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Thompson v. LVNV Funding, LLC

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

June 18, 2015


For Amanda C. Thompson, Plaintiff: B Grant McNutt, LEAD ATTORNEY, BOND BOTES SYKSTUS TANNER & MCNUTT, Florence, AL.

For LVNV Funding, LLC, Defendant: Neal D Moore, III, LEAD ATTORNEY, FERGUSON FROST & DODSON LLP, Birmingham, AL.


VIRGINIA EMERSON HOPKINS, United States District Judge.

Before the court is a motion to withdraw the reference filed by defendant LVNV Funding, LLC (" LVNV" ), on October 24, 2014. (Doc. 1). For the reasons stated herein, the motion will be GRANTED.


On September 6, 2013, the plaintiff Amanda C. Thompson filed a petition for relief under Chapter 13 of the Bankruptcy Code in the Bankruptcy Court for the Northern District of Alabama. (Doc. 1-2 at 10). On December 12, 2013, Resurgent Capital Services (" Resurgent" ), acting as agent for LVNV, filed a proof of claim in the case, asserting a total debt of $186.58 owed by Thompson. (Doc. 1-2 at 14-19). On September 15, 2014, Thompson responded by initiating an adversary proceeding against LVNV, and Susan Gaines, the Claims Processor for Resurgent, in the bankruptcy court. In that proceeding, she alleges that LVNV violated the Fair Debt Collection Practices Act by filing a proof of claim concerning a debt that is unenforceable because the applicable statute of limitations has barred it. (Doc. 1-2 at 22). 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). (Doc. 1 at 1).


District courts possess " original and exclusive jurisdiction of all cases under title 11." 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 are 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.'" Abrahams v. Phill-Con Services, LLC, No. 10-0326-WS-N, 2010 WL 4875581, *2 (S.D. Ala. Nov. 23, 2010) (quoting Matter of Vicars Ins. Agency, Inc., 96 F.3d 949, 952 (7th Cir. 1996)). 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.'" Id. (quoting Vicars, 96 F.3d at 953).

In keeping with the other courts of this circuit, this court will follow the latter approach. Clearly the FDCPA is a non-Title 11 federal law impacting interstate commerce, since 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.

Thompson points to the Eleventh Circuit's recent holding in Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014), arguing from it that the court's inquiry will not require substantial and material consideration of the FDCPA because the issue has been decided. (Doc. 3 at 4). 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 about the exact same conduct as is alleged in this case, namely, filing a proof of claim for a time-barred debt. In Crawford, LVNV moved to dismiss the action, asserting that the FDCPA did not prohibit its alleged conduct. The bankruptcy and district courts agreed with LVNV, but the Eleventh Circuit reversed and remanded, unequivocally holding 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 Thompson'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. 4 at 3). LVNV contends that 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. However, a Rule 12(b)(6) motion is a proper vehicle for the resolution of a question of law. See Neitzke v. Williams, 490 U.S. 319, 328, 109 S.Ct. 1827, 104 L.Ed.2d 338 (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 . . . ." ). 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, and the procedural posture in that case does not negate it as binding authority.

The court is persuaded by LVNV's second argument, however. In Crawford, the Eleventh Circuit did not resolve the following issue: " Whether the [Bankruptcy] Code 'preempts' the FDCPA when creditors misbehave in bankruptcy." Crawford, 758 F.3d at 1262 n.7. As the Eleventh Circuit noted, some circuits have held that the Bankruptcy Code precludes remedies under the FDCPA for actions taken in bankruptcy. See Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir. 2010); Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002). Other circuits have allowed debtors to seek remedies under the FDCPA. See Simon v. FIA Card Servs., N.A., 732 F.3d 259, 271-74 (3d Cir. 2013); Randolph v. IMBS, Inc., 368 F.3d 726, 730-33 (7th Cir. 2004). District courts within this circuit are similarly split. Compare In re McMillen, 440 B.R. 907 (N.D.Ga. 2010); In re Pariseau, 395 B.R. 492 (M.D. Fla. 2008) (preclusion); with Rios v. Bakalar & Assocs., 795 F.Supp.2d 1368 (S.D. Fla. 2011); Bacelli v. MFP, Inc., 729 F.Supp.2d 1328 (M.D. Fla. 2010) (no preclusion). The preclusion issue will require the court to weigh in on a circuit split that the Eleventh Circuit has thus far " artfully dodged," Crawford, 758 ...

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