In re Associated Community Services, Inc.

520 B.R. 650, 2014 Bankr. LEXIS 4542, 60 Bankr. Ct. Dec. (CRR) 61, 2014 WL 5483496
CourtUnited States Bankruptcy Court, E.D. Michigan
DecidedOctober 30, 2014
DocketNo. 14-44095
StatusPublished
Cited by2 cases

This text of 520 B.R. 650 (In re Associated Community Services, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Associated Community Services, Inc., 520 B.R. 650, 2014 Bankr. LEXIS 4542, 60 Bankr. Ct. Dec. (CRR) 61, 2014 WL 5483496 (Mich. 2014).

Opinion

Opinion Sustaining In Part Debtor’s Objection To Daniel Pepper’s Proof Of Claim

PHILLIP J. SHEFFERLY, Bankruptcy Judge.

Introduction

This matter is before the Court on an objection filed by the Debtor, Associated Community Services, Inc., to a $10 million proof of claim filed by Daniel Pepper, which states that it is filed by Pepper “on behalf of himself and others similarly situated.” For the reasons set forth in this opinion, the Court holds that: (i) the claim must be disallowed as a class action claim [651]*651made on behalf of anyone other than Pepper; and (ii) to the extent that the claim is made on behalf of Pepper, there are issues of fact that require further proceedings.

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 157(a) and § 28 U.S.C. § 1334(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(B).

Facts

■The following facts are not in dispute.

The Debtor is engaged in the business of soliciting donations for charities and non-profit organizations by direct mail and telephone. On October 18, 2013, Pepper filed a lawsuit against the Debtor in the Superior Court of Los Angeles County in the State of California (“State Court”). The lawsuit states that it is filed on behalf of Pepper and on behalf of others similarly situated, and that it is a class action for damages and injunctive relief. The lawsuit alleges that the Debtor engaged in unlawful recording and monitoring of telephone calls in violation of the telephonic privacy laws in California.

On December 30, 2013, the Debtor removed the lawsuit to the United States District Court for the Central District of California (“District Court”). The District Court scheduled a conference with the parties for March 24, 2014. However, before the conference took place, the Debtor filed this Chapter 11 case on March 13, 2014. As a result, the District Court closed its file on March 19, 2014.

When the Debtor filed its Chapter 11 petition, the Debtor included Pepper and Pepper’s counsel on the matrix of creditors that it filed. In addition, the Debtor listed Pepper on schedule F, with a claim of zero, indicating that it was both disputed and unliquidated. Because a copy of the Chapter 11 petition was filed in the District Court, and because both Pepper and Pepper’s counsel were fisted on the matrix and the schedules filed by the Debtor in this Chapter 11 case, there is no question that Pepper and his counsel knew of the existence of this Chapter 11 case immediately when it was filed.

On April 16, 2014, the Court issued a Chapter 11 case management order setting forth the dates, deadlines and procedures to govern this Chapter 11 case. Among other things, the Chapter 11 case management order set the claims deadline in this case at July 15, 2014. The Chapter 11 case management order also set deadlines for the Debtor to take certain actions, including the fifing of a combined plan of reorganization and disclosure statement.

On the very last day to file claims, July 15, 2014, Pepper filed proof of claim no. 19 in the amount of $10 million. The proof of claim is not signed by Pepper, but is signed by Christina Wickman, his attorney. The only document attached to it is a copy of the notice of removal that the Debtor filed to remove Pepper’s lawsuit from the State Court to the District Court.

On September 11, 2014, the Debtor filed an objection (ECF No. 120) to Pepper’s proof of claim. The objection makes two basic arguments. First, the Debtor concedes that class action proofs of claims are permissible in the Sixth Circuit, but requests that Pepper’s proof of claim be disallowed because Pepper has neither sought nor received class action certification either pre-petition from the State Court or District Court, or post-petition from this Court. Second, the Debtor argues that it did not commit any of the violations of California law alleged in Pepper’s proof of claim. In support, the Debt- or attaches a declaration from one of its principals, Richard Cole.

On October 8, 2014, Pepper filed a timely response (ECF No. 131) to the Debtor’s objection. In his response to the Debtor’s first argument, Pepper does not dispute [652]*652the fact that there has been no certification of the putative class of claimants described in his proof of claim either pre-petition or post-petition by the State Court, the District Court or this Court. However, Pepper addresses this argument by requesting that this Court now permit him to have a reasonable time in which to conduct discovery and seek class certification by filing a motion in this Court under Fed. R. Bankr.P. 7023. In response to the Debtor’s second argument, Pepper contends that the Debtor’s conduct did violate the California privacy laws. In support, Pepper attaches a declaration that he has signed.

On October 14, 2014, the Debtor filed a reply (ECF No. 134) to Pepper’s response. On October 17, 2014, the Court held a hearing on the objection and took it under advisement.

Discussion

Federal Rule of Bankruptcy Procedure 3001 governs proofs of claims. Fed. R. Bankr.P. 3001(b) states that a proof of claim shall be executed by the creditor or the creditor’s authorized agent. This rule makes clear that a proof of claim can only be filed by the creditor holding the claim or by someone that the creditor authorizes as its agent to file the claim for the creditor. On its face, this rule does not permit an individual to file a proof of claim on behalf of anyone other than such individual. Further, the rule says nothing about filing a class action proof of claim on behalf of any other individuals who may be similarly situated to the individual filing the proof of claim.

Despite the absence of any explicit reference in Rule 3001 to the filing of a class action proof of claim, the law is now settled that class action proofs of claims are permissible in bankruptcy cases. In Reid v. White Motor Corp., 886 F.2d 1462 (6th Cir.1989), the Sixth Circuit Court of Appeals followed an opinion from the Seventh Circuit in In re American Reserve, 840 F.2d 487 (7th Cir.1988), which relied on Fed.R.Civ.P. 23 as authority for the filing of a class proof of claim in a bankruptcy case.

The court in American Reserve noted that Bankruptcy Rule 7023 expressly provided that “Rule 23 Fed.R.Civ.P.

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520 B.R. 650, 2014 Bankr. LEXIS 4542, 60 Bankr. Ct. Dec. (CRR) 61, 2014 WL 5483496, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-associated-community-services-inc-mieb-2014.