Searching over 5,500,000 cases.

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.

Bednar v. Pierce & Associates, P.C.

United States District Court, N.D. Illinois, Eastern Division

November 10, 2016



          Harry D. Leinenweber, Judge

         Before 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.

         I. BACKGROUND

         On 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 18, 2015.

         On 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.

         At the 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 bankruptcy discharge.

         On June 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.

         II. ANALYSIS

         Plaintiff 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.

         Defendants 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.

         The 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.

         A. Preemption

         PNC and 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.

         In 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 ...

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.