Andrews v. Indirect Purchaser Class (In re Andrews)

IN RE: CHRISTOPHER ANDREWS, Debtor.

CHRISTOPHER ANDREWS, Plaintiff, v. INDIRECT PURCHASER CLASS, Defendant.

Case No. 18-31345-dof

Adversary Proceeding Case No. 18-3070-dof

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION - FLINT

July 23, 2019

Chapter 7 Proceeding

Hon. Daniel S. Opperman

OPINION GRANTING RENEWED MOTION TO DISMISS OF INDIRECT PURCHASER CLASS

Introduction

The Defendant, Indirect Purchaser Class (the "IPC"), renews its motion to dismiss this adversary proceeding for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) (the "Renewed Motion"). Plaintiff's complaint alleges that the IPC's periodic garnishments in the aggregate amount of $2,356.96 within the 90 days pre-petition, exempted by the Plaintiff, constitute avoidable preferences under 11 U.S.C. § 547. Further, the Plaintiff contends that the IPC is also violating the automatic stay provided by 11 U.S.C. § 362 by "holding" the garnished funds. The Renewed Motion argues that (i) the garnished funds are exempt from avoidance pursuant to 11 U.S.C. § 547(c)(9) as they are not equal to or in excess of $6,451.00 and the Plaintiff's debts are not primarily consumer debts, and (ii) the receipt of garnished funds pre- petition does not violate the automatic stay. The Plaintiff objects to the Renewed Motion. The Court grants the Renewed Motion for the reasons stated in this Opinion.

Jurisdiction

This Court has subject matter jurisdiction over this proceeding under 28 U.S.C. § 1334(b), 28 U.S.C. § 157, and E.D. Mich. LR 83.50(a). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) (matters concerning the administration of the estate), (B) (allowance or disallowance of claims against the estate or exemptions from property of the estate), and (C) (counterclaims by the estate against persons filing claims against the estate).

Facts and Procedural History

A. The Plaintiff's Complaints

The Plaintiff filed a voluntary Chapter 7 bankruptcy on May 31, 2018. On October 11, 2018, the Plaintiff filed his original Complaint against Marvin Miller LLC (a/k/a The Miller Law Firm), alleging that Dickinson Wright PLLC ("Dickinson Wright") represented Marvin Miller, LLC relative to a periodic garnishment of the Plaintiff in the amount of $2,356.96 that occurred within the 90 days prior to the Plaintiff's bankruptcy filing. According to the Plaintiff, Marvin Miller LLC "represents a class action for indirect purchasers," and "has a rule 11 sanctions against the Plaintiff for an amount of somewhere around $21,000." The Plaintiff claimed an exemption in the "Prefernce [sic] garnishment Dickinson wright [sic] law firm for indirect purchasing [sic.]" pursuant to 11 U.S.C. § 522(d)(5) in the amount of $2,500.00, and the Chapter 7 Trustee has not objected to the Plaintiff's claim of exemption. The Plaintiff further alleged that the garnishment constitutes a preference under 11 U.S.C. § 547, and that Dickinson Wright has not returned thefunds despite three requests by the Plaintiff. Finally, the Plaintiff alleged that The Miller Law Firm's retention of the garnished funds constitutes a violation of the automatic stay provided by 11 U.S.C. § 362, and that the Plaintiff is entitled to return of the garnished funds in the amount of $2,536.96; damages for emotional distress, late fees, transportation to and from his attorney's office, and miscellaneous expenses in the amount of $1,000; attorney fees to be determined by fee application; and putative damages in the amount of $2,500.00.

On January 31, 2018, the Complaint was amended to include the IPC as a defendant in this matter subject to identical allegations. On February 15, 2019, The Miller Law Firm was dismissed with prejudice. The IPC is therefore the sole remaining defendant in this matter.

B. The Motions to Dismiss and Responses

On October 11, 2018, the IPC filed its initial motion to dismiss (the "Initial Motion"). In relevant part, the brief in support of the Initial Motion indicates that the IPC is a court-approved settlement class of indirect purchasers harmed by a price-fixing conspiracy among manufacturers of polyurethane foams. The U.S. District Court for the Northern District of Ohio approved a class action settlement in January 2015. See In re Polyurethane Foam Antitrust Litig., Case No. 1:10-MD-2196 (N.D. Ohio) (the "Class Action" and the Court will be referred to as "Class Action Court"). The Plaintiff, appearing pro se, objected to the Class Action settlement, and filed numerous other objections and appeals, all of which were overruled. The Plaintiff's objections are alleged to have delayed receipt of $43.5 million from a settling defendant, delayed disbursement of settlement funds to the IPC, caused the IPC to incur unnecessary attorney fees responding to the various objections, and devolved into personal attacks against the trial court, the Sixth Circuit, and counsel for the IPC. On October 4, 2016, the Class Action Court entered an order imposingsanctions against the Plaintiff in the amount of $15,303.00, noting that the Sixth Circuit Court of Appeals referred to the Plaintiff as a "professional objector," and further noting that the Plaintiff "...continues his vexatious use of the judicial system and does so either to extort a pay-off from IPC or as a delay tactic to prolong his coercion attempt." The court imposed sanctions against the Plaintiff pursuant to 28 U.S.C. § 1927, penalizing the Plaintiff for the amount of interest lost to the IPC because of the Plaintiff's frivolous filings.

The Plaintiff subsequently failed to appear at a court-ordered deposition on December 21, 2016, which resulted in an Order of Civil Contempt being entered against the Plaintiff on December 29, 2016. On January 6, 2017, the U.S. Marshals arrested the Plaintiff and delivered him before the Class Action Court. On February 28, 2017, the Class Action Court entered an Order Regarding Sanctions, which upheld the previously awarded sanctions against the Plaintiff, required the Plaintiff to pay interest on the previously awarded sanctions in the amount of $6,579.00, and imposed an additional sanction in the amount of $500.00 for the missed deposition. See Order Re: Sanctions, p. 2, attached to the Initial Motion as Exhibit B.

On March 28, 2017, the 16^th Judicial District Court for the State of Michigan domesticated the sanctions orders in judgment in favor of the IPC in the amount of $22,406.00. The IPC issued a periodic garnishment to Estate Information Services, Inc. ("EIS") in an effort to collect on its judgment, and beginning in June 2017, funds garnished from EIS pre-petition "have been paid to, or are being held in trust to be paid to, the Indirect Purchaser Class Qualified Settlement Fund ('QSF')." The IPC contends that the QSF funds have already been distributed to eligible members of the settlement class in accordance with orders issued in the Class Action.

In relevant part, the IPC argued that the Complaint should be dismissed because the garnished funds are exempt from avoidance pursuant to 11 U.S.C. § 547(c)(9) as they are not equalto or in excess of $6,451.00 and the Plaintiff's debts are not primarily consumer debts. In addition, IPC argued that the receipt of garnished funds pre-petition is not violative of the automatic stay.

On October 25, 2018, the Plaintiff filed a response to the Initial Motion, essentially arguing that "[t]here is an argument to be made that Rule 11 sanction is a consumer debt," that such debt is "certainly not corporation debt, or business debt," and that "one could argue [the debt] is personal." See response to the Initial Motion, p. 1-2. The Plaintiff further argues that holding on to garnished funds despite demands for their return violates the automatic stay, and that the Plaintiff understood that the "Miller Law Group" was the entity holding the funds in question. The Plaintiff supplemented his response on May 17, 2019.

On November 6, 2018, the IPC filed a reply brief arguing, in relevant part, that the Plaintiff was wrong in asserting that the debt in question is automatically consumer debt if it is not a business debt. Rather, certain debts, referred to as "interstitial," are neither consumer debt nor business debt. See November 6, 2018 reply, p. 3.

The Court held a hearing on the Initial Motion, among others, on November 28, 2018. The hearing on the Initial Motion was adjourned, and the Complaint was amended on December 31, 2018. As previously indicated, the Complaint was amended to include the IPC as a defendant but was otherwise identical to the original Complaint. After the adjourned hearing date on February 6, 2019, the Court entered an order requiring a stipulation that the IPC be added as a defendant in place of The Miller Law Firm. The Order also provided that the IPC could renew the Initial Motion once it was added to the case and The Miller Law Firm was dismissed. The Miller Law Firm was subsequently dismissed on February 15, 2019. The IPC filed the Renewed Motion on February 15, 2019, in which it incorporated the facts, arguments, and authority contained in the Initial Motion.

On March 4, 2019, the Plaintiff, through his then attorney, filed an objection to the Renewed Motion. The objection essentially argues that garnishment of a 1099 contractor is illegal, and that the debt at issue is "consumer debt" because it was incurred when the Plaintiff was "acting as a consumer by representing himself in a class action as a consumer."

The IPC filed a reply brief arguing that Michigan Court Rule 3.101(A)(4) expressly permits the garnishment of all periodic payments, including commissions. EIS indicated that the garnished monies owed to the Plaintiff were for commissions, and as such the periodic garnishment was expressly permitted by the relevant court rule. The IPC also argues that the sanctions imposed on the Plaintiff do not constitute "consumer debt" as they were not voluntarily incurred for personal or household...