09-4984-cv
Simmons v. Roundup F u n d i n g , LLC
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2009
(Argued: May 11, 2010 Decided: October 5, 2010)
Docket No. 09-4984-cv
LAMONT B. SIMMONS, MELISSA R. SIMMONS,
on behalf of themselves and all others
similarly situated,
Plaintiffs-Cross-Defendants
-Appellants,
ROUNDUP FUNDING, LLC,
Defendant-Counter-Claimant
-Appellee,
MALEN & ASSOCIATES, P.C.,
Before: JACOBS, Chief Judse, WINTER and
McLAUGHLIN, Circuit Judses.
Appeal from a judgment of the United States District
Court for the Southern District of New York (Sweet, J.),
* We direct the Clerk of Court to amend the caption as
noted.
dismissing on the pleadings a Fair Debt Collection Practices
Act claim. We hold that a proof of claim filed in
bankruptcy court cannot form the basis for a claim under the
Fair Debt Collection Practices Act, and therefore affirm the
dismissal. We vacate the award of costs and attorneys' fees
in favor of defendants.
JOSHUA N. BLEICHMAN, Law Offices
of Joshua N. Bleichman, Spring
Valley, NY, for Plaintiffs-
Cross-Defendants-Appellants.
PAUL WILLIAM MAHLER, Malen &
Associates, P.C., Westbury, NY,
for Defendant-Appellee Malen &
Associates;
LINH K. TRAN, Seattle, WA, for
Defendant-Counter-Claimant-
Appellee Roundup Funding, LLC.
DENNIS JACOBS, Chief Judse:
Lamont and Melissa Simmons ("the Simmons") allege that
an inflated proof of claim filed by a creditor in their
bankruptcy proceeding constituted a violation of the Fair
Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692
m. They appeal from a judgment of the United States
District Court for the Southern District of New York (Sweet,
J.), dismissing their complaint on the pleadings. We hold
that such a proof of claim cannot form the basis for a claim
under the FDCPA, and therefore we affirm.
The Simmons sought protection in bankruptcy in October
2007. In December 2007, Roundup Funding, LLC ("Roundup")
filed a proof of claim for a debt in the claimed amount of
$2,039.21. The Simmons filed an objection, and Roundup's
counsel, Malen & Associates ("Malen"), filed a response
(which, it is alleged, included no relevant information).
At a hearing on April 17, 2008, the bankruptcy court reduced
the Roundup claim to $1,100, the amount the Simmons conceded
they owed.
On July 10, 2008, the Simmons brought a putative class
action against Roundup and Malen, alleging that they had
violated the FDCPA by misrepresenting the amount of the
Simmons's debt. An amended complaint reflected the same
underlying theory.
Malen and Roundup moved to dismiss under Rule 12(b)(6)
on the ground that an inflated proof of claim in bankruptcy
court cannot form the basis for an FDCPA action as a matter
of law, and also sought costs and attorneysf fees pursuant
to 15 U.S.C. § 1692k(a)(3). Their motions to dismiss and
their requests for attorneys' fees and costs were granted by
the district court, Simmons v. R o u n d u ~Funding, LLC, No. 08-
CV-6263, 2009 U.S. Dist. LEXIS 87383 (S.D.N.Y. Sept. 22,
2009) , and the Simmons's appeal followed.'
A
"We review a district court's grant of a motion to
dismiss under Rule 12 (b)(6) de novo." Vietnam Ass'n for
Victims of Auent Oranse v. Dow Chem. Co., 517 F.3d 104, 115
(2d Cir. 2008) (internal quotation marks omitted) .
"A debt collector may not use any false, deceptive, or
misleading representation or means in connection with the
collection of any debt." 15 U.S.C. § 1692e. Among other
things, the FDCPA bars misrepresentation of "the character,
amount, or legal status of any debt." I . § 1692e (2)(A).
d
"Congress acted with the aim of eliminating abusive
It is unclear from their briefs whether the Simmons
are appealing the dismissal of their claim as-well as the
grant of attorneys' fees and costs or just the latter.
Their lawyer failed to clarify the point when asked to do so
at oral argument. However, the Simmons's brief at one point
states that the district court "erred . . . in . . .
dismissing the Plaintiff's [sic] case"; so we divine that
they appeal the dismissal.
practices in the debt collection industry, and also sought
to ensure that those debt collectors who refrain from using
abusive debt collection practices are not competitively
disadvantaged. These purposes inform the FDCPA's many
provisions." Jacobson v. Healthcare Fin. Servs., 516 F.3d
85, 89 (2d Cir. 2008) (internal quotation marks omitted)
(citing 15 U.S.C. § 1692 (e) ("It is the purpose of this
subchapter to eliminate abusive debt collection practices by
debt collectors....")).
Federal courts have consistently ruled that filing a
proof of claim in bankruptcy court (even one that is somehow
invalid) cannot constitute the sort of abusive debt
collection practice proscribed by the FDCPA, and that such a
filing therefore cannot serve as the basis for an FDCPA
action. See, e.q., B-Real, LLC v. Rogers, 405 B.R. 428,
431-32 (M.D. La. 2009) ("[TI he Bankruptcy Code itself
contemplates a creditor filing a proof of claim on a
time-barred debt and the Bankruptcy Court disallowing such
claim after objection from the debtor. It is difficult for
this Court to understand how a procedure outlined by the
Bankruptcy Code could possibly form the basis of a violation
under the FDCPA."); Middlebrooks v. Interstate Credit
Control, Inc., 391 B.R. 434, 437 (D. Minn. 2008) (holding
that an FDCPA action cannot be premised on the filing of a
proof of claim in bankruptcy court); Gray-Mapp v. Sherman,
100 F. Supp. 2d 810, 813-14 (N.D. Ill. 1999) (same); Baldwin
v. McCalla, No. 98-C-4280, 1999 U.S. Dist. LEXIS 6933, at
*lo-11 (N.D. Ill. Apr. 19, 1999) (same).
We join these courts. The FDCPA is designed to protect
defenseless debtors and to give them remedies against abuse
by creditors. There is no need to protect debtors who are
already under the protection of the bankruptcy court, and
there is no need to supplement the remedies afforded by
bankruptcy itself.
B
"The FDCPA . . . was designed to protect against the
abusive debt collection practices likely to disrupt a
debtor's life." Mace v. Van Ru Credit Corp., 109 F.3d 338,
343 (7th Cir. 1997). "Debtors in bankruptcy proceedings do
not need protection from abusive collection methods that are
covered under the FDCPA because the claims process is highly
regulated and court controlled. While the FDCPA's purpose
is to protect unsophisticated consumers from unscrupulous
debt collectors, that purpose is not implicated when a
debtor is instead protected by the court system and its
officers." B-Real, 405 B.R. at 432 (footnote
omitted) (internal quotation marks omitted). Thus debtors
are protected in bankruptcy proceedings--and by discharge
afterward.
Bankruptcy provides remedies for wrongfully filed
proofs of claim. "It is beyond cavil that past bankruptcy
practice, as well as explicit Bankruptcy Code provisions,
have left the remedy for fraudulent and otherwise defective
proofs of claim to the Bankruptcy Code." Baldwin, 1999 U.S.
Dist. LEXIS 6933, at *14 (referencing 11 U.S.C. §§ 105,
1330); see also Walls v. Wells Fargo Bank, N.A., 276 F.3d
502, 510 (9th Cir. 2002) ("Nothing in either [the Bankruptcy
Code or the FDCPA] persuades us that Congress intended to
allow debtors to bypass the Code's remedial scheme when it
enacted the FDCPA. While the FDCPA's purpose is to avoid
bankruptcy, if bankruptcy nevertheless occurs, the debtor's
protection and remedy remain under the Bankruptcy Code.").
These remedies include revocation of fraudulent proofs of
c l a i m and t h e c o u r t ' s contempt power. See B a l d w i n , 1 9 9 9
U.S. Dist. LEXIS 6 9 3 3 , a t * 1 4 . Without seeking t h e s e
r e m e d i e s , t h e Simmons f i l e d s u i t u n d e r t h e FDCPA. "Nothing
i n e i t h e r t h e B a n k r u p t c y Code o r t h e FDCPA s u g g e s t s t h a t a
debtor should be permitted t o bypass t h e procedural
s a f e g u a r d s i n t h e Code i n f a v o r o f a s s e r t i n g p o t e n t i a l l y
m o r e l u c r a t i v e c l a i m s u n d e r t h e FDCPA. And n o t h i n g i n t h e
FDCPA s u g g e s t s t h a t i t i s i n t e n d e d a s a n o v e r l a y t o t h e
p r o t e c t i o n s a l r e a d y i n p l a c e i n t h e bankruptcy proceedings."
Grav-Mapp, 1 0 0 F. S u p p . 2d a t 8 1 4 .
As t h e d i s t r i c t c o u r t h e l d , t h e f i l i n g a p r o o f o f c l a i m
i n b a n k r u p t c y c o u r t c a n n o t f o r m t h e b a s i s f o r a n FDCPA
claim. 2
I11
"On'a f i n d i n g by t h e c o u r t t h a t an a c t i o n under t h i s
Some c o u r t s h a v e r u l e d m o r e b r o a d l y t h a t n o FDCPA
a c t i o n c a n b e b a s e d on a n a c t t h a t v i o l a t e s a n y p r o v i s i o n o f
t h e B a n k r u p t c y Code, b e c a u s e s u c h v i o l a t i o n s a;e- d e a l t w i t h
e x c l u s i v e l y b y t h e B a n k r u p t c y Code. See, e . ~ . , alls v.
W
Wells F a r g o Bank, N.A., 276 F . 3 d 5 0 2 , 5 1 0 ( 9 t h C i r . 2 0 0 2 ) ;
D i a m a n t e v . Solomon & Solomon, P . C . , 1:99-CV-1339, 2 0 0 1 U.S.
D i s t . LEXIS 1 4 8 1 8 , a t * 1 8 ( N . D . N . Y . S e p t . 18, 2001); K i b l e r
v . WFS F i n . , CV-00-5217, 2000 U.S. D i s t . LEXIS 1 9 1 3 1 , a t * 3 3
(C.D. C a l . Sept. 12, 2000). T h i s broader r u l e h a s n o t been
u n i v e r s a l l y a c c e p t e d , see R a n d o l ~ hv . IMBS, I n c . , 3 6 8 F. 3 d
7 2 6 , 732-33 ( 7 t h C i r . 2 0 0 4 ) , a n d w e a r e n o t c o m p e l l e d t o
c o n s i d e r it i n t h i s c a s e .
section was brought in bad faith and for the purpose of
harassment, the court may award to the defendant attorney's
fees reasonable in relation to the work expended and costs."
15 U.S.C. § 1692k(a) (3). "[Wle review for abuse of
discretion a district court's decision to award attorneys'
fees to a defendant pursuant to the FDCPA." Jacobson, 516
F.3d at 96. The district court granted motions by Roundup
and Malen for costs and attorneys' fees related to the
motions to dismiss. The finding that this action was
brought "in bad faith and for the purpose of harassment,"
see 15 U.S.C. § 1692k(a)(3), seems to have been premised
upon the conclusion that this action was meritless and
properly dismissed on the pleadings. While we agree with
the district court's ruling on the merits of the claim, see
supra Part 11, the merits turned on a question of law that
was, until this opinion, undecided in this Circuit. The
assertion of the claim did not by itself prove bad faith.
Accordingly, we vacate the judgment insofar as it grants
Malen and Roundup attorneys' fees and costs related to the
motions to dismiss.
Notwithstanding our vacatur, we cannot disagree with
the district court's characterization that the Simmons were
1 "careless" in their pursuit of this action below, Simmons,
2 2009 U.S. Dist. LEXIS 87383, at *2, and continue to be so
3 here. Therefore, we grant reasonable costs of this appeal
4 in favor of Malen and Roundup.
5
6 * * *
7 For the foregoing reasons, we affirm the district
8 court's dismissal of the Simmons's claim, vacate the grant
9 of attorneys' fees and costs related to the motions to
10 dismiss, and grant Malen and Roundup reasonable costs of
11 this appeal.