IN
THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
________________________________________________________________________
In Re: ) Chapter 13 Case 02-41069-
)
DONALD E. SMITH, )
) Adversary Proceeding No.
Debtor )
___________________________________ ) _______________________
)
DONALD E. SMITH, )
)
Plaintiff, )
)
on his behalf and on behalf
of )
all others similarly
situated, )
)
v. )
)
FAIRBANKS CAPITAL
CORPORATION, )
)
Defendant. )
________________________________________________________________________
CLASS
ACTION COMPLAINT
Pursuant to Sections 105, 362, 502, 506, and 549 of the
Bankruptcy Code and Rules 3007, 7001, and 7023 of the Federal Rules of
Bankruptcy Procedure, Donald E. Smith (the "Debtor") brings this
Adversary Proceeding on his behalf and on behalf of the class that he proposes
to represent against Fairbanks Capital Corporation ("Fairbanks")
showing the Court the following:
PARTIES, JURISDICTION AND BACKGROUND
1. The Debtor commenced his bankruptcy
case by filing a petition under Chapter 13, Title 11 of the United States Code
on May 24, 2002.
2. The Debtor's Chapter 13 case has been
confirmed.
3. The Court has jurisdiction over this matter pursuant
to 28 U.S.C. §§ 157 and 1334(b). This
matter is an adversary proceeding which arises in and relates to the following
cases pending in the United States Bankruptcy Court for the Southern District
of Georgia, Savannah Division, to wit: In re Donald E. Smith, Case No. 02-41629-JDW.
4. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)
(B) and (O).
5. Venue is proper in this Court pursuant to 28 U.S.C. § 1409.
6. Fairbanks is subject to the personal jurisdiction of this
Court. Fed. R. Bank. P. 7004(f).
7. Fairbanks may be served by first class mail upon its
registered agent, Corporation Service Company,
4845 Jimmy Carter Boulevard, Norcross, Georgia
30093. Fed. R. Bank. P. 7004(b)(3).
All debtors who filed chapter 13 cases after February 3, 1998 whose cases have been confirmed and against whom Fairbanks has posted a charge to, or otherwise recovered from, for attorney fees that were incurred by Fairbanks post-petition but prior to confirmation without either filing an application pursuant to Rule 2016 of the Federal Rules of Bankruptcy Procedure or adequately disclosing its attorneys fees claim in the proof of claim.
9. The Debtor does not know the exact size of the class, but alleges that Fairbanks possesses such information. Upon information and belief, the Debtor alleges that the members of the class number in the thousands such that said members are so numerous and geographically dispersed that joinder of all members is impractical.
10. Questions or law and fact common to all members of the class include – but are not necessarily limited to – the following:
a. Whether Fairbanks sufficiently disclosed its attorneys’ fees in its proofs of claim?
b. Whether Fairbanks willfully failed to disclose its attorneys’ fees adequately?
c. Whether Fairbanks has recovered unauthorized attorneys’ fees?
d. Whether the attorneys’ fees should be removed from the accounts?
e. Whether the recovery of such attorneys’ fees is a postpetition transfer within the meaning of section 549(a) of the Bankruptcy Code?
f. Whether the entire claims of Fairbanks should be disallowed pursuant to section 502(d) of the Bankruptcy Code?
g. Whether Fairbanks willfully violated the automatic stay?
11. The Debtor’s claim is typical of the claims of all class members, as the Debtor’s claim arises from the same conduct giving rise to the claims of the class members and the relief the Debtors seek is common to the class members.
12. The Debtor will fairly and adequately protect the interests of the class because the Debtor (a) is typical of those debtors against whom Fairbanks has asserted attorneys' fees claims without either filing an application pursuant to Rule 2016 of the Federal Rules of Bankruptcy Procedure for fees or adequately disclosing its attorneys’ fees claim in its proof of claim and (b) has no interests antagonistic to interests of the class. By applications filed simultaneously with this Complaint, the Debtors have requested the Court to authorize them to retain counsel, who are experienced in both bankruptcy and class action litigation.
13. Fairbanks has acted on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class a whole.
14. The common questions described above in this Complaint and other common questions of law and fact predominate over questions, if any, affecting individual class members. This action is superior to other available alternative methods for the fair and efficient adjudication of this controversy.
FACTUAL
ALLEGATIONS
15. In the Debtor’s case, Fairbanks has never filed an application pursuant to Rule 2016 of the Federal Rules of Bankruptcy Procedure for post-petition, pre-confirmation fees based on an assertion that is an oversecured creditor within the meaning of section 506(b) of the Bankruptcy Code. Furthermore, its proofs of claim filed in the Debtor's case does not adequately disclose that it is asserting a claim for attorneys’ fees or does not disclose it at all.
16. Upon information and belief, the failure of Fairbanks to disclose its attorneys’ fees claim was willful.
17. Upon information and belief, Fairbanks has nevertheless posted attorneys’ fees to the Debtor's account and collected them directly from the Debtor.
COUNT I - CLAIMS OBJECTION
18. The Debtor restates and incorporate paragraphs 1 through 17 as if fully stated herein.
19. Pursuant to section 502 of the Bankruptcy Code and Rule 3007 of the Federal Rules of Bankruptcy Procedure, the Debtor objects to the claim of Fairbanks in his case, and in the cases of the class members, because Fairbanks has asserted a claim for attorneys’ fees which has not been adequately disclosed in the proof of claim.
COUNT II - REQUEST FOR SANCTIONS
20. The Debtor restates and incorporates paragraphs 1 through 19 as if fully stated herein.
21. Section 506(b) of the Bankruptcy Code requires bankruptcy court approval of attorneys’ fees for creditors, like Fairbanks, asserting that the value of the collateral securing their claim is greater than the amount of their claim.
22. Fairbanks never filed an application pursuant to Rule 2016 of the Federal Rules of Bankruptcy Procedure for fees and also never adequately disclosed its attorneys’ fees claim in its proofs of claim.
23. The failure of Fairbanks to disclose attorneys’ fees constitutes a willful and malicious abuse of the bankruptcy process.
24. Pursuant to section 105(a) of the Bankruptcy Code, the Debtors request the Court to impose actual damages and punitive damages and award reasonable attorneys’ fees.
COUNT III - DECLARATORY & EQUITABLE
RELIEF
25. The Debtor restates and incorporates paragraphs 1 through 24 as if fully stated herein.
26. Pursuant to Rule 7001(7) and (9) of the Federal Rules of Bankruptcy Procedure, the Debtor requests the following injunctive relief from the Court: (a) enjoining Fairbanks from posting undisclosed attorneys’ fees to the accounts of class members; (b) ordering Fairbanks to expunge undisclosed attorneys’ fees from the accounts of class members; (c) ordering Fairbanks to refund all undisclosed attorneys’ fees collected from class members; (d) ordering Fairbanks to provide an accounting of undisclosed attorneys’ fees it has recovered; and (e) ordering Fairbanks to disclose its attorneys’ fees fully in its proofs of claim filed in the future.
COUNT IV - CLAIM DISALLOWANCE
27. The Debtor restates and incorporate paragraphs 1 through 26 as if fully stated herein.
28. Pursuant to section 502(d) of the Bankruptcy Code, the Debtor requests the Court to disallow the entire claim of Fairbanks in his case and in the cases of the class members to the extent that Fairbanks has recovered a postpetition transfer within the meaning of section 549(a) of the Bankruptcy Code and has failed to return it.
29. Pursuant to Rule 6001 of the Federal Rules of Bankruptcy Procedure, Fairbanks shall have the burden of proof to establish the validity of such transfers.
COUNT V - VIOLATION OF THE AUTOMATIC
STAY
30. The Debtor restates and incorporates paragraphs 1 through 29 as if fully stated herein.
31. The Debtor is an individual within the meaning of section 362(h) of the Bankruptcy Code.
32. Fairbanks has willfully violated section 362(a) of the Bankruptcy Code.
Such violation has injured the Debtor.
33. Pursuant to section 362(h) of the Bankruptcy Code, the Debtor is entitled to recover actual damages, including costs and attorneys’ fees, and punitive damages.
WHEREFORE, the Debtor respectfully requests the following relief:
a. That the Court determine that this adversary proceeding may be maintained as a class action under Rules 23(a), (b)(2), and (b)(3) of the Federal Rules of Civil Procedure, as incorporated by the Rule 7023 of the Federal Rules of Bankruptcy Procedure;
b. That the Court direct that the best notice of this adversary proceeding be given which is practicable under the circumstances, as provided by Rule 23(c)(2) of the Federal Rules of Civil Procedure and as incorporated by the Rule 7023 of the Federal Rules of Bankruptcy Procedure;
c. That the Court enjoin Fairbanks from posting undisclosed attorneys’ fees to the accounts of class members;
d. That the Court order Fairbanks to expunge undisclosed attorneys’ fees from the accounts of class members;
e. That the Court order Fairbanks to refund to class members all undisclosed attorneys’ fees collected;
f. That the Court impose actual and punitive damages;
g. That the Court order Fairbanks to disclose its attorneys’ fees fully in its proofs of claim filed in the future;
h. That pre- and postjudgment interest be awarded;
i. That reasonable attorneys’ fees, experts’ fees, and other costs of litigation be awarded;
j. That the Court disallow the entire claim of Fairbanks in the cases of the class members to the extent that Fairbanks has recovered a postpetition transfer within the meaning of section 549(a) of the Bankruptcy Code and has failed to return it; and
k. That the Court award such other and further relief as it deems just and proper.
Dated: January 31, 2003.
LAW OFFICE OF R. WADE GASTIN:
___
Judson C. Hill, Georgia Bar No. 354277
P.O. Box 8012
Savannah, Georgia 31412
(912) 232-0203
OLIVER MANER & GRAY, LLP:
__________________________________
Timothy D. Roberts, Georgia Bar 609795
218 W. State Street
P.O. Box 10186
Savannah, GA 31412
(912) 236-6311