Johnson v. Midland Funding, LLC
528 B.R. 462
S.D. Ala.2015Background
- Plaintiff filed Chapter 13 bankruptcy; defendant (a debt buyer/creditor) filed a proof of claim that on its face disclosed the claim was time‑barred. Plaintiff sued under the FDCPA alleging the proof of claim was deceptive (§1692e) and unfair (§1692f).
- The Eleventh Circuit in Crawford v. LVNV held filing and trying to enforce a known time‑barred claim in Chapter 13 can violate the FDCPA, but declined to address whether the Bankruptcy Code precludes such FDCPA claims.
- Defendant moved to dismiss, arguing (1) the Bankruptcy Code precludes FDCPA claims that conflict with the Code, and (2) plaintiff fails to state an FDCPA claim (the latter largely amounted to disputing Crawford).
- The Code (11 U.S.C. §§101(5), 501, 502) defines a "claim" broadly and entitles creditors to file proofs of claim; under Alabama law a statute of limitations generally bars the remedy but not the underlying right to payment.
- The court found an actual conflict: the Bankruptcy Code permits filing a proof of claim on a debt that remains a claim under state law despite being time‑barred, while the FDCPA (as construed by Crawford) prohibits debt collectors from filing such proofs of claim when they know the debt is stale.
- Because the Bankruptcy Code postdates the FDCPA and the provisions are irreconcilable as applied to creditors who are debt collectors, the court held the Code governs and dismissed the FDCPA action with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bankruptcy Code precludes an FDCPA claim based on filing a proof of claim on a time‑barred debt | Johnson: debt collectors can comply with both statutes by refraining from filing stale proofs of claim; no irreconcilable conflict | Defendant: Code expressly permits filing such proofs of claim; conflict is irreconcilable | Held: Irreconcilable conflict exists; Code controls and precludes the FDCPA claim |
| Whether a "right to payment" under §101(5) requires a claim to be immediately civilly enforceable | Johnson: §101(5) requires a bona fide, legally enforceable right (no limitations defense) | Defendant: §101(5) is broad; state law defines the existence of a claim; limitations is an affirmative defense | Held: §101(5) is broad; state law governs; limitations generally extinguish remedy, not the underlying right |
| Whether courts should apply a "can comply with both" test (as in Randolph) | Johnson: Randolph shows overlapping regulation can be enforced together if compliance is possible | Defendant: Randolph is inapposite because it compares obligations, not a right v. an obligation | Held: The "can comply" test is inapt where one statute grants a right (to file) and the other seeks to eliminate that right; here statutes are mutually exclusive |
| Whether POM Wonderful’s harmonization approach bars finding irreconcilable conflict | Johnson: Different statutory purposes mean the statutes can coexist | Defendant: Different purposes do not resolve a direct statutory contradiction | Held: Different purposes do not cure direct, positive repugnancy; no legislative history shows Congress intended FDCPA to override Code here |
Key Cases Cited
- Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014) (held filing and attempting to enforce a known time‑barred claim can violate the FDCPA)
- Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co., 549 U.S. 443 (2007) (state law defines the substance of bankruptcy claims)
- Pennsylvania Dep’t of Public Welfare v. Davenport, 495 U.S. 552 (1990) (a "right to payment" is an enforceable obligation; Bankruptcy Code definitions are broad)
- Morton v. Mancari, 417 U.S. 535 (1974) (when statutes can coexist courts must give effect to each absent clear congressional intent otherwise)
- EC Term of Years Trust v. United States, 550 U.S. 429 (2007) (later statute repeals earlier statute to the extent of irreconcilable conflict)
- POM Wonderful LLC v. Coca‑Cola Co., 573 U.S. 102 (2014) (statutes with different regulatory aims may be harmonized, but harmonization does not avoid irreconcilable conflict when terms are directly contradictory)