Second Circuit Strikes Down Attempted Bankruptcy Contempt Proceedings In Class Context

In a recent decision, Bruce v. Citigroup, Inc., et al., the United States Court of Appeals for the Second Circuit clarified the limits of bankruptcy court jurisdiction over class actions. Specifically, the court rejected a bankruptcy court's ruling that allowed a plaintiff's nationwide class action to survive Defendant Citibank, N.A.'s ("Citi") motion to dismiss and strike class allegations. Following its sister Circuits, the Second Circuit held that the Bankruptcy Code does not permit a bankruptcy court to adjudicate contempt claims of a nationwide class because it lacks authority to enforce other bankruptcy court's discharge injunctions.

Bruce sued Citi for allegedly violating a bankruptcy order discharging plaintiff's debt and enjoining attempts to collect on the discharged debt, alleging Citi reported her debt as "charged off" without noting that the debt was "included in bankruptcy," failed to timely request a correction of the tradeline reporting after