Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in dismissing for lack of standing plaintiff-debtor’s class action alleging that defendant-debt collector violated sections 1692g(a)(4) and (5) of Fair Debt Collection Practices Act by neglecting to inform her that any notification that disputed debt and that any request for name and address of original creditor must be made in writing. Plaintiff lacked standing to pursue instant claim, where she failed to allege that she tried to dispute her debt or verify her original creditor without submitting written requests, and where instant bare allegation of procedural violation without any allegation of concrete harm failed to satisfy injury-in-fact requirement to establish federal jurisdiction. Ct. rejected plaintiff’s action that she had standing simply because defendant had failed to provide her with all information required under sections 1692g(a)(4), (5). (Dissent filed.)

Dist. Ct. did not err in granting defendant’s motion for summary judgment in plaintiff-surety’s action seeking to invoke doctrine of quia timet to require defendant to deposit $2.5 million in cash as bond collateral and satisfy all bond obligations issued by plaintiff on behalf of defendant under circumstances where certain subcontractors had sued defendant for failure to pay for labor and materials used in construction project covered by said bonds. Record showed that plaintiff had previously settled with defendant with respect to its contractual claim regarding written indemnity agreement calling for defendant to repay plaintiff for claims made against said bonds. As such, plaintiff could not use doctrine of quia timet to force defendant to make good on instant indemnity agreement, since: (1) plaintiff had settled its claim against defendant based on indemnity agreement; and (2) surety cannot use general equitable principles to obtain rights beyond those for which it negotiated in written indemnity agreement.

Record contained sufficient evidence to support Bankruptcy Ct. order that denied discharge of debtor’s debts in Chapter 7 bankruptcy proceeding, where two creditors filed adversary proceeding that contended that debtor omitted information in her petition that was material to debtor’s financial condition. Bankruptcy Ct. could properly find that certain real estate owned by debtor, debtor’s guarantee to bank on loan given to debtor’s company, debtor’s joint bank accounts and debtor’s use of alternative name in prior financial dealings were all not disclosed in bankruptcy petition. Moreover, Bankruptcy Ct. could properly conclude that debtor acted “fraudulently” by omitting said information from her petition with intent to deceive court and creditors, where record showed that: (1) debtor took active role in her financial affairs and was aware of her assets and liabilities; (2) debtor supplied information to her attorney who reviewed with debtor each page of petition before petition was filed; (3) said omissions deprived court and creditors accurate account of debtor’s financial affairs; and (4) said omissions underscored over-arching pattern of false statements that reflected disregard for truth.

Dist. Ct. did not err in dismissing plaintiff-bank’s claim alleging that defendant issued erroneous CARPELS rating that exposed plaintiff to extra oversight and caused it to pay increased deposit insurance. At some point, plaintiff merged into non-bank enterprise and sought under Administrative Procedure Act (APA) refund of increased insurance payments. Yet, plaintiff could not assert said claim under APA, where: (1) APA establishes right of review only where there is no other adequate remedy in court; and (2) plaintiff asserted that it had such remedy under 12 USC section 1817(e)(1). Moreover, plaintiff could only use section 1817(e)(1) as source of financial payout if Tucker Act applied and could only assert said action in Ct. of Federal Claims. Also, plaintiff forfeited any claim under either section 1817(e)(1) or 1819(a) because plaintiff failed to raise section 1819(a) claim in Dist. Ct. and failed to alert Dist. Ct. to potential relief under section 1817(e)(1) until after Dist. Ct. had dismissed case.

Dist. Ct. did not err in awarding plaintiff $778,306.70 in lost profits arising out of defendant’s breach of distribution contract that restricted defendant from making direct sales of its silos to customers in area covered by agreement. Although defendant argued that plaintiff could not recover any lost profits due to provision in agreement that precluded plaintiff from obtaining recovery of any lost profits arising out of breach of instant agreement, Dist. Ct. could properly find under Wisconsin case law that plaintiff could recover lost profits, where instant limitation of remedies clause violated Wisconsin statute (section 402.719), since: (1) said clause failed of its essential purpose because said clause provided plaintiff with no remedy for instant breach of agreement; and (2) under section 402.719, Dist. Ct. could therefore consider all UCC remedies, including lost profits as damages arising out of instant breach of parties’ agreement. Moreover, defendant’s request to certify instant damages question to Wisconsin Supreme Ct. is inappropriate, since: (1) said court has previously found that limitation of consequential damages provision is per se unconscionable where, as here, it fails of its essential purpose; and (2) certification of issue is proper only if state supreme court had not resolved said issue. Fact that other state courts had taken different approach to instant limited remedy clause, or that defendant argued that Wisconsin Supreme Ct. would reconsider its stance in view of said state-court rulings did not require different result.

Dist. Ct. did not err in entering sanctions order that held debtor’s attorney and debtor jointly and severally liable to creditor for $1,837.50 under Fed. R. Bankr.8020 and 28 USC section 1927. Bankruptcy Ct. could properly find that debtor’s attorney filed separate Chapter 13 petitions for improper purpose of thwarting debtors’ creditors, rather than paying them, where intent on filing said petitions was to re-litigate one creditor’s successful state-court foreclosure judgment on debtor’s home. Also, sanctions were appropriate, where debtor’s attorney never presented argument as to why Bankruptcy Ct.’s determination was clearly erroneous, and debtor’s attorney failed to file any opening brief in appeal of dismissal of debtor’s petition, even though appeal had been pending for 16 months. Moreover, counsel improperly used automatic stay provision in 11 USC section 362(a) as litigation ploy to drag out state-court foreclosure proceedings and filed series of last-minute extension requests to further delay proceedings. Also, Dist. Ct. did not err in eventually suspending counsel’s law license to practice in W.D. Wis., where said suspension was based on Wis. Supreme Ct. order suspending counsel’s law license for one year. Ct. further observed that suspension would also have been appropriate if based on counsel’s actions taken in this and other federal court cases.

Ct. of Appeals certified question to Illinois Supreme Court as to whether debtor in Chapter 7 bankruptcy proceeding can assert as exemption under section 21 of Illinois Workers’ Compensation Act proceeds to her workers’ compensation claim that was pending at time she had filed her bankruptcy petition, but was settled two days after she had filed said petition. Bankruptcy Ct. and Dist. Ct. denied said exemption, after concluding that use of any workers’ compensation exemption to thwart instant class of medical creditors who provided treatment for debtor’s work-related injuries would frustrate purpose of Illinois Workers’ Compensation Act. Ct. of Appeals, though, noted that section 21 of Illinois Workers’ Compensation Act has been interpreted by bankruptcy courts to create exemption for workers’ compensation claims, and that question remained to be answered by Illinois Supreme Court as to whether Illinois Workers’ Compensation Act as altered by 2005 amendments allowed instant care-provider creditors to reach proceeds of debtor’s workers compensation claim.