WENDY L. HAGENAU, Bankruptcy Judge.
On October 1, 2019, Danitta-Ross a.k.a. Danitta-Ross: Morton, purportedly on behalf of HRN Group, LLC ("HRN"), filed the complaint against Aldridge Pite, LLP ("AP") and others. AP filed the Motion seeking dismissal of the complaint because Plaintiff is not represented by counsel, the Court does not have subject matter jurisdiction, the complaint is an improper "shotgun pleading" under Fed. R. Bankr. P. 7008, and the complaint fails to state a claim upon which relief can be granted in accordance with Rule 7012 of the Federal Rules of Bankruptcy Procedure, which incorporates Rule 12(b)(6) of the Federal Rules of Civil Procedure. On December 2, 2019, Plaintiff filed an untimely response to the Motion (Doc. No. 35), to which AP filed a reply.
HRN filed a voluntary petition under Chapter 7 of the Bankruptcy Code on August 7, 2018. AP, on behalf of Wells Fargo Bank N.A., as trustee, filed a motion for relief from the stay to initiate and conclude a dispossessory proceeding on real property located at 4596 Meadow Creek Path, Lithonia, Georgia on which Wells Fargo had foreclosed in 2016 pre-petition ("Wells Fargo MFR") (Doc. No. 13). On September 27, 2018, the Wells Fargo MFR came before the Court for hearing. The Court noted the foreclosure had already occurred and the matter to be resolved was possession of the property, the Trustee had no objection to the lifting of the stay, and litigation between the parties should continue in state court. The Court therefore granted the Wells Fargo MFR. No appeal was taken.
On September 26, 2019, AP, on behalf of Wilmington Savings Fund Society FSB, as trustee ("Wilmington"), filed a motion for relief from stay with respect to the property located at 6236 Katelyn Park, Lithonia, Georgia 30058 ("Wilmington MFR") (Doc. No. 76). The motion alleged that 126 payments on the loan secured by the property were missed. A hearing was scheduled on this motion for October 17, 2019. The day of the hearing, Ms. Morton, allegedly on behalf of the Debtor, filed an Affidavit of Opposition to Motion for Relief from Automatic Stay (Doc. No. 80) in which she contended Wilmington was not the true holder of the note and security deed and should not be permitted relief from the stay. At the hearing on October 17, 2019, Ms. Morton contended again that Wilmington was not the holder of the note authorized to foreclose. After hearing argument from counsel and from Ms. Morton, the Court found that Wilmington had established a colorable claim for relief and granted the Wilmington MFR. An appeal has been taken from this order.
Liberally construed, the complaint challenges the right of various creditors and AP to seek relief from the stay and foreclose, alleging fraudulent actions. Plaintiff asks the Court to reverse its prior orders granting the Wells Fargo MFR (Count 1) and the Wilmington MFR (Count 3), and seeks injunctions against the disposition of several properties, including 4596 Meadow Creek Path and 6236 Katelyn Park, on the basis the security deeds against the properties are fraudulent and the creditors lack standing to seek relief as to the properties. Plaintiff also seeks in its general conclusion an order requiring all credit reporting agencies to correct all negative information regarding the properties.
AP seeks dismissal of the complaint because the Plaintiff is not an individual and does not have counsel. It is well established in the Eleventh Circuit that a corporation may not appear in federal court without an attorney.
HRN Group, LLC is a different entity from Ms. Morton, and it must have representation in order to participate in court proceedings. The Court has informed Ms. Morton of this numerous times. On September 25, 2018, the Court entered an Order to show cause why the case should not be dismissed, directing the Debtor to retain counsel or appear before the Court on October 4, 2018, to explain the lack of counsel. In that notice, the Court cited to numerous Eleventh Circuit cases requiring a corporation to appear through an attorney. Ms. Morton appeared at a hearing on September 27, 2018. The Court informed her that since the Debtor was a corporation, it needed an attorney in order to participate in any court proceedings. Nevertheless, the Court allowed her to speak that day with the admonition that the Debtor must retain counsel for any future hearings and that Ms. Morton would not be allowed to speak on behalf of the corporate Debtor. Ms. Morton argued the Debtor was a limited liability company and not a corporation and that the Debtor need not obtain counsel. The Court disagreed with her position. At the Show Cause hearing on October 4, the Debtor did not appear with counsel. Instead, Ms. Morton again appeared and stated her contention that a limited liability company was not a corporation and the Debtor was not required to obtain counsel. The Court reiterated that counsel was required, citing several Eleventh Circuit and other court decisions to that effect. Nevertheless, the Court gave the Debtor until October 24, 2018 to obtain counsel. On October 24, 2018, Kim King appeared as counsel on behalf of the Debtor.
On March 1, 2019, Ms. King filed a motion to withdraw as attorney of record for the Debtor. The motion to withdraw omitted several items required under the local bankruptcy rules, and it was not immediately granted. At the hearing on March 7, 2019, Ms. King appeared to explain to the Court that she had requested to withdraw. On September 26, 2019, Ms. King appeared at a hearing and reiterated her need to withdraw as counsel for the Debtor. Ms. Morton, as the sole member of the Debtor, agreed that Ms. King could withdraw, and the Court permitted her withdrawal at that time. The Court reminded Ms. Morton of the earlier hearings and rulings requiring the Debtor to obtain counsel in order to participate in Court hearings. Nevertheless, the Debtor has not retained counsel and Ms. Morton continues to file documents on her own allegedly on behalf of the Debtor. Because the Debtor does not have counsel in this adversary proceeding, it cannot participate and dismissal is appropriate.
AP alternatively seeks dismissal of the complaint for failing to comply with Fed. R. Civ. P. 8, made applicable to this case by Fed. R. Bankr. 7008, for failing to satisfy basic pleading standards. Rule 8 of the Federal Rules of Civil Procedure provides that "each allegation must be simple, concise, and direct." Fed. R. Civ. P. 8(d)(1). A complaint must include more than "`naked assertion[s]' devoid of `further factual enhancement.'"
The complaint fails to satisfy the requirements of Rule 8. In fact, it fails to make a discernable claim against AP. AP is not a lender or servicer; it is a law firm that represented the moving creditor. The complaint does not include a clear recitation of claims and asserts that multiple parties committed certain acts without identifying which party engaged in what conduct specifically. The complaint is full of conclusory, vague, and immaterial facts, and merely mentions AP in reference to the Wells Fargo MFR and the Wilmington MFR. The "conclusion" of the complaint cites a number of statutes which the respondents are alleged to have violated.
The allegations are in the nature of a shotgun pleading and do not adequately plead a claim against AP. A shotgun pleading fails in one way or another to give the defendants adequate notice of the claims against them and the grounds upon which each claim rests.
Although Plaintiff is proceeding in this action pro se, that does not relieve it of the requirement of drafting a well-pleaded complaint. While courts typically afford pro se plaintiffs more latitude with regard to pleading standards, "[e]ven a pro se litigant is required to comply with the rules of procedure."
AP alternatively seeks dismissal of the Complaint pursuant to of Fed. R. Civ. P. 12(b)(6) for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.
While the plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully,"
With these pleading standards in mind, the complaint falls short of plausibly demonstrating AP's alleged liability. Plaintiff seems to contend the Wells Fargo MFR and Wilmington MFR should not have been granted because the movants lacked standing. The Court's granting of the Wells Fargo MFR and Wilmington MFR was not a finding on the validity of the arguments of the parties on the underlying issue. The purpose of a relief from stay proceeding is simply to determine "whether a creditor has a colorable claim to property of the estate."
The Court found Wells Fargo and Wilmington established a colorable claim for relief. The Court's ruling did not determine that HRN has no defense or deprive HRN or Ms. Morton of any right to contest in another court the authority of the moving parties to conduct the foreclosure or dispossessory action. The Court simply ruled that the bankruptcy estate has no further interest in the property or the outcome of the dispute, and the dispute was best left to other courts to resolve. No appeal was taken from the Wells Fargo MFR. The complaint pleads no basis for relief as to the Wells Fargo MFR.
The Wilmington MFR, on the other hand, has been appealed. "The filing of a notice of appeal is an event of jurisdictional significance — it confers jurisdiction on the court of appeals and divests the [lower] court of its control over those aspects of the case involved in the appeal."
Although Plaintiff did not cite to it, Plaintiff's claim could be construed as a request to reconsider the Court's orders granting stay relief. To the extent the complaint could be construed as a motion under Bankruptcy Rule 9023 to reconsider the court's earlier orders, it must be denied as untimely. Under Bankruptcy Rule 9023, motions to reconsider must be filed within 14 days of entry of the judgment.
Wells Fargo presented a colorable claim it was the holder of the note, but any defense of the Debtor to Wells Fargo's standing including allegations of fraud in the chain of title are preserved for the appropriate non-bankruptcy forum. No claim for reconsideration of the Court's order granting Wells Fargo stay relief has been stated. Because of the appeal of the Court's order granting stay relief on the Wilmington MFR, the Court does not have jurisdiction to consider a request to reconsider it.
Beyond complaining about the Court granting the Wells Fargo and Wilmington MFRs, on which AP represented the moving parties, the complaint fails to provide AP with fair notice of what the claim is and the grounds upon which it rests and makes it impossible for the Court and AP to discern which allegations are brought against AP. Consequently, Plaintiff has failed to state claims in accordance with the pleading requirements in accordance with Rule 12(b)(6) and should be dismissed.
AP also asserts the Court lacks subject matter jurisdiction over this proceeding and seeks dismissal of the Complaint pursuant to of Fed. R. Civ. P. 12(b)(1). The plaintiff has the burden of proving the Court's subject matter jurisdiction by a preponderance of the evidence.
Bankruptcy court jurisdiction is codified in 28 U.S.C. § 1334(b) and 28 U.S.C. § 157. Pursuant to 28 U.S.C. § 1334, "district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). The bankruptcy court's jurisdiction is derivative of and dependent upon these bases.
The first category of cases, "arising under" proceedings, are matters invoking a substantive right created by the Bankruptcy Code.
Matters relate to a case under title 11 "where resolution of the same could have a material effect on the administration of the case or claims against the bankruptcy estate, but such a claim could exist outside of bankruptcy."
However, "related to" jurisdiction is not boundless. "Bankruptcy jurisdiction is designed to provide a single forum for dealing with all claims to the bankrupt's assets, but it cannot be extended beyond its purpose."
Plaintiff has not established its claims arise under the Bankruptcy Code, or in a case under title 11, or are related to the Bankruptcy Case. It is difficult to discern exactly what claims Plaintiff alleges against AP. Plaintiff challenges the right of parties whom AP represented to seek relief as to the properties at 4596 Meadow Creek Path and 6236 Katelyn Park. This is not a cause of action created by the Bankruptcy Code and does not arise only in bankruptcy proceedings. Indeed, as the Court has stated, the Debtor can assert its rights and contest the underlying merits in another forum. Accordingly, this matter does not fall within either of the first two categories under § 1334, and the Court lacks jurisdiction over Plaintiff's claims if they are not "related to" his bankruptcy case.
Having considered the complaint and the facts concerning the Bankruptcy Case, the Court concludes that the relief sought in the complaint is not "related to" the Bankruptcy Case. The Bankruptcy Case is a liquidation case, rather than a reorganization case. The Chapter 7 Trustee has filed a notice that he did not intend to pursue the liquidation of any assets. The Trustee clearly had no interest in the properties that were the subject of the Wells Fargo MFR and Wilmington MFR or in any damages that may be owed to Plaintiff as a result of AP's conduct. Moreover, the Debtor is not entitled to a discharge. Based on the facts available to the Court, the resolution of the claims asserted in this case would not impact Plaintiff's bankruptcy estate. The complaint as to AP is not "related to" the Bankruptcy Case and the Court does not have jurisdiction over it.
Even if the case were not dismissed, the Court would abstain from hearing it under 28 U.S.C. § 1334(c). Under 28 U.S.C. § 1334(c)(1), the Court has discretion to abstain from hearing a case "in the interest of justice, or in the interest of comity with State courts or respect for state law."
Courts employ a multifactor test to determine whether abstention is appropriate. Courts consider the following nonexclusive factors:
These factors weigh heavily in favor of abstention in this adversary proceeding. The outcome of this adversary proceeding cannot conceivably have any effect on the bankruptcy case because there is no estate being administered in bankruptcy. A no asset corporate Chapter 7 case, like HRN's case, serves no bankruptcy purpose. The only purpose of a corporate Chapter 7 case is to permit the fair and orderly liquidation of corporate assets. Where there are no assets of the estate that can be distributed to creditors, the case serves no bankruptcy purpose.
Moreover, any issues relating to the foreclosure and dispossessory proceedings relating to 4596 Meadow Creek Path and 6236 Katelyn Park can be resolved in another forum, and Plaintiff can pursue a determination of its property interests in a court with jurisdiction. Additionally, Plaintiff has demanded a jury trial. Abstention will not prejudice any party; if anything, this case can be managed more efficiently in state court. Thus, even if the case were not dismissed, the Court would abstain from hearing it under 28 U.S.C. § 1334(c).