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Slaughter v. LVNV Funding, LLC

United States District Court, N.D. Alabama, Southern Division

February 12, 2015

LVNV FUNDING, LLC, et al., Defendants.


KARON OWEN BOWDRE, Chief District Judge.

Before the court is a motion to withdraw the reference (doc. 1) filed by defendant LVNV Funding, LLC, on October 24, 2014. For the reasons discussed below, the court will deny the motion.


Plaintiff Alfred Slaughter filed a petition for relief under Chapter 13 of the Bankruptcy Code in the Bankruptcy Court for the Northern District of Alabama. (Doc. 1-1 at 1). LVNV filed four proofs of claim in the case, asserting a total debt of $1902.66 owed by Slaughter. (Doc. 1-6 at 1-2). Slaughter responded by initiating an adversary proceeding against LVNV[1] in the bankruptcy court on September 16, 2014, alleging that LVNV violated the Fair Debt Collection Practices Act (FDCPA) by filing proofs of claim concerning debts that are time-barred. (Doc. 1-4). LVNV now moves this court to withdraw the reference of the adversary proceeding and to relieve the bankruptcy court of jurisdiction pursuant to 28 U.S.C. § 157(d).


District courts possess "original and exclusive jurisdiction of all cases under title 11, " the Bankruptcy Code, 28 U.S.C. § 1334(a) (2012). District courts are permitted, however, to refer all cases to the bankruptcy court to the extent that they arise under Title 11, arise in Title 11, or relate to a case under Title 11. 28 U.S.C. § 157(a) (2012). This court has entered such a general order of reference. See Bank United v. Manley, 273 B.R. 229, 234 n.10 (N.D. Ala. 2001).

The reference that applies to this Chapter 13 case, however, is not absolute, because 28 U.S.C. § 157(d) provides for its withdrawal under limited circumstances, either as a mandatory matter or as a permissive matter. The district court is required to withdraw a proceeding "if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce." Id.

Some courts, citing the statute's plain language, have held that withdrawal is required if any consideration of a non-Title 11 federal law is necessary to a resolution of the dispute. See, e.g., In re Kiefer, 276 B.R. 196, 199 (E.D. Mich. 2002). Most courts, however, including all district courts within the Eleventh Circuit that have considered the issue, have found that "withdrawal should be granted only if the current proceeding could not be resolved without substantial and material consideration of the non-Code federal law.'" Birgans v. Magnolia Auto Sales, No. 12-3830-S-NE, 2012 WL 6000339, *2 (N.D. Ala. Nov. 30, 2012) (quoting Matter of Vicars Ins. Agency, Inc., 96 F.3d 949, 952 (7th Cir. 1996)); Abrahams v. Phil-Con Services, LLC, No. 10-0326-WS-N, 2010 WL 4875581, *2 (S.D. Ala. Nov. 23, 2010)[2]. Under this approach, for withdrawal to be warranted, "the issues in question [must] require more than the mere application of well-settled or "hornbook" non-bankruptcy law; significant interpretation of the non-Code statute must be required.'" Abrahms, 2010 WL 4875581 at *2 (quoting Vicars, 96 F.3d at 953).

This court, in line with the other courts in this circuit, will follow the latter approach. The FDCPA is undisputedly a non-Title 11 federal law impacting interstate commerce, particularly when the use of an "instrumentality of interstate commerce" is a definitional requirement for regulation under the statute, 15 U.S.C. § 1692a(6) (2012). Whether withdrawal is required, then, turns on whether substantial and material consideration of the FDCPA will be necessary to the resolution of the dispute.

Slaughter points to the Eleventh Circuit's recent holding in Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014); he argues from it that the court's inquiry will not require substantial and material consideration of the FDCPA because the Eleventh Circuit has decided the issue. In Crawford, the Eleventh Circuit held that the filing of a proof of claim to collect a stale debt in a Chapter 13 bankruptcy violates the FDCPA. Id. at 1256. LVNV was there sued over the exact same conduct as in this case - filing a proof of claim for a time-barred debt. In Crawford, LVNV moved to dismiss the adversary proceeding, asserting that the FDCPA does not forbid its alleged conduct. The bankruptcy and district courts agreed with LVNV, but the Eleventh Circuit reversed and remanded. The Court unequivocally held that "[t]he FDCPA's broad language, our precedent, and the record compel the conclusion that defendants' conduct violated a number of the Act's protective provisions." Id. at 1257.

LVNV presents two rebuttal arguments attempting to prove that, even in light of Crawford, substantial and material consideration of the FDCPA is required to resolve Slaughter's claims. First, LVNV asserts that "the issue before the Eleventh Circuit [in Crawford ] was the sufficiency of the pleadings under a Rule 12(b)(6) motion, and not the ultimate merits of the case." (Doc. 6 at 4-7). According to LVNV, because the appellate opinion in Crawford was not a final determination on the merits, and the Eleventh Circuit purposefully left unresolved initial issues for the district court, Crawford cannot be relied upon for a withdrawal analysis under the FDCPA.

LVNV underestimates the guidance provided by Crawford. The Eleventh Circuit expressly held in Crawford that the filing of a proof of claim to collect a stale debt in a Chapter 13 bankruptcy violates the FDCPA. Id. at 1256. The procedural posture in that case does not negate it as binding authority. A Rule 12(b)(6) motion presents a proper vehicle for the resolution of a question of law. See Neitzke v. Williams, 490 U.S. 319, 328 (1989) ("When a complaint raises an arguable question of law which the district court ultimately finds is correctly resolved against the plaintiff, dismissal on Rule 12(b)(6) grounds is appropriate...."). While factual issues remained in Crawford and warranted a remand of the action for further proceedings (instead of remand for an entry of judgment), this posture in no way detracts from the precedential value of the Eleventh Circuit's resolution of the underlying legal issues and does not relieve this court from being bound by that analysis. Therefore, this court finds that LVNV's first argument, that Crawford cannot sufficiently guide this court's analysis to the same conclusion, is unavailing.

LVNV's second argument likewise fails; LVNV argues that "the Crawford opinion produced disparities between the Bankruptcy Code and the FDCPA[, ] and such disparities are complicated interpretive issues[] of first impression, '" which require "substantial and material" consideration of the FDCPA (doc. 6 at 6-7). Granted, LVNV is correct that the Eleventh Circuit delicately side-stepped a rather important issue in Crawford: "Whether the [Bankruptcy] Code preempts' the FDCPA when creditors misbehave in bankruptcy." Crawford, 758 F.3d at 1262 n.7. However, that issue has not been raised here, except to the extent LVNV argues that whether the Bankruptcy Code "preempts" the FDCPA is an " example of a complicated interpretive issue [] of first impression.'" (Doc. 6 at 6-7) (emphasis added). In fact, LVNV explicitly states the matter is not before the court: "By presenting Patrick, [3] Plaintiff is in essence asking this court to rule on a matter not presently before it." (Doc. 6 at 8).

The court is aware that at least one circuit has held that the Bankruptcy Code broadly precludes remedies under the FDCPA for actions taken in bankruptcy. S ee Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002). And another court has held that the Bankruptcy Code precludes remedies under the FDCPA for wrongfully filed proofs of claim. See Simmons v. Roundup Funding, LLC., 622 F.3d 93, 96 (2nd Cir. 2010). However, the court finds that the parties have not raised the preclusion issue at this juncture. Moreover, any analysis of the interplay between the Bankruptcy Code and the FDCPA will undoubtedly require a close look at the Bankruptcy Code, which makes the ...

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