hear argument next in case sixteen three forty eight midland funding versus johnson mr chairman graham thank you mr chief justice and may it please the court the bankruptcy code sets up a process for evaluating claims that are subject to potential limitations defenses under that process a creditor seeking to collect on a debt files or proof of claim for certain types of consumer debt the creditor also includes information to enable the trustee and other parties in interest to assess the claims timeliness and where appropriate to object a creditor is not required to go further and to certify that there is no valid limitations defense to its own claim if that is exactly what respondent and the government are asking this court to do under the guise of surprisingly is no our view is that there would be nothing misleading or unfair about the suit in that instance but this court need not address that issue in order to resolve the question presented here and indeed the courts of appeals that have accepted our view have largely assumed that the filing of a suit in state court presents different considerations from the filing of a proof of claim in bankruptcy and that is for the simple reason that there are distinctive characteristics about the operation of the bankruptcy system first and perhaps most importantly the bankruptcy system defines the term claim quite broadly to include any circumstance in which there is a right to payment and as this court held in butner whether or not there is a right to payment is defined under state law and alabama law is clear that the running of the limitations period does not extinguish the right the right remains and so for instance if the debtor take some action to make repayment the right springs into life indeed the right never disappears in the first place but the right once again becomes judicially enforceable are there any circumstances just as a practical matter where the trustee decides that the trustee is going to pay the time obviously prejudicial to the other creditors are there any ever ever just trying to think of that i could i can't think of any instance in which a trustee would want to i was thinking suppose that the debtor wanted to continue a business relation with the with with the creditors that  is time barred from the national but i just can't think of any instance and justice kennedy i can't think of such an instance either and i think that's precisely because the trustee has the statutory duty to  preserve the assets of the estate and to do so for the creditors and again that is a critical feature of the bankruptcy so i'm sorry i'm difficulty with this business completely you you creditors and you say to them you don't have to pay me but out of the goodness of your heart you should already just call them up and say you will mean money and you hope that they'll pay you and this is the same thing in bankruptcy court you filed the claim and you hope the trustee doesn't see that it's out of time and apparently you collect on millions of dollars of these tents so it's not what you do so just a sort of mark my or i do not think that that is a valid understanding of our business model and let me explain why first this debt was not at the time it was purchased and indeed mid month my client makes every effort not to purchase time our debt now of course they're not always correct in their assessments and debt that is not time art at the time  in this case to believe he got that there was not time where is filed this claim forget about some of the others just to be clear there is actually no allegation in this case that we knew that there was a valid limitations defense if you take a look at the complaint in this case and if you take a look at page twenty five of the joint appendix in particular all that the complaint alleges is that we were aware of the very facts that we disclosed in the proof of claim facts that to be sure indicated the existence of a potential limitations defense because after all a good faith basis to believe the statute of limitations is not midland at the time would file proofs of claim without conducting some sort of exhaustive inquiry and that's for the simple reason that midline did not believe that that was legally required and so again there's no record on this what do you do with the committee  that's that everyone who files with proof of claims asked an obligation to do a good faith inquiry as to whether it's in an forcible obligation or i don't think that that is an accurate characterization of what the advisory committee did and what we've heard not what they do what they say i don't think that's an accurate characterization of what they said either and let me explain why that's true first of all let me set out what the advisory committee actually did because that's a critical part of our argument in rule thirty zero one c three which was adopted in two thousand and twelve the advisory committee required certain disclosures the whole point of which was to put trustees and other parties in interest on notice of the potential availability of limitations to facts and the advisory committee thought about going further it thought about doing again exactly what respondent in the government are asking this court to do under the f t c v a namely to require a certification that having investigated the existence of limitations defense the creditor had made a determination that there was no valid such defense now the advisory committee decided not to do that justice sotomayor and it decided not to do that for two critical reasons the first was that the advisory committee recognized that the question of whether or not there is a valid limitations defense as a quote as opposed to the question of whether or not the claim appears to be could be complicated and it could be complicated even in the context of consumer debts like these ones because of the potential for revival and tolling choice of law issues and the like the second reason your foot if if that is true that you investigated and you had a good faith basis for believing that it wasn't time you wouldn't be liable either under the bankruptcy rules or under the bitter ruse so but the point is contemplates and this goes to the second reason why the advisory committee did not go further the advisory committee expressed the concern that if it had gone further it could be violating the bankruptcy rules enabling act because it would be acting  eighty six of the agenda book where the advisory committee working group discusses the proposal to require creditors to quote state whether the claim is timely under the relevant statute of limitations but let me explain that point in a little more detail because i do think that this is really important to understanding our argument here the way that the bankruptcy code operates is first that a party is entitled a creditor is entitled to file a proof of claim where they have a payment and at that point the burden shifts the claim is presumptively valid and if there is an issue concerning the enforceability of the claim that is an issue that has to be raised by the trustee or by another party in interest or else the claim will be allowed now what i think respondent and the government are trying to do here is to really allied to separate concepts the question of validity on the one hand and the question of enforceability on the other and i think respondent in particular is attempting to somehow build the concept of enforceability into the definition of a claim but how we know that that is not true by virtue of the fact that in section five zero to be the statute the code specifically provides that in force ability is a basis for objecting and for disallowing a claim it doesn't go to the question of whether or not you have a valid claim in the first place so once again hundred seventy eight when congress adopted the bankruptcy code it docked at this broad definition of claim to bring claims into the bankruptcy estate so there is contingent on maturity these are  may not be enforceable today but it might be in the future i agree with the first half of your question but not the second justice that i or because you're right the code talks about an entitlement payment but that is precisely what we have here and to the extent that the code includes as examples of types of rights to payment contingent claims or an mature and claims that illustrates that the definition of claim includes rights to payment that may not be presently enforceable again the question of enforceability is a question that arises with regard to objections it does not relate to the question of an entitlement to follow a claim and this is critical to understanding how the bankruptcy code works and how the bankruptcy code works in turn informs the application of the actual language of the f t c the f t c p a which is after all the question before this court before you get to that language mr shand again could you just you know just from a common sense basis it seems hard to understand why congress would want all these unenforceable proofs of claim to flow in because only two things can happen one is that the trustee will properly filter out those claims and the other is that the trustee will be swapped and won't have the time or the energy or the inclination or home make mistakes and some of those claims will be deemed enforceable when in fact they're not so why would anybody want these proofs of claim to flood into the bankruptcy system so just going into responses to that the first is that again you know we don't know that these claims are an inforce of all i think what we know is that there is an apparent time bar to these claims the very fact that are disclosed in the proof of claim illustrate that and there are some further work to be done before an ultimate legal determination can be made about whether there is a valid limitations defense in congress very consciously put that burden on the trustee and other parties in interest in the bankruptcy code the trustee or the debtor or any other party in interest can come in and object and the issue can be litigated i have the understanding here is that this case involves not claims which maybe they're barred by the statute of limitations and maybe they're not that the issue as presented to us is as to claims where everybody knows including the person who's filing the proof of claim that they're barred by the statute of limitations and what sense could it make for congress to think oh that's a great idea for some of the people just to file those claims and and you know the and the and the best thing that can happen is that those claims will be filtered out in the world the thing that can happen is that they won't be people will make mistakes and people will pay on things that they shouldn't be paying on yeah and justice kagan just to be clear i'm disputing the assumption that we somehow acted with knowledge here but i'm happy for this court to consider this case as we said in foot no one of our brief on the assumption that if there had been an objection the claim would have been disallowed i think that the answer though is still the same and i think that congress in adopting this system in the code must have known that some number of claims would be allowed that should otherwise be disallowed if there is an objection because after all that is the ineluctable consequence of imposing the burden on responsive parties in deeming claims to be valid absent an objection but the reason the affirmative reason i list that claim with the trustee just to be sure that it can be a part of the discharge with the claim to that the claim is extinguished and i can't later be sued i think it should be listed for the simple reason that there is a valid of the virtue of the discharge and the virtue of a discharge is that in the language of the code and language in particular of section five twenty three a three discharge prevents the creditor from taking any act to collect and that includes efforts to encourage the debtor notwithstanding the absence of a judicial remedy to make any sort of payment which i think respondent acknowledges that the debtor retains some ability to do even if it would also for close the possibility of the creditor arguing that there had been a waiver yes i guess another was of the debts discharged than the board doesn't have to worry about some claim that he had waived the statute of limitations yes well that is correct in the sense that again the creditor can take no action to call act even a sort of voluntary request for payment and that has very real value and in addition as we explained in our brief discharge has other collateral consequences in prohibiting certain types of discrimination based on the existence of debts and those are the very principles that again under a why not just the code more generally but the very broad definition of claim in particular and that really was an innovation of the one nine hundred seventy eight bankruptcy code namely replacing the old provability system with a very broad definition of claim that was meant to bring claims within the bankruptcy  question justice ginsburg presupposes a state of mind which is simply not a legend on which there's simply no record in this case or in other cases but i don't want to fight that factual premise too hard because i think that even if such a state of mind exists the operation of the code is the same again the state of mind of the creditor is neither here nor there for purposes of the operation of the code the sole question for purposes of the operation of the code is whether or not there is a right to payment and so when these proofs of claim were filed the there there is not an extensive further investigation at that point or at least i'm certainly not aware of one on the part of my client or on the part of debt collectors more generally what the debt collector is obligated to do under the code and under the rules is to disclose the information that essentially provides the world notice of a prima facia limitations to mr sherman i'm sorry i was going to bring this back to the language of the code because i did want to address that but justice kagan you know let's suppose that you're right that the code allows this i mean it's hard for me to believe that the code actively invites set but let's suppose that the code as it's written allows that that is then you wouldn't violate the code by filing these proofs of claim that's that's for sure but why would that also absolve you from liability under other statutes the code does not obligate this you don't have to do this under the code it's a choice and then another statute can come along and say you know what for certain actors for certain creditors for these debt collectors there's an independent rule and the code says nothing about that yet so let me address first the specific language of the f t c and i want to put down a marker because i want to address the separate issue of how the f t c and the bankruptcy code relate we think that the operation of the bankruptcy code informs the analysis under the two relevant provisions of c first on the question of whether or not we made false or misleading representation and second the question of whether or not this is unfair or unconscionable practice on the question of six hundred ninety two e our submission is quite straightforward that there is nothing false or misleading about the submission of a proof of claim that is not only entirely accurate but that affirmatively puts the world on notice as to the existence of a potential imitations defense and to go to the second prong of this the question of whether or not such a proof of claim is misleading our submission is that the filing of a proof of claim implies only a good faith basis that the creditor has a claim it doesn't imply anything about the enforceability of the cla or generally or about the availability of the limitations defense more specifically other than providing affirmative notice that such potential defense or is it is delivering which of pennsylvania public welfare versus davenport a holding and that's for the simple reason that neither davenport nor the later cases citing davenport in any way purported to somehow exclude unenforceable right from the definition of a claim in davenport everyone agreed that the right in question was enforceable in some respect and the question was whether the fact that the enforcement mechanism and was limited somehow affected whether or not it came within the definition of claim and the court said no but again if you thought that that rose to the level of even a passing holding i would return to the language of the bankruptcy code and in particular the definition of a claim which says nothing about enforceability to the contrary section five zero two builds enforceability into the objections that have to be raised i do want to say a bit about the other provision of the f t c p s a the provision that prohibits unfair or unconscionable practices and i think that on that provision we would rely centrally on the protections provided by the bankruptcy system it bears remembering that a proof of claim unlike a civil lawsuit is not filed against the debtor it is filed against the a state and as we've been discussing the trustee bears a statutory obligation initial question what would be the purpose of the trustee permitting a still plea to go for the trustee should object where in the language of the statute some purpose would be served and i think that there are actually contexts in which an objection might be futile because it would have no effect on any of the other creditors or certainly on the amount that the debtor paying is but otherwise the trustee should have jack and i would say that to the extent that you have concern about with that situation  collected with regard to this particular type of claim more generally but leaving that aside i want to make one very important point about the interplay between the bankruptcy code in the f t c here i think that respondents brief sort of has this janus like quality because responde fights us to some extent on the operation of the bankruptcy code and i think really the principal beef that responded has here is that the bankruptcy system just isn't working as it should if you take a look at pages twenty nine to thirty of respondents brief respond it really makes the broader point that trustees and other parties in interest simply aren't objecting as often as they shouldn't bankruptcy although you know it's great so i just ask you a practical question would there be anything that is suppose a trustee or the attorney for a debtor said i am going to say this case is in alabama the statute of limitations for the collection of the debt in alabama six years i'm going to object to every any claim for a debt that was incurred more than six years ago would that be inconsistent with the duties of the trustee or the attorney i mean no not necessarily because at that point essentially what would be happening is that the trustee would say there's a  limitations defense here we're going to raise an objection and at that point the issue would be litigated and if the creditor in that circumstance didn't come back and request a hearing or otherwise litigate the issue  i think it's quite possible depending on the nature of the objection that the objection would be sustained in that the claim would be disallowed you cannot ask mr geyser the same question but i can understand why a trustee you are an attorney wouldn't take that this would take that approach well automatically object to anything that is over the statute a woman tell and i think that this illustrates the artifice ality of taking the f t c and injecting it into the bankruptcy regime to be sure the f t c applies to debt collectors specifically but i think in this context what will either happen is that there will be an objection and the claim will be disallowed that's what took place in this case albion on somewhat different grounds and of course in that circumstance there is no harm to the actual debtor because the claim has in fact been disallowed if in fact the claim has been allowed it seems quite odd to say that you could still bring an f d c p a action because what you would effectively be doing is collaterally challenging the bankruptcy court's decision to allow the claim in the first place and as we explained in our brief and we make this point not only specifically with regard to the standing of this plaintiff but really with regard to this whole category of cases one of the reasons why this practice is not unfair or unconscionable is that it is very hard to posit a circumstance in which it will actually lead to an injury to the debtor and it's really for that reason sorry you're taking the trust the amount that the trustee gets paid is somehow dependent on the objections of the trustee raises and i would refer to the fundamental principle underlying argument this is exactly how congress thought this system should work and if the system as an administrative matter is not working as congress intended the solution is to fix the bankruptcy system and not to extend the f t c p a into the domain of bankruptcy or reserve about my time thank you counsel geyser thank you mr chief justice and may please the court the event is in fact using a business model that intentionally floods bankruptcy courts with time barred debts and after the first half of the argument i think two propositions remain undisputed the  that under the bankruptcy code these debts are unenforceable and will lose one hundred percent of the time if anyone objects the second is there is literally no scenario where middling collect unless the system breaks down and fails contract of adhesion or you know the normal list of reasons that a debt might be unenforceable does your theory apply to all of those are theory i think is exactly what justice souter meyer said earlier in the argument adecco actor asked to have a good faith belief that they have a right to payment under the code and have a valid and enforceable that if they have any reasonable basis to think that that an a from the defense might not apply then they don't violate the f t c people then what that means is that not just in this case not just with statute of limitations but that there are a whole set of claims that can be brought in bankruptcy where you would say they don't they don't have a reasonable good faith belief and of course what they say is we do we do have a good faith belief ok and now who's going to decide that a bankruptcy judge no an ordinary judge in a case brought in an ordinary court where in fact that one side wins they get a thousand dollars per instance plus attorneys fees plus costs no i thought the point of the bankruptcy code was to have bankruptcy matters decided in a bankruptcy court and not in an ordinary article three court so how do you reconcile what you are arguing with the basic point of bankruptcy you know i think the point of the bankruptcy code is to have legitimate genuine disputes resolved in the bankruptcy really really how interesting then what do they argue about in i mean are there cases in bankruptcy court where one side says i have a legitimate dispute and the other side says no you don't is that on heard of in bankruptcy court not outside its purpose not at all and to be very clear our theory doesn't cover that situation if a creditor can articulate only when the creditor comes in and says i admit i had no good faith reason for bringing this that's the only thing your theory covers this is the situation it covers and this is all it covers if the affirmative defense a complete defense is obvious on the face of the claim and if there is not an articulable reason to think that that complete defense may not apply this is exactly the same standard that applies in all five courts of appeals have looked at this this is not shifting the burden this is not imposing an affirmative certification requirement on all creditors to investigate claims that have nothing no defect on the face of the current that that well how do you know that's the case in the statute of limitations with respect to a statute of limitations defense there are exceptions to the statute of limitations tolling you know the whole list of them so it's hard to say i mean the argument on the other side is look we've spelled out we have to spelled out that sort of basis if you think there's a statute of limitations defense here the dates of these things if it's obvious on the face which was the standard you propose then it ought to be obvious to the other side as well  the court there is a little disputable foot no battle about that in terms of what the record provided or not so there was on it we think that the original complaint should have been clear and this is sense been amended to express the legend midline acted with knowledge ok let's take the case where the date suggested six years is that was incurred however many years beyond that and you say they should just not raise it or you say well they should inquire somehow to make sure that there wasn't a basis for tolling the the  statute what do they have to do all they have to do is satisfying discharge the obligation they have to satisfy and discharge under will nine eleven it's a big deal me what that is it's it is a reasonable belief after in every simple and corey that they have  argument is that that's exactly how bankruptcy works here we have a claim and if there is action to it it shifts to the other side it seems to me that you're putting the burden on them to research the claim before suiting you to bankruptcy only affirmative defense is blindingly obvious on the face of the complaint and this by the way is exact same rule that applies in alabama state court will that let me but when asked this in state courts generally my understanding is that there is  it is just not enforceable forget bankruptcy a civil practitioner represents the creditors they know the debt is time barred is an ethical to sue because  judge this is time for the judge said too late you didn't raise the defense and affirmative defense can't be can be waived but i think what's important is that all five courts of appeals have looked at this has said that if you bring the complaint knowing that it's subject to a complete defense you're posing unnecessary costs on a defendant to jack may not be i mean it depends on the circumstance but that isn't what's bothering me and i know i put it in a sort of you have a very good argument i'm not saying you don't i'm telling you what's worrying me what's worrying me is that we take a set of cases which now you've you've you've you've narrowed it to that set which is sanctionable under rule nine eleven which is a bankruptcy rule with sanctions and you're saying in addition to the sanctions the person who the debtor can go in bring a different case now under the word unfair in the debt collection act and i'm saying what's worrying me and i'd like to hear what you say specifically is that here we have two sets of courts one with the power to sanction the i'll do the ordinary article three court which presumably will automatically give a thousand dollars per violation if you know plus attorneys fees plus costs and that seems what the bankruptcy court was trying to avoid we want bankruptcy matters decided in bankruptcy court i don't think i have a convincing argument against you i have a point and i'd like to hear what you have to say in response we appreciate that and i think that the ultimate response is what congress intended with the fair debt collection practices act which it specifically designed for remedies for professional that collector realizing that ordinary remedies like rule nine eleven sanctions that are calibrated for general creditors aren't always enough professional debt collectors are inventive they impose heightened risks and you often need a high end remedy to check their conduct which i think if the states were so worried about that whatever all states do would apparently two states they say if the statute of limitation runs the debt is barred forever but apparently many states don't say that they say you can still sue the they do tort it's malicious prosecution to file a lawsuit in alabama so be to the complete defense of the statute of limitations is it just the statute of limitations you're talking about or is it up for a minute differences it's clearly at least the statue of limitations i think it's any complete defense to the suit sorry and use it just the statute of limitations you're talking about or is it all affirmative different any affirmative affirmative defense some of these you know are quite complicated and therefore we're now going to have the article three judge maybe not in some cases but in many cases deciding pretty complicated things as matters of prank rips the law growing out of the bankruptcy case now if that's wrong why is it rule i think it's wrong for two reasons of the first is that when the matter that they'll be citing the fair debt collection practices then think of the most complicated one you can think of and let's talk about that well the most complicated one i can think of we can dispose of very quickly because any time there's a good faith basis to think the defense might not apply we don't have an f t c p r claim so what is the other affirmative defenses that your argument might apply to i think one example could be release let's say that you sign a release to a claim and then the debt collector the next day in the bankruptcy files a proof of claim on exactly the same that they've just released in that case they're  imposing an unnecessary costs on everyone in the process they're trying to collect a debt that they will only collect in two circumstances the other to actually trick everyone in the system who doesn't realize there's a complete defense or people do realize there's a complete defen and they acquiesce are there any affirmative defenses that your argument might apply to that are bankruptcy related particularly where these all kinds of the sort of defenses that are involved in any suit i think logically its any complete defense of the proof of claim we've been focusing on the complete defenses and right i was asking are any of those defenses only bankruptcy related to some of them only arise in a bankruptcy proceeding i can't think of one off the top of my head justice kagan what we're looking at are defenses that again he filed the proof of claim without a good faith reason to believe it's actually valid and enforceable that it's it effectively is a rule that says creditors can't act in bad faith and  said to the bankruptcy judge who happens to know something about it because he's heard the case if i were to ask him but who's going to bother to ask it because i get my attorney's fees and a thousand dollars in it's out if i go into this other court before a judge who doesn't know about it and just issue i have a litigator on an issue an easy issue the state of mind of the individual creditor yes it's just state of mind i grant you the easy thing about state of mind is it's only three words and the difficult thing is of course proving what it was you know now do you see what is worrying me i do you i do you justice breyer i think that in the bankruptcy setting first of all given the speed of the proof of claim process the odds are the objection will be adjudicated before the f t c is is far and away are under way at all which is actually what happened in this case i also think that in most circumstances the state of mind can be satisfied by the creditor by simply articulating any reason they  filed the suit they simply have to explain why did you have why did you think you were entitled to collect because every claim in the bankruptcy process is automatically dean prime official valid and enforceable and when a deck letter says by filing a proof of claim i do these time barred claims slip through when that's a big part of your argument why i don't trust these attorneys for the debtor automatically object to any claim that is beyond the number limitations i think there are two reasons that they don't the first is that the cost of objecting is sometimes more than the benefit of excluding the claim these are nuisance value claims they often will acquiesce in a legitimate payout parties it might not seem like very much but that doesn't pose a cost on the system the other reason that the trust i can see if you couldn't even how you could have a computer program that does this automatically i can understand why it would be very difficult your honor even if it took only an hour you're talking about hundreds of thousands of claims filed each year which in the aggregate amounts to an awful lot of time the other reason that perhaps these would there be in the typical chapter thirteen well the what we've seen in at least the cases that we had a chance to go past the claims what claims filed in the bankruptcy but the point is congress wanted to limit the bankruptcy process too little dismissed if you just gave it's could every claim that they look at that that those are the claims that they have to sort through and i don't i doesn't tell us very much about how many of these claims there are sometimes we don't know how many claims of these nature there are because sometimes they slip through a no notice is on and the other reason that the trustees don't always object justice alito and they've told us this the chapter thirteen trustees at page fifteen in their brief there's an information asymmetry trustees assume that creditors act in good faith so they assume if there's a facially time bar claim it's possible that the creditors aware of some basis for tolling and the trustee doesn't know what the creditor sinking and so they might not object which is a way that these claims are in fact misleading even to sophisticated trustees so the real point is that midland wouldn't file these claims if the system actually function the way that congress intended if it did function and everyone objected the way they were supposed to these claims would always lose and i find this very difficult case because if the if your description of midlands business model is correct it doesn't seem to me that has much if any social utility on the other hand i have real problem with your art with fitting your argument into the concept of an affirmative defense i thought an affirmative defense was a rule of law that may allow the defendant to prevail if the defendant asserts the defense but you want to switch you're switching that over to the side of the plaintiff or the person following the claim that seems inconsistent with the whole idea of an affirmative defense the idea of an affirmative defense let's take statute of limitations the idea is that the defendant may escape liability based on the statute of limitations but only if the defendant has searched the defense and if necessary proves it and if the defendant doesn't do that then the law is perfectly content with protests if they look in they realize there's a facially obvious time this is case is a great example that that's over a decade all that they've missed the limitations period by almost five years on a six year limitation period they almost doubled the length of time they in this case is that is there something in the record i mean it's a rather surprising to me that there is a company and their business model you say is to go around buying up debts that can't be enforced and are worthless and then filing cases hoping that no one will notice is that shown in the record i mean if somebody they admit that's their business model where does this come from your honor i think it comes in first this is dismissed on the pleadings we can develop it in the case but it comes from the f t c report that analyzed the data of debt collectors and you have to see said that's what they do it says they buy debts for pennies on the dollar the amount of the deck and why doesn't the f t c then bring an action against them but that's what they're doing while the government sometimes does and we have the f t c that could do such a thing and you have the sanctions in the bankruptcy code and now you want this to congress one of this tale that the entire purpose of the f t c p a is to use a private attorney general function to police professional debt collector miscount i have been able to find only one judge who has been able to get around nine eleven is limitation nine eleven is the sanctioning power right that's correct you have to like rule the give notice to the other side that they're violating right that's correct and if they withdraw the claim at that point there's no sanctions right that that's right a month there's only one judge in the bankruptcy kotex who has used his inherent powers but for general creditors and we know that midland in fact does do exactly what you've described they file it claim they're caught someone moves for sanctions they withdraw the claim and it's a great system but it's not exactly what congress intended in the code and it's responded that there is no benefit to including these time barred claims in the code and as a chief judge would explained in her seventh circuit a descent of the time bar is virtually exactly the same as a discharge injunction in the broadest majority of cases debtors often to award sanctions and there might be a good reason not to do so is that a possible scenario in other words that the law allows recovery but you sanction the attorney for getting that well i think it may be that most just records would not which is not to exercise  happen but if like if you could think about it more broadly you could imagine a system where a plaintiff was permitted and intitled in petitioners words to come in and throw out any possible legal argument no matter how frivolous and the burden was on the defendant to shoot all of those arguments down that is not the system that we have adopted rule eleven a record we close to consider the issue has the just has held that rule of an requires a party to certify that has done a reasonable investigation and has a good faith basis for believing that its claims are warranted by law every court of that has considered and has said that that includes forbearing from filing a lawsuit when it is obvious that it is th of course there will be a set of clay where the person is behaving pretty badly but there's a remedy right in the code it's called a sanction and moreover if they really go around doing this i don't know why the f t c wouldn't bring a claim saying this is an unfair business practice so if in fact you say this they also have a remedy under this other act it's quite possible given the remedies that they have under the other act the lawyers won't move for sanctions so i won't bother with it exactly i'll go right into court and then we'll have two sets of courts and other people trying to decide the same question same problem that was bothering me fifteen minutes  ago i'd like to know what you think i'd love to tell you the exact same thing is true in the general civil civil litigation contacts that there is the possibility of ruhleben sanctions just like there's a possibility of rule ninety eleven sanctions in the very statutory findings in the f t c congress said in our view the existing legal remedies are not sufficient to deter this kind of planning of some collect x frank group c is very different the whole idea is let's get everything here in one place and deal with it and you know different priorities and all that i think it's much more significant if you have things spinning out of the bankruptcy estate big adjudicated elsewhere than the fact that you might have it as a general matter in just record so mr chief that's it's a bedrock principle of bankruptcy that a creditors rights  that in the government's view this case is as much about abuse of bankruptcy as it is about a violation of the f b i does that think it's then why not what about this is a little complicated as a solution and so on pretty nervous i don't know that i'd really do this but did you say ok the word in the collection act is unfair and worse in bankruptcy there's a whole system set up to decide it's unfair by people who know about it so where a bankruptcy court does in fact say that it's unfair and sanctions a party for this unfair behavior in that case it's unfair within the meaning of the debt collection act and in that case you can go and bring your extra ram so there are two reasons i think why that would not work the first is as i said in my are pointed out there's a safe haven response to an objection that's not what happened here but the second is that there's even more reason to be cautious about this in bankruptcy than there is in general civil litigation because by operation avoid thirty one of the bankruptcy rules and section five hundred two of the code a proof of claim when it's  makes the underlying claim presumptively valid do you think this good faith defense is objective or subjective i think it's i mean it's the same it's basically the same object of it's object of our doing is saying that the the same standard that would be applied under rule nine eleven or rule  should be applied here take the case of a lease with the first collection act you're just talking about collectors will so but once under bankruptcy you have a single creditor it's a person who owns a sandwich shop has a claim it's it turns out that it's clearly barred by the statute of limitations files that claim that sanctionable conduct it as a practical matter probably wouldn't be because they would with what are the legal matter would be under your interpreter and if they didn't have a good faith basis for believing that the limitations period didn't apply in that case because of tolling or some other equitable principle and they had a subjective theory they were acting in perfect good faith subjectively but not object overall nine eleven requires a lawyer or a number that in party to certify that they have done a reasonable investigation and have a good faith basis for believing that their claims are warranted by existing law and so if they haven't done that reasonable investigation or if they have ignored the results of that investigation which must have been what happened here and they violated the eleven and engaged in unfair and misleading practice what other affirmative defenses as your theory apply to what think about for example the defense of red's judicata if a creditor had sued in state claim on a timely timely that and the state court had said this is not a valid claim we wouldn't want to system where that creditor could then file or proof of claim in bankruptcy hoping that the claim would just slip through the cracks and get paid even though the creditor knew for sure that a lot of these affirmative defenses though aren't presented as abstractly as that they may involve nuances we have cases about the scope of race to the cottage and when it applies and one other i assume your argument applies to every affirmative defense only if it's obvious and if they credit or doesn't is able to access all the information without discovery that's the rule that's been applied in the rule eleven context one applies to every affirmative defense every obvious affirmative defense or the creditor or the plains or any non obvious affirmative defenses to which it wouldn't apply i mean i think something like contributory negligence may be kind of a classic from a defense that would be it would be hard to say that the plaintiffs in the civil litigation about a lack of lack of personal jurisdiction i mean i guess it depends on the circumstances if there's if the creditor you know there's no personal jurisdiction but you file the suit anyway and the rule or claim because that takes money away from other credit i can't they consent suppose it's chapter eleven suppose we're trying to get a plan suppose the plan is a company that does business in countries i know you don't believe there are such countries but there are there are countries where it's a matter of honor to pay a debt and people actually do pay debt i believe that alright alright so in there you could see easy to think of cases justice breyer but i think the one thing everyone agrees on in this case is that if the bankruptcy system works as congress intended one hundred the functional equivalent of a discharge and the anti discrimination provisions apply to any dischargeable debt not just that have been discharged and so that would apply to these to these types of debts and so i just think there's nothing in the code that gives the creditor the right to try to sneak one through when the creditor knows that if it's objected to it should be disallowed as you are in times dependent on a view of the code that precludes these kinds of claims yes so if if one looked at the code and said well it seems as though these kinds of claims a which can be filed if that was your view of the code what do you think follows from that so then i think it would not be unfair and it would not be misleading and if i'd like if you could i'd like to tell you why it's the reason it's unfair here is because the creditor does not have a right to get paid in bankruptcy on this type of claim and so it's unfair to try to do that and to put the other participants to the burden of making sure that it doesn't happen it's misleading because when you file the proof of claim under rule and eleven you're making an implicit representation i finished it and it's that you have done a reasonable investigation and have a good basis for believing that the claim is warranted if it is warranted under the bankruptcy code that's not misleading thank you counsel three minutes mr shand again thank you mr chief justice just two points on robot all first i think with all due respect th court should be concerned about the breath of respondents position and let me lay out some circumstances that i think would be covered by respondents rules circumstance in which a claim has been discharged in a previous bankruptcy a circumstance in which a claim has in fact actually been paid off a circumstance in which the claim is subject to a set off or a circumstance in which the creditor simply gets the wrong amount of the wrong person and these circumstances i'm reliably informed recur with some frequency in bankruptcy proceedings and yet in all of those circumstances after an objection is raised and the claim is disallowed there could be a claim that the claim itself was false or misleading under the f t c and a holding in respondents favor would really be a recipe for clogging the courts with these sorts of clams and i would no parent fat equally that to the extent that respondent and the government's argument presupposes some absence of a good faith basis for believing that some of these objections are infallible that's very hard to reconcile with the language of the f t c because if there's one established principle about the operation of the f t c it is that there is no affirmative state of mind requirement and so what spondon and the government would be asking you to do is to say sure there could be a prima facia claim under the f t c but the only way in which a creditor could escape liability would be to invoke the affirmative defense and section six hundred ninety two k paragraph see where the violation is not intentional and results from a bona fide an error which requires the maintenance of procedures reasonably calculated to avoid that error and so again this is going to be a recipe for bringing these f t c p a actions into play and many many bankruptcies and that leads me to my second point which is that this court has never applied the f t c p a within the four corners of a bankruptcy proceeding and i think that the problem with doing so here is that it really doesn't address the principal concern that respondent and the government raises and let me give you an example as to why that's true suppose you have a bank that holds credit card debt and that bank actually doesn't sell that debt on to a debt collector well that bank could do the very same thing it could file a proof of claim it would be required to disclose that there is a prima facia limitations defense and yet if that bank does not qualify as a debt collector under the definition of the f t c p a a f t p a liability would not be available and that simply illustrates the fact that this is really a problem if it is in fact a problem with the operation of bankruptcy and it's a problem that congress or the advisory committee are best situated to remedy and so for instance if there's concern about the limitations defense one solution is to eliminate the fact that that's a defense and for congress to shift the burden back on to the creditor but again that's a remedy in the particular context of bankruptcy and just to address finally the government broader argument about the sanction ability of conduct outside bankruptcy this court has never held that it would be a violation of rule laughing for a plaintiff to file a complaint in the face of an obvious defense whether it's a limitations defense or some other type of very broad consequences against across the full range of litigation thank you thank you counsel the case was submitted