The Eleventh Circuit will decide by this fall whether the federal Fair Debt Collection Practices Act is a dead letter or a valuable weapon in the hands of a bankrupt. The pivotal case, Johnson v. Midland Funding LLC, is scheduled for argument during the week of April 11.
The Eleventh Circuit handed down LVNV Funding LLC v. Crawford in 2014, holding that the filing of a stale claim in bankruptcy is in violation of the FDCPA. The appeals court said it was trying to stop a practice where debt collectors file claims in bankruptcy even though they know the debts are barred by the statute of limitations.
Crawford did not decide whether the later adoption of the Bankruptcy Code impliedly repealed the FDCPA. Two other circuits have held that debtors cannot sue under the FDCPA, at least for actions taken by the creditor before discharge. Implied repeal is the issue to be argued in Johnson.
If the Eleventh Circuit uses Johnson to hold, like the Seventh Circuit, that courts can enforce both the FDCPA and the Bankruptcy Code in parallel, there will be a heightened split of circuits and fodder for a certiorari petition.
Meanwhile, the debtor’s lawyers in Crawford won a decision last week from a bankruptcy judge in Alabama showing why the FDCPA is an important tool in the hands of a bankrupt. The case also entailed a debt collector that filed proofs of claim based on time-barred debts. The debtor-plaintiffs only sought and ultimately received $1,000 in statutory damages for violating the FDCPA. The statute automatically awards attorneys’ fees to a successful plaintiff.
In his decision on March 17, Bankruptcy Judge William R. Sawyer of Montgomery, Ala., gave the debtor-plaintiffs’ lawyer about $36,000 out of a requested $46,500 in fees, even though each plaintiff only took home $1,000 in damages.
Judge Sawyer said the debt collector “could have simply offered to settle” because each case only entailed a threat of $1,000 in damages. Instead, he said, the defendants “have waged a war of attrition, engaging in conduct designed to harass and inconvenience the plaintiffs.”