Covert et al v. LVNV Funding, LLC et al

Filing 24

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 12/9/13. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
CHRISTOPHER M. COVERT, ET AL.
:
v.

:

Civil Action No. DKC 13-0698

:
LVNV FUNDING, LLC., ET AL.
:
MEMORANDUM OPINION
Presently

pending

and

ready

for

review

is

a

motion

to

dismiss pursuant to Fed.R.Civ.P. 12(b)(6) filed by LVNV Funding,
LLC. (“LVNV”), Resurgent Capital Services Limited Partnership
(“Resurgent”),

and

Sherman

(collectively “Defendants”).

Originator
(ECF No. 13).

LLC

(“Sherman”)

The issues have

been fully briefed, and the court now rules, no hearing being
deemed necessary.

Local Rule 105.6.

For the following reasons,

the motion to dismiss will be granted.
I.

Background1
Christopher M. Covert, Thomas E. Haworth, Carol J. Haworth,

Kifle Ayele, and Dwan L. Brown (collectively “Plaintiffs”) are
debtors who initiated this putative class action on March 5,
2013, alleging unjust enrichment and violations of federal and
state

debt

collection

statutes.

Plaintiffs

claim

that

Defendants violated federal and state law when they filed proofs
1

The facts are drawn from the complaint.

of

claim

without

in

the

Plaintiffs’
requisite

Chapter

collection

13

bankruptcy

license

Maryland to collect the underlying debts.2

from

proceedings

the

State

of

Plaintiffs allege the

following facts.
LVNV and Sherman are debt buyers “that have acquired from
another creditor, and then sought to collect, a ‘consumer claim’
.

.

.

already

Plaintiffs.”

in

default

and

(ECF No. 1 ¶ 9).

owed

by

each

of

the

Named

Plaintiffs allege that at all

relevant times, Sherman did not have a license from the State of
Maryland to do business as a collection agency.

(Id. ¶ 15).

Plaintiffs allege that LVNV similarly did not have a Maryland
collection license until February 18, 2010, at which point LVNV
became “authorized to do business as a collection agency only at
its

business

address

[in

Nevada].”

(Id.

¶

17).

Moreover,

Plaintiffs contend that
[b]efore LVNV had the requisite license from
the State of Maryland, LVNV acquired from
Sherman Originator consumer claims allegedly
in default and then filed thousand[s] of
lawsuits in courts of the State of Maryland
and filed a Proof of Claim in thousands of
bankruptcy cases that residents of the State
of Maryland had commenced in the United

2

Under Chapter 13 of the Bankruptcy Code, the debtor
remains in possession of the property and cures his or her
indebtedness, under the supervision of the trustee, by making
regular payments to creditors from his or her earnings through a
court approved payment plan.
See 11 U.S.C. §§ 1306(b), 1322;
Olick v. Parker & Parsley Petroleum Co., 145 F.3d 513, 516 (2d
Cir. 1998).
2

States Bankruptcy Court for the District of
Maryland.
(Id. ¶ 19).3

Plaintiffs assert that “Resurgent subsequently

received payments on behalf of LVNV in certain of the Maryland
Bankruptcy Cases based on such an invalid and unauthorized Proof
of Claim.”

(Id.).

Plaintiffs contend that LVNV continues to

collect consumer claims associated with Maryland residents “from
LVNV’s other places of business in South Carolina and other
States and not at its Nevada Place of Business, including the
filing

of

a

Proof

Bankruptcy Cases.”

of

Claim

in

many

additional

Maryland

(Id. ¶ 20).

Specifically, Resurgent, on behalf, of LVNV, filed proofs
of

claim

in

each

Plaintiff’s

Chapter

13

proceeding

on

the

following dates: (1) November 18, 2008 on Carol Haworth’s and
Thomas Haworth’s accounts (ECF No. 1-2, 1-3, 1-4); (2) December
4,

2008

on

Christopher

Covert’s

account

(ECF

No.

1-1);

(3)

December 23, 2008 on Kifle Ayele’s account (ECF No. 1-5); (4)
April 8, 2009 on Dwan Lee Brown’s account (ECF No. 1-6).

LVNV

is listed as the current creditor on the proofs of claim.

The

proofs

the

of

claim

further

provide

that

Resurgent

services

respective accounts on behalf of the current creditor.
United

States

Bankruptcy

Court

3

for

the

District

of

The

Maryland

At issue in this case are the proofs of claim filed in the
bankruptcy proceedings, not the state court lawsuits allegedly
initiated by LVNV.
3

confirmed each Chapter 13 repayment plan, including the filed
proofs of claim at issue here.4

Plaintiffs allege that “[i]n

each of the Named-Plaintiffs’ Maryland Bankruptcy cases, LVNV
has filed a Proof of Claim that was invalid and illegal because
Sherman Originator and LVNV did not have the requisite licenses
from the State of Maryland to do business as collection agencies
at

the

time

that

they

acquired

the

consumer

claim

at

issue

(i.e., the debt) when the consumer claim was already in default
or at the time that Resurgent on behalf of LVNV filed a Proof of
Claim to collect on the consumer claim.”
Plaintiffs

explain

that

as

a

(ECF No. 1 ¶ 25).
result

of

Defendants’

activities, on October 25, 2011, the Maryland State Collection
Agency Licensing Board in the Office of the Commissioner of
Financial Regulation issued a Summary Order to Cease and Desist
and Summary Suspension of Collection Agency Licenses to LVNV and
Resurgent.
entities

The state board ordered all Defendants and related
to

“cease

and

desist

from

engaging

in

the

debt

collection business, including all collection-related litigation
activities in Maryland state courts.”

(Id. ¶ 22).

Plaintiffs

aver that the Summary Order provides that “LVNV had already

4

Specifically, Plaintiffs assert that the bankruptcy court
confirmed Mr. Covert’s Chapter 13 repayment plan on December 18,
2008 (ECF No. 1 ¶ 48); the Haworths’ Chapter 13 repayment plan
on December 15, 2008 (Id. ¶ 56);
Mr. Ayele’s Chapter 13
repayment plan on December 18, 2009 (Id. ¶ 63); and Mr. Brown’s
Chapter 13 repayment plans December 2, 2010 (Id. ¶ 70).
4

brought over 17,160 actions in Maryland State courts prior to
the date that it became licensed as a collection agency” . . .
and

“even

February
collection

after

2010,

obtaining

LVNV

activities

a

collection

has

continued

by

conducting

to

agency

engage

business

as

license

in

in

unlicensed

a

collection

agency in Maryland from a location in Greenville, South Carolina
for which LVNV is not licensed.”

(Id.).5

Plaintiffs assert that

Defendants entered into a Settlement Agreement with the Maryland
Licensing Board on June 28, 2012, “but that settlement does not
apply

to

‘consumer

claims

that

are

subject

to

a

pending

bankruptcy proceeding or were discharged in bankruptcy.’”
¶ 23 (quoting Settlement Agreement)).

(Id.

Finally, Plaintiffs aver

that “Resurgent on behalf of LVNV . . . continued to receive,
even after the Summary order, payments in Maryland Bankruptcy
cases, including Named-Plaintiffs cases, based on an invalid and
illegal Proof of Claim.”

(Id. ¶ 25; see also id. ¶¶ 42, 50, 58,

65).6

5

Maryland law requires a debt collector to obtain a
license.
See
Maryland
Collection
Agency
Licensing
Act
(“MCALA”), Md. Code Ann., Bus. Reg. § 7-301(a) (“a person must
have a license whenever the person does business as a collection
agency in the State”).
6

Specifically, Plaintiffs assert that on behalf of LVNV,
Resurgent received the following payments: (a) 33 monthly
payments from the proof of claim filed on Mr. Covert’s account,
from August 31, 2009 through May 29, 2012, totaling $1,543.47
(ECF No. 1 ¶ 49); (b) three monthly payments from the proof of
claim filed on the Howarths’ accounts from May 31,2011 through
5

Plaintiffs allege that Defendants violated: (1) the Fair
Debt Collections Practices Act (“FDCPA”), 15 U.S.C. §§ 1692, et
seq.

(Count

I);

(2)

Maryland

Consumer

Debt

Collection

Act

(“MCDCA”), Md. Code Ann., Com. Law, §§ 14-201, et seq. (Count
II); and (3) Maryland Consumer Protection Act (“MCPA”), Md. Code
Ann., Com. Law §§ 13-101, et seq. (Count III).

Plaintiffs also

assert unjust enrichment (Count IV) and object to each proof of
claim that LVNV filed in the respective bankruptcy cases (Count
V).

Finally, Plaintiffs seek attorneys’ fees and expenses in

obtaining bankruptcy relief pursuant to Rule 2016 of the Federal
Rules of Bankruptcy Procedure (Count VI).
15-28).7

(See ECF No. 1, at

There is jurisdiction pursuant to 28 U.S.C. §§ 1331 and

1334, and supplemental jurisdiction over the remaining state law
claims pursuant to 28 U.S.C. § 1367.

Defendants suggest that

Counts V and VI should be deemed referred to the United States
Bankruptcy Court pursuant to Local Rule 402.

It may be that all

claims are deemed referred pursuant to Local Rule 402.

Under

the circumstances, however, the reference is withdrawn at this

December 31, 2012, totaling $1,620.17, $893.60, and $102.62 (Id.
¶ 57); (c) 27 monthly payments from the proof of claim filed in
Mr. Ayele’s account from October 29, 2010 through December 31,
2012, totaling $3,360.10 (Id. ¶ 64); and (d) payments totaling
$105.15 from August 31, 2011 through August 31, 2012 from the
proof of claim filed in Mr. Brown’s account (Id. ¶ 71).
7

Counts three through five are asserted
Plaintiff Covert and the State Law Sub-Class.
6

on

behalf

of

time.

See

28

U.S.C.

§

157(d)

(“t]he

district

court

may

withdraw, in whole or in part, any case or proceeding referred
under this section, on its own motion or on timely motion of any
part, for cause shown.”); In re Grewe, 4 F.3d 299, 304 (4th Cir.
1993)

(“district

courts

retain

the

power

to

withdraw

any

reference from the bankruptcy court.”).
Defendants moved to dismiss the complaint on April 9, 2013
(ECF No. 13), which Plaintiffs opposed on May 6, 2013 (ECF No.
Defendants replied on May 17, 2013 (ECF NO. 17).8

16).
II.

Standard of Review
The purpose of a motion to dismiss under Rule 12(b)(6) is

to test the sufficiency of the complaint.
Charlottesville,

464

F.3d

480,

483

(4th

Presley v. City of
Cir.

2006).

A

plaintiff’s complaint need only satisfy the standard of Rule
8(a), which requires a “short and plain statement of the claim
showing that the pleader is entitled to relief.”
8(a)(2).

Fed.R.Civ.P.

“Rule 8(a)(2) still requires a ‘showing,’ rather than

a blanket assertion, of entitlement to relief.”
v. Twombly, 550 U.S. 544, 556 n.3 (2007).

Bell Atl. Corp.

That showing must

consist of more than “a formulaic recitation of the elements of
a cause of action” or “naked assertion[s] devoid of further
8

Defendants subsequently filed a Notice of Supplemental
Authority on May 22, 2013. (ECF No. 19). Plaintiffs then filed
two sets of papers advising of supplemental authority – one on
July 18, 2013 (ECF No. 21) and one on October 11, 2013 (ECF No.
22).
7

factual enhancement.”

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (internal citations omitted).
At this stage, all well-pleaded allegations in a complaint
must be considered as true, Albright v. Oliver, 510 U.S. 266,
268 (1994), and all factual allegations must be construed in the
light

most

favorable

to

the

plaintiff.

See

Harrison

v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th Cir. 1993)).

In evaluating the complaint, unsupported legal

allegations

not

need

be

accepted.

Revene

Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989).

v.

Charles

Cnty.

Legal conclusions

couched as factual allegations are insufficient, Iqbal, 556 U.S.
at 678, as are conclusory factual allegations devoid of any
reference to actual events.

United Black Firefighters v. Hirst,

604 F.2d 844, 847 (4th Cir. 1979).
Defendants

assert

that

dismissal of the complaint.
claims

because

the

the

following

grounds

warrant

(1) Res judicata bars Plaintiffs’

confirmation

of

each

Chapter

13

plan

conclusively establishes the validity of the proofs of claim and
Defendants’ right to receive payments thereunder.

(2) Count one

should be dismissed because the filing of alleged invalid proofs
of

claim

does

not

under the FDCPA.
are

barred

by

constitute

actionable

collection

activity

(3) Plaintiffs’ federal and state law claims
the

statute

of
8

limitations.

Alternatively,

Defendants contend (4) that Plaintiffs’ state law claims are
preempted by the Bankruptcy Code.
that

objections

to

the

Finally, Defendants aver (5)

proofs

of

claim

and

requests

for

attorneys’ fees and expenses are not properly before this court
and should have been brought in the United States Bankruptcy
Court for the District of Maryland.
Defendants’

affirmative

defenses,

statute

of

limitations

and res judicata, are not typically considered on a motion to
dismiss.
that

a

The statute of limitations is an affirmative defense
party

typically

Fed.R.Civ.P. 8(c).

must

raise

in

a

pleading

under

See Enjola v. Leasecomm Corp., 214 F.Supp.2d

520, 525 (D.Md. 2002); Gray v. Mettis, 203 F.Supp.2d 426, 428
(D.Md. 2002).
face

of

Nevertheless, dismissal may be proper “when the

the

complaint

clearly

reveals

meritorious affirmative defense.”

the

existence

of

a

Brooks v. City of Winston-

Salem, N.C., 85 F.3d 178, 181 (4th Cir. 1996); see also Rice v.
PNC Bank, N.A., No. PJM 10-07, 2010 WL 1711496, at *3 (D.Md.
Apr. 26, 2010) (dismissing claims brought under the Truth in
Lending

Act

as

untimely

pursuant

to

a

motion

to

dismiss).

Similarly, the United States Court of Appeals for the Fourth
Circuit has permitted dismissal on res judicata grounds in some
circumstances:
This
Court
has
previously
upheld
the
assertion of res judicata in a motion to
dismiss.
Although an affirmative defense
9

such as res judicata may be raised under
Rule 12(b)(6) “only if it clearly appears on
the
face
of
the
complaint,”
when
entertaining a motion to dismiss on the
ground of res judicata, a court may take
judicial notice of facts from a prior
judicial proceeding when the res judicata
defense raises no disputed issue of fact.
Andrews v. Daw, 201 F.3d 521, 524 (4th

Cir. 2000) (internal

citations omitted).
III. Analysis
A.

Res Judicata

“Under res judicata principles, a prior judgment between
the same parties can preclude subsequent litigation on those
matters

actually

adjudication.”

and

necessarily

resolved

in

the

first

In re Varat Enters., Inc., 81 F.3d 1310, 1314-15

(4th Cir. 1996).

The concept of claim preclusion provides that

if the later litigation arises from the same cause of action as
the first, then the judgment bars litigation not only of every
matter actually adjudicated in the earlier case, but also every
claim that might have been presented.
463 U.S. 110, 129-30 (1983).
bankruptcy cases.

Nevada v. United States,

Res judicata generally applies to

See In re Varat Enters., Inc., 81 F.3d at

1314-15 (“Under res judicata, a . . . judgment can preclude
subsequent

litigation.”).

Res

judicata

applies

when

three

conditions are met: “1) the prior judgment was final and on the
merits, and rendered by a court of competent jurisdiction in

10

accordance with the requirements of due process; 2) the parties
are identical, or in privity, in the two actions; and 3) the
claims in the second matter are based upon the same cause of
action

involved

in

the

earlier

(internal citations omitted).

proceeding.”

Id.

at

1315

In order for res judicata to bar

litigation, all three elements must be present.
All three elements are met for the unjust enrichment claim.
The confirmation of Plaintiffs’ Chapter 13 plans constitutes a
final judgment on the merits.

See In re Varat Enters., Inc., 81

F.3d at 1315. (“[a] bankruptcy court’s order of confirmation is
treated as a final judgment with res judicata effect.”); In re
Luria, 175 B.R. 601, 608 (Bankr.D.Md. 1994) (“[o]nce the plan is
confirmed, all questions which could have been raised pertaining
to such plan are res judicata.” (internal citations omitted).
Second, the parties to the present dispute are the same parties
whose Chapter 13 plans the bankruptcy court confirmed.9
the

unjust

enrichment

claim

stems

from

Defendants’

Third,
payment

collections based on the proofs of claim that the bankruptcy
court approved as part of the Chapter 13 plan confirmations.
“[T]he debtor may not file a post-confirmation collateral
action that calls into question the proof of the claim.”

9

In re

“A party for the purposes of former adjudication includes
one who participates in a Chapter [13] plan confirmation
proceeding.”
In re Varat Enterprises, Inc., 81 F.3d at 1316
n.6.
11

Snow, 270 B.R. 38, 41 (D.Md. 2001) (citing Adair v. Sherman, 230
F.3d 890, 894-95 (7th Cir. 2000)).

To show unjust enrichment,

Plaintiffs asserts that Defendants “filed a Proof of Claim in
Maryland Bankruptcy Cases . . . and received payments, which
conferred a substantial benefit on Defendants . . . It would be
inequitable for any of the Defendants to retain any such monies
to which none of them had any legal right.”
97).

Plaintiffs’

unjust

enrichment

(ECF No. 1 ¶¶ 94,

claim

constitutes

a

collateral attack on the Bankruptcy Court’s confirmation of the
Chapter

13

plans

Defendants’

because

collection

on

bankruptcy proceedings.
JFM-99-42,
(holding

1999

that

WL

res

Plaintiffs
the

debts

essentially
approved

object
during

to
the

See, e.g., In re Bacx Corp., Civ.A.

33955337,
judicata

at

*2

barred

(D.Md.

several

Sept.
unjust

8,

1999)

enrichment

claims because the claims stemmed from the same operative facts
addressed during the hearing in Bankruptcy Court approving the
sale); In re Met-L-Wood Corp., 861 F.2d 1012, 1018 (7th Cir.
1988)

(interpreting

suit

not

seeking

to

rescind

sale,

but

seeking heavy damages from purchasers and others as a collateral
attack

on

objected

judgment
to

the

bankruptcy cases.
Corp.,

907

F.2d

confirming

proofs

of

sale).
claim

Plaintiffs

Defendants

could

filed

in

have
the

Department of Air Force v. Carolina Parachute
1469,

1473-74

(4th

Cir.

1990)

(noting

that

federal courts have consistently applied res judicata principles
12

to bar a party from asserting a legal position after failing,
without

reason,

to

object

to

the

relevant

proposed

plan

of

reorganization or to appeal the confirmation order); Rich v.
Maryland Nat. Bank, 42 B.R. 350, 353 (D.Md. 1984) (“The Order of
Confirmation is . . . res judicata as to all justiciable issues
decided

or

which

confirmation.”).

could

have

been

Accordingly,

decided

res

at

judicata

the
bars

hearing
the

on

unjust

enrichment claim.10
Res judicata does not, however, bar the federal and state
consumer law claims.

As the Fourth Circuit previously held,

“[b]ecause confirmation of a Chapter 13 plan is res judicata
only

as

to

issues

that

can

be

raised

in

the

less

formal

procedure for contested matters . . . confirmation generally
cannot

have

preclusive

effect

as

10

to

the

validity

of

a

lien

Even if res judicata does not bar the unjust enrichment
claim, Plaintiffs fail to state a claim.
Among other elements
of an unjust enrichment claim under Maryland law, a plaintiff
must show circumstances such that it would be inequitable for
the defendant to retain the benefit conferred by the plaintiff
without paying for it. See Abt. Assocs., Inc. v. JHPIEGO Corp.,
104 F.Supp.2d 523, 535 (D.Md. 2000). Here, Defendants lawfully
collected payments from the proofs of claim through the
bankruptcy proceeding.
Thus, any payments received from the
proofs of claim cannot be characterized as unjust, and
Plaintiffs cannot maintain this claim. See, e.g., Thompkins v.
Lil’ Joe Records, Inc., 476 F.3d 1294, 1314 (11th Cir. 2007)
(dismissing an unjust enrichment claim on the ground that
“[defendant] became lawful owner of the copyrights through the
bankruptcy, and it ha[d] no royalties obligations to [plaintiff]
. . . any profits [defendant] realizes from its exploitation of
the copyrights that it lawfully purchased through the bankruptcy
cannot be characterized as unjust.”).
13

[Bankruptcy

Rule

7001(2)],

adversary proceeding.”
(4th Cir. 1995).

which

must

be

resolved

in

an

Cen-Pen Corp., v. Hanson, 58 F.3d 89, 93

Similarly, although “the debtor may not file a

post-confirmation collateral action that calls into question the
proof

of

the

claim,”

a

debtor

may

commence

an

adversary

proceeding to “recover money or property” pursuant to Bankruptcy
Rule 7001(1).
Circuit

See Modanlo, 493 B.R. at 473 n.3.

noted,

“[i]f

an

issue

must

be

raised

The Fourth
through

an

adversary proceeding it is not part of the confirmation process
and, unless it is actually litigated, confirmation will not have
a preclusive effect.”

Cen Per Corp., 58 F.3d at 93 (quoting In

re Beard, 112 B.R. 951, 955-56 (Bankr.N.D.Ind. 1990)).11
Plaintiffs argue that the relief they seek in the instant
proceeding

could

not

have

been

11

raised

in

their

bankruptcy

A bankruptcy case is commenced by the filing of a
petition.
Fed.R.Bankr.P. 1002(a).
Within the case, the
creditor may file a proof of claim, which, if objected to,
becomes a disputed matter, and a disputed matter in a bankruptcy
case is referred to as a contested matter.
See Fed.R.Bankr.P.
9014 advisory committee’s note; see also In re American Reserve,
840 F.2d 487, 488 (7th Cir. 1998) (“All disputes in bankruptcy
are either adversary proceedings or contested matters”).
An
adversary proceeding in a bankruptcy case must fall within one
of the categories defined in Rule 7001 and must be commenced by
the filing of a complaint.
Fed.R.Bankr.P. 7001, 7003.
In
addition, any objection to a proof of claim that asserts a claim
for relief of the kind listed in Rule 7001 may serve as a
complaint
commencing
an
adversary
proceeding.
See
Fed.R.Bankr.P. 3007.
Here, Plaintiffs did not file objections
to the proofs of claim in their bankruptcy cases; instead, they
filed the instant putative class action complaint alleging
violations related to the proofs of claim.
14

proceedings because they seek to recover “money for their actual
damages, statutory damages, attorneys’ fees and expenses, and
the same relief for the putative class” based on consumer law
violations.

(See ECF No. 16, at 3-4).

Plaintiffs’ objections

stem from the alleged invalidity of the proofs of claim – and
not the underlying debt – because Defendants allegedly did not
have a valid collection license at the time they filed proofs of
claim and subsequently collected payments.

Cf. Adair, 230 F.3d

at 896 (rejecting plaintiff’s FDCPA claim upon finding that he
was “attempting to use an FDCPA claim to attack the existence of
the underlying debt, a matter already determined definitively in
the bankruptcy proceeding.”).

Unlike in In re Varat Enters.,

Inc., Plaintiffs’ federal and state consumer law claims do not
stem from the same cause of action at issue in the confirmation
proceeding,

which

addressed

Furthermore,

as

the

confirmation

of

a

the

Fourth

existence

Circuit

bankruptcy

plan

reasoned
generally

of

debt.12

a
in

Cen-Pen,

cannot

have

preclusive effect on matters – enumerated in Rule 7001 – which
must be resolved in an adversary proceeding.
F.3d

at

93.

Although

generally,

once

a

Cen-Pen Corp., 58
bankruptcy

plan

is

confirmed, its terms are not subject to collateral attack, “[i]f

12

According to the Bankruptcy Code, any proof of claim
filed by a creditor is deemed allowed, unless a party in
interest objects.
See 11 U.S.C. § 502(a); In re Greenig, 152
th
F.3d 631, 633 (7 Cir. 1998).
15

an issue must be raised through an adversary proceeding it is
not part of the confirmation process and, unless it is actually
litigated, confirmation will not have a preclusive effect.”
Just

as

“[i]nitiation

of

an

adversary

proceeding

is

Id.
a

prerequisite to challenging ‘the validity or existence’ of a
lien

[under

Rule

7001(2),]”

so

too

is

an

initiation

of

an

adversary proceeding a prerequisite to recover money or property
under Rule 7001(1).
Defendants

Id.

respond

that

Plaintiffs’

claims

cannot

be

classified as actions “to recover money or property” under Rule
7001(1) because Plaintiffs do not seek to recover funds for the
bankruptcy
statutory

estate,
and

but

actual

instead
damages

misconduct under the FDCPA.

are
for

attempting
alleged

debt

to

recover

collection

In the complaint, Plaintiffs allege

that they have suffered actual damages and in their prayer for
relief they request recovery of actual damages for the alleged
violation of federal and state consumer laws.

This allegation

is sufficient to bring the claims within the purview of Rule
7001(1).

See In re Richard B. Dean and Brenda S. Dean v. Global

Fin. Credit, LLC, 359 B.R. 218, 222 (C.D.Ill. 2006) (rejecting
defendant’s argument that the debtors were not seeking recovery
of money or property under Rule 7001(1), but only sought to
recover sanctions for alleged contempt); see also In re Moses, 9
B.R. 370 (Bankr.N.D.Ga. 1981) (holding that a claim for damages
16

under

the

Truth

in

Lending

Act

required

an

adversary

proceeding).
Accordingly,

the

bankruptcy

court’s

confirmation

Chapter 13 plans does not serve as res judicata to
putative

class

action

for

alleged

violations

of

of

the

bar the

federal

and

state consumer laws.
B.

FDCPA, MCDCA, and MCPA Claims (Counts I, II, and III)

Defendants

argue

that

Plaintiffs

fail

to

state

a

claim

under the FDCPA because the filing of a proof of claim does not
constitute

an

act

to

collect

a

debt.

In

the

opposition,

Plaintiffs primarily argue that the FDCPA and the Bankruptcy
Code do not preempt each other, but offer nothing to support an
argument

that

filing

allegedly

unlawful

proofs

of

claim

constitutes collection activity within the meaning of the FDCPA.
The
collect[]

FDCPA
or

regulates

attempt[]

debt

to

collectors

collect,

directly

[consumer] debts owed [to] . . . another.”

who

“regularly

or

indirectly,

Heintz v. Jenkins,

514 U.S. 291, 294 (1995) (quoting 15 U.S.C. § 1692a(6)).

To

state a claim for relief under the FDCPA, Plaintiffs must allege
that

“(1)

the

plaintiff

has

been

the

object

of

collection

activity arising from consumer debt, (2) the defendant is a
debt[] collector as defined by the FDCPA, and (3) the defendant
has engaged in an act or omission prohibited by the FDCPA.”
Stewart, 859 F.Supp.2d at 759 (citation omitted).
17

The FDCPA states that “to be liable under the statute’s
substantive provisions, a debt collector’s targeted conduct must
have been taken ‘in connection with the collection of any debt,’
e.g.,

15 U.S.C. §§ 1692c(a)-(b), 1692d, 1692e, 1692g, or in

order ‘to collect any debt,’ id. § 1692f.”

Glazer v. Chase Home

Fin. LLC, 704 F.3d 453, 459-60 (6th Cir. 2013).
in

this

district

activities

violate

Receivables,

LLC,

have
the
765

held

that

FDCPA,

unlicensed

see,

F.Supp.2d

e.g.,

719,

729

Although judges
debt

collection

Bradshaw
(D.Md.

v.

Hilco

2011),

the

outcome determinative question is whether filing proofs of claim
constitutes debt collection activity within the meaning of the
FDCPA

and

the

state

consumer

laws,

which

also

collection activity as a prerequisite to recovery.13

13

require

a

The Fourth

At issue in Bradshaw v. Hilco Receivables, LLC was
whether defendant violated Maryland and federal consumer laws by
filing suit against Maryland debtors.
765 F.Supp.2d at 723.
The court stated that “it is clear that [defendant] is a debt
collector and has engaged in collection activity within the
meaning of the FDCPA as a result of its initiation of state
court lawsuits brought against [plaintiff] and the class
members.”
Id. at 727.
Although the court “declined to hold
that any violation of state law, no matter how trivial,
constitutes a per se violation of the FDCPA,” the court held
that a violation of state licensing law may support a cause of
action under the FDCPA, including when an unlicensed debt
purchaser files lawsuits to collect on debt in default as a
threat to take an action that cannot legally be taken.
Id. at
729; see also Hauk v. LVNV Funding, LLC, 749 F.Supp.2d 358, 36667 (D.Md. 2010) (indicating that a debt collector’s failure to
register under state collection law is pertinent to whether it
used unfair or unconscionable means to collect a debt).
The
Bradshaw court also concluded that consumers who are sued by
unlicensed debt collectors in violation of the MCALA may bring a
18

Circuit has yet to address this exact issue.

The majority of

courts, however, have held that filing proofs of claim, even if
unlawful, does not constitute debt collection activity.

A long

line of cases have held that the FDCPA is inapplicable to the
filing of proofs of claim in bankruptcy cases, “regardless of
whether the underlying claim is stale or invalid for any other
reason.”
(D.Mass.

In re Claudio v. LVNV Funding, LLC, 463 B.R. 190, 193
2012);

see

also

In

re

McMillen,

440

B.R.

907,

911

(Bkrtcy.N.D.Ga. 2010) (“[t]here are many cases where courts have
dismissed

complaints

holding

that

an

FDCPA

cause

of

action

cannot be based on filing a proof of claim during a bankruptcy
proceeding”);

Jacques

v.

U.S.

Bank

N.A.,

416

B.R.

63,

80

(Bkrtcy.E.D.N.Y. 2009) (holding that filing a proof of claim is
not a prohibited activity under the FDCPA).

claim for damages under the MCDCA and MCPA. As this case does
not involve collection efforts based on lawsuits to recover
money from consumers, Bradshaw is readily distinguishable.
Furthermore, to the extent Plaintiffs rely on Finch v. LVNV
Funding LLC, 212 Md.App. 748 (2013), for the proposition that
Defendants’ conduct is actionable under the MCPA and MCDCA, such
reliance is similarly misplaced.
Like Bradshaw, Finch did not
address whether an unlicensed debt collector’s filing of proofs
of claim in Chapter 13 bankruptcy proceedings constitutes
collection activity under the MCPA and MCDCA. Specifically, the
Court of Special Appeals of Maryland held that a judgment
entered in favor of an unlicensed debt collector constitutes a
void judgment as a matter of law; the court thus concluded that
because
the
underlying
judgments
are
void,
parties
may
collaterally attack such judgments in a circuit court action.
Finch, 212 Md.App. at 764.
19

As the Second Circuit held in Simmons v. Roundup Funding,
LLC, 622 F.3d 93, 95 (2d Cir. 2010), “[f]ederal 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 also Jenkins v. Genesis Fin.

Solutions and Vativ Recovery Solutions, LLC, 456 B.R. 236, 240
(Bankr.E.D.N.C. 2011) (“The court is not persuaded that filing a
proof of claim can constitute regulated ‘collection’ activity
within the meaning of [the FDCPA]”); In re Lisier v. Citibank,
N.A., Bkr. No. 09-17326PM, 2010 WL 4941475, at *2 (Bankr.D.Md.
Nov. 24, 2010) (recognizing the proposition “that the filing of
an inflated proof of claim in a bankruptcy case cannot form a
basis

for

a

claim

under

the

Fair

Debt

Collection

Practices

Act.”).
Furthermore, the court in In re Humes recently held, “as a
matter of law . . . a FDCPA claim cannot be predicated on a
creditor’s filing of a proof of claim.
policy dictate such a result.”

The Code, case law, and

In re Humes v. LVNV Funding,

L.L.C., et al., 496 B.R. 557, 581 (Brtcy.E.D.Ark. 2013).
Humes provides:
If filing a proof of claim constituted a
‘collection’ activity [under the FDCPA],
then filing proofs of claim under § 502(b)
20

In re

would be fundamentally at odds with language
in § 362(a)(6) providing that the filing of
a petition ‘operates as a stay, applicable
to all entities, of . . . any act to
collect, assess, or recover a claim against
the
debtor
that
arose
before
the
commencement of the case under this title.’
Id. (quoting Jenkins, 456 B.R. at 240) (emphasis in original);
see also In re Carter v. B-Line, LLC, Adversary No. 11-00069-8RDD,

2012

WL

627769,

at

*2

(Bkrtcy.E.D.N.C.

Feb.

24,

2012)

(dismissing case where plaintiff argued that “[b]y engaging in
the collection of debts without being licensed, the [d]efendant
was

engaging

in

an

unfair

practice

in

violation

of

North

Carolina General Statute § 58-70-115” because filing proofs of
claim did not constitute collection activity).14

The court’s

analysis in In re McMillen is also instructive:
[F]iling a proof of claim in bankruptcy
cannot be the basis for an FDCPA claim,
because it is not an activity against a
consumer debtor.
The FDCPA is designed to
regulate debt collection activities against
unsophisticated consumers.
To constitute a
debt collection activity under the FDCPA,
the activity must be asserted against a
consumer. The filing of a proof of claim is
a request to participate in the distribution
of
the
bankruptcy
estate
under
court
control.
It is not an effort to collect a

14

Although Plaintiffs argue that Section 1692e(5) forbids
threatening to take or actually taking “any action that cannot
legally be taken,” “the Bankruptcy Code and Rules allow the
action of filing a proof of claim on any type of non-fraudulent
debt.”
B-Real, LLC v. Rogers, et al., 405 B.R. 428, 433
(M.D.La. 2009).
21

debt from the debtor, who enjoys
protections of the automatic stay.

the

440 B.R. at 912.
Plaintiffs’

reliance

on

cases

in

their

opposition

concerning whether the Bankruptcy Code preempts FDCPA claims is
misplaced,

considering

the

threshold

issue

is

whether

filing

proofs of claim, even assuming they were unlawful, constituted
collection

activity

within

instance,

Plaintiffs

rely

the
on

meaning
an

of

opinion

the
from

FDCPA.
the

For

Seventh

Circuit, Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004), to
support their position of a viable FDCPA claim.

But as the

court in In re Claudio observed, “Randolph was not a case about
the filing of invalid or stale proofs of claim – in fact, it was
not about proofs of claim at all.”15
194.

In re Claudio, 463 B.R. at

Randolph dealt with the question of whether FDCPA claims

arising from a pending bankruptcy proceeding were categorically
precluded by the Bankruptcy Court.

Similarly, Plaintiffs cite

Kline v. Mortgage Elec. Sec. Sys., 659 F.Supp.2d 940 (S.D.Ohio
2009), for the broad proposition that the Bankruptcy Code does
15

Plaintiffs assert in the opposition that their claims,
under both federal and state statutes, “arise from Defendants’
failure to comply with Maryland state statutory provisions
requiring
collection
agencies
to
obtain
Maryland
state
licenses.”
(ECF No. 16, at 14).
Notably, the court in In re
Claudio observed that “even if the FDCPA did apply, it is far
from clear that the filing of a claim whose enforcement is
barred under state law would violate its provisions.” 463 B.R.
at 194.
22

not

preclude

FDCPA

claims.

In

Kline,

however,

the

court

rejected “the Report and Recommendation of the Magistrate Judge
to the extent that she recommended that the Court dismiss the
FDCPA claims of Jones and the Rosses, because the Bankruptcy
Code impliedly repeals their claims under that statute.”
951

(emphasis

added).

Consequently,

the

court

Id. at

in

Kline

concluded that the FDCPA claims could not be dismissed “on the
basis of the implicit repeal of [the FDCPA].”
added).

Id. (emphasis

Whether Plaintiffs’ FDCPA claim is precluded by the

Bankruptcy Code is a separate question, however, from whether
Plaintiffs pled a prima facie case under the FDCPA, MCPA, and
MCDCA.
The

same

logic

applies

with

equal

force

to

Plaintiffs’

claims alleging violations of the MCDCA and MCPA, which also
require Plaintiffs to show an attempt to collect a debt.

See

Wiseman v. First Mariner Bank, No. ELH-12-2423, 2013 WL 5375248,
at *25 (D.Md. Sept. 23, 2013) (“Both the FDCPA and MCDCA impose
a

variety

of

obligations

collectors”).

and

potential

Specifically,

the

liabilities

MCDCA

on

“prohibits

debt
debt

collectors from utilizing threatening or underhanded methods in
collecting

or

attempting

to

collect

a

delinquent

debt.”

Bradshaw, 765 F.Supp.2d at 731-32; see also Md. Code. Ann., Com.
Law § 14-202(8).

The MCPA likewise provides that “a person may

not engage in any unfair or deceptive trade practice,” such as a
23

“false

or

misleading

statement[

],”

in

relation

to

“[t]he

extension of consumer credit” or the “collection of consumer
debts.”

Md. Code Ann., Com. Law § 13-303(5).

Based

on

the

foregoing,

the

first

three

counts

of

Plaintiffs’ complaint will be dismissed.16
C.
Objections to Proofs of Claim (Count V) and Attorneys’
Fees (Count VI)
Plaintiffs’ so-called “claims” in Count V “Objections to
Proofs

of

Claim

and

Other

Bankruptcy

Relief”

and

Count

VI

“Attorneys’ Fees and Expenses in Obtaining Bankruptcy Relief”
are not independent causes of action, but rather requests for
relief.

Specifically, in count five, Plaintiffs request that

the court enter an order “providing that, without any additional
submission

or

filing

in

the

Maryland

Bankruptcy

Cases,

objections to each and every Proof of Claim filed by LVNV and/or
Resurgent on behalf of LVNV are deemed filed in an omnibus
objection by Named-Plaintiffs and the members of the Class in
the Maryland Bankruptcy Cases.”

(ECF No. 1, at 26).

Plaintiffs

state that “violations of the FDCPA and Maryland statutes are
bases for objections to each Proof of Claim filed by LVNV in the
Maryland

Bankruptcy

Cases.”

(Id.).

Indeed,

Plaintiffs

recognize that they seek relief through this count, as they

16

Because Named Plaintiffs’ FDCPA, MCDCA, and MCPA claims
cannot proceed, it is not necessary to reach the issue of
whether these claims are time-barred.
24

explicitly plead that “[t]his Court . . . should exercise that
jurisdiction and grant relief in favor of Named-Plaintiffs . . .
against LVNV and Resurgent to expedite the filing and resolution
of objections to any Proof of Claim filed by LVNV and such other
relief
(Id.).

necessary

to

address

Defendants’

illegal

conduct.”

Thus, Plaintiffs’ remedial request depends upon their

substantive causes of action alleging violations of the FDCPA,
MCPA, and MCDCA, which as explained supra, cannot proceed.
Similarly, in the final count of the complaint, Plaintiffs
assert
services

their

entitlement

rendered

and

to

recover

reimbursement

attorneys’
of

expenses

fees
upon

application filed pursuant to Fed.R.Bankr.P., Rule 2016.”
at 28).

“for
an
(Id.

The Supreme Court of the United States has recognized

that “the question whether a litigant has a ‘cause of action’ is
analytically distinct and prior to the question of what relief,
if

any,

Passman,

a

litigant

442

U.S.

may
228,

be
239

entitled
(1979).

to

receive.”
Because

an

Davis

v.

award

of

attorneys’ fees is a form of relief, it is not a standalone
cause of action.

See Carroll Co. v. Sherwin-Williams Co., 848

F.Supp.2d 557, 570 (D.Md. 2012); see also Hess Constr. Co. v.
Bd. of Educ., 341 Md. 155 (1996) (noting that attorneys’ fees,
when authorized, are generally either a statutory or contractual
remedy); White v. Harris, 23 F.Supp.2d 611, 616 (D.Md. 1998)
(“new Count VII – equitable relief and attorney’s fees – states
25

no separate cause of action, but merely requests an alternative
non-monetary form of relief.”).
Accordingly, these last two counts of the complaint will
also be dismissed.
IV.

Conclusion
For the foregoing reasons, Defendants’ motion to dismiss

will be granted.

A separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

26