United States District Court, N.D. Alabama, Northeastern Division
DAVID PROCTOR UNITED STATES DISTRICT JUDGE
case is before the court on Defendant's Motion to
Withdraw the General Order of Reference (Doc. # 1-2), filed
August 30, 2018. The Motion requests that the court withdraw
the reference and relieve the Bankruptcy Court of
jurisdiction over the subject adversary proceeding pursuant
to 28 U.S.C. § 157(d) and Federal Rule of Bankruptcy
Procedure 5011. (Doc. # 1-2). The Motion has been fully
briefed (6, 9) and is ripe for review. After careful review,
and for the reasons explained below, the court concludes that
Defendant's Motion is due to be granted.
Brenda Cole filed a Chapter 13 bankruptcy petition on July
12, 2017. (Doc. # 6 at 2). On September 1, 2017, Defendant
MidFirst Bank filed a proof of claim in Plaintiff's
Chapter 13 case for an amount of $30, 422.94. (Doc. # 1-2 at
1). In April 2018, Defendant mailed the disputed
“modified monthly mortgage statement” (the
“Mortgage Statement”) to Plaintiff. (Id.
at 3). Plaintiff filed this adversary proceeding
in the Bankruptcy Court on June 29, 2018 alleging that
Defendant violated the automatic stay under 11 U.S.C. Â§'
362(a)(3) and (a)(6) by mailing Plaintiff the Mortgage
Statement after the commencement of her bankruptcy case.
(Id. at 18). In its present Motion, Defendant argues
the General Order of Reference should be withdrawn because
resolution of Plaintiff's claim would require
“material and substantial consideration of
non-bankruptcy federal law, ” specifically the recently
amended mortgage servicing regulations from the Consumer
Financial Protection Bureau
(“CFPB”) and the “mini-Miranda”
language of the Fair Debt Collection Practices Act
(“FDCPA”). (Doc. # 1-2 at 1).
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 court's reference which 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 or
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.
argues that the court is required to withdraw the reference
in this proceeding because resolution of the issues raised in
Plaintiff's Complaint expressly involves substantial and
material consideration of federal non-Bankruptcy Code law.
The court agrees.
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, 2012 WL 6000339, *2 (N.D. Ala.
Nov. 30, 2012) (citation omitted); In re Price, 2007
WL 2332536, at *2 (M.D. Ala. Aug. 13, 2007); Abrahams v.
Phil-Con Servs., LLC, 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).
Consistent with other courts in this circuit, the court will
follow this latter approach in addressing each of
newly amended CFPB regulations and the FDCPA are undisputedly
non-Code federal laws affecting interstate commerce. 15
U.S.C. § 1692a(6). Therefore, whether withdrawal is
required turns on whether substantial and material
consideration of these laws is necessary to resolve the
Complaint, Plaintiff expressly seeks relief from the court
that would determine that the Mortgage Statement Defendant
sent to Plaintiff was “not required,
mandated, nor authorized under the newly enacted [CFPB]
regulations.” (Doc. # 1-2 at 18) (emphasis in original).
Despite her contention that “the resolution of
MidFirst's [defense] is not as complicated as it may
appear” (Doc. # 6 at 5), Plaintiff “candidly
acknowledges that the CFPB regulations have only recently
been enacted, and certainly the issue raised by MidFirst is
one of first impression. Moreover, Plaintiff further
acknowledges that the resolution of MidFirst's [defense]
certainly requires the material consideration of
non-bankruptcy law.” (Id. at 4-5). In light of
these admissions, “the court has no trouble concluding
that this issue extends beyond the application of
well-settled, non-bankruptcy law.” McGregor v.
Asset Acceptance, LLC, 2015 WL 3751986, at *1 (N.D. Ala.
July 16, 2015); see also Holmes v. Grubman, 315
F.Supp.2d 1376, 1379 (M.D. Ga. 2004) (noting that withdrawal
is mandatory especially where there are “matters of
first impression or where there is a conflict between
bankruptcy and other laws”)).
court is persuaded that in order to resolve Plaintiff's
claim, a Bankruptcy Court would have to “(1) review and
analyze a brand new non-bankruptcy mortgage servicing
regulation to determine its ambit and operation, (2)
determine whether MidFirst's Mortgage Statement complies
with the new regulation, (3) determine whether compliance
with the new regulation provides a defense to MidFirst as to
the automatic stay, and (4) if such a defense does not exist,
[decide if] compliance with the regulation is a factor in
determining whether the automatic stay was violated.”
(Doc. # 1-2 at 12). Furthermore, because Plaintiff asserts
that her injury derives at least in part from the
“mini-Miranda language” in the Mortgage
Statement, a Bankruptcy Court would also have to
“interpret the FDCPA and apply it to the unique factual
circumstances presented by the CFPB-required statement”
in order to determine whether the automatic stay was
violated. (Id. at 13).
it would be improper for the court to weigh in on the merits
of the dispute at this juncture of the proceedings, the court
recognizes that the undeniable influence of the CFPB and the
FDCPA over Plaintiff's claims means that resolution will
necessarily involve a substantial and material consideration
of non-Code federal laws. Consequently, the court must
withdraw the reference.