Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca2-15-00527/USCOURTS-ca2-15-00527-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 

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15-527

Garfield v. Ocwen Loan Servicing, LLC

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2015

Argued: October 20, 2015 Decided: January 4, 2016

Docket No. 15-527

- - - - - - - - - - - - - - - - - - - - - - 

1 DONNA GARFIELD,

2 Plaintiff-Appellant,

3

4 v.

5

6 OCWEN LOAN SERVICING, LLC,

7 Defendant-Appellee.

8 - - - - - - - - - - - - - - - - - - - - - - 

9

10 Before: NEWMAN, WINTER, and CABRANES, Circuit Judges. 

11

12 Appeal from the January 26, 2015, judgment of the

13 United States District Court for the Western District of New

14 York (Elizabeth A. Wolford, District Judge), dismissing

15 claims brought under the Fair Debt Collection Practices Act

16 for seeking to collect a debt discharged in bankruptcy, and

17 requiring the plaintiff to seek relief in the bankruptcy

18 court.

19 Judgment reversed and case remanded with instructions

20 to reinstate the FDCPA claims.

21

1

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1 Kenneth R. Hiller, Law Offices of

2 Kenneth Hiller, PLLC, Amherst,

3 NY, for Appellant.

4

5 Gary Neal Smith, Houser & Alison,

6 APC, Newark, NJ, for Appellee.

7

8 (Daniel L. Geyser, Stris & Maher

9 LLP, Los Angeles, CA, for

10 amicus curiae National

11 Association of Consumer

12 Bankruptcy Attorneys, in

13 support of Appellant.)

14

15

16 JON O. NEWMAN, Circuit Judge.

17 The principal issue on this appeal is whether a

18 debtor who has received a claim on a debt that has been

19 discharged in a bankruptcy proceeding can sue the claimant

20 in a district court under the Fair Debt Collection Practices

21 Act (“FDCPA”) or must seek relief in the bankruptcy court. 

22 The issue arises on an appeal by Plaintiff-Appellant Donna

23 Garfield from the January 26, 2015, judgment of the United

24 States District Court for the Western District of New York

25 (Elizabeth A. Wolford, District Judge), in favor of

26 Defendant-Appellee Ocwen Loan Servicing, LLC (“Ocwen”). The

27 judgment dismissed Garfield’s complaint alleging various

28 causes of action under the FDCPA.

29 We conclude that Garfield may pursue her FDCPA claims

30 in a district court and therefore reverse and remand.

2

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1 Background

2 The complaint alleges the following facts, which are

3 assumed to be true on this appeal from dismissal for failure

4 to state a claim on which relief can be granted. See Bell

5 Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007).

6 Garfield obtained a mortgage from Ocwen’s predecessor-in7 interest, Litton Loan Servicing L.P. and became personally

8 obligated on a mortgage loan. Garfield failed to make

9 payments on the mortgage loan and filed for Chapter 13

10 Bankruptcy in the United States Bankruptcy Court for the

11 Western District of New York. During the bankruptcy

12 proceedings, Ocwen acquired Garfield’s mortgage loan.

13 Under her bankruptcy plan, Garfield paid the arrears on

14 her mortgage loan through monthly payments made during the

15 bankruptcy proceeding. Critical to the pending appeal, in

16 August 2013 she obtained a discharge of her entire personal

obligation for the mortgage loan.1 17 However, Garfield agreed

1 Garfield’s claim that her personal obligation on the

mortgage debt was discharged is inferable from her

complaint, but not precisely stated. The complaint alleges

that Garfield’s “bankruptcy was discharged,” ¶ 14, and that

Ocwen reported to Equifax that she “still owed the amount

which was included in her Chapter 13 bankruptcy,” ¶ 19. Her

brief in this Court explicitly alleges that her debt “had

been discharged in her prior bankruptcy case,” Br. for

Appellant 1, and that “the Bankruptcy Court entered an order

discharging Plaintiff’s indebtedness on all of the debts

3

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1 to pay $938 per month to prevent foreclosure of the

mortgaged property.2 2

3 Garfield concedes that she made only one monthly

4 payment after her bankruptcy discharge and that by March

5 2014 the arrears on her monthly obligation totaled

6 $6,672.34. In February 2014 Ocwen contacted Garfield and

7 demanded that she pay $21,825.15 or face foreclosure on her

8 home. Ocwen sent a delinquency notice in April 2014 for

9 $22,684.36. These amounts reflected both Garfield’s conceded

10 arrears for post-bankruptcy monthly payments and the

11 mortgage loan arrears that had been discharged. Ocwen also

12 reported to Equifax that Garfield owed the discharged

13 amount.

14 In July 2014, Garfield filed her FDCPA complaint

15 against Ocwen in the United States District Court for the

16 Western District of New York. She alleged that Ocwen’s

17 attempt to collect the arrears on her mortgage loan, which

listed on her bankruptcy petition, including her debt to

Ocwen,” id. 3-4 (citing Complaint ¶ 14).

2 Ocwen contends that it is only the “servicer” of

Garfield’s mortgage, “not the owner of the security

instrument,” and “is not a secured creditor enforcing a

valid security interest.” Br. for Appellee 27 n.8. Ocwen

does not dispute that Garfield’s failure to make required

payments risks foreclosure. 

4

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had been discharged,3 1 violated several provisions of the

2 FDCPA: 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2), 15 U.S.C. §

3 1692e(5), 15 U.S.C. § 1692e(8), 15 U.S.C. § 1692e(10), 15

4 U.S.C. § 1692e(11), 15 U.S.C. § 1692f, 15 U.S.C. § 1692f(1),

5 and 15 U.S.C. § 1692g(a)(3).

6 Garfield also alleged that Ocwen violated the FDCPA in

7 the manner it attempted to collect the post-bankruptcy

8 monthly mortgage payments that she concedes she owes.

9 Specifically, she alleges (1) that Ocwen violated subsection

10 1692e(11), which requires a so-called “mini-Miranda

11 warning,” during conversations with a debtor, and (2) that

12 Ocwen failed to send within five days of its initial

13 communications a 30-day notice of a debtor’s right to

14 dispute a debt, as required by subsection 1692g(a)(3).

15 The District Court dismissed Garfield’s complaint. The

16 Court held that the Bankruptcy Code provides the exclusive

17 remedy for Garfield’s claim that Ocwen attempted to collect

3 The Bankruptcy Code’s discharge provision, 11 U.S.C.

§ 524, provides in relevant part that a discharge in

bankruptcy “operates as an injunction against the

commencement or continuation of an action, the employment of

process, or an act[] to collect, recover or offset any such

debt as a personal liability of the debtor, whether or not

discharged of such debt is waived.” Id. § 524(a)(2).

5

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an allegedly discharged debt.4 1 The Court also stated that,

2 even if the Code does not broadly preclude all FDCPA claims

3 for conduct that violates the discharge injunction,

4 Garfield’s particular FDCPA claims conflict with the Code’s

5 remedies and were therefore precluded.

6 Discussion

7 I. Implied Repeal of All FDCPA Provisions Invoked for Claims

8 After Discharge

9 The District Court held that the Bankruptcy Code

10 precludes all claims under the FDCPA for conduct that

11 violates a discharge injunction. Acknowledging Garfield’s

12 argument that the Supreme Court “should only rarely infer

13 statutory repeal,” the District Court ruled that “many of

14 Plaintiff’s allegations directly conflict with the

15 Bankruptcy Code’s discharge injunction provisions.” 

16 When it is claimed that a later enacted statute creates

17 an irreconcilable conflict with an earlier statute, the

18 question is whether the later statute, by implication, has

19 repealed all or, more typically, part of the earlier

20 statute. See National Ass’n of Home Builders v. Defenders of

4 Specifically, it held that the appropriate means to

redress conduct that violates the discharge injunction is a

motion for contempt filed in the bankruptcy court under 11

U.S.C. § 105(a).

6

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1 Wildlife, 551 U.S. 644, 662-63 (2007). Repeal by implication

2 is disfavored. “In the absence of some affirmative showing

3 of an intention to repeal, the only permissible

4 justification for a repeal by implication is when the

5 earlier and later statutes are irreconcilable.” Morton v.

6 Mancari, 417 U.S. 535, 550 (1974).

7 Where, as in this case, the later statute is the

Bankruptcy Code,5 8 a distinction must be made between claims

9 brought under the earlier statute during the pendency of a

10 bankruptcy proceeding and those brought after a discharge.

11 Four circuits have considered FDCPA claims brought during

12 the pendency of a bankruptcy proceeding.

13 Our Court has ruled that the FDCPA does not authorize

14 suit during the pendency of bankruptcy proceedings. See

15 Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir.

16 2010). This ruling appears to construe FDCPA provisions to

17 be inapplicable when invoked for claims made during

18 bankruptcy, rather than determine that such provisions have

5 The subsections of the FDCPA under which Garfield

makes claims, with one exception discussed below, see note

11, infra, were enacted on September 20, 1977, and came into

effect on March 20, 1978. See Pub. L. No. 95-109, §§ 807,

808, 809, 91 Stat. 874, 877, 879 (1977). The current version

of the discharge injunction, 11 U.S.C. § 524(a), was enacted

on November 6, 1978. See Pub. L. No. 95-958, 92 Stat. 2549,

2592 (1978).

7

Case 15-527, Document 108-1, 01/04/2016, 1674633, Page7 of 17
1 been impliedly repealed by the provision of the Bankruptcy

2 Code authorizing a discharge injunction. See id. at 94. Our

3 Court’s opinion does not include the word “repeal.”

4 In Simmons, the debtors, while engaged in a bankruptcy

5 proceeding, objected to the amount of a creditor’s proof of

6 claim, which the bankruptcy court reduced. The debtors then

7 brought a putative class action, contending that the

8 creditor’s filing of an inflated proof of claim violated the

9 FDCPA. See id. The creditor moved to dismiss, arguing that

10 the Bankruptcy Code exclusively provides whatever remedies

11 exist for filing an inflated proof of claim. See id.

12 Affirming dismissal of the complaint, we said, “The

13 FDCPA is designed to protect defenseless debtors” and

14 “[t]here is no need to protect debtors who are already under

15 the protection of the bankruptcy court.” Id. at 96 (emphasis

16 added). Noting that some courts had broadly rejected all

17 FDCPA claims (even claims filed after discharge) predicated

18 on acts alleged to have violated the Bankruptcy Code, we

19 observed that “[t]his broader rule has not been universally

20 accepted, and we are not compelled to consider it in this

case.” Id. at 96-97 n.2 (citation omitted).6 21

6 In a non-precedential decision, Yaghobi v. Robinson,

145 F. App’x 697 (2d Cir. 2005), we affirmed the dismissal

8

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1 The Ninth Circuit has ruled that the Bankruptcy Code

2 precludes FDCPA claims brought during the pendency of

3 bankruptcy proceedings. See Walls v. Wells Fargo Bank, N.A.,

4 276 F.3d 502, 511 (9th Cir. 2002). This Court, like the

5 District Court in the pending appeal, appears to have said

6 “precludes” FDCPA claims to reflect that the FDCPA

7 provisions invoked for such claims have been repealed by

8 implication with respect to conduct that violates the

9 discharge injunction.

10 Two circuits have ruled to the contrary. In Randolph v.

11 IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004), the debtors

12 brought FDCPA claims against creditors for seeking to

13 collect debts in violation of the automatic stay. The

14 creditors asserted that the Bankruptcy Code’s remedies for

15 violations of the automatic stay, see 11 U.S.C. § 362(h)

16 (now § 362(k)), precluded relief under the FDCPA.

of claims, alleging violations of a discharge injunction,

brought in a district court under the Bankruptcy Code’s

contempt provision, 11 U.S.C. § 105(a), the Code’s discharge

provision, id. § 524, the FDCPA, and state law provisions.

After affirming dismissal of claims brought under the

Bankruptcy Code’s provisions, we also affirmed the dismissal

of “plaintiff’s parallel federal and state unfair debt

collection practice claims,” adding, “We need not here

decide whether debtors in bankruptcy can ever maintain such

claims based on violations of the Bankruptcy Code,” noting

the circuit split discussed above. See id. at 698.

9

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1 The Seventh Circuit acknowledged that there were some

2 “operational differences between the statutes,” but stated

3 that these differences constituted “overlap” between the

4 statutes rather than “irreconcilable conflict,” id. at 730,

5 and that “[o]verlapping statutes do not repeal one another

6 by implication,” Id. at 731. “The Bankruptcy Code of 1986

7 does not work an implied repeal of the FDCPA, any more than

8 the latter Act implicitly repeals itself.” Id. at 732.

9 Judge Easterbrook helpfully assembled a chart comparing

10 the statutes’ differing treatment of conduct that violates

11 both the automatic stay and the FDCPA:

12 Bankruptcy FDCPA

13 Who Anyone Debt collector only

14

15 Scienter Willfulness S t r i c t l i a b ility (§

16 1692e(2)(A)

17

18 Defense None Bona fide error plus due

19 care (§ 1692k(c)), or

20 reliance on FTC opinion

21 (§ 1692k(e)) 

22

23 Statutory Damages None $ 1 , 0 0 0 m a x i m u m

24 (§ 1692k(a)(2)(A)

25

26 Compensatory Damages Yes Yes (§ 1692k(a)(1)) 

27

28 Punitive Damages Yes No

29

30 Cap on Class Recovery No Yes (§ 1692k(a)(2)(B)(ii))

10

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1 Maximum recovery No Yes, $500,000 or 1% of net 

2 worth, whichever is less 

3 (§ 1692k(a)(2)(B)(ii)) 

4

5 Attorneys' fees to debtor No Yes (§ 1692k(a)(3)) 

6

7 Attorneys' fees to creditor No Yes (§ 1692k(a)(3))

8

9 Statute of limitations None (laches defense only) One year (§ 1692k(d))

10

11 Id.

12 The Seventh Circuit concluded, “It is easy to enforce

13 both statutes, and any debt collector can comply with both

14 simultaneously.” Id.

15 The Third Circuit has also ruled against implied repeal

16 of FDCPA provisions invoked for claims brought during the

17 pendency of bankruptcy proceedings, see Simon v. FIA Card

18 Services, N.A., 732 F.3d 259, 274 (3d Cir. 2013), concluding

19 that the Bankruptcy Code effected “no broad preclusion” of

20 FDCPA claims, id. at 278.

21 The pending appeal concerns FDCPA claims brought after

22 discharge, the context we explicitly distinguished in

23 Simmons. Now facing the issue of implied repeal of FDCPA

24 provisions invoked for claims in the post-discharge context,

25 we conclude that the Bankruptcy Code does not broadly repeal

26 the FDCPA for purposes of FDCPA claims based on conduct that

27 would constitute alleged violations of the discharge

11

Case 15-527, Document 108-1, 01/04/2016, 1674633, Page11 of 17
1 injunction. No irreconcilable conflict exists between the

2 post-discharge remedies of the Bankruptcy Code and the

3 FDCPA. There is no reason to assume that Congress did not

4 expect these two statutory schemes to coexist in the post5 discharge context. The Seventh Circuit’s analysis of FDCPA

6 and Bankruptcy Code provisions, although leading that Court

7 to a result that differs from our Simmons decision in the

8 pre-discharge context, argues against preclusion of FDCPA

9 claims after discharge. At that point the former debtor no

10 longer has the “protection of the bankruptcy court,”

11 Simmons, 622 F.3d at 96, which we deemed decisive on the

12 preclusion issue prior to discharge. Indeed, the Bankruptcy

13 Code provision concerning the discharge injunction, see 11

14 U.S.C. § 524(a)(2), does not explicitly create a cause of

15 action for its violation, whereas the automatic stay

provision provides such a remedy, see id. § 362(k).7 16

17

18

7 In noting this distinction, we do not decide whether

the discharge injunction provision should be construed

implicitly to create a cause of action for its violation, in

addition to a contempt remedy. See 11 U.S.C. § 105(a);

Bessette v. Avco Financial Services, Inc., 230 F.3d 439, 445

(1st Cir. 2000) (discharge injunction enforceable by

contempt proceeding).

12

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1 II. Implied Repeal of Specific FDCPA Provisions Invoked for

2 Claims After Discharge

3 Even though the Bankruptcy Code does not impliedly

4 repeal all FDCPA provisions to remedy conduct that violates

5 the discharge injunction, it might impliedly repeal some

6 specific provisions invoked to remedy such conduct. Ocwen

7 focuses first on Garfield’s claim that Ocwen’s failure to

8 provide a so-called “mini-Miranda” warning in its initial

communication violated subsection 1692e(11) of the FDCPA.8 9

10 This claim, Ocwen contends, irreconcilably conflicts with

11 the Bankruptcy Code’s post-discharge remedies.

12 In Simon, the Third Circuit held that the FDCPA could

13 not require the creditor to include a mini-Miranda warning

14 with its examination notice and subpoenas because a

15 communication that included such a warning, sent prior to a

8 Subsection 1692e(11) prohibits

“[t]he failure to disclose in the initial written

communication with the consumer and, in addition,

if the initial communication with the consumer is

oral, in that initial oral communication, that the

debt collector is attempting to collect a debt and

that any information obtained will be used for

that purpose, and the failure to disclose in

subsequent communications that the communication

is from a debt collector, except that this

paragraph shall not apply to a formal pleading

made in connection with a legal action.”

13

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1 discharge, would constitute a collection attempt forbidden

2 by the automatic stay. See 732 F.3d at 279-80. Sending the

3 notice and subpoenas prior to discharge did not violate the

4 Bankruptcy Code. See id. The Third Circuit ruled that

5 subsection 1692e(11) conflicted with the Bankruptcy Code

6 because including the warning would violate the Code and

7 omitting it would violate the FDCPA. See id. at 280.

8 This holding in Simon, however, whether or not we would

9 agree with it, has no application to Garfield’s subsection

10 1692e(11) claim. Ocwen’s communication, even without a mini11 Miranda warning, was an attempt to collect a discharged debt

12 in violation of the Bankruptcy Code. The absence of a mini13 Miranda warning also violated the FDCPA. There is no

14 conflict.

15 Two of Garfield’s FDCPA claims allege that Ocwen

16 violated subsections 1692e(11) and 1692g(a)(3) in the manner

17 that Ocwen sought to collect Garfield’s delinquent post18 bankruptcy monthly payments, which she agreed to make to

19 avoid foreclosure. Subsection 1692g(a)(3) requires notice of

an opportunity to dispute a debt.9 20 Both of these subsections

9 Subsection 1692g(a)(3) provides:

“Within five days after the initial communication

with a consumer in connection with the collection

14

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1 regulate Ocwen’s collection of debt that Garfield concedes

2 she owes.

3 Garfield alleges that Ocwen sent her a bill on March

4 17, 2014, for her monthly payment as well as her arrears for

5 post-discharge monthly payments missed from July 2013 to

6 February 2014. She claims that Ocwen violated the mini7 Miranda warning requirement of subsection 1692e(11) “during

8 conversations with [her],” and that it violated subsection

9 1692g(a)(3) by failing to send a 30-day right-to-dispute

10 notice within five days of the initial communication. These

11 alleged violations do not conflict with any provisions of

the Bankruptcy Code.10 12

13

of any debt, a debt collector shall . . . send the

consumer a written notice containing . . . a

statement that unless the consumer, within thirty

days after receipt of the notice, disputes the

validity of the debt, or any portion thereof, the

debt will be assumed to be valid by the debt

collector . . . .”

10 Had there been a conflict, the analysis with respect

to subsection 1692e(11) would differ from that applicable to

the FDCPA as a whole because this subsection was

substantially reworded in a 1996 amendment, see Pub. L. 104-

208 § 2305, 100 Stat. 3009 (Sept. 30, 1996), and therefore

is a later statute compared to the injunction provision of

the Bankruptcy Code. In the absence of a conflict, the

sequence of these provisions need not be considered on the

issue of implied repeal.

15

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1 Ocwen challenges several of Garfield’s other FDCPA

2 claims on a somewhat perverse ground. These are Garfield’s

3 claims under subsections 1692e, 1692e(2), 1692e(5),

4 1692e(8), 1692e(10), 1692f, and 1692f(1), all of which

5 regulate collection of a debt. Subsection 1692e, for

6 example, prohibits use of “any false, deceptive, or

7 misleading representation or means in connection with the

8 collection of any debt.” Ocwen contends that these

9 provisions conflict with the Bankruptcy Code because, by

10 regulating how to collect a debt, they imply that it can

11 collect the discharged debt, an action that the discharge

12 injunction prohibits. But, as Garfield responds, Ocwen can

13 avoid violating both the cited provisions and the Bankruptcy

14 Code simply by not attempting to collect the discharged

15 debt. And once Ocwen tries to collect the discharged debt,

16 it risks violation of both the cited provisions and the

17 Bankruptcy Code. Either way, there is no conflict.

18 In sum, none of Garfield’s individual FDCPA claims

19 conflicts with the discharge injunction under the Bankruptcy

20 Code.

21 III. Piecemeal Litigation

22 The District Court ruled that, even if some of

23 Garfield’s claims do not pose a conflict with the discharge

16

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1 injunction, the Court should dismiss them and require

2 Garfield to bring them in the Bankruptcy Court. The District

3 Court relied on the “clear federal policy . . . [of]

4 avoidance of piecemeal adjudication,” Joint App’x at 39

5 (alteration in original), citing Colorado River Water

6 Conservation District v. United States, 424 U.S. 800, 819

7 (1976). That decision created a limited abstention doctrine

8 in the context of ongoing, parallel state proceedings, which

9 do not exist here. See id. at 817-18.

10 We do not rule out the unlikely possibility that in

11 adjudicating a debtor’s FDCPA claims, a district court might

12 consider it useful to stay its proceedings to permit the

13 plaintiff to seek clarification from a bankruptcy court as

14 to the proper interpretation of some aspect of that court’s

15 rulings, including the discharge injunction. But the remote

16 possibility of a need for such clarification provides no

17 basis for routing all FDCPA claims exclusively into the

18 bankruptcy court.

19 Conclusion

20 The judgment of the District Court is reversed, and the

21 case is remanded with instruction to reinstate Garfield’s

22 FDCPA claims against Ocwen.

17

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