United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
D. Leinenweber, Judge
the Court is Defendant PNC Bank, National Association
("PNC") and Defendant Select Portfolio Servicing
Inc.'s ("SPS") (collectively, the
"Defendants") Motion to Dismiss pursuant to
Fed.R.Civ.P. 12(b)(6) [ECF No. 18]. For the reasons stated
herein, the Motion is granted.
November 29, 2014, Plaintiff Michael Bednar
("Bednar" or "Plaintiff") filed for
bankruptcy. Among the debts included in his bankruptcy was a
mortgage held by PNC and serviced by SPS. Bednar proposed as
part of his bankruptcy plan to surrender the subject property
in full satisfaction of the creditors' claims. Pursuant
to the plan, the bankruptcy court lifted the automatic stay -
applicable to all debts brought into bankruptcy - against
SPS, allowing it to pursue foreclosure against the property
on behalf of PNC. PNC sold the subject property on December
February 1, 2016, PNC obtained from the state court an Order
Approving Report of Sale and Distribution ("Order")
. As is crucial to Bednar's claim in this case, the Order
stated that there was a personal deficiency judgment against
him for the amount of $3, 430.28.
time that the Order was entered, Bednar's bankruptcy was
ongoing. This means that the automatic stay on "any act
to collect, assess, or recover a claim" against him was
still in effect. See, 11 U.S.C. § 362. The deficiency
judgment thus violated the stay order. Bednar, however, did
not object to the violation of the stay despite being
represented by counsel in bankruptcy (the same law firm that
represents him in the current case) . Instead, he amended his
bankruptcy schedule to disclose among his assets a potential
claim against SPS for violating the automatic stay. See,
In re Bednar, . No. 14-42970, Dkt. No. 20 (Bankr.
N.D. 111. May 27, 2106). Three days later, Bednar received a
24, 2016, Bednar filed the present lawsuit, alleging that he
"has suffered damages in the form of emotional distress
and time spent consulting with his attorneys as a result
of" the personal deficiency judgment against him. ECF
No. 1 ("Compl.") 8181 67, 82. He sues PNC and SPS
under Illinois state law and a third defendant, not a part of
this Motion to Dismiss, on the Fair Debt Collection Practices
Act ("FDCPA") . Shortly after the filing of
Plaintiff's lawsuit, PNC moved to vacate the judgment.
Plaintiff does not allege that either PNC or SPS took any
steps towards the collection of the judgment in between the
time the Order was entered to when it was vacated.
claims that PNC and SPS violated the Illinois Consumer Fraud
and Deceptive Business Practices Act ("ICFA"). He
alleges that "[i]t was unfair and deceptive for PNC [and
SPS] to seek to collect the subject loan from Plaintiff
through the personal deficiency judgment" when "the
subject loan was not collectible at the time the personal
deficiency judgment was entered against Plaintiff" due
to the automatic stay. Compl. 8181 62, 76.
argue that the action fails on several independent grounds.
First, Defendants contend that the ICFA is preempted by the
Bankruptcy Code, specifically the stay provision and the
provision allowing a debtor to recover damages against a
creditor for willfully violating a stay. Second, Defendants
argue that Plaintiff has failed to allege elements of an ICFA
claim. Finally, Defendants assert that Plaintiff lacks
standing to sue PNC.
Court finds that Plaintiff's ICFA claim is preempted. It
also finds that Plaintiff has not plausibly alleged actual
damages. Because his claim against both Defendants therefore
must be dismissed, the Court does not address the remaining
arguments that Defendants raise.
SPS argue that because Plaintiff's ICFA claim is premised
solely on violation of the automatic stay operative in
bankruptcy proceedings, the claim is preempted by the
Bankruptcy Code. The Defendants rely on MSR Expl. v.
Meridian Oil, 74 F.3d 910 (9th Cir. 1996), and its
progeny of cases to support this proposition.
MSR, the Ninth Circuit laid out the rationale for
why the Bankruptcy Code should preempt a state law claim that
arose out bankruptcy proceedings. The defendants, MSR's
creditors, had filed claims against MSR during the
latter's bankruptcy. MSR, 74 F.3d at 912. The
claims were disallowed by the bankruptcy court. Id.
As the Ninth Circuit noted, "MSR did not pursue . . .
any  remedy in the bankruptcy court" for this
disallowed filing. Id. Instead, "MSR waited
until its reorganization plan was confirmed and substantially
consummated, whereupon it brought this malicious prosecution
action in the ...