Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

McCREADY v. EBAY

March 29, 2004.

KENNETH A. McCREADY, Debtor-Appellant
v.
eBAY, INC., Respondent-Appellee



The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge

MEMORANDUM OPINION AND ORDER

Debtor/Appellant Kenneth McCready appeals from the December 18, 2002 decision of Bankruptcy Judge Carol Doyle, denying McCready's petition for sanctions against eBay, Inc., due to eBay's alleged violations of the automatic stay in bankruptcy. For the reasons explained here, this court affirms.

BACKGROUND

  Kenneth McCready filed his voluntary Chapter 7 bankruptcy petition on April 17, 2002. Prior to the bankruptcy filing, McCready had registered several accounts with eBay, an internet trading site, and had entered into a user agreement with eBay which authorized him to sell items on eBay's web site. (McCready denies signing any user agreement, and denies, further, that the user agreement that eBay has submitted as Exhibit A to eBay's Response to Debtor's Petition was the version in effect at the time he began trading goods on eBay; he does not deny, however, that an individual seeking to do business on eBay is required to register and agree to eBay's terms.) Respondent eBay claims that McCready violated that agreement by failing to deliver goods purchased by eBay buyers or by delivering product of less quality than what he had advertised on the web. eBay claims that it received several fraud complaints from buyers and gave McCready notices and warnings. By July 10, 2002, he had not yet complied with the corrective measures eBay directed, and eBay suspended his accounts.

  On August 26, 2002, McCready filed an amended motion for a rule to show cause, alleging Page 2 that eBay willfully violated the automatic stay provisions of 11 U.S.C. § 362(a). He contends that eBay's suspension of his accounts, and communications directing him to "resolve" his disputes with buyers, constitute efforts to collect pre-petition debts, and that he is entitled to damages under § 362(h). In response to McCready's amended motion for a rule to show cause, eBay argued that McCready lacked standing to assert a § 362(h) claim and that, in any event, eBay had not violated the automatic stay under this title.*fn1

  On appeal, eBay has not renewed its standing objection. This court agrees that Judge Doyle properly overruled that objection. Statutory language and relevant case law establish that an individual debtor may recover damages for willful violation of the automatic stay. See 11 U.S.C. § 362(h) ("An individual injured by any willful violation of the stay shall recover. . . ."); Pettitt v. Baker, 876 F.2d 456, 457 (5th Cir. 1989).

  The bankruptcy court concluded, however, that eBay's conduct did not violate the automatic stay provisions of the Bankruptcy Code. Judge Doyle stated her conclusions in an oral ruling. (Transcript of proceedings on December 17, 2002, Exhibit C to Response Brief of Respondent-Appellee, eBay, Inc. [hereinafter, "Transcript"], at ___.) McCready appeals.

  DISCUSSION

  The filing of a bankruptcy petition operates as an automatic stay of any action or proceeding against the debtor and bars an act to collect a claim that arose before the filing of the bankruptcy. 11 U.S.C. § 362(a)(1), (6). The stay operates as an injunction and remains in effect until a bankruptcy discharge is granted or denied. 11 U.S.C. § 362(c)(2)(C). The stay is designed to effect Page 3 orderly administration of the debtor's estate, protect creditors' rights to equality of distribution, provide a "breathing spell" for the debtor, maintain the status quo, and prevent harassment and coercion of the debtor. See Rogers v. NationsCredit Financial Servs. Corp., 233 B.R. 98 (N.D. Cal. 1999), citing Morgan Guaranty Trust Co. v. American Sav. and Loan Ass'n, 804 F.2d 1487, 1491 (9th Cir. 1986). Thus, the stay protects both the debtor and creditor. In reviewing the bankruptcy court's decision that eBay's conduct did not violate the automatic stay, the court reviews the bankruptcy court's findings of fact for clear error and its legal conclusions de novo. In re Scott, 172 F.3d 959, 966 (7th Cir. 1999); In re Zolner, 249 B.R. 287, 291 (N.D. III. 2000).

  McCready argues that eBay's suspension of his accounts and related communications violate § 362(a)(1) and (6) of the Bankruptcy Code. Section 362(a)(1) provides that the stay bars the "commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor . . . to recover a claim against the debtor that arose before the commencement" of the bankruptcy filing. Section 362(a)(6) bars "any act to collect, assess, or recover a claim against the debtor that arose before the commencement" of the case.

  In reaching her conclusion that eBay's communications were not debt collection efforts, Judge Doyle reviewed each of the e-mail messages that McCready submitted as exhibits. (Transcript, at 24-26; see E-mail printouts, Exhibits A — S in support of Debtor's Amended Petition for Order or Rule to Show Cause.) On June 3, 2002, eBay advised McCready that it had received various fraud complaints regarding him and that he must "resolve" those complaints or face a suspension of his accounts. McCready responded by warning eBay against any attempts to collect from him monies owed to the purported claimants, and contesting the legitimacy of the claims. On June 4, eBay again advised McCready that he must "resolve" the disputes with his buyers or face suspension of his accounts.

  The following month, on July 9, 2002, eBay advised McCready that it was investigating a particular claim in which the buyer maintained he had returned merchandise to McCready but had Page 4 not received a refund. McCready responded that such a claim was covered by his bankruptcy filing and demanded that eBay stop "dunning" him. The following day, on July 10, eBay told McCready it had found in favor of the buyer on this claim, and in a separate e-mail, advised McCready that his accounts were suspended due to what eBay referred to as "transaction nonperformance." This July 10 message listed several transactions which had generated complaints and explained that in order to have the suspension lifted, McCready would have to get the buyers who had made complaints to advise eBay that their complaints were "resolved."

  On July 11, McCready acknowledged that one of the buyers who had complained in fact had a legitimate claim; McCready's e-mail message to eBay asked, "May I repay this gentleman and get reinstated [on eBay]? If so, will you please tell me how much I am to refund to him." In response, eBay advised that it had reimbursed the disgruntled buyer through its own "Fraud Protection Program," so McCready should reimburse the program and pay the buyer the $25 "deductible" from that program.

  In the bankruptcy court's view, eBay's actions violated neither § 362(a)(1) or (6). As Judge Doyle noted in her oral ruling, the eBay user agreement gives eBay broad power to suspend a user's authority to do business on the eBay site. Specifically, the agreement authorizes eBay to "remove your items listings, warn our community of your actions, issue a warning, temporarily suspend, indefinitely suspend or terminate your membership . . . if . . .[eBay] believe[s] that your actions may cause financial loss or legal liability for you, our users, or us." (User Agreement ¶ 9, emphasis supplied). It provides, further, that "eBay may suspend or terminate your account if we suspect that you . . . have engaged in fraudulent activity in connection with our site." (Id. ¶ 5.3, emphasis supplied.) In the bankruptcy court's view, eBay's exercise of its broad powers under those provisions did not constitute an "attempt to collect a debt." (Transcript, at 27.) Rather, eBay was simply explaining the conditions McCready was required to meet before he could be ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.