Caldwell et al v. Redstone Federal Credit Union et al
MEMORANDUM OPINION AND ORDER - Based on the foregoing, Defendants motions to dismiss, (docs. 7 & 10), are GRANTED IN PART and DENIED IN PART. Specifically, Counts III and IV are DISMISSED; Count V is DISMISSED, but only as a separate count and without any effect on the underlying claim for attorneys fees; and Counts I and II remain pending.(KEK)
2016 Sep-08 PM 03:27
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
DEMETRIUS D. CALDWELL, et al.,
REDSTONE FEDERAL CREDIT UNION, et
Case No.: 2:15-cv-01923-JHE
MEMORANDUM OPINION AND ORDER1
On October 29, 2015, Plaintiffs Demetrius and Sabrina Caldwell initiated this action on
behalf of themselves and a purported class against Defendants Redstone Federal Credit Union
(“Redstone”) and the Law Office of C. Howard Grisham (“Grisham”), alleging a bankruptcy
count of contempt for discharge-injunction violations,2 a count for violations of the Fair Debt
Collection Practices Act (“FDCPA”), a count for declaratory and injunctive relief, a count for
state-law unjust enrichment, and a count for attorney’s fees. (Doc. 1). On November 23, 2015,
Defendants moved to dismiss the Caldwells’ claims. (Docs. 7 & 10). On January 20, 2016, the
Caldwells responded in opposition, (docs. 18 & 19), and Defendants replied on January 27,
2016, (docs. 22 & 23). The motion is fully briefed and ripe for review. For the reasons stated
more fully below, the motion to dismiss is GRANTED IN PART and DENIED IN PART.
In accordance with the provisions of 28 U.S.C. § 636(c) and Federal Rule of Civil
Procedure 73, the parties have voluntarily consented to have a United States Magistrate Judge
conduct any and all proceedings, including trial and the entry of final judgment. (Doc. 15).
On April 26, 2016, because of the unusual circumstances of this case, Chief Judge
Karon Bowdre, acting on behalf of the Court, designated the undersigned magistrate judge to
exercise authority over the bankruptcy matters arising herein, including the issue of whether to
withdraw the reference to the Bankruptcy Court. (Doc. 25).
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
assertion[s]’ 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.
Before filing bankruptcy, the Caldwells owed money on a defaulted consumer credit card
issued by Redstone. (Doc. 1 at 2-3). On October 16, 2005, the Caldwells filed a chapter 7
bankruptcy case in the Northern District of Alabama, Southern Division, in which Redstone was
listed as an unsecured creditor. (Id. at 3). See also In re Caldwell, No. 05-13100-TBB7. The
Caldwells received a discharge on January 25, 2006. (Doc. 1 at 3). After the discharge,
Redstone and Grisham attempted to collect the discharged debt. (Id.).
Defendants have moved to dismiss all of the Caldwells’ claims either for failure to state a
claim or as preempted or precluded by statute. The Caldwells contend they have properly
alleged valid claims in all five of their counts.
Because Count V for attorney’s fees has
engendered a dispute of procedure instead of substance, the analysis will begin by briefly
addressing that dispute. Then, because the Caldwell’s argument in favor of keeping Count I for
contempt of the bankruptcy discharge injunction in this Court is in large part premised on the
continued viability of their non-bankruptcy claims in Counts II-IV, the remaining analysis will
“When considering a motion to dismiss, all facts set forth in the plaintiff=s complaint
‘are to be accepted as true and the court limits its consideration to the pleadings and exhibits
attached thereto.’” Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000)
(quoting GSW, Inc. v. Long Cnty., 999 F.2d 1508, 1510 (11th Cir. 1993)). In other words, these
“facts” are taken directly from the complaint.
address those claims before proceeding to the claim for contempt of the discharge injunction.
A. Count V – Attorney’s Fees
Defendants’ argument that there is no independent cause of action for attorney’s fees is
not disputed, and the Caldwells contend they asserted them in a separate count out of “an
abundance of caution” because they must be separately pled. (Doc. 18 at 14). Although they
acknowledge the requirement to plead attorney’s fees as a separate claim has been removed from
the rule, the Caldwells rely on the Advisory Committee Notes to the 2014 Amendments to FED.
R. BANKR. P. 7008 (which, with some bankruptcy-specific additions, incorporates Rule 8’s
general pleading requirements into the bankruptcy adversary-proceeding rules) to conclude fees
must still be pled separately in the complaint “if the fees are an element of damages.” (Doc. 18
This appears to conflate the requirement to plead fees as an element of a claim and the
requirement to plead them as a separate claim under former Rule 7008(b).4 The latter was
removed from Rule 7008 because, “differ[ing] from the practice under the Federal Rules of Civil
Procedure, [it] had the potential to serve as a trap for the unwary.” FED. R. BANKR. P. 7008,
Advisory Committee Notes to the 2014 Amendments. However, the Advisory Committee Notes
acknowledge that, “[w]hen fees are an element of damages . . . , the general pleading
requirements of this rule still apply.” Id. It is unlikely the committee would remove a portion of
the rule because it was determined to be confusing—then, in a more confusing fashion,
reincorporate that rule in a specific situation that is only referenced in the notes to the
amendment and not in the rule itself.
Before subsection (b) was deleted in 2014, it read: “A request for an award of
attorney’s fees shall be pleaded as a claim in a complaint, cross-claim, third-party complaint,
answer, or reply as may be appropriate.” Fed. R. Bankr. P. 7008(b) (1987).
Instead, since December 1, 2014, attorney’s fees are governed by Rule 7054(b)(2) of the
Bankruptcy Rules. See Soares v. Lorono, No. 12-CV-05979-WHO, 2015 WL 151705, at *21
(N.D. Cal. Jan. 12, 2015). That rule incorporates most of Rule 54(d)(2) into the Bankruptcy
Rules. FED. R. BANKR. P. 7054(b)(2) (incorporating FED. R. CIV. P. 54(d)(2) (except subsection
(D)) into the rules for adversary proceedings); FED. R. BANKR. P. 9014(c) (incorporating FED. R.
BANKR. P. 7054 into the rules for contested matters). Under those rules, “[a] claim for attorney’s
fees and related nontaxable expenses must be made by motion unless the substantive law
requires those fees to be proved at trial as an element of damages.” FED. R. CIV. P. 54(d)(2)(A)
(emphasis added). Rule 7008’s Advisory Committee Note is merely a reminder that, although
attorney’s fees no longer have to be separately pled in bankruptcy, they must still be pled to the
extent they would otherwise be required as facts supporting an element of another claim to be
See RBC Bank (USA) v. Glass, 773 F. Supp. 2d 1245, 1247 (N.D. Ala. 2011)
(discussing, in the context of Rule 54, the differences between “post-judgment prevailing party
fees, and fees owed as an integral part of a contractual obligation”); FED. R. BANKR. P. 7008,
Advisory Committee Notes to the 2014 Amendments (noting the requirement to state attorney’s
fees as a claim “differed from the practice under the Federal Rules of Civil Procedure”).
Regardless, it is undisputed the Caldwells are not seeking to raise an “independent cause
of action” for attorney’s fees. (See doc. 18 at 14) (stating a separate count was brought only “out
of an abundance of caution” regarding the procedural issue). Moreover, stating attorney’s fees as
a separate count does not provide the Caldwells any substantive benefit they would not have had
from simply alleging attorney’s fees under the claims supporting them. In any event, Defendants
do not argue this is a basis to dismiss the request for attorney’s fees but instead assert they should
be incorporated into the other counts and fail on the merits of those claims. (Doc. 8 at 9; doc. 11
at 12-13; doc. 22 at 9-10; doc. 23 at 9).5 Accordingly, the Court will spill no more ink on this
issue, and Defendants’ subsequent arguments that Count V should be dismissed because the
other claims are due to be dismissed, (doc. 22 at 10; doc. 23 at 9), will necessarily be resolved by
the discussions of those counts below.
B. Count II – FDCPA
The Caldwells’ second count asserts claims for post-discharge violations of the FDCPA
and is alleged solely against Defendant Grisham. (Doc. 1 at 4). Grisham argues FDCPA claims
do not exist in this context because the remedy for bankruptcy violations is under the Bankruptcy
Code, not the FDCPA. (Doc. 11 at 8-9) (citing Walls v. Wells Fargo Bank, N.A., 276 F.3d 502
(9th Cir. 2002)). In response, the Caldwells assert the majority of other courts, including several
circuit courts, have rejected the reasoning in Walls and argue this Court should adopt the
reasoning of those courts. (Doc. 19 at 2-11). Grisham’s reply does not address these other cases
but merely relies on Walls as “instructive.” (Doc. 22 at 5).
The Caldwells have the better argument here. Although Walls was the first case to
address the issue, its reasoning has been criticized. See Simon v. FIA Card Servs., N.A., 732
F.3d 259, 275 (3d Cir. 2013) (“[A]s the Seventh Circuit correctly noted, the Ninth Circuit’s
reliance on a precedent involving federal statutory preemption of a state-law claim to decide
whether a federal statute precludes a federal-law claim is misplaced.”) (citing Randolph v. IMBS,
Inc., 368 F.3d 726, 733 (7th Cir. 2004)). The Walls court held the Bankruptcy Code is an
exclusive remedy even against other federal laws, relying on one case addressing preemption of
state law and another case addressing the scope of the Consumer Credit Protection Act’s
application to the trustee’s actions taken under the Bankruptcy Code. See 276 F.3d at 510 (citing
The contempt and FDCPA counts already mention “legal fees” in their relief clauses.
(Doc. 1 at 4 & 6).
MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910, 914 (9th Cir. 1996), and Kokoszka v.
Belford, 417 U.S. 642, 651 (1974)). Neither of those cases—nor even the Walls court directly—
addressed the preclusion doctrine.
The preclusion doctrine concerns “the alleged preclusion of a cause of action under one
federal statute by the provisions of another federal statute” and “is not governed by the Court’s
complex categorization of the types of pre-emption [of state law by federal law].”
Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2236 (2014). Nor does the state-federal
balance frame the inquiry. Id. The preemption doctrine’s “principles are instructive insofar as
they are designed to assess the interaction of laws that bear on the same subject.” Id.
The Walls court stated the Bankruptcy Code precludes the operation of other statutes
within its ambit because allowing other federal actions would require “bankruptcy-laden
determinations” and “circumvent the remedial scheme of the Code under which Congress struck
a balance between the interests of debtors and creditors by permitting (and limiting) debtors’
remedies for violating the discharge injunction to contempt.” 276 F.3d at 510. For this latter
proposition, the court quoted MSR Exploration’s conclusion that the complexity and
comprehensiveness of the Code “demonstrates Congress’s intent to create a whole system under
federal control which is designed to bring together and adjust all of the rights and duties of
creditors and embarrassed debtors alike.” Id. (quoting MSR Exploration, 74 F.3d at 914). While
that is true for state law that attempts to regulate in the same area as the Bankruptcy Code,
Congress is presumed to know it legislates against the background of its own prior legislation.
See Kokoszka, 417 U.S. at 650 (“The drafters of the statute were well aware that the provisions
and the purposes of the Bankruptcy Act and the new legislation would have to coexist.”). “When
two statutes complement each other, it would show disregard for the congressional design to
hold that Congress nonetheless intended one federal statute to preclude the operation of the
other.” POM Wonderful LLC, 134 S. Ct. at 2238 (citing J.E.M. Ag Supply, Inc. v. Pioneer
Hi-Bred Int’l, Inc., 534 U.S. 124, 144 (2001) (“[W]e can plainly regard each statute as effective
because of its different requirements and protections”)).
Similarly, the Walls court expanded the language of Kokoszka beyond its holding, stating
that, like the Consumer Credit Protection Act addressed in Kokoszka, “the FDCPA’s purpose is
to avoid bankruptcy” so “if bankruptcy nevertheless occurs, the debtor’s protection and remedy
remain under the Bankruptcy Code.” 276 F.3d at 510 (citing Kokoszka, 417 U.S. at 651).
However, in Kokoszka, the Supreme Court was addressing not whether the Consumer Credit
Protection Act complemented the Bankruptcy Code but whether Congress intended it to prevent
the trustee from taking custody of 75% of a tax refund that would have otherwise been part of the
estate. 417 U.S. at 650. The Court held the Consumer Protection Act was intended to prevent
bankruptcy, not substantially alter the internal workings of the subsequently enacted Bankruptcy
Code. Id. at 651. The Walls court’s holding is broader than the cases upon which it stands, has
been subsequently criticized, and is otherwise unpersuasive on the preclusion issue.
Moreover, although the Walls case was not specifically mentioned, the Eleventh Circuit
recently held the Bankruptcy Code does not generally preclude the application of the FDCPA
because the principles of the preclusion doctrine apply only where there is “irreconcilable
conflict” between the provisions. See Johnson v. Midland Funding, LLC, No. 15-11240, 2016
WL 2996372, at *5 (11th Cir. May 24, 2016). Specifically, it found “[t]he FDCPA and the Code
are not in irreconcilable conflict” because they “differ in their scopes, goals, and coverage, and
can be construed together in a way that allows them to coexist.” Id. “The FDCPA easily lies
over the top of the Code’s regime, so as to provide an additional layer of protection against a
particular kind of creditor,” kicking in “only when the creditor is a debt collector” and his
behavior is “unconscionable” or “deceptive.” Id. (citing 15 U.S.C. §§ 1692a(6), 1692e, 1692f).
This directly repudiates the general preclusion holding in Walls, and Defendant Grisham, against
whom the FDCPA claim is alleged, acknowledges as much. (Doc. 29 at 1). Therefore, Count II
of the Caldwells’ complaint is not due to be dismissed on this ground.
C. Count III – Declaratory and Injunctive Relief
Defendants contend the Caldwells’ declaratory and injunctive relief claims are due to be
dismissed as redundant of their other claims. (Doc. 8 at 6-7; doc. 9 at 10-11). The Caldwells
never really respond to this argument, mentioning their declaratory judgment claims only as
support of their contention their action must be brought as a complaint instead of a motion in
bankruptcy court. (Doc. 18 at 9 & 13). Regardless, Defendants are correct the Caldwells’
declaratory and injunctive relief claims are redundant of their other claims and do not allege “any
real and immediate controversy apart from what is already alleged in” their other counts. See
Strubel v. Hartford Ins. Co. of The Midwest, No. 809CV01858T17TBM, 2010 WL 745616, at *3
(M.D. Fla. Feb. 26, 2010).
Count III seeks declaratory relief on the following grounds: (1) “Defendants cannot
collect or attempt to collect discharged debts”; (2) “Defendants’ conduct violated the Bankruptcy
Code”; (3) “Defendant Grisham’s conduct violated the [FDCPA]”; (4) “Defendants’ conduct as
alleged herein was willful and/or intentional”; and (5) “Defendants are in contempt.” (Doc. 1
at 6-7). It then seeks to have Defendants enjoined “from collecting or attempting to collect
discharged debt.” (Id. at 7).
The requests for the Court to declare Defendants cannot collect or attempt to collect
discharged debts and to enjoin them from doing so is redundant of the original discharge order,
which explicitly incorporates 11 U.S.C. § 727 and, by necessary extension, 11 U.S.C. § 524(a)
(describing the effect of § 727 as an injunction against collection of discharged debts). In re
Caldwell, No. 05-13100-TBB7, doc. 23.
The injunction from collecting discharged debts
already exists, and enforcement of it is through the Caldwells’ already existing contempt claim.
See Alderwoods Grp., Inc. v. Garcia, 682 F.3d 958, 966 (11th Cir. 2012). They cannot obtain a
successive injunction because it “would be superfluous, adding no judicial action and providing
no additional relief.” Id. (quoting Barrientos v. Wells Fargo Bank, N.A., 633 F.3d 1186, 1190
(9th Cir. 2011)). Similarly, the remaining requests for the Court to declare that Defendants’
conduct violated the Bankruptcy Code and the FDCPA, that that conduct was willful, and that
they are in contempt are only real and immediate controversies to the extent they are relevant to
the contempt and FDCPA claims in Counts I and II. As a result, they are redundant of those
As the Caldwells do not appear to have a claim for declaratory and injunctive relief that is
separate from their other claims or the already existing bankruptcy discharge, Count III is due to
D. Count IV – Unjust Enrichment
The Caldwells’ fourth count asserts a state-law claim in equity for unjust enrichment.
(Doc. 1 at 7). Defendants contend this claim is preempted by the Bankruptcy Code. (Doc. 8
at 7-9; doc. 11 at 11-12). The Caldwells respond that state law is only preempted “to the extent
of any conflict with a federal statute” and an unjust enrichment claim does not conflict with the
discharge injunction. (Doc. 19 at 11-14). Defendants’ replies state the Caldwells’ focus on
conflict preemption is misplaced because the Bankruptcy Code’s preemption of unjust
enrichment is based on its preemption of the entire field. (Doc. 22 at 7-9; doc. 23 at 7-8). The
Caldwells also raise the issue again in the supplemental brief on new authority, asserting the
Eleventh Circuit’s holding in Johnson v. Midland Funding is dispositive of the issue because,
like the FDCPA, a state-law unjust enrichment claim supplements instead of conflicts with the
Bankruptcy Code and can, therefore, coexist with it. (Doc. 26-1). In response, Defendants point
to the fact the Johnson case addressed a preclusion issue and not a preemption issue. (Doc. 28
at 4-6; doc. 29 at 5-6).
Federal preemption of state law occurs (1) where Congress has expressly intended it; (2)
where the federal scheme is “so pervasive as to make reasonable the inference that Congress left
no room to supplement it” and “the federal system will be assumed to preclude enforcement of
state laws on the same subject”; (3) or where there is an actual conflict between state and federal
law so that (a) “compliance with both federal and state regulations is a physical impossibility” or
(b) “state law stands as an obstacle to the accomplishment and execution of the full purposes and
objectives of Congress.” Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev.
Comm’n, 461 U.S. 190, 203-04 (1983).
First, regarding Johnson, although the principles of direct statutory conflict are relevant
to both the preclusion analysis and conflict preemption analysis, cf. POM Wonderful LLC v.
Coca-Cola Co., 134 S. Ct. 2228, 2236 (2014) (noting the preemption doctrine’s “principles are
instructive insofar as they are designed to assess the interaction of laws that bear on the same
subject”), the Johnson court did not address whether the FDCPA was an obstacle to the purposes
of Congress because the rationale behind the preclusion analysis assumes the purpose of
Congress is for the statutes to work together unless they physically cannot.
therefore, may overlap absent a “positive repugnancy”; however, state laws may still be
preempted if it was not the intent of Congress for state laws to supplement the federal scheme.6
The Bankruptcy Code has long been considered a federal statutory scheme that is so
pervasive as to evidence a Congressional intent to fully occupy the space without state law
supplementation. See Int’l Shoe Co. v. Pinkus, 278 U.S. 261, 265 (1929) (“States may not pass
or enforce laws to interfere with or complement the Bankruptcy Act or to provide additional or
auxiliary regulations.”); Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439, 447 (1st Cir. 2000)
(finding the Bankruptcy Code’s statutory remedy for disgorgement of unjust profits preempted
the alternative state court remedy for unjust enrichment because it was “inevitably in conflict
with Congress’s plan that federal courts enforce § 524 through § 105”); Pereira v. First N. Am.
Nat. Bank, 223 B.R. 28, 31 (N.D. Ga. 1998) (“‘The Bankruptcy Code provides a comprehensive
scheme reflecting a “balance, completeness and structural integrity that suggests remedial
exclusivity.”’”) (quoting Brandt v. Swisstronics, Inc. (In re Shape), 135 B.R. 707, 708 (Bankr. D.
Me. 1992) (quoting Periera v. Chapman, 92 B.R. 903, 908 (C.D. Cal. 1988))).
The Caldwells’ unjust enrichment claim is preempted because it seeks the exact same
relief to which they are entitled under their contempt claim. See Jove Eng’g, Inc. v. I.R.S., 92
F.3d 1539, 1557 (11th Cir. 1996) (“The purpose of civil contempt sanctions is to (1) compensate
the complainant for losses and expenses it incurred because of the contemptuous act, and (2)
The Caldwells also cite Bacelli v. MFP, Inc., 729 F. Supp. 2d 1328 (M.D. Fla. 2010),
for the proposition a debtor can pursue claims under the Bankruptcy Code and another statute
where the statute “work in concert with each other.” (Doc. 19 at 13). However, as with
Johnson, the cited portion of the Bacelli case was addressing the Bankruptcy Code’s potential
preclusion of the FDCPA, another federal statute. See 729 F. Supp. 2d at 1336. The Bacelli
court explicitly did not address whether the Bankruptcy Code preempted the state law at issue in
that case. See id. at 1338. A subsequent line of cases in that court have begun to conflate the
two analyses with regard to Florida’s Consumer Collections Practices Act based on its similarity
to the FDCPA but no such analysis would be persuasive here. See Hernandez v. Dyck-O’Neal,
Inc., No. 3:14-CV-1124-J-32JBT, 2015 WL 2094263, at *4 n.6 (M.D. Fla. May 5, 2015)
(drawing from Bankruptcy/FDCPA preclusion cases because the preclusion/preemption analysis
is “similar” and so are the FDCPA and the FCCPA).
coerce the contemnor into complying with the court order.”) (emphasis added); Pereira, 223
B.R. at 31-32 (“Congress clearly intended violations of the Bankruptcy Code provisions relating
to the automatic stay and post-discharge injunction to be addressed in the bankruptcy court rather
than in state law actions for an accounting or for unjust enrichment.”).
The Caldwells’ attempt to re-characterize their unjust enrichment claim as one stemming
not from whether Defendants attempted to collect a debt but “from how Defendants collected the
debt, i.e., reviving the judgment and execution of their property,” (doc. 19 at 14), is
unpersuasive. It appears to be an attempt to shoehorn this claim into the language of In re
Johnston, No. 05-6288, 2007 WL 1166017 (Bankr. N.D.W. Va. Apr. 12, 2007). However, in
that case, the state statute really did deal with something outside the Bankruptcy Code, i.e., the
Bankruptcy Code prohibited attempted collection of a debt and the state law prohibited direct
contact with a debtor who was known to be represented by counsel. Id. at *3. Those laws did
not address the same issue. They “overlapped” only to the extent they happened to apply to the
same person, and the Johnston court acknowledged it was a bridge too far to assert the
Bankruptcy Code preempted the state law because the debtor would not have had counsel except
for the bankruptcy, see id. at *4. That is not the case here. An unjust enrichment claim has
nothing to do with “reviving the judgment and execution of [the Caldwells’] property”; it merely
“permit[s] the court in equity and good conscience to disallow one to be unjustly enriched at the
expense of another.” Koch Foods of Alabama, LLC v. Gen. Elec. Capital Corp., 303 F. App’x
841, 846 (11th Cir. 2008) (quoting Avis Rent A Car Sys., Inc. v. Heilman, 876 So. 2d 1111, 1123
(Ala. 2003)). The alleged unjust enrichment here occurred because the discharge injunction
invalidated certain debts, see 11 U.S.C. § 524, and Defendants then “collect[ed] discharged
debts,” (doc. 1 at 7). Upon proving such a claim, the Caldwells would be entitled to restitution.
See Heilman, 876 So. 2d at 1123. The Caldwells’ contempt claim is based on the allegations
Defendants “have . . . collected a discharged debt” and the Caldwells are, therefore, entitled to
compensatory damages. (Doc. 1 at 4). A contempt claim alleging the collection of a discharged
debt wholly encompasses an unjust enrichment claim for collecting a discharged debt.
Therefore, the Bankruptcy Code’s complete remedial scheme preempts such a claim.
E. Count I – Contempt of the Bankruptcy Discharge Injunction
Defendants contend this claim should be dismissed because there is no private right of
action for the violation of a discharge injunction so the proper way to address such violations is
through contempt proceedings in the bankruptcy court. (Doc. 8 at 3-6; doc. 11 at 4-7). The
Caldwells argue they do not seek to raise a private right of action under 11 U.S.C. § 524 but a
“contempt proceeding pursuant to [11 U.S.C.] § 105(a).” (Doc. 18 at 3-4). Further, they argue,
the district court has exclusive jurisdiction over bankruptcy cases, which may be referred to the
bankruptcy court, but the referral must be withdrawn when non-bankruptcy claims are included,
such as FDCPA claims. (Id. at 5-8). They also contend it is in the interest of judicial economy
to withdraw the reference instead of bifurcating the contempt claims from the FDCPA claims,
which all arise from the same nucleus of operative fact. (Id. at 8). Lastly, the Caldwells contend
they had to bring their contempt claim as a separate lawsuit because (1) courts routinely hear
contempt actions as adversary proceedings, (2) their other claims could not be brought by
motion, and (3) they seek class certification. Defendants’ reply characterizes the Caldwells
argument as a continued assertion of a separate private cause of action for contempt and
contends that, because no such cause of action exists, the claim must be dismissed regardless of
whether the district court could have jurisdiction over such a claim.
doc. 23 at 1-3).
(Doc. 22 at 2-3;
Although the Caldwells attempt to tie together a lot of arguments in support of bringing
their contempt claim in this Court, their underlying contention is that bringing their contempt
claim in this Court, alongside their FDCPA claim based on the same facts, is in the interest of
judicial economy and the parties’ interests in preventing unnecessary costs and delay. They did
not want to split the claims into a motion in the bankruptcy court and a suit in the district court
when the facts are the same, and they were reluctant to file the non-bankruptcy claims in the
bankruptcy court because, they assert, those post-discharge claims do not affect the bankruptcy
estate and would likely be dismissed as not being within the court’s jurisdiction. (Doc. 18
at 7-8). The remaining arguments just try to prove they are allowed to do (jurisdictionally and
procedurally) what they otherwise want to do. In doing so, they have created a Gordian knot of
jurisdictional and procedural issues for this Court to cut through.
1. Jurisdictional Issues
First, there is the question of whether a contempt claim may be raised in a separate suit
than the original bankruptcy case. Defendants consistently characterize this question as whether
there is a private cause of action for contempt of the discharge injunction upon which a separate
suit can be based and conclude that, because there is not, such a claim may not be raised in a
separate suit. (Doc. 8 at 3-6; doc. 11 at 4-7; doc. 22 at 2-3; doc. 23 at 1-3). Defendants are
correct in stating there is no private right of action for contempt of the discharge injunction.
Although the Eleventh Circuit has not spoken directly on the issue, it has held that no
independent contempt cause of action exists at common law, see Blalock v. United States, 844
F.2d 1546, 1550 (11th Cir. 1988) (holding that no independent contempt cause of action exists
but, in criminal cases, Rule 6(e)(2), FED. R. CRIM. P., creates a cause of action for injunctive
relief that can be enforced with the contempt power), and has indicated an inclination to follow
the majority of other circuits holding no private right of action exists under § 524 or § 105(a) of
the Bankruptcy Code, see In re McLean, 794 F.3d 1313, 1319 (11th Cir. 2015) (citing Walls v.
Wells Fargo Bank, N.A., 276 F.3d 502, 509 (9th Cir. 2002), for this proposition (despite
ultimately avoiding the question) when noting the court’s concern the bankruptcy court had acted
beyond its jurisdiction by addressing contempt of a discharge injunction under a different case
number); id. at 1326 (differentiating between adversary proceedings, which are generally
“viewed as stand-alone lawsuit,” and contested matters, under which motions for an order of
contempt fall) (citing FED. R. BANKR. P. 9014); see also In re Joubert, 411 F.3d 452, 457 (3d
Cir. 2005) (§ 105(a) does not create a private cause of action); Walls, 276 F.3d at 509 (neither
§ 105(a) nor § 524 create a private right of action); Pertuso v. Ford Motor Credit Co., 233 F.3d
417, 422-23 (6th Cir. 2000) (same).
However, this does not answer the question of whether the contempt proceeding must be
raised in the original bankruptcy case. In fact, recent Eleventh Circuit precedent indicates that it
does not—jurisdictionally or procedurally.
In McLean, the court addressed whether a
bankruptcy court exceeded its jurisdiction in enforcing, through contempt proceedings, a
discharge injunction issued under a different case number (i.e., a second bankruptcy petition filed
three years after the discharge order at issue). 794 F.3d at 1319.
On the jurisdictional question, the court noted that “‘the court that issued the injunctive
order alone possesses the power to enforce compliance with and punish contempt of that order,’
and this ‘power to sanction contempt is jurisdictional.’” Id. at 1318-19 (quoting Alderwoods
Grp., 682 F.3d at 970). The question then was whether the “court” with power to punish
contempt extended beyond the original case. See id. at 1319 (“[O]ur concern was that the
bankruptcy court might have acted beyond its jurisdiction in enforcing the discharge injunction
issued under a different case number.”). The court cited Alderwoods Group for the proposition
the contempt power “was ‘equal’ to and reflective of a court’s power to issue an underlying order
in the first place, implying that “the contempt power is vested at the same level of organization
as Congress’s grant of jurisdiction” and, therefore, “suggests that a court’s power to punish any
contempt against it transcends case numbers or the presence of individual judges and lies with
the entire tribunal.” Id. at 1319 n.2. Therefore, the court held the bankruptcy court had properly
entered the contempt order enforcing the previous discharge order in the new bankruptcy case.
Id. at 1319-20 (“The bankruptcy court therefore had jurisdiction to entertain a motion for
contempt in the McLeans’ second bankruptcy case for a violation of the discharge injunction
from their first . . . .”). Accordingly, there is no jurisdictional issue with raising a contempt
proceeding under a new case number as long as it is in the same court.
On a related issue, because a bankruptcy court is a unit of the district court and acquires
its authority from the grant of jurisdiction to that court, the “entire tribunal,” whose authority the
contempt power vindicates, must be the district court (which includes the bankruptcy court),
whose exclusive authority was exercised in the original discharge injunction. See 28 U.S.C.
§ 1334 (giving district courts exclusive jurisdiction over bankruptcy cases); id. § 151 (“In each
judicial district, the bankruptcy judges in regular active service shall constitute a unit of the
district court to be known as the bankruptcy court for that district.”); id. § 157(a) (providing for
referral to the bankruptcy judges of the district); Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539, 1543,
1544, 1547-49 (11th Cir. 1996) (reversing and remanding to the district court a contempt motion,
upon which the district court had withdrawn the reference and entered a final order).7
Ultimately, the McLean court expressed its holding in terms that the United States
Bankruptcy Court for the Middle District of Alabama had sole power to enforce compliance with
the discharge injunction, “irrespective of the case number of, or the judge who might have
2. Procedural Issues
On the procedural question, Defendants and the Caldwells are each partly correct. As
Defendants contend, a contempt proceeding must be brought by motion in the court issuing the
discharge order. See McLean, 794 F.3d at 1326 (holding that, although it was not reversible
error when the defending party did not object, it is an error to be corrected when a contempt
proceeding is brought as an adversary proceeding instead of a contested matter). Accordingly,
the Court construes Count I as a contested matter under Bankruptcy Rule 9014. Although the
motion should have been filed in the bankruptcy court, the undersigned acknowledges the
economy of keeping the claims together and understands the Caldwells’ reluctance to split them
up considering the time and effort it would take to get them back together and the risk of, failing
that, having to conduct the same trial twice. Because, as discussed above, nothing prevents a
motion for a contempt order from being filed in a different case in the same court, the issue
before the Court is whether, as the Caldwells have argued, the reference to the Bankruptcy Court
should be withdrawn.
The reference to the Bankruptcy Court is not absolute because 28 U.S.C. § 157(d)
provides for withdrawal under limited circumstances, sometimes mandatorily, sometimes
permissively. The district court is required to withdraw a proceeding “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.” Id. “Most
courts . . . , including all district courts within the Eleventh Circuit that have considered the issue,
presided over, the prior proceeding.” Id. at 1319. While this language, on its face, could be
limited to state only the bankruptcy court has the power to enforce the order, the court was
dealing with whether contempt jurisdiction was confined to a particular case. The rationale for
holding that it was not also supports the conclusion the district court also falls within the
meaning of “court” and may, if appropriate, withdraw the reference on contempt proceedings.
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.” Thompson
v. LVNV Funding, LLC, 534 B.R. 816, 818 (N.D. Ala. 2015) (internal quotation marks omitted).
The Caldwells contend the withdrawal is mandatory because they have brought FDCPA
claims based on post-discharge conduct, which cannot be heard in the bankruptcy court.
(Doc. 18 at 6-7). While the FDCPA claim would certainly require withdrawal of those claims if
they had been raised in the Bankruptcy Court, those claims were filed in this Court and never
referred to the Bankruptcy Court. The real question is whether the bankruptcy matters (i.e., the
contempt count), which should have been filed in the Bankruptcy Court and could easily be
dismissed without prejudice or severed from the rest of the claims and transferred to the
Bankruptcy Court, should be kept in this Court as part of this case. Cf. Church v. Accretive
Health, Inc., No. 14-0057-WS-B, 2014 WL 7184340, at *14 (S.D. Ala. Dec. 16, 2014)
(dismissing); Land Ventures for 2, LLC v. Fritz, No. 2:12-CV-240-WKW, 2015 WL 5919879, at
*6 (M.D. Ala. Oct. 9, 2015) (affirming transfer). Because the contempt proceeding could be
resolved without any consideration of non-Code federal law, much less “substantial or material”
consideration, withdrawal of that claim is not mandatory. If the contempt count remains at part
of this case, it will be under the permissive prong of § 157(d).
Specifically, the Court is permitted to withdraw all or part of a proceeding “for cause
shown.” 28 U.S.C. § 157(d). When determining whether cause exits to withdraw a case from
the Bankruptcy Court, a district court should consider: “(1) the advancement of uniformity in
bankruptcy administration; (2) decreasing forum shopping and confusion; (3) promoting the
economical use of the parties’ resources; . . . (4) facilitating the bankruptcy process”; “
whether the claim is core or non-core;  efficient use of judicial resources;  a jury demand;
and  prevention of delay.” Washington v. LVNV Funding, LLC, No. 7:14-MC-02054-RDP,
2015 WL 1245741, at *3 (N.D. Ala. Mar. 18, 2015) (quoting In re Childs, 342 B.R. 823, 827
(Bankr. M.D. Ala. 2006)) (internal quotation marks omitted).
The Caldwells contend judicial economy supports their request for withdrawal of the
reference. (Doc. 18 at 8). Defendants refer to the court’s finding in Church v. Accretive Health,
Inc. that “a considerable body of authority has concluded that the bankruptcy judge who issued
the discharge order is the only appropriate authority to decide whether (and if so what type and
magnitude of) civil contempt sanctions are warranted in the § 524 context” and concluding that
any contempt motion should be directed in the first instance to the bankruptcy judge. (Doc. 22 at
4; doc. 23 at 4) (quoting Church, No. 14-0057-WS-B, 2014 WL 7184340, at *11).
The Church court relied on the Seventh Circuit’s reasoning that the court that issued the
discharge order is in a better position than a judge in whatever federal district the plaintiff
managed to serve the defendant, and on the Ninth Circuit’s similar fear that a private remedy
could put enforcement of the discharge injunction in the hands of a court that did not issue it
instead of the bankruptcy judge who did. See No. 14-0057-WS-B, 2014 WL 7184340, at *11
(quoting Cox v. Zale Delaware, Inc., 239 F.3d 910, 916 (7th Cir. 2001), and Walls, 276 F.3d at
Neither of these circuit cases was dealing with a withdrawal of the reference, and
withdrawing the reference does not touch on those court’s concerns because the contempt
proceeding would still be in the district that issued the discharge order. Furthermore, although
the Wall court referenced the contempt proceeding being in front of the bankruptcy judge who
issued the discharge order, the bankruptcy judge in the Caldwells’ case has since retired so the
“judge whose discharge order gave rise to the injunction” would not preside over the contempt
proceeding even if the original case were reopened.
Although withdrawal of the reference, to some degree, undermines the normal
bankruptcy procedures and, since contempt of the discharge injunction is a core bankruptcy
issue, also undermines the efficient use of the Bankruptcy Court’s expertise as a judicial
resource, the countervailing promotion of economical use of the parties’ and the Court’s
resources and the avoidance of delay by having the same issues dealt with only once in the same
proceeding outweighs those considerations. See, e.g., Lomax v. Bank of Am., N.A., 435 B.R. 362,
376 (N.D.W. Va. 2010) (not explicitly applying these factors but finding cause existed to
withdraw the reference regarding claims of bankruptcy injunction violations because of the
judicial economy of keeping them together with the plaintiff’s FDCPA claims). Further, forum
shopping does not appear to be a major consideration beyond the economic factors already
discussed (which apply to both parties and the Court), and, there being no jury demand in this
case, the “jury demand” factor does not weigh in favor of either side. Therefore, the Court finds
there is cause to WITHDRAW the reference on the Caldwells’ contempt count, and Defendants’
request to dismiss this count because it is not an independent cause of action is DENIED.
Based on the foregoing, Defendants’ motions to dismiss, (docs. 7 & 10), are GRANTED
IN PART and DENIED IN PART. Specifically, Counts III and IV are DISMISSED; Count V
is DISMISSED, but only as a separate count and without any effect on the underlying claim for
attorney’s fees; and Counts I and II remain pending.
DONE this 8th day of September, 2016.
JOHN H. ENGLAND, III
UNITED STATES MAGISTRATE JUDGE
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