Ward v. Midland Credit Management, Inc.

Filing 15

OPINION MEMORANDUM AND ORDER: HEREBY ORDERED that Defendant's Motion to Dismiss [Doc. No. 8 ] is GRANTED. IT IS FURTHER ORDERED that this matter is DISMISSED. An appropriate Judgment will accompany this Opinion, Memorandum and Order. Signed by District Judge Henry Edward Autrey on 08/14/2015. (CLK)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
MELVIN WARD,
Plaintiff,
v.
MIDLAND CREDIT MANAGEMENT,
INC.,
Defendant,

)
)
)
)
)
)
)
)
)
)

No. 4:15CV814 HEA

OPINION, MEMORANDUM AND ORDER
This litigation is before the Court having been removed to this Court pursuant to 28
U.S.C. § 1446(a), based on the Court’s federal question jurisdiction, 28 U.S.C. § 1331.
This matter is before the Court on Defendant’s Motion to Dismiss Plaintiff’s Complaint.
[Doc. No. 8].1 Plaintiff has filed a Response in opposition to the Motion. [Doc. No. 12].
Defendant has filed a Reply. [Doc. No. 13]. Additionally, Defendant filed a Notice of
Supplemental Authority. [Doc. No. 14]. For the reasons set forth below, the Motion is granted.
Background 2
Plaintiff Melvin Ward filed this action in the Circuit Court for the City of St. Louis,
Missouri, on April 23, 2015. Therein, Plaintiff alleges that Defendant Midland Credit
Management, Inc., violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq.
(“FDCPA”) by filing a proof of claim in Plaintiff’s bankruptcy proceedings on an alleged debt
that was time-barred by the applicable statute of limitations. On March 14, 2015, Plaintiff filed

1

Plaintiff’s pleading is tilted a “Petition” because it was originally filed in state court. As the parties refer to the
pleading as a “Complaint,” the Court will do so as well for consistency.

2

The recitation of facts is taken from Plaintiff’s First Amended Complaint and are taken as true for the purposes of
this motion. Such recitation in no way relieves any party from the necessary proof thereof in later proceedings.

an Objection to Claim against Defendant. The bankruptcy court sustained Plaintiff’s Objection,
and ordered Defendant’s claim disallowed in its entirety on April 7, 2015.
Standard
A complaint must set out a “short and plain statement of [a plaintiff’s] claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To test the legal sufficiency of a
complaint, a defendant may file a motion to dismiss for failure to state a claim upon which relief
can be granted. Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007)). In other words, a plaintiff must plead facts from which the court can draw
a “reasonable inference” of liability. Iqbal, 556 U.S. at 678. The complaint need not contain
“detailed factual allegations” but must contain more than mere “labels and conclusions, and a
formulaic recitation of the elements” or “naked assertion[s]” devoid of “further factual
enhancement.” Twombly, 550 U.S. at 555, 557. An “unadorned, the-defendant-unlawfullyharmed-me accusation” will not suffice. Iqbal, 556 U.S. at 678. “While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations,” id. at 679,
which “raise a right to relief above the speculative level,” Twombly, 550 U.S. at 555.
Under Twombly and Iqbal, “[a] plaintiff . . . must plead facts sufficient to show that her
claim has substantive plausibility.” Johnson v. City of Shelby, 135 S. Ct. 346, 347 (2014). If the
plaintiff “inform[s] the [defendant] of the factual basis for [her] complaint, [she] [is] required to
do no more to stave off threshold dismissal for want of an adequate statement of [her] claim.” Id.
In evaluating a motion to dismiss, the court can “choose to begin by identifying pleadings
that, because they are no more than conclusions, are not entitled to the assumption of truth.”
Iqbal, 556 U.S. at 679. Turning to any “well-pleaded factual allegations,” the court should

-2-

“assume their veracity and then determine whether they plausibly give rise to an entitlement to
relief.” Id. The court may only consider the initial pleadings. Brooks v. Midwest Heart Grp., 655
F.3d 796, 799 (8th Cir. 2011).
Discussion
Plaintiff alleges that Defendant, through filing a proof of claim on a stale debt in
Plaintiff’s bankruptcy proceedings, violated various provisions of the FDCPA. Specifically,
Plaintiff alleges that Defendant violated: (1) Section 1692d-f, by threatening action Defendant
had no intention of taking, including misrepresenting that it possessed a legal right to enforce
payment on Plaintiff’s alleged debt; (2) Section 1692(e), by falsely representing the legal status
of a debt; (3) Section 1692e-f, by filing a proof of claim on an alleged debt when the last alleged
payment on the debt was older than the applicable statute of limitations; (4) Section 1692e, by
using false, deceptive, and misleading tactics to collect the debt; and (5) Section 1692d-f, by
engaging in harassing, abusive, unfair, and unconscionable conduct in the collection of a debt.
Plaintiff relies primarily on Crawford v. LVNV Funding, LLC, an Eleventh Circuit case
which held that “[the defendant’s] filing of a time-barred proof of claim against [the plaintiff] in
bankruptcy was ‘unfair,’ ‘unconscionable,’ ‘deceptive,’ and ‘misleading’ within the broad scope
of” the FDCPA. 758 F.3d 1254, 1261 (11th Cir. 2014). Some courts—primarily district courts in
the Seventh Circuit—have followed Crawford. See, e.g., Reed v. LVNV Funding, LLC, No. 14 C
8371, 2015 WL 1510375 *6 (N.D. Ill., March 27, 2015); Patrick v. Quantum3 Group, LLC, 2015
WL 627216 (S.D. Ind. 2015); Matter of Sekema, 523 B.R. 651, 653 (Bankr. N.D. Ind. 2015).
In moving for dismissal, Defendant argues that “an ‘FDCPA claim cannot be predicated
on a creditor’s filing of a proof of claim,’” and therefore “‘[f]iling a proof of claim subject to a
limitations defense does not violate the FDCPA,’” particularly because “creditors such as
[Defendant] are entitled to file proofs of claim even for stale debts.’” [Doc. No. 9 at 1] [quoting

-3-

In re Humes, 496 B.R. 557, 581 (Bankr. E.D. Ark. 2013); In re Dunaway, No. 14-41073-13DRD, 2015 WL 2414866, at *3 (Bankr. W.D. Mo. May 19, 2015) (alteration in original); In re
Gatewood (Gatewood v. CP Medical, LLC), No. 5:14-ap-7068, Doc. 28 at 10 (Bankr. W.D. Ark.
Feb. 6, 2015)).
In addition to the above-cited cases from bankruptcy district courts within the Eighth
Circuit, Defendant relies upon a case from the District of Minnesota, which also held that “an
FDCPA claim cannot be premised on proofs of claim filed during the bankruptcy proceedings.”
Middlebrooks v. Interstate Credit Control, Inc., 391 B.R. 434, 437 (D. Minn. 2008) (quotation
omitted). Defendant further relies on many district court cases from other circuits that have come
to the same or similar conclusions. See, e.g., In re Broadrick, 532 B.R. 60 (Bankr. M.D. Tenn.
2015); Birtchman v. LVNV Funding, LLC, 2015 WL 1825970 (S.D. Ind. Apr. 22, 2015); Owens
v. LVNV Funding, LLC, 2015 WL 1826005 (S.D. Ind. Apr. 21, 2015); Donaldson v. LVNV
Funding, LLC, 2015 WL 1539607 (S.D. Ind. Apr. 7, 2015); Torres v. Asset Acceptance, LLC,
No. 14-CV-6542, 2015 WL 1529297 (E.D. Pa. Apr. 7, 2015); Johnson v. Midland Funding, LLC,
528 B.R. 462, 469 (S.D. Ala. 2015); In re LaGrone, No. 14-AP-00578, 2015 WL 273373, at *8
(Bankr. N.D. Ill. Jan. 21, 2015). The court in Broadrick recently explained its view that:
The FDCPA should not be implicated with regard to stale debts when a creditor
merely (a) files an accurate proof of claim in a bankruptcy case, (b) when the
proof of claim includes all the required information including the timing of the
debt, (c) the applicable statute of limitations is one that does not extinguish the
right to collect the debt but merely limits the remedies, and (d) no legal
impediment to collection or factual circumstances exist that would invoke the
FDCPA other than merely the applicability of a statute of limitations.
Broadrick, 532 B.R. at 75. The Broadrick court made clear that it was not adopting a sweeping
view that the FDCPA may never be applicable to actions taken in bankruptcy proceedings. Id. at
74–75.

-4-

Last month, the United States Bankruptcy Appellate Panel for the Eighth Circuit (“BAP”)
“found compelling” the Broadrick court’s reasoning. In re Gatewood, ___ B.R. ___, 2015 WL
4496051, at *5 (B.A.P. 8th Cir. July 10, 2015).
Given the imbalance in the case law, with scales tipped in favor of Defendant’s position,
as well as the holding of this Circuit’s BAP in Gatewood, 3 and the vast differences between
lawsuits filed against individuals and to collect on debts versus proofs of claims filed in
bankruptcy cases, 4 this Court will adopt and apply the Broadrick analysis.

3

The BAP’s holding is persuasive, though not binding on this Court. In re Watkins, 461 B.R. 57, 60 n.2 (W.D. Mo.
2011) (citing In re Pepmeyer, 273 B.R. 782, 785 (N.D.Iowa 2002); In re Williams, 257 B.R. 297, 301 n. 5 (Bankr.
W.D. Mo.2001)).

4

One court explained, these differences thusly:
First, in collection lawsuits, the debtors themselves must assert the statute of limitations in an
answer. Debtors in bankruptcy cases, on the other hand, have the benefit of a trustee with a
fiduciary duty to all parties to examine proofs of claims and object to the allowance of any claim
that is improper.
Second, a debtor in bankruptcy has much less at stake in the allowance of a proof of claim than a
defendant facing the prospect of an adverse judgment in a collection lawsuit. A proof of claim
does not result in collection from the debtor personally but seeks only a share in the total payments
available to all of the debtor’s creditors. This is most obvious in a Chapter 7 case, where the
debtor’s nonexempt assets are the sole source of payments to creditors and where it is rare for the
value of these assets to exceed the amount of the debt. Accordingly, in most Chapter 7 cases, the
debtor has no standing to object to claims. In Chapter 13, creditors are paid through a plan the
debtor proposes, but in a case like the present one, where the debtor is proposing to pay the
creditors less than the full amount of their claims, the effect is similar to Chapter 7: the debtor will
pay the same total amount to creditors, regardless of whether particular proofs of claim are
disallowed.
Third, in a collection lawsuit a consumer debtor would have to retain and likely pay for the
services of a lawyer. Debtors in bankruptcy, by contrast, are likely from the outset of the case to
be represented by an attorney who can both advise them about the existence of a statute of
limitations defense and file an objection if the trustee does not.
Finally, even if the trustee fails to file a claim objection based on the statute of limitations, even if
filing a claim objection would have a significant benefit for the debtor, and even if the debtor did
not have legal assistance, it would be easier—and less embarrassing—for the individual debtor to
file a claim objection pro se than to deal with an untimely collection lawsuit. Under Bankruptcy
Rule 3001(c)(3), a claim for credit card debt—such as the one at the center of this adversary
proceeding—must list the creditor who held the debt at the time of the account holder's last
transaction, the date of the last transaction, the date of the last payment, and the date the account
was charged to profit or loss. As explained in the Advisory Committee Notes to the 2012
Amendments, these required disclosures were designed to “provide a basis for assessing the
timeliness of the claim.” So unlike the consumer who has only the information required in a state
court complaint, a debtor in bankruptcy should always have the information needed to determine
whether the statute of limitations for a claim has expired. And unlike the situation in a collection
action, where a consumer debtor would need to become acquainted with the applicable procedures
and make a potentially embarrassing appearance, the debtor in a bankruptcy case would be

-5-

Here, the parties do not dispute the following: Defendant filed an accurate proof of claim
in Plaintiff’s bankruptcy proceedings; the proof of claim included all of the required information
including the timing of the debt; the applicable statute of limitations is one that does not
extinguish the right to collect the debt but merely limits the remedies; 5 and no legal impediment
to collection or factual circumstances exist that would invoke the FDCPA other than merely the
applicability of the applicable statute of limitations. Broadrick, 532 B.R. at 75.
The Court therefore finds that the FDCPA should not be implicated and will grant
Defendant’s Motion, and dismiss this case.
Conclusion
Based on the foregoing, the Court grants Defendant’s Motion to Dismiss.
Accordingly,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss [Doc. No. 8] is
GRANTED.
IT IS FURTHER ORDERED that this matter is DISMISSED.
An appropriate Judgment will accompany this Opinion, Memorandum and Order.
Dated this 14th day of August, 2015.

HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE

involved in the case before the untimely proof of claim was filed and would already be familiar
with the procedures for filing documents with the court.
LaGrone, 525 B.R. at 426–27 (citations omitted).
5

In Missouri, “statutes of limitations ‘merely suspend the remedy without extinguishing the right.’” Discovery Grp.
LLC v. Chapel Dev., LLC, 574 F.3d 986, 990 (8th Cir. 2009) (quoting Rincon v. Rincon, 571 S.W. 2d 475, 476 (Mo.
Ct. App. 1978)).

-6-