R. DAVID PROCTOR, District Judge.
Before the court is Plaintiff's Motion for Withdrawal of Reference (Doc. 1-1), filed December 27, 2014. For the reasons discussed below, the court concludes that the motion is due to be granted.
This adversary proceeding arises from Plaintiff Veronica G. McGregor's allegations that Defendant Asset Acceptance, by and through counsel, made certain unlawful statements (i.e., false and misleading representations regarding a debt that was previously paid and discharged through Plaintiff's bankruptcy case) to Plaintiff's contemplated lender, Mutual Savings Credit Union, while Plaintiff and her husband were pursuing the purchase of a home. (Doc. 1-2, ¶ 2).
According to Plaintiff's Complaint, the representations of Defendant's attorneys' resulted in multiple violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. (Counts One through Four), and a discharge violation under 11 U.S.C. § 1328(a) (Count Five). (Doc. 1-2, at ¶¶ 1, 48-69). Plaintiff demanded a jury trial. (Doc. 1-1, at 2). On January 26, 2015, Plaintiff filed a Motion for Withdrawal of Reference. (Doc. 1). The Motion has been fully briefed and is ripe for decision. (Docs. 2, 3).
Plaintiff requests the court to withdraw the reference with respect to this adversary proceeding for three reasons: (1) resolution of this matter will require the court to substantially and materially consider the FDCPA; (2) discharge allegations arises out of the same facts and circumstances as those forming the basis of the alleged FDCPA violations; and (3) Plaintiff has demanded a jury trial. (See Doc. 1-1, ¶¶ 2-4).
District courts possess "original and exclusive jurisdiction of all cases under title 11" of the Bankruptcy Code. 28 U.S.C. § 1334(a). District courts are permitted, however, to refer all cases to the bankruptcy court to the extent that they arise under, arise in, or relate to a case under Title 11. Id. at § 157(a). This court has entered such a general order of reference. See United States v. ILCO, Inc., 48 B.R. 1016, 1020 (N.D. Ala. 1985). The reference that applies to this Chapter 13 case, however, is not absolute. Title 28 U.S.C. § 157(d) provides for the withdrawal of the reference under limited circumstances, either as a mandatory matter or as a permissive matter. The court addresses each theory in turn, and for the reasons outlined below, the court agrees that withdrawal of the reference here is appropriate.
Plaintiff argues that the court is required to withdraw the reference in this proceeding because resolution of Plaintiff's FDCPA claims involves substantial and material consideration of federal non-Bankruptcy Code law.
Mandatory withdrawal by a district court is required "if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce." 28 U.S.C. § 157(d). Some courts, citing the statute's plain language, have held that withdrawal is required if any consideration of a non-Title 11 federal law is necessary to resolve a dispute. See, e.g., In re Kiefer, 276 B.R. 196, 199 (E.D. Mich. 2002). However, district courts within the Eleventh Circuit have found that "withdrawal should be granted only if the current proceeding could not be resolved without substantial and material consideration of the non-Code federal law." See, e.g., Birgans v. Magnolia Auto Sales, Case No. 5:12-mc-03830-CLS, 2012 WL 6000339, *2 (N.D. Ala. Nov. 30, 2012) (citation omitted); In re Price, Case No. 2:06-mc-3317-MHT, 2007 WL 2332536, at *2 (M.D. Ala. Aug. 13, 2007); Abrahams v. Phil-Con Servs., LLC, Case No. 2:10-cv-00326-WS-N, 2010 WL 4875581, *2 (S.D. Ala. Nov. 23, 2010). Under this approach, in order for withdrawal to be warranted, "the issues in question [must] require more than the mere application of well-settled or `hornbook' non-bankruptcy law; significant interpretation of the non-Code statute must be required." Abrahams, 2010 WL 4875581, at *2 (citation omitted). This court, in line with other courts in this circuit, will follow this principal in addressing each of Plaintiff's arguments.
It is beyond dispute that the FDCPA is a non-title 11 federal law which affects interstate commerce. 15 U.S.C. § 1692a(6). Therefore, whether withdrawal is required turns on whether substantial and material consideration of the FDCPA is necessary to resolve the dispute.
Although the resolution of Plaintiff's FDCPA claims undoubtedly involves the resolution of various state and bankruptcy law issues,
The court has no trouble concluding that this issue extends beyond the application of well-settled, non-bankruptcy law. Resolution of the ultimate issue requires significant interpretation of the FDCPA. That is, the court must consider whether a defendant's communications with a third party may be actionable under 15 U.S.C. § 1692e. (See Doc. 3, at 3-4). If Defendant's representations to Mutual Savings Credit Union are not actionable, Plaintiff has no basis for her FDCPA claims. On this question, Plaintiff points to the unsettled nature of whether the FDCPA requires misrepresentations be made directly to the debtor, argues that there are no controlling decisions,
It would be, of course, improper for this court to weigh in on the merits of this circuit split here; rather, the court merely recognizes that (1) the split exists, (2) the Eleventh Circuit has not yet weighed in on the question, and (3) the answer to the question is most likely dispositive of the relevant claims asserted here. Therefore, because this proceeding will likely require a substantial and material consideration of the FDCPA, the court must withdraw the reference.
Even if withdrawal is not required as to any of Plaintiff's claims, the court concludes it should exercise its discretion to permissively withdraw all five counts of Plaintiff's Complaint.
Plaintiff has demonstrated sufficient cause to withdraw each count of Plaintiff's Complaint. As discussed in more detail above, Plaintiff's FDCPA claims are indisputably non-core, and it is at least arguable that the court will be required to interpret a non-Code statute in deciding those claims. To the extent that this court will decide Plaintiff's FDCPA claims, with respect to the discharge violation claim, judicial economy favors not severing Plaintiff's Complaint. (See Doc. 2, at 3 ("All five of [Plaintiff's] claims are based upon the same conduct. . . .")). In addition, it is in the interest of all parties for the court to take up Plaintiff's allegation regarding discharge violations in order to provide uniform rulings and prevent the needless confusion and delay that would likely result from separate proceedings. Plaintiff's bankruptcy estate is closed. Allowing the bankruptcy court to hear Plaintiff's claims would do little, if anything, to facilitate the bankruptcy process. Finally, Plaintiff has made a jury demand (Doc. 1-1, at ¶ 2), which also counsels in favor of withdrawal. Although no single factor applied here is dispositive, taken together, all the factors weigh in favor of the court permitting withdrawal. Therefore, having determined that Plaintiff has presented sufficient cause, the court concludes that it should exercise its discretion and withdraw all five counts of Plaintiff's Complaint. (Doc. 1-2).
For the reasons stated above, Plaintiff's Motion to Withdraw the Reference (Doc. 1) is due to be granted.
A separate order will be entered.
According to Defendant, it necessarily follows that, in order to assess the merits of Plaintiff's claims, the court must: (1) determine whether Defendant's judgment lien could have attached to any of Plaintiff's property prior to the filing of her issue of bankruptcy petition, and, if so, which class of creditors could claim interest; and (2) analyze Alabama law on the attachment and existence of judgment liens. (Doc. 2, at 5).
In Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355 (6th Cir. 2012), a borrower and her husband brought an FDCPA action alleging that a mortgage lender, its purported assignee, and loan servicer improperly failed to acknowledge payments and engaged in improper collection practices. Id. at 355. The Sixth Circuit held that allegations that the defendant debt collectors "impermissibly communicated with third parties concerning [the plaintiff's] asserted outstanding debt, . . . and that [the defendants] have falsely reported the amount of debt [that plaintiff and her husband] owe (or don't owe) to the credit reporting agencies and to other parties" was sufficient to state a plausible claim for relief under sections 1692c and 1692e. Id. at 363.
Contrary to the decision in Bridge, in Kropelnicki v. Siegal, 290 F.3d 118, 130 (2d Cir. 2002), the Second Circuit held that a plaintiff could not sustain a cause of action under the FDCPA based on a communication that was not directed at the debtor. Id. at 123. In Kropelnicki, debt collectors sought repayment on an unpaid balance due on a credit card held by the plaintiff's daughter, and on which the plaintiff was liable as a "supplemental cardholder." Id. at 123. During the debt collection, the defendants sent a letter addressed to plaintiff's daughter, who lived at plaintiff's house, informing the daughter that a judgment had been entered against her (the daughter) on the outstanding debt. Id. at 124. Subsequently, the plaintiff attempted to assert a claim under § 1692e, alleging that defendants' letter contained "false, deceptive or misleading representations made in connection with the collection of [their] debt." Id. at 129-30. The Second Circuit concluded that "[i]n order to make out this claim, [the plaintiff] must first show that the letter was a communication to her. This she cannot do because the letter was only addressed to [plaintiff's daughter], and was therefore not a communication with [the plaintiff] at all." Id. at 130; see also Schuh v. Druckman & Sinel, LLP, 751 F.Supp.2d 542, 548 (S.D.N.Y. 2010) (stating "a plaintiff cannot prevail in a claim under the FDCPA merely by showing that the communication from the debt collector conveying information about a debt was transmitted to just anybody. Rather, the plaintiff `must first show that the [communication] was a communication . . . to the debtor herself.'" (quoting Kropelnicki, 290 F.3d at 548)).
Similarly, O'Rourke v. Palisades Acquisition XVI, LLC, 635 F.3d 938, 941-42 (7th Cir. 2011), the Seventh Circuit held that a plaintiff could not sustain a § 1692e cause of action against a debt collector based on a third-party communication. Id. at 943-44. In O'Rourke, the plaintiff attempted to base a FDCPA claim on an allegedly false statement made by the defendant debt collector to a state court judge. Id. at 940-41. The dispute began when defendant debt collector brought a state court action to collect on an unpaid credit card balance. Id. at 939. Attached to defendants' state court complaint was an exhibit that closely resembled a credit card statement listing the balance the plaintiff owed and placing the defendant in the place of the issuer. Id. at 939. The plaintiff sued in federal court claiming that the attachment violated the FDCPA, 15 U.S.C. § 1692e(2), (10). See id. at 939, 941. Atypically, the plaintiff claimed that the attachment was actionable because it was meant to mislead the state court judge. Id. at 939. The Seventh Circuit engaged in a substantial interpretation of the FDCPA, concluding in relevant part:
O'Rourke, 635 F.3d at 943-44 (internal footnotes and citations omitted).
Finally, the Eighth Circuit has also spoken plainly to the issue. "The weight of authority applying section 1692e does so in the context of a debt collector making a false, deceptive, or misleading representation to the plaintiff." Volden v. Innovative Fin. Sys., Inc., 440 F.3d 947, 954 (8th Cir. 2006) (emphasis in the original) (the false statements at issue were not made to the consumer but between a check guarantee company and a returned-check processor); see also Hemmingsen v. Messerli & Kramer, P.A., 674 F.3d 814, 818 (8th Cir. 2012). Although neither the Second, Sixth, Seventh, or Eighth Circuits have spoken directly to the factual circumstance presented here, their case law reflects different interpretations of the FDCPA.
