Moffitt v. America's Servicing Co. (In Re Moffitt)Moffitt v. America's Servicing Co. (In Re Moffitt)
ORDER GRANTING MOTION TO DISMISS IN PART
Now before the Court is the Motion to Dismiss Amended Complaint Seeking Damages in Core Adversary Proceeding and brief in support filed by America’s Servicing Company and Wells Fargo Bank, N.A. (“ASC”) on July 29, 2008 (the “Motion to Dismiss”). ASC filed a Supplemental Motion to Dismiss Amended Complaint Seeking Damages in Core Adversary Proceeding on August 22, 2008 (the “Supplemental Motion to Dismiss”). Plaintiffs/Debtors (the “Moffitts”) filed a response and brief on Septеmber 22, 2008, and ASC filed its reply and brief on November 5, 2008. The Court heard oral argument on November 12, 2008, and took the matter under advisement.
BACKGROUND
The Moffitts received a Chapter 13 discharge on April 6, 2006. Prior to the entry of discharge, the Court entered an Order approving ASC’s claim in the total amount of $14,409.13 (“Order Approving Claim”) and directing the Moffitts to begin making their monthly mortgage payments directly tо ASC (which they did). The same day, the Moffitts paid ASC an additional $10,000 with written directions that this sum be applied to the principal on their loan. Around the same time, the Chapter 13 Trustee (the “Trustee”) made final disbursements to ASC totaling $9,581.57 (in accordance with the Order Approving Claim)
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which should have brought the Moffitts’ home loan current (paying all allowed fees and costs and catching up prior mortgage payments). Instead of bringing the balance current with the Trustee’s final disbursement, applying the additional $10,000 to principal, and applying the regular monthly mortgage payments to principal, interest, and escrow as they were paid, ASC misapplied
After considering the Motion to Approve Plaintiffs’ Attorney Fees and Costs filed by the Moffitts, ASC’s response, and the Moffitts’ reply and brief in support, the Court entered an Order Approving Award of Attorneys’ Fees and Costs (the “Fee Order”) awarding the Moffitts $13,010.72 in attorneys’ fees and costs in connection with the TRO Motion and hearing on June 27, 2008. ASC had objected to some of the fees requested as not being reasonable, but did not object to the overall award of fees and costs. ASC immediately sought leave to appeal the Court’s award of attorney feеs on the grounds that the Court did not have the authority to award fees and costs, and also raising for the first time, the issue of whether the Court had subject matter jurisdiction. On July 15, 2008, the Bankruptcy Appellate Panel for the Eighth Circuit Court of Appeals denied ASC’s motion to file an interlocutory appeal of the Fee Order. On July 29, 2008, ASC filed its Motion to Dismiss, and on August 22, 2008, ASC filed its Supplemental Motion to Dismiss.
ASC’S MOTION TO DISMISS
ASC moves to dismiss claims one through six of the Moffitts’ complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted pursuant to Fed.R.Civ.P. 12(b)(1) and (6) and Fed. R. Bankr.P. 7012. ASC moves to dismiss claims seven through twelve of the Moffitts’ complaint for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and Fed. R. Bankr.P. 7012. This Order examines only the issue of jurisdiction. The Court finds that it doеs have subject matter jurisdiction over claims one through six, but does not have subject matter jurisdiction over claims seven through twelve. ASC argues that even if the Court has subject matter jurisdiction for claims one through six, these claims fail to state a claim upon which relief may be granted under Fed.R.Civ.P. 12(b)(6). The Rule 12(b)(6) issues will be addressed in a separate order.
The parties’ arguments are set forth in detail below along with the applicable law and the Court’s decisions. The facts relevant to the case were set forth in this Court’s Memorandum Opinion dated June 18, 2008, and will be restated here only to the extent necessary. Any addi
LEGAL STANDARD
“Courts are obligated to examine their own jurisdiction and subject matter jurisdiction may be raised at any time, by a party or the court, sua sponte.” May v. Missouri Dep’t of Revenue (In re May), 251 B.R. 714, 719 (8th Cir. BAP 2000).
Federal courts are courts of limited jurisdiction and that limited jurisdiction is conferred only by statute or by the United States Constitution. [Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee,456 U.S. 694 , 701,102 S.Ct. 2099 , 2103,72 L.Ed.2d 492 (1982).] As a result of this statutory and Constitutional restraint on federal power, parties themselves cannot confer subject matter jurisdiction, their consent to such jurisdiction is irrelevant, they cannot waive the requirement by failing to challenge jurisdiction.
In re Fitzgeralds Gaming Corp.,
Pursuant to 28 U.S.C. § 1334, federal district courts have original and exclusive jurisdiction over all cases under title 11 (i.e., the Bankruptcy Code), and original but not exclusive jurisdiction over all civil proceedings “arising under title 11, or arising in or related to cases under title 11.” Proceedings under the Bankruptcy Code may be automatically rеferred to the bankruptcy judges for the district by the district court. 28 U.S.C. § 157(a). The Eastern District of Arkansas’s Local Rule 83.1 provides for automatic referral of “[a]ll cases and proceedings arising under Title 11 of the United States Code or arising in or related to a case under Title 11, brought pursuant to 28 U.S.C. § 1334, § 1412, or § 1452, except personal injury or wrongful death tort claims, ... ”. Thus, a Bankruptcy Court’s jurisdictiоn is strictly limited to proceedings that “arise under,” “arise in,” or are “related to” a bankruptcy case. Supplemental jurisdiction under 28 U.S.C. § 1367 does not extend to bankruptcy courts. As explained by the District Court for the Eastern District of Louisiana in In re Walker:
‘[r]elated to’ jurisdiction already allows the bankruptcy court to hear, to the extent Congress intended, all supplemental claims that have a conceivable effect on the bankruptcy. It seems counterintuitive, then, that Congress, having given bankruptcy courts only limited judicial power over ‘non-core’ or ‘related to’ proceedings, would have intended for bankruptcy courts to nevertheless look to 28 U.S.C. § 1367 as an additional or expanded basis of jurisdiction.
ANALYSIS
Claims One Through Six
Claims one through six are based on provisions of the bankruptcy code, and therefore fall within the Court’s “arising under” jurisdiction. Numerous courts have held that the bankruptcy court retains jurisdiction over core proceedings such as claims determinations
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or violations of the discharge injunction under § 524 even after a case is closed.
See e.g., In re Mahoney,
Claims Seven Through Twelve
Claims seven through twelve of the Moffitts’ Amended Complaint are based on either federal (but not bankruptcy) or state law. Accordingly, none of these causes of action were created by or based on a provision of the Bankruptcy Code, thereby “arising under” title 11, and none of these causes of action are dеpendent on the bankruptcy case’s existence, thereby “arising in” a case under title 11. Accordingly, the Court could only have “related to” jurisdiction over these causes of action. The Eighth Circuit Court of Appeals has set forth the following test for determining whether a case is “related to” a case under title 11:
“[T]he test for determining whether a civil proceеding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy * * *. An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action * * * and which in any way impacts upon the handling and administration of the bаnkrupt estate.”
Dogpatch Properties, Inc. v. Dogpatch U.S.A., Inc. (In re Dogpatch U.S.A., Inc.),
ASC argues that the Court does not have “related to” jurisdiction over claims seven through twelve because on February 28, 2007, when the Moffitts filed this complaint, they had already completed their Chapter 13 plan, they had received their discharge in April
of
2006, and their bankruptcy casе had closed in June of 2006. The Moffitts argue that claims seven through twelve have a sufficient “nexus” to their Chapter 13 bankruptcy case to warrant this Court’s exercise of jurisdiction, and that the Court should retain jurisdiction over these claims. The Court acknowledges that it has an in depth knowledge of the facts concerning claims seven through twelve, and further recognizes that the costs to the parties of trying claims seven through twelve in another court, not to mention the time another court will have to invest in comprehending these facts and deciding the causes of action will be significant. But despite the logic and economy of this Court deciding claims seven through twelve, Eighth Circuit law limits “related to” jurisdiction to
We agree that the bankruptcy court did not have jurisdiction in the claim-objection proceeding under 28 U.S.C. §§ 157(b) or (c) (establishing core and non-core bankruptcy court jurisdiction), because (1) Mr. McAlpin’s challenge to the propriety of the claimed collection costs came after his discharge, so the claim could no longer have been against the estate, and thus did not involve a right created by bankruptcy law or arising only in bankruptcy, see Specialty Mills, Inc. v. Citizens State Bank,51 F.3d 770 , 773 (8th Cir.1995) (core proceedings); and (2) the claim-objection proceeding was not related to the bankruptcy, because at the time Mr. McAlpin objected to the claim there was no longer a plan to be confirmed, or an estate, and therefore the proceeding could not conceivably have affected his estate, see id. at 773-74 (non-core proceedings must have “conceivable effect” on administration of debtor’s estate); In re Fairfield Cmtys., Inc.,142 F.3d 1093 , 1095 (8th Cir.1998) (once bankruptcy debtor’s reorganization plan has been confirmed, debtor’s estate, and thus bankruptcy court’s jurisdiction, ceases to exist; bankruptcy court is not meant to protect parties with regard to post-confirmation matters). 6
In re McAlpin,
CONCLUSION
For the reasons stated herein, it is hereby
ORDERED that ASC’s Motion to Dismiss claims one through six will remain under advisement, and the Court will subsequently enter an Order detailing its decision on whether those claims adequately state a claim for relief under Fed.R.Civ.P. 12(b)(6); and it is further
ORDERED that claims seven through twelve of the Moffitts’ Amended Complaint are hereby DISMISSED for lack of subject matter jurisdiсtion without prejudice to the right of the Plaintiffs to assert those claims in another court of competent jurisdiction.
IT IS SO ORDERED.
Notes
. In accordance with the Trustee’s Final Report and Account, a total of $14,409.13 was paid on ASC's claim, which included the final disbursement of $9,581.57.
. ASC has asked the Court to take judicial notice as permitted by Fed.R.Evid. 201 of all pleadings, claims, and loan documents of record in the Moffitts' bankruptcy case. "Some materials that are part of the public record or do not contradict the complaint may be considered by a court in deciding a Rule 12(b)(6) motion to dismiss.”
State ex rel. Nixon v. Coeur D’Alene Tribe,
. The Court also finds it significant that a prior version of 11 U.S.C. § 502(j) specifically stated, “[bjefore a case is closed, a claim that has been allowed may be reconsidered for cause and in 1984, Congress redrafted § 502(j) to exclude the “[bjefore a case is closed” limitation. Section 502(j) has since been interpreted to allow reconsideration of a claim after a case has been closed and reopened.
See In re International Yacht and Tennis, Inc., 922
F.2d 659, 662 (11th Cir.1991) ("The effect of this change most likely is to permit reconsideration of claims once a case is reopened.”) (citing Collier
Bankruptcy
¶ 502.10, 502-106 (15th ed.1979, Rel. 24-11/87 Pub. 219); Advisory Committee Note to Bankruptcy Rule 3008 (1983);
In re Associated Air Services,
.
See also In re Singleton,
Very often, issues will arise after the case is closed, such as over the validity of a purported reaffirmation agreement, proposed 11 U.S.C. [§] 524(b), the existence of prohibited post-bankruptcy discrimination, proposed section 525, the validity of securities issued undеr a reorganization plan, and so on. The bankruptcy court will be able to hear these proceedings because they arise under title 11. H. Rep. No. 95-595, at 445 (1977), reprinted in 1978 U.S.C.C.A.N. 5963. With such extensive and uniform authority in support of the proposition, I also conclude that "[tjhe Bankruptcy Codecontemplates that various activities may occur after closing” and that the Court rеtains jurisdiction to adjudicate matters arising under title 11, even after the case is closed (and presumably, while the case remains closed).
.
Pacor
was overruled on other grounds by
Things Remembered, Inc. v. Petrarca,
.
Fairfield
was a Chapter 11 case. Courts routinely find they still have jurisdiction after confirmation of a Chapter 13 case.
See e.g., In re Watson,
. Although ASC urges the Court to interpret
McAlpin
as standing for the proposition that a bankruptcy court loses its "arising under”