Poole v. Clubzz (In re Poole)

639 B.R. 730

IN RE: Trevor W. POOLE, Debtor.

Trevor W. Poole, Plaintiff,

v.Maxx Fitness Clubzz, Defendant.

Case No. 18-33612

Adv. Pro. No. 21-03029

United States Bankruptcy Court, N.D. Ohio, Western Division.

Signed March 31, 2022

Eric R. Neuman, Toledo, OH, for Plaintiff.

MEMORANDUM OF DECISION AND ORDER

John P. Gustafson, United States Bankruptcy Judge

This adversary proceeding is before the court upon Plaintiff Trevor W. Poole's ("Plaintiff-Debtor" or "Debtor") Complaint for Violation of the Automatic Stay and Discharge Injunction ("Complaint"). [Doc. #1].¹ Defendant Maxx Fitness Clubzz ("Defendant-Creditor" or "Maxx Fitness") is a prepetition unsecured creditor, as listed on Amended Schedule E/F in Plaintiff-Debtors’ Chapter 7 Case in this court. [No. 18-33612, Doc. #65, p. 4].

A review of the record reflects that no answer or other response to any pleading or order in this adversary proceeding has ever been filed by Defendant-Creditor. For the reasons set forth below, pursuant to Fed. R. Civ. P. 55, made applicable by Fed. R. Bankr. P. 7055, Plaintiff-Debtors’ Motion for Default Judgment will be GRANTED in part and DENIED in part.

The district court has jurisdiction over the Chapter 7 bankruptcy case and all civil proceedings arising under Title 11 or arising in or related to that case, including this adversary proceeding. 28 U.S.C. § 1334(a) and (b). The Chapter 7 case and all proceedings arising in or related to that case, including this adversary proceeding, have been referred to this court for decision. 28 U.S.C. § 157(a) and General Order No. 2012-07 of the United States District Court for the Northern District of Ohio. Proceedings to enforce the discharge injunction are core proceedings that this court may hear and decide. 28 U.S.C. § 157(b)(2). As a core proceeding that stems from the bankruptcy itself, Plaintiff-Debtor's claims are within the court's constitutional authority to enter final judgment. DeWine v. Scott (In re Scott) , 566 B.R. 471, 474 (Bankr. N.D. Ohio 2017) (citing Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.E.2d 475 (2011) ).

A defendant's failure to answer the complaint does not, standing alone, entitle a plaintiff to a default judgment as a matter of right. Westfield Nat'l Ins. v. Young (In re Young) , 2018 WL 1219544 at 2, 2018 Bankr. LEXIS 624, at *4 (Bankr. N.D. Ohio Mar. 7, 2018) ; Am. Express Centurion Bank v. Truong (In re Truong) , 271 B.R. 738, 742 (Bankr. D. Conn. 2002). "In determining whether a default judgment is appropriate, ‘the court should [accept] as true all of the factual allegations of the complaint, except those relating to damages’ and afford plaintiff ‘all reasonable inferences from the evidence offered.’ " In re Young , 2018 WL 1219544 at 2, 2018 Bankr. LEXIS 624 at *4 (quoting Au Bon Pain Corp. v. Artect, Inc. , 653 F.2d 61, 65 (2d Cir. 1981) ). "Yet the court must decide whether the unchallenged facts constitute a legitimate cause of action, since the party in default does not admit mere conclusions of law." Id. (citing Smith v. Household Fin. Realty Corp. of N.Y. (In re Smith) , 262 B.R. 594, 597 (Bankr. E.D.N.Y. 2001) ).

The court finds that notice, including the initial service of the summons and the Complaint, pursuant to Fed. R. Bankr. P. 7004(b)(7), Ohio R. Civ. P. 4.2(F)-(J), and Fed. R. Civ. P. 4(h)(1)(B), as applicable under Fed. R. Bankr. P. 7004(a)(1), has been duly and properly served upon Defendant-Creditor at all stages of this adversary proceeding. Moreover, as a result of being properly served with an alias summons and the Complaint and its ensuing default, Defendant-Creditor has impliedly consented to entry of default judgment against it by the bankruptcy court. See, Messer v. Fyre Media Inc. (In re Fyre Festival LLC) , 611 B.R. 735, 740 (Bankr. S.D.N.Y. 2020). Thus, having found that service of the summons and Complaint on Defendant-Creditor is due and proper, the court also finds that Defendant-Creditor has failed to plead, answer, or otherwise defend this action as required by the applicable rules of procedure.

FACTS

On November 16, 2018, Plaintiff-Debtor filed a "skeleton" Petition. [No. 18-33612, Doc. #1]. Attached to Plaintiff-Debtor's Petition was a creditor matrix. [No. 18-33612, Doc. #1, pp. 9-16]. The Chapter 7 case was filed as a "non-consumer" case, with a declaration that the Plaintiff-Debtor had primarily business debts. [No. 18-33612, Doc. #1, p. 6]. Defendant-Creditor was not listed on the Plaintiff-Debtor's matrix as a creditor. [No. 18-33612, Doc. #1, pp. 9-16].

On December 5, 2018, the Debtor filed the balance of the required documents, including the Schedules. [No. 18-33612, Doc. #10, p. 6]. Defendant-Creditor was not listed on Schedule F, [No. 18-33612, Doc. #10, pp. 20-38], nor was the gym membership listed as an executory contract on Schedule G. [No. 18-33612, Doc. #10, p. 39]. The Plaintiff-Debtor's Statement of Intention [Official Form 108] also did not include the Defendant-Creditor. [No. 18-33612, Doc. #10, pp. 64-65]. In short, Defendant-Creditor was not listed anywhere in the initial bankruptcy filings.

On or about February 11, 2019, the Chapter 7 Trustee filed a Request for Notice to File Claims, [No. 18-33612, Doc. #20], and May 22, 2019, was set as the claims bar date. [No. 18-33612, Doc. #20, p. 1].

An Order of Discharge was entered on March 21, 2019. [No. 18-33612, Doc. #27].

After the entry of the Order of Discharge, Plaintiff-Debtor began receiving collection notices from Defendant-Creditor regarding unpaid gym membership dues. [Doc. #19, p. 2].

On April 1, 2021, an Amendment to Schedules E/F was filed, together with an amendment to the Matrix. [No. 18-33612, Doc. #65]. The Amendments listed two additional creditors, one of which was "Maxx Fitness Clubzz." [Id. , at pp. 4 & 6].

Although Plaintiff-Debtor owed Defendant-Creditor unpaid membership dues at the commencement of the bankruptcy case, [Doc. #1, ¶10], April 1, 2021, was the first time Defendant-Creditor was listed anywhere in Plaintiff-Debtor's Schedules and/or Matrix since the filing of the Petition on November 16, 2018. Thus, the listing of Maxx Fitness was more than two years and four months after Plaintiff-Debtor filed his Petition for relief.

Defendant-Creditor was served with the Amended Bankruptcy Schedules. [Doc. #1, ¶12].

Defendant-Creditor received notice of Plaintiff-Debtor's bankruptcy at some point on or after April 1, 2021, after the discharge was entered and after the deadline to file claims. [Doc. #1, ¶14; Doc. #17-2, p. 1; Doc. #19, p. 4].

On or about April 21, 2021, Defendant-Creditor sent, via email, a notice to Plaintiff-Debtor seeking to collect on its account. [Doc #1, p. 5; Doc. #17, p. 2].

On or about April 22, 2021, Plaintiff-Debtor sent to Defendant-Creditor a letter informing Defendant-Creditor that its collection notices were subject to the discharge order entered on March 21, 2019, and such collection notices violated the discharge injunction. [Doc. #1, p. 5; Doc. #17-2, p. 1].

Defendant-Creditor sent, via email, additional collection notices to Plaintiff-Debtor on the following dates: May 6, 2021; May 7, 2021; May 8, 2021; May 9, 2021; and May 10, 2021. [Doc. #1, p. 5; Doc. #17, p. 3].

On May 18, 2021, Plaintiff-Debtor filed this Adversary Proceeding. [Doc. #1]. At the time of the filing of the Complaint, Plaintiff-Debtor's bankruptcy case remained open for administration. [Doc. #1, ¶19]. At the time of the filing of the Complaint, no distribution had been made in Debtor's Chapter 7 case.

On May 18, 2021, the Clerk issued a summons and notice of pre-trial conference. [Doc. #2]. Plaintiff-Debtor's return on service shows that the summons and Complaint were properly served on Defendant-Creditor at the address listed in Plaintiff's Amended Schedule E/F, [No. 18-33612, Doc. #65, p. 4; Doc. #3], to an officer at Defendant-Creditor's place of business by regular U.S. mail, postage pre-paid. [Doc. #3]. The summons required an Answer or other response to the Complaint, and a pre-trial scheduling conference was set for June 29, 2021. [Doc. #2].

On June 29, 2021, the court held the initial pre-trial scheduling conference. Plaintiff-Debtor appeared at the hearing via telephone. There was no appearance by or on behalf of Defendant-Creditor and no answer or other response to the Complaint was filed and served by Defendant-Creditor. The court granted Plaintiff-Debtor's oral motion for a Clerks’ Entry of Default and required that a Motion for Default Judgment be filed within fourteen days. [Doc. #5]. On July 12, 2021, the Clerk's Entry of Default was docketed pursuant to Fed. R. Civ. P. 55(a), made applicable to these proceedings under Fed. R. Bankr. P. 7055. [Doc. #6].

On July 1, 2021, Defendant-Creditor called Plaintiff-Debtor on his personal line seeking to collect on its account. [Doc. #17, p. 3].

Plaintiff-Debtor filed his Motion for Default Judgment ("Motion") on July 13, 2021. [Doc. #7]. The court scheduled a hearing on the Motion, notice of which the Clerk mailed to Defendant-Creditor at the address set forth in Plaintiff-Debtor's Amended Schedule E/F, [Doc. ##10, 11], in care of "Chief Operating Officer" of Defendant-Creditor. [Doc. #11].

The court held a hearing on the Motion on August 17, 2021. Plaintiff-Debtor appeared at the hearing via telephone. There was no appearance by or on behalf of Defendant-Creditor. At the August 17th hearing, the court informed Plaintiff-Debtor it would grant its Motion, and a further hearing would be scheduled to assess and determine damages, [Doc. ##13, 14], notice of which the Clerk mailed to Defendant-Creditor at the address set forth in Plaintiff-Debtor's Amended Schedule E/F. [Doc. ##13, 16]. On September 1, 2021, Plaintiff-Debtor filed his Memorandum in Support of Damages. [Doc. #17].

On September 14, 2021, the court held an evidentiary hearing on damages. Plaintiff-Debtor appeared at the hearing via telephone. There was no appearance by or on behalf of Defendant-Creditor. At the...