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Rutherford v. First Tennessee Bank National Association

August 7, 2008


The opinion of the court was delivered by: Thomas A. Varlan United States District Judge



This civil action is before the Court on Defendant First Tennessee Bank National Association's ("Defendant First Tennessee") Motion to Dismiss. [Doc. 19.] Plaintiff William T. Rutherford ("Plaintiff") has responded in opposition to Defendant First Tennessee's motion [Doc. 21], and Defendant First Tennessee has filed a reply to Plaintiff's opposition brief. [Doc. 22.] The Court has carefully reviewed the pending motion, supporting memorandum, and underlying pleadings in light of the applicable law. [Docs. 10, 19, 20, 21, 22.] For the reasons set forth herein, Defendant First Tennessee's Motion to Dismiss [Doc. 19] will be granted in part and denied without prejudice in part.

I. Relevant Facts

According to Plaintiff, he incurred a financial obligation with Defendant First Tennessee in July of 1989, which went into default in 1993 for late payment on a vehicle loan that Plaintiff co-signed for his son, Wesley Rutherford ("Wesley"). [Doc. 10 at 3.] The vehicle was subsequently repossessed by Defendant First Tennessee, and Defendant First Tennessee received a judgment from the court in Blount County, Tennessee, in the amount of $9,354.01 on January 17, 1996, for the deficiency balance, accrued interests, court costs, and attorneys fees. [Doc. 10 at 4-5.]

In 1998, Plaintiff filed a bankruptcy case seeking protection as a debtor under Chapter 7 of the Bankruptcy Code. [Doc. 10 at 5.] On September 4, 1998, the Bankruptcy Court entered an order discharging all of Plaintiff's dischargeable debts, including the First Tennessee judgment debt, pursuant to 11 U.S.C. § 524. [Doc. 10 at 6.]

On July 9, 1999, a copy of the January 17, 1996, Blount County, Tennessee, judgment was recorded in the office of the Register of Deeds for Sevier County, Tennessee. [Doc. 10 at 6-7.] Around July of 2005, Plaintiff alleges that Defendant First Tennessee sold the judgment debt to Defendant First Investment Services, LLC ("First Investment"), who allegedly then transferred the debt to Defendant Credit Bureau of North America, LLC ("CBNA") for collection from Plaintiff. [Doc. 10 at 9.] In December of 2005, Plaintiff allegedly received a collection letter from Defendants CBNA and Terry Clark ("Clark") to collect on the debt. [Doc. 10 at 9-10.] Plaintiff alleges that Defendant CBNA then began to report the debt as an adverse or negative collection account to credit reporting agencies. [Doc. 10 at 11.] Due to Defendant CBNA's negative report to the credit reporting agencies, Plaintiff claims to have suffered economic damages, such as difficulties obtaining a mortgage. [Doc. 10 at 18-19.]

As a result, Plaintiff alleges that Defendant First Tennessee violated the Bankruptcy Court's Discharge Order entered in Plaintiff's bankruptcy case in accordance with 11 U.S.C. § 524 and the Tennessee Consumer Protection Act of 1977. [Doc. 10 at 30-32.] Plaintiff also makes a claim for invasion of privacy against Defendant First Tennessee. [Id. at 33.] Plaintiff makes similar claims, in addition to other alleged violations, against Defendants CBNA, First Investment, Clark, and Does 1-5 ("Does"). [Doc. 10 at 30-33.]

II. Standard of Review

A party may move to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). In determining whether to grant a motion to dismiss, all well-pleaded allegations must be taken as true and be construed most favorably toward the non-movant. Trzebuckowski v. City of Cleveland, 319 F.3d 853, 855 (6th Cir. 2003). While a court may not grant a Rule 12(b)(6) motion based on disbelief of a complaint's factual allegations, Lawler v. Marshall, 898 F.2d 1196, 1199 (6th Cir. 1990), the court "need not accept as true legal conclusions or unwarranted factual inferences." Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). The Sixth Circuit has made it clear that despite the liberal system of notice pleading, conclusory allegations are not enough to survive Rule 12(b)(6) dismissal. See MacDermid v. Discover Fin. Servs, 488 F.3d 721, 733 (6th Cir. 2007). The issue is not whether the plaintiff will prevail, but whether the claimant is entitled to offer evidence to support his or her claim. Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995). Consequently, a complaint will not be dismissed pursuant to Rule 12(b)(6) unless there is no law to support the claims made, the facts alleged are insufficient to state a claim, or there is an insurmountable bar on the face of the complaint.

III. Analysis

A. Title 11 U.S.C. § 524

Under the Bankruptcy Code, a discharge "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived." 11 U.S.C. § 524(a)(2). As his first cause of action, Plaintiff claims that Defendant First Tennessee, along with the other defendants, violated the discharge injunction, as set forth in 11 U.S.C. § 524, by seeking to collect on a debt after the entry of Plaintiff's discharge. As a result, Plaintiff seeks actual damages, punitive damages, and legal fees under 11 U.S.C. § 105 against Defendant First Tennessee and the other defendants. Title 11 U.S.C. § 105(a) provides that the "court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title."

In support of its motion to dismiss, Defendant First Tennessee argues that it did not violate the discharge injunction because 11 U.S.C. ยง 524's prohibition only applies to actions taken by the creditor to collect from the debtor, not selling the discharged debt to a third party. Defendant First Tennessee also contends that the injunction did not prevent it from selling the debt to Defendant First Investment because even though the debt was discharged as to Plaintiff, the debt remained valid against his son, Wesley. Finally, Defendant First Tennessee argues that its actions were not in willful violation of the discharge injunction because ...

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