Amicus Curiae Brief — Midland Funding, LLC v. Johnson, 137 S. Ct. 326 (2016) (No. 16-348)

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[Supreme Coun US

FILED

{ No. 16-348 | OFFICE OF THE CLERK

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Supreme Court of the Anited States

MIDLAND FUNDING, LLC,

Petitioner,

Vv.

ALEIDA JOHNSON,

Respondent.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF OF AMICUS CURIAE

G. ERIC BRUNSTAD, JR.

IN SUPPORT OF RESPONDENT

G. Eric Brunstad, Jr.

Counsel of Record

Kate M. O’Keeffe

DECHERT LLP

90 State House Square

Hartford, Connecticut 06103

(860) 524-3999

eric.brunstad@dechert.com

Counsel for Amicus Curiae

(RN a ee

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES .ccccesscccesscscccesssccsvese ill

INTEREST OF THE AMICUS CURIAE............. 1

REELED isnccavestnsnsnnietyidsoedescsetlenvensuanstieeoheneess 5

SUMMARY OF THE ARGUMENT .................... 8

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I. Knowingly Filing A Proof Of Claim For

A Time-Barred Debt Is A Violation Of

Re TES saiccnrcenctvikinsagdiedstesSpinaiteinkideerwiides 10

A. Filing a Proof of Claim is an Act to

Collect a Debt Analogous to Filing a

Traditional Debt-Collection Lawsuit. ..... 10

B. Midland’s Proffered Reasons to

Preclude Application of the FDOCPA

to Proofs of Claim are Equally

Applicable to, and Have Long Been

Rejected in the Context of.

Traditional Debt-Collection

aN aco etn eae peeesuauiucilaeeegiehin 17

Il. The FDCPA Covers Proofs Of Claim

Premised on Stale Debts Filed In

Bankruptcy Proceedings. ................ccessesessess 20

TABLE OF CONTENTS

(cont’d)

Page

A. The Plain Meaning of the FDCPA

Compels its Application in the

I a cuudahbuesnilens 20

B. Nothing in the Bankruptcy Code

Prevents the Application of the

FDCPA to a Proof of Claim for a

(yg | eee 22

C. The Enactment of the Bankruptcy

Code Did Not Impliedly Repeal the

TABLE OF AUTHORITIES

Page

CASES

Amell v. United States,

Se 24

Baldino v. Wilson (In re Wilson),

116 F.3d 87 (3d Cir. 1997) ...c..ccccccccccceececeeceees 13

Beattie v. D.M. Collections, Inc.,

754 F. Supp. 383 (D. Del. 1991)............... 11, 15

Bell Atl. Corp. v. Twombly,

Be ee Ce ME civics ccscssccoceincvesuacesececessdss 18

Branch v. Smith,

I? oo ececuedinabale 25

Buchanan v. Northland Grp., Inc.,

776 F.3d 393 (6th Cir. 2015)..............cccccccceeee LO

Castro v. Collecto, Inc.,

634 F.3d 779 (6th Cir. 2011)....................00000. 10

Connecticut Nat’] Bank v. Germain,

ci leo sci wasnees 20, 21

Crawford Fitting Co. v. J.T. Gibbons, Inc.,

482 U.S. 437 (1987)............ si tn Lp Perillee NOt ae,

TABLE OF AUTHORITIES

(continued)

Crawford v. LVNV Funding, LLC,

758 F.3d 1254 (11th Cir. 2014), cert.

denied, 135 S. Ct. 1844 (2015)..........0....

Estancias La Ponderosa Dev. Corp. v.

Harrington (In re Harrington),

902 F.2d 3 (ist Cir. 1993) ......................

Fourco Glass Co. v. Transmirra Prods.

Corp.,

ED cn ctatincintissckenmeseserscs

Freyermuth v. Credit Bureau Servs., Inc.,

248 F.3d 767 (8th Cir. 2001)............0000..

Georgia v. Pennsylvania R.R. Co.,

324 U.S. 439 (1945), reh’g denied, 324

I Soc ciakterichssncassamandeetoseinisecieias

Goins v. JBC & Assocs., P.C.,

352 F. Supp. 2d 262 (D. Conn. 2005) ....

Green v. Bock Laundry Mach. Co.,

ee, BO CIs arccctcnesannccsniensonsscecseen

Hartford Underwriters Ins. Co. v. Union

Planters Bank, N.A..,

ee I casinccscsaccsoaiscentonsbocnsccecnaal

Page

TABLE OF AUTHORITIES

(continued)

Page

Herkert v. MRC Receivables Corp.,

655 I. Supp. 2d 870 (N.D. Ill. 2009)....8, 11, 15

Huertas v. Galaxy Asset Mgmt.,

G41 F.36 38 (oe Cir. 301))........................ 10

In re Chacon,

438 B.R. 725 (Bankr. D. N.M. 2010)... 13

In re Cummings,

221 B.R. 814 (Bankr. N.D. Ala. 1998)... 13

J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred

Int'l, Inc.,

Pe CR, PO I ices cccesdnsiinnecnecvess 9, 26, 28

Kimber v. Fed. Fin. Corp.,

668 F. Supp. 1480 (M.D. Ala. 1987)...... passim

Lamie v. U.S. Trustee,

540 U.S. 526 (2004)............0.00...002. 8, 20, 21, 22

Larsen v. JBC Legal Grp., P.C.,

533 F. Supp. 2d 290 (E.D.N.Y. 2008) ........... 11

McMahon v. LVNV Funding, LLC,

744 F.3d 1010 (7th Cir. 2014)... 15

TABLE OF AUTHORITIES

(continued)

Page

Midlantic Nat’] Bank v. New Jersey Dept.

of Envtl. Prot.,

Ne RD wi cicncecciscporncsseeisctensnenin 22, 23

Morton v. Mancari,

ee I so cccivcsincmicvieensins 23, 26, 29

Mulvania v. United States (In re

Mulvania),

214 B.R. 1 (B.A-P. 9th Cir. 1997) ................--15

Nat’ Ass’n of Home Builders v. Defenders

of Wildlife,

EEE TFT, BOE I nse ncensvcecscctsncnsnnssopass passim

Phillips v. Asset Acceptance, LLC,

736 F.3d 1076 (7th Cir. 2013).............. 8, 10, 14

Posadas v. Nat’] City Bank of New York,

ao os aca leedanemennon 24, 28

Radzanower v. Touche Ross & Co.,

Ee CI ois coins tvsenccsscnescovevnivnsenase 26

Rake v. Wade,

re ceesenelidunteeninenestetl 20

Red Rock v. Henry,

Ie BE CD occ ccrcserovceannscesnssesassncosenee 24

vil

TABLE OF AUTHORITIES

(continued)

Page

Rodriguez v. United States,

eB I rcesciinsieceassoceessserseeinsares 24, 28

Tennessee Student Assistance Corp. V.

Hood,

A OE OID CD isos cxnsvsssvccsesenesnecedecesonses 16

Tennessee Valley Auth. v. Hill,

Bs cvsccassosurensersesocesiscnes 25, 26

United States v. Borden Co.,

ssn ssouvunenedeacnnanesmdinses 25

United States v. Fausto,

SE ee IE vires exccennstssesossunseienanis 28, 29

United States v. Ron Pair Enters.,

ee CI oe ie sccictcprnccddsasuntanesconsvesoies 20

Wilmot v. Mudge,

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STATUTES AND RULES

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Te 3 Ci } | | een seepecwnse 6, 12, 23, 27

TABLE OF AUTHORITIES

(continued)

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TABLE OF AUTHORITIES

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INTEREST OF THE AMICUS CURIAE'

The undersigned amicus curiae is a Senior

Research Scholar in Law at the Yale Law School,

has served as an Adjunct Professor of Law at the

Georgetown University Law Center and the New

York University School of Law, and is a frequent

Visiting Lecturer in Law at the Yale Law School.

He has also taught at the Harvard Law School.

Among other subjects, he teaches courses on

bankruptcy law, domestic and international

business reorganizations, commercial transac

tions, secured transactions, and the federal

courts. In addition to his teaching, the under-

signed is a contributing author of Collier on

Bankruptcy, responsible for writing several

chapters of the Treatise. He is also a partner at

the law firm of Dechert LLP; a prior Chair of the

ABA Business Bankruptcy Committee; a former

member of the Judicial Conference Advisory

Committee on the Federal Bankruptcy Rules;

and a Fellow of the American College of Bank-

ruptcy.

| No counsel for any party has authored this brief in

whole or in part, and no party or counsel for a party has

made a monetary contribution to the preparation or sub-

mission of this brief. See Sup. Ct. R. 37.6. Both Petition

er and Respondent have filed with the Court letters con’

senting to the filing of amicus curiae briefs in support of

either or neither party.

The undersigned has briefed and argued nu-

merous bankruptcy matters before the Court, in-

cluding Schwab v. Reilly, 560 U.S. 770 (2010);

Milavetz, Gallop & Milavetz, PA. v. United

States, 559 U.S. 229 (2010); Florida Dep’t of

Revenue v. Piccadilly Cafeterias, Inc., 554 U.S.

33 (2008); Travelers Cas. & Sur. Co. v. Pacific

Gas & Elec. Co., 549 U.S. 443 (2007); Marrama

v. Citizens Bank of Mass., 549 U.S. 365 (2007);

Till v. SCS Credit Corp., 541 U.S. 465 (2004);

and Hartford Underwriters Ins. Co. v. Union

Planters Bank, N.A., 530 U.S. 1 (2000). He has

otherwise participated as counsel for one of the

parties in numerous other bankruptcy matters

before the Court, including Executive Benefits

Insurance Agency v. Arkison, 134 S. Ct. 2165

(2014); Stern v. Marshall, 131 S. Ct. 2594 (2011);

Hamilton v. Lanning, 560 U.S. 505 (2010); Cen-

tral Virginia Cmty. College v. Katz, 546 U.S. 356

(2006); Rousey v. Jacoway, 544 U.S. 320 (2005);

Kontrick v. Ryan, 540 U.S. 443 (2004); Lamie v.

United States Trustee, 540 U.S. 526 (2004); FCC

v. NextWave Personal Comme'ns Inc., 537 U.S.

293 (2003); and Connecticut Nat'l Bank v. Ger-

main, 503 U.S. 249 (1992). In addition, he has

prepared and filed with the Court several amicus

briefs in bankruptcy cases, including Husky In-

ternational Electronics, Inc. v. Ritz, 136 S. Ct.

1581 (2016); Bullard v. Blue Hills Bank, 135 S.

Ct. 1686 (2015); Harris v. Viegelahn, 135 S. Ct.

1829 (2015); Wellness International Network,

Ltd. v. Sharif. 135 S. Ct. 1932 (2015); Clark v.

Rameker, 134 S. Ct. 2242 (2014); Law v. Siegel,

134 S. Ct. 1188 (2014); Bullock v. BankCham-

paign, N.A., 133 S. Ct. 1754 (2013); RadLAX

Gateway Hotel, LLC v. Amalgamated Bank, 132

S. Ct. 2065 (2012); Hall v. United States, 132 S.

Ct. 1882 (2012); Ransom v. FIA Card Servs., 131

S. Ct. 716 (2011); United Student Aid Funds,

Inc. v. Espinosa, 559 U.S. 260 (2010); Howard

Delivery Serv., Inc. v. Zurich American Ins. Co.,

547 U.S. 651 (2006); Tennessee Student Assis-

tance Corp. v. Hood, 541 U.S. 440 (2004); Archer

v. Warner, 538 U.S. 314 (2003); and Things Re-

membered, Inc. v. Petrarca, 516 U.S. 124 (1995).

The purpose of this brief is to address matters

that bear on this Court’s determination of two

important issues that affect the protections af-

forded to debtors in bankruptcy from fraudulent

and exploitative conduct: (1) whether a creditor

who qualifies as a “debt collector” under the Fair

Debt Collection Practices Act (““FDCPA”) violates

that Act by knowingly and intentionally filing a

proof of claim in bankruptcy on a time-barred

debt; and (2) if such conduct does fall within the

scope of the FDCPA, whether Congress clearly

and manifestly intended the Bankruptcy Code to

preclude application of the FDCPA to the filing

of proofs of claim.

As to the first issue, the knowing and inten-

tional filing of a proof of claim on a time-barred

debt is a violation of the FDCPA. As the Elev-

enth Circuit noted in Crawford v. LVNV Fund-

ing, LLC, 758 F.3d 1254 (11th Cir. 2014), cert.

denied, 135 S. Ct. 1844 (2015), consumer debt

buyers like petitioner in this case have filed a

“deluge” of stale proofs of claim in consumer

bankruptcy cases in the hope of collecting on

some percentage of them. The filing of these

stale claims represent attempts by debt collec-

tors to mislead debtors into the belief that the

relevant debts are legally valid when the collec-

tors know they are unenforceable. In addition,

they represent illicit efforts to play off of the pre-

sumptive good faith of most creditors who file le-

gitimate proofs of claim on enforceable obliga-

tions. As this brief explains, courts have widely

held that lawsuits seeking to enforce stale claims

violate the FDCPA when the creditors know the

claims are unenforceable, and proofs of claim

filed on the same stale debts are fundamentally

no different.

On the second issue, this brief further ex-

plains that the plain language of the FDCPA

makes clear that it applies to proofs of claim, and

nothing in the Bankruptcy Code makes an ex-

ception to the FDCPA in this context. This

Court has made clear that it will not construe a

statute as being implicitly repealed by a later

statute unless Congress’s intent to do so is “clear

and manifest.” This high burden cannot be met

in this instance.

STATEMENT

Petitioner Midland Funding, LLC (“Midland”)

is in the business of purchasing and seeking to

collect unpaid debts. Pet. App. 3a. Midland pur-

chased a debt that Respondent Aleida Johnson

(“Johnson”) at one point owed to Fingerhut Cred-

it Advantage. Id. The date of the last transac-

tion on Johnson’s account with Fingerhut was in

May of 2003. Id.

Johnson filed a Chapter 13 bankruptcy peti-

tion in March of 2014. Jd. In May of 2014, Mid-

land filed a proof of claim in Johnson’s bankrupt-

cy case, seeking to collect $1,879.71 on the debt

purchased from Fingerhut. Jd. Midland’s claim

is governed by Alabama law, which imposes a

six-year statute of limitations on claims to collect

on an overdue debt, and therefore under Ala-

bama law the claim is time-barred. Id.

Johnson commenced an action against Mid-

land in the United States District Court for the

District of Alabama, alleging that Midland’s

time-barred attempt to collect on the overdue

debt was a violation of the Fair Debt Collection

Practices Act (““FDCPA”). Pet. App. 18a-19a.

The FDCPA prohibits a “debt collector” from

“usling] any false, deceptive, or misleading rep-

resentation or means in connection with the col-

lection of any debt,” including “falselly] repre-

sentling] .. . the character, amount, or legal sta-

tus of any debt.” 15 U.S.C. § 1692e. The FDCPA

further prohibits a debt collector from “usling]

unfair or unconscionable means to collect or at-

tempt to collect any debt,” including collecting

any amount that is not “expressly authorized by

the agreement creating the debt or permitted by

law.” Id. § 1692f. A “debt collector” under the

statute is “any person... in any business the

principal purpose of which is the collection of any

debts, or who regularly collects or attempts to

collect . . . debts owed or due or asserted to be

owed or due another.” Id. § 1692a.

Midland moved to dismiss Johnson’s claim.

Pet. App. 18a. The District Court recognized

that it was bound by the Eleventh Circuit’s deci-

sion in Crawford v. LVNV Funding, LLC, 758

F.3d 1254 (11th Cir. 2014), cert. denied, 135 S.

Ct. 1844 (2015), that filing a proof of claim in

bankruptcy to collect a time-barred debt is a vio-

lation of the FDCPA. Pet. App. 19a. Neverthe-

less, the court held that the FDCPA prohibition

on filing stale proofs of claim is in “irreconcilable

conflict” with section 501(a) of the Bankruptcy

Code, which provides in permissive terms that

“(al creditor . . . may file a proof of claim.” 11

U.S.C. § 501(a). The court held that where, as is

the case under Alabama law, a statute of limita-

tions period only extinguishes a creditor’s reme-

dy but not the underlying right to payment, a

creditor has the right to file a proof of claim on a

time-barred debt under section 501. Pet. App.

22a. The court then found that this right is in

conflict with the FDCPA because a creditor may

comply with the FDCPA only by “surrendering

its right under the Code to file a proof of claim on

a time-barred debt.” Pet. App. 33a. Because the

Bankruptcy Code was enacted after the FDCPA,

the court held that the former impliedly repealed

the latter. Pet. App. 31a, 37a.

On appeal, the Eleventh Circuit reversed.

The court first noted that it had faced a “nearly

identical” question in Crawford and confirmed its

decision in that case that filing a stale proof of

claim in bankruptcy constitutes a violation of the

FDCPA. Pet. App. 5a. The Eleventh Circuit also

disagreed with the lower court’s conclusion that

the FDCPA and the Bankruptcy Code conflicted

irreconcilably. Pet. App. 7a. The court held that

the FDCPA and the Bankruptcy Code “differ in

their scopes, goals, and coverage, and can be con-

strued together in a way that allows them to co-

exist.” Pet. App. lla. The Bankruptcy Code al-

lows—but does not require—all creditors to file

proofs of claim, while the FDCPA prohibits those

creditors that qualify as “debt collectors” from

filing stale proofs of claim. Pet. App. 12a, 14a.

Reasoning that the Bankruptcy Code’s filing

rules “do not shield debt collectors from the obli-

gations that Congress imposed on them,” the

Eleventh Circuit concluded that a debt collector

that chooses to file a time-barred proof of claim

“is simply opening himself up to a potential law-

suit for an FDCPA violation.” Pet. App. 13a-14a.

SUMMARY OF THE ARGUMENT

The Eleventh Circuit correctly held that Mid-

land violated the FDCPA by filing a proof of

claim for a time-barred debt in Johnson’s bank-

ruptcy proceeding and that the Bankruptcy Code

did not implicitly repeal the FDCPA as to proofs

of claim filed in bankruptcy. Federal courts have

widely recognized that filing or threatening to

file a lawsuit to collect a debt that is barred by

the applicable statute of limitations is a violation

of the FDCPA. See, e.g., Phillips v. Asset Ac-

ceptance, LLC, 736 F.3d 1076, 1079 (7th Cir.

2013). A proof of claim filed in a bankruptcy

proceeding is the equivalent of a lawsuit to col-

lect a debt and, like a separately filed lawsuit,

filing a proof of claim for a time-barred debt is an

act to collect a debt “which the debt collector

knows or should know is unavailable or unwin-

nable” and “is the kind of abusive practice the

FDCPA was intended to eliminate.” Herkert v.

MRC Receivables Corp., 655 F. Supp. 2d 870,

876 (N.D. Ill. 2009) (citation and quotation

marks omitted). Midland’s attempts to distin-

guish the two scenarios fall short, and the deci-

sion below holding that the filing of a stale proof

of claim violates the FDCPA should be affirmed.

Furthermore, the Bankruptcy Code in no way

precludes application of the FDCPA to stale

proofs of claim. The starting point for all statu-

tory interpretation is the text of the statute it-

self. See Lamie v. U.S. Trustee, 540 U.S. 526,

534 (2004). On its face, the FDCPA prohibits

debt collectors from “usling] any false, deceptive,

or misleading representation or means in con-

nection with the collection of any debt,” 15

U.S.C. § 1692e, and from “usling] unfair or un-

conscionable means to collect or attempt to col-

lect any debt,” id. § 1692f. There is no exception

in these provisions for debt collectors acting

within a bankruptcy proceeding, and the statute

therefore clearly applies to misleading, unfair, or

unconscionable attempts to collect a debt

through a proof of claim. Further, nothing in the

Bankruptcy Code excepts application of the

FDCPA to a debt collector filing a proof of claim,

and the provisions are not “irreconcilably con-

flicted” such that this Court should infer repeal

of the FDCPA by the Code. Moreover, it is a

cardinal rule of statutory construction that “re-

peals by implication are not favored and will not

be presumed unless the intention of the legisla-

ture to repeal is clear and manifest.” Nat’] Ass’n

of Home Builders v. Defenders of Wildlife, 551

U.S. 644, 662 (2007) (citation and quotation

marks omitted). Here there is no evidence that

Congress intended the Code to repeal the

FDCPA in this setting, let alone evidence suffi-

cient to satisfy the “clear and manifest” stand-

ard. Where, as here, two statutes may coexist

and the requisite intent to infer repeal does not

exist, the courts must regard both provisions as

effective. See J.E.M. Ag Supply, Inc. v. Pioneer

Hi-Bred Int'l, Inc., 534 U.S. 124, 143-44 (2001).

The Eleventh Circuit properly did so, and this

Court should affirm.

ARGUMENT

I. Knowingly Filing A Proof Of Claim For A

Time-Barred Debt Is A Violation Of The

FDCPA.

A. Filing a Proof of Claim is an Act to Collect

a Debt Analogous to Filing a Traditional

Debt-Collection Lawsuit.

Federal courts have widely held that filing or

threatening to file a lawsuit to collect a time-

barred debt is a violation of the FDCPA. See

Phillips v. Asset Acceptance, LLC, 736 F.3d

1076, 1079 (7th Cir. 2013); accord Buchanan v.

Northland Grp., Inc., 776 F.3d 393, 399-400 (6th

ir. 2015) (letter offering settlement of time-

barred claim was a violation of FDCPA because

“consumers might still be confused about the en-

forceability cf a debt”); Huertas v. Galaxy Asset

Memt., 641 F.3d 28, 33 (3d Cir. 2011) (recogniz-

ing that threatened or actual litigation on a

time-barred debt is a violation of the FDCPA,

but finding no threat of litigation); Castro v. Col-

lecto, Inc., 634 F.3d 779, 783 (5th Cir. 2011) (rec-

ognizing that “threatening to sue on time-barred

debt may well constitute a violation of the

FDCPA,” but finding that claim was not time-

barred); Freyermuth v. Credit Bureau Servs.,

Inc., 248 F.3d 767, 771 (8th Cir. 2001) (same as

Huertas).2 As one court has explained, “bringing

or threatening to bring a lawsuit ‘which the debt

collector knows or should know is unavailable or

unwinnable by reason of a legal bar such as the

statute of limitations is the kind of abusive prac-

tice the FDCPA was intended to eliminate.”

Herkert, 655 F. Supp. 2d at 876 (quoting

Ramirez v. Palisades Collection LLC, No. O7-

3840, 2008 WL 2512679, at *5 (N.D. Ill. June 23,

2008)); see also Beattie, 754 F. Supp. at 393

(“[Tlhe [FDCPA] was designed to prevent debt

collectors from threatening suit against persons

whom the collector knows or should know are not

legally liable for a debt.”). As these decisions

recognize, a lawsuit premised or threatened on

the basis of a stale claim is an abuse of the liti-

gation system. A proof of claim premised on the

basis of a stale claim is fundamentally no differ-

ent.

In all material respects, the act of filing a

proof of claim in a bankruptcy case is the func-

2 See also Herkert v. MRC Receivables Corp.,

655 F. Supp. 2d 870, 875 (N.D. Ill. 2009); Larsen

v. JBC Legal Grp., P.C., 533 F. Supp. 2d 290, 302

(E.D.N.Y. 2008); Goins v. JBC & Assocs., P.C.,

352 F. Supp. 2d 262, 272 (D. Conn. 2005); Beat-

tie v. D.M. Collections, Inc., 754 F. Supp. 383,

393 (D. Del. 1991); Kimber v. Fed. Fin. Corp.,

668 F. Supp. 1480, 1487 (M.D. Ala. 1987).

tional equivalent of commencing litigation to col-

lect a debt outside the bankruptcy process. To

begin with, a debtor commences a_ court-

supervised bankruptcy case by filing a bankrupt-

cy petition. 11 U.S.C. § 301. In turn, the filing

of the petition triggers the automatic stay, which

generally bars creditors from pursuing debt-

collection activity outside the bankruptcy pro-

cess. 11 U.S.C. § 362.

In lieu of pursuing immediate litigation out-

side the bankruptcy process, creditors may, but

are not required to, file proofs of claim setting

forth the debts they assert they are owed. 11

U.S.C. § 501(a). The point is to give creditors

who are stayed from pursuing legitimate debt-

collection activity outside the bankruptcy system

an opportunity to assert legitimate claims

through the proof of claim procedure. In other

words, the point is to provide a means for the

creditor to be paid something on its claim, a clas-

sic debt-collection activity. In the event a credi-

tor invokes the bankruptcy debt-collection proce-

dure improperly by filing a proof of claim seeking

to collect an unenforceable debt, the Code clearly

provides that such claims must be disallowed.

11 U.S.C. § 502(b)(1). And the fact that such

claims must be disallowed under section 502

dramatically undercuts any notion that it is

somehow legitimate for creditors to file such

claims in the first instance.

Although the proof of claim process acts gen-

erally as a non-bankruptcy litigation substitute,

the filing of a proof of claim can easily morph in-

to formal debt-collection litigation, either within

or outside the bankruptcy court. For example,

where a creditor has filed a proof of claim, relief

from stay may be granted so that the claim may

be liquidated in a traditional litigation forum,

leaving only the consideration of unique aspects

of bankruptcy law to be adjudicated in the bank-

ruptcy court. See, e.g., Baldino v. Wilson (In re

Wilson), 116 F.3d 87, 91 (3d Cir. 1997) (allowing

relief from stay to “expedite the resolution of [the

state tort] claim by eliminating it if [the debtor]

prevails on appeal, or by rendering it final and

nondischargeable if [the plaintiff] prevails”); In

re Chacon, 438 B.R. 725, 736 (Bankr. D. N.M.

2010) (‘A number of courts have . . . come up

with the same solution: permit the liability and

damages issues to be determined either in the

state court or the U.S. district court, and then

have the parties return to the bankruptcy court

as needed for an adjudication of the dischargea-

bility issue.”); In re Cummings, 221 B.R. 814,

819 n.9 (Bankr. N.D. Ala. 1998) (“Numerous

courts have determined that, under appropriate

circumstances, a bankruptcy court may grant re-

lief from the stay to allow a debt to be liquidated

in a pending state court proceeding, and then

make a determination of dischargeability based

on the state court record.”). In such circum-

stances where relief from stay has been granted

and the creditor pursues a time-barred lawsuit

against the debtor, the creditor’s claim would ob-

viously be subject to any statute of limitations

defense, and the pursuit of the litigation itself

may well violate the FDCPA under the prece-

dents discussed above. See, e.g., Phillips, 736

F.3d at 1079; Kimber, 668 F. Supp. at 1487 (find-

ing an FDCPA violation because “time-barred

lawsuits are, absent tolling, unjust and unfair as

a matter of public policy”).

Alternatively, creditors may file proofs of

claim and have their claims adjudicated entirely

in the bankruptcy court. Once again, such proofs

of claim are likewise subject to any available

statute of limitations defense and, if time-barred,

must be disallowed as unenforceable under sec-

tion 502 of the Bankruptcy Code. 11 U.S.C.

§ 502(b)(1). The question is whether, for purpos-

es of the FDCPA, debt-collection activity involv-

ing the filing of a proof of claim should be viewed

differently from the very non-bankruptcy debt-

collection activity that the proof of claim process

substitutes for and closely tracks. The answer is

that, for purposes of the FDCPA, there is simply

no basis for treating them differently.

To begin with, just like a debt collector who

threatens or commences a traditional lawsuit on

a debt he knows is stale, a debt collector who

knowingly files a proof of claim for a time-barred

debt is plainly seeking to collect a debt that the

collector “knows or should know is unavailable or

unwinnable by reason of a legal bar.” Herkert,

655 F. Supp. 2d at 876 (citation and quotation

marks omitted). Such conduct is precisely “the

kind of abusive practice the FDCPA was intend-

ed to eliminate.” Jd.; see also Beattie, 754 F.

Supp. at 393. Thus, a debt collector’s filing of a

proof of claim on a debt he knows is time-barred

is similarly “unjust and unfair as a matter of

public policy” and violates the FDCPA for the

same reasons applicable to a traditional debt-

collection lawsuit. Kimber, 668 F. Supp. at 1487;

see also McMahon v. LVNV Funding, LLC, 744

F.3d 1010, 1020 (7th Cir. 2014) (“Whether a debt

is legally enforceable is a central fact about the

character and legal status of that debt. A mis-

representation about that fact thus violates the

FDCPA.”).

The parallel between a proof of claim and a

traditional debt-collection lawsuit is even more

apparent in the scenario in which a debtor in

bankruptcy objects to a proof of claim and files a

counterclaim. A claim combined with an objec-

tion and counterclaim gives rise to an “adversary

proceeding” under the Bankruptcy Rules, which

is just the bankruptcy term for what amounts to

a traditional lawsuit commenced by a summons

and complaint. See FED. R. BANKR. P. 3007(b);

FED. R. BANKR. P. 7001 (defining adversary pro-

ceedings); see also, e.g., Mulvania v. United

States (In re Mulvania), 214 B.R. 1, 7 (B.A.P. 9th

Cir. 1997) (objection to claim joined with request

to determine validity of lien is an adversary pro-

ceeding).

Notably, an adversary proceeding is a sepa-

rate piece of litigation from the overarching

bankruptcy case and in large part mirrors litiga-

tion that occurs outside the bankruptcy context.

See, e.g., Tennessee Student Assistance Corp. v.

Hood, 541 U.S. 440, 457 (2004) (Thomas, J., dis-

senting) (“The similarities between adversary

proceedings in bankruptcy and federal civil liti-

gation are striking.”); Estancias La Ponderosa

Dev. Corp. v. Harrington (In re Harrington), 992

F.2d 3, 6 n.3 (1st Cir. 1993) (noting “[t]he great

similarity between an adversary proceeding in

bankruptcy and an ordinary civil action”). The

Bankruptcy Rules incorporate the Federal Rules

of Civil Procedure in adversary proceedings,

making discovery and pretrial procedure in an

adversary proceeding largely identical to that in

traditional civil litigation. See FED. R. BANKR. P.

7016 (adopting FED. R. Civ. P. 16 regarding pre-

trial conferences); FED. R. BANKR. P. 7026-7037

(adopting discovery rules in FED. R. CIv. P. 26 to

37). Post-trial procedures to alter or amend a

judgment or move for a new trial are also the

same in an adversary proceeding as in civil liti-

gation. FED. R. BANKR. P. 7052, 9023, 9024. The

filing of a proof of claim, therefore, can easily

give rise to a distinct piece of litigation virtually

indistinguishable from ordinary civil litigation.

Because of these similarities, it would be illogical!

to recognize the applicability of the FDCPA with

respect to debt-cellection activity involving an

ordinary lawsuit but not debt-collection activity

involving a proof of claim.

B. Midland’s Proffered Reasons to Preclude

Application of the FDCPA to Proofs of

Claim are Equally Applicable to, and Have

Long Been Rejected in the Context of, Tra-

ditional Debt-Collection Lawsuits.

In spite of the similarities between the filing

of a proof of claim on a stale debt and a tradi-

tional lawsuit premised on the same stale debt,

Midland nonetheless insists that the filing of a

proof of claim cannot be a violation of the

FDCPA because “[dlebt recovery within bank-

ruptcy is fundamentally different from debt col-

lection outside bankruptcy.” Pet. Br. 34. None

of the “differences” that Midland identifies, how-

ever, justify creating an exception under the

FDCPA for the filing of proofs of claim on debts

that are known to be stale.

According to Midland, “debtors in bankruptcy

are protected by a panoply of procedures,” in-

cluding the assignment of a trustee (and often

counsel) to object to claims, regulations govern-

ing the content of proofs of claim and the proce-

dures for administering them, and sanctions for

abusive conduct. Pet. App. 31-32. But similar

protections exist for debtors outside of bankrupt-

cy. And just as none of these protections excuse

application of the FDCPA in traditional litiga-

tion, the protections Midland identifies do not

excuse the application of the FDCPA to debt-

collection activity involving a proof of claim.

For example, under both state and federal

law, traditional complaints must meet all appli-

cable pleading standards or risk dismissal. See,

e.g., FED. R. Civ. P. 8(a)(2) (a complaint must in-

clude a “short and plain statement of the claim

showing that the pleader is entitled to relief’);

ALA. R. Civ. P. 8(a) (same); Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007) (dismissing a

complaint that did not provide “enough facts to

state a claim to relief that is plausible on its

face”). Moreover, where counsel are involved,

they must certify that the relevant pleadings are

true and well-founded. For example, an attorney

signing a pleading in federal court certifies that

a reasonable inquiry has been made regarding

the truth of the factual allegations contained

therein, the claims are warranted, and the plead-

ing is not motivated by an improper purpose.

FED. R. CIv. P. 11; see also, e.g., ALA. R. Civ. P.

11. Under these standards, knowingly filing a

time-barred lawsuit has been held to be sanc-

tionable conduct. See Kimber, 668 F. Supp. at

1488 (citing cases). But that does not mean that

the FDCPA also does not apply.

By the same token, the mere fact that certain

bankruptcy procedures may also shield a debtor

from certain kinds of harm arising from illegiti-

mate proofs of claim is not sufficient reason to

excuse application of the FDCPA, which has its

own focus and remedial scope. The relevant in-

quiry in determining if a debt-collection action

violates the FDCPA is whether a debt collector’s

conduct is misleading or deceptive, not whether

other potential safeguards are in place to further

combat abuses. See, e.g., Freyermuth, 248 F.3d

at 771 (“The case law on this issue focuses on the

debt collector's actions, and whether an unso-

phisticated consumer would be harassed, misled

or deceived by them.”).

Midland also contends that the FDCPA does

not apply to proofs of claim premised on time-

barred debts because a creditor has the right un-

der the Bankruptcy Code to file a proof of claim

and the debtor may always raise any applicable

statute of limitations as a defense. Pet. Br. 18-

19. But the same thing can be said of traditional

debt-collection litigation: the creditor has the

right to file a complaint and the debtor may raise

any applicable statute of limitations as a de-

fense. See Goins, 352 F. Supp. 2d at 272. Nota-

bly, courts have consistently rejected this argu-

ment as a reason to avoid application of the

FDCPA to time-barred lawsuits. Id. (although

statute of limitations is an affirmative defense

that can be waived, it is “a complete defense” and

“the threat to bring a suit under such circum:

stances can at best be described as a ‘misleading’

representation”); Kimber, 668 F. Supp. at 1488

(rejecting assertion that “because a statute of

limitations is an affirmative defense which is

waived if not raised, a plaintiff may not be penal-

ized for knowingly filing a time-barred suit”).

The same reasoning applies to proofs of claim.

Il. The FDCPA Covers Proofs Of Claim Premised

on Stale Debts Filed In Bankruptcy Proceed-

ings.

A. The Plain Meaning of the FDCPA Compels

its Application in the Claims Process.

Im construing amd applying a statute, “(t]he

starting point... is the existing statutory text.”

Lamie vy. U.S. Trustee, 540 U.S. 526, 534 (2004)

(citing Hughes Aircraft Co. v. Jacobson, 525 U.S.

432, 438 (1999)); see also United States v. Ron

Pair Enters., 489 U.S. 235, 241 (1989) (“The task

of resolving the dispute over the meaning of [the

statutory provision at issue] begins where all

such inquiries must begin: with the language of

the statute itself.”). In addition, “when the stat-

ute’s language is plain, the sole function of the

courts—at least where the disposition required

by the text is not absurd—is to enforce it accord-

ing to its terms.” Hartford Underwriters Ins. Co.

v. Union Planters Bank, N.A., 530 U.S. 1, 6

(2000) (citations and quotation marks omitted);

see also Rake v. Wade, 508 U.S. 464, 471 (1993):

Connecticut Nat'l Bank v. Germain, 503 U.S.

249, 253-54 (1992). That is because a cardinal

presumption is that Congress “says in a statute

what it means and means in a statute what it

says there.” Germain, 503 U.S. at 254. Similar-

ly, courts must also generally refrain from en-

grafting limitations on statutory provisions that

do not appear in its text. See, e.g., Lamie, 540

U.S. at 538.

On its face, the FDCPA prohibits debt collec-

tors from “usling] any false, deceptive, or mis-

leading representation or means in connection

with the collection of any debt,” including

“falselly] representling] . . . the character,

amount, or legal status of any debt,” 15 U.S.C.

§ 1692e. The FDCPA also prohibits a debt col-

lector from “usling] unfair or unconscionable

means to collect or attempt to collect any debt,”

including collecting any amount that is not “ex-

pressly authorized by the agreement creating the

debt or permitted by law.” Id. § 1692f. There is

no exception in the statute for filing proofs of

claim in a bankruptcy proceeding. Rather, the

FDCPA provides its own protections by expressly

applying only to creditors that qualify as “debt

collectors” and allowing a safe harbor for those

debt collectors whose violations are “not inten-

tional and resulted from a bona fide error.” I/d.

§ 1692k(c).

A debt collector who knowingly attempts to

collect a claim by filing a proof of claim premised

on a time-barred debt violates the FDCPA no

less than a debt collector who knowingly threat-

ens to file or files a traditional lawsuit premised

on the same time-barred debt. Both acts fall

squarely within the plain terms and remedial

scope of the FDCPA, and this Court should en-

force the statute according to its plain terms.

Hartford Underwriters, 530 U.S. at 6. To read

into the statute an exception for proofs of claim

filed with a bankruptcy court would improperly

apply a limitation to the statute that simply does

not exist. See Lamie, 540 U.S. at 538.

B. Nothing in the Bankruptcy Code Prevents

the Application of the FDCPA to a Proof of

Claim for a Time-Barred Debt.

The Bankruptcy Code does not supply the full

universe of laws and rules that govern the con:

duct of bankruptcy proceedings. See, e.g., 28

U.S.C. § 959(b) (requiring any trustee, receiver,

or debtor in possession to “manage and operate

the property in his possession . . . according to

the requirements of the valid laws of the State in

which such property is situated”); Midlantic

Nat’l Bank v. New Jersey Dept. of Envtl. Prot.,

474 U.S. 494, 507 (1986) (finding that “[t]he

Bankruptcy Court does not have the power to

authorize an abandonment without formulating

conditions that will adequately protect the pub-

lic’s health and safety” as required by state law).

Although it is certainly true that provisions such

as the automatic stay proscribe certain conduct,

it is equally true that Congress did not intend for

parties in bankruptcy “to have carte blanche to

ignore nonbankruptcy law.” Id. at 502.

Section 501 of the Bankruptcy Code provides

that “a creditor... may file a proof of claim.” 11

U.S.C. § 501(a) (emphasis added). This provision

is permissive, not mandatory. In comparison,

the FDCPA prohibits a “debt collector” from us-

ing “any false, deceptive, or misleading represen-

tation” or “unfair or unconscionable means” to

collect a debt, 15 U.S.C. §§ 1692e, 1692f, unless

the debt collector can show by a preponderance

of the evidence that its FDCPA violation “was

not intentional and resulted from a bona fide er-

ror,” id. § 1692k(c). Nothing in section 501 cre-

ates an exception to the FDCPA for creditors fil-

ing proofs of claim in bankruptcy proceedings or

suspends the operation of the FDCPA in the

bankruptcy context. As this Court has stated,

“(tlhe 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 congres-

sional intention to the contrary, to regard each

as effective.” Morton v. Mancari, 417 U.S. 535,

551 (1974).

As there is nothing in the language of section

501 that negates application of the FDCPA to

debt collectors who file proofs of claim that

are “false, deceptive, or misleading” or “unfair or

unconscionable,” application of the FDCPA

should continue in the absence of a clearly stated

congressional expression to the contrary. See

Fourco Glass Co. v. Transmirra Prods. Corp., 353

U.S. 222, 227 (1957) (“It will not be inferred that

Congress, in revising and consolidating the laws,

intended to change their effect unless such in-

tention is clearly expressed.”); Green v. Bock

Laundry Mach. Co., 490 U.S. 504, 521 (1989)

(party contending Congress changed settled law

has burden of showing intent). There is no such

expression in section 501 (or anywhere else in

the Bankruptcy Code), and this Court should ac-

cordingly conclude that both laws are effective.

C. The Enactment of the Bankruptcy Code

Did Not Impliedly Repeal the FDCPA as it

Applies to Proofs of Claim.

A cardinal rule of statutory construction that

has often been repeated by this Court is that re-

peals by implication are not favored and will not

be found unless the congressional intent to re

peal is “clear and manifest.” Red Rock v. Henry,

106 U.S. 596, 602 (1883); accord Nat'l Ass’n of

Home Builders v. Defenders of Wildlife, 551 U.S.

644, 662 (2007); Rodriguez v. United States, 480

U.S. 522, 524 (1987); Posadas v. Nat’l City Bank

of New York, 296 U.S. 497, 503 (1936). The par-

ty urging repeal “bears a heavy burden of per-

suasion” in establishing such intent, Amel] v.

United States, 384 U.S. 158, 165 (1966), and this

Court has stated repeatedly that “repeals by im-

plication are not favored.” Nat'l Ass’n of Home

Builders, 551 U.S. at 662 (citation and quotation

marks omitted); see also Branch v. Smith, 538

U.S. 254, 273 (2003); Crawford Fitting Co. v. J.T.

Gibbons, Inc., 482 U.S. 437, 442 (1987); Tennes-

see Valley Auth. v. Hill, 437 U.S. 153, 189

(1978); United States v. Borden Co., 308 U.S.

188, 198 (1939). This Court has made clear that

it “will not infer a statutory repeal unless the

later statute expressly contradictls] the original

act or unless such a construction is absolutely

necessary ... in order that [the] words [of the

later statute] shall have any meaning at all.”

Nat'l Ass’n of Home Builders, 551 U.S. at 662

(alterations in original) (citations and quotation

marks omitted).

This Court has identified two specific situa-

tions in which repeal by implication may occur:

“where provisions in two statutes are in ‘irrecon-

cilable conflict,” or where the latter Act covers

the whole subject of the earlier one and ‘is clearly

intended as a substitute.” Branch, 538 U.S. at

273 (quoting Posadas, 296 U.S. at 503). Midland

does not claim that section 501 of the Bankrupt-

cy Code covers the whole subject of, or is clearly

intended to substitute for, the FDCPA. Mid-

land’s sole contention is that the statutes “irrec-

oncilably conflict” and that the FDCPA must

yield to the later-enacted Bankruptcy Code. See

Pet. Br. 43-44.

Irreconcilability may be found only where it is

“impossible for both provisions under considera-

tion to stand.” Wilmot v. Mudge, 103 U.S. 217,

221 (1880); see also Morton, 417 U.S. at 550 (no

implied repeal where the statutes in question

“can readily co-exist”). | Under this stringent

standard, courts may find irreconcilable conflict

only where there is “a clear repugnancy between

the old law and the new.” Georgia v. Pennsylva-

nia R.R. Co., 324 U.S. 489, 457 (1945), reh’g de-

nied, 324 U.S. 890 (1945); accord Tennessee Val-

ley Auth., 437 U.S. at 190. Where a party advo-

cating for repeal fails to meet the heavy burden

of demonstrating that two statutes cannot, under

any circumstances, be reconciled, courts must

apply both provisions. J.E.M. Ag Supply, Inc. v.

Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 143-44

(2001) (“[W]hen two statutes are capable of coex-

istence, it is the duty of the courts, absent a

clearly expressed congressional intention to the

contrary, to regard each as effective.” (quoting

Morton, 471 U.S. at 551)); see also Radzanower

v. Touche Ross & Co., 426 U.S. 148, 155 (1976)

(“It is not enough to show that the two statutes

produce differing results when applied to the

same factual situation, for that no more than

states the problem.”).

Under its longstanding precedents, this Court

should not infer repeal of the FDCPA as to proofs

of claim filed in bankruptcy unless such a infer-

ence “is absolutely necessary .. . in order that

the words of the [Bankruptcy Code] shall have

any meaning at all.” Nat'l Ass’n of Home Build-

ers, 551 U.S. at 662. Midland, of course, cannot

meet the heavy burden of showing such a neces-

sity exists because the Bankruptcy Code simply

does not prohibit what the FDCPA directs. Once

again, section 501 merely provides that “a credi-

tor... may file a proof of claim.” 11 U.S.C.

§ 501(a) (emphasis added). In contrast, the

FDCPA prohibits a “debt collector” from using

“any false, deceptive, or misleading representa-

tion” or “unfair or unconscionable means” to col-

lect a debt. 15 U.S.C. §§ 1692e, 1692f. A “debt

collector” is defined as “any person... in any

business the principal purpose of which is the

collection of any debts, or who regularly collects

or attempts to collect . . . debts owed or due or

asserted to be owed or due another.” Id. § 1692a.

Thus, while creditors generally are permitted to

file proofs of claim in a debtor’s bankruptcy pro-

ceeding, the select creditors who also qualify as

“debt collectors” violate the FDCPA by knowing-

ly and intentionally choosing to file a proof of

claim on a time-barred debt.

Debt collectors can easily comply with both

the Bankruptcy Code and the FDCPA, and it is

therefore in no way “impossible for both provi-

sions... to stand.” Wilmot, 103 U.S. at 221. A

debt collector is free to choose to file only proofs

of claim that do not violate the FDCPA. The two

provisions clearly “are capable of coexistence,”

and it therefore “is the duty of the courts, absent

a clearly expressed congressional intention to the

contrary, to regard each as effective.” J.E.M. Ag

Supply, Inc., 534 U.S. at 143-44.

But even if the FDCPA and the Bankruptcy

Code could be said to “irreconcilably conflict” in

some sense, repeal by implication is still not ap-

propriate unless the legislature’s intent to cause

such a result is “clear and manifest.” Posadas,

296 U.S. at 503; see also Nat'l Ass’n of Home

Builders, 551 U.S. at 662; Rodriguez, 480 U.S. at

524. As the court below acknowledged, and Mid-

land does not dispute, there was no “clear and

manifest” Congressional intent to repeal the

FDCPA with the enactment of the Bankruptcy

Code. Pet. App. 14a (“Congress never expressed

a ‘clear and manifest’ intent to repeal the protec-

tions of the FDCPA when it enacted the Bank-

ruptcy Code only a year later.”). In fact, Midland

essentially concedes that the burden of establish-

ing “clear and manifest” intent is not met here,

but claims that because the conflict “has arisen

through judicial interpretation, Congress had no

reason specifically to address that application lof

the FDCPA] when it enacted the Bankruptcy

Code,” and that addressing the conflict at that

time in fact “would have required an act of clair-

voyance.” Pet. Br. 43. In support of this asser-

tion, Midland cites United States v. Fausto, 484

U.S. 439 (1988), but that case in no way excuses

the requirement of “clear and manifest” intent to

infer a statute’s repeal. In Fausto, the Court

held that the Civil Service Reform Act (““CSRA”),

under which certain employees have no adminis-

trative or judicial review of adverse personne!

actions, precluded such employees from seeking

judicial review of a personnel action based on the

Back Pay Act. Id. at 447. While the Court held

that there was no need for an “express state-

ment” of repeal, id. at 453, the Court found am-

ple support in the purpose behind the CSRA and

the language of the act as a whole to conclude

that Congress intended to preempt application of

the Back Pay Act to personnel actions governed

by the CSRA. See id. at 447 (“In the context of

the entire statutory scheme, we think it displays

a clear congressional intent to deny the excluded

employees the protections of Chapter 75—

including judicial review—for personnel action

covered by that chapter.”). No similar indicia of

intent are present with respect to the relevant

statutes here, and Midland simply cannot cir

cumvent the well-established criteria that clear

and manifest intent must exist for the Court to

find an implied repeal. See, e.g., Morton, 417

U.S. at 550 (declining to find implied repeal

where “nothing im the legislative history . . . indi-

cates affirmatively any congressional intent to

repeal”).

CONCLUSION

For the foregoing reasons, as well as those

briefed by Respondent, the decision of the court

below should be affirmed.

Respectfully submitted,

G. Eric Brunstad, Jr.

Counsel of Record

Kate M. O’Keeffe

DECHERT LLP

90 State House Square

Hartford, Connecticut 06103

(860) 524-3999

eric.brunstad@dechert.com

December 21, 2016 Counsel for Amicus Curiae

—_ ene ie —s a A ee Ne —— a

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