Barrientos v. Wells Fargo Bank, N.A.

Summarized by Jon Powers , White and Williams LLP
15 years 1 month ago

Citation:

(9th Circuit, Dec 31,1969)

Tag(s):

9th Circuit

Ruling:

A party alleging contempt for violation of the discharge injunction must bring the contempt action by way of motion in the underlying bankruptcy case, not by adversary proceeding.

Procedural context:

Appeal of a district court order affirming the bankruptcy court's grant of a Rule 12(b)(6) motion to dismiss.

Facts:

Appellant Adolfo Barrientos ("Debtor") filed a Chapter 7 bankruptcy petition and received a discharge. After entry of the discharge, Debtor filed an adversary proceeding against Wells Fargo alleging Wells Fargo verified certain debts to credit reporting agencies in violation of the discharge injunction. The Adversary Complaint alleged a single cause of action for contempt for violation of Section 524 of the Bankruptcy Code and sought an injunction, declaratory relief, monetary penalties and attorney fees. Wells Fargo moved to dismiss under Rule 12(b)(6) alleging that such a contempt action must be dismissed under the reasoning set forth in Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 506-07 (9th Cir. 2002) because Section 105 does not support a private right of action for violation of Section 524. The bankruptcy court agreed and the district court affirmed, noting that the proper procedural avenue for such a contempt proceeding was through a motion in the underlying bankruptcy proceeding. The Ninth Circuit affirmed, reasoning that allowing an adversary proceeding would potentially permit a judge other than the judge in the underlying bankruptcy to enforce the discharge, which would undermine the bankruptcy court's supervision of the discharge. The Ninth Circuit also reasoned that Bankruptcy Rule 9020 requires "parties in interest" to bring contempt proceedings by way of a Rule 9014 contested matter and allowing an adversary proceeding would obliterate the distinction between contested matters and adversary proceedings. In support of its ruling, the Barrientos court cited In re Kalikow, 602 F.3d 82 (2d Dir. 2010), which held a proceeding under Section 524 seeks to enforce an injuction already entered and therefore does not need to be brought as an adversary proceeding under Bankrutpcy Rule 7001.

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