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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2016

## Text

[Supreme Coun US
FILED

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{ No. 16-348 | OFFICE OF THE CLERK

BsyeRe _————————- wares
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

|

I

TABLE OF CONTENTS
Page

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TABLE OF AUTHORITIES .ccccesscccesscscccesssccsvese ill
INTEREST OF THE AMICUS CURIAE............. 1
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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

u

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

m1

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,

lv

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

Vv

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

v1

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,

ee . cessncnnndeebenennneen 26, 27
STATUTES AND RULES
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$50.00. 6 O08.....<...--<.0.. RA AR Es 12

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

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TABLE OF AUTHORITIES
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Be te Oe eo da snc sansticnovnicndcanyniiee passim
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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.

2

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.

3

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-

4

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.

5

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

6

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

7

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.

8
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,

9

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).

10

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

11

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).

12

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.

13

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

14

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

15

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

16

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!

17

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

18

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

19

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’

20

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

21

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-

22

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

23

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

24

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

25

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.

26

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

27

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,”

28

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

29

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”).

30

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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0706%3A10. Public record. Not legal advice.