Crawford v. LVNV Funding, LLC

• Citation: 758 F.3d 1254
• Decision Date: 10 July 2014
• Docket Number: No. 13–12389.,13–12389.
• Parties: Stanley CRAWFORD, Plaintiff–Appellant, v. LVNV FUNDING, LLC, et al., Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

758 F.3d 1254

Stanley CRAWFORD, Plaintiff–Appellant,

v.LVNV FUNDING, LLC, et al., Defendants–Appellees.

No. 13–12389.

United States Court of Appeals, Eleventh Circuit.

July 10, 2014.

Nicholas Heath Wooten, Nick Wooten, LLC, Auburn, AL, for Plaintiff–Appellant.

Neal D. Moore, III, Sarah E. Orr, Ferguson Frost & Dodson, LLP, Birmingham, AL, for Defendants–Appellees.

Appeal from the United States District Court for the Middle District of Alabama. D.C. Docket No. 2:12–cv–00701–WKW, Bkcy No. 08–bk–30192–DHW.

Before HULL, Circuit Judge, and WALTER,^* District Judge, and GOLDBERG,^** Judge.

GOLDBERG, Judge:

A deluge has swept through U.S. bankruptcy courts of late. Consumer debt buyers—armed with hundreds of delinquent accounts purchased from creditors—are filing proofs of claim on debts deemed unenforceable under state statutes of limitations. This appeal considers whether a proof of claim to collect a stale debt in Chapter 13 bankruptcy violates the Fair Debt Collection Practices Act (“FDCPA” or “Act”). 15 U.S.C. §§ 1692–1692p (2006).

We answer this question affirmatively. The FDCPA's broad language, our precedent, and the record compel the conclusion that defendants' conduct violated a number of the Act's protective provisions. See id. §§ 1692(e), 1692d–1692f. We hence reverse the orders of the bankruptcy and district courts.

I. FACTS ¹

Stanley Crawford, the plaintiff in this case, owed $2,037.99 to the Heilig–Meyers furniture company. Heilig–Meyers charged off this debt in 1999, and in September 2001, a company affiliated with defendant LVNV Funding, LLC, acquired the debt from Heilig–Meyers.² The last transaction on the account occurred one month later on October 26, 2001. Accordingly, under the three-year Alabama statute of limitations that governed the account, Crawford's debt became unenforceable in both state and federal court in October 2004. SeeAla.Code § 6–2–37(1).

Then, on February 2, 2008, Crawford filed for Chapter 13 bankruptcy in the Middle District of Alabama. During the proceeding, LVNV filed a proof of claim to collect the Heilig–Meyers debt, notwithstanding that the limitations period had expired four years earlier. In response, Crawford filed a counterclaim against LVNV via an adversary proceeding pursuant to Bankruptcy Rule 3007(b). Crawford alleged that LVNV filed stale claims as a routine business practice and that attempting to claim Crawford's time-barred debt violated the FDCPA.

Bankruptcy Judge Dwight H. Williams, Jr., dismissed Crawford's adversary proceeding in its entirety. Crawford then appealed to the district court, but Chief Judge W. Keith Watkins affirmed. Crawford v. LVNV Funding, LLC, Nos. 2:12–CV–701–WKW, 2:12–CV–729–WKW, 2013 WL 1947616 (M.D.Ala. May 9, 2013). Crawford appealed to us on May 24, 2013.

II. THE FDCPA

To decide this case, we must first examine the statute that governs Crawford's claim: the FDCPA. The FDCPA is a consumer protection statute that “imposes open-ended prohibitions on, inter alia, false, deceptive, or unfair” debt-collection practices. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 587, 130 S.Ct. 1605, 1615, 176 L.Ed.2d 519 (2010) (quotation marks and citations omitted). Finding “abundant evidence” of such practices, Congress passed the FDCPA in 1977 to stop “the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. § 1692(a). Congress determined that “[e]xisting laws and procedures” were “inadequate” to protect consumer debtors. Id. at § 1692(b); see Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1173 (11th Cir.1985) (noting “that despite prior [Federal Trade Commission] enforcement in the area,” Congress found “[e]xisting laws and procedures” inadequate).

In short, the FDCPA regulates the conduct of debt-collectors, which the statute defines as any person who, inter alia, “regularly collects ... debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). Undisputedly, LVNV and its surrogates are debt collectors and thus subject to the FDCPA.³

To enforce the FDCPA's prohibitions, Congress equipped consumer debtors with a private right of action, rendering “debt collectors who violate the Act liable for actual damages, statutory damages up to $1,000, and reasonable attorney's fees and costs.” Owen v. I.C. Sys., Inc., 629 F.3d 1263, 1270 (11th Cir.2011) (citing 15 U.S.C. § 1692k(a)); Jeter, 760 F.2d at 1174 n. 5 (“Most importantly, consumers were given a private right of action to enforce the provisions of the FDCPA against debt collectors....”). To determine whether LVNV's conduct, as alleged in Crawford's complaint, is prohibited by the FDCPA, we begin “where all such inquiries must begin: with the language of the statute itself.” Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216 (11th Cir.2012) (quotation marks omitted).

Section 1692e of the FDCPA provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. Section 1692f states that “[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” Id.§ 1692f.

Because Congress did not provide a definition for the terms “unfair” or “unconscionable,” this Court has looked to the dictionary for help. “The plain meaning of ‘unfair’ is ‘marked by injustice, partiality, or deception.’ ” LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1200 (11th Cir.2010) (quoting Merriam–Webster Online Dictionary (2010)). Further, “an act or practice is deceptive or unfair if it has the tendency or capacity to deceive.” Id. (quotation marks omitted and alterations adopted). We also explained that “[t]he term ‘unconscionable’ means ‘having no conscience’; ‘unscrupulous'; ‘showing no regard for conscience’; ‘affronting the sense of justice, decency, or reasonableness.’ ” Id. (quoting Black's Law Dictionary 1526 (7th ed.1999)). We have also noted that “[t]he phrase ‘unfair or unconscionable’ is as vague as they come.” Id. (quoting Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470, 474 (7th Cir.2007)).

Given this ambiguity, we have adopted a “least-sophisticated consumer” standard to evaluate whether a debt collector's conduct is “deceptive,” “misleading,” “unconscionable,” or “unfair” under the statute. LeBlanc, 601 F.3d at 1193–94, 1200–01 (holding that the “least-sophisticated consumer” standard applies to evaluate claims under both § 1692e and § 1692f); see also Jeter, 760 F.2d at 1172–78 (reversing the district court's use of the “reasonable consumer” standard in a § 1692e case). The inquiry is not whether the particular plaintiff-consumer was deceived or misled; instead, the question is “whether the ‘least sophisticated consumer’ would have been deceived” by the debt collector's conduct. Jeter, 760 F.2d at 1177 n. 11. The “least-sophisticated consumer” standard takes into account that consumer-protection laws are “not made for the protection of experts, but for the public—that vast multitude which includes the ignorant, the unthinking, and the credulous.” Id. at 1172–73 (quotation marks omitted). “However, the test has an objective component in that while protecting naive consumers, the standard also prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness.” LeBlanc, 601 F.3d at 1194 (quotation marks omitted and alterations adopted).

Given our precedent, we must examine whether LVNV's conduct-filing and trying to enforce in court a claim known to be time-barred-would be unfair, unconscionable, deceiving, or misleading towards the least-sophisticated consumer. See id. at 1193–94; see also Jeter, 760 F.2d at 1172–78. ⁴

III. DISCUSSION

The reason behind LVNV's practice of filing time-barred proofs of claim in bankruptcy court is simple. Absent an objection from either the Chapter 13 debtor or the trustee, the time-barred claim is automatically allowed against the debtor pursuant to 11 U.S.C. § 502(a)-(b) and Bankruptcy Rule 3001(f). As a result, the debtor must then pay the debt from his future wages as part of the Chapter 13 repayment plan, notwithstanding that the debt is time-barred and unenforceable in court.

That is what happened in this case. LVNV filed the time-barred proof of claim in May of 2008, shortly after debtor Crawford petitioned for Chapter 13 protection. But neither the bankruptcy trustee nor Crawford objected to the claim during the bankruptcy proceeding; instead, the trustee actually paid monies from the Chapter 13 estate to LVNV (or its surrogates) for the time-barred debt.⁵ It wasn't until four years later, in May 2012, that debtor Crawford—with the assistance of counsel—objected to LVNV's claim as unenforceable.

LVNV acknowledges, as it must, that its conduct would likely subject it to FDCPA liability had it filed a lawsuit to collect this time-barred debt in state court. Federal circuit and district courts have uniformly held that a debt collector's threatening to sue on a time-barred debt and/or filing a time-barred suit in state court to recover that debt violates §§ 1692e and 1692f. See Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th Cir.2013) (explaining that a debt collector's filing of a time-barred lawsuit to recover a debt violates the FDCPA); see also Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 32–33 (3d Cir.2011) (indicating that threatened or actual litigation to collect on a time-barred debt violates the FDCPA, but finding no FDCPA violation because the debt-collector never pursued or threatened litigation); Castro v. Collecto, Inc., 634 F.3d 779, 783, 787 (5th Cir.2011) (collecting cases and indicating that threatened or actual litigation to collect a time-barred debt “may well constitute a violation of [§ 1692e],” but ultimately concluding that no FDCPA violation occurred because the debt was not time-barred under the...