Jones v. City of Chicago (In re Jones)

1

In Re: Tony R. Jones, Debtor.

Tony R. Jones, Plaintiff, v. City of Chicago, Illinois, Defendant.

No. 16-26076

Adv. Case No. 22-00206

United States Bankruptcy Court, N.D. Illinois, Eastern Division

February 15, 2024

Chapter 7

AMENDED OPINION ON THE CITY'S MOTION TO DISMISS (ADV. DKT. NO. 20)

Jacqueline P. Cox, U.S. Bankruptcy Court Chief Judge

This matter comes before the court on the City of Chicago's (the "City") Motion to Dismiss the First Amended. Individual and Class Action Complaint for Damages for Violation of the Automatic Stay ("Motion to Dismiss" or "Motion") (Adv. Dkt. 20). For the reasons explained below, the Motion is granted. Adversary proceeding No. 22-00206 is dismissed with prejudice.

I. Jurisdiction

The court has jurisdiction over this matter under 28 U.S.C § 1334 and Internal Operating Procedure 15(a) of the U.S. District Court for the Northern District of Illinois. This matter is a "core" proceeding under 28 U.S.C. § 157(b)(2)(A), matters concerning the administration of the estate.^[1]

II. Background

This matter concerns the rights, if any, of Tony R. Jones ("Plaintiff," "Plaintiff-Debtor," or "Debtor"), in a vehicle impounded and repossessed pre-petition. The City offered to turn the vehicle over to the Chapter 7 Trustee (the "Trustee") during the Debtor's bankruptcy case; the Trustee declined to accept it due to its inconsequential value. Nov. 14,2023 Hearing Transcript (hereinafter "Nov. 14, 2023 Hr'g Tr."), pp. 23, 28.

On August 15, 2016, the Debtor filed this pro se Chapter 7 case. See Petition (Dkt. 1), In re Jones, Bankr. Case No. 16-26076 (Bankr. N.D.Ill. 2016).^[2] Because his prior bankruptcy case, Bankr. Case No. 16-22327, had been dismissed on August 11, 2016, the automatic stay came into existence in the latter case for 30 days.^[3] 11 U.S.C. § 362(c) (3)(A). The Debtor filed a motion to extend or impose the automatic stay herein on September 14, 2016. That motion was granted on September 22, 2016; the automatic stay was extended generally as to all creditors. Id., Mot. to Extend and/or Impose Automatic Stay (BK Dkt. 13) & Order (BK Dkt. 15).

The Debtor scheduled a 1996 Dodge Ram vehicle ("the vehicle") valued at $2,500 that had been "seized by [the] City of Chicago." Id., Petition (BK Dkt. 1), Schedule A/B: Property, p. 14. The vehicle was not claimed as exempt. Id., Petition (BK Dkt. 1), Schedule C: The Property You Claim as Exempt, pp. 23-24. The Debtor scheduled the City of Chicago Department of Revenue as a secured creditor with an $8,480 secured claim stemming from booting and seizing his vehicle for traffic tickets. Id., Petition (BK Dkt. 1), Schedule D: Creditors Who Have Claims Secured by Property, p. 25. The City was listed as having a lien from the automobile seizure. Id.

During this Chapter 7 case, the City offered to turn over the vehicle, which had been impounded pre-petition, to the Chapter 7 Trustee, Phillip D. Levey. Nov. 14, 2023 Hr'g Tr., pp. 10, 23. The Trustee declined the City's offer. Nov. 14, 2023 Hr'g Tr., pp. 5, 15-16. The Chapter 7 Trustee filed a no-asset report herein and the Debtor's debts were discharged under 11 U.S.C. § 727 on November 9, 2016. See Discharge Order (BK Dkt, 20). The bankruptcy case was closed on November 14, 2016; the Trustee was discharged. Id.

Note that the Discharge Order states that creditors cannot collect discharged debts but that "a creditor with a lien may enforce a claim against the debtors' property subject to that lien unless the lien was avoided or eliminated. For example, a creditor may have the right to foreclose a home mortgage or repossess an automobile." See Discharge Order (BK Dkt. 20), p. 1.

On July 6, 2017, the Debtor filed a Chapter 13 bankruptcy case pro se, assigned to Judge A. Benjamin Goldgar. See In re Jowes, Bankr. Case No. 17-20197 (Bankr. N.D.Ill. 2017).^[4] TheDebtor did not schedule the vehicle in question or claim it as exempt, but he did schedule a different vehicle (a 2015 Dodge Journey) and claimed it as exempt. See Schedules (Ch. 13 BK Dkt. 16), Schedule A/B, p. 2; Schedule C, p. 11. On August 7, 2018, his Chapter 13 case was dismissed.^[5] On November 13, 2018, the case was closed; the Chapter 13 Trustee was discharged.^[6]

On May 6, 2019, Chapter 13 Debtors whose vehicles had been impounded by the City pre-petition (including the Plaintiff-Debtor herein) filed an adversary proceeding against the City; it was assigned to Judge Timothy A. Barnes. See First Am. Compl. (Adv. Dkt. 1), ¶¶ 6-15, Cordova v. City of Chi. (In re Cordova), Ch. 13 Case No. 19-06255, Adv. No. 19-00684 (hereinafter "Cordova") (stating the Plaintiffs joined in the action under Fed.R.Bankr.P. 7020), The Plaintiffs asserted they had a private right of action to proceed under 11 U.S.C. § 362(k) and sought actual and punitive damages, alleging the City violated the automatic stay. See Cordova, First Am. Compl. (Adv. Dkt. 1), ¶¶ 5, 20, 29. The Complaint was subsequently amended to assert class action allegations. Id., Ninth Am. Compl. (Adv. Dkt. 113), ¶¶ 72-83; Id., Tenth Am. Compl. (Adv. Dkt. 155), ¶¶ 68-80.

For purposes of Fed.R.Civ.P. 23 (made applicable in adversary proceedings by Fed.R.Bankr.P. 7023), the Tenth Amended Complaint in Cordova defined the class as:

All persons whose motor vehicles were impounded by the City of Chicago under Chicago Municipal Code Chapter 9-100, et seq, during the period of January 1,2016 to June 19, 2019, who filed a Chapter 13 bankruptcy case in the United States Bankruptcy Court for the Northern District of Illinois during the aforesaid period, and who were thereby deprived by City of Chicago of the use or possession of their motor vehicle after demand for release.

Cordova, Tenth Am. Compl. (Adv. Dkt. 155), ¶ 69.

In Cordova, the Plaintiff-Debtor in this case filed a Motion to Sever and Transfer the Case ("Motion to Sever"), asserting he was not a member of the proposed class and could not receive class relief, since during discovery he learned the City disposed of his 1996 Dodge Ram after his Chapter 7 discharge but before his Chapter 13 filing, so he lacked an ownership interest in the vehicle at the time of his Chapter 13 filing. Id., Motion to Sever (Adv. Dkt. 296), ¶¶ 3-5 (citations omitted). In that motion, he argued that the City's "permanent deprivation" of the vehicle violated his rights under § 362, and he desired to resolve the merits of his claim "without the delay of awaiting class certification" and any potential appeal from a ruling on class certification. Id., ¶ 6 (citations omitted). On October 20,2022, the court granted the Motion to Sever. Cordova, Order (Adv. Dkt. 351).

On December 22,2022, the Plaintiff-Debtor filed the instant Adversary Proceeding No. 22-00206 in the closed Chapter 7 bankruptcy case, without re-opening it, individually and as a class action, asserting the City violated 11 U.S.C. § § 362(a)(2) and (a)(6) when it refused the demands of Chapter 7 debtors for the return of their impounded vehicles after filing for bankruptcy relief. See Compl. (Adv. Dkt. 1), Jones v. City of Chi., Adv. No. 22-00206 (In re Jones), Ch. 7 Case No. 16-26076 (Bankr. N.D.Ill. filed Dec. 22,2022) (hereinafter "Jones") (citations omitted).^[7]

On March 20, 2023, after the City filed a motion to dismiss, the Plaintiff-Debtor amended the complaint, again asserting individual and class claims against the City and seeking actual and compensatory damages for the City's alleged stay violations. Jones, First Am. Compl. (Adv. Dkt. 17), ¶¶ 18-57. The Plaintiff-Debtor admits that "[immediately after plaintiffs filing of his [chapter 7] bankruptcy case, Defendant City offered to turnover the impounded vehicle to the Chapter 7 Trustee ....," but the "Chapter 7 Trustee declined the City's offer of turnover of plaintiffs impounded vehicle because such property was of inconsequential value or benefit to the estate." Id., ¶ 14. However, he asserts that when the Chapter 7 Trustee declined the City's turnover offer, the vehicle was presumptively abandoned, and thus it became property of the Plaintiff-Debtor. Id., ¶ 50.

In the First Amended Complaint, the Plaintiff-Debtor alleges, individually and on behalf of a class of plaintiffs, the City violated the stay due to (1) its acts taken to enforce pre-petition judgments of vehicle impoundment (§ 362(a)(2)); (2) its acts taken against the Debtor's property (e.g., keeping the impounded vehicle after the Trustee declined the turnover offer) (and property of class members) to enforce liens that purport to secure pre-petition claims (§ 362(a)(5)); and (3) its acts taken to "collect assess, or recover" pre-petition claims against the Plaintiff-Debtor and others (§ 362(a)(6)). Id., ¶¶ 45-54. He also argues the City violated § 554(c) by refusing to abandon impounded vehicles to the Debtor and the class members after their Chapter 7 cases were closed, again relying on the theory that the Chapter 7 Trustees abandoned the vehicles and they then became the debtors' property. Id., ¶¶ 55-57.

Like the Cordova plaintiffs, Mr. Jones relies on a private right of action to proceed under § 362(k). Am. Compl. (Adv. Dkt. 17), ¶ 7. He defines the class under Fed.R.Civ.P. 23 as:

All persons whose motor vehicles were impounded by the City of Chicago under City of Chicago Municipal Code §§ 9-100-120 or 2-14-132, other than for a drug use-related offense, between May 15, 2012 to the present, who filed a Chapter 7 bankruptcy case in the United States Bankruptcy Court for the Northern District of Illinois during the period of impoundment, who demanded the release of their vehicle after filing their petition for voluntary bankruptcy, and who were deprived by City of Chicago of the use or possession of their motor vehicle after the demand for release was made.

First...