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McGregor v. Asset Acceptance, LLC

United States District Court, N.D. Alabama, Eastern Division

June 16, 2015

VERONICA G. McGREGOR, Plaintiff,
v.
ASSET ACCEPTANCE, LLC, Defendant.

MEMORANDUM OPINION

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.

I. Background

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).[1]

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).

II. Discussion

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.[2] 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.[3]

Although the resolution of Plaintiff's FDCPA claims undoubtedly involves the resolution of various state and bankruptcy law issues, [4] 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 ...


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