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Midland Funding, LLC., has filed a petition for certiorari seeking Supreme Court review of the Eleventh Circuit decision in Johnson v. Midland Funding, LLC., 2016 U.S. App. LEXIS 9478, No. 15-11240 (May 24, 2016), petition for cert. filed, No. 16-348, (Sept. 16, 2016). In Johnson, the court expanded its earlier decision in Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014), cert. denied, ___ U.S. ___, 135 S.Ct. 1844, 191 L.Ed.2d 724 (2015), to find that not only does a proof of claim on a time-barred debt violate the FDCPA, but the FDCPA claim is not in conflict with, nor is it precluded by, the Bankruptcy Code.
Also pending on cert. petition is a case out of the Seventh Circuit where that court disagreed with the Eleventh Circuit and found that filing a proof of claim for a time-barred debt violates neither the Bankruptcy Code nor the FDCPA. Owens, et al. v. LVNV Funding, LLC., No. 16-315, (petition for cert. filed Aug. 26, 2016). Finding that the debt collector’s conduct did not violate either statute, the court did not address the issue of preclusion of one federal statute by a later-enacted statute.
Like the Owens court, the Fourth and Eighth Circuits have found that a proof of claim on a time-barred debt does not violate the FDCPA or the Bankruptcy Code. Dubois v. Atlas Acquisitions, LLC. No. (4th Cir. Aug. 25, 2016); Nelson v. Midland Credit Management, Inc., No.15-2984 (8th Cir. July 11, 2016).
The Second Circuit has also touched on the issue. In Garfield v. Ocwen Loan Servicing, LLC., 811 F.3d 86 (2d Cir. 2016), the court held that a debtor who has received a claim on a debt that has been discharged in a bankruptcy proceeding is not required to seek relief in the bankruptcy court but may sue the claimant in a district court under the FDCPA. That court found that the “Bankruptcy Code does not broadly repeal the FDCPA for purposes of FDCPA claims based on conduct that would constitute alleged violations of the discharge injunction.” See also Simon v. FIA Card Services, N.A.,732 F.3d 259 (3d Cir. 2013), concluding that the bankruptcy Code effected “no broad preclusion” of FDCPA claims. In Garfield, however, the Second Circuit distinguished its earlier decision in Simmons v. Roundup Funding, LLC, 622 F.3d 93 (2d Cir. 2010), in which it held that the FDCPA does not authorize suit during the pendency of bankruptcy proceedings based on an allegedly inflated proof of claim.
The issue is currently under consideration in the Sixth Circuit, Broadrick v. LVNV Funding, No. 16-5042, and the Third Circuit, Torres v. Calvary SPVI, No. 15-2131.