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Dreher Tomkies LLP
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BANKRUPTCY PROOF OF CLAIM NOT BASIS FOR FDCPA ACTION

The United States Court of Appeals for the Second Circuit recently held that a proof of claim filed in bankruptcy court cannot form the basis for a claim under the federal Fair Debt Collection Practices Act. Simmons v. Roundup Funding, LLC, 2010 WL 3859609 (2nd Cir. 2010). The proof of claim at issue had been filed by Roundup in the Simmons’ bankruptcy proceeding in the amount of $2,039.21, which the bankruptcy court eventually reduced to $1,100. The Simmons then filed a class action alleging violation of the FDCPA based on misrepresentation of the Simmons’ debt. The district court granted the defendants’ motion to dismiss on the grounds that an inflated proof of claim could not form the basis of a claim under the FDCPA as a matter of law.

In reviewing the motion to dismiss, the appellate court noted that federal courts consistently have ruled that proofs of claim (even if they are invalid) cannot serve as the basis of an FDCPA violation. The appellate court also noted that the protection of defenseless debtors provided by the FDCPA is not necessary for debtors already protected by the bankruptcy court. Bankruptcy, as the court pointed out, provides remedies for wrongfully filed proofs of claim, including revocation of fraudulent proofs of claim and use of the court’s contempt power. The court noted that the Simmons sought neither of these remedies before filing their FDCPA action. The court agreed with other courts’ findings that a debtor should not be permitted to bypass the safeguards of the Bankruptcy Code in order to bring what may be a more lucrative claim under the FDCPA. Thus, the court held that filing a proof of claim in bankruptcy court cannot form the basis for an FDCPA claim.

While the court made its point firmly, it noted that other courts have ruled more broadly, that no FDCPA action can be based on an act that violates any provision of the Bankruptcy Code because such violations are within the exclusive purview of the Bankruptcy Code. This rule has not universally been followed. See Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004). The Simmons court noted that it was not compelled to consider the broader rule in this case.

DAILY CALLS NOT HARASSMENT

The United States District Court for the Eastern District of California recently held on a motion for summary judgment that a series of collection calls did not violate either the federal Fair Debt Collection Practices Act or the California Rosenthal Fair Debt Collection Practices Act. Arteaga v. Asset Acceptance, LLC, 2010 WL 3310259 (E.D. Cal. Aug. 23, 2010), reconsideration den. (Sept. 15, 2010). The case involved collection calls alleged by the plaintiff to have been made “daily” or “real close to daily” which the plaintiff characterized as “constantly and continuously.” Although the defendant disputed the plaintiff’s characterization of the calls as “daily,” it admitted that its collectors attempted to reach the plaintiff 18 times (each on a different day) over a six month period. The defendant asserted that it placed the calls in order to contact the plaintiff to arrange payment, and not with any intent to annoy, abuse or harass the plaintiff. The plaintiff admitted that she did not know how many times the defendant called, despite caller ID and an answering machine on which records indicated two messages were left during the period, and that she was also getting calls “every few days” from a different collection agency during the same period.

The plaintiff claimed violations of FDCPA Sections 1692d (prohibiting debt collectors from engaging in “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt”) and 1692d(5) (specifying that harassment, oppression or abuse includes “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number”). In examining these claims, the court first noted that it would apply a standard similar to the “least sophisticated debtor” standard (i.e., that it would view the claims from the perspective of a consumer who is relatively more susceptible to harassment). It also noted that the pattern of calls, and not just the volume, determines whether the harassment is actionable.

The court reviewed existing case law determining that conduct constituting harassment or raising an issue of fact as to whether harassment has occurred includes (i) immediately recalling a debtor after the debtor has hung up, (ii) continuing to call a debtor after the debtor has requested that the debt collector cease communication,

(iii) calling the debtor at the work place or at inconvenient hours, or calling the debtor’s friends or family, or (iv) calling the debtor multiple times in the same day or in a short period of time. The court found that none of this egregious conduct was present in the instant case and that the defendant’s conduct as presented did not constitute harassment as a matter of law under Section 1692d or raise a triable issue of fact under Section 1692d(5). The court noted that there was no support for the notion that the “daily” or “nearly daily” calls alone would necessarily raise an issue of fact.

The court applied the same analysis to the plaintiff’s Rosenthal FDCPA claims, concluding that the alleged “daily” calls in question failed to raise a genuine issue of material fact as to whether the communications were so frequent as to be unreasonable or to constitute harassment under the circumstances, whether in volume or by pattern.

  • Mike Tomkies and Margaret Stolar