Green Point Credit, LLC v. McLean (In Re McLean)

794 F.3d 1313, 2015 WL 4480920
CourtCourt of Appeals for the Eleventh Circuit
DecidedJuly 23, 2015
Docket14-14002
StatusPublished
Cited by81 cases

This text of 794 F.3d 1313 (Green Point Credit, LLC v. McLean (In Re McLean)) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Green Point Credit, LLC v. McLean (In Re McLean), 794 F.3d 1313, 2015 WL 4480920 (11th Cir. 2015).

Opinion

JILL PRYOR, Circuit Judge:

Green Point Credit, LLC and Green Tree Servicing LLC (collectively, “Green Tree”) appeal the judgment the district court entered in its role as bankruptcy appellate court concerning an adversary proceeding that debtors Deborah and Eric McLean filed against Green Tree in the bankruptcy court. The district court affirmed the bankruptcy court’s ruling that Green Tree violated the discharge injunction under 11 U.S.C. § 524(a)(2) by filing a proof of claim in the McLeans’ instant bankruptcy proceeding to collect a debt that was discharged in their previous bankruptcy proceeding. The order also affirmed the bankruptcy court’s award of both compensatory and non-compensatory sanctions to the McLeans.

This appeal presents a novel question: whether a creditor violates the discharge injunction under § 524(a)(2) by filing a proof of claim in a bankruptcy proceeding to collect a debt that was discharged in a previous bankruptcy proceeding. Green Tree asks us to answer this question in the negative or, in the alternative, to vacate the compensatory sanctions for lack of evi-dentiary foundation and the non-compensatory sanctions for being impermissibly punitive. After careful review, and with the benefit of oral argument, we conclude that Green Tree violated the discharge injunction; however, we vacate both monetary awards and remand to the district court with instructions to vacate and remand to the bankruptcy court.

I.

The McLeans have twice met Green Tree in bankruptcy court. Their first encounter began in 2006, when the McLeans listed Green Tree as an unsecured creditor in their Chapter 13 petition in the Bankruptcy Court for the Middle District of Alabama. The bankruptcy court converted the petition to a Chapter 7 petition and subsequently discharged the debt, a deficiency of $11,018.00 on a sales contract for a mobile home, in its January 2009 discharge order. Green Tree received electronic notice of the discharge.

In June 2012, the McLeans filed a second Chapter 13 petition in the same bankruptcy court. This petition did not list Green Tree as a creditor. Despite the 2009 discharge order, Green Tree filed a proof of claim in the second proceeding for a debt in the amount of $11,018.03, representing the same deficiency that Green Tree had sought to recover in the Mc-Leans’ first proceeding. The McLeans learned of this filing in a letter from the bankruptcy court informing them that their projected bankruptcy plan payments were going to double because of the filing. 1 According to the McLeans, this revised projection caused them emotional distress because they were unable to make the increased payments and expected to lose *1318 all their possessions as a result. The Mc-Leans objected to the proof of claim on December 13, 2012 on the basis that the debt previously had been discharged.

On January 7, 2013, before the bankruptcy court ruled on the objection, the McLeans initiated an adversary proceeding against Green Tree with a complaint alleging that Green Tree’s proof of- claim violated 11 U.S.C. § 524(a)(2), which provides that a discharge order operates as an injunction against further debt collection activities by creditors. Four days after the McLeans filed their complaint, Green Tree withdrew its proof of claim. Green Tree has since acknowledged that it filed the proof of claim in error, due to the failure of its automated electronic system to recognize that the McLeans’ debt had been discharged. Still, the McLeans sought to recover actual damages for the emotional distress that the proof of claim caused before it was withdrawn and sanctions befitting of Green Tree’s misconduct. The bankruptcy court sustained the Mc-Leans’ objection in the bankruptcy proceeding on January 16, 2013. After a trial in the adversary proceeding, the bankruptcy court found in favor of the McLeans, ruling that Green Tree violated the discharge injunction. The bankruptcy court awarded the McLeans compensatory sanctions for their emotional distress and a non-compensatory award that it labeled “coercive sanctions,” which were designed to encourage Green Tree to correct any defects in its automated systems that could cause another such violation.

Green Tree appealed to the district court, which affirmed the bankruptcy court’s judgment. The district court agreed with each of the bankruptcy court’s conclusions but took care to address the risk that the non-compensatory sanctions, which the bankruptcy court imposed after Green Tree withdrew its offending proof of claim, might have been of a punitive, rather than coercive, nature. Finding Green Tree acted with reckless disregard of the risk of -violating the discharge injunction, the district court concluded that, even if there remained no contempt that Green Tree could have corrected before the bankruptcy court imposed them, the sanctions could be upheld as punitive. This appeal followed.

II.

“Where the district court [sitting as an appellate court] affirms the bankruptcy court’s order, we review the bankruptcy court’s decision.” Fisher Island Ltd. v. Solby + Westbrae Partners (In re Fisher Island Invs., Inc.), 778 F.3d 1172, 1189 (11th Cir.2015). “Like the district court, we review the bankruptcy court’s findings of fact for clear error and the court’s conclusions of law and mixed questions of law and fact de novo.” Christopher v. Cox (In re Cox), 493 F.3d 1336, 1340 n. 9 (11th Cir.2007) (per curiam). “Although neither party submitted briefs on the issue, it is a duty of this Court to determine whether it has jurisdiction over a particular matter, even if doing so raises the issue sua sponte. We review jurisdictional issues de novo.” Walden v. Walker (In re Walker), 515 F.3d 1204, 1210 (11th Cir.2008) (citation omitted).

III.

As a preliminary matter, we first must address whether the bankruptcy court had jurisdiction over the McLeans’ adversary proceeding and whether we, in turn, have jurisdiction to entertain this appeal. Before oral argument, we raised sua sponte the .question whether the bankruptcy court acted within its jurisdiction by enforcing the discharge injunction arising from the McLeans’ previous bankruptcy case. It is settled that “the court that issued the injunctive order alone possesses *1319 the power to enforce compliance with and punish contempt of that order,” and this “power to sanction contempt is jurisdictional.” Alderwoods Grp., Inc. v. Garcia, 682 F.3d 958, 970 (11th Cir.2012); see also Cox v. Zale Del., Inc., 239 F.3d 910, 917 (7th Cir.2001) (“[A]ffirmative relief can be sought only in the bankruptcy court that issued the dischargeThe question our precedent does not answer is how broadly we are to construe the identity of the “court” that has the power to enforce the discharge injunction.

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794 F.3d 1313, 2015 WL 4480920, Counsel Stack Legal Research, https://law.counselstack.com/opinion/green-point-credit-llc-v-mclean-in-re-mclean-ca11-2015.