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Caldwell v. Redstone Federal Credit Union

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

July 20, 2018

DEMETRIUS D. CALDWELL, et al., Plaintiffs,
v.
REDSTONE FEDERAL CREDIT UNION, et al., Defendants.

          MEMORANDUM OPINION AND ORDER [1]

          JOHN H. ENGLAND, III UNITED STATES MAGISTRATE JUDGE.

         On January 30, 2018, Defendants Redstone Federal Credit Union (“Redstone”) and the Law Office of C. Howard Grisham (“Grisham”) moved for partial dismissal of Plaintiffs' Second Amended Class Action Complaint, (doc. 75), under Fed.R.Civ.P. 12(b)(6) for failure to state a claim as to six of the eight named plaintiffs. (Docs. 76 & 79). Plaintiffs filed a response opposing both motions, (doc. 84), and both Defendants replied, (docs. 87 & 88). Plaintiffs have also moved for leave to file a sur-reply, (doc. 89), which is opposed by Defendants, (docs. 91 & 92). Plaintiffs moved for, (doc. 93), and were granted, (doc. 94), leave to file a supplemental opposition brief, (doc. 95), and Defendants have filed supplemental replies, (docs. 96 & 97). Finally, Plaintiffs have moved for leave to file a sur-reply to their supplemental opposition brief, (doc. 98), which Defendants also oppose, (docs. 99 & 100).

         The motions are fully briefed and ripe for review. For the reasons stated more fully below, the motions to dismiss are GRANTED IN PART and DENIED IN PART.

         I. Standard of Review

         Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955 (2007)). Mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action” are insufficient. Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949 (citations and internal quotation marks omitted). “Nor does a complaint suffice if it tenders ‘naked assertions]' devoid of ‘further factual enhancement.'” Id. (citing Bell Atl. Corp., 550 U.S. at 557, 127 S.Ct. 1955). Additionally, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b).

         Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint fails to state a claim upon which relief can be granted. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949 (citations and internal quotation marks omitted). A complaint states a facially plausible claim for relief “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). The complaint must establish “more than a sheer possibility that a defendant has acted unlawfully.” Id; see also Twombly, 550 U.S. at 555, 127 S.Ct. at 1965 (“Factual allegations must be enough to raise a right to relief above the speculative level.”). Ultimately, this inquiry is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679, 129 S.Ct. at 1950.

         The court accepts all factual allegations as true on a motion to dismiss under Rule 12(b)(6). See, e.g., Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000). However, legal conclusions unsupported by factual allegations are not entitled to that assumption of truth. Iqbal, 556 U.S. at 678, 129 S.Ct. at 1950.

         II. Background

         A. Procedural History

         On October 29, 2015, Plaintiffs Demetrius and Sabrina Caldwell (the “Caldwells”) initiated this action on behalf of themselves and a purported class against Redstone and Grisham, alleging five counts including a bankruptcy count of contempt for violating discharge injunctions[2] and a count for violations of the Fair Debt Collection Practices Act (“FDCPA”). (Doc. 1). Defendants moved to dismiss the Caldwells' claims, (docs 7 & 10), and the undersigned granted those motions in part and denied them in part on October 17, 2016, dismissing all but the two claims identified above. (Doc. 30).

         On June 14, 2017, Plaintiffs amended their complaint, adding six additional named plaintiffs: Jane B. Locklin, Bart Reeves, Davis A. Mitchell, Jeremy D. Holland, Jessalyn Hooper, and Lorondo Brazelton (collectively, the “New Plaintiffs”). (Doc. 48 at ¶¶ 5-10). While the Amended Complaint alleged generally that the New Plaintiffs had been subjected to Defendants' attempts to collect debts discharged in bankruptcy, it did not identify how Defendants had done so. Both Defendants moved to dismiss. (Docs. 51 & 53). Granting Defendants' alternative motions for a more definite statement, the undersigned ordered Plaintiffs to file an amended complaint “which should include the factual basis for the New Plaintiffs' claims that Defendants wrongfully attempted to collect the debts they discharged in bankruptcy.” (Doc. 73 at 8). On January 30, 2018, Plaintiffs filed their Second Amended Complaint, containing the facts below. (Doc. 75).

         B. Facts[3]

         Each of the New Plaintiffs filed a Chapter 7 bankruptcy petition in the Northern District of Alabama. (Doc. 75 at ¶ 14). Each owed money to Redstone and/or Grisham. (Id. at ¶ 15). Each Plaintiff received a discharge from the Bankruptcy Court. (Id. at 18). Nevertheless, Redstone- which had been mailed a copy of the discharge orders in each case-used Grisham to attempt to collect the discharged debt. (Id. at ¶¶ 19-20).

         1. Jane B. Locklin (“Locklin”)

         Redstone obtained a judgment against Locklin on June 17, 2005, and recorded the judgment on June 27, 2005. (Id. at ¶ 26). Locklin filed for Chapter 7 bankruptcy on January 8, 2007, and received a discharge of Redstone's debt on April 18, 2007. (Id. at ¶¶ 27-28). Defendants revived the judgment on March 17, 2015, and later recorded the revived judgment in the Madison County Probate Office. (Id. at ¶ 29). In April 2015, Defendants sent Locklin correspondence demanding payment of the debt. (Id. at ¶ 30).

         2. Bart Reeves (“Reeves”)

         Redstone recorded a judgment against Reeves on January 10, 2010, in the Morgan County Probate Court. (Id. at ¶ 31). Reeves filed for Chapter 7 bankruptcy on August 26, 2011, receiving a discharge of Redstone's debt on November 29, 2011. (Id. at ¶¶ 32-33). Defendants have neither satisfied the judgment nor filed pleadings with any probate court or the Circuit Court of Madison County indicating that Reeves's debt was discharged in bankruptcy. (Id. at ¶ 34).

         3. Davis A. Mitchell (“Mitchell”)

         Redstone recorded a judgment in the Morgan County Probate Court on December 22, 2008.[4] (Id. at ¶ 35). Mitchell filed for Chapter 7 bankruptcy on May 18, 2013, and received a discharge of Redstone's debt on August 14, 2013. (Id. at ¶¶ 36-37). As with Reeves, Defendants have not satisfied the judgment, nor have they filed pleadings in the Circuit Court of Morgan County or any probate court indicating the debt was discharged. (Id. at ¶ 38). Additionally, the judgment has attached to real property Mitchell acquired after the discharge of his debt. (Id. at ¶ 39).

         4. Jeremy D. Holland (“Holland”)

         Defendants recorded a judgment against Holland in the Morgan County Probate Court on June 1, 2011. (Id. at ¶ 40). Holland filed for Chapter 7 bankruptcy on December 27, 2011. (Id. at ¶ 41). He then received a discharge of Redstone's debt on March 27, 2012. (Id. at ¶ 42). Defendants have not satisfied the judgment or filed pleadings in the Circuit Court of Morgan County or any probate court reflecting the debt was discharged in bankruptcy, and Holland's credit report reflects he still owes the $22, 867 amount of the judgment. (Id. at ¶ 43).

         5. Jessalyn Hooper (“Hooper”)

         Hooper, formerly known as “Jessalyn N. Mobley, ” filed for Chapter 7 bankruptcy on June 8, 2005, and received a discharge of a judgment recorded against him by Defendants on May 3, 2005 in the Madison County Probate Court. (Id. at ¶¶ 44-46). Defendants have not satisfied the judgment or filed pleadings in the District Court of Madison County or any probate court to reflect that the debt has been discharged. (Id. at ¶ 47). As with Mitchell, Hooper obtained real property after the discharge to which the judgment has attached. (Id. at ¶ 48).

         6. Lorondo Brazelton (“Brazelton”)

         Defendants recorded a judgment against Brazleton in the Madison County Probate Court on May 1, 2007. (Id. at ¶ 49). Brazleton filed for Chapter 7 bankruptcy on August 1, 2007, and received a discharge of Redstone's debt on November 14, 2007. (Id. at ¶¶ 50-51). Defendants have not satisfied the judgment or filed pleadings in the District Court of Madison County or any probate court indicating the debt has been discharged. (Id. at ¶ 52).

         ITT. Analysis

         Defendants contend the New Plaintiffs have failed, for various reasons, to articulate actionable violations of the discharge injunctions and the FDCPA. As a preliminary matter, though, the undersigned will address Plaintiffs' motions for leave to file sur-replies.

         A. Motions for leave to file sur-replies (Docs. 89 & 98)

         Plaintiffs have moved for leave to file a sur-reply to Defendants' replies to the original motion, (doc. 89), and to Defendants' responses to their supplemental opposition brief, (doc. 98).

         In their first motion for leave to file a sur-reply, (doc. 89), Plaintiffs contend they should be allowed to file the proposed sur-reply attached to their motion, (doc. 89-1), because Defendants have raised additional issues in their reply briefs, mischaracterized the holding of a case, and misinterpreted the law on lien enforcement. (Doc. 89 at ¶ 1). Defendants point out that the reply briefs contain no new issues and that, to the extent they are arguably incorrect on the law, the court can determine that without the need for a sur-reply. (Docs. 91 & 92).

         Plaintiffs second motion for leave to file a sur-reply is based on their contention they “feel compelled to respond to certain statements made in Defendants' Responses” to their supplemental response brief. (Doc. 98 at ¶ 1). In their motion, filed almost a month after Defendants' responses, Plaintiffs contend Defendants argue questions of fact, cite an abrogated case, [5] and again misstate the law. (Id. at ¶¶ 1-2). Opposing the motion, Grisham responds by noting Plaintiffs have failed to identify a basis other than a desire to respond for their sur-reply. (Doc. 99 at ¶ 1). Grisham then defends its response on the merits. (Id. at ¶¶ 2-5). Redstone notes the delay between the responses and motion for leave, adopts Grisham's arguments, and reasserts its arguments against Plaintiffs' prior motion for leave. (Doc. 100).

         The undersigned has considered the arguments Plaintiffs offer for the necessity of sur-replies, and none are compelling. Therefore, both motions are DENIED.[6]

         B. Count I - Contempt of Discharge Injunction

         Defendants[7] argue none of the conduct alleged by Plaintiffs violated the discharge injunction. As to Reeves, Mitchell, Holland, Hooper, and Brazelton, Defendants state that they did not take any actions at all, and omissions of the kind Plaintiffs allege are insufficient to state a contempt claim. They separately argue they did not violate the injunction as to Locklin (the only New Plaintiff alleging an affirmative act by Defendants) because the judgment lien Locklin references was specifically not avoided in her bankruptcy and their actions related to an in rem proceeding against the property, not against Locklin personally. Plaintiffs assert the totality of the circumstances shows that Defendants' inaction with respect to the non-Locklin New Plaintiffs was intended to pressure them into repaying the discharged debts and in any event Defendants' lack of adequate policies and procedures to avoid inadvertent violations itself violated the injunction. (Doc. 84 at 8). As to Locklin, Plaintiffs dispute the judgment lien could legally be revived at all and that it was a prohibited continuation of an action to collect debt as a personal liability of the debtor. (Id. at 11-13). Additionally, they state the letter sent by Grisham to Locklin violated the injunction because, notwithstanding its formal designation, the effect of the letter was to pressure Locklin into repaying the discharged debt; because that determination should be made on a fully-developed factual record, Plaintiffs argue, it is inappropriate for dismissal under Rule 12(b)(6). (Id. at 13-14).

         A discharge in a bankruptcy case:

(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived;
(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and
(3) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(a)(1), or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor's spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived.

11 U.S.C. § 524(a). In the Eleventh Circuit, “the test for whether a creditor violates the discharge injunction under 11 U.S.C. § 524(a)(2) is whether the objective effect of the creditor's action is to pressure a debtor to repay a discharged debt.” In re McLean, 794 F.3d 1313, 1321-22 (11th Cir. 2015). To state a claim for contempt of the discharge injunction, a plaintiff must allege facts supporting that a ...


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