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Case: 15-11240 Date Filed: 05/24/2016 Page: 1 of 17





No. 15-11240


D.C. Docket No. 1:14-cv-00322-WS-C


f.k.a. Aleida Hill,

individually and on behalf of all similarly situated individuals, Plaintiff-Appellant, versus




No. 15-14116 ________________________

D.C. Docket No. 1:14-cv-00324-WS-M JUDY N. BROCK, individually and on behalf of a class of others similarly situated,


Plaintiffs-Appellants, Case: 15-11240 Date Filed: 05/24/2016 Page: 2 of 17 versus


LVNV FUNDING, LLC, Defendants-Appellees.


Appeals from the United States District Court for the Southern District of Alabama ________________________

(May 24, 2016) Before WILSON, MARTIN and HIGGINBOTHAM, ∗ Circuit Judges.

MARTIN, Circuit Judge:

Under the Bankruptcy Code (“Code”), a “creditor... may file a proof of claim” in a bankruptcy proceeding. 11 U.S.C. § 501(a). The Fair Debt Collection Practices Act (“FDCPA”) prohibits a “debt collector” from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. This Court held that a debt collector violates the FDCPA when it files a proof of claim in a bankruptcy case on a debt that it knows to be time-barred. Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1261 (11th Cir. 2014). In considering this case below, the District Court interpreted the Crawford ruling as having placed the FDCPA and the Code in irreconcilable ∗ Honorable Patrick E. Higginbotham, United States Circuit Judge for the Fifth Circuit, sitting by designation.

2 Case: 15-11240 Date Filed: 05/24/2016 Page: 3 of 17 conflict. We see no such conflict. Although the Code certainly allows all creditors to file proofs of claim in bankruptcy cases, the Code does not at the same time protect those creditors from all liability. A particular subset of creditors—debt collectors—may be liable under the FDCPA for bankruptcy filings they know to be time-barred. Because we find no irreconcilable conflict between the FDCPA and the Code, we reverse.

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Aleida Johnson filed a Chapter 13 bankruptcy petition in March 2014. In May 2014, Midland Funding, LLC (“Midland”) filed a proof of claim in her case, seeking payment of $1,879.71. Midland is a buyer of unpaid debt. Specifically, Midland purchases accounts with overdue unpaid balances and tries to collect those accounts. Midland’s claim against Ms. Johnson originated with Fingerhut Credit Advantage, and the date of the last transaction on her account was listed as May 2003. This was over ten years before Ms. Johnson filed for bankruptcy. The claim arose in Alabama, where the statute of limitations for a creditor to collect an overdue debt is six years. See Ala. Code § 6-2-34.

Judy Brock also filed a Chapter 13 bankruptcy petition. Ms. Brock filed her petition in April 2014; in June 2014, Resurgent Capital Services, L.P.

(“Resurgent”) filed a proof of claim seeking payment of $4,155.40. Resurgent is a “manager and servicer of domestic and international consumer debt portfolios for

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credit grantors and debt buyers.” Resurgent’s filing was an attempt to collect Ms.

Brock’s debt on behalf of LVNV Funding, LLC, which is a purchaser of unpaid debt like Midland. Ms. Brock’s debt originated with Washington Mutual Bank, N.A., and the date of the last transaction on her account was January 2008. There had been no activity on her account for over six years before Ms. Brock filed for bankruptcy.

Ms. Johnson and Ms. Brock (together, “Debtors”) sued their respective creditors (together, “Claimants”) under the FDCPA. The FDCPA 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. This includes attempting to collect a debt that is not “expressly authorized by the agreement creating the debt or permitted by law.” Id. § 1692f(1). Both Debtors alleged in their lawsuits that the claims on their face were barred by the relevant statute of limitations. They argued that the proofs of claim were thus “‘unfair,’ ‘unconscionable,’ ‘deceptive,’ and misleading” in violation of the FDCPA.

Midland moved to dismiss Ms. Johnson’s FDCPA suit, and the District Court granted the motion. The District Court read the Bankruptcy Code as affirmatively authorizing a creditor to file a proof of claim—including one that is time-barred—if that creditor has a “right to payment” that has not been extinguished under applicable state law. The District Court identified tension

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between this provision of the Code and the FDCPA, which makes it unlawful to file a proof of claim known to be time-barred. The court found this conflict to be irreconcilable and applied the doctrine of implied repeal to hold that a creditor’s right to file a time-barred claim under the Code precluded debtors from challenging that practice as a violation of the FDCPA in the Chapter 13 bankruptcy context.

In Ms. Brock’s later FDCPA suit, the District Court granted Resurgent’s motion for judgment on the pleadings based on the rationale and holding in Ms.

Johnson’s case. The two cases were consolidated for this appeal.

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We review de novo the District Court’s grant of a motion to dismiss for failure to state a claim. Lanfear v. Home Depot, Inc., 679 F.3d 1267, 1275 (11th Cir. 2013). Like the District Court, we accept the allegations in the complaint as true and construe the facts in the light most favorable to the plaintiff. Id. We apply the same standard of review to the District Court’s judgment on the pleadings. See Horsley v. Feldt, 304 F.3d 1125, 1131 (11th Cir. 2002). Judgment on the pleadings is appropriate “when no issues of material fact exist, and the movant is entitled to judgment as a matter of law.” Ortega v. Christian, 85 F.3d 1521, 1524 (11th Cir. 1996).

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The Debtors argue on appeal that the District Court’s decision conflicts with our Circuit’s precedent in Crawford. Again, Crawford held that a debt collector violates the FDCPA by knowingly filing a proof of claim in a bankruptcy proceeding on a debt that is time-barred. 758 F.3d at 1261. The Debtors here pursue their argument that the Code does not preclude this type of FDCPA claim simply because the claim was made in the context of a Chapter 13 bankruptcy case.

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In Crawford, this Court faced a question nearly identical to the one we consider here: “whether a proof of claim to collect a stale debt in Chapter 13 bankruptcy violates the [FDCPA].” 758 F.3d at 1256. We concluded there was an FDCPA violation in Crawford, based on “[t]he FDCPA’s broad language, our precedent, and the record.” Id. at 1257.

The Crawford panel first looked to the language of the FDCPA, which prohibits a “false, deceptive, or misleading representation,” 15 U.S.C. § 1692e, or “unfair or unconscionable means,” id. § 1692f, to collect on a debt. 758 F.3d at

1258. Because of the ambiguity in these terms, the Court adopted a “‘leastsophisticated consumer’ standard” to evaluate whether a debt collector’s conduct was deceptive under the FDCPA. Id. It then concluded that “[s]imilar to the filing of a stale lawsuit,” which is prohibited by the FDCPA for debts on which the statute of limitations has run, “a debt collector’s filing of a time-barred proof of

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claim creates the misleading impression to the debtor that the debt collector can legally enforce the debt.” Id. at 1261. This impression causes problems because “[t]he ‘least sophisticated’ Chapter 13 debtor may be unaware that a claim is time barred and unenforceable and thus fail to object to such a claim.” Id. Then when the debtor fails to object, the time-barred debt becomes part of the debtor’s repayment plan, which would “necessarily reduce[] the payments to other legitimate creditors with enforceable claims.” Id. Thus Crawford held that the practice of filing time-barred proofs of claim was misleading under the FDCPA.


In a footnote, the panel said it “decline[d] to weigh in on a topic the district court artfully dodged: Whether the Code ‘preempts’ the FDCPA when creditors misbehave in bankruptcy.” Id. at 1262 n.7. The Court said it “need not address this issue” because the claimant there “argue[d] only that its conduct does not fall under the FDCPA, or, alternatively, did not offend the FDCPA’s prohibitions” and it “d[id] not contend that the Bankruptcy Code displaces or ‘preempts’ §§ 16923 and 1692f of the FDCPA.” Id.

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We now answer the question left open in Crawford. The Bankruptcy Code does not preclude an FDCPA claim in the context of a Chapter 13 bankruptcy when a debt collector files a proof of claim it knows to be time-barred. We

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recognize that the Code allows creditors to file proofs of claim that appear on their face to be barred by the statute of limitations. However, when a particular type of creditor—a designated “debt collector” under the FDCPA—files a knowingly time-barred proof of claim in a debtor’s Chapter 13 bankruptcy, that debt collector will be vulnerable to a claim under the FDCPA. Our examination of these statutes leads us to conclude that the Code and the FDCPA can be read together in a coherent way.


Under the Bankruptcy Code, a “creditor... may file a proof of claim” in a debtor’s bankruptcy. 11 U.S.C. § 501(a). A “claim” is defined as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Id. § 101(5)(A). The Supreme Court interprets this language to create an “entitle[ment]” for creditors to file a proof of claim in a bankruptcy proceeding where a “right to payment” exists. Travelers Cas. & Sur.

Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 449, 127 S. Ct. 1199, 1204 (2007) (quotation omitted). A “right to payment” under the Bankruptcy Code “is nothing more nor less than an enforceable obligation.” Penn. Dep’t of Pub.

Welfare v. Davenport, 495 U.S. 552, 559, 110 S. Ct. 2126, 2131 (1990).

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The Debtors argue that there is no “right” to file a time-barred claim when there is no right to have that claim repaid in a Chapter 13 bankruptcy proceeding.

We reject this argument, because the Code does allow claims in a Chapter 13 bankruptcy proceeding by a party who does not necessarily have a right to have his claim paid. See In re McLean, 794 F.3d 1313, 1321 (11th Cir. 2015) (“[T]he Bankruptcy Code explicitly contemplates that creditors may file unenforceable claims in the bankruptcy court.”). And having a claim is not the same as being entitled to a remedy. Indeed, Alabama law, which governs the right of the Claimants to recover here, provides that “[w]hen the statute of limitations expires, it does not extinguish the cause of action; instead, it makes the remedy unavailable.” In re HealthSouth Corp., 974 So. 2d 288, 296 (Ala. 2007). So although a party may not be able to enforce its claim because of a statute-oflimitations bar, that party still may assert the claim in the first place. See id.

As the District Court pointed out, the Bankruptcy Code’s procedure for addressing proofs of claim demonstrates that some filed claims will not ultimately be paid in a bankruptcy proceeding. Where a proof of claim is filed in a bankruptcy case, that claim is generally “deemed allowed,” so it will be viewed as a valid claim and paid out of the bankruptcy estate. 11 U.S.C. § 502(a). However, the bankruptcy trustee is charged with “examin[ing] proofs of claim and object[ing] to the allowance of any claim that is improper.” Id. § 704(a)(5); see

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also id. at § 1302(b)(1). Once the trustee objects, the bankruptcy court is in turn charged with determining whether the claim “is unenforceable against the debtor... under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.” Id. § 502(b)(1); see also id. § 558 (“The [bankruptcy] estate shall have the benefit of any defense available to the debtor... including statutes of limitation.”). Thus, where the bankruptcy process is working as intended, a time-barred proof of claim may be filed but will not be paid by the bankruptcy estate.


So while we recognize that creditors can file proofs of claim they know to be barred by the relevant statute of limitations, those creditors are not free from all consequences of filing these claims. The FDCPA does not allow a debt collector to “use unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. Neither may they “use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Id.

§ 1692e. A debt collector who violates one of these rules may face civil liability to the debtor. Id. § 1692k. As this Court recognized in Crawford, a debt collector violates the FDCPA by filing a knowingly time-barred proof of claim in a Chapter 13 bankruptcy proceeding. 758 F.3d at 1261.

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