Johnson v. Midland Funding, LLC

Summarized by Paul Avron , Berger Singerman LLP
9 years 9 months ago

Citation:

No. 15-11240 (11th Cir. May 24, 2016)

Tag(s):

Ruling:

In a consolidated appeal, the Eleventh Circuit reversed dismissal of two actions brought under the Fair Debt Collection Practices Act (FDCPA) by Chapter 13 debtors given that the claimant-debt collectors filed proofs of claim knowing that the underlying claims against the debtors were time-barred.

Procedural context:

In a consolidated appeal the Eleventh Circuit reviewed a District Court's dismissal of two actions brought under the Fair Debt Collection Practices Act where the debt collection agencies filed proofs of claim in individual chapter 13 cases where the underlying claims were time-barred under state law.

Facts:

Corporate debt collectors filed proofs of claims in individual chapter 13 cases on underlying claims that were uncollectible under applicable state (Alabama) law. Each of the chapter 13 debtors filed actions against the debt collection agencies under the Fair Debt Collection Practices Act (FDCPA) because the underlying debts were uncollectible. A U.S. District Court judge dismissed both actions. The debtors-plaintiffs appealed and their appeals were consolidated as they raised the same issue, that is, whether the Eleventh Circuit's prior decision in Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014) placed the FDCPA and the Bankruptcy Code in irreconcilable conflict such that the FDCPA actions could not proceed. In Crawford, the Eleventh Circuit held that a debt collector violates the FDCPA when it files a proof of claim in a bankruptcy case with knowledge that the claim concerns a debt that is time-barred. The Eleventh Circuit found no irreconcilable conflict where the Bankruptcy Code allows claimants to file claims in bankruptcy cases but a subset of claimants--debt collectors--may be liable under the FDCPA for filing claims which are time-barred under applicable state law. The Eleventh Circuit cited to applicable Alabama law holding that "[w]hen the statute of limitations expires, it does not extinguish the cause of action; instead, it makes the remedy unavailable." Thus, creditors generally may file proof of claim in bankruptcy cases even though they are time-barred under applicable state law, but as to debt collectors, they may be liable to the debtors under the FDCPA.

Judge(s):

Eleventh Circuit Judges Wilson and Martin, and visiting Fifth Circuit Judge Patrick Higginbotham.

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