NELSON S. ROMAN, United States District Judge.
Credit One ("Defendant") submits the current motion seeking leave to appeal the United States Bankruptcy Court for the Southern District of New York's (the "Bankruptcy Court") order of May 14, 2015 (the "May Order") (ECF No. 3, Exhibit A), denying Defendant's motion to strike class allegations and motion to dismiss for lack of subject matter jurisdiction. In the May Order, the Bankruptcy Court additionally denied Credit One's motion to compel arbitration, and Credit One has appealed that decision as of right. For the reasons set forth below, the motion for leave to appeal the additional issues is DENIED.
Plaintiff Orrin Anderson ("Plaintiff") incurred a debt with Defendant Credit One by opening a credit card account in 2002. In 2011, Plaintiff defaulted on the account, and the account was closed in December 2011. Plaintiff filed a voluntary bankruptcy with the Bankruptcy Court on January 31, 2014. As a result of the bankruptcy proceedings, Mr. Anderson received a discharge of consumer debt, including the Credit One account. Despite the discharge, the debt remained on Mr. Anderson's credit report as "charged off" (i.e., not discharged in bankruptcy). Plaintiff subsequently contacted Defendant to notify it that the debt had been discharged in bankruptcy and to request that Defendant update his credit report. According to Plaintiff, Defendant took no action and Plaintiff's credit report continues to show the debt as charged off rather than discharged in bankruptcy.
On October 17, 2014, Plaintiff moved to reopen the bankruptcy proceeding and after a hearing, the Bankruptcy Court reopened the case to "permit the Debtor to commence and pursue an adversary proceeding. . . against Credit One Bank with respect to alleged violations of the Debtor's discharge injunction." (Bank. Doc. 14-22147-rdd, ECF No. 26.) Thereafter, Plaintiff filed an Amended Class Action Complaint (the "Class Action Complaint"), seeking to represent a class of persons having credit reports with remaining entries for discharged debts. In the Class Action Complaint, Plaintiff asserts a cause of action pursuant to 11 U.S.C. § 524 ("§ 524") and 11 U.S.C. § 105 ("§ 105"). Under § 524, a discharge in a bankruptcy action acts as an injunction against all efforts to collect a discharged debt. 11
On March 3, 2015, Credit One filed a combined motion to compel arbitration, motion to strike class allegations, and motion to dismiss for lack of subject matter jurisdiction. The Bankruptcy Court held a hearing on May 5, 2015 (the "May Hearing") and denied Defendant's motions. Credit One appealed, as of right, the denial to compel arbitration. Credit One additionally seeks leave to appeal the denials to strike class allegations and dismiss for lack of subject matter jurisdiction.
Under the doctrine of pendent appellate jurisdiction, a court may, in its discretion, consider nonappealable issues in a case once it has taken jurisdiction over a related issue. See San Filippo v. U.S. Trust Co. of N.Y., 737 F.2d 246, 255 (2d Cir.1984) ("[U]nder the doctrine of pendent appellate jurisdiction, once we have taken jurisdiction over one issue in a case, we may, in our discretion, consider other nonappealable issues in the case as well. . . ."). The Supreme Court has cautioned, however, that "a rule loosely allowing pendent appellate jurisdiction would encourage parties to parlay [appealable] collateral orders into multi-issue interlocutory appeal tickets." See Swint v. Chambers County Comm'n, 514 U.S. 35, 49, 115 S.Ct. 1203, 131 L.Ed.2d 60 (1995). Therefore, a careful exercise of discretion is required in granting pendent jurisdiction.
The Second Circuit has held that an exercise of pendent appellate jurisdiction is appropriate only "over an independent but related question that is `inextricably intertwined' with the [appealable issue] or is `necessary to ensure meaningful review' of that issue." Kaluczky v. City of White Plains, 57 F.3d 202, 207 (2d Cir. 1995) (quoting Swint, 514 U.S. at 51, 115 S.Ct. 1203). A question is "inextricably intertwined" where there is "sufficient overlap in the factors relevant to the appealable and nonappealable issues to warrant our exercising plenary authority over the appeal." Kaluczky, 57 F.3d at 207 (internal citation omitted). In other words, "issues usually will not be considered inextricably intertwined where review of the unappealable issue is `not necessary for review of the issue over which we have appellate jurisdiction.'" Lamar Advert. of Penn, LLC v. Town of Orchard Park, New York, 356 F.3d 365, 372 (2d Cir.2004) (citing Rein v. Socialist People's Libyan Arab Jamahiriya, 162 F.3d 748, 759 (2d Cir. 1998)). See also Swint, 514 U.S. at 50-51, 115 S.Ct. 1203 (suggesting courts may exercise pendent jurisdiction where an issue is "inextricably intertwined" with an issue over which the court properly has appellate jurisdiction, or where review of a jurisdictionally insufficient issue is "necessary to ensure meaningful review" of a jurisdictionally sufficient one); Davidson v. Chestnut, 193 F.3d 144, 151 (2d Cir. 1999) (refusing to assert jurisdiction over plaintiff's cross-appeal where "[n]one of [the cross-appealed] issues overlaps with" the issues on direct appeal). Therefore, where a court can consider and decide the appealable issue without addressing or considering the nonappealable issue(s), an exercise of pendent appellate jurisdiction is not warranted. Rein, 162 F.3d at 759 (finding, inter alia, issues of subject matter jurisdiction and personal jurisdiction not inextricably intertwined where court can resolve the former "without at all considering" the latter).
Under 28 U.S.C. § 158(a)(3), "with leave of the court," district courts have jurisdiction to hear appeals from "interlocutory orders and decrees" of the bankruptcy courts. 28 U.S.C. § 158(a)(3). To determine whether leave to appeal should be granted, district courts apply the standards prescribed in 28 U.S.C. § 1292(b). See In re Kassover, 343 F.3d 91 (2d Cir.2003); In re Enron Corp., No. 01-16034, 2006 WL 2548592, at *3 (S.D.N.Y. Sept. 5, 2006). A court may certify for interlocutory appeal an order that involves (1) a controlling question of law (2) as to which there is a substantial ground for difference of opinion and (3) that an immediate appeal from which may materially advance the ultimate termination of the litigation. 28 U.S.C. § 1292(b). The moving party has the burden of establishing all three elements. See Casey v. Long Island R.R., 406 F.3d 142, 146 (2d Cir.2005). The conditions create a significant hurdle to § 1292(b) certification, "since `the power [to grant an interlocutory appeal] must be strictly limited to the precise conditions stated in the law.'" Klinghoffer v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21, 25 (2d Cir.1990) (citing Gottesman v. General Motors Corp., 268 F.2d 194, 196 (2d Cir.1959)). Even when the statutory criteria are met, "[d]istrict court judges have broad discretion to deny certification." Century Pac., Inc. v. Hilton Hotels Corp., 574 F.Supp.2d 369, 370-71 (S.D.N.Y.2008) (quoting SPL Shipping Ltd. v. Gujarat Cheminex Ltd., No. 06-CV-15375 (KMK), 2007 WL 1119753, at *1 (S.D.N.Y. Apr. 12, 2007) (quoting Nat'l Asbestos Workers Med. Fund v. Philip Morris, Inc., 71 F.Supp.2d 139, 166 (E.D.N.Y.1999) (stating that the authority to deny certification, even where the three statutory criteria are met, is "independent" and "unreviewable") (internal citation omitted)).
Moreover, interlocutory appeals are strongly disfavored in federal practice. In re Ambac Fin. Grp., Inc. Sec. Litig., 693 F.Supp.2d 241, 282 (S.D.N.Y.2010). Movants cannot invoke the appellate process "as a vehicle to provide early review of difficult rulings in hard cases." In re Levine, No. 94-44257, 2004 WL 764709, at *2 (S.D.N.Y. Apr. 9, 2004) (internal citations omitted).
For these reasons, and because a basic tenet of federal law is to delay appellate review until a final judgment, § 1292(b) certification should be "rare." Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir.1996). Certification should be reserved for "exceptional" cases, for example, where an immediate appeal would avoid protracted litigation. Id. at 865-66. See also In re Facebook, Inc., IPO Sec. & Derivative Litig., 986 F.Supp.2d 524, 529-30 (S.D.N.Y.2014) (quoting McNeil v. Aguilos, 820 F.Supp. 77, 79 (S.D.N.Y.1993) (Sotomayor, J.) ("[O]nly exceptional circumstances [will] justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.").
Credit One has appealed as of right the Bankruptcy Court's decision denying Credit One's motion to compel arbitration. In refusing to compel arbitration, the Bankruptcy Court decided that the case necessarily raised core issues under the Bankruptcy Code and forcing those issues to be arbitrated inherently conflicts with the Bankruptcy Code. Those decisions are before this Court as of right on appeal.
On this motion, Credit One additionally asks the Court to examine the following issues (the "Proposed Issues"):
In order to hear these issues, the Court must either exercise pendent appellate jurisdiction or grant interlocutory appeal.
The Court may properly exercise pendent appellate jurisdiction over the Proposed Issues above if they are "inextricably intertwined" with the issue of whether the Bankruptcy Court should have compelled arbitration. In deciding whether to compel arbitration — the issue before this Court as of right — "a court must consider (1) whether the parties have entered into a valid agreement to arbitrate, and, if so, (2) whether the dispute at issue comes within the scope of the arbitration agreement." In re Am. Express Fin. Advisors Secs. Litig., 672 F.3d 113, 128 (2d Cir.2011). In the instant case, where the claims arise under a federal statute, "the Court must also determine whether Congress intended such federal statutory claims to be arbitrated, and whether arbitration would prevent the effective vindication of the federal statutory right." In re Belton, No. 15 CV 1934 VB, 2015 WL 6163083, at *3 (S.D.N.Y. Oct. 14, 2015) motion to certify appeal denied, No. 15 CV 1934(VB), 2016 WL 164620 (S.D.N.Y. Jan. 12, 2016) (citing Am. Express Co. v. Italian Colors Rest., ___ U.S. ___, 133 S.Ct. 2304, 2309-10, 186 L.Ed.2d 417 (2013) (internal quotation marks omitted)). If this analysis would require the Court to examine any of the other three Proposed Issues in order "to ensure meaningful review" of arbitrability, the Court may — in its discretion — exercise pendent appellate jurisdiction.
Credit One contends that the denial of the motion to strike class allegations is inextricably intertwined with the denial of the motion to compel arbitration because both issues require the Court to examine "the validity, enforceability and effect of the parties' agreement to arbitrate," and the arbitration clause and class action waiver clause should be "construed together as promoting the aims of arbitration." (Credit One Bank, N.A.'s Motion for Leave to Appeal, ECF No. 3, at 6.) Credit One, however, misinterprets the standard of pendent appellate review. Though both questions may require the Court to examine the parties' agreement to arbitrate, the Court can fully assess the validity and applicability of the arbitration agreement — according to the standard outlined above — without ever reaching the issue of the class action waiver. The main inquiry, as evidenced by the May Order and May Hearing, will not focus on the agreement itself but rather requires this Court to determine whether Congress intended to preclude arbitration of § 524 claims. (Hearing Transcript, ECF No. 3, Exhibit B, at 49-51.) See also In re Belton, 2015 WL 6163083, at *4. This federal preclusion inquiry is not at all dependent on the enforceability of the class action waiver in the arbitration agreement. Therefore, review of the "consolidation or joinder of parties" clause is not "necessary to ensure meaningful review" of arbitrability, and the Court will not grant pendent jurisdiction over the issue of a class action waiver.
Determining whether the Bankruptcy Court has subject matter jurisdiction to hear a nationwide class action would require the Court to analyze a number of factors. In federal court, 28 U.S.C. Section 1334(b) is the source of bankruptcy jurisdiction generally, granting it to the district courts and then, by the General Order of Reference, referring it pursuant to 28 U.S.C. Section 157(a)-(b) to the bankruptcy judges. Section 157(b)(1) provides that bankruptcy judges "may hear and determine . . . all core proceedings arising under title 11." See In re Haynes, No. 11-23212(RDD), 2014 WL 3608891, at *7 (Bankr.S.D.N.Y. July 22, 2014). Therefore, in deciding whether subject matter jurisdiction exists, the Court would have to examine whether or not the case presents a core bankruptcy issue, which does overlap with the analysis of arbitrability inasmuch as the Court will likely inquire into the nature of the issues (core or noncore) in deciding whether or not Congress intended such federal statutory claims to be arbitrated. This common thread, however, is where the overlap ends. The nationwide class action inquiry would also require the Court to examine (1) cases holding that "only the court issuing an injunction should have the power to enforce that injunction," (2) whether a private right of action is created under § 524 through the court's general contempt power and the power granted in § 105 of the Bankruptcy Code, and (3) the differences, if any, between the All Writs Act and § 105(a). Id. In light of these additional, distinct inquiries, it cannot be said that there is "sufficient overlap in the factors relevant to" the issue of arbitrability and the issue of subject matter jurisdiction to entertain a nationwide class action lawsuit. Kaluczky, 57 F.3d at 207. Therefore, the Court will not grant pendent supplemental jurisdiction over the nationwide class action issue.
Finally, whether the Bankruptcy Court has subject matter jurisdiction to award injunctive relief or punitive damages is wholly unrelated to arbitrability. In its brief, Credit One has not provided any argument as to how these two issues may be intertwined. The Court fails to see how an examination of the types of relief a bankruptcy court can offer is at all similar to congressional intent regarding preclusion of arbitration. In any event, during the May Hearing, the Bankruptcy Court declined to decide whether punitive damages are appropriate under the civil and criminal contempt power of the court, making the issue unripe for appeal.
For the foregoing reasons, the Court will not exercise pendent appellate jurisdiction over the proposed issues.
As noted above, the Court may certify for interlocutory appeal an issue that involves (1) a controlling question of law (2) as to which there is a substantial ground for difference of opinion and (3) that an immediate appeal from which may materially advance the ultimate termination of the litigation. 28 U.S.C. § 1292(b). However, interlocutory appeals are strongly disfavored in federal practice and should only be granted rarely. In re Ambac Fin. Grp., Inc. Sec. Litig., 693 F.Supp.2d at 282; Koehler, 101 F.3d at 865.
Credit One urges the Court to certify for appeal the question of whether the waiver contained in the arbitration provision of the cardholder agreement is enforceable as a class action waiver in federal court. The waiver reads, "[n]otwithstanding
The remaining issues in Credit One's motion — the question of subject matter jurisdiction to entertain a nationwide, putative class action and to award injunctive and/or punitive relief — present the Court with three questions it would have to decide on appeal: (1) whether a private right of action exists, or is even necessary, under § 524 for violations of a discharge injunction; (2) whether bankruptcy courts can enforce discharge orders entered by other bankruptcy courts; and (3) whether the bankruptcy court can award punitive and/or injunctive relief.
With regards to question (3), it is clear that the Bankruptcy Court has not ruled on the issue and has reserved judgment until further briefing and relevant facts are presented. (Hearing Transcript, ECF No. 3, Exhibit B, at 64.) Therefore, the issue is not ripe for appeal, and the Court will not grant interlocutory appeal as to the damages question. Even assuming, arguendo, that the issue was ripe for appeal, its resolution would not "advance the time for trial or . . . shorten the time required for trial." Plaintiff is also seeking compensatory damages based on the § 524 claims, so the trial will proceed with the same claims and the same breadth of discovery and motion practice whether or not punitive and/or injunctive relief is permitted. Therefore, the appeal would not materially advance the termination of the litigation. Transport Workers Union, Local 100, AFL-CIO v. New York City Transit Auth., 358 F.Supp.2d 347, 350 (S.D.N.Y. 2005).
Questions (1) and (2), on the other hand, involve controlling questions of law that could materially affect the outcome of the litigation. If the Court were to decide that Plaintiff does not have a private right of action under § 524 and cannot, alternatively, seek relief pursuant to § 105, the litigation would terminate. "Although the resolution of an issue need
A substantial ground for difference of opinion exists where "(1) there is conflicting authority on the issue, or (2) the issue is particularly difficult and of first impression for the Second Circuit." Capitol Records, LLC v. Vimeo, LLC, 972 F.Supp.2d 537, 551 (S.D.N.Y.2013). Mere conjecture that courts would disagree on the issue or that the court was incorrect in its holding is not enough; "[f]or there to be a `substantial ground for difference of opinion' under the law, 28 U.S.C. § 1292(b), there must be `substantial doubt' that the district court's order was correct." SPL Shipping Ltd. v. Gujarat Cheminex Ltd., No. 06-CV-15375KMK, 2007 WL 1119753, at *2 (S.D.N.Y. Apr. 12, 2007) (quoting N.F.L. Ins. v. B & B Holdings, No. 91 Civ. 8580(PKL), 1993 WL 255101, at *2 (S.D.N.Y. July 1, 1993) (in turn quoting S.Rep. No. 85-2434, at 3 (1958), reprinted in 1958 U.S.C.C.A.N. 5255, 5257)). The possibility of a different outcome on appeal is not sufficient to show a substantial ground for difference of opinion, nor is "the mere presence of a disputed issue that is a question of first impression." In re Flor, 79 F.3d 281, 284 (2d Cir.1996).
The Court cannot find that substantial conflicting authority exists as to question (1): whether a private right of action exists or is necessary to enforce a § 524 injunction. In support of its argument that a difference of opinion does exist, Credit One contends that courts have consistently held that there is no private right of action for violation of the discharge injunction. (Credit One Bank, N.A.'s Motion for Leave to Appeal, ECF No. 3, at 13.) Credit One cites a number of cases for this assertion. (Id.) While these cases generally support the proposition that § 524 does not create a private right of action in itself, the cases additionally acknowledge the right of a bankruptcy court to enforce an existing injunction pursuant to § 105. In other words, though § 524 does not create a private right of action properly pursued through a lawsuit in District Court, the contempt power of the bankruptcy court provides a basis for such proceedings. See Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 421 (6th Cir.2000) (where plaintiffs sought to bring an action in district court for violation of an automatic stay provision, the Court held that "the traditional remedy for violation of an injunction lies in contempt proceedings, not in a lawsuit such as this one"). For example, in Barrientos v. Wells Fargo Bank, N.A, the Ninth Circuit explained that while no private right of action for
The Bankruptcy Court is correct, therefore, that the argument "there's no private right of action under 524 is essentially a red herring," because bankruptcy courts can invoke § 105 to enforce a discharge injunction. See Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 506-07 (9th Cir.2002) (agreeing with the First Circuit that § 105 powers "inherently include the ability to sanction a party" and "bankruptcy court is authorized to invoke § 105 to enforce the discharge injunction and order damages for the debtor if appropriate on the merits.") (emphasis added). This is especially so where the Second Circuit has acknowledged that "[w]here . . . a debtor thinks a creditor is acting in violation of a bankruptcy court's § 524 discharge order, relief is properly sought in the first instance from the bankruptcy court rather than in the district court, which only has appellate jurisdiction over bankruptcy cases." Yaghobi v. Robinson, 145 Fed. Appx. 697, 699 (2d Cir.2005) (internal citations and quotation marks omitted). The Second Circuit in Yaghobi explained that the claim is brought pursuant to § 105, and the Court therefore did not need to "reach the question of whether he may assert a private right of action under § 524."
The only question, then, is whether a substantial grounds for difference of opinion exists as to whether the bankruptcy court may enforce the injunction through an adversary proceeding rather than a contested matter brought via motion. The Court agrees with the Bankruptcy Court that a careful reading of
Thus, the Court cannot find that any substantial ground for dispute exists as to whether Plaintiff has a right of action or can proceed via an adversary proceeding. See In re Flor, 79 F.3d 281, 284 (2d Cir. 1996) (internal citations omitted) (emphasis in original) ("It is the duty of the district judge . . . to analyze the strength of the arguments in opposition to the challenged ruling when deciding whether the issue for appeal is truly one on which there is a substantial ground for dispute").
Finally, the Court additionally does not find a substantial ground for difference of opinion exists as to whether bankruptcy courts can enforce discharge orders entered by other bankruptcy courts (question (3)). Though Credit One does raise a difference of opinion among courts as to whether enforcement of an injunction is limited to the "issuing court," the difference does not rise to a level of substantiality that creates the exceptional circumstances required to certify for appeal. For its assertion that a bankruptcy court can only enforce its own discharge orders, Credit One largely relies on statements in dicta and statements regarding enforcement of injunctions generally.
For the foregoing reasons, the Court DENIES Credit One's motion for leave to appeal the Bankruptcy Court's order denying its motion to strike class allegations and dismiss for lack of subject matter jurisdiction.
SO ORDERED.