Whitworth v. National Enterprise Systems, Inc. et al

Filing 23

Findings & Recommendation: Defendant's Motion for Summary Judgment 7 should be denied. Objections to the Findings and Recommendation are due by 3/3/2009. Response to Objections to the Findings and Recommendation are due by 3/17/2009. Signed on 2/17/09 by Magistrate Judge Paul Papak. (gm)

17

IN THE UNITED STATES DISTRICT C O U R T F O R T H E DISTRICT OF OREGON

LESLIE M. WHITWORTH, Plaintiff, CV 0 8 - 9 6 8 - P K FINDINGS A N D RECOMMENDATION

v.

NATIONAL ENTERPRISE SYSTEMS, INC., R U S S D O E , a n d M I C H E L L E D O E , Defendants. P A P A K , M a g i s t r a t e Judge: This action was filed by p l a i n t i f f Leslie M. Whitworth against defendant National Enterprise Systems, Inc. ("National") and two o f its employees, D o e defendants Russ and Michelle, on August 19, 2008. Whitworth alleges defendants' liability u n d e r the federal F a i r D e b t C o l l e c t i o n P r a c t i c e s A c t a n d t h e O r e g o n U n l a w f u l D e b t C o l l e c t i o n P r a c t i c e s Act. T h i s court h a s subject-matter jurisdiction o v e r WhitwOlih's claims pursuant to 28 U.S.C. §§ 1331 and

P a g e 1 - FINDINGS A N D R E C O M M E N D A T I O N

1367. N o w before the cOUli i s defendants' motion for summmy j u d g m e n t (#7). I have considered the motion, oral argument on b e h a l f o f the parties, and all o f the pleadings on file. For the reasons set fOlih below, the summary j u d g m e n t motion should be denied.

LEGAL STANDARD
Summary judgment is appropriate " i f the pleadings, depositions, answers to interrogatories, and admissions on file, together w i t h the affidavits, i f any, s h o w that there is no genuine issue as to any material fact and that the moving party is entitled to a j u d g m e n t as a matter o f law." Fed. R. Civ. P. 56(c). Summmy judgment is n o t proper i f material factual issues exist for trial. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 318, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Warren v. City o / C a r l s b a d , 58 F.3d 4 3 9 , 4 4 1 (9th Cir. 1995), cert. denied, 116 S.Ct. 1261 (1996). I n evaluating a motion for summary judgment, the district cOUlis o f t h e United States must draw all reasonable inferences i n favor o f the nonmoving party, a n d m a y n e i t h e r m a k e c r e d i b i l i t y d e t e l m i n a t i o n s n o r p e r f o r m a n y w e i g h i n g o f t h e evidence. See, e.g., Lytle v. Household }vgg., Inc., 494 U.S. 545, 554-55 (1990); Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000).

FACTUAL BACKGROUND
WhitwOlih owed a delinquent debt that was acquired i n 2007 b y defendant National. A c c o r d i n g to t h e a l l e g a t i o n s o f t h e c o m p l a i n t , d u r i n g t h e p e r i o d f r o m N o v e m b e r 2 1 , 2 0 0 7 , through December 6, 2007, National employees Michelle and Russ called Whitworth on the telephone at least 28 times in attempting to collect the debt. WhitwOlih alleges that the defendants vilified and verbally abused h i m during these calls, i n violation o f federal and state P a g e 2 - F I N D I N G S AND R E C O M M E N D A T I O N

debt collection practices law. O n February 28, 2008, Whitworth filed a petition for bankruptcy under Chapter 13 o f the Bankruptcy Code. He listed his potential debt collection practices claim against the defendants among his assets. Whitworth filed this action on August 19, 2008.
ANALYSIS

The gravamen o f defendants' motion for summary j u d g m e n t is that WhitwOlih is not the p m i y i n i n t e r e s t e n t i t l e d t o p u r s u e t h e c l a i m s a l l e g e d i n h i s c o m p l a i n t because, h a v i n g r e q u e s t e d t h e p r o t e c t i o n o f t h e B a n k r u p t c y Code, h i s a s s e t s - i n c l u d i n g h i s c a u s e o f a c t i o n a g a i n s t t h e defendants - n o w belong to the bankruptcy estate. Defendants argue that it is only the trustee o f the estate who is the real party in interest authorized under Federal Civil Procedure Rule 17(a) to prosecute this action. Defendants' argument is premised on a fundamental misunderstanding o f the nature o f the protections offered under Chapter 13 o f the Bankruptcy Code. T h e Code expressly provides that Chapter 13 debtors retain possession o f property i n the bankruptcy estate. See 11 U.S.C. § 1306(b) ("[e]xcept as provided in a confirmed p l a n o r order c o n f i r m i n g a p l a n , t h e d e b t o r s h a l l r e m a i n i n p o s s e s s i o n o f all p r o p e r t y o f t h e e s t a t e " ) ; s e e also,

e.g., I I U.S.C. § 1303 (providing that debtors under Chapter 13 shall have substantially the smne
powers as do trustees o f the estate). Moreover, the Code provides that a debtor i n possession, such as a debtor filing for the protections o f Chapter 13, enjoys express authority to sue or to be sued on b e h a l f o f the bankruptcy estate: With or without cOUli approval, the tlUstee or debtor in possession may prosecute or may enter a n appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in b e h a l f o f the estate before any tribunal.

P a g e 3 - FINDINGS A N D R E C O M M E N D A T I O N

Fed. R. Bankr. P. 6009 (emphasis supplied).l T h e Code defines the property o f the estate as including "all legal o r equitable interests o f t h e debtor in property as o f t h e c o m m e n c e m e n t o f the case," 11 U.S.C. § 541, necessarily including legal c l a i m s o r causes o f action, see, e.g., J'vlcGuire v. United States, 550 F . 3 d 9 0 3 , 9 1 4 (9th Cir. 2008) ("A chose i n action is property o f the bankruptcy estate p u r s u a n t to I I U.S.C. § 5 4 1 ( a ) ( I ) " ) , citing City & County a / S a n Francisco v.

P G & E CO/p., 433 F.3d I l l S , 1126 (9th Cir. 2006).
Although i t does n o t appear t h a t the N i n t h Circuit has had occasion to w e i g h in o n the q u e s t i o n , the c o u r t s o f t h e S e c o n d a n d S e v e n t h C i r c u i t s h a v e p e r s u a s i v e l y d e t e n n i n e d t h a t i t w o u l d f r u s t r a t e t h e p u r p o s e s o f S e c t i o n 1 3 0 6 t o l e a v e the d e b t o r i n p o s s e s s i o n o f h i s c a u s e s o f action and yet to prohibit h i m from prosecuting t h e m i n his o w n name. See G l i c k v. Parker &

Parsley Petroleum Co., 145 F.3d 5 1 3 , 5 1 5 , 5 1 5 - 5 1 6 (2d Cir. 1998) (holding that "a Chapter 13
debtor. . . has standing to litigate causes o f action that are not p m i o f a case u n d e r title 11" and deriving support from t h e legislative histOly o f Chapter 13 for t h e p r o p o s i t i o n t h a t Section 1303 w a s drafted to p e n n i t Chapter 13 debtors to sue and be sued o n b e h a l f o f the bankruptcy estate);

Cable v. I v y Tech State College, 200 F . 3 d 467, 473 (7th Cir. 1999) ("Under the reorganization
chapters, t h e d e b t o r - i n - p o s s e s s i o n s t e p s into t h e r o l e o f trustee a n d e x e r c i s e s c o n c u r r e n t a u t h o r i t y

1 T h e foregoing i s i n s t r i c t c o n t r a s t w i t h t h e r u l e s a p p l i c a b l e to debtors w h o s e e k t h e p r o t e c t i o n s o f C h a p t e r 7 o f the B a n k r u p t c y C o d e , p u r s u a n t t o w h i c h t h e t r u s t e e o f the e s t a t e h a s s o l e a n d e x c l u s i v e a u t h o r i t y t o m a n a g e e s t a t e a s s e t s . See I I U . S . C . § 7 0 4 ( 1 ) . T h e d i f f e r e n t treatment reflects t h e velY different policies underlying the two chapters: whereas the Chapter 13 debtor seeks to pay his o r her debts i n full, a n d only requests the intervention o f the courts to e s t a b l i s h a f e a s i b l e p a y m e n t p l a n , the a s s e t s o f the C h a p t e r 7 d e b t o r a r e l i q u i d a t e d a n d the proceeds applied i n partial payment o f the outstanding debt. Thus, the Chapter 7 debtor, w h o h a s s e l e c t e d a s e v e r e r e m e d y t o the p r o b l e m o f i n d e b t e d n e s s , i s n o t p e r m i t t e d t o i n t e r f e r e i n the disposal o f assets i n w h i c h he o r she no longer has any significant interest, b u t the Chapter 13 d e b t o r , w h o c o n t e m p l a t e s r e s u m i n g e x c l u s i v e c o n t r o l o f h i s or h e r a s s e t s a f t e r s u c c e s s f u l l y repaying all creditors, is permitted to retain p o s s e s s i o n o f alld a p a r t i n managing the estate.

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to sue and be sued o n b e h a l f o f the estate"), citing Fed. R. Bankr. P. 6009; see also Donato v.
lvfetropolitan Life Ins. Co., 230 B.R. 418, 425 (N.D. Cal. 1999) ("under 11 U.S.C. § 1303, a

Chapter 13 debtor retains the capacity to sue o n prepetition causes o f action"). Although a Chapter 13 debtor has standing to sue in his own name, such standing is concurrent with that o f the trustee in bankruptcy, and any such suit m u s t necessarily be o n b e h a l f o f the bankruptcy estate. See Fed. R. Bania'. P. 6009. However, because Chapter 13 debtors are expressly authorized by statute to bring actions o n b e h a l f o f estates, the estate i t s e l f need n o t be j o i n e d as a named party i n such actions. See Fed. R. Civ. P. 17(a)(1)(G). Whitworth therefore may properly prosecute this action in his own name. A t oral argument, defendants raised the n e w argument, not articulated in either o f the two briefs filed i n support o f their motion, that the debtor's plan approved b y the court i n Whitworth's bankruptcy action prevents Whitworth from prosecuting this action as a matter o f law. The plan provides that Whitworth "shall incur no credit obligations during the life o f t h e plan without the t r u s t e e ' s w r i t t e n c o n s e n t u n l e s s m a d e n e c e s s m y by e m e r g e n c y o r i n c u n e d i n t h e o r d i n m y c o u r s e o f operating the debtor's business." Defendants argue that retaining counsel to prosecute a lawsuit, even o n a contingency basis, is necessarily to incur a credit obligation, i n that i n the event o f a n adverse result, an unsuccessful plaintiff is generally responsible for certain c o u l i fees a n d costs. The cOUli need n o t decide the validity o f defendants' perhaps novel equation o f p r o s e c u t i n g a legal a c t i o n w i t h incurring a c r e d i t obligation. A s s u m i n g a r g u e n d o t h a t W h i t w o r t h i n c u r r e d a c r e d i t o b l i g a t i o n by f i l i n g h i s c o m p l a i n t , h e n e v e l i h e l e s s r e m a i n s a d e b t o r i n possession o f his estate expressly authorized by statute to bring this action. As such, this cOUli P a g e 5 - FINDINGS A N D R E C O M M E N D A T I O N

may properly exercise personal jurisdiction over him. Whether Whitworth is in compliance with his debtor's plan is a matter for the determination o f the bankruptcy court, and cannot be a q u e s t i o n o f j u r i s d i c t i o n a l i m p o r t w i t h i n this p r o c e e d i n g . B e c a u s e W h i t w o r t h i s e x p r e s s l y a u t h o r i z e d b y s t a t u t e to p r o s e c u t e t h i s a c t i o n o n b e h a l f o f the bankruptcy estate in h i s o w n name, defendants' motion for summaty j u d g m e n t should b e denied. CONCLUSION For the reasons s e t forth above, I recommend that defendants' motion for summary j u d g m e n t (#7) be denied. SCHEDULING O R D E R The above Findings and Recommendation will be refelTed to a United States District Judge for review. Objections, i f any, are due March 3, 2009. I f n o objections are filed, review o f the Findings and Recommendation will go under advisement on that date. I f objections are filed, a response to the objections is due fourteen days after the date the objections are filed and the review o f the Findings and Recommendation will go under advisement o n that date.

Dated this 17th day o f FeblUaty, 2009.

H norable Paul P a p a k United States Magistrate Judge

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