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Jeziorowski v. Credit Protection Association L.P.

United States District Court, W.D. New York

May 1, 2017

Joseph Jeziorowski, Plaintiff,
v.
Credit Protection Association, L.P., Defendant.

          ORDER AND MEMORANDUM

          LAWRENCE J. VILARDO UNITED STATED DISTRICT JUDGE.

         INTRODUCTION

         On November 4, 2016, this Court issued a 30-day stay “for the limited purpose of allowing the plaintiff to file an amended petition in the U.S. Bankruptcy Court (Case No. 14-10069) in order to: (1) list this litigation as an asset of the Bankruptcy Estate, and (2) allow . . . the trustee to be substituted as plaintiff in this case.” Docket Item 42. Pursuant to that order, the plaintiff filed both an amended petition in the related bankruptcy proceeding and an optimistically entitled “Unopposed Motion to Substitute Party.” See Docket Items 45, 46. The accuracy of that motion's title was short lived: On January 26, 2017, the defendant filed a response opposing the motion, to which the plaintiff replied on February 2, 2017. Docket Items 49, 50.[1]

         For the reasons that follow, this Court GRANTS the plaintiff's motion.

         BACKGROUND

         Jeziorowski filed this action in December 2013, alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq., and the Telephone Consumer Protection Act of 1991 (“TCPA”), 47 U.S.C. § 227, et seq. A short time later, in January 2014, Jeziorowski filed a voluntary Chapter VII petition in Bankruptcy Court. At the § 341(a) meeting of creditors, Jeziorowski mentioned his pending FDCPA/TCPA lawsuit, which he valued at about $1, 000 (the statutory FDCPA cap per claim). Docket Item 29-1 at 1 (¶ 3); Docket Item 29-2 at 1 (¶ 4).[2] The United States Bankruptcy Trustee (“trustee”) instructed him to have his attorney report to the Bankruptcy Court if his case had more significant value. After the meeting, the trustee reported that the debtor lacked assets; Jeziorowski received a discharge from Bankruptcy Court in April 2014; and the bankruptcy case was closed shortly thereafter. The FDCPA/TCPA lawsuit, however, remained pending.

         In late 2015 or early 2016, Jeziorowski's attorney contacted the trustee to learn how to reopen the bankruptcy case so as to include the pending federal litigation in an amended petition. On January 27, 2016, the Bankruptcy Court reopened the plaintiff's petition.

         After discovery was completed in this case, on February 1, 2016, the plaintiff moved to stay the proceedings so that the Bankruptcy Estate, as administered by the trustee, could be substituted as the plaintiff. Docket Item 29. In response, the defendant asked this Court to deny the plaintiff's motion to stay and to dismiss the plaintiff's complaint with prejudice. Docket Item 32. On March 12, 2016, this case was reassigned from the Honorable John T. Curtin to the undersigned. Docket Item 39. After a status update, this Court issued the above-mentioned stay, setting the stage for the instant motion.

         APPLICABLE LAW

         A. Chapter VII Voluntary Petition: Disclosure Requirements

         Under Chapter VII, a bankruptcy trustee can liquidate a debtor's assets and distribute the proceeds to creditors. Once a debtor files under Chapter VII, the debtor's assets, including any pending lawsuits or claims, can become the property of the bankruptcy estate. See 11 U.S.C. § 541(a)(1); Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116, 122 (2d Cir. 2008) (“Every conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within the reach of § 541.”) (per curiam) (internal quotation marks and citation omitted).

         Because the complete disclosure of assets is “essential to the proper functioning of the bankruptcy system . . . .”, Chartschlaa, 538 F.3d at 122, the law includes strict requirements. See Fed. R. Bankr. P. 1007(b) (listing mandatory schedules, statements, and other documents). For example, a “Statement of Financial Affairs” requires the debtor to “[l]ist all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of this bankruptcy case.” Docket Item 33-1 at 32. And the failure to disclose can result in severe penalties: unlike disclosed property that the trustee does not administer, which reverts to the debtor, “undisclosed assets automatically remain property of the estate after the case is closed . . . .” Chartschlaa, 538 F.3d at 122; 11 U.S.C. § 554.

         Generally, “oral disclosure of [a] lawsuit [is] insufficient to satisfy [a debtor's] disclosure obligations under the bankruptcy code, which requires a debtor to file complete and accurate schedules relating to his finances.” Ibok v. SIAC-Sector Inc., 470 F. App'x 27, 29 (2d Cir. 2012) (summary order) (citing Chartschlaa, 538 F.3d at 122-23); see also Guay v. Burack, 677 F.3d 10, 19-20 (1st Cir. 2012); Lewis v. Weyerhaeuser Co., 141 F. App'x. 420, 424-27 (6th Cir. 2005); Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 784 (9th Cir. 2001); Barger v. City of Cartersville, 348 F.3d 1289, 1295 (11th Cir. 2003). As a result, when the only disclosure is oral disclosure, a debtor later seeking to profit from an otherwise undisclosed claim may lack standing, or the court may impose judicial estoppel to preclude him from pursuing it, or both.[3]

         B. ...


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