Opinion
Case No. 98 C 1808
March 2, 1999
MEMORANDUM OPINION AND ORDER
On December 8, 1997, Plaintiff Mary L. Polis ("Polis") filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. In that petition, Polis named defendant, Getaways, Inc., d/b/a Global Excursions ("Getaways") as a creditor with an undisputed claim of $5,995. Polis subsequently filed the instant suit against Getaways on March 24, 1998. Polis alleges that Getaways imposed hidden finance charges on her in violation of the Truth-In-Lending Act ("TILA") and the Illinois Consumer Fraud and Deceptive Business Practices Act ("CFA"). Defendant now moves this court to dismiss Polis' complaint, pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction. For the reasons set forth below, the court grants defendant's motion.
Background
On June 16, 1997, Polis purchased a travel package from defendant. In her purchase contract, she was to make 60 monthly payments of $99.91 each. According to the Truth in Lending statement given to her, a 0% finance charge and a 0% annual percentage rate ("APR") applied. Polis charges that, in reality, a finance charge was levied and was buried in the amount financed rather than broken out and readily identified.
Months after buying the Getaways travel package, Polis filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. In Re Polis, No. 97 B 37667 (J. Barliant). Polis listed Getaways as a creditor with an undisputed claim of $5,995. On February 9, 1997, the § 341 Creditors Meeting was concluded and the Trustee filed a No Asset Report. On February 13, 1998, Polis filed amended Schedules B and C to her bankruptcy petition and identified a potential cause of action against Getaways and exempted the entire claim under the Illinois wild card exemption. Polis assigned her potential claims no value, characterizing them as "unknown" and exempted $1,100 in other property under her wild card exemption. Without knowledge of the suit against Getaways, the Bankruptcy Court entered a discharge order on March 25, 1998 and shortly thereafter, on April 2, 1998, the Chapter 7 case was closed.
On March 24, 1998, Polis brought the instant, putative class action suit naming Getaways as defendant. Plaintiff alleges that Getaways systematically imposed hidden finance charges in connection with the sale of her travel package, in violation of TILA, 15 U.S.C. § 1601 et seq., implementing Federal Reserve Board Regulation Z, 12 C.F.R. part 226, and the Illinois CFA. On April 15, 1998, Getaways filed a motion to reopen the bankruptcy and objections to Polis' exemption with the Bankruptcy Court. On July 7, 1998, Judge Barliant reopened the bankruptcy matter and issued a ruling that Polis' cause of action exceeded her wildcard exemption and sustained defendant's objection to her exemption of the potential Getaways' claim. Judge Zagel, of this court, affirmed the decision of the bankruptcy court on December 30, 1998. Polis v. Getaways, No. 98 C 5001 (Dec. 30, 1998 J. Zagel).
Getaways filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) on May 5, 1998. Defendant claims that, at the time she filed her complaint, Polis lacked standing because it is a pre-petition claim belonging to the bankruptcy estate.
Analysis
Getaways contends that because her claim against it was not properly exempted in bankruptcy court, the bankruptcy estate, not Polis owns any claim against it and therefore, Polis lacks standing to sue. Polis argues that her claims were properly exempted and thus she does own the claim, giving her sufficient standing to bring the instant suit.
Article III of the United States Constitution limits this court's jurisdiction to actual cases or controversies. U.S. Const. Art. III, § 2; Board of Education of Downers Grove v. Steven L., 89 F.3d 464, 467 (7th Cir. 1996). Standing goes to the court's jurisdiction and must exist at the time it was filed. Board of Education of Downers Grove, 89 F.3d at 467. If Polis lacked standing at the time she filed this action, the court must dismiss the suit, even if she later acquires an interest sufficient to support standing. Ball v. Nations Credit Financial Services Corp., 207 B.R. 869, 872 (N.D. Ill. 1997) (citing Lucan v. Defenders of Wildlife, 504 U.S. 555, 569-70, 569-70nn.4-5 (1992)).
After filing a bankruptcy petition, all property of the debtor becomes property of the estate. Ball, 207 BR. at 872 (citing In re Salter, 52 F.3d 708, 711 (7th Cir. 1995), cert denied, ___ U.S. ___, 116 S.C. 1273 (1976).). It is well-settled that a cause of action is property that would become property of the estate. See In re Annexes, 996 F.2d 866, 869 (7th Cir. 1993) (holding that "every conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within the reach of § 541"). As such, ordinarily, the bankruptcy trustee will have exclusive standing to assert any cause of action that is property of the estate. See 11 U.S.C. § 323; Salter, 52 F.3d at 711-713. Only upon exemption of the claim by debtor or abandonment of it by the trustee, will the debtor have standing to pursue the cause of action in his or her own name. See Ball, 207 BR. at 872; Scrivner v. Commercial Credit Loans, Inc., No. 96 C 8552, 1997 WL 312058, *5 (N.D. Ill. June 5, 1997) (holding that since named plaintiffs' RICO claims belonged to bankruptcy estate and were neither exempted or abandoned, they remained property of estate and plaintiffs lacked standing).
Illinois state law permits TILA and related causes of action to be exempted under the wild card provision. See 735 ILCS 5/12-1001(b);In re Smith, 640 F.2d 888, 891 (7th Cir. 1981). The bankruptcy trustee in this case has not abandoned the Getaways claim. Therefore, unless Polis properly exempted her claim against Getaways in the bankruptcy proceeding, she does not have standing to bring suit here.
The issue before the court is whether Polis properly exempted her claim against Getaways. The court need not engage in a protracted analysis of this issue however, because two courts have already done so. On July 7, 1998, Judge Barliant of the bankruptcy court considered this very issue and sustained Getaways' objection to Debtor Polis' exemption. Judge Barliant allowed Polis an exemption of $900, excluding her claim against Getaways. On appeal to Judge Zagel of the district court, Judge Barliant's decision was affirmed.
Polis argues that the fair market value of her claim at the time of filing was zero dollars and that she has not exceeded the allowable wildcard exemption amount. She contends that because no market actually exists for a pending claim, its value is so speculative as to be worthless. Judge Zagel found otherwise. "The fact that the value of a cause of action is speculative at the time of filing does not mean that its value is zero. . . . All that is required to reveal the value is that a competent lawyer pursue the claim to resolution or settlement through the court system." Polis v. Getaways, No. 98 C 5001, 4 (Dec. 30, 1998 J. Zagel) (citing In Re: Bronner, 135 B.R. 645, 648 (B.A.P. 9th Cir. 1992).
Ultimately, Judge Zagel held that "the bankruptcy properly limited Polis' interest in the causes of action to any future proceeds up to $900, the amount remaining in her wildcard exemption [without the Getaways claim]. Polis's own valuation of the lawsuit at less than $900 is not dispositive, as it is evident at this stage that the true value of the [Getaways] suit would be greater than that."Polis v. Getaways, No. 98 C 5001, 5 (Dec. 30, 1998 J. Zagel).
In his opinion, Judge Zagel held that a TILA action could be claimed as a "wild card" exemption under 735 ILCS 5/12-1001(b), but that no more than $2,000 of total wild card exemptions could be claimed. Since Polis already claimed $1,100 in exemptions, if her claim against Getaways exceeded $900 , she would be barred from exempting it. Any claim worth more than $900, as a prepetition claim, would be property of the estate. In arriving at his decision to affirm the bankruptcy court, Judge Zagel noted that Polis serves as class representative in the suit, that TILA provides up to $1000 in statutory damages, in addition to actual damages and attorneys' fees, see 15 U.S.C. § 1640(a), and that plaintiff might also be awarded punitive damages under state law. He concluded that it was "not at all unreasonable that a successful named class representative would receive at least $1000 for serving in that capacity. Since it is not a certainty that Polis's recovery would be less than the remaining $900 in her wildcard exemption, the [bankruptcy] court correctly limited Polis's exemptible interest in the cause of action."
Judge Barliant also considered the fact that Getaways offered the estate trustee $1,500 to settle the case supported his decision to limit her exemption amount to $900. This court agrees with Judge Zagel that to rely completely on Getaways' offer of settlement for valuation of Polis' claim would be problematic as a matter of policy.
Having thoroughly reviewed the parties' briefs and Judge Zagel's opinion, this court finds that Polis did not properly exempt her claim against Getaways. As such, it remains property of the bankruptcy estate and only the estate has standing to bring the suit. Since Polis lacks the requisite standing to sue, the court grants defendant's motion to dismiss.
Conclusion
Thus, for the reasons set forth above, the court finds that Polis lacks standing to bring this suit. The court therefore grants defendant's motion to dismiss.