Opinion
ORDER ON DEFENDANT'S MOTION TO DISMISS
PETER W. BOWIE, United States Bankruptcy Court
Defendant Wells Fargo Bank has moved to dismiss plaintiffs' First Amended Complaint for failure to state a claim for which relief could be granted.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334 and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (0).
Discussion
Plaintiffs have sued Wells Fargo by adversary proceeding in this Court for violating the discharge injunction contained in 11 U.S.C. § 524. Plaintiffs set out a single cause of action, captioned "Violation of Discharge Injunction 11 USC 524". The sole question presented by the motion to dismiss is whether plaintiffs have some private right of action to sue for violation of the discharge injunction. The Ninth Circuit Court of Appeals has already answered that question in the negative.
In Walls V. Wells Fargo Bank, 276 F.3d 502 (9th Cir. 2002), the court was directly urged to find a private right of action under both § 524 and § 105. The court rejected those arguments. In discussing the question, the court noted:
Walls argues that § 524 creates substantive rights in favor of the debtor; therefore § 105(a) should be available to enforce these rights and should not be limited only to authorizing a cause of action for contempt.
276 F.3d at 506. Walls invoked a First Circuit decision, Bessette, but the Ninth Circuit stated:
We disagree that Bessette goes so far, but regardless, are persuaded that violations of that section may not independently be remedied through § 105 absent a contempt proceeding in the bankruptcy court.
Id. The Ninth Circuit's reading of Bessette was that in its decision:
The First Circuit addressed only the § 105(a) issue. It states that § 105 does not itself create a private right of action, but that it does provide a bankruptcy court with statutory contempt powers in addition to whatever inherent contempt powers the court may have. Because these powers inherently include the ability to sanction a party, the court concluded that a bankruptcy court is authorized to invoke § 105 to enforce the discharge injunction and order damages for the debtor if appropriate on the merits.
Walls suggests that § 105 may be used to create substantive rights in the Code, therefore a private right of action is appropriate because § 105 empowers the bankruptcy court to use "any" means necessary to advance the purpose of the Code. However, to create a new remedy would put us in the business of legislating.
In deciding that Congress did not intend to create a private right of action under § 524 or under § 105, the Ninth Circuit observed:
In the 1984 amendments. Congress added subsection (b) to § 362, expressly conferring on debtors the right to sue for damages for a willful violation of the automatic stay. Section 524 was amended on the same day, but no similar provision, providing a private right of action for violation of the discharge injunction, was added.
276 F.3d at 509. After another sentence, the court placed its footnote 3, which stated:
This also bolsters our conclusion that § 105 does not allow for a private right of action to enforce § 524. If Congress had understood § 105 as permitting a private cause of action, the 1984 amendment creating one for violations of § 362 would have been superfluous.
Id.
Yet another reason presented by the Ninth Circuit for why-implying a private right of action would be inappropriate was recognition that:
Implying a private remedy here could put enforcement of the discharge injunction in the hands of a court that did not issue it (perhaps even in the hands of a jury), which is inconsistent with the present scheme that leaves enforcement to the bankruptcy judge whose discharge order gave rise to the injunction.
Id.
In light of Walls, it is clear that plaintiffs have no private right of action under either § 524 or § 105. So, rhetorically, the question is how do they get their concerns before the Court. The answer should be clear: Plaintiffs want this court to utilize the court's powers under § 105 to remedy an alleged violation of the discharge injunction. To do so, they need to ask the court to examine the circumstances. They cannot, however, simply sue defendants under the authority of the court's powers because they would thus be exercising a right of action they do not have, at least on a de facto basis.
The Court recognizes, however, that the water is somewhat muddied by language such as in Walls, where Walls had, in part, sued for contempt. There, the district court referred the "request for contempt to the bankruptcy court." 276 F.3d at 507. Or, in In re Over. 322 F.3d 1178, 1189 {9th Cir. 2003), where the court stated:
Nonetheless, we have held that the Trustee may be entitled to recovery for violation of the automatic stay "under section 105(a) as a sanction for ordinary civil contempt."
The Dyer court referenced the Walls decision in stating that the trustee "is limited to the civil contempt remedy provided by § 105(a)." To the extent such language can be read to suggest a trustee does have a private right of action under § 105(a), it is diametrically contrary to Walls, which has not been reversed or vacated. Moreover, such a reading would be inconsistent with In re Bennett, 298 F.2d 1059, 1069 (9'''" Cir. 2002), where the court found it was not necessary to assert a counterclaim for § 105 sanctions because such sanctions are a part of the relief a court can grant independent of any formal demand in a party's pleadings.
Echoing the concerns of the Walls court, in In re Startec Global Comm'n Corp.. 292 B.R. 246, 253-54 (Bankr. D.MD 2003), the court noted:
Generally, enforcement of a court's order by-contempt power is the sole province of the court that originated the order. . . .
Just as modification or vacatur of an order must be sought from the originating court, . . . request for the enforcement must be addressed to the originating court. If parties could apply to another tribunal, or arbitrator, to determine whether an order of another court has been breached, or should be enforced, and by what means, an improper collateral attack on the order effectively would be permitted. . . . Therefore, this court, and this court only, has the power to enforce its own order and sanction violations by civil contempt.
Conclusion
For all the foregoing reasons, Wells Fargo's motion to dismiss should be, and hereby is granted. Counsel for Wells Fargo shall prepare and lodge a proposed separate form of judgment of dismissal within twenty (20) days of the date of entry of this Order.
IT IS SO ORDERED.
CERTIFICATE OF MAILING
The undersigned, a regularly appointed and qualified clerk in the office of the United States Bankruptcy Court for the Southern District of California, at San Diego, hereby certifies that a true copy of the attached document, to wit:
ORDER ON DEFENDANT'S MOTION TO DISMISS
Barbara J. Kelly, Judicial Assistant
was enclosed in a sealed envelope bearing the lawful frank of the Bankruptcy Judges and mailed to each of the parties at their respective address listed below:
Attorney for Plaintiffs: Kenneth Andrews, Esq. Doan, Levinson & Liljegren, LLP.
Attorney for Defendant: Rocio Herrera, Esq. Adorno Yoss Alvarado & Smith.
Said envelope(s) containing such document were deposited by me in a regular United States mail box in the City of San Diego, in said district on January 30, 2008.