Amicus Curiae Brief — PHH Mortgage Corporation, Petitioner v. Mark Anthony Guthrie

No. 23-785

IN THE

Supreme Court of the United States

PHH MORTGAGE CORPORATION,

Petitioner,

v.

MARK ANTHONY GUTHRIE,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Fourth Circuit

BRIEF OF THE MORTGAGE BANKERS ASSOCIATION,

THE CHAMBER OF COMMERCE OF THE UNITED

STATES, THE AMERICAN BANKERS ASSOCIATION,

USFN–AMERICA’S MORTGAGE BANKING

ATTORNEYS, THE AMERICAN FINANCIAL SERVICES

ASSOCIATION, AND THE BANK POLICY INSTITUTE

AS AMICI CURIAE IN SUPPORT OF PETITIONER

ELAINE J. GOLDENBERG

Counsel of Record

RACHEL G. MILLER-ZIEGLER

MUNGER, TOLLES & OLSON LLP

601 Massachusetts Ave. NW

Suite 500E

Washington, DC 20001

(202) 220-1100

Elaine.Goldenberg@mto.com

Counsel for Amici Curiae

(additional counsel on inside cover)

JUSTIN WISEMAN

MORTGAGE BANKERS

ASSOCIATION

1919 M Street NW,

5th Floor

Washington, DC 20036

Counsel for the Mortgage

Bankers Association

RICHARD P. HABER

MCCALLA RAYMER LEIBERT

PIERCE, LLC

420 Lexington Avenue,

Suite 840

New York, NY 10170

(347) 286-7409

Counsel for USFN–America’s

Mortgage Banking Attorneys

PHILIP BOHI

AMERICAN FINANCIAL

SERVICES ASSOCIATION

1750 H St NW

Suite 650

Washington, DC 20006

(202) 466-8605

ANDREW R. VARCOE

JONATHAN D. URICK

U.S. CHAMBER LITIGATION

CENTER

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

Counsel for the Chamber of

Commerce of the United States

of America

THOMAS PINDER

ANDREW DOERSAM

AMERICAN BANKERS

ASSOCIATION

1333 New Hampshire Ave. NW

Washington, DC 20036

Counsel for the American

Bankers Association

GREGG L. ROZANSKY

THE BANK POLICY INSTITUTE

1300 Eye Street NW

Suite 1100 West

Washington, DC 20005

(202) 289-4322

Counsel for the Bank Policy

Institute

Counsel for the American

Financial Services Association

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS............................................... i

TABLE OF AUTHORITIES ........................................ ii

INTEREST OF AMICI CURIAE ................................. 1

INTRODUCTION AND SUMMARY OF

ARGUMENT........................................................... 4

ARGUMENT ................................................................ 5

A. The Fourth Circuit’s Decision

Runs Afoul Of Basic Principles Of

Federal Law ...................................................... 5

B. If Allowed To Stand, The Fourth

Circuit’s Decision Will Have

Serious Practical Consequences ....................... 8

1. Permitting State-Law Claims

For Violation Of Discharge

Orders Threatens To Impose

Onerous And Unpredictable

Liability On Creditors, Even

Where They Act Reasonably ....................... 8

2. The Uncertainty And

Unpredictability Spawned By

The Fourth Circuit’s Approach

Would Have Pernicious

Practical Effects ......................................... 15

CONCLUSION .......................................................... 19

ii

TABLE OF AUTHORITIES

Page(s)

FEDERAL CASES

In re Anderson,

884 F.3d 382 (2d Cir. 2018) .................... 6, 7, 10, 13

Barr v. Am. Ass’n of Pol. Consultants,

Inc.,

140 S. Ct. 2335 (2020) .......................................... 12

Blue Chip Stamps v. Manor Drug Stores,

421 U.S. 723 (1975) ........................................ 14, 15

Bruce v. Citigroup Inc.,

75 F.4th 297 (2d Cir. 2023) ............................ 13, 14

Cent. Bank of Denver, N.A. v. First

Interstate Bank of Denver, N.A.,

511 U.S. 164 (1994) ........................................ 18, 19

Cox v. Zale Delaware, Inc.,

239 F.3d 910 (7th Cir. 2001) .................. 6, 7, 13, 14

In re Crocker,

941 F.3d 206 (5th Cir. 2019), as

revised (Oct. 22, 2019) .......................................... 14

Epic Sys. Corp. v. Lewis,

584 U.S. 497 (2018) ................................................ 7

Exxon Shipping Co. v. Baker,

554 U.S. 471 (2008) .............................................. 12

iii

TABLE OF AUTHORITIES

(continued)

Page(s)

Gonzales v. Parks,

830 F.2d 1033 (9th Cir. 1987) .............................. 15

GTE Sylvania, Inc. v. Consumers Union

of U.S., Inc.,

445 U.S. 375 (1980) ................................................ 6

Guthrie v. PHH Mortg. Corp.,

79 F.4th 328 (4th Cir. 2023) ................................... 6

Hanover Nat’l Bank v. Moyses,

186 U.S. 181 (1902) ................................................ 5

Int’l Shoe Co. v. Pinkus,

278 U.S. 261 (1929) .......................................... 4, 15

Int’l Union, United Mine Workers of Am.

v. Bagwell,

512 U.S. 821 (1994) ............................................ 4, 5

MSR Expl., Ltd. v. Meridian Oil, Inc.,

74 F.3d 910 (9th Cir. 1996) .................................. 16

Ohio v. Kovacs,

469 U.S. 274 (1985) .............................................. 10

Payne v. Jones,

711 F.3d 85 (2d Cir. 2013) .................................... 12

Pertuso v. Ford Motor Credit Co.,

233 F.3d 417 (6th Cir. 2000) ................................ 16

iv

TABLE OF AUTHORITIES

(continued)

Page(s)

Shady Grove Orthopedic Assocs., P.A. v.

Allstate Ins. Co.,

559 U.S. 393 (2010) .............................................. 12

Stoneridge Inv. Partners, LLC v.

Scientific-Atlanta, Inc.,

552 U.S. 148 (2008) .............................................. 14

Taggart v. Lorenzen,

139 S. Ct. 1795 (2019) .................. 5, 8, 9, 11, 17, 18

In re Ybarra,

424 F.3d 1018 (9th Cir. 2005) .............................. 10

STATE CASES

Cortez v. Purolator Air Filtration Prods.

Co.,

999 P.2d 706 (Cal. 2000) ........................................ 9

Laurich-Trost v. Wabnitz,

2003 WL 22805159 (Ohio Ct. App.

Nov. 25, 2003) ......................................................... 7

PNH, Inc. v. Alfa Laval Flow, Inc.,

958 N.E.2d 120 (Ohio 2011) ................................. 15

State ex rel. McGraw v. Telecheck Servs.,

Inc.,

582 S.E.2d 885 (W. Va. 2003)................................. 9

v

TABLE OF AUTHORITIES

(continued)

Page(s)

FEDERAL STATUTES

11 U.S.C. 101(5) ......................................................... 10

11 U.S.C. 101(12) ....................................................... 10

11 U.S.C. 523(a)(1)-(20) ........................................... 5, 9

11 U.S.C. 523(c)(1) ..................................................... 17

11 U.S.C. 524 ............................................................... 7

11 U.S.C. 524(a)(2) ................................................... 4, 5

11 U.S.C. 524(j) .......................................................... 10

11 U.S.C. 727(b) ......................................................... 10

11 U.S.C. 1328(a)(1) ............................................... 9, 10

28 U.S.C. 1334(a) ..................................................... 5, 7

28 U.S.C. 1334(b) ......................................................... 7

STATE STATUTES

N.C. Gen. Stat. § 75-56(b).......................................... 11

W. Va. Code § 46A-2-127(d) ......................................... 9

FEDERAL RULE

Fed. R. Bankr. P. 4007(a) .......................................... 16

vi

TABLE OF AUTHORITIES

(continued)

Page(s)

CONSTITUTIONAL PROVISION

U.S. Const. art. I, § 8, cl. 4 ............................ 4, 5, 6, 16

OTHER AUTHORITIES

Cong. Rsch. Serv., IN11377, Mortgage

Servicing Rights and Selected Market

Developments (May 2020),

https://crsreports.congress.gov/

product/pdf/IN/IN11377 ....................................... 18

Individual Chapter 11 Discharge, Form

3180RI, https://www.uscourts.gov/

forms/bankruptcy-forms/individualchapter-11-discharge ...................................... 10, 11

Ralph K. Winter, Paying Lawyers,

Empowering Prosecutors, and

Protecting Managers: Raising the

Cost of Capital in America,

42 Duke L.J. 945 (1993) ....................................... 19

INTEREST OF AMICI CURIAE 1

The Mortgage Bankers Association (MBA) is a national association representing the real-estate finance

industry, an industry that employs more than

300,000 people in virtually every community in the

country.

MBA works to ensure the continued

strength of the nation’s residential and commercial

real-estate markets, to expand homeownership, and

to extend access to affordable housing to all Americans. Its membership of more than 2,200 companies

includes all elements of real-estate finance: independent mortgage banks, mortgage brokers, commercial banks, thrifts, REITs, Wall Street conduits, life

insurance companies, credit unions, and others in the

mortgage lending field.

The Chamber of Commerce of the United States of

America (the Chamber) is the world’s largest business federation. It represents 300,000 direct members and indirectly represents the interests of more

than three million companies and professional organizations of every size, in every industry sector, and

from every region of the country. An important function of the Chamber is to represent the interests of its

members in matters before Congress, the Executive

Branch, and the courts. To that end, the Chamber

regularly files amicus curiae briefs in cases, like this

one, that raise issues of concern to the nation’s business community.

Pursuant to Rule 37, counsel for amici curiae affirm that all

parties were timely notified of the filing of this brief. No counsel

for a party authored this brief in whole or in part and no entity

or person, other than amici, their members, or their counsel,

made any monetary contribution intended to fund the preparation or submission of this brief.

1

2

The American Bankers Association (ABA) is the

voice of the nation’s $23.4 trillion banking industry,

which is composed of small, regional, and large banks

that together employ approximately 2.1 million people, safeguard $18.6 trillion in deposits, and extend

$12.3 trillion in loans. ABA regularly advocates on

behalf of its members on important policy issues and

through amicus curiae briefs on issues of importance

to the industry.

USFN–America’s Mortgage Banking Attorneys

(USFN) is a national, not-for-profit association of law

firms that specialize in matters of real-estate finance.

Founded in 1988, USFN consists of organizations

that represent the nation’s largest banks, mortgage

lenders, mortgage-servicing companies, and government-sponsored enterprises in connection with foreclosure, bankruptcy, loan modifications and other

workouts, inventoried properties, and litigation related to those areas. USFN’s members also include industry-affiliated suppliers of products and services.

USFN was established to promote competent, professional, and ethical representation by its membership

and in the mortgage-servicing industry.

Founded in 1916, the American Financial Services

Association (AFSA) is the national trade association

for the consumer credit industry. AFSA works to protect access to credit and consumer choice. AFSA has

a broad membership, ranging from large international financial services firms to single-office, independently owned consumer finance companies. AFSA

members provide consumers with many kinds of credit, including traditional installment loans, mortgages,

direct and indirect vehicle financing, payment cards,

and retail sales financing.

The Bank Policy Institute is a nonpartisan public

policy, research, and advocacy group that represents

3

universal banks, regional banks, and the major foreign banks doing business in the United States. The

Institute produces academic research and analysis on

regulatory and monetary policy topics, analyzes and

comments on proposed regulations, and represents

the financial services industry with respect to cybersecurity, fraud, and other information security issues.

Issues of focus include capital and liquidity regulation, anti-money-laundering, payment systems, consumer protection, bank powers, bank examination,

and competition in the financial sector.

Amici’s members, which include businesses that

engage in lending, debt collection, and foreclosure,

have a powerful interest in reversal of the erroneous

Fourth Circuit decision as to which petitioner seeks

review in this case. Those businesses rely on the

ability to collect duly owed debts in a predictable,

cost-effective manner. But the decision below threatens onerous and unpredictable state-law liability for

debt-collection efforts as to which federal law would

impose no liability. Such liability would have numerous harmful effects, including chilling legitimate

debt-collection activities and, therefore, chilling the

provision of financial services, including lending. It

also would undermine the uniformity that is one of

the fundamental—and constitutionally prescribed—

attributes of bankruptcy law.

4

INTRODUCTION AND

SUMMARY OF ARGUMENT

This case stands at the intersection of two basic

but critical legal rules. First, bankruptcy law is federal and, by constitutional command, must be uniform. See Int’l Shoe Co. v. Pinkus, 278 U.S. 261, 265

(1929); U.S. Const. art. I, § 8, cl. 4. Second, a judge

that issues an injunction is “solely responsible for

identifying, prosecuting, adjudicating, and sanctioning” conduct in violation of that injunction. Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S.

821, 831 (1994).

As the petition explains, the Fourth Circuit ran

afoul of both of those principles in allowing Mark

Guthrie to pursue state-law claims against PHH

Mortgage Corporation (PHH) based on an alleged violation of a bankruptcy court’s discharge order, which

“operates as an injunction” under federal law. 11

U.S.C. 524(a)(2). The Fourth Circuit’s holding that

preemption is no bar to such claims is manifestly incorrect, as the majority of circuits that have addressed the issue have recognized. Those circuits

have held that a debtor’s recourse for such an alleged

violation is not an action asserting violation of state

law, but rather a contempt action under federal law

in the bankruptcy court that issued the injunction in

the first instance.

Unless this Court intervenes, the Fourth Circuit’s

erroneous holding also will give rise to a number of

harmful practical consequences. Creditors trying to

collect debts will face the threat of onerous and unpredictable liability under state law—even where

those creditors operate not only in good faith but also

in an objectively reasonable way. That heightened

potential liability will, in turn, chill lawful debtcollection efforts, increase litigation surrounding dis-

5

chargeability, and burden debt-related activities

more generally. This Court’s review is urgently

needed to stave off those highly undesirable results.

ARGUMENT

A. The Fourth Circuit’s Decision Runs Afoul Of

Basic Principles Of Federal Law

The Constitution grants Congress the “Power” to

“establish * * * uniform Laws on the subject of

Bankruptcies throughout the United States.” U.S.

Const. art. I, § 8, cl. 4. That grant “includes the power to discharge the debtor from his contracts and legal liabilities.” Hanover Nat’l Bank v. Moyses, 186

U.S. 181, 188 (1902). Congress has exercised that

power in the Bankruptcy Code, which provides that

many types of debts are dischargeable in bankruptcy

but that certain types of debts are not. See 11 U.S.C.

523(a)(1)-(20); see also 28 U.S.C. 1334(a) (federal

courts have “original and exclusive jurisdiction of all

cases under” the Bankruptcy Code).

Under the Code, a discharge takes the form of an

order that “operates as an injunction” against any future attempts to collect discharged debt. 11 U.S.C.

524(a)(2). Accordingly, bankruptcy courts may enforce a “discharge injunction” through civil-contempt

sanctions. Taggart v. Lorenzen, 139 S. Ct. 1795, 1801

(2019); see ibid. (civil-contempt proceeding in bankruptcy court provides a debtor with a “potent weapon”

to address any violation of a discharge injunction) (citation omitted). The judge that has issued an injunction is the judicial officer that is “solely responsible

for identifying, prosecuting, adjudicating, and sanctioning” any violation of that injunction—that is, for

addressing any “contumacious conduct” that flies in

the face of the court’s order and thereby defies the

court’s authority. Bagwell, 512 U.S. at 831.

6

Allowing a debtor to pursue a state-law claim

premised on a violation of a discharge order, as the

Fourth Circuit did in the decision below, offends

those basic principles. State law has no role to play

in policing violations of a discharge order; a federal

civil-contempt remedy already exists to address such

violations and has preemptive effect. See Guthrie v.

PHH Mortg. Corp., 79 F.4th 328, 350 (4th Cir. 2023)

(Wynn, J., concurring in part and dissenting in part)

(describing 1970 amendment to Bankruptcy Code to

make discharge operate as an injunction); see also

Pet. 5-6, 24-30. Allowing state-law claims to supplant

that federal remedy would put the States in the driver’s seat for determining the consequences of violating a bankruptcy-discharge injunction, thereby displacing a clear federal enactment in an area where

Congress has been constitutionally tasked with ensuring “uniform Laws.” U.S. Const. art. I, § 8, cl. 4.

Moreover, the Fourth Circuit’s holding runs roughshod over the fundamental principle that the issuing

court—here, a federal bankruptcy court—is responsible for determining what, if any, consequences should

follow from violation of an injunction. That principle

vindicates a court’s inherent authority. All parties

bound by an injunction have a duty to “obey * * * out

of respect for judicial process.” GTE Sylvania, Inc. v.

Consumers Union of U.S., Inc., 445 U.S. 375, 387

(1980) (citation omitted)—and that “same respect”

dictates that the issuing “court alone has the power

to enforce” its injunction, In re Anderson, 884 F.3d

382, 391 (2d Cir. 2018) (discussing discharge orders).

In addition, “[t]he court that issued the discharge order is in a better position” than any other court “to

adjudicate the alleged violation, assess its gravity,

and on the basis of that assessment formulate a

proper remedy.” Cox v. Zale Delaware, Inc., 239 F.3d

7

910, 916 (7th Cir. 2001); see, e.g., Anderson, 884 F.3d

at 390-391 (“[T]he bankruptcy court retains a unique

expertise in interpreting its own injunctions and determining when they have been violated.”).

Although only federal courts can discharge debts in

bankruptcy, state courts have concurrent jurisdiction

over certain bankruptcy-related matters, which allows them to apply federal bankruptcy law in some

circumstances. Compare 28 U.S.C. 1334(a), with 28

U.S.C. 1334(b) (federal courts have “original but not

exclusive jurisdiction of all civil proceedings arising

under [the Bankruptcy Code], or arising in or related

to cases under [the Bankruptcy Code]”); see, e.g.,

Laurich-Trost v. Wabnitz, 2003 WL 22805159, at *2

(Ohio Ct. App. Nov. 25, 2003) (holding that debt was

not collectible in state court because that debt had

already been discharged in bankruptcy pursuant to

11 U.S.C. 524). But that general principle of concurrent jurisdiction does not undermine the conclusion

that a specific federal-law remedy for violation of a

discharge injunction preempts state substantive law.

That general principle also does not trump the more

specific principle—which is often applied as between

courts that have identical jurisdiction—that it is the

court that issued an injunction that has the sole judicial power to enforce that injunction through monetary or other remedies. 2

As the petition notes, the question whether claims for violations of bankruptcy discharge orders are subject to arbitration is

distinct from the question presented by the petition, as the former question implicates a separate body of arbitration-related

law that has no relevance here. Pet. 24 n.10; see, e.g., Epic Sys.

Corp. v. Lewis, 584 U.S. 497, 510-525 (2018).

2

8

B. If Allowed To Stand, The Fourth Circuit’s

Decision Will Have Serious Practical

Consequences

1. Permitting

State-Law

Claims

For

Violation Of Discharge Orders Threatens

To Impose Onerous And Unpredictable

Liability On Creditors, Even Where They

Act Reasonably

Federal law on the consequences for violating a

discharge injunction is clear, well-developed, and relatively predictable. Creditors are familiar with that

body of law and used to conforming their conduct to

its requirements. But the Fourth Circuit’s approach

would significantly change that state of affairs and

introduce an enormous amount of uncertainty into

debt collection, foreclosure, and similar activities. Allowing state-law claims for violation of a bankruptcy

court’s discharge injunction would lower the standard

for finding the existence of a violation and would do

so inconsistently across different states. It would

create the possibility of more significant and difficultto-predict damages, including for debt-collection activity that creditors currently regard as routine. And

it would open the door to the prospect of class actions

alleging violation of a discharge injunction, which

would be extremely onerous for creditors to litigate.

a. In Taggart, this Court held that a court may

impose a civil-contempt sanction for violation of a

bankruptcy-discharge order only “when there is no

objectively reasonable basis for concluding that the

creditor’s conduct might be lawful under the discharge order.” 139 S. Ct. at 1801. That standard reflects the “traditional standards in equity practice for

determining when a party may be held in civil contempt for violating an injunction.” Ibid.

9

In contrast, state-law causes of action that could

be premised on violation of a discharge order often

require something less than a showing of objective

unreasonableness. See, e.g., W. Va. Code § 46A-2127(d) (provision of West Virginia Consumer Credit

Protection Act (WVCCPA) barring “[a]ny false representation or implication of the character, extent or

amount of a claim against a consumer, or of its status

in any legal proceeding”); State ex rel. McGraw v.

Telecheck Servs., Inc., 582 S.E.2d 885, 897 n.19 (W.

Va. 2003) (noting that WVCCPA exception for “bona

fide error of fact * * * does not include errors or mistakes of law”); see also, e.g., Cortez v. Purolator Air

Filtration Prods. Co., 999 P.2d 706, 717 (Cal. 2000)

(“The [California Unfair Competition Law] imposes

strict liability when property or monetary losses are

occasioned by conduct that constitutes an unfair

business practice.”). Indeed, Guthrie has argued that

some of his state-law claims here impose essentially a

strict-liability standard. See Pet. 28. The result is

that, in many states, a litigant may be able to pursue

state-law claims based on a creditor’s violation of a

discharge order even where the creditor acted objectively reasonably and a civil-contempt sanction therefore would be unavailable under Taggart.

That lower standard creates significant unpredictability for creditors accused of violating a discharge injunction. Whether a particular debt is discharged in whole or in part—and thus, whether attempting to collect that debt violates the order—often

involves a complex legal question on which reasonable minds may differ. Although a discharge order

will discharge most debts, the Bankruptcy Code includes numerous exceptions to discharge, many of

which involve complicated, multi-part tests. See, e.g.,

11 U.S.C. 523(a)(1)-(20); 11 U.S.C. 1328(a)(1) (dis-

10

charge exception specific to Chapter 13 bankruptcy

cases); see also 11 U.S.C. 524(j) (permitting creditors

with security interest in “principal residence,” acting

post-discharge, to “seek[] or obtain[]” certain “periodic

payments” in “ordinary course of business”). And

even if those statutory exceptions do not apply, creditors may still be entitled to collect a debt in the face

of a discharge order—for instance, if the debt arose

after the bankruptcy, or if the money sought to be collected is not a “claim” under the Bankruptcy Code.

See, e.g., 11 U.S.C. 727(b); 11 U.S.C. 101(5), (12). Deciding whether such entitlement exists often involves

challenging questions of law and fact. See, e.g., Ohio

v. Kovacs, 469 U.S. 274, 278-279 (1985) (addressing

whether obligation was “claim”); In re Ybarra, 424

F.3d 1018, 1022-1024 (9th Cir. 2005) (addressing

when claim arises).

Notably, a discharge order itself is not much help

to creditors attempting to determine whether they

can collect on a particular debt. A bankruptcydischarge order is issued on a form that includes only

very basic information about the debtor and the

bankruptcy (e.g., the debtor’s name and bankruptcy

case number) along with bare-bones and generalized

statements that “[c]reditors cannot collect discharged

debts” and that “[m]ost,” but not all, “debts are discharged.” E.g., Individual Chapter 11 Discharge,

Form

3180RI,

https://www.uscourts.gov/forms/

bankruptcy-forms/individual-chapter-11-discharge;

see Anderson, 884 F.3d at 390 (discussing use of

“standard form using boilerplate language”). The result is that the discharge order, standing alone, provides no real guidance to a creditor trying to determine whether a particular debt is discharged. Indeed, the form order includes a caution that it provides “only a general summary” of the discharge, that

11

“some exceptions exist,” that “the law is complicated,”

and that an interested party “should consult an attorney to determine the exact effect of the discharge

in this case.” Form 3180RI.

The combination of difficult dischargeability questions and a lack of guidance from the discharge order

itself means that “there will often be at least some

doubt as to the scope of such orders,” Taggart, 139 S.

Ct. at 1803, and that whether a particular debt is discharged will often be subject to reasonable disagreement, see, e.g., id. at 1800 (state court and bankruptcy court concluded debt not discharged; federal district court concluded debt discharged). The federallaw standard set forth in Taggart thus provides

much-needed protection to creditors who are doing

their best to puzzle through complicated issues and

reach a reasonable conclusion. But under the Fourth

Circuit’s approach, debtors might well be able to secure judgments under state law even for conduct that

creditors reasonably believed was permitted under

the federal Bankruptcy Code.

b. State-law claims for violation of a discharge order also carry the potential for far more significant

and unpredictable damages than a creditor would

likely face under a civil-contempt judgment.

First, state law may impose remedies that are unavailable or uncommon in the civil-contempt context.

Most notably, violation of state law may trigger statutory damages that would be unavailable in a civilcontempt proceeding and that can quickly multiply,

particularly given the often repetitive nature of debtcollection efforts. For example, one of the claims asserted in this case, which alleges unfair or deceptive

acts or practices, permits damages of between $500

and $4,000 per violation—even without any showing

of actual harm. See N.C. Gen. Stat. § 75-56(b); Pet.

12

29. Guthrie alleged that petitioner contacted him

numerous times, including through letters and phone

calls.

Complaint ¶¶ 55, 264, No. 7:20-cv-43

(E.D.N.C.). If Guthrie were able to show that each

such contact constituted a violation of state law, he

could obtain substantial statutory damages on that

single claim, regardless of whether he was actually

harmed in any way by any of the letters or calls. And

in a case involving multiple plaintiffs, imposing those

kinds of statutory damages can quickly create staggering liability. See Barr v. Am. Ass’n of Pol. Consultants, Inc., 140 S. Ct. 2335, 2345 (2020); Shady

Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co.,

559 U.S. 393, 445 n.3 (2010) (Ginsburg, J., dissenting) (noting that statutory damages can “pose[] the

risk of massive liability unmoored to actual injury”).

Second, jury awards on state-law claims will be

far less predictable than civil-contempt sanctions issued by federal bankruptcy-court judges. As a general matter, jury verdicts carry the risk of “stark unpredictability.” Exxon Shipping Co. v. Baker, 554

U.S. 471, 499 (2008) (discussing empirical evidence

regarding “punitive damages awarded by juries in

state civil trials”). Although juries may have to rely

on their “instincts” and “random, often inaccurate,

bits of information” about prior awards, judges’ “far

greater familiarity with the experience of the legal

system” means that the remedies they authorize are

more likely to be consistent with past practice. E.g.,

Payne v. Jones, 711 F.3d 85, 93-96 (2d Cir. 2013).

And the disparity between jury and judge awards is

likely to be particularly heightened in this context:

bankruptcy-court judges have special expertise in and

familiarity with discharge orders, the often-difficult

interpretive questions that arise in connection with

such orders, and the sort of activities that are accept-

13

ed business practices in the field of debt collection

and foreclosure. See Anderson, 884 F.3d at 390-391

(“[T]he bankruptcy court retains a unique expertise

in interpreting its own injunctions and determining

when they have been violated.”). Bankruptcy-court

contempt sanctions are, accordingly, likely to be more

predictable and more appropriately tailored to the

conduct at issue than a verdict from a jury, whose

members may very well have never encountered the

bankruptcy process, much less a discharge order, before their jury service.

c. The Fourth Circuit’s approach also opens the

door to the possibility of class actions alleging violations of state law, even as against creditors who have

reasonably concluded that their conduct conforms to

the strictures of any relevant bankruptcy discharge

order. That approach therefore would exacerbate the

uncertainty that creditors would face in trying to determine whether they are likely to be subject to a significant claim for violation of a discharge injunction

and, if so, what their financial exposure might be.

As the petition notes, litigants have frequently attempted to bring class actions alleging violations of

bankruptcy-discharge orders. Pet. 33. Many of those

class actions have tried to aggregate debtors from

across different bankruptcy districts in the same

state, or even from different places across the country. See, e.g., Bruce v. Citigroup Inc., 75 F.4th 297,

306 (2d Cir. 2023). And many of them have involved

a “large” number of putative class members. Cox, 239

F.3d at 912.

Courts taking the opposite view from the Fourth

Circuit here, and thus correctly holding that only the

court issuing an injunction has authority to impose

civil-contempt sanctions for its violation, have rejected such class actions. As those courts have ex-

14

plained, a putative class action that includes debtors

who have obtained discharge injunctions from multiple different bankruptcy-court judges is not consistent with the rule that each bankruptcy-court

judge has authority to enforce his or her own orders.

See, e.g., Bruce, 75 F.4th at 306 (holding that a

court’s civil-contempt authority “does not extend to

other bankruptcy courts’ discharge orders in a nationwide class action”); Cox, 239 F.3d at 916 (acknowledging that treating contempt as exclusive

remedy “precludes class-action relief” because other

debtors “are scattered all over the country”); see also

In re Crocker, 941 F.3d 206, 216-217 (5th Cir. 2019),

as revised (Oct. 22, 2019) (requiring “return[] to the

issuing bankruptcy court to enforce an injunction”

and raising question “whether [bankruptcy court] has

authority to enforce the injunctions arising from discharges entered by any bankruptcy court in the same

judicial district”).

But no such limitation exists if debtors can challenge violations of the discharge order through state

law and outside of the civil-contempt process. There

is every reason to think that, if the Fourth Circuit’s

approach is permitted to stand, debtors will pursue

class relief against creditors under state law that

they could not pursue federally. And it is well recognized that class actions exert significant pressure on

defendants regardless of the merits of the claims

raised in those actions, including by imposing increased litigation costs (such as the costs required to

litigate class-certification issues) and by sometimes

forcing defendants to settle to escape from even a remote prospect of significant classwide damages. Cf.

Stoneridge Inv. Partners, LLC v. Scientific-Atlanta,

Inc., 552 U.S. 148, 162-164 (2008) (discussing in terrorem effect of class actions in securities cases); Blue

15

Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 741

(1975) (same).

2. The Uncertainty And Unpredictability

Spawned By The Fourth Circuit’s

Approach

Would

Have

Pernicious

Practical Effects

If this Court does not step in to align the Fourth

Circuit with its sister circuits, the distinct state-law

features discussed above would all combine to make

the large number of discharge orders issued annually

in Maryland, Virginia, West Virginia, North Carolina, and South Carolina into potential sources of creditor liability, even for creditors who operate in an objectively reasonable manner. See Pet. 31 & n.12. Indeed, as the petition explains (at 32), even debtors

who reside outside of the Fourth Circuit may be able

to take advantage of its rule, magnifying the decision’s ramifications. Such a sea change would likely

have a variety of harmful consequences for creditors

and other participants in the lending industry.

First, some creditors may decide that the costs

and risks associated with collecting a debt are too

great, leading them to write off or modulate their efforts to collect debts that they are fully entitled to collect under a reasonable reading of the relevant discharge order. See generally Gonzales v. Parks, 830

F.2d 1033, 1036 (9th Cir. 1987) (recognizing that “the

kind of substantial damage awards that might be

available in state court tort suits * * * could in some

instances deter persons from exercising their rights”);

PNH, Inc. v. Alfa Laval Flow, Inc., 958 N.E.2d 120,

126 (Ohio 2011). But it is the federal Bankruptcy

Code, not state law, that is responsible for determining which debts can be collected and which are discharged. See Int’l Shoe Co., 278 U.S. at 265 (“In re-

16

spect of bankruptcies the intention of Congress is

plain. The national purpose to establish uniformity

necessarily excludes state regulation.”). The Fourth

Circuit’s rule turns that fundamental feature of

bankruptcy law on its head and would create significant unfairness for creditors.

What’s more, the chilling effect of the Fourth Circuit’s rule may create national disuniformity, as creditors will be more likely to write off debts in states in

the Fourth Circuit, particularly those with harsh

state-law remedies, or to refrain from viable collection efforts in those states. Such uneven application

of the law in enforcing bankruptcy-discharge injunctions is also fundamentally unfair—and beyond that,

it offends both the Bankruptcy Code and the Constitution. See U.S. Const. art. I, § 8, cl. 4; MSR Expl.,

Ltd. v. Meridian Oil, Inc., 74 F.3d 910, 915 (9th Cir.

1996) (noting “the unique, historical, and even constitutional need for uniformity in the administration of

the bankruptcy laws”); Pertuso v. Ford Motor Credit

Co., 233 F.3d 417, 426 (6th Cir. 2000) (“Permitting

assertion of a host of state law causes of action to redress wrongs under the Bankruptcy Code would undermine the uniformity the Code endeavors to preserve and would ‘stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’” (citation and alteration omitted)).

Second, and relatedly, the potential for more onerous state-law litigation would create at least some incentive for creditors to seek a bankruptcy-court determination regarding whether a debt has been discharged prior to attempting collection of that debt.

The Bankruptcy Rules permit creditors to “file a

complaint to obtain a determination of the dischargeability of any debt.” Fed. R. Bankr. P. 4007(a). In

17

Taggart, this Court recognized that adopting a strictliability standard for civil contempt “m[ight] lead

risk-averse creditors to seek an advance determination in bankruptcy court even where there is only

slight doubt as to whether a debt has been discharged.” Taggart, 139 S. Ct. at 1803; see ibid. (noting that “there will often be at least some doubt as to

the scope of [discharge] orders”). An unpredictable

and difficult regime of state-law liability would likely

provide even further motivation for creditors to seek

such advance determinations.

But a system where more creditors feel compelled

to take such a step is both inconsistent with the congressional scheme and unduly costly. As Taggart

noted, Congress contemplated that an advance determination of that kind “would be needed in only a

small class of cases.” Taggart, 139 S. Ct. at 1803 (citing 11 U.S.C. 523(c)(1)); see 11 U.S.C. 523(c)(1) (listing three situations in which an advance determination is required). The Fourth Circuit’s rule threatens

to transform what should be a rare procedure, generally limited to specific kinds of debt, into a much

more common practice. That could well mean far

more litigation on the issue than Congress contemplated. See Taggart, 139 S. Ct. at 1803. The result

would be “additional federal litigation, additional

costs, and additional delays,” all “interfer[ing] with a

chief purpose of the bankruptcy laws: to secure a

prompt and effectual resolution of bankruptcy cases

within a limited period.” Ibid. (citations omitted).

And, as this Court explained, those “negative consequences, especially the costs associated with the added need to appear in federal proceedings, could work

to the disadvantage of debtors as well as creditors.”

Ibid.

18

Finally, all of the unpredictability and uncertainty

discussed above—even as to objectively reasonable

conduct—would increase the cost of collecting debt,

and such increased cost would be priced into the cost

of lending and borrowing to at least some degree,

even if only at the margins. See generally Cent. Bank

of Denver, N.A. v. First Interstate Bank of Denver,

N.A., 511 U.S. 164, 189 (1994) (“uncertainty and excessive litigation can have ripple effects”). Given that

the Fourth Circuit’s approach may require perfect

compliance to avoid meaningful state-law remedies,

creditors operating under the shadow of that decision

would likely spend more time and money trying to

conform their conduct to the sometimes complex rules

regarding dischargeability. Those efforts would be

particularly onerous for lenders with a multi-state or

national profile, as such lenders would need to monitor the laws of multiple states rather than just understanding one federal bankruptcy regime relating

to violation of discharge injunctions. And even after

making those efforts, creditors would likely make innocent mistakes sometimes, and they would need to

factor the potential for substantial state-law judgments into their business operations—for instance,

by increasing their reserves. In addition, loanservicing rights that trade on a secondary market

would trade for less money if they were exposed to

greater risk due to potential state-law liability. See

generally Cong. Rsch. Serv., IN11377, Mortgage Servicing Rights and Selected Market Developments

(May 2020), https://crsreports.congress.gov/product/

pdf/IN/IN11377. The bottom line is that the Fourth

Circuit’s approach would mean higher costs than exist under a relatively predictable and straightforward

regime in which alleged violations of discharge injunctions are handled by the issuing bankruptcy

court under the rules set forth in Taggart. See gen-

19

erally Ralph K. Winter, Paying Lawyers, Empowering

Prosecutors, and Protecting Managers: Raising the

Cost of Capital in America, 42 Duke L.J. 945, 948

(1993) (“Unnecessary civil * * * liability diminishes

the return to, and increases the cost of, capital.”), cited in Central Bank, 511 U.S. at 189.

In short, allowing the Fourth Circuit’s decision to

stand would create a host of practical problems and

harmful impacts. This Court’s review is urgently

needed.

CONCLUSION

For the foregoing reasons, and those stated by

petitioner, the Court should grant the petition for

certiorari.

Respectfully submitted,

ELAINE J. GOLDENBERG

Counsel of Record

RACHEL G. MILLER-ZIEGLER

MUNGER, TOLLES & OLSON LLP

601 Massachusetts Ave. NW

Suite 500E

Washington, DC 20001

(202) 220-1100

Elaine.Goldenberg@mto.com

Counsel for Amici Curiae

JUSTIN WISEMAN

MORTGAGE BANKERS

ASSOCIATION

1919 M Street NW,

5th Floor

Washington, DC 20036

Counsel for the Mortgage

Bankers Association

ANDREW R. VARCOE

JONATHAN D. URICK

U.S. CHAMBER LITIGATION

CENTER

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

Counsel for the Chamber of

Commerce of the United States of

America

20

RICHARD P. HABER

MCCALLA RAYMER LEIBERT

PIERCE, LLC

420 Lexington Avenue,

Suite 840

New York, NY 10170

(347) 286-7409

Counsel for USFN–America’s

Mortgage Banking Attorneys

PHILIP BOHI

AMERICAN FINANCIAL SERVICES

ASSOCIATION

1750 H St NW

Suite 650

Washington, DC 20006

(202) 466-8605

Counsel for the American

Financial Services Association

FEBRUARY 21, 2024

THOMAS PINDER

ANDREW DOERSAM

AMERICAN BANKERS

ASSOCIATION

1333 New Hampshire Ave. NW

Washington, DC 20036

Counsel for the American

Bankers Association

GREGG L. ROZANSKY

THE BANK POLICY INSTITUTE

1300 Eye Street NW

Suite 1100 West

Washington, DC 20005

(202) 289-4322

Counsel for the Bank Policy

Institute