The following are summaries of the February 2016 opinions posted on the Massachusetts Bankruptcy Court’s website.
Kimmy R. Jackson v. ING Bank et al. (In re Kimmy R. Jackson), AP Case No. No. 13-01064-MSH (February 1, 2016)
In this adversary proceeding, the Debtor claimed that one of the defendants, a law firm, violated the discharge injunction of Bankruptcy Code § 524 and the Fair Debt Collection Practices Act (“FDCPA”) and engaged in deceit, misrepresentation, breach of contract and wrongful foreclosure, all in connection with its attempt to enforce default remedies including foreclosing a mortgage on the Debtor’s condominium. The court entered judgment in favor of the law firm on the Debtor’s claims alleging wrongful foreclosure, breach of contract, deceit and misrepresentation, based in part on the court’s determination that the Debtor’s claims were not ripe for adjudication. However, the court did enter judgment in the Debtor’s favor against the law firm for violation of the discharge injunction and § 1692e(2)(A) of the FDCPA, finding that Debtor was the object of collection activity arising from a debt, that the law firm was a debt collector as defined in the FDCPA, and the law firm engaged in acts or omissions prohibited under the FDCPA by misrepresenting the legal status of the mortgage debt.
In re Savvas V. Gianasmidis, Ch. 11 No. 15-12119-JNF (February 11, 2016)
The Debtor filed a motion and judgment creditors filed an opposition, including a request for sanctions, against the Debtor and his attorneys for filing the motion. The court denied the Debtor’s motion and denied the request for sanctions in the creditors’ opposition. The creditors then filed a separate motion for sanctions. Rule 9011 requires that a party seeking sanctions provide the opposing party with notice and a 21-day period to correct or withdraw the offending pleading. The Court denied the motion for sanctions because (i) the creditors had not provided the 21-day safe harbor period, (ii) the offending motion was already denied, and (iii) the creditors’ initial request for sanctions was procedurally improper in that it was not made by separate motion as required by Rule 9011.
In re Kevin M. Rielly, Case No. 15-15003-JNF (February 11, 2016)
The Debtor sought a determination that a creditor willfully violated the automatic stay when it attached and levied on the Debtor’s checking and brokerage accounts pursuant to a state court trustee process order and refused to release the attachments on those accounts despite notice of the commencement of the bankruptcy case. The Bankruptcy Court found that the creditor’s actions to secure and serve the trustee process order had occurred prior to the petition date, and therefore, did not constitute a violation of the automatic stay. To the extent the Debtor complained that his account became inaccessible after the petition date, the Bankruptcy Court found that the Debtor failed to show that the creditor had exercised any control or influence over the postpetition actions of the third party financial institutions where the funds were located. Finally, the Bankruptcy Court found that the creditor had not violated the automatic stay through its failure to take action to effectuate a release of the attachments, considering the unique circumstances of the chapter 7 case. The creditor had refused to take action toward releasing the attachments until the Debtor provided assurance that he would not dissipate the funds once they became accessible. Noting that the accounts in question contained both exempt and non-exempt funds, the Court found that the creditor had engaged in a reasonable, prudent and good faith effort to preserve the rights of the parties, including the rights of the chapter 7 trustee.
Zutrau v. Zutrau (In re Zutrau), A.P. No. 11-1183-FJB (Feb. 24, 2016)
In this Adversary Proceeding, Judge Bailey was asked to determine whether the Debtor’s debt to the plaintiff, his sister, was excepted from discharge under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6). The plaintiff had made a series of loans to the Debtor. The court held that $193,000 of the unpaid debt was not dischargeable because it was “obtained by . . . a false representation,” and $80,000 was not dischargeable because it was related to “willful and malicious injury by the debtor to another entity.
Benjamin Higgins, Law Clerk to the Hon. Frank J. Bailey (Contributions are on personal behalf and should not be construed as statements by the U.S. Bankruptcy Court)
John Joy, Latham & Watkins LLP
Devon MacWilliam, Partridge Snow & Hahn
Michael K. O’Neil, Murphy & King