Smith v. TMS Mortgage, Inc., Case No.00-31220 (Bankr. W.D.N.C. April 5, 2001)(Hodges) - Plaintiff-Debtors filed an adversary proceeding and putative class action challenging the defendant's practice of placing a $125 charge to its Proof of Claim without court approval pursuant to Section 506(b) of the Bankruptcy Code and Rule 2016 of the Federal Rules of Bankruptcy Procedure. The defendants filed a Motion to Dismiss the Complaint, arguing that the plaintiffs lacked constitutional and statutory standing. The court concluded that the plaintiffs met the constitutional and statutory standing tests, but dismissed the case on its own initiative. The court concluded that a class action is not a necessary, efficient, or appropriate vehicle for resolution of the issues raised in the plaintiff's Complaint, and that the allegedly improper practices of the creditor could be rectified by an administrative order and prospective injunctive relief ordering the defendant to cease immediately the practice of including a charge for the preparation of the Proof of Claims in Proofs of Claims filed in the Western District of North Carolina.

Tate & Ballard et. al. v. NationsBanc Mortgage Corp., Case No. 97-3725 (Bankr. W.D.N.C. Oct. 2, 2000)(Whitley) - Mortgage lender filed proofs of claim in Chapter 13 cases, which included a $125 "bankruptcy fee." Class plaintiffs objected to the fee on the grounds that it was not "reasonable" under s 506(b). The class also sought damages and statutory penalties under the NC Fair Debt Collection and Deceptive Trade Practices Acts. On the parties' cross-motions for summary judgment, the creditor argued there was no subject matter jurisdiction and that the plaintiffs' state law claims were preempted. The Bankruptcy Court held it had jurisdiction over the entire class, and that the creditor could not collect the fee (which was reimbursement for legal fees) without making a fee application under Rule 2016. The creditor was therefore ordered to disgorge the fees. However, the Court also held that the plaintiffs' state law claims were preempted by federal law due to the unique federal interest in regulating bankruptcy procedure.