Scheible v. Quantum3 Grp., LLC

JULIA ELIZABETH SCHEIBLE, Plaintiff, v. QUANTUM3 GROUP, LLC, & GALAXY PORTFOLIOS, LLC, Defendants.

1:15-cv-487-JMS-DML

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

November 6, 2015

ORDER ON DEFENDANTS' MOTION TO DISMISS

Plaintiff Julia Elizabeth Scheible brings this action under the Fair Debt Collections Practices Act ("FDCPA") against Defendants Galaxy Portfolios, LLC ("Galaxy"), and Quantum3 Group, LLC ("Quantum") (collectively, "Defendants"). [Filing No. 1.] Ms. Scheible alleges that Defendants violated the FDCPA by filing a proof of claim in her Chapter 13 bankruptcy proceeding regarding time-barred debt, which is debt on which the statute of limitations had already run. Ms. Scheible objected to Defendants' time-barred proof of claim, and the bankruptcy court sustained the objection. Ms. Scheible then filed this civil suit against Defendants, alleging that they violated the FDCPA by filing the proof of claim on time-barred debt and not being licensed as debt collectors in Indiana.

Presently pending before the Court is Defendants' Motion to Dismiss Ms. Scheible's claims. [Filing No. 16.] Defendants argue that Ms. Scheible's claims fail as a matter of law. Ms. Scheible opposes Defendants' motion. [Filing No. 23.] For the reasons that follow, the Court GRANTS Defendants' Motion to Dismiss. [Filing No. 16.]

I.STANDARD OF REVIEW

The Federal Rules of Civil Procedure require that a complaint provide the defendant with "fair notice of what the . . . claim is and the grounds upon which it rests.'" Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)). In reviewing the sufficiency of a complaint, the Court must accept all well-pled facts as true and draw all permissible inferences in favor of the plaintiff. See Active Disposal Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011). A Rule 12(b)(6) motion to dismiss asks whether the complaint "contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). The Court will not accept legal conclusions or conclusory allegations as sufficient to state a claim for relief. See McCauley v. City of Chicago, 671 F.3d 611, 617 (7th Cir. 2011). Factual allegations must plausibly state an entitlement to relief "to a degree that rises above the speculative level." Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This plausibility determination is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.

II.BACKGROUND

Ms. Scheible's Complaint makes the following allegations, which the Court accepts as true for purposes of resolving the pending motion.

Ms. Scheible experienced financial difficulties in 2013 and stopped paying some of her unsecured debts, including one that she allegedly owed to Galaxy. [Filing No. 1 at 3.] On February 17, 2014, Ms. Scheible filed a Chapter 13 bankruptcy petition in the United States BankruptcyCourt for the Southern District of Indiana. [Filing No. 1 at 3; In re Scheible, No. 14-0917-RLM-13.] Ms. Scheible was represented by counsel in her bankruptcy proceeding. [Filing No. 1 at 3.] On March 26, 2014, Galaxy, via its agent Quantum, filed a proof of claim in the amount of $710.25 (the "Proof of Claim") in Ms. Scheible in the bankruptcy proceeding. [Filing No. 1 at 3; Filing No. 1-1.] The Proof of Claim noted that Ms. Scheible's last transaction date on the account at issue was July 27, 2004. [Filing No. 1-1 at 4.] The Proof of Claim was served on the bankruptcy trustee assigned to Ms. Scheible's bankruptcy and on Ms. Scheible's attorney. [Filing No. 1-1 at 5.]

The statute of limitations in Indiana for collecting delinquent debts is six years from the date of the last activity. See Ind. Code § 34-11-2-9. On April 16, 2014, Ms. Scheible's bankruptcy counsel filed a written objection to the Proof of Claim, asserting that enforcement of that debt is barred by Indiana's statute of limitations. [Filing No. 1 at 3; Filing No. 1-2.] The bankruptcy court sustained that objection on May 22, 2014. [Filing No. 1-3.]

On March 24, 2015, Ms. Scheible filed a Complaint in this Court against Defendants, alleging that the Proof of Claim filed in her bankruptcy action violated the FDCPA. [Filing No. 1.] Ms. Scheible's Complaint references two sections of the FDCPA—15 U.S.C. § 1692e(5), which she contends "prohibits debt collectors from taking actions that cannot legally be taken in connection with the collection of a debt," and 15 U.S.C. § 1692e, which she contends "prohibits debt collectors from using false representations and deceptive means to collect a debt." [Filing No. 1 at 4-5.] As support for her second claim, Ms. Scheible alleges that because Quantum and Galaxy are not authorized to collect debt in Indiana, filing the Proof of Claim violated the FDCPA. [Filing No. 1 at 5 (citing 15 U.S.C. § 1692e).] Ms. Scheible seeks actual damages, statutory damages,costs, and reasonable attorney's fees as a result of Defendants' alleged violations. [Filing No. 1 at 5.]

III.DISCUSSION

Ms. Scheible's Complaint asserts two FDCPA claims against Defendants. First, she claims that Defendants' Proof of Claim on time-barred debt in her Chapter 13 bankruptcy proceeding violated 15 U.S.C. § 1692e(5). [Filing No. 1 at 4.] Second, Ms. Scheible claims that Defendants violated 15 U.S.C § 1692e by filing the Proof of Claim when they were not licensed as debt collectors in Indiana. [Filing No. 1 at 5.] The Court will address Ms. Scheible's claims in turn.

A. Time-Barred Proofs of Claim

In their motion to dismiss, Defendants argue that they did not violate the FDCPA by filing the Proof of Claim on time-barred debt in Ms. Scheible's bankruptcy proceeding. [Filing No. 17.] They contend that they did not take any action that they could not legally take and that the Proof of Claim was not false, deceptive, or misleading because it was a true representation of Ms. Scheible's debt and contained the charge-off date. [Filing No. 17 at 3-5.] Thus, Defendants ask the Court to dismiss Ms. Scheible's FDCPA claim to the extent it is based on them filing a Proof of Claim in her bankruptcy proceeding. [Filing No. 17 at 4.]

In response, Ms. Scheible opposes Defendants' request to dismiss her claim. [Filing No. 23.] She emphasizes that "nothing in the Bankruptcy Code entitles a creditor to file a proof of claim on a stale, unenforceable, and time-barred claim." [Filing No. 23 at 5.] She argues that filing a proof of claim on a time-barred debt is "inherently deceptive and misleading" and, thus, must violate the FDCPA. [Filing No. 23 at 7.]

In reply, Defendants emphasize this Court's previous rulings that filing a proof of claim on time-barred debt is not unlawful or misleading under the FDCPA. [Filing No. 26 at 2-3.]

The Court granted Ms. Scheible leave to file a surreply, [Filing No. 28], and in that brief she contends that Defendants "misconstrue the protections of the FDCPA[,]" [Filing No. 29 at 1]. She emphasizes that the FDCPA is a "strict liability statute" and that a debt collector can violate the law "simply by committing one of the prohibited acts, e.g., attempting to collect a time-barred debt." [Filing No. 29 at 1.]

The purpose of the FDCPA is "to eliminate abusive debt collection practices by debt collectors." 15 U.S.C. § 1692(e); see Mace v. Van Ru Credit Corp., 109 F.3d 338, 343 (7th Cir. 1997) ("[The FDCPA] was designed to protect against the abusive debt collection practices likely to disrupt a debtor's life."). Section 1692e provides that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. The FDCPA sets forth non-exhaustive examples of conduct that violates this prohibition, such as "[t]he threat to take any action that cannot legally be taken." 15 U.S.C. § 1692e(5).

"The courts have ruled that the [FDCPA] is intended for the protection of unsophisticated consumers . . . , so that in deciding whether for example a representation made in a dunning letter is misleading the court asks whether a person of modest education and limited commercial savvy would be likely to be deceived." Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 774 (7th Cir. 2007). However, communications to a consumer's lawyer are judged by a different standard: a communication "that would be unlikely to deceive a competent lawyer . . . [is] not . . . actionable." Id.

Earlier this year, this Court issued two decisions concluding that under the circumstances presented in those cases, the defendants at issue had not violated the FDCPA as a matter of law by filing time-barred proofs of claim in bankruptcy proceedings. Birtchman v. LVNV Funding, LLC,2015 WL 1825970 (S.D. Ind. 2015), pending on appeal; Owens v. LVNV Funding, LLC, 2015 WL 1826005 (S.D. Ind. 2015), pending on appeal. In so holding, the Court noted that the Seventh Circuit had not yet decided whether filing a time-barred proof of claim in a bankruptcy proceeding violates the FDCPA. That remains true to date. See, e.g., In re Edwards, 2015 WL 5830823, at *3 (Bankr. N.D. Ill. Oct. 6, 2015) ("The Seventh Circuit has not yet addressed the issue in this case: whether filing a proof of claim in bankruptcy to collect on an unenforceable debt violates the FDCPA.").

The Court concludes that the material allegations of Ms. Scheible's FDCPA claim regarding Defendants' Proof of Claim on time-barred debt are the same as those that the Court addressed in Birtchman and Owens. Specifically, Ms. Scheible fails to point to incorrect information in Defendants' Proof of Claim; the Proof of Claim set forth the debt's charge off date, which was more than six years before it was filed; Ms. Scheible was represented by counsel in her bankruptcy proceeding; and her counsel's objection to the Proof...