White-Lett v. Bank of N.Y. Mellon Corp. (In re Lett)

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IN RE: SHIRLEY LETT, Debtor.

SHIRLEY WHITE-LETT, Plaintiff, v. BANK OF NEW YORK MELLON CORPORATION, et al., Defendants.

No. 10-61451-BEM

ADVERSARY PROCEEDING No. 20-6031-BEM

United States Bankruptcy Court, N.D. Georgia, Atlanta Division

March 23, 2022

CHAPTER 7

ORDER

Barbara Ellis-Monro U.S. Bankruptcy Court Judge

This matter is before the Court on Plaintiff's Motion for Reconsideration of January 24 Order Denying Her Motion for Summary Judgment (the "Motion to Reconsider"). [Doc. 164]. Plaintiff and Select Portfolio Servicing, Inc. ("SPS") filed cross motions for summary judgment on Plaintiff's claim that SPS violated her discharge injunction. [Docs. 72, 99]. On January 24, 2022, the Court entered an order denying both motions (the "Summary Judgment Order"). [Doc. 162]. By the Motion to Reconsider, Plaintiff seeks reconsideration of the ruling on her motion for summary judgment.

I.Motion to Reconsider Standard

Federal Rule of Civil Procedure 59(e), made applicable by Federal Rule of Bankruptcy Procedure 9023, authorizes the Court to alter or amend a judgment "if there is newly-discovered evidence or manifest errors of law or fact." Metlife Life and Annuity Co. of Conn. v. Akpele, 886 F.3d 998 1008 (11th Cir. 2018). It may not be used "to relitigate old matters, raise argument or present evidence that could have been raised prior to the entry of judgment." Michael Linet, Inc. v. Village of Wellington, Fla. 408 F.3d 757, 763 (11th Cir. 2005). Nor may it be used merely to request reexamination of an unfavorable ruling. Id.; Jacobs v. Tempur-Pedic Intern., Inc. 626 F.3d 1327, 1344 (11th Cir. 2010).

II.Legal Analysis

In the Summary Judgment Order, the Court determined factual issues regarding SPS's knowledge of Plaintiff's discharge precluded summary judgment for Plaintiff. Plaintiff contends the Court erred by misapplying the relevant law and disregarding certain undisputed evidence.

A. Application of Taggart

Plaintiff argues that the Court erred in applying Taggart v. Lorenzen, 139 S.Ct. 1795 (2019), which sets forth the standard for imposing sanctions for a violation of the discharge injunction. Plaintiff contends Taggart only applies when the creditor knew about the discharge injunction and does not apply when the creditor denies knowledge. Here, Plaintiff says, SPS has attempted to establish it had no knowledge of her discharge, such that Taggart does not apply. In making this argument Plaintiff describes Taggart as an exception to liability for sanctions or a defense to liability and repeatedly mentions SPS's inability to prove its lack of knowledge. Plaintiff further contends that any Taggart defense is barred in this case because SPS did not disclose the defense in discovery and SPS did not articulate any legal or factual basis justifying its violation of the discharge injunction.

The burden of proof on the claim for discharge injunction lies with Plaintiff and must be established by clear and convincing evidence. Daniels v. Howe Law Firm, P.C. (In re Daniels), 591 B.R. 814, 822 (Bankr. N.D.Ga. 2018) (Ritchey Craig, J.) (citations omitted). In the Summary Judgment Order, the Court found that SPS violated the discharge injunction by sending mortgage statements to Plaintiff. [Doc. 162 at 13]. Once such a violation has been established, sanctions for civil contempt may be imposed if "there is no objectively reasonable basis for concluding that the creditor's conduct might be lawful." Taggart, 139 S.Ct. at 1799.

The Eleventh Circuit has described a burden-shifting framework for establishing liability for civil contempt:

A party seeking civil contempt bears the initial burden of proving by clear and convincing evidence that the alleged contemnor has violated an outstanding court order. … Once this prima facie showing is made, the burden of production shifts to the alleged contemnor to produce evidence explaining his noncompliance. … If the alleged contemnor makes a sufficient showing, the burden shifts back to the initiating party, who retains the ultimate burden of proving contempt by showing that the alleged contemnor was able to comply.

N.L.R.B. v. Triple A Fire Prot., Inc., No. 96-6944, 2002 WL 987269, at *4 (11th Cir. Feb. 5, 2002); see also In re Mellem, 625 B.R. 172, 178 (B.A.P. 9th Cir. 2021) ("If the movant establishes the threshold elements, the burden of going forward shifts to the responding party to show that it was impossible to comply with the discharge order. … The ultimate burden of persuasion remains on the movant to show, per Taggart, no objectively reasonable basis for concluding that the alleged contemnor's conduct might be lawful under the discharge order."); In re Kimball Hill, Inc., 620 B.R. 894, 907 (Bankr. N.D.Ill. 2020). Because Taggart established that sanctions for a discharge violation are in the nature of civil contempt, Taggart itself is not a "defense" or an "exception" to liability as Plaintiff argues. Instead, Taggart sets forth the analytical framework for determining whether sanctions should be imposed.

Plaintiff has asked the Court to reconsider its denial of her summary judgment motion. Therefore, in this context, SPS is the nonmoving party.^[1] When the nonmoving party has the burden at trial, the moving party can establish its entitlement to summary judgment by either pointing to specific portions of the record that show the nonmoving party cannot meet its burden of proof at trial or by providing affirmative evidence to negate the nonmoving party's case. Hammer v. Slater, 20 F.3d 1137, 1141 (11th Cir. 1994). But, "it is never enough simply to state that the non-moving party cannot meet its burden at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991).

Here, Plaintiff established that SPS violated the discharge injunction with its mortgage statements, which shifts the burden of production to SPS. As in Triple A Fire Protection, in which both parties sought summary judgment on a civil contempt claim, whether SPS has satisfied its burden of production is a question of fact that the record is insufficient to answer. 2002 WL 987269, at *4. Plaintiff has not shown that SPS will be unable to meet its burden of production at trial nor, as explained more fully below, has she produced evidence to negate SPS's ability to do so.

Additionally, Plaintiff's argument that Taggart does not apply when a creditor denies knowledge of the discharge injunction is without merit. A creditor's knowledge or lack of knowledge is directly relevant to whether it had an objectively reasonably basis for believing its conduct did not violate the discharge injunction. When a creditor lacks knowledge of the discharge injunction, that provides an objectively reasonable basis for believing its conduct is lawful. Therefore, as stated in the Summary Judgment Order, to be liable for sanctions under Taggart, the creditor must be aware of the discharge injunction.

B. Undisputed Facts

Plaintiff argues that she has put forth undisputed evidence that SPS had knowledge of her bankruptcy discharge, which was omitted from the Court's analysis. All the evidence Plaintiff cites comes from the Amended Declaration of Shirley White-Lett (the "Amended Declaration"). [Doc. 127], Plaintiff's Amended Response to the Motion for Summary Judgment of Select Portfolio Servicing Inc. (the "Amended Response") [Doc. 157], and Plaintiff's Supplemental Statement of Facts in Opposition to Motion for Summary Judgment of Select Portfolio Servicing Incorporated (the "Supplemental SOF"). [Doc. 158]. Plaintiff's motion for summary judgment and accompanying Statement of Material Facts Not Genuinely Disputed in Support of Summary Judgment (the "SMF") [Doc. 73] was filed on January 11, 2021. Plaintiff's Amended Declaration was filed on September 23, 2021. It stated that it was filed "in support of my opposition to summary judgment by SPS and for use for any other purpose." [Doc. 127 at 1]. The Amended Declaration further stated that it was filed after Plaintiff received a contact history from SPS and was able to refresh her memory from that contact history. [Id. n.1]. Plaintiff did not seek to amend or supplement the SMF filed with her motion for summary judgment to cite to the Amended Declaration.^[2] When deciding a motion for summary judgment the Court may consider materials in the record that are not cited by the parties in support of their factual positions, but it is not required to do so. See Fed. R. Civ. P. 56(c)(3). Therefore, it was not error for the Court to disregard the Amended Declaration, the Supplemental SOF, and arguments made in the Amended Response in the context of Plaintiff's motion for summary judgment.

The only allegation in Plaintiff's SMF relating to SPS's knowledge of her bankruptcy was ¶ 24, which stated:

In November 2013, Plaintiff received notice from SPS that SPS would be the new servicer and informing her of the opportunity to apply for a loan modification. The letter also gave a contact phone number. Plaintiff immediately called the number and sought to inform one of its representatives concerning the problems she had been having with Bank of America …. Plaintiff also informed this representative that she had not been told whether her loan was reaffirmed in chapter 7. SPS responded by asserting a lack of knowledge as to reaffirmation ….

[Doc. 73 ¶ 24]. In response, SPS disputed that a phone call took place in November 2013^[3] and provided excerpts of the contact history showing no such phone call. [Doc. 100 at 11; Doc. 99-2 at 32]. Although not stated in her SMF Plaintiff's complaint alleged that "SPS was given knowledge of the bankruptcy discharge early on by Plaintiff in a telephone conversation concerning whether the loan had been reaffirmed." [Doc. 1 ¶ 38]. In ¶ 38, of...