The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
RAY MOORE, )
)
Plaintiff-Appellant, )
)
v. ) CASE NO. 2:19-cv-223-ALB
)
AUTOMOTIVE FINANCE CORP., )
)
Defendant-Appellee. )
)
MEMORANDUM OPINION AND ORDER
This matter comes to the Court on appeal from the Bankruptcy Court’s order
dismissing Ray Moore’s (“Plaintiff”) Amended Complaint against Automotive
Finance Corporation (“Defendant”) for failure to state a claim upon which relief may
be granted. Having reviewed the record, the parties’ briefs, and applicable law, this
Court affirms.
Background
The following facts are taken from Plaintiff’s First Amended Complaint. See
Doc. 2-12.
Plaintiff was in the car business and declared bankruptcy. Plaintiff owed
Defendant a sum of money, and that debt was discharged in the bankruptcy in 2016.
About two years after the bankruptcy, Plaintiff and a business partner
organized a new company to purchase automobiles at dealer or wholesale prices and
to resell those cars to consumers for a profit.
Plaintiff’s new company attempted to gain access to physical and virtual
automobile auction sites through an entity known as AuctionAccess. AuctionAccess
is the entity through which an automotive dealer must obtain credentials to purchase
wholesale automobiles at hundreds of auctions across North America (including
Canada and Mexico). It is the number one dealer credentialing system for the
wholesale auction industry in North America. The AuctionAccess card is a dealer’s
gateway into the wholesale auction physical and online lanes and a tool for
AuctionAccess’ auction partners to verify photo IDs, proper dealer licenses and
other credentialing documents necessary to conduct business in the wholesale
industry. AuctionAccess controls access, through its credentialing system, to Adesa
and Manheim, which are the largest and most significant automobile wholesale
and/or remarketing companies in North America.
AuctionAccess denied Plaintiff, his partner, and his new company access
through the credentialing system. A representative of AuctionAccess informed them
that Defendant had blocked them from obtaining buyer credentials. Specifically,
“AuctionAccess denied or rejected [Plaintiff’s] applications or requests based upon
a directive or instruction from Defendant.” (Doc. 2-12 ¶ 29). The representative
arranged for Plaintiff and Defendant to discuss the reasons for the block.
Plaintiff and Defendant had the following conversation. Defendant advised
Plaintiff that he owed a substantial amount of money. Plaintiff argued that the debt
was discharged in the bankruptcy. Defendant advised that it was under no obligation
to allow Plaintiff to obtain buyer credentials from AuctionAccess. Defendant
suggested that it would remove its block for an amount of money. Plaintiff suggested
one thousand dollars. Defendant said “make it two thousand and we have a deal.”
(Doc. 2-12 ¶ 40). Defendant later confirmed by email that it would “accept
$2,000.00 in consideration for informing Auction Insurance Agency that the
outstanding matter with [Defendant] has been resolved.” (Doc. 2-12 ¶ 43).
Plaintiff sued Defendant for violating the bankruptcy discharge in 11 U.S.C.
§ 524(a). The Bankruptcy Court initially dismissed the Complaint without
prejudice. After Plaintiff amended the Complaint, the Bankruptcy Court dismissed
the Amended Complaint with prejudice for failure to state a claim upon which relief
may be granted.
This appeal followed.
Jurisdiction
The Court has jurisdiction over this appeal under 28 U.S.C. § 158.
Standard of Review
The Bankruptcy Court’s legal conclusions are reviewed de novo. Educ. Credit
Mgmt. v. Mosley (In re Mosley), 494 F.3d 1320, 1324 (11th Cir. 2007). To survive
a motion to dismiss for failure to state a claim, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “[C]onclusory allegations, unwarranted
deductions of facts or legal conclusions masquerading as facts will not prevent
dismissal.” Oxford Asset Mgmt. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir. 2002).
Discussion
The Bankruptcy Court correctly held that Plaintiff’s Amended Complaint did
not state a claim for violating the discharge injunction under 11 U.S.C. § 524(a).
Section 524 provides that a discharge order “operates as an injunction against the
commencement or continuation of an action, the employment of process, or an act,
to collect, recover or offset” a discharged debt. 11 U.S.C. § 524(a)(2). The Supreme
Court has recently held that “[a] court may hold a creditor in civil contempt for
violating a discharge order where there is not a ‘fair ground of doubt’ as to whether
the creditor’s conduct might be lawful under the discharge order.” Taggart v.
Lorenzen, 139 S. Ct. 1795, 1804 (2019). In other words, if there is “an objectively
reasonable basis for concluding that the creditor’s conduct might be lawful,” id. at
1801, then the Bankruptcy Court cannot find that the creditor violated the discharge
order.
Under the facts as alleged in the Amended Complaint, there was an
objectively reasonable basis to conclude that Defendant’s conduct was lawful. It is
well established that the bankruptcy discharge does not eliminate the underlying
debt, but only the debtor’s personal liability for paying the debt. See, e.g., Matter of
Edgeworth, 993 F.2d 51, 53 (5th Cir. 1993). It is also well-established, with some
exceptions not applicable here, that a creditor is not required to do business with a
debtor just because the debtor has received a discharge in bankruptcy. See, e.g.,
Brown v. Penn. State Employees Credit Union, 851 F.2d 81, 85 (2d Cir. 1988). For
that reason, a creditor can require a debtor to pay a discharged debt as a condition of
continuing a business relationship. See, e.g., DuBois v. Ford Motor Credit Co., 276
F.3d 1019, 1023-24 (8th Cir. 2001). And, finally, it well established that a debtor
may choose—because of a business relationship, a feeling of personal responsibility,
or for some other reason—to pay a discharged debt. See 11 U.S.C. § 524(f).
Plaintiff does not challenge any of the above principles. The only twist in this
case is that Plaintiff does not want to do business with Defendant. Instead, Plaintiff
wants to secure credentials with AuctionAccess, and AuctionAccess will not give
Plaintiff those credentials until Defendant removes its block based on the discharged
debt. That is a distinction without a difference. No one is telling Plaintiff that he is
liable for the discharged debt or trying to collect it. Instead, a credentialing service
is refusing to give Plaintiff credentials to buy wholesale cars. If a creditor can
lawfully choose not to do business with a debtor because of a discharged debt, then
a creditor can lawfully tell a third-party credentialing service that it should not
credential a debtor because of a discharged debt. At the very least, there is “an
objectively reasonable basis for concluding that the creditor’s conduct might be
lawful.” Taggart, 139 S.Ct. at 1801. Accordingly, the Bankruptcy Court did not err
in granting Defendant’s motion to dismiss the Amended Complaint.
Conclusion
The Bankruptcy Court’s judgment is AFFIRMED.
A separate judgment will be entered.
DONE and ORDERED this 24th day of July 2019.
/s/ Andrew L. Brasher
ANDREW L. BRASHER
UNITED STATES DISTRICT JUDGE