Dubois v. Atlas Acquisitions LLC (In re Dubois)

• Decision Date: 25 August 2016
• Docket Number: No. 15–1945,15–1945
• Citation: 834 F.3d 522
• Parties: In re: Eric Dubois, Debtor. Chaille Dubois, f/k/a Chaille Gaines, f/k/a Candace DuBois, f/k/a Candace Gaines, f/k/a Candi Gaines, f/k/a Candi DuBois; Kimberly Adkins, Plaintiffs–Appellants, v. Atlas Acquisitions LLC, Defendant–Appellee, and Timothy P. Branigan; Nancy Spencer Grisby, Trustees.
• Court: U.S. Court of Appeals — Fourth Circuit

834 F.3d 522

In re: Eric Dubois, Debtor.

Chaille Dubois, f/k/a Chaille Gaines, f/k/a Candace DuBois, f/k/a Candace Gaines, f/k/a Candi Gaines, f/k/a Candi DuBois; Kimberly Adkins, Plaintiffs–Appellants,

v.Atlas Acquisitions LLC, Defendant–Appellee,andTimothy P. Branigan; Nancy Spencer Grisby, Trustees.

No. 15–1945

United States Court of Appeals, Fourth Circuit.

Argued: May 10, 2016

Decided: August 25, 2016

ARGUED: Morgan William Fisher, LAW OFFICES OF MORGAN FISHER LLC, Annapolis, Maryland, for Appellants. Donald S. Maurice, Jr., MAURICE WUTSCHER, LLP, Flemington, New Jersey, for Appellee. ON BRIEF: Courtney L. Weiner, LAW OFFICES OF MORGAN FISHER LLC, Washington, D.C., for Appellants. Alan C. Hochheiser, BUCKLEY KING, LPA, Cleveland, Ohio, for Appellee.

Before DIAZ, FLOYD, and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Floyd

wrote the majority opinion, in which Judge Thacker joined. Judge Diaz wrote a dissenting opinion.

FLOYD

, Circuit Judge:

Appellants Kimberly Adkins and Chaille Dubois filed separate Chapter 13 bankruptcy petitions in the Bankruptcy Court for the District of Maryland. Appellee Atlas Acquisitions LLC (Atlas) filed proofs of claim in their bankruptcy cases based on debts that were barred by Maryland's statute of limitations.¹ The issue on appeal is whether Atlas violated the Fair Debt Collection Practices Act (FDCPA) by filing proofs of claim based on time-barred debts. We hold that Atlas's conduct does not violate the FDCPA, and affirm the bankruptcy court's dismissal of Appellants' FDCPA claims and related state law claim.

I.

The facts of Appellants' cases are similar. Adkins filed for Chapter 13 bankruptcy on August 29, 2014. Atlas filed two proofs of claim in her case. The first proof of claim indicated that Adkins owed Atlas $184.62 based on a loan that originated with payday lender Check N Go and that Atlas purchased from Elite Enterprise Services, LLC (Elite Enterprise) on September 15, 2014.² The proof of claim identified the last transaction date on the account as May 19, 2009. Atlas's second proof of claim was for $390.00 based on a loan that originated with payday lender Impact Cash USA and that Atlas purchased from Elite Enterprise on November 18, 2014. The proof of claim identified the last transaction date on that account as September 10, 2009. It is undisputed that both debts were beyond Maryland's three-year statute of limitations when Atlas purchased and attempted to assert the debts in Adkins's bankruptcy case. See Md. Code Ann., Cts. & Jud. Proc. § 5–101

. Adkins neither listed the debts on her bankruptcy schedules nor sent a notice of bankruptcy to Atlas.

Dubois filed for Chapter 13 bankruptcy on December 6, 2014. Atlas filed a proof of claim for $135.00 based on a loan that originated with payday lender Iadvance and that Atlas purchased from Elite Enterprise on January 5, 2015. The proof of claim identified the last transaction date on the account as October 18, 2008. It is undisputed that this debt was also beyond Maryland's statute of limitations when Atlas purchased and attempted to assert the debt in Dubois's bankruptcy case. Dubois did not list the debt on her bankruptcy schedules nor did she send a notice of bankruptcy to Atlas.

Adkins and Dubois filed separate adversary complaints against Atlas. Both objected to Atlas's claims as being time-barred and further alleged that Atlas violated the FDCPA by filing proofs of claim on stale debts. Appellants sought disallowance of Atlas's claims as well as damages, attorney's fees, and costs under the FDCPA.³

Atlas conceded that its claims were based on time-barred debts and stipulated to their disallowance. However, Atlas moved to dismiss Appellants' FDCPA claims under Federal Rule of Civil Procedure 12(b)(6)

for failure to state a claim upon which relief could be granted. See Fed. R. Bankr. P. 7012(b) (incorporating Rule 12(b)(6) into adversary proceedings). After hearing consolidated oral arguments, the bankruptcy court concluded that filing a proof of claim does not constitute debt collection activity within the meaning of the FDCPA and granted Atlas's motion to dismiss. Pursuant 28 U.S.C. § 158(d)(2), we permitted Appellants to appeal the bankruptcy court's decision directly to this Court. We review the bankruptcy court's dismissal of Appellants' claims under Rule 12(b)(6) de novo. See, e.g., In re Mwangi, 764 F.3d 1168, 1173 (9th Cir. 2014) ; In re McKenzie, 716 F.3d 404, 412 (6th Cir. 2013).

II.

Before addressing the substance of Appellants' claims, we provide a brief overview of the relevant statutes in this case: the Bankruptcy Code (the “Code”) and the FDCPA.

A.

“The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor.’ ” Marrama v. Citizens Bank, 549 U.S. 365, 367, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007)

(quoting Grogan v. Garner, 498 U.S. 279, 286, 287, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) ). Through bankruptcy, the debtor's assets are collected for equitable distribution among creditors and his remaining debts are discharged. See Covert v. LVNV Funding, LLC, 779 F.3d 242, 248 (4th Cir. 2015) ; In re Jahrling, 816 F.3d 921, 924 (7th Cir. 2016). A bankruptcy debtor must file with the bankruptcy court a list of creditors, a schedule of assets and liabilities, and a statement of the debtor's financial affairs. 11 U.S.C. § 521(a)(1). “[B]eing all-inclusive on the schedules is consistent with the Code's principle of honest and full disclosure.” In re Vaughn, 536 B.R. 670, 676 (Bankr. D.S.C. 2015). Scheduling a debt notifies the creditor of the bankruptcy and of the creditor's opportunity to file a proof of claim asserting a right to payment against the debtor's estate. See id. at 679 ; 11 U.S.C. § 501(a).

The bankruptcy court may “allow” or “disallow” claims from sharing in the distribution of the bankruptcy estate. 11 U.S.C. § 502

. In Chapter 13 proceedings, allowed claims are typically paid, either in whole or in part, out of the debtor's future earnings pursuant to a repayment plan proposed by the debtor and confirmed by the bankruptcy court. See id.§ 1322(a)(1); 4–501 Collier on Bankruptcy¶ 501.01 (Collier). Upon completion of all payments under the plan, the bankruptcy court “grant[s] the debtor a discharge of all debts provided for by the plan or disallowed.” 11 U.S.C. § 1328(a). Thus, at the end of the process the debtor receives the “fresh start” contemplated by the Bankruptcy Code.

B.

Congress enacted the FDCPA to eliminate abusive debt collection practices and to ensure that debt collectors who refrain from such practices are not competitively disadvantaged. 15 U.S.C. § 1692(a)

, (e). The FDCPA regulates the conduct of “debt collectors,” defined to include “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” Id.§ 1692a(6). Among other things, the FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” and from using “unfair or unconscionable means to collect or attempt to collect any debt.” Id.§§ 1692e–1692f. The statute provides a non-exhaustive list of conduct that is deceptive or unfair (e.g., falsely implying that the debt collector is affiliated with the United States, id.§ 1692e(1)). Debt collectors who violate the FDCPA are liable for actual damages, statutory damages of up to $1,000, and attorney's fees and costs. See id.§ 1692k(a).

C.

Federal courts have consistently held that a debt collector violates the FDCPA by filing a lawsuit or threatening to file a lawsuit to collect a time-barred debt. See Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1259–60 (11th Cir. 2014)

(collecting cases), cert. denied, ––– U.S. ––––, 135 S.Ct. 1844, 191 L.Ed.2d 724 (2015). Appellants contend that filing a proof of claim on a time-barred debt in a bankruptcy proceeding similarly violates the FDCPA. Atlas counters that filing a proof of claim is not debt collection activity and is therefore not subject to the FDCPA. Alas further argues that, even if the FDCPA applies, filing a proof of claim on a time-barred debt does not violate its provisions. These arguments are addressed in turn.

III.

Atlas does not dispute that it is a debt collector but argues that filing a proof of claim does not constitute debt collection activity regulated by the FDCPA. See 15 U.S.C. § 1692e

(prohibiting deceptive or misleading representations “in connection with the collection of any debt”); id.§ 1692f (prohibiting unfair or unconscionable means “to collect or attempt to collect any debt”). Instead, Atlas contends that a proof of claim is merely a “request to participate in the bankruptcy process.” Appellee's Br. 20.

Determining whether a communication constitutes an attempt to collect a debt is a “commonsense inquiry” that evaluates the “nature of the parties' relationship,” the “[objective] purpose and context of the communication [ ],” and whether the communication includes a demand for payment. Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 385 (7th Cir. 2010)

; see also Olson v. Midland Funding, LLC, 578 Fed.Appx. 248, 251 (4th Cir. 2014) (citing Gburek factors approvingly). Here, the “only relationship between [the parties] [is] that of a debtor and debt collector.” Olson, 578 Fed.Appx. at 251. Moreover, the “animating purpose” in filing a proof of claim is to obtain payment by sharing in the distribution of the debtor's bankruptcy estate. See Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011) ; 4–501 Collier¶ 501.01. This fits squarely within the Supreme Court's understanding of debt collection for purposes of the FDCPA. See Heintz v. Jenkins, 514 U.S. 291, 294, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995) (explaining that in...