Eleventh Circuit Doubles Down on Crawford

Beau Hays

Hays, Potter & Martin, LLP

Peachtree Corners, GA

Following up on the recent post by Steve Sather reporting on the Eighth Circuit’s dismissive rejection of the Eleventh Circuit’s Crawford ruling that filing a time-barred claim in a bankruptcy case violates the FDCPA, we can report that the Eleventh Circuit recently doubled down on its position.  Johnson v Midland Funding, LLC, No. 15-11240, 2016 WL 2996372 (11^th Cir. 5/24/2016)(the Nelson case, reported on by Steve, mentions this case)

What Happened

In March 2014, Aledia Johnson filed a Chapter 13 case in the Southern District of Alabama.  Midland Funding filed a claim for $1,879.71, to which Johnson objected.  On July 11, 2014, the Bankruptcy Court entered its Order granting the objection.  Coincidentally, on July 10, the Eleventh Circuit had handed down the decision in Crawford.  Entirely not coincidentally, on July 14, 2016, Johnson filed a putative class action asserting that Midland Funding had violated the FDCPA in the Southern District of Alabama, Johnson v Midland Funding, LLC, No.. 14-322-WS-C (N.D. Ala.).  Midland Funding, faced with the immovable object that is the Crawford precedent in the Eleventh Circuit moved to dismiss utilizing a new argument - that the FDCPA as applied by Crawford is in irreconcilable conflict with the Bankruptcy Code.

The trial court, in a fairly thorough opinion, agreed.  The Eleventh Circuit, however, reversed the trial court and held that there is no irreconcilable conflict that would lead to preemption of the FDCPA by the Bankruptcy Code.

Analysis

Midland Funding's argument is based upon a rule of statutory construction which holds that when two statutes are in irreconcilable conflict, the newer statute is presumed to have been enacted with knowledge of the conflict and so constitutes an "implied repeal" of the earlier statute.  Since the FDCPA was enacted in 1977 and the current Bankruptcy Code dates from 1978, the Code will preempt the FDCPA in the case of a conflict.

Eighth Circuit Rejects Crawford Decision on Stale Claims

Stephen W. Sather

Barron & Newburger, P.C.

Austin, TX

Creating a circuit split, the Eighth Circuit has rejected the Eleventh Circuit's Crawford ruling that filing a time-barred claim violates the FDCPA.    Nelson v. Midland Credit Management, Inc., No. 15-2984 (8th Cir. 7/11/16).

 

What Happened

In a scenario that has played out dozens of times in the past two years, a debtor filed chapter 13 and a creditor filed a proof of claim on a debt that was outside the statute of limitations.   Rather than simply objecting to the claim, the Debtor filed suit for violation of the FDCPA.   The District Court dismissed the case for failure to state a cause of action, resulting in an appeal to the Court of Appeals.   The Eighth Circuit affirmed.

How the Court Ruled

Under the FDCPA, a debt collector is not prohibited from attempting to collect a debt which is beyond the statute of limitations.   However, the debt collector cannot file suit or threaten to file suit.  In Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014), the Eleventh Circuit found that filing a proof of claim was similar to filing suit to collect a debt.    The Eighth Circuit disagreed, distinguishing Crawford in four short paragraphs.