the case.”
In re Taylor,
The complaint is a mixture of factual allegations appropriate to a complaint [¶¶ 1, 2, 3, 4, 6 (first three sentences)] and mostly speaking legal argument [¶¶ 5, 6(last three sentences and footnote), 7-11] generally inappropriate to a complaint under the basic rules of pleading set forth in Fed. R. Bankr. P. 7008 and Fed.R.Civ.P. 8. 1 There are four exhibits attached to the complaint. They become part of the complaint for pleading purposes under Fed. R. Bankr.P. 7010 and Fed.R.Civ.P. 10(c).
The court discerns the following factual allegations from the complaint and the attached exhibits: Plaintiffs filed a voluntary petition for relief in the underlying Chapter 7 Case No. 03-37774 on September 29, 2003. Plaintiffs scheduled Defendant as an unsecured creditor owed $1,493.70 on their Schedule F. [Ex. A]. Defendant was given notice of the commencement of the Chapter 7 case by notice mailed on October 3, 2003, c/o a law firm in Cleveland, Ohio. [Ex. B], Defendant did not object to the dischargeability of Plaintiffs’ debt to it and Plaintiffs received their Chapter 7 discharge on February 26, 2004. [Complaint ¶ 4, Ex. D], Defendant was notified of the discharge c/o the same law firm in Cleveland, Ohio.
Id.
Plaintiffs aver that Defendant has continued to report to or failed to update the status of the balance due with credit reporting agencies post-discharge as shown by an alleged credit report for Plaintiff Philip Lohmeyer [Ex. C]. Page 1 of 8, only, of a document from an entity called Credit Infonet and titled Consumer Liability Report is attached as Exhibit C and incorporated into the pleading aver-ments in support of this allegation. The date on the document is “Ordered On” and “Completed On” on April 4, 2006. The Applicant Name is only Philip Lohmeyer. The entry for Alvin’s Jeweler’s shows a Date Opened /Date Last Reported of 04-96/ 08-03. Under one column captioned
The demand for judgment in the complaint as required by Fed. R. Bankr.P. 7008 and Fed.R.Civ.P. 8(a) refers to Bankruptcy Code section number 11 U.S.C. §§ 524 and 727. The ad damnum clause seeks an injunction, and compensatory damages of more than $5,000, punitive damages, and legal fees.
The standard for granting a motion to dismiss at the pleading stage is hard to meet. Case law is replete with references to such motions as disfavored and rarely granted.
See, e.g, Sosa v. Coleman,
Plaintiffs’ factual allegations attempt to state a cause of action for violation of the discharge injunction of 11 U.S.C. § 524. A Chapter 7 bankruptcy discharge “discharges the debtor from all debts that arose before the date of the order for relief under this chapter....” 11 U.S.C. § 727(b). In order to effectuate the “fresh start” intended by the grant of a discharge in bankruptcy, Congress provided that a discharge “operates as an injunction against ... an act, to collect, recover or offset any such debt [discharged under section 727] as a personal liability of the debtor, whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)(2).
In this case, Plaintiffs allege that Defendant’s continued reporting of or failure to update their account after their Chapter 7 discharge with a balance of $1,493.70 is an effort to collect the debt in violation of the discharge injunction. In the Sixth Circuit there is no statutory private right of action for damages under 11 U.S.C. § 524 or 11 U.S.C. § 105 for violation of the discharge injunction.
Pertuso v. Ford Motor Co.,
In asking for dismissal of this claim at the pleading stage, Defendant overstates the law involving the interplay between credit reporting and violation of the discharge injunction. The only case upon which Defendant relies is a decision rendered by another judge of this court.
Irby v. Fashion Bug, (In re Irby),
Notably the post-discharge document attached to the complaint in this case does show a debt owed to Defendant by Plaintiff Philip Lohmeyer with Current Balance of $1,493. It does in fact suggest to a reviewer that Plaintiff Philip Lohmeyer has personal liability for the debt with a “Current Balance” of $1,493 as of April 4, 2006, at a time when he in fact no longer had any personal liability to Defendant due to his discharge more than two years earlier. If Plaintiff Philip Lohmeyer can prove that Defendant inaccurately reported or failed to update the status of the debt as a current liability of Plaintiffs as shown on the April 4, 2006, document for the purpose of coercing payment by Plaintiffs notwithstanding the discharge, which would essentially amount to lying in passive wait, then in this court’s view a violation of the discharge injunction will have occurred without other overt collection action such as letters or harassing telephone calls. Defendant’s motive in making a credit notation is material.
See In re Singley,
Another relevant case, although not one cited by Defendant, is
Lover v. Rossman and Co. (In re Lover),
Of similar relevance is Gordon v. Summit Bank (In re Gordon), Case No. 99-33342DAS, Adv. No. 00-0194, 2000 WL
713742, 2000 Bankr.LEXIS 596 (Bankr.E.D.Pa., May 1, 2000), which involved a judgment in favor of the defendant bank
after trial.
The evidence at trial showed that the party making the problematic report was not the defendant bank, but an entity called Chex System not even a party to the lawsuit. More significantly to the instant case, however, before trial in
Gordon
the court had denied defendant’s Rule 12(b)(6) motion to dismiss on the pleadings because “we were not prepared to rule that there was an insuperable bar’ to the Debtor’s claim as a matter of law ...” Noting the dearth of case law on these issues, which persists to this day, the court relied on
In re Sommersdorf,
In
In re Goodfellow,
In addition to its legal arguments, Defendant asserts that facts outside of the record justify dismissal at this stage of the case. Facts asserted in Defendant’s motion include that Defendant wrote off the debt in August 2003, before the bankruptcy case, and that no further reports on the debt in issue of any kind were made to any credit bureaus after August 2003. At this stage of the case, these “facts” and the attached documents are simply unsupported argument by Defendant. While they may ultimately constitute a complete defense on the merits and a basis for summary judgment, facts outside the complaint and its attachments cannot be considered by the court in the procedural context of a Rule 12(b)(6) motion to dismiss for failure to state a claim at the pleading stage. The court is limited to considering the pleading in issue, documents attached to the pleading and matters of which the court may take judicial notice.
Lovelace v. Software Spectrum, Inc.,
The court does, however, have concerns as to whether Plaintiffs have sufficiently alleged an injury in fact to achieve standing to proceed. As Plaintiffs are limited to a cause of action for civil contempt of the discharge injunction, there are two kinds of civil fines that the court may impose.
In re Sherelle M. Walker,
The ad damnum clause demands damages, which the court liberally interprets
The issue of injury to Plaintiffs reaches beyond basic Rule 8 and Rule 12 pleading concerns about whether they have stated a claim for relief to the justiciability of the complaint. A plaintiff must satisfy both constitutional and prudential standing requirements.
See Community First Bank v. Nat’l Credit Union Admin.,
To satisfy Article Ill’s standing requirement, a plaintiff must have some actual or threatened injury due to the alleged illegal conduct of the defendant; the injury must be “fairly traceable” to the challenged action; and there must be a substantial likelihood that the relief requested will redress or prevent the plaintiffs injury. See Valley Forge [Christian College v. Americans United for Separation of Church & State, Inc.], 454 U.S. [464]at 472,102 S.Ct. 752 ,70 L.Ed.2d 700 [(1982)]. Hence, the “irreducible minimum” constitutional requirements for standing are proof of injury in fact, causation, and redressability. See id. A plaintiff bears the burden of demonstrating standing and must plead its components with specificity. See id.
In addition to the constitutional requirements, a plaintiff must also satisfy three prudential standing restrictions. First, a plaintiff must “assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.” Warth [v. Seldin], 422 U.S. [490]at 499,95 S.Ct. 2197 ,45 L.Ed.2d 343 [(1975)] (citations omitted). Second, a plaintiffs claimmust be more than a “generalized grievance” that is pervasively shared by a large class of citizens. See Valley Forge, 454 U.S. at 474-75 ,102 S.Ct. 752 ,70 L.Ed.2d 700 . Third, in statutory cases, the plaintiffs claim must fall within the “zone of interests” regulated by the statute in question. See id. These additional restrictions enforce the principle that, “as a prudential matter, the plaintiff must be a proper proponent, and the action a proper vehicle, to vindicate the rights asserted.”
Coal Operators and Associates, Inc. v. Babbitt,
Plaintiffs’ complaint satisfies prudential standing requirements as described by the Sixth Circuit in
Babbitt,
but its lack of any allegations of actual injury to them raises a standing issue of constitutional dimensions under Article III. Plaintiffs must allege an injury in fact or a real and immediately threatened injury to them resulting from Defendant’s alleged actions that may be redressed by the relief they have requested, which is interpreted by the court as compensatory sanctions payable to Plaintiffs for contempt from Defendant’s alleged violation of the discharge injunction. So far they have not done so. Their hypothetical discussions about the general importance and impact of credit reports do not set forth any actual or threatened injury to them that may be redressed through an award by the court of compensatory sanctions payable to them. Plaintiffs do not allege, for example, that they applied before the commencement of the adversary proceeding for any loans or extensions of credit or employment opportunities or housing opportunities&emdash;all examples of situations where credit reports might be accessed and used&emdash;that were denied
because
of the information from Defendant appearing on the April 4, 2006, document. “It is clearly established that ‘[ajllegations of possible future injury do not satisfy the requirements of Art. III. A threatened injury must be certainly impending to constitute injury in fact.’ ”
Rosen v. Tennessee Comm’r of Finance and Admin.,
Although Plaintiffs’ complaint for contempt due to violation of the discharge injunction is defective due to the lack of allegations of injury in fact sufficient to establish their constitutional standing to proceed based on the relief they have requested, the court cannot find at this point that they can neither allege nor prove any set of facts that will entitle them to compensatory sanctions for contempt. The court will grant Plaintiffs leave to amend their complaint to plead facts demonstrating the nature of the injury in fact to them that occurred before they filed their adversary proceeding against Defendant or any injury immediately threatened at the time they filed their complaint. If the complaint is amended, Defendant shall respond by either answering the amended complaint or renewing its motion to dismiss on the basis of lack of injury and standing. If no amended complaint is filed, the court will finally grant the pending motion to dismiss. If the motion to dismiss is renewed, Plaintiffs shall be granted leave to respond, after which the court will decide whether Plaintiffs have sufficiently alleged injury in fact to establish standing and survive dismissal on the pleadings.
IT IS ORDERED that Plaintiffs are granted twenty one (21) days from the date of this order to file an amended complaint alleging, with specificity, facts demonstrating their standing in this adversary proceeding. Defendant shall either file an answer or renew its motion to dismiss within fourteen (14) days after the amended complaint is filed. If the motion to dismiss is renewed, Plaintiffs must file any brief in opposition on or before fourteen (14) days after the renewed motion is filed. Plaintiffs’ failure to file an amended complaint as provided in this order will result in the court’s dismissal of the case by the final granting of Defendant’s pending Motion to Dismiss [Doc. # 4] without further notice or opportunity for a hearing. If an amended complaint and an answer to same are filed, the court will deny the balance of the pending motion to dismiss, without prejudice, and set a schedule for discovery, further motion practice and a further pretrial conference.
Notes
. No motion to strike under Fed. R. Bankr.P. 7012 and Fed.R.Civ.P. 12(f) has been filed.
. The distinction between a statutory right of action and civil contempt is more than just nomenclature. "The primary purpose of a civil contempt order is to compel obedience to a court order and compensate for injuries
. The complaint is captioned "Complaint for Injunctive Relief and Monetary Damages and Punitive Damages.” As explained above, there is already a statutory injunction in place under 11 U.S.C. § 524(a). The only cause of action properly set forth is whether Defendant may be held liable for contempt for alleged violation of that statutory injunction. The court will not enter another injunction enjoining violations of the existing injunction, which is permanent. And Plaintiffs have not sought imposition of a coercive fine to be paid to the court in the event any continuing reporting that they can prove is not remedied. Thus the request for injunctive relief as a remedy is redundant surplusage that does not create redressability and resolve the standing problem due to no pleading of an injury in fact to Plaintiffs.