DAVID F. LEVI, U.S. District Judge
Randy and Deborah Metcalf ("the Metcalfs") bring this suit against Beneficial California, Inc. ("Beneficial"), for Beneficial's alleged violations of Bankruptcy Code provisions that protect Chapter 7 debtors. The Metcalfs move for certification of a class of debtors from whom Beneficial allegedly solicited payment of discharged debt.
I.
Under 11 U.S.C. § 362, Chapter 7 bankruptcy petitioners are granted an automatic stay, from the bankruptcy filing date to the entry of a discharge order, of all acts to collect, assess, or recover on debts accrued prior to the filing date. 11 U.S.C. § 362 (a)(6). A discharge order triggers an injunction on future attempts to collect on discharged debt as a personal liability of the debtor. 11 U.S.C. § 524 (a)(2). A debtor may, with the approval of the bankruptcy court, reaffirm a debt that is otherwise dischargeable. 11 U.S.C. § 524 (c). A reaffirmation agreement renews the debtor's personal liability even after the discharge date. Id.
A discharge order does not, however, affect any security 26 interest that a creditor may have in a debtor's property. See Johnson v. State Home Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 2153 (1991).
Randy Metcalf began working as a real estate agent and broker in 1992. (Metcalf Depo. at 13:7-13). From 1994 on, he listed and sold foreclosed real estate owned properties for Beneficial. (Id. at 15:1-10). Metcalf has taken out a succession of loans with Beneficial over the past 20 years. (Id. at 38:6-15)
The Metcalfs filed a Chapter 7 bankruptcy petition on June 11, 1997. (Complaint at ¶ 5). At that time, the Metcalfs held three loans with Beneficial: a home equity loan that was secured by a second mortgage on the Metcalfs' homestead, and two personal property secured loans, one for the purchase of a computer, the other for a television. (Id. at ¶ 9). The next day, the Metcalfs sent a letter to Beneficial's Yuba City branch stating that they intended to continue to make payments on their loans. (June 12, 1997 Letter Re: Reaffirmation of Debt, Exh. 3 to Klein Decl.). Along with this letter, the Metcalfs enclosed a copy of their Chapter 7 Statement of Intention to reaffirm all three of their debts to Beneficial. (See id.) However, they eventually executed reaffirmation agreements only for their two personal-property secured loans. (Complaint at ¶ 9). The bankruptcy court approved the reaffirmation agreement on the loan that was secured by the television, but refused to do so on the one secured by the computer. (Id.)
The reaffirmed personal property loan is not a subject of this lawsuit. (Id.)
Beneficial did not contact the Metcalfs by telephone during the automatic stay period. Beneficial did, however, send the Metcalfs a reminder notice on their home equity loan prior to the discharge. (See METBC 00243, Exh. 5 to Klein Decl.). The Metcalfs continued to make scheduled payments on the loans during the automatic stay period. (See METBC 00234-35, Exh. 5 to Klein Decl.; METBC 00254, Exh. 6 to Klein Decl.). On October 14, 1997, the bankruptcy court discharged the Metcalfs' debts. (Complaint at ¶ 10).
After the discharge, the Metcalfs made 33 monthly payments, totaling $1,155, on their personal property secured loan, and 28 monthly payments of $280, totaling $7,840, on their real property secured loan. (Id. at ¶¶ 11-14). The Metcalfs allege that they made these payments in response to illegal Post-discharge telephone calls from Beneficial. The Metcalfs further allege that Beneficial made these calls as part of its practice of directly soliciting payment on discharged debt in violation of the § 524 discharge injunction. (Reply at 1).
According to Albert Spears, one of Household International, Inc.'s ("Household") bankruptcy department managers, Beneficial has, as a matter of standard practice over at least the past three to four years, contacted certain of its secured debtors by telephone following the entry of a § 524 discharge injunction. (Spears Depo. at 52:10-53:7). Beneficial's representatives telephone customers who have been delinquent on their debt payments for 30 days post-discharge, to ascertain their intentions with respect to the real property that secures their loans. (Id. at 47:11-48:2). Beneficial often reorganizes the terms of its loans to these customers so that they can continue to make payments and avoid foreclosure. (Id. at 52:4-9).
Beneficial merged with Household in June 1998. Prior to the merger, Beneficial's branches were individually responsible for servicing loans, conducting collection activities, and handling bankrupt accounts. (Robinson Depo. at 18:9-19:4). After the merger, Beneficial centralized responsibility for accounts involving real-estate and personal-property secured bankruptcies at offices in Illinois and Florida, respectively. (Spears Depo. at 5:1-7:20).
Beneficial's policy manual prohibits its representatives from asserting that customers remain personally liable on the loans; instead, the manual directs the company's representatives to inform customers that Beneficial is aware that their personal liability has been discharged. (See Policy and Compliance Manual, METBC 00469, Exh. 19 to Klein Decl.).
The challenged practice applies only to loans secured by real, as opposed to personal, property. (See Real Estate Bankruptcy Queue Management, Exh. 21 to Klein Decl.).
Since its merger with Household, Beneficial has classified these debtors in an administrative category entitled "Queue 2(J)." (Id. at 52:10-15). There is a great deal of turnover in this category of customers: every 60 days about a quarter of them move out of Queue 2(J) and are replaced by new customers whose accounts have become thirty days delinquent. (Id. at 55:9-56:4). About 95% of the debtors in Queue 2(J) continue to make payments on their accounts following discharge. (Id. at 57:2-7). At any one time, there are more than 500 debtors in Queue 2(J) nationwide. (Id. at 54:4-7).
The Metcalfs propose to certify a class of all individuals in the United States (a) who filed a Chapter 7 petition for relief under the Bankruptcy Code; (b) as to whom Beneficial received notice of the bankruptcy; (c) who did not reaffirm the debt, redeem the collateral, or surrender the collateral to Beneficial; and (d) from whom payments on such pre-petition debt or alleged debt were solicited by Beneficial "beyond mere regular monthly statements on the lien." (Motion at 3). The Metcalfs specifically challenge Beneficial's policy of requiring its agents to call secured debtors whose debts have been discharged to ascertain their intentions with respect to their property, once they have become 30 days delinquent on their account payments. (Reply at 1).
As stated, the class allegations do not include a violation of the § 362 automatic stay, because the challenged Beneficial practice only pertains to debts that have been discharged.
II.
To obtain class certification, the Metcalfs must satisfy satisfy the four prerequisites of Fed.R.Civ.P. 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. They must also demonstrate that a class action is maintainable under either Fed.R.Civ.P. 23(b)(2) or (3).
The Metcalfs fail to make the necessary showing under Fed.R.Civ.P. 23(a). Further, because common questions of law or fact do not predominate, their class action is not maintainable under Fed. EL Civ. P. 23(b)(3).
The Metcalfs also request certification under Fed.R.Civ.P. 23 (b)(2). However, they primarily seek compensatory and punitive damages. Fed.R.Civ. p. 23(b)(2) permits the maintenance of class actions for injunctive or declaratory relief; certification under this provision is not appropriate for class actions that seek predominately monetary relief. Bolin v. Sears, Roebuck Co., 231 F.3d 970, 975 (5th Cir. 2000).
The Metcalfs assert that Beneficial violated § 524 by telephoning its debtors after their debts were discharged in Chapter 7 proceedings. They argue for a certification of all Beneficial debtors who were called under Beneficial's policy. However, the Bankruptcy Code does not impose a blanket prohibition on all telephone calls or contacts from creditors to debtors following discharge. The Code only prohibits attempts to recover on discharged debt as a personal liability of the debtor. See 11 U.S.C. § 524 (a)(2). It is entirely possible that some of Beneficial's telephone calls to its debtors violated the discharge injunction, due either to their coercive content or frequency or for other reasons. But there is no evidence to suggest that Beneficial violated § 524(a)(2) by routinely asserting that its debtors remained personal liable for discharged debt as a matter of policy. The record instead indicates that it was Beneficial's policy to inform its debtors that their personal liability had been discharged in Chapter 7 proceedings. Further, the record does not suggest that Beneficial had a practice of telephoning its debtors repeatedly in the post-discharge period. In sum, there is insufficient evidence to suggest that other proposed class members experienced the treatment alleged by the Metcalfs on which a claim of liability may be based).
The bankruptcy judge in In re Henry, No. LA 97-54348-SB (Bankr. C.D. Cal., Aug. 23, 2001), held that a creditor had engaged in "egregious willful conduct" in violation of the automatic stay and discharge injunction when it contacted its debtors 90 times, mostly by telephone, over the seven months following their Chapter 7 filing. Id., slip op. at 16. The court held that the creditor's practice of calling debtors in the automatic stay period to ascertain their intentions with respect to property in which the creditor had a security interest was "highly inappropriate." Id., slip op. at 6. In the present case, however, the Metcalfs have not alleged that Beneficial telephoned debtors during the automatic stay period, nor that Beneficial contacted its individual debtors repeatedly in the post-discharge period as a matter of policy. Thus, the Henry case has little bearing on the present motion for class certification.
In deciding whether to certify a class, the court must identify those issues that will be in dispute and on which the litigation will turn. This analysis is not an evaluation of the merits but an identification of the issues in the case. While many Beneficial debtors may have received a post-discharge telephone call from Beneficial, this fact alone is essentially irrelevant because it establishes no issue in dispute and does not state a claim. Rather, it will be the particular content of the telephone calls and the frequency of those calls on which liability may be based and on which the litigation will focus. Thus, individual issues will predominate, and a class action is not appropriate.
III.
The Metcalfs' motion for class certification is DENIED.
IT IS SO ORDERED.