Simon v. FIA Card Services, No. 12-3293; Third Circuit; opinion by Rosenthal, U.S.D.J.; filed October 7, 2013. Before Judges Rendell, Greenaway and Rosenthal, District Judge, sitting by designation. On appeal from the District of New Jersey, No. 3-12-cv-518. [Sat below: Judge Pisano.] DDS 15-8-xxxx [44 pp.]
Stacey and Robert Simon filed for bankruptcy protection under Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of New Jersey. The schedules submitted to the court identified an unsecured, nonpriority claim credit-card debt owed to Bank of America (now FIA). FIA retained Weinstein & Riley to represent it in the Simons’ bankruptcy proceeding.
W&R sent a letter to the Simons and their bankruptcy counsel stating that FIA was considering filing an adversary proceeding to challenge the dischargeability of the credit-card debt and offering to forgo the proceeding if the Simons stipulated that the credit-card debt was nondischargeable or agreed to pay a reduced amount to settle the debt. Attached to the letter was a notice of a Rule 2004 examination to be held at W&R’s New York City office, or an agreed-on alternate location.
The Simons filed a motion in the bankruptcy court to quash the examination notices on the ground that they failed to comply with the Bankruptcy Rule 9016 and Civil Rule 45 subpoena requirements, and an adversary proceeding asserting Fair Debt Collection Practices Act claims against FIA and W&R. The court quashed the notices and dismissed the FDCPA claims for lack of subject-matter jurisdiction.
The Simons then filed this action alleging that the letters and subpoenas violated 15 U.S.C. § 1692e(5), (11) and (13) of the FDCPA. The district court dismissed the FDCPA suit, with prejudice, finding that the claims were precluded by the bankruptcy code and that the complaint did not contain sufficient factual allegations to state a claim under the FDCPA. The Simons appeal.
Held: When FDCPA claims arise from communications a debt collector sends a debtor in a pending bankruptcy proceeding, and the communications are alleged to violate the bankruptcy code or rules, there is no categorical preclusion of the FDCPA claims. Nor is there a preclusion when there is no allegation that the communications violate the code or rules. The proper inquiry is whether the FDCPA claim raises a direct conflict between the code or rules and the FDCPA or whether both can be enforced.
The court rejects appellees’ contention that the FDCPA claims should be dismissed on the ground that the letter and notice sent to the Simons did not “attempt to collect a debt” because there was no demand for payment. To be liable under the FDCPA, a debt collector’s targeted conduct must have been taken in connection with the collection of a debt. “Debt collector” has been held to include an attorney who regularly engages in consumer-debt-collection activity. Thus, W&R’s actions constituted “debt collection” covered by the FDCPA.
Nor can the Simons’ claims be dismissed on the ground that the letter and notice were not “communications” under the act. A “communication” need only convey information regarding a debt and is not limited to specific requests for payment. Thus, the letters and subpoenas were a “communication” from a “debt collector” made “in connection with the collection of a debt.”
As to the subpoenas’ failure to disclose the method for recording the examination, the court holds that that failure did not violate Bankruptcy Rule 9016 or Civil Rule 45. Bankruptcy Rule 9016 provides that Civil Rule 45 applies to subpoenas issued in bankruptcy cases. Civil Rule 45(a)(1)(B) requires that a subpoena for a deposition must state the method for recording the testimony, but courts have recognized that a Rule 2004 examination differs from a deposition. Thus, Civil Rule 45 and Bankruptcy Rule 9016 did not require the subpoenas to state the method for recording the examinations.
Next, the court finds no reason to reverse the dismissal of the claim that appellees violated § 1692e(5) and (13) by issuing subpoenas from the District of New Jersey for examinations to be held in New York, since the subpoenas did not compel the Simons to appear only in New York.
As to the claim that appellees violated § 1692e(11) by failing to include in the letters the required “mini-Miranda” warning — that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose — the court rejects applying the “ competent attorney” standard because the inquiry under § 1692e(11) is whether the “mini-Miranda” disclosure was required and, if so, provided. The sophistication of the party receiving the communication is irrelevant to that inquiry. It rejects application of the standard to the § 1692e(5) and (13) claims that the subpoenas failed to comply with Civil Rule 45 and Bankruptcy Rule 9016 for the same reason.
The court then considers whether the bankruptcy code precludes the § 1692e(5) and (13) and § 1692e(11) claims.
It rejects the broad approach taken by the Ninth Circuit — that a debt collector’s communications to a consumer debtor in the context of a bankruptcy proceeding cannot be the basis for an FDCPA claim — and adopts that taken by the Seventh Circuit. It says that when, as here, FDCPA claims arise from communications a debt collector sends a bankruptcy debtor in a pending bankruptcy proceeding, and the communications are alleged to violate the bankruptcy code or rules, there is no categorical preclusion of the FDCPA claims. When there is no allegation that such communications violate the code or rules, there is even less reason for categorical preclusion. The proper inquiry for both circumstances is whether the FDCPA claim raises a direct conflict between the code or rules and the FDCPA, or whether both can be enforced.
The court then considers whether the FDCPA claims here present such a conflict with the bankruptcy code and rules as to preclude the claims.
To be valid, a subpoena must comply with Civil Rule 45′s requirements. Even if the Rule 2004 examination subpoenas did not comply with Bankruptcy Rule 9016 and Civil Rule 45, plaintiffs have remedies available under the code and rules. Appellees have not shown why the availability of these bankruptcy remedies would preclude the FDCPA claims for violating Civil Rule 45 and Bankruptcy Rule 9016 subpoena rules by failing to serve the subpoenas directly on the Simons and failing to include the text of Civil Rule 45(c)-(d) in the subpoenas. No conflict exists between the code or rule obligations and those plaintiffs seek to impose under the FDCPA. A creditor may comply with both. Nor is there a conflict between the remedies for noncompliance available under each. That the bankruptcy court has other means to enforce compliance with the subpoena rules does not conflict with finding liability or awarding damages under the FDCPA for violations based on a debt collector’s failure to comply with the subpoena rules.
Finally, the code’s automatic stay provision forbids any act to collect, assess or recover a claim against the debtor that arose before the commencement of the bankruptcy proceeding. Several courts have held that sending a § 1692e(11) notice violates the automatic stay. If a § 1692e(11) claim could arise from the absence of the mini-Miranda notice in the letters and subpoenas, the firm would violate the code’s automatic-stay provision by including the notice or violate the FDCPA by not including it. This conflict precludes allowing the § 1692e(11) claim.
The dismissal of the § 1692e(5) and (13) claims for violating the Civil Rule 45 and Bankruptcy Rule 9016 subpoena rules by failing to identify the recording method in the Rule 2004 examination subpoenas and by issuing the subpoenas from a district other than where the examinations were to be held is affirmed. The dismissal of the § 1692e(11) claim is affirmed because the mini-Miranda requirement conflicts with the automatic-stay provision of the code. The dismissal of the § 1692e(5) and (13) claims for failing to serve the subpoenas directly on the Simons and to include the text of Civil Rule 45(c)-(d) in the subpoenas is reversed.
For appellants — Andy Winchell. For appellees — Kenneth S. Jannette and Susan Power Johnston, of the N.Y. bar (Weinstein & Riley).