Crawford v. LVNV FUNDING, LLC UNITED STATES COURT OF APPEALS, ELEVENTH CIRCUIT 758 F.3D XXXXXXXXXX)
Stanley Crawford owed $2,037.99 to the Heilig-Meyers furniture company. Heilig-Meyers charged off the debt in 1999, and in September 2001, a company affiliated with the defendant in this case, LVNV Funding, LLC, acquired the debt. On October 2004, the debt became unenforceable due to Alabama’s statute of limitations and because the last transaction on the debt occurred three years earlier in October 2001. JUSTICE GOLDBERG To decide this case, we must first examine the statute that governs Crawford’s claim: the FDCPA. The FDCPA is a consumer protection statute that “imposes open-ended prohibitions on, inter alia, false, deceptive, or unfair” debt-collection practices. Finding “abundant evidence” of such practices, Congress passed the FDCPA in 1977 to stop “the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. § 1692(a). Congress determined that “[e]xisting laws and procedures” were “inadequate” to protect consumer debtors. In short, the FDCPA regulates the conduct of debt-collectors, which the statute defines as any person who, inter alia, “regularly collects . . . debts owed or due or asserted to be owed or due another.” Undisputedly, LVNV and its surrogates are debt collectors and thus subject to the FDCPA. To enforce the FDCPA’s prohibitions, Congress equipped consumer debtors with a private right of action, rendering “debt collectors who violate the Act liable for actual damages, statutory damages up to $1,000, and reasonable attorney’s fees and costs.” To determine whether LVNV’s conduct, as alleged in Crawford’s complaint, is prohibited by the FDCPA, we begin “where all such inquiries must begin: with the language of the statute itself.”
Section 1692e of the FDCPA provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Section 1692f states that “[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” Because Congress did not provide a definition for the terms “unfair” or “unconscionable,” this Court has looked to the dictionary for help. “The plain meaning of ‘unfair’ is ‘marked by injustice, partiality, or deception.’” Further, “an act or practice is deceptive or unfair if it has the tendency or capacity to deceive.” We also explained that “[t]he term ‘unconscionable’ means ‘having no conscience’; ‘unscrupulous’; ‘showing no regard for conscience’; ‘affronting the sense of justice, decency, or reasonableness.’” We have also noted that “[t]he phrase ‘unfair or unconscionable’ is as vague as they come.” Given this ambiguity, we have adopted a “least-sophisticated consumer” standard to evaluate whether a debt collector’s conduct is “deceptive,” “misleading,” “unconscionable,” or “unfair” under the statute. The inquiry is not whether the particular plaintiff–consumer was deceived or misled; instead, the question is “whether the ‘least sophisticated consumer’ would have been deceived” by the debt collector’s conduct. The “least-sophisticated consumer” standard takes into account that consumer-protection laws are “not made for the protection of experts, but for the public—that vast multitude which includes the ignorant, the unthinking, and the credulous.” “However, the test has an objective component in that while protecting naive consumers, the standard also prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness.” Given our precedent, we must examine whether LVNV’s conduct—filing and trying to enforce in court a claim known to be time-barred—would be unfair, unconscionable, deceiving, or misleading towards the least-sophisticated consumer. The reason behind LVNV’s practice of filing time-barred proofs of claim in bankruptcy court is simple. Absent an objection from either the Chapter 13 debtor or the trustee, the time-barred claim is automatically allowed against the debtor pursuant to 11 U.S.C. § 502(a)-(b) and Bankruptcy Rule 3001(f). As a result, the debtor must then pay the debt from his future wages as part of the Chapter 13 repayment plan, notwithstanding that the debt is time-barred and unenforceable in court. That is what happened in this case. LVNV filed the timebarred proof of claim in May of 2008, shortly after debtor Crawford petitioned for Chapter 13 protection. But neither the bankruptcy trustee nor Crawford objected to the claim during the bankruptcy proceeding; instead, the trustee actually paid monies from the Chapter 13 estate to LVNV (or its surrogates) for the time-barred debt. It wasn’t until four years later, in May 2012, that debtor Crawford—with the assistance of counsel—objected to LVNV’s claim as unenforceable. LVNV acknowledges, as it must, that its conduct would likely subject it to FDCPA liability had it filed a lawsuit to collect this time-barred debt in state court. Federal circuit and district courts have uniformly held that a debt collector’s threatening to sue on a time-barred debt and/or filing a time-barred suit in state court to recover that debt violates §§ 1692e and 1692f. As an example, the Seventh Circuit has reasoned that the FDCPA outlaws “stale suits to collect consumer debts” as unfair because (1) “few unsophisticated consumers would be aware that a statute of limitations could be used to defend against lawsuits based on stale debts” and would therefore “unwittingly acquiesce to such lawsuits”; (2) “the passage of time . . . dulls the consumer’s memory of the circumstances and validity of the debt”; and (3) the delay in suing after the limitations period “heightens the probability that [the debtor] will no longer have personal records” about the debt. These observations reflect the purpose behind statutes of limitations. Such limitations periods “represent a pervasive legislative judgment that it is unjust to fail to put the adversary on notice to defend within a specified period of time.” That is so because “the right to be free of stale claims in time comes to prevail over the right to prosecute them.” Statutes of limitations “protect defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise.” The same is true in the bankruptcy context. In bankruptcy, the limitations period provides a bright line for debt collectors and consumer debtors, signifying a time when the debtor’s right to be free of stale claims comes to prevail over a creditor’s right to legally enforce the debt. A Chapter 13 debtor’s memory of a stale debt may have faded and personal records documenting the debt may have vanished, making it difficult for a consumer debtor to defend against the timebarred claim. Similar to the filing of a stale lawsuit, a debt collector’s filing of a time-barred proof of claim creates the misleading impression to the debtor that the debt collector can legally enforce the debt. The “least sophisticated” Chapter 13 debtor may be unaware that a claim is time barred and unenforceable and thus fail to object to such a claim. Given the Bankruptcy Code’s automatic allowance provision, the otherwise unenforceable time-barred debt will be paid from the debtor’s future wages as part of his Chapter 13 repayment plan. Such a distribution of funds to debt collectors with time-barred claims then necessarily reduces the payments to other legitimate creditors with enforceable claims. Furthermore, filing objections to time-barred claims consumes energy and resources in a debtor’s bankruptcy case, just as filing a limitations defense does in state court. For all of these reasons, under the “least-sophisticated consumer standard” in our binding precedent, LVNV’s filing of a time-barred proof of
claim against Crawford in bankruptcy was “unfair,” “unconscionable,” “deceptive,” and “misleading” within the broad scope of § 1692e and § 1692f. Any contrary arguments mentioned in the briefs do not alter this conclusion. For example, we disagree with the contention that LVNV’s proof of claim was not a “collection activity” aimed at Crawford and, therefore, not “the sort of debt-collection activity that the FDCPA regulates.” As noted earlier, the broad prohibitions of § 1692e apply to a debt collector’s “false, deceptive, or misleading representation or means” used “in connection with the collection of any debt.” 15 U.S.C. § 1692e. The broad prohibitions of § 1692f apply to a debt collector’s use of “unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. The FDCPA does not define the terms “collection of debt” or “to collect a debt” in §§ 1692e or 1692f. However, in interpreting “to collect a debt” as used in § 1692(a)(6), the Supreme Court has turned to the dictionary’s definition: “To collect a debt or claim is to obtain payment or liquidation of it, either by personal solicitation or legal proceedings.” Applying these definitions here, we conclude that LVNV’s filing of the proof of claim fell well within the ambit of a “representation” or “means” used in “connection with the collection of any debt.” It was an effort “to obtain payment” of Crawford’s debt “by legal proceeding.” In fact, payments to LVNV were made from Crawford’s wages as a result of LVNV’s claim. And, it was Crawford—not the trustee—who ultimately objected to defendants’ claim as time-barred. Our conclusion that §§ 1692e and 1692f apply to LVNV’s proof of claim is consistent with the FDCPA’s definition of a debt-collector as “any person who . . . regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6) (emphasis added). LVNV also argues that considering the filing of a proof of claim as a “means” used “in connection with the collection of debt” for purposes §§ 1692e and 1692f of the FDCPA would be at odds with the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a)(6). We disagree. The automatic stay prohibits debt-collection activity outside the bankruptcy proceeding, such as lawsuits in state court. It does not prohibit the filing of a proof of claim to collect a debt within the bankruptcy process. Filing a proof of claim is the first step in collecting a debt in bankruptcy and is, at the very least, an “indirect” means of collecting a debt. Just as LVNV would have violated the FDCPA by filing a lawsuit on stale claims in state court, LVNV violated the FDCPA by filing a stale claim in bankruptcy court. Because we hold that LVNV’s conduct violated the FDCPA’s plain language, we vacate the district court’s dismissal of Crawford’s complaint and remand for further proceedings.
CRITICAL THINKING
What ambiguity is central to this case? Do you agree with the way the court interpreted the ambiguous word or phrase? Can you think of an alternative reasonable definition?
ETHICAL DECISION MAKING
Who are the primary stakeholders affected by the court’s ruling? Does the appeals court have a stronger ethical obligation to elevate the interests of some stakeholders over others? Explain.