United States District Court, N.D. Alabama, Eastern Division
June 16, 2015
VERONICA G. McGREGOR, Plaintiff,
ASSET ACCEPTANCE, LLC, Defendant.
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.
A. Mandatory Withdrawal
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. The court agrees.
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,  if each of these non-federal, threshold issues are resolved in Plaintiff's favor, the case will be resolved by answering the following question: did Defendant violate the FDCPA when it told Plaintiff's potential lender that a judgment lien survived her bankruptcy, which Defendant would release for $3, 000 as payment for the interest that had accrued on the judgment. ( See Doc. 2, at 3). According to Plaintiff's Complaint, Defendant's representations violated the FDCPA's provisions prohibiting certain false and misleading representations regarding Plaintiff's debt. (Doc. 1-2, at ¶¶ 1, 48-69); see 15 U.S.C. §§ 1692e(2), (10), 1692f(6).
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,  and that a circuit split exists on the issue. (Doc. 3, at 3).
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.
B. Permissive Withdrawal
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. Section 157(d) permits the district court to withdraw, "in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown." 28 U.S.C. § 157(d). "The decision whether to withdraw the reference is committed to the district court's discretion." Abrahams, 2010 WL 4875581, at *3 (citing In re Tate, Case No. 09-cv-0039, 2010 WL 320488 at *8 (S.D. Ala. Jan. 18, 2010)). In determining whether there is cause for withdrawal of a reference, the Eleventh Circuit directs the courts to "consider such goals as advancing uniformity in bankruptcy administration, decreasing forum shopping and confusion, promoting the economical use of the parties' resources, and facilitating the bankruptcy process." Dionne v. Simmons (In re Simmons), 200 F.3d 738, 742 (11th Cir. 2000) (quoting In re Parklane/Atl. Joint Venture, 927 F.2d 532, 536 n.5 (11th Cir. 1991); Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 998 (5th Cir. 1985)). "Additional factors that may be considered include: (1) whether the claim is core or non-core; (2) efficient use of judicial resources; (3) a jury demand; and (4) prevention of delay." Price, 2007 WL 2332536, at *2; BankUnited Fin. Corp. v. FDIC, 436 B.R. 216, 220 (S.D. Fla. 2010).
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.
DONE and ORDERED.