Garfield v. Ocwen Loan Servicing, LLC
811 F.3d 86
2d Cir.2016Background
- Donna Garfield filed Chapter 13, cured arrears through the plan, and received a bankruptcy discharge of her personal liability on the mortgage debt; she agreed to make post‑discharge monthly payments to avoid foreclosure.
- After discharge Garfield defaulted on most post‑discharge monthly payments; Ocwen acquired servicing and demanded payment that included both discharged pre‑bankruptcy arrears and post‑discharge payments.
- Ocwen sent delinquency notices and reported to credit bureaus that Garfield still owed amounts that were included in her bankruptcy.
- Garfield sued Ocwen in district court under multiple FDCPA provisions (e.g., §§ 1692e, 1692e(11), 1692g(a)(3), 1692f) alleging attempts to collect discharged debt and procedural collection violations for post‑discharge obligations.
- The district court dismissed, holding the Bankruptcy Code provides the exclusive remedy for violations of the discharge injunction (contempt in bankruptcy court) and thus precludes FDCPA claims.
- The Second Circuit reversed, holding FDCPA claims based on post‑discharge conduct may proceed in district court because there is no irreconcilable conflict between the Bankruptcy Code’s discharge remedies and the FDCPA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FDCPA claims based on attempts to collect a discharged debt are precluded by the Bankruptcy Code (implied repeal) | FDCPA claims survive post‑discharge and may be brought in district court | Bankruptcy Code provides exclusive remedy for discharge violations; plaintiffs must seek relief in bankruptcy (contempt) | FDCPA not broadly impliedly repealed for post‑discharge claims; plaintiff may proceed in district court |
| Whether specific FDCPA provisions (e.g., §1692e(11)) conflict with the discharge injunction | §1692e(11) and other FDCPA provisions can coexist with discharge injunction; no conflict when collector simply refrains from collecting discharged debt | Requiring compliance with FDCPA implies permission to collect discharged debt and therefore conflicts with §524 | No irreconcilable conflict; specific FDCPA provisions at issue do not conflict with post‑discharge injunction in this case |
| Whether FDCPA claims for collection of conceded post‑discharge payments (procedural violations) are barred | FDCPA protections (mini‑Miranda, notice to dispute) apply to collection of legitimately owed post‑discharge payments | Such FDCPA rules might interfere with bankruptcy remedies or lead to piecemeal litigation | FDCPA procedural claims related to post‑discharge payments do not conflict with Bankruptcy Code and may proceed |
| Whether district court must dismiss FDCPA claims and require plaintiff to litigate in bankruptcy court to avoid piecemeal litigation | Plaintiff may bring FDCPA claims in district court; only rare stays to seek bankruptcy clarification would be appropriate | Proceeding in district court risks piecemeal adjudication and interferes with bankruptcy process | Court rejected mandatory routing to bankruptcy; piecemeal concern insufficient to require exclusive bankruptcy adjudication |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- National Ass'n of Home Builders v. Defenders of Wildlife, 551 U.S. 644 (repeal by implication standard)
- Morton v. Mancari, 417 U.S. 535 (repeal by implication disfavored)
- Simmons v. Roundup Funding, LLC, 622 F.3d 93 (2d Cir.) (FDCPA claims precluded during pending bankruptcy)
- Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir.) (FDCPA not impliedly repealed; statutes can overlap)
- Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir.) (Bankruptcy Code precludes FDCPA claims during bankruptcy)
- Simon v. FIA Card Servs., N.A., 732 F.3d 259 (3d Cir.) (no broad preclusion of FDCPA during bankruptcy)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (limited abstention/avoidance of piecemeal litigation)
- Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439 (1st Cir.) (discharge injunction enforceable by contempt)