In re Padilla

389 B.R. 409

In re Irene PADILLA, Debtor Irene Padilla, Plaintiff, v. GMAC Mortgage Corporation, Defendant.

Bankruptcy No. 98-18621ELF.

Adversary No. 07-0156.

United States Bankruptcy Court, E.D. Pennsylvania.

June 30, 2008.

COPYRIGHT MATERIAL OMITTED

Carol B. McCullough, McCullough & Eisenberg PC, Warminister, PA, for Plaintiff.

Louis W. Schack, Reed Smith Shaw & McClay LLP, Philadelphia, PA, for Defendant.

OPINION

ERIC L. FRANK, Bankruptcy Judge.

I. INTRODUCTION ...................................................................... ____
  II. PROCEDURAL HISTORY ................................................................ ____
 III. STANDARD OF REVIEW UNDER FED. R. CIV. P. 12(b)(6) ................................. ____
  IV. THE PLAINTIFF'S FACTUAL ALLEGATIONS AND CLAIMS .................................... ____
      A. The Facts ...................................................................... ____
      B. The Claims ..................................................................... ____
      C. The Class Allegations .......................................................... ____
   V. CLAIM NOS. 1, 2 AND 3 WILL BE DISMISSED BECAUSE THE
      DEBTOR'S DEBT TO GMACM WAS NOT DISCHARGED IN THE
      CHAPTER 13 CASE ................................................................... ____
  VI. CLAIM NO. 4 WILL BE DISMISSED BECAUSE THE CONFIRMATION
      ORDER, BY ITSELF, DID NOT CREATE OBLIGATIONS
      REMEDIABLE BY CONTEMPT ............................................................ ____
 VII. CLAIM NO. 5 STATES A LEGALLY SUFFICIENT CLAIM ..................................... ____
      A. Introduction ................................................................... ____
      B. After a Cure of a Prepetition Default Has Been Effected Under
         § 1322(b)(5), A Subsequent Demand for Payment of Any
         Unclaimed, Alleged Delinquent Prepetition Charges Violates 11
         U.S.C. § 1327(a) .......................................................... ____
      C. A Violation of 11 U.S.C. § 1327(a) May Be Remedied Through 11
         U.S.C. § 105(a) ........................................................... ____
         1. introduction ................................................................ ____
         2. enforcement of 11 U.S.C. § 1327(a), generally .......................... ____
         3. case law concerning private rights of action under the
              Bankruptcy Code ........................................................... ____
         4. section 1327(a) is distinguishable from the Code sections
              analyzed under prior case law ............................................. ____
         5. enforcement of § 1327(a) through 11 U.S.C. § 105(a) ............... ____
         6. pre-Code practice ........................................................... ____
         7. summary ..................................................................... ____
VIII. CLAIM NO. 6 FAILS TO STATE A CLAIM BECAUSE NEITHER THE
      CONFIRMED PLAN, THE BANKRUPTCY CODE, THE RULES OF
      COURT NOR THE PARTIES' CONTRACT IMPOSED A DUTY ON
      GMACM TO GIVE THE DEBTOR NOTICE OR OBTAIN COURT
      APPROVAL OF POSTPETITION LEGAL EXPENSES GMACM
      ALLEGEDLY INCURRED DURING THE PENDENCY OF THE
      CASE .............................................................................. ____
      A. Introduction ................................................................... ____
      B. Case Law Supporting the Debtor's Position ...................................... ____
      C. § 506(b) and § 1322(e) ............................................... ____
      D. § 506(b), § 1322(b)(5) and the ramifications of § 1328(a) ....... ____
      E. Fed. R. Bankr.P. 2016 .......................................................... ____
      F. The GMACM Mortgage ............................................................. ____
      G. Summary ........................................................................ ____

IX. GMACM'S REQUEST THAT THE CLASS ALLEGATIONS BE
     STRICKEN WILL BE GRANTED, EXCEPT AS TO CLAIM NO. 5 ................................. ____
     A. Dismissal of Class Claims Based on Claim Nos. 1-4 and 6 ......................... ____
     B. Claim No. 5 ..................................................................... ____
        1. GMACM's arguments ............................................................ ____
        2. preliminary jurisdictional concerns .......................................... ____
        3. the request to strike the class claim is premature ........................... ____
   X. CONCLUSION ........................................................................ ____

I. INTRODUCTION

Plaintiff-Debtor Irene Padilla ("the Debtor") initiated the above adversary proceeding against Defendant GMAC Mortgage Corporation ("GMACM") as a class action. The Debtor alleges that GMACM, a mortgage servicer, violated, on a systemic basis, the rights of debtors in chapter 13 bankruptcy cases that were "confirmed, completed and discharged" in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. More specifically, the Debtor alleges that, after the entry of the debtors' chapter 13 discharges, GMACM regularly demanded payment of attorney's fees incurred: (1) prepetition and (2) postpetition/pre-confirmation. The Debtor complains that GMACM's conduct violates the Bankruptcy Code in various ways. The Debtor seeks restitution, disgorgement, interest, punitive damages, attorney's fees and costs. Presently pending before the court is GMACM's Motion to Dismiss the Amended Class Action Adversary Complaint, Or, In the Alternative, To Strike Class Claims ("the Motion").

For the reasons explained below, the Motion will be granted in large part. All but one of the Debtor's claims will be dismissed and all of the class allegations will be stricken with respect to the dismissed claims. The Motion will be denied with respect to one (1) claim asserted by the Debtor and, in regard to that claim, the Debtor will be required to seek certification of a class "[a]t an early practicable time." See Fed.R.Civ.P. 23(c)(1)(A) (incorporated by Fed. R. Bankr.P. 7023).

II. PROCEDURAL HISTORY

On July 7, 1998, the Debtor filed this chapter 13 bankruptcy case. On February 23, 1999, the court entered an Order confirming the Debtor's proposed chapter 13 plan. On August 22, 2002, the court entered an Order discharging the Debtor. The bankruptcy case was closed on August 27, 2002.

On July 8, 2005, nearly three (3) years after the case was closed, the Debtor filed a motion to reopen her chapter 13 bankruptcy case so that she might initiate an adversary proceeding against GMACM asserting various claims arising from GMACM's alleged violation of the terms of her confirmed plan and her chapter 13 discharge order. The Debtor also asserted that GMACM's alleged misconduct was pervasive, making it appropriate to permit the proposed adversary proceeding to proceed as a class action. GMACM filed a response to the motion on August 15, 2005. After several continuances, a hearing was held on September 13, 2005. By Order dated October 12, 2005, the court denied the motion to reopen.¹ However, the court granted the Debtor the opportunity to conduct certain "narrowly tailored" discovery and to file an amended motion to reopen by January 11, 2006.

On January 11, 2006, the Debtor filed an amended motion to reopen this case. For unknown reasons, that motion was withdrawn and re-filed, again styled as an amended motion to reopen the case, on January 23, 2006. GMACM filed a response to the (second) amended motion. By Order dated March 26, 2007, after a hearing and extensive briefing, I granted the motion to reopen and gave the Debtor until April 20, 2007 in which to file an adversary complaint. See In re Padilla, 365 B.R. 492 (Bankr.E.D.Pa.2007).

On April 19, 2007, the Debtor filed an adversary complaint asserting claims on her own behalf and on behalf of a purported class of former bankruptcy debtors. On July 19, 2007, after GMACM filed a motion to dismiss the complaint under Fed. R. Bankr.P. 7012 and Fed.R.Civ.P. 12(b)(6), the Debtor filed an amended complaint (hereafter, "the Amended Complaint"). On August 27, 2007, GMACM renewed its effort to terminate the litigation by filing the Motion. Both parties filed memoranda of law in support of their positions and a hearing on the Motion was held on October 25, 2007.

III. STANDARD OF REVIEW UNDER FED. R. CIV. P. 12(b)(6)

In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted, the court must accept all of the plaintiffs factual allegations as true and reasonable inferences therefrom in the light most favorable to the plaintiff. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Taliaferro v. Darby Township Zoning Board, 458 F.3d 181, 188 (3d Cir.2006). Dismissal is appropriate only if, accepting as true all facts alleged in the complaint, the plaintiff has not pled "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007).

One Court of Appeals has described the standards a complaint must satisfy as follows:

the complaint must [first] describe the claim in sufficient detail to give the defendant "fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1[9]55, 1964 (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Second, its allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a "speculative level"; if they do not, the plaintiff pleads itself out of court. Bell Atlantic, 127 S.Ct. at 1[9]65, 1973 n. 14.

E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir....