- Simon v. FIA Card Services, N.A., No. 12-3293, 2013 WL 5508868 (3d Cir. Oct. 7, 2013)
- Affirming in part and reversing in part the dismissal of the Debtors’ claims under the Fair Debt Collection Practices Act (the “FDCPA”) and remanding the case back to the United States District Court for the District of New Jersey for consideration of whether the failure to comply with Rule 45 of the Federal Rules of Civil Procedure (“Federal Rule”) and Rule 9016 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rule”) violated sections 1692e(5) and (13) of the FDCPA. Affirming the dismissal of the Debtors’ claims under sections 1692e(5) and (13) of the FDCPA, the Court of Appeals for the Third Circuit held that (a) failing to identify the recording method in the subpoenas for examinations under Bankruptcy Rule 2004 or (b) issuing the subpoenas from a district other than the one where the examinations were to be held did not violate Bankruptcy Rule 9016 or Federal Rule 45. Affirming the dismissal of the Debtors’ claims under section 1692e(11) of the FDCPA, the Third Circuit held that the “mini-Miranda” notice required under section 1692e(11) conflicts with the automatic stay provision of the Bankruptcy Code that forbids “any act to collect, assess, or recover a claim against the debtor that arose before the commencement” of the bankruptcy case and such conflict precludes allowing a claim under section 1692e(11). Reversing the dismissal of the Debtors’ claims under sections 1692e(5) and (13) of the FDCPA, the Third Circuit held that (a) failure to serve the subpoenas directly on the individuals subpoenaed, as required by Federal Rule 45(b)(1), and (b) failure to include the text of Federal Rule 45(c)-(d) in the subpoenas, as required by Federal Rule 45(a)(1)(A)(iv), violated Federal Rule 45 and Bankruptcy Rule 9016. Following the Seventh Circuit’s approach, the Court of Appeals for the Third Circuit held that there is no categorical preclusion of the FDCPA claims when FDCPA claims arise from communications that a debt collector sends a debtor in a pending bankruptcy case that allegedly violate the Bankruptcy Code or Bankruptcy Rules. The Third Circuit concluded that the bankruptcy court’s authority to enforce compliance with the subpoena rules under the Bankruptcy Code does not conflict with finding liability under the FDCPA for violations based on a debt collector’s failure to comply with the subpoena rules.
- Procedural context:
- The United States District Court for the District of New Jersey dismissed the Debtors’ complaint for liability under sections 1692e(5), (11), and (13) of the FDCPA under Federal Rule 12(b)(6). The district court held that the Bankruptcy Code provided the exclusive remedy for the alleged violations and precluded the Debtors’ claims under the FDCPA. The district court also held that even if claims under the FDCPA were not precluded, the Debtors’ complaint did not allege sufficient facts to state a claim. The Debtors appealed the district court’s decision. Addressing an issue of first impression of whether communications that a debt collector sends a debtor during a pending bankruptcy case (i.e., sending a letter and notice offering to settle a debt and requesting an examination under Bankruptcy Rule 2004) can give rise to a claim under the FDCPA, the Court of Appeals for the Third Circuit affirmed in part, reversed in part, and remanded.
- On December 30, 2010, Robert Maxwell Simon and Stacey Helene Simon (the “Debtors”) filed for bankruptcy protection under chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. The Debtors’ schedules identified an unsecured, non-priority claim for credit-card debt owed to Bank of America (now FIA Card Services, N.A. (“FIA”)). FIA retained Weinstein & Riley, P.S. (“W&R”) to represent it in the Debtors’ bankruptcy case. On January 28, 2011, W&R sent a letter to the Debtors through their bankruptcy counsel along with a notice of the Debtors’ examinations under Bankruptcy Rule 2004. The letter mentioned that FIA was considering filing an adversary proceeding under section 523 of the Bankruptcy Code to challenge the dischargeability of the Debtors’ debt due to FIA and included an offer to forego filing of the adversary proceeding if the Debtors agreed to either (a) stipulate that the debt was nondischargeable or (b) pay a reduced amount to settle the debt. The letter also stated that an examination under Bankruptcy Rule 2004 had been scheduled and contained additional information about how to challenge the debt. Attached to the letter was a notice identifying the date and time for the Debtors’ examinations and requesting production of certain documents for the examinations. The Debtors filed a motion to quash the notice for examinations under Bankruptcy Rule 2004 because it failed to comply with the subpoena requirements under Bankruptcy Rule 9016 and Federal Rule 45. Further, the Debtors filed an adversary proceeding asserting claims against FIA and W&R under sections 1692e(5), (11), and (13) of the FDCPA. Specifically, the Debtors alleged that by sending the letter and notice, W&R and FIA violated sections 1692e(5) and (13) in four ways by: 1. intentionally failing to send the letter and subpoena to the Debtors and instead sending the documents to their bankruptcy counsel and therefore violating Federal Rule 45(b)(1)'s requirement that subpoenas be served directly on the individuals subpoenaed; 2. specifying the location for the Bankruptcy Rule 2004 examinations as the office of W&R in New York, rather than in New Jersey and therefore violating Federal Rule 45(a)(2)(B)'s requirement that a subpoena be issued “from the court for the district where the deposition is to be taken”; 3. failing to include in the subpoena the text of Federal Rule 45(c) and (d), as required under Federal Rule 45(a)(l)(A)(iv); and 4. failing to include in the subpoena the method of recording the Bankruptcy Rule 2004 examinations, as required under Federal Rule 45(a)(1)(B). Further, the Debtors alleged that W&R violated section 1692e(11) of the FDCPA by failing to include the “mini-Miranda ” warning that a debt collector must provide in the initial communication with the debtor that “the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.” The bankruptcy court quashed the notices under Bankruptcy Rule 2004 but ruled that it lacked subject-matter jurisdiction over the FDCPA claims and dismissed them without prejudice. The Debtors filed a lawsuit against FIA and W&R in the United States District Court for the District of New Jersey alleging that the letters and subpoenas violated the FDCPA prohibition on false, deceptive, and misleading debt-collection practices under 15 U.S.C. § 1692e(5), (11), and (13). FIA and W&R filed a motion to dismiss on three grounds: (1) the FDCPA claim was precluded by the Bankruptcy Court's earlier dismissal of the Debtors’ adversary proceeding; (2) the Debtors’ complaint failed to state a claim; and (3) the allegations from which the FDCPA claims arose were governed exclusively by the Bankruptcy Code. The District Court dismissed the FDCPA suit, with prejudice, stating that the FDCPA claims were precluded by the Bankruptcy Code and that the complaint failed to set forth sufficient factual allegations to state a claim under the FDCPA. The Debtors appealed the order dismissing their complaint.
- The Honorable Lee H. Rosenthal, the United States District Court for the Southern District of Texas, sitting by designation
3447 in the system
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