Randolph vs. IMBS Inc. et al. 368 F.3d 726 (7th Cir. 2004)
The Bankruptcy Code does not exist in a vacuum. Inevitably, there will be overlap between the Code and other federal and state statutes. Federal preemption resolves many of the conflicts that arise with state laws. However, where the Bankruptcy Code and another federal statute both address the same conduct, no clear guidelines exist to determine which prevails. Courts must look to principles of statutory construction and interpretation, as well as the underlying statutory policies and congressional intentions when there is a potential conflict among federal statutes, because, fundamentally, each federal statute has equal effect under the law. Baldwin vs. McCalla, Raymer, Padrick, Cobb Nichols amp; Clark LLC, 1999 WL 284788 at *7 (N.D. Ill.) citing United States v. Palumbo Bros. Inc., 145 F.3d 850, 862 (7th Cir. 1998).
One statute with the inherent potential for inconsistency with the Bankruptcy Code is the Fair Debt Collection Practices Act. 15 U.S.C. §1692 et seq. (“FDCPA”). The FDCPA “was designed to protect against the abusive debt collection practices likely to disrupt a debtor’s life.” Baldwin, supra at 11, citing Mace vs. Van Ru Credit Corp., 109 F.3d 338, 343 (7th Cir. 1997). To that end, the FDCPA provides a framework for debt collection that includes mandatory notices to debtors, prohibitions of certain practices designed to harass, confuse and coerce debtors, and strict liability damages for violations of the Act.
However, when a debtor files for bankruptcy protection, a troublesome conflict arises. Specifically, can a debt collector be held liable for damages pursuant to the FDCPA for actions taken during and after the bankruptcy case when the Bankruptcy Code already provides remedies for such actions? This question is important when considering that the FDCPA is a strict liability statute while the Bankruptcy Code’s automatic stay and discharge injunction provisions call for only “willful” violations to be penalized. Many previous decisions had held that Bankruptcy Code violations were properly and exclusively addressed by bankruptcy remedies, only. See e.g. Baldwin, supra; Cooper vs. Litton Loan Servicing et. al., 253 B.R. 286 (Bankr. N.D. Fla. 2000); Gray-Mapp vs. Sherman, et. al. 100 F.Supp.2d 810 (N.D. Ill. 1999); Hubbard vs. National Bond and Collection Associates Inc., 126 B.R. 422 (D. Del. 1991). But see, Peeples vs. Blatt, 2001 WL 921731 (N.D. Ill) (FDCPA claim for post-discharge collection activities can be determined without doing violence to the Bankruptcy Code’s purpose of adjudicating all claims in a single proceeding, citing Wagner vs. Ocwen Federal Bank, FSB, 2000 WL 1382222 (N.D. Ill. 2001)). See also, Molloy vs. Primus Auto. Fin. Servs., 247 B.R. 804 (C.D. Cal. 2000) (holding that a debtor discharged in bankruptcy is still in need of and entitled to protection under the FDCPA when acts complained of occurred after the discharge.)
In Randolph, the 7th Circuit addressed this superficially apparent tension between the automatic stay (11 U.S.C. §362) and injunction protections (11 U.S.C. §524) of the Bankruptcy Code, and the remedial provisions of the FDCPA. The lower court had ruled that §362 of the Bankruptcy Code “preempts” the strict liability provision of the FDCPA (11 U.S.C. §1692e(2)(A)). The 7th Circuit disagreed and noted that one federal statute cannot preempt another. Rather, “[w]hen two federal statutes address the same subject in different ways, the right question is whether one implicitly repeals the other—and repeal by implication is a rare bird indeed. …It takes either irreconcilable conflict between the statutes or a clearly expressed legislative decision that one replace the other.” 368 F.3d at 730.
The 7th Circuit found that, rather than these statutes presenting an irreconcilable conflict resulting in preemption of one statute by another (i.e., Bankruptcy statute trumps FDCPA), there exist operational overlaps that do not preclude the compliance with, and enforcement of, both statutes. “Overlapping statutes do not repeal one another by implication; as long as people can comply with both, then courts can enforce both.” Id. at 31.
This decision stands as a clear statement on the availability of FDCPA claims for violations of the provisions of the Bankruptcy Code. The 7th Circuit supported its conclusion by relating a long history of decisions by the U.S. Supreme Court permitting the coexistence of overlapping statutory coverages, even where not completely harmonious. Applying that concept to the facts of the case, the Court opined that, “[i]t would be better to recognize that the statutes overlap, each with coverage that the other lacks…. They are simply different rules, with different requirements of proof and different remedies.” 368 F.3d at 731–32. As a result, at least in the 7th Circuit, a cause of action for impermissible collection practices may be shown by a bankrupt debtor under either the Bankruptcy Code or the Fair Debt Collection Practices Act or, potentially, both, each with its own evidentiary requirements and remedies.