Stephen W. Sather
Barron & Newburger, P.C.
When the Eleventh Circuit found that a creditor could be sued for violating the FDCPA for filing a proof of claim on a time-barred debt, it caused quite a stir. Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014), cert den., 135 S.Ct. 1844 (2015). However, when the case was remanded, it turned out that the suit, like the claim it sought to challenge, was beyond the statute of limitations. Crawford v. LVNV Funding, LLC, 2016 U.S. Dist. LEXIS 104472 (M.D. Ala. 8/9/16).
Stanley Crawford’s case began when he filed for chapter 13 relief on February 2, 2008. On May 21, 2008, LVNV filed a proof of claim. Nearly four years later, on May 3, 2012, Crawford filed an adversary proceeding asserting that the claim violated the FDCPA. The Bankruptcy Court dismissed the case, finding that filing a time-barred claim did not violate the statute and the District Court affirmed. The Eleventh Circuit reversed and sent the case back to the Bankruptcy Court. While the case was on appeal, Crawford completed his chapter 13 plan and received a discharge. When the case came back, the Bankruptcy dismissed it a second time, finding that it was not filed within the one year limitations period provided by the FDCPA. Now the District Court has affirmed that dismissal.
The Opinion on Remand
Crawford conceded that he did not file his suit within one year of when the proof of claim was filed. However, he claimed that his suit was either a compulsory counterclaim to the proof of claim or was in the nature of recoupment. The District Court held that the suit was not a compulsory counterclaim to the proof of claim for the reason that it did not arise from the same transaction or occurrence. The debt arose from Stanley Crawford’s purchase of furniture, while the adversary proceeding arose from attempting to collect that debt.
The Court went on to find that even if it was assumed that the suit arose out of the same transaction (a requirement for both a compulsory counterclaim and recoupment), recoupment still would not apply. In order to invoke recoupment, there must be a valid claim against which to recoup. However, by the time that the case reached the District Court, Crawford had already received his discharge and the debt was no more.
It is extremely ironic that a case based on failure to act within the statute of limitations would be barred by the statute of limitations. As a result, Mr. Crawford gets his name in the casebooks but no recovery. The practical lesson here is that sometimes the best defense is the simplest one. While the Crawford issue has divided the Courts of Appeals, it was never necessary to reach it in this case since the case was filed out of time.