BARRIS v. MIDLAND FUNDING LLC

Filing 5

OPINION. Signed by Judge William J. Martini on 2/9/15. (gh, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Docket No.: 14-cv-6469

CYNTHINA BARRIS,
Plaintiff,

OPINION
v.
MIDLAND FUNDING LLC,
Defendant.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff brings this action pursuant to the Fair Debt Collection Practices Act, 15
U.S.C. § 1692 et seq., (“FDCPA”). Defendant Midland Funding (“MF”) filed this motion
to dismiss for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1).
Plaintiff did not oppose the motion to dismiss. For the reasons set forth below, the motion
is GRANTED.
I.

BACKGROUND

On some date unspecified in the Complaint, Plaintiff discovered that MF reported
a debt she had incurred to a credit-rating agency. (Complaint at ¶¶ 9-11). Plaintiff
disputed the debt directly with MF via a dispute letter. (Complaint at ¶ 12). In September
2013, MF re-reported the debt to the credit-rating agency. On October 8, 2013, Plaintiff
examined her credit report and found that MF had failed to report the debt as “disputed by
consumer” to the credit-rating agency. (Complaint at ¶ 14). Plaintiff alleges that this
failure violated the FDCPA. (Id.).
On October 31, 2013, Plaintiff filed for bankruptcy. On February 7, 2014, she
discharged her personal debts via an order of the Bankruptcy Court. (ECF No. 4-4).
On September 16, 2014, Plaintiff filed this Complaint in state court, alleging that
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MF’s failure to report the debt as “disputed by consumer” to the credit-rating agency
entitled her to relief under the FDCPA. MF removed to federal court on October 20, 2014
pursuant to 28 U.S.C. § 1446. The Court has jurisdiction pursuant to 28 U.S.C. § 1331
(federal question).
Plaintiff concedes that, prior to filing her Chapter 7 bankruptcy petition, she was
aware of this FDCPA claim against MF. The Bankruptcy Code, 11 U.S.C. § 521, requires
debtors to disclose any potential claims during the bankruptcy proceedings. McLauchlan
v. Aurora Loan Servs. LLC, No. C10-1560TSZ, 2011 WL 841289, at *2 (W.D. Wash. Mar.
8, 2011) (citing Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 785 (9th Cir.
2001)). Plaintiff did not do so. Instead, Plaintiff filed this action after the discharge of
her debts. MF argues that the claim became the property of the bankruptcy estate during
the bankruptcy proceedings, and thus Plaintiff Barris has no standing to bring this claim.
II.

LEGAL STANDARD

A Rule 12(b)(1) motion to dismiss must be granted where a court lacks subjectmatter jurisdiction. Fed. R. Civ. P. 12(b)(1). “When subject matter jurisdiction is
challenged under Rule 12(b)(1), the plaintiff must bear the burden of persuasion.” Brill v.
Velez, 2014 U.S. Dist. LEXIS 87668, at *2 (D.N.J. June 27, 2014). “Challenges to subject
matter jurisdiction may be facial or factual attacks.” Lincoln Benefit Life Co. v. AEI Life,
LLC, 13 F. Supp. 3d 415 (D.N.J. 2014) (citing Common Cause v. Pennsylvania, 558 F.3d.
249, 257 (3d Cir. 2009)).
The concept of standing is an integral part of the constitutional limitation of federalcourt jurisdiction to actual cases or controversies. Hagan v. United States, 2002 U.S. Dist.
LEXIS 3504, at *13 (E.D. Pa. Mar. 1, 2002) (citing Simon v. Eastern Kentucky Welfare
Rights Organization, 426 U.S. 26, 41-42 (1976)). Absent the constitutional minimum
pursuant to Article III, a federal court does not have subject matter jurisdiction. In re New
Jersey Tax Sales Certificates Antitrust Litig., 2014 U.S. Dist. LEXIS 154977, at *37
(D.N.J. Oct. 31, 2014).
Accordingly, the plaintiff bears the burden at all times to establish the three
elements of standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). The
plaintiff must have suffered an injury in fact. Id. at 560 n.1. Second, Plaintiff must
establish a causal connection between the injury and the conduct complained of. Id. at
560-61 (citing Simon, 426 U.S. at 41-42). Lastly, it must be “likely” as opposed to “merely
speculative” the injury will be “redressed by a favorable decision.” Id. at 561 (citing
Simon, 426 U.S. at 38).
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III.

DISCUSSION

In cases where a debtor attempts to bring a cause of action for a pre-petition claim
that was not disclosed in the bankruptcy proceeding, the debtor lacks standing because
pre-petition claims belong to the bankruptcy trustee. Schafer v. Decision One Mortg.
Corp., 2009 U.S. Dist. LEXIS 56639, at *12 (E.D. Pa. Jul. 1, 2009).
The filing of a bankruptcy petition creates a bankruptcy estate, which consists of
“all legal or equitable interests of the debtor in property” as of the commencement of the
case. In re Allen, 768 F.3d 274, 281 (3d Cir. 2014) (quoting 11 U.S.C. § 541(a)(1)). The
scope of 11 U.S.C. § 541(a)(1) is broad, and it includes all kinds of property, including
possible causes of action. Id. The duty to disclose applies to all pre-petition claims. See
11 U.S.C. § 521(1) (“the debtor shall file…a schedule of assets and liabilities…and a
statement of the debtor’s financial affairs…”); Collier on Bankruptcy, 15th Edition Rev.
§521.06[3][a] (“Possible causes of action belonging to the debtor should be listed, even if
the likelihood of success is unknown”). Failure to list an asset as property of the
bankruptcy estate does not prevent it from becoming property of the estate. 11 U.S.C. §
554(d).
Once an asset becomes part of the bankruptcy estate, all rights held by the debtor in
the asset are extinguished unless the asset is expressly and unequivocally abandoned back
to the debtor. See 11 U.S.C. § 554(a)-(c). At the close of the bankruptcy case, any estate
property not abandoned or administered in the bankruptcy proceedings remains the
property of the bankruptcy estate. See 11 U.S.C. § 554.
Once an estate is created, the trustee has sole and exclusive authority to pursue
claims on behalf of the estate. See In Re Dionisio, 2003 U.S. App. LEXIS 12432, at *5
(3d Cir. 2003); See also in re Truong, 2006 Bankr. LEXIS 4525, at *11 (Bankr. D.N.J.
May 3, 2006). (“[A] trustee is granted complete authority and discretion with respect to
the prosecution and defenses of any litigation of the debtor’s estate.”). For a debtor to
regain standing, the trustee must abandon the claim, whether voluntarily or pursuant to an
Order of Court. 11 U.S.C. § 554(a)-(b).
Here, Plaintiff alleges that she became aware of her claims against MF on October
8, 2013, when she allegedly examined her credit report and determined that MF failed to
mark her debt as “disputed by consumer.” (See Complaint at ¶¶ 11-14). Because she filed
for bankruptcy after October 8, 2013, her FDCPA claim is a pre-petition claim. Thus, the
FDCPA claim became part of the bankruptcy estate on October 31, 2013, when Plaintiff
filed for Chapter 7 protection. See 11 U.S.C. § 541 (a)(1). Because Plaintiff neglected to
list this claim as an asset on her bankruptcy schedules, it remains a part of the bankruptcy
estate. Tilley v. Anixter Inc., 332 B.R. 501, 508 (D. Conn. 2005) (“A trustee may abandon
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scheduled property, i.e., property that has been listed on the bankruptcy petition, either
through procedures requiring notice and a hearing, 11 U.S.C. § 554(a) & (b), or by failing
to administer it before the close of the bankruptcy case, id. at § 554(c). Unscheduled
property, in contrast, can never be abandoned without the notice and hearing required in
sections 554(a) and (b).”).
Here, Plaintiff fails to demonstrate that the trustee voluntarily abandoned any estate
property. As a consequence, Plaintiff lacks standing to pursue this FDCPA claim. The
Trustee has exclusive authority to dispose of or control property of the bankruptcy estate,
including Plaintiff's claim against MF.
For these reasons, I recommend that Plaintiff's Complaint be dismissed. Dismissal
is without prejudice as to the trustee for Plaintiff’s bankruptcy estate, the real party in
interest. See Schafer v. Decision One Mortg. Corp., 2009 U.S. Dist. LEXIS 56639, at *22
(E.D. Pa. June 30, 2009) (“Further, the Court reminds the parties that Ms. Schafer’s
Complaint was dismissed without prejudice to the right of the bankruptcy trustee to pursue
such a claim as a party-plaintiff, or the right of Ms. Schafer to re-file a complaint in the
event that her claims are abandoned by the bankruptcy trustee.”).
IV.

CONCLUSION

For the reasons set forth above, Defendant’s motion is GRANTED. An appropriate
order follows.

/s/ William J. Martini
________________________________
WILLIAM J. MARTINI, U.S.D.J.
Date: February 9, 2015

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