Allen v. Wings Financial Credit Union

Background

Zachary Allen opened a credit-card account with Wings Credit Union in 2022. Allen filed a Chapter 7 bankruptcy case on April 23, 2024, and Wings was listed as a creditor. Allen alleged that Wings received notice of the bankruptcy but continued sending credit-card statements during the bankruptcy case. He alleged that a May statement said the account was past due, a June statement warned that Wings might report negative information if he did not pay, and additional statements arrived in July and August.

The bankruptcy court discharged Allen’s bankruptcy on August 7, 2024. Allen alleged that Wings received notice of the discharge but still sent an August statement. He claimed that these contacts violated the automatic stay under 11 U.S.C. § 362, which generally stops collection efforts when a bankruptcy case begins; violated the discharge injunction under 11 U.S.C. § 524, which generally bars efforts to collect a discharged debt; and amounted to intrusion upon seclusion, an invasion-of-privacy claim.

Motion and analysis

Wings moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which challenges a federal court’s subject-matter jurisdiction, or alternatively to refer the bankruptcy claims to the bankruptcy court. The district court concluded that it had jurisdiction over Allen’s claims under Title 11 of the Bankruptcy Code. But federal law and the District of Minnesota’s local bankruptcy rule provide for referral of bankruptcy cases and proceedings to the district’s bankruptcy judges.

The court determined that the bankruptcy court was the proper forum for both bankruptcy-related claims. It relied on authority stating that automatic-stay claims should be referred to the bankruptcy court. It also reasoned that enforcement of the discharge injunction is handled through the Bankruptcy Code’s contempt provision and that the court that issued the discharge order was the appropriate court to adjudicate that claim.

The district court separately considered Allen’s state-law intrusion-upon-seclusion claim. Its authority to hear that claim depended only on supplemental jurisdiction, meaning additional authority to hear a related state-law claim alongside federal claims. Because the court referred the bankruptcy claims and declined to exercise supplemental jurisdiction over the state-law claim, it dismissed Count Three without prejudice.

Disposition

Judge Donovan W. Frank granted Wings’ motion as follows: Counts One and Two were referred to the Bankruptcy Court, and Count Three was dismissed without prejudice. The order did not decide whether Wings violated the automatic stay, the discharge injunction, or Allen’s privacy rights.