Feggins v. LVNV Funding Llcand Resurgent Capital Servicing L.P. (In re Feggins)

• Decision Date: 20 November 2015
• Docket Number: Adv. Pro. No. 14–1049–WRS,Case No. 13–11319–WRS
• Citation: 540 B.R. 895
• Parties: In re William Henry Feggins, Debtor William Henry Feggins, Plaintiff v. LVNV Funding LLCand Resurgent Capital Servicing L.P., Defendants
• Court: U.S. Bankruptcy Court — Middle District of Alabama

540 B.R. 895

In re William Henry Feggins, Debtor

William Henry Feggins, Plaintiff

v.LVNV Funding LLCand Resurgent Capital Servicing L.P., Defendants

Case No. 13–11319–WRS

Adv. Pro. No. 14–1049–WRS

United States Bankruptcy Court, M.D. Alabama.

Signed November 20, 2015

Nicholas H. Wooten, Attorney for Plaintiff

Neal D. Moore III, Attorney for Defendants

MEMORANDUM DECISION

William R. Sawyer, United States Bankruptcy Judge

These consolidated Adversary Proceedings came before the Court for trial on August 10, 2015. The Plaintiffs were present by counsel Nicholas H. Wooten and the Defendants were present by counsel Neal D. Moore, III, and Tina Lam. For the reasons set forth below, judgment is entered in favor of the Plaintiffs and against the Defendants.

I. FACTS

This litigation is a consolidation of five adversary proceedings. The Plaintiffs are William Henry Feggins (AP 14–01049), Ray C. Balcom (AP 14–01060), Donnie L. Chandler (AP 14–01062), Cynthia Gamble Grant (AP 14–01063), and Robert W. Henson (AP 14–01064).¹Each of the Plaintiffs is a debtor in Chapter 13 bankruptcy. The Plaintiffs assert violations of the Fair Debt Collection Practices Act (“FDCPA”) against Defendants LVNV Funding, LLC, and Resurgent Capital Services, L.P. (collectively “the Defendants”), alleging that the Defendants filed proofs of claim on time-barred debts in their respective bankruptcies.²

At trial the Court heard testimony from eight witnesses: Chapter 13 Trustee Curtis C. Reding; Plaintiffs Feggins, Henson, Chandler, and Grant; attorneys Christopher Stanfield and Rafael Gil, III; and Lisa Landreth, an employee of Defendant Resurgent Capital Services, L.P.³There is no dispute that the proofs of claim filed by the Defendants were all for time-barred debts. Moreover, it is apparent from a review of the claims at issue that the time-barred status of the underlying debts could be determined from the face of the claims.

At trial the Defendants filed two virtually identical motions for judgment on partial findings, one after the Plaintiffs' case-in-chief and the other after their own case-in-chief. (Docs.62, 65); seeFED. R. CIV. P. 7052(c) (as incorporated by FED. R. BANKR. P. 7052). The Court will address these motions simultaneously, and will occasionally find it necessary to refer to two of its prior rulings in this litigation.⁴

II. ANALYSIS

A. Jurisdiction and Adjudicatory Power

This Court has “related to” jurisdiction pursuant to 28 U.S.C. §§ 157(a)and 1334(b), and the District Court's General Order of Reference dated April 25, 1985. Feggins's objection to claim is a core proceeding on which this Court may enter a final order. 28 U.S.C. § 157(b)(2)(B). The Plaintiffs' FDCPA claims are non-core. SeeAvalos v. LVNV Funding, LLC (In re Avalos),531 B.R. 748, 750 (Bankr.N.D.Ill.2015).

A bankruptcy court may enter a final order in a non-core proceeding with consent of the parties. Wellness Int'l Network, Ltd. v. Sharif,––– U.S. ––––, 135 S.Ct. 1932, 1947–48, 191 L.Ed.2d 911 (2015); 28 U.S.C. § 157(c)(2). This consent need not be express, but must “be knowing and voluntary.” Wellness Int'l Network,135 S.Ct. at 1948. “[T]he key inquiry is whether ‘the litigant or counsel was made aware of the need for consent and the right to refuse it, and still voluntarily appeared to try the case’ before the non-Article III adjudicator.” Id.(quoting Roell v. Withrow,538 U.S. 580, 590, 123 S.Ct. 1696, 155 L.Ed.2d 775 (2003)).

The Defendants have not expressly consented to adjudication, but their consent may be implied from the course of their conduct in this litigation. The Defendants have repeatedly moved for entry of judgment in their favor on numerous grounds. (Docs.5, 16, 21, 32, 39, 51, 62, 63, 65). Yet nowhere in this mass of filings have the Defendants suggested they seek anything other than a final judgment in their favor, or that they do not consent to adjudication in this Court. Based upon these filings, the Court concludes that the Defendants have consented to entry of a final judgment by a bankruptcy court.

B. The Court Will Not Dismiss Balcom's Case Despite His Failure to Appear at Trial

The Defendants moved to dismiss the adversary proceeding of plaintiff Ray Balcom for his failure to appear at trial. (Doc. 63). The Defendants served a subpoena on Balcom, but he did not appear for trial notwithstanding the fact that neither the Court nor the Defendants excused his appearance. While Balcom's lawyer advised the Court at the pre-trial conference that he might have difficulty obtaining Balcom's presence at the trial, a formal motion to quash the subpoena or to excuse his appearance was not filed. The Court would have preferred that Balcom file a written motion supported by an affidavit setting out the reasons for his nonappearance. While the path chosen by Balcom here is not ideal, the Court will not dismiss his claim for the following reasons.

First, Balcom's testimony was unnecessary to prove his own case-in-chief because his counsel submitted documents raising a prima facie violation of the FDCPA. InfraPart II(C). Second, the other Plaintiffs testified at trial, and the Court infers that Balcom would have testified substantially as they did. Third, and most importantly, it is clear from the Defendants' examination of the other Plaintiffs that the Defendants wanted Balcom's testimony to support their contention that he was not misled or harmed in any way and that there was no violation of the FDCPA. However, FDCPA claims are decided under an objective standard and Balcom's subjective testimony would have been unnecessary and irrelevant. InfraPart II(C). The Defendants articulated no persuasive reason for why Balcom's testimony would have been probative of any issue at trial. Therefore, the Court will not dismiss Balcom's case for his noncompliance with the Defendants' subpoena.

C. The Plaintiffs Established Prima Facie Violations of the FDCPA

The FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. It also prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. With exceptions inapplicable here, the FDCPA defines a “debt collector” as “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.” 15 U.S.C. § 1692a(6). This definition also “includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” 15 U.S.C. § 1692a(6).

A debt collector who files a proof of claim in bankruptcy on a facially time-barred debt deceptively, unfairly, and unconscionably attempts to collect a debt in violation of §§ 1692e and 1692f of the FDCPA. Crawford v. LVNV Funding, LLC (In re Crawford),758 F.3d 1254, 1261 (11th Cir.2014), cert. denied sub nom.LVNV Funding, LLC v. Crawford,––– U.S. ––––, 135 S.Ct. 1844, 191 L.Ed.2d 724 (2015). Such activity takes advantage of bankruptcy's automatic claims allowance process and forces debtors, trustees, and courts to spend time and resources finding, objecting to, and disallowing their claims; otherwise the stale claims will be paid at the expense of either the debtor or other creditors.⁵Id.at 1259, 1261; see alsoFeggins II,535 B.R. at 868–69. When evaluating a claim under §§ 1692eor 1692f, the Court must use the “least-sophisticated consumer standard.” Crawford,758 F.3d at 1258–59. “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.”⁶Id.at 1258(quoting Jeter v. Credit Bureau, Inc.,760 F.2d 1168, 1173 (11th Cir.1985)). The FDCPA is a “strict liability” statute that is subject to the affirmative defense of a debt collector's “bona fide error.” Id.at 1259 n. 4(citing 15 U.S.C. § 1692k(c)).

The Plaintiffs entered into evidence one or more claims that were filed by the Defendants in each of their cases. Each of these claims was for debts purportedly owed to entities other than the Defendants; thus, the Court finds that the Defendants were debt collectors within the meaning of the FDCPA. See15 U.S.C. § 1692a(6). In addition, each of these claims was clearly filed more than six years after the underlying debt was charged off, rendering them “unenforceable” under Alabama law and subject to disallowance under the Bankruptcy Code.SeeALA. CODE § 6–2–34(5)and (9); 11 U.S.C. § 502(b)(1); see alsoFeggins II,535 B.R. at 867(“It is well established that a claim that is barred by statute of limitations under applicable law will be disallowed....”).

The Defendants suggested at trial that Balcom, Henson, Chandler, and Grant would not have been affected by making payments on the Defendants' stale claims because they had proposed what are known as “POT” (payment-over-time) plans. (Doc. 74, pp. 34–37). In a “POT” plan, a Chapter 13 debtor proposes to pay unsecured creditors a fixed amount of money regardless of the number of creditors or the amount of allowed claims exceeding that “POT”; thus, the Defendants posit that payment of their stale claims would not have affected the Plaintiffs' overall payment amount.

However, the purpose of the FDCPA is not merely to protect consumers, but also to “eliminate abusive debt collection practices” and to ensure “that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged[.]” 15 U.S.C. § 1692(e). In other words, the FDCPA protects other creditors as well as consumers, and payment of stale claims via “POT” plans reduces the amount paid to creditors holding valid claims....