Feggins v. LVNV Funding LLC (In re Feggins)

535 B.R. 862

In re William Henry Feggins, DebtorWilliam Henry Feggins, Plaintiff

v.LVNV Funding LLC and Resurgent Capital Services L.P., Defendants

Case No. 13–11319–WRS

Adv. Pro. No. 14–1049–WRS

United States Bankruptcy Court, M.D. Alabama.

Signed August 24, 2015

Filed August 25, 2015

Nicholas H. Wooten, Nick Wooten, LLC, Auburn, AL, for Plaintiff.

Tina Lam, Neal D. Moore, III, Ferguson, Frost, Moore & Young, LLP, Birmingham, AL, for Defendants.

MEMORANDUM DECISION

William R. Sawyer, United States Bankruptcy Judge

These consolidated cases are before the Court on the Defendants' Motion for Judgment on the Pleadings.¹ (Doc. 39). The motion is now fully briefed. (Docs.50, 51). For the reasons set forth below, the Defendants' Motion for Judgment on the Pleadings is DENIED.²

I. FACTS.

As this is before the Court on the Defendants' Motion for Judgment on the Pleadings, the Court will accept as true the facts pled in the Complaint.³

William Feggins (“Feggins”) filed a petition in bankruptcy pursuant to Chapter 13 of the Bankruptcy Code on July 24, 2013. (Doc. 1, ¶ 14). On December 12, 2013, Defendant Resurgent Capital Services, L.P. filed Proof of Claim 17 on behalf of Defendant LVNV Funding, LLC (collectively “Defendants”) in the amount of $2,026.66. (Doc. 1, ¶¶ 15–18). Feggins alleges that this claim is barred by the statute of limitations.⁴ In addition, Feggins claims that the filing of a time-barred proof of claim in bankruptcy court is a violation of the Fair Debt Collection Practices Act (“FDCPA”). Therefore, Feggins not only seeks disallowance of Claim 17 under the Bankruptcy Code but also damages and attorney's fees under the FDCPA.⁵

II. JURISDICTION.

This Court has jurisdiction to hear these proceedings pursuant to 28 U.S.C. § 1334(b). An objection to a proof of claim is a core proceeding. 28 U.S.C. § 157(b)(2)(B). Determination of whether the Defendants are entitled to judgment on Feggins's FDCPA claim is a non-core proceeding, but the denial of a motion for judgment on the pleadings is not a final order. See Continental Nat'l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1348 (11th Cir.1999) ; Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir.1987) ; 28 U.S.C. § 157(c)(1).

III. MOTION FOR JUDGMENT ON THE PLEADINGS STANDARD.

These consolidated adversary proceedings are before the Court on the Defendants' motion for judgment on the pleadings. See Fed. R. Civ. P. 12(c), as made applicable to these proceedings by Fed. R. Bankr. P. 7012(b). The standard to be applied here is the same as if this were a motion to dismiss made pursuant to Rule 12(b)(6). Robert v. Abbett, Case No. 3:08–CV–329–WKW, 2009 WL 902488, *3 (M.D.Ala. Mar. 31, 2009). That standard is as follows:

A pleading must contain a short and plain statement of the claim showing that the pleader is entitle to relief.... The pleading standard Rule 8 announces does not require detailed factual allegations but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.... A pleading that offers labels and conclusions or a formulaic recitation of the element of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its fact. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

Ashcroft v. Iqbal, 556 U.S. 662, 677–79, 129 S.Ct. 1937, 1949–50, 173 L.Ed.2d 868 (2009) (internal citations omitted); see also Critten v. Quantum3 Group, LLC, 528 B.R. 835, 837 (Bankr.M.D.Ala.2015).

IV. THE BANKRUPTCY CODE DOES NOT PRECLUDE THE FDCPA.

The Defendants' central argument in the instant motion is that the Bankruptcy Code precludes the Fair Debt Collection Practices Act. The Eleventh Circuit recently held that the filing of a proof of claim on a stale debt in bankruptcy proceedings is a violation of the FDCPA. Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1261 (11th Cir.2014), cert. denied sub nom. LVNV Funding, LLC v. Crawford, ––– U.S. ––––, 135 S.Ct. 1844, 191 L.Ed.2d 724 (2015). However, the court expressly declined to weigh in on whether the Bankruptcy Code displaces the FDCPA when debt collectors “misbehave in bankruptcy.”⁶ Id. at 1262 n. 7. If the Bankruptcy Code precludes the FDCPA, the filing of a proof of claim on a time-barred debt in a bankruptcy case could not implicate the FDCPA because the exclusive remedy would be under the Bankruptcy Code. This argument is rejected for two reasons: first, there is a strong federal policy against repeal by implication because, whenever possible, federal statutes are to be read in harmony, and second, there is no irreconcilable conflict between the Bankruptcy Code and the FDCPA.

A. Repeal by implication is not favored.

Before addressing the specifics of the Defendants' repeal argument, the Court notes that there is nothing in the language of either the FDCPA or the Bankruptcy Code that states that a debtor may not be provided a remedy under the FDCPA when the collection activity complained of takes place in a bankruptcy proceeding. In other words, there is no express conflict here and the Defendants make no claim that there is. Rather, the Defendants assert that there is an inherent conflict—the weakest of statutory preclusion arguments.

The Defendants argue that the Bankruptcy Code repeals the FDCPA by implication, failing to recognize that such a practice is highly disfavored and only rarely done. “Because a repeal by implication requires the most speculation about the intent of Congress, there is a presumption against finding one.” Miccosukee Tribe of Indians of Fla. v. U.S. Army Corps of Engineers, 619 F.3d 1289, 1299 (11th Cir.2010). “The courts are not at liberty to pick and choose among congressional enactments, and when two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective. ‘When there are two acts upon the same subject, the rule is to give effect to both if possible.... The intention of the legislature to repeal “must be clear and manifest.” ’ ” Morton v. Mancari, 417 U.S. 535, 551, 94 S.Ct. 2474, 2483, 41 L.Ed.2d 290 (1974) (quoting United States v. Borden Co., 308 U.S. 188, 198, 60 S.Ct. 182, 188, 84 L.Ed. 181 (1939) ); see also Rodriguez v. United States, 480 U.S. 522, 524, 107 S.Ct. 1391, 1392, 94 L.Ed.2d 533 (1987).

While neither the Supreme Court nor the Eleventh Circuit has ruled upon the question posed here, other circuits have split on the question of whether the Bankruptcy Code precludes the FDCPA. The Second and the Ninth Circuits have broadly ruled that it does. Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2nd Cir.2010) (holding that the Bankruptcy Code provides exclusive remedies for inflated proofs of claim, dismissing an FDCPA claim); Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir.2002) (holding that § 524(a) of the Bankruptcy Code provided the exclusive remedy for violation of the discharge injunction, dismissing an FDCPA claim). The Third and the Seventh Circuits have ruled to the contrary, finding that the FDCPA and the Bankruptcy Code may peacefully co-exist, allowing FDCPA claims in cases involving debtors that were in bankruptcy. Simon v. FIA Card Services, N.A., 732 F.3d 259, 271 (3d Cir.2013) (holding that debt collectors' communication with debtors in bankruptcy violated the FDCPA and that an FDCPA remedy was not precluded by the Bankruptcy Code); Randolph v. IMBS, Inc., 368 F.3d 726, 732 (7th Cir.2004) (holding that the Bankruptcy Code does not work an implied repeal of the FDCPA in action involving demand letters sent in violation of the automatic stay).

The Seventh Circuit in Randolph reversed the district court's holding that § 362(h) of the Bankruptcy Code “preempts” § 1692e(2)(A) of the FDCPA.⁷ “When two federal statutes address the same subject in different ways, the right question is whether one implicitly repeals the other—and repeal by implication is a rare bird indeed.” Randolph, 368 F.3d at 730. The court noted that the two statutes “overlap.” Id. “It is easy to enforce both statutes, and any debt collector can comply with both simultaneously.” Id. In the case at bar, the Defendants can easily comply with both statutes simultaneously. “The Bankruptcy Code of 1986 does not work an implied repeal of the FDCPA, any more than the latter Act implicitly repeals itself.” Id. at 732.

The implicit repeal of one federal statute by another is exceedingly rare. “The conclusion that two statutes conflict ... is one that courts must not reach lightly. If any interpretation permits both statutes to stand, the court must adopt that interpretation, ‘absent a clearly expressed congressional intention to the contrary.’ ” Miccosukee Tribe, 619 F.3d at 1299 (quoting Garfield v. NDC Health Corp., 466 F.3d 1255, 1266 (11th Cir.2006) ). “Courts must first ‘assiduously attempt’ to try to construe the two statutes in harmony before concluding that one impliedly repeals the other.” Id. (citing Tug Allie–B, Inc. v. United States, 273 F.3d 936, 952 (11th Cir.2001) (Black, J., concurring)).

B. Section 501 of the Bankruptcy Code does not irreconcilably conflict with the FDCPA.

The Defendants argue that § 501 of the Bankruptcy Code provides an absolute right to file a proof of claim, thereby precluding provisions of the FDCPA that impose liability for the filing of a time-barred claim. (Doc. 39 pp. 9–16; Doc. 51 pp. 4–10). The flaw in the Defendants' argument is that this right to file a proof of claim under § 501 does not shelter them from liability if it is later determined that the filing violates another provision of the law. For example, sanctions may be imposed under Bankruptcy Rule 9011 if a filed proof of...