Campbell v. Carruthers (In re Campbell)

553 B.R. 448

In re Angela Campbell, DebtorAngela Campbell, Plaintiff

v.Dennis Scott Carruthers, and D. Scott Carruthers, A Professional Law Corporation, Defendants

Case No. 15–12342–WRS

Adv. Pro. No. 16–1013–WRS

United States Bankruptcy Court, M.D. Alabama.

Signed June 14, 2016

Anthony B. Bush, The Bush Law Firm, LLC, Montgomery, AL, for Plaintiff.

Dennis Scott Carruthers, pro se.

D. Scott Carruthers, A Professional Law Corporation, Stanton, CA, pro se.

MEMORANDUM DECISION

William R. Sawyer, United States Bankruptcy Judge

This adversary proceeding came before the Court for a damages hearing on May 25, 2016. Plaintiff Angela Campbell alleges that Defendants Dennis Scott Carruthers and his law firm have committed multiple violations of the automatic stay and the Fair Debt Collection Practices Act. The Defendants have not answered and the Court has entered default against them. Plaintiff appeared at the damages hearing in person and through her counsel. The Defendants did not appear. For the reasons set forth below, the Court enters JUDGMENT FOR THE PLAINTIFF.

I. FACTS & PROCEDURAL HISTORY

Plaintiff Angela Campbell (“Campbell”) filed Chapter 13 bankruptcy on November 12, 2015. (Case No. 15–12342, Doc. 1). On her Schedule F, she listed roughly $10,000 in student loan debt owed to the United States Department of Education and Navient, and Navient filed a proof of claim for $10,223.59. (Case No. 15–12342, Doc. 1, Claim 5). Her confirmed plan provides that property of the estate remains so after confirmation. (Docs. 2 & 21). She is still in bankruptcy.

Defendant Dennis Scott Carruthers is a California attorney who practices under the firm name “D. Scott Carruthers, A Professional Law Corporation” (collectively “Carruthers”). On January 7, 2016, an individual named Brian Bell (“Bell”) called Campbell and left the following voice message on her phone:

Angela Campbell, this is Brian Bell at the Attorney's office Scott Caruthers. Give me a call here we need to speak. Reach me back at 1–800–495–8682. My direct extension here is 612 again this is Brian Bell calling from the Attorney's office Scott Caruthers.

(Ex. 1) (underline and misspellings in original). Campbell testified that when she returned the call Bell informed her that he was an attorney¹ for the “ATI school” and that she informed him she was in bankruptcy and had listed the debt. Bell informed Campbell that the bankruptcy “did not matter” because it was unrelated to the debt, and Campbell referred him to her bankruptcy attorney. Bell hung up, but called Campbell back about ten minutes later and stated that the bankruptcy was unrelated, that she owed approximately $4,000, and threatened her that if she did not pay that amount or allow him to start debiting her bank account, that he would place a garnishment on her wages. When Campbell informed Bell that she could not afford to have her wages garnished because she was a single parent, he said that did not matter. In order to prevent Bell from garnishing her wages, Campbell provided him with her debit card number. She asked Bell to only take out $25, but he informed her that he required $50. She said she was only paid bi-weekly, and he said he would take out $50 every two weeks. Campbell again asked Bell not to take that much out because she does not make much money, but Bell refused.

On January 21, 2016, Carruthers withdrew $50 from Campbell's bank account. (Ex. 2). Campbell did not have sufficient funds in her account and incurred a $28 overdraft fee as a result. She testified that she incurred an additional $200 in overdraft fees in the days that followed as a result of Carruthers's action. Campbell eventually cancelled her debit card on the advice of her attorney.

On February 11, 2016, Bell again called Campbell and left the following voice message on her phone:

Angela Campbell Brian Bell here with the attorney's office Scott Caruthers give me a call back here at 1–800–495–8682.

(Ex. 3) (grammatical errors and underline in original). Bell also called Campbell at her place of employment and demanded to know why he could not debit more money from her account. Campbell told him that she had cancelled her debit card on the advice of her attorney and asked him to leave her alone. According to Campbell, Bell responded “well, I'm not going to leave you alone because you owe me this money.” On February 15, 2016, Carruthers debited another $50 from Campbell's bank account, and Campbell incurred another $28 overdraft fee as a result. (Ex. 4). Campbell's bank statement reflects that she was only able to bring her bank account current through the use of a payday loan. (Ex. 4).

Campbell sued Carruthers and his firm for violations of the automatic stay and the Fair Debt Collection Practices Act (“FDCPA”) on February 3, 2016. (Doc. 1).

Carruthers was served with the summons on February 8. (Doc. 4). On February 16, Campbell amended her complaint to reflect Carruthers's and Bell's ongoing conduct. Carruthers never answered or entered an appearance, and the Clerk of Court entered default against him on March 31, 2016. (Doc. 10). This damages hearing followed.

II. ANALYSIS

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a), and the District Court's General Order of reference dated April 25, 1985.

A. Adjudicatory Power

Campbell's claim that the automatic stay has been violated is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). Her FDCPA claim is non-core, but Carruthers was served with the complaint and has not refused consent to this Court's adjudication of that claim. In Wellness International Network, Ltd. v. Sharif, ––– U.S. ––––, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015), the Supreme Court held that a litigant may waive his right to an Article III adjudicator by failing to timely raise it. Wellness Int'l Network, 135 S.Ct. at 1947–48. The Supreme Court stated that “the key inquiry is whether the litigant or counsel was made aware of the need for consent and the right to refuse it, and still voluntarily appeared to try the case before the non-Article III adjudicator.” Id. at 1948 (internal quotation marks omitted). This Court found such a waiver in a case where the defendant answered, litigated for two years before refusing consent, and failed to appear at trial. See Wilkins v. AmeriCorp Inc. (In re Allegro Law LLC), 545 B.R. 675, 700 (Bankr.M.D.Ala.2016). The Court has also found a waiver where the defendants litigated and never refused consent. See Feggins v. LVNV Funding, LLC (In re Feggins), 540 B.R. 895, 900 (Bankr.M.D.Ala.2015).

This case is distinguishable from Allegro Law and Feggins because Carruthers has not litigated before this Court at all. Nevertheless, the Court concludes that Carruthers has impliedly consented to the Court's adjudication of Campbell's FDCPA claim. The summons that was served on Carruthers prominently featured the following warning:

IF YOU FAIL TO RESPOND TO THIS SUMMONS, YOUR FAILURE WILL BE DEEMED TO BE YOUR CONSENT TO ENTRY OF A JUDGMENT BY THE BANKRUPTCY COURT AND JUDGMENT BY DEFAULT MAY BE TAKEN AGAINST YOU FOR THE RELIEF DEMANDED IN THE COMPLAINT.

(Doc. 2) (capitalization and bold type in original). As an attorney, Carruthers could not have failed to realize the meaning of this language or the ramifications of choosing to ignore this lawsuit. Courts considering this issue in identical circumstances both before and after Wellness International Network have determined that a defendant's failure to litigate after receipt of a summons with the above-quoted language amounts to the defendant's implied consent to bankruptcy court adjudication. E.g., Hopkins v. M & A Ventures (In re Hoku Corp.), 61 Bankr.Ct.Dec. 257, 2015 WL 8488949, *2–3 (Bankr.D.Idaho Dec. 10, 2015) ; Executive Sounding Bd. Assocs. Inc. v. Advanced Mach. & Eng'g Co. (In re Oldco M Corp.), 484 B.R. 598, 614–15 (Bankr.S.D.N.Y.2012). To hold otherwise would turn the law of waiver, consent, and default judgments on its head. The Court agrees with and adopts the reasoning of Hoku and Oldco M, and holds that a defendant who receives notice of an adversary proceeding against him in bankruptcy court and fails to defend himself impliedly consents to the bankruptcy court's adjudication under 28 U.S.C. § 157(c)(2).

B. Liability

1. Willful Violation of the Automatic Stay

The filing of a bankruptcy petition “operates as a stay, applicable to all entities, of ... any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case....” 11 U.S.C. § 362(a)(6). The automatic stay also prohibits “any act to obtain possession of property of the estate or property from the estate or to exercise control over property of the estate” regardless of when the underlying claim arose. 11 U.S.C. § 362(a)(3). Property of the estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). In Chapter 13 bankruptcy, it also includes all such property that the debtor acquires after the commencement of the case. 11 U.S.C. § 1306(a)(1).

The Bankruptcy Code provides a statutory cause of action to redress willful violations of the automatic stay. Vaughn v. Cent. Miss. Credit Corp. (In re Vaughn), 542 B.R. 589, 598 (Bankr.M.D.Ala.2015) ; see 11 U.S.C. § 362(k)(1). “Violations of the automatic stay are willful ‘if the violator (1) knew of the automatic stay and (2) intentionally committed the violative act, regardless of whether the violator specifically intended to violate the automatic stay.’ ” Id. (quoting Jove Eng'g, Inc. v. I . R . S . (In re Jove Eng'g, Inc.), 92 F.3d 1539, 1555 (11th Cir.1996) ). Campbell has the burden of proving the violation and the defendant's willfulness by a preponderance of the evidence. Id. (citing Grine v. Chambers (In re Grine), 439 B.R. 461, 466 (Bankr.N.D.Ohio 2010).

Carruthers clearly violated the automatic stay provided by 11 U.S.C. §§ 362(a)(3) and (a)(6). The money in Campbell's bank account was property of...