OPINION AND ORDER GRANTING • MOTION TO DISMISS
Thе plaintiff-debtor’s complaint in this adversary proceeding
Background
The facts are not in dispute. On May 27, 2014, Midland filed Claim 9 in the debtor’s chapter 13 bankruptcy case. The claim was signed by Lynch in her capacity as Midland’s agent. The claim disclosed the date of the last transaction and payment on the underlying account was June 26, 2006. On its face the debt covered by the claim was time-barred from suit pursuant to the applicable Alabama statute of limitations.
Two weeks after the Eleventh Circuit’s Crawford decision, the plaintiff-debtor objected to Midland’s claim on grounds that the statute of' limitations had expired. (BK Doc. 52.) In her objection, the debtor did not allege any facts that, if proven, would demonstrate Midland’s claim was not in compliance with the Bankruptcy Code, Rules, or Official Form BIO; the sole basis for the objection was that the debt underlying the claim was time-barred under the statute of limitations.
Midland then withdrew its proof of claim, and the court entered an order mooting the objection. (BK Doc. 63.) Shortly thereafter, the plaintiff filed her complaint seeking damages under the FDCPA based on Midland’s having filed a proof of claim on a time-barred debt. The defendants do not dispute that Midland is a debt collector and, therefore, subject to the FDCPA. Additionally, the amended complaint (AP Doc. 4) prayed for “such sanctions as the Court may deem just, equitable, and proper to enforce provisions of the Bankruptcy Code.” The defendants moved to dismiss the complaint (AP Doc. 10), arguing — unlike the creditor in Crawford — that the claims-allowance procedure under the Code and Rules precluded the imposition of FDCPA penalties when the attempt to collect a stale debt was simply the filing of a proof of claim in a chapter 13 debtor’s case. The plaintiff responded that her FDCPA claims were not precluded by the Code and Rules, but as a fallback asked thаt if her FDCPA claims were dismissed, that the dismissal be without prejudice to her claim for sanctions against the defendants, presumably under Rule 9011.
While the defendants’ motion to dismiss was under advisement, the District Court for the Southern District of Alabama issued its opinion in Johnson v. Midland Funding, LLC,
The Court also declines to weigh in on a topic the district court artfully dodged: Whether the Code “preempts” the FDCPA when creditors misbehave in bankruptcy. Crawford, 2013 WL 1947616 , at *2 n. 1. Some circuits hold that the Bankruptcy Code displaces the FDCPA in the bankruptcy context. 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 hold the opposite. See Simon v. FIA Card Ser., N.A.,732 F.3d 259 , 271-74 (3d Cir.2013); Randolph v. IMBS, Inc.,368 F.3d 726 , 730-33 (7th Cir.2004). In any event, we need not address this issue because LVNV argues only that its conduct does not fall under the FDCPA or, alternatively, did not offend the FDCPA’s prohibitions. LVNV does not contend that the Bankruptcy Code displaces or “preempts” §§ 1692e and 1692f of the FDCPA.
The district court in Johnson found that the Code allows debt collectors to file claims for stale debts in a bankruptcy ease, subject to the disallowance and objection procedures prescribed in the Code, and dismissed an FDCPA complaint as being precluded by the Code’s specific claim-related procedures. After the publication of the Johnson decision, the plaintiff in the instant case filed a motion to stay her adversary proceeding (AP Doc. 41), pending the outcome of the appeal of Johnson to the Eleventh Circuit. In her motion to 'stay, the plaintiff, for the first time, took the position that her amended complaint was sufficient to state a claim for sanctions under Rule 9011 based on the amended complaint’s prayer-language seeking sanctions as the court found appropriate. The defendants objected to the plaintiffs request for a stay, and the court sustained the objection (AP Doc. 44).
FDCPA Precluded By Bankruptcy Claims Allowance Procedure
But-for the question left unanswered by the Eleventh Circuit in footnote 7 of Crawford, the law in this circuit would unequivocally be that a debt collector’s act of filing a proof of claim in a chapter 13 case for a timе-barred debt bestows a cause of action—arguably for strict liability—upon the debtor for damages under the FDCPA. Crawford,
Thus, the narrow issue before this court is whether the respective conse-
The notion that the FDCPA prohibits, and therefore penalizes, a debt collector who attempts to collect a time-barred debt by filing a proof of claim in a bankruptcy case loses traction when considered in light of: (i) the claims-filing, objection, allowance, and disallowance procedures prescribed in Code §§ 501 and 502, and Rules 3001-3008; (ii) the Code’s broad definition of “claim” in § 101(5)(A); and (iii) the Alabama cases holding that a right to payment remains for a time-barred debt even though it may not be judicially enforceable.
Following the Johnson court’s lead, this court concludes that the FDCPA must yield to the Code and Rules under these facts. Id. at 473. In addition, another bankruptcy judge of this court ruled, in a pre-Crawford case, that:
An FDCPA claim ... cannot be based on the filing of a proof of claim, regardless of the ultimate validity of the underlying claim. The Debtor’s remedy in dealing with an objectionable' сlaim is already set forth in the claims allowance process and should be dealt with accordingly, as has already occurred in this case.
In re Simpson, No. 08-00137,
Sanctions
The plaintiff contends that even if this court rules that filing a claim for a stalе debt does not support a claim for damages under the FDCPA, such conduct is nonetheless sanctionable, presumably under Rule 9011, or on some other unspecified basis. • At the status conference on the motion to dismiss, plaintiffs counsel argued that the language in her prayer for relief at the conclusion of the amended complaint asking for “such sanctions as the Court may deem just, equitable, and proper to enforce provisions of the Bankruptcy Code” kept open the door for sanctions even if the court found that preclusion applied to the FDCPA cause of action specifically alleged in the complaint.
The court disagrees that the sanetions-demand language at the conclusion of the amended complaint satisfied the minimum pleading standard required to state a claim for sanctions under the Code, the Rules, or otherwise, based upon the Supreme Court’s established pleading standard set forth in Bell Atlantic Corp. v. Twombly,
While Rule 9011
Even if the Curt were to hold that it is wrongful to file claims, which, albeit valid, are stаle, it has been repeatedly held in [that] District that, absent a court initiated inquiry pursuant to Rule 9011(c)(2), Rule 9011 sanctions can be sought by a party only after the opponent has been afforded 21 days advance notice and an opportunity to withdraw or correct the allegedly offending allegation. See Rule 9011(c)(1)(A). Failure to comply with' this safe harbor provision is fatal to the sanctions request.
Claudio v. LVNV Funding, LLC (In re Claudio),
Further, the amended complaint does not state a claim for sanctions even if the language used did suffice as á motion for sanctions, and even if the appropriate “safe harbor” notice had been given. The proof of claim was withdrawn soon after the claim objection was filed, and before the instant adversary proceeding was filed. Had the filing of the claim on a stale debt been sufficiently offensive conduct to support a Rule 9011 violation, the withdrawal of the claim before the debtor took any action in opposition to the claim remedied the problem. Additionally, the filing of a claim on a debt that is stale under state law — where the proof of claim is otherwise in all material respects compliant — is not egregious and offensive conduct that Rule 9011 was intended to address. See Keeler v. PRA Receivables Management, LLC (In re Keeler),
If the reasoning of Sekema and Feggins are correct, why would not any claim that is later disallowed under § 502(b) for any reason be “frivolous and groundless” so that it is not one that “may” have been filed under § 501? It seems circular to say that because the claim was disallowed, it was never allowed, and because it was never allowed, it was not a claim that the creditor “may file a proof оf claim” for under § 501, although it could never have been disallowed had the claim not been filed. If the “frivolous and groundless” categorization is reserved for claims that are subject to a statute of limitations defense, does this court then have a duty under Espinosa
By way of an example, assume a creditor files a proof of claim that is not fraudulent, although the creditor knew or should have known its claim might be disallowed on statute of limitations grounds if that objection is raised by the debtor or the trustee. Under the plaintiffs logic, that creditor has exposed itself to the imposition of sanctions. If sanctions were appropriate in such an instance, they likewise should be imposed if thе claim were subject to disallowance for other affirmative defenses that could be deemed “obvious,” such as, for example, accord and satisfaction, payment, res judicata, estoppel, release, lack of consideration, setoff, or re-coupment. Any creditor filing a claim, not just those identified as debt collectors under the FDCPA, whose filed-claims are later disallowed on virtually any affirmative defense grounds would be exposed to sanctions if the affirmative defense were deemed “obvious.” Such logic would chill the filing of any claim that was even arguably subject to an affirmative defense, and stands in opposition to the Code’s invitation for “[a] creditor ... [to] file a proof of claim .... ” which will be “deemed allowed, unless a party in interest ... objects.” Code §§ 501(a), 502(a). This court is not saying that filing a bogus or other illicit claim could never be grounds for sanctions under Rule 9011 or otherwise, but sanctions are not warranted under the simple facts in this case and others like it.
So done and ordered.
. The court has jurisdiction under 28 U.S.C. § 157(b). "The parties agree this matter is a core proceeding, that the Court has proper jurisdiction and can enter a final judgment herein.” (AP Doc. 31, Report of Parties’ Planning Meeting.)
. The complaint also asked the court to sanction the defendants for filing a claim on a time-barred debt. Although the demand for sanctions appeared to be an afterthought, as discussed below, the court finds that the defendants’ conduct did not warrant sanctions under Bankruptcy Rule 9011, or otherwise.
.No party argued that the statute of limitations of a state other than Alabama applied. Alabama Code 1975 § 6-2-34 reads in relevant part: "The following must be commenced within six years: ... (4) Actions
. References herein to the “Code” refer to the United States, Bankruptcy Code, 11 U.S.C. § 101, et seq., and references to a “Rule” refer to a Federal Rule of Bankruptcy Procedurе.
. The claims-allowance process begins with Code § 501(a) that provides that "[a] creditor ... may file a proof of claim” and continues with § 502(a) that states "[a] claim ..., proof of which is filed under section 501 ..., is deemed allowed, unless a party in interest ... objects.” Finally, § 502(b) completes the process by providing that "... if such an objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim ... and shall allow such clаim ... except to the extent that ... such claim is unenforceable ... under any ... applicable law _” e.g., expiration of the statute of limitations. And Rules 3001-3008 provide the procedural guidelines for the Code's claims-allowance process.
Code § 101(5)(A) broadly defines the term "claim” as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured -” (emphasis added).
"In Alabama, a creditor’s right to payment is not eliminated by a limitations bаr. Ex parte Liberty National Life Insurance Co.,
It is also significant that claims filed in a bankruptcy case are scrutinized by debtor's counsel, unless the debtor is pro se, but in all cases, even those filed pro se, claims are scrutinized by the chapter 13 trustee. Such scrutiny of a creditor’s claim by a person with legal know-how does not nеcessarily occur' — ■ especially for pro se debtors — when a collection suit is filed in state court; yet another reason to differentiate between the FDCPA’s application to claims filed in bankruptcy courts and collection suits filed in state courts. Although the panel in Crawford applied the least-sophisticated consumer' standard to its analysis of a bankruptcy claim under the FDCPA, there is no similar standard of review for claims under Code § 501 or 502, or Rules 3001-3008. Applying the FDCPA’s higher standard to bankruptcy claims would have the effect of amending Code §§ 501 and 502 for a particular subset of creditors: debt collectors whose claims are time-barred under state law. If Congress intended bankruptcy claims filed by this particular subset of creditors to be scrutinized under the higher standards of the FDCPA, it gave no such indication in the plain language of the Code.
. Rule 9011(b) provides that by filing any paper, such as a proof of claim, the filer "is certifying that to the best of the [filеr’s] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,—
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have eviden-tiary support after a reasonable opportunity for further investigation or discovery; and
(4)the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.”
Rule 9011(c)(1)(A) provides for sanctiоns in the court’s discretion after notice and a hearing, if the court finds Rule 9011(b) was violated and upon motion, served under Rule 7004. The "motion for sanctions may not be filed with or presented to the court unless, within 21 days after service of the motion ... the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected [unless the violation is the filing of a petition.]”
. United Student Aid Funds, Inc. v. Espinosa,
. In the proof of claim context, would the debtor have the burden of proving the affirmative defense was "obvious” or would the creditor have the burden of proving the defense was not "obvious?” The slope becomes slippery indeed. Congress provided for a process of deemed allowance and grounds for objection, which distributes the burden and benefit between debtor and creditor in the claim context that cannot be changed by judi