United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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Nos. 98-2231 & 98-2407 (Consolidated)

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Sears, Roebuck and Co., *

*

Plaintiff - Appellant, *

*

v. *

*

Bonnie Patricia O’Brien, *

*

Defendant - Appellee. *

* Appeals from the United States

_______________________ * District Court for the Southern

* District of Iowa.

*

Sears, Roebuck and Co., *

*

Plaintiff - Appellant, *

*

v. *

*

Lois M. Siverly, *

*

Defendant - Appellee. *

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Submitted: April 21, 1999

Filed: May 13, 1999

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1The Honorable Richard G. Kopf, United States District Judge for the District

of Nebraska, sitting by designation.

2The Honorable Charles R. Wolle, Chief United States District Judge for the

Southern District of Iowa.

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Before BEAM and HANSEN, Circuit Judges, and KOPF,1 District Judge.

___________

KOPF, District Judge.

Sears, Roebuck and Co., (Sears) appeals from two decisions of the district court2

separately affirming two decisions of the bankruptcy court. The appeals have been

consolidated. We affirm.

These cases raise one primary issue. Does federal bankruptcy law preempt an

Iowa law that prohibits a creditor from sending a collection letter to a debtor who is

represented by a lawyer, when that creditor knows that the debtor is represented by

counsel? The district court found that the state law was not preempted, and that Sears

violated the law by sending such a letter to both debtors. On this point, we agree with

the district court. The district court also found it unnecessary to address whether the

particular collection letters independently violated federal bankruptcy law or an Iowa

ethical rule, and we agree on this point as well. 

I. Background

We next describe the pertinent Iowa law. We then set out the procedural history

and factual background of the two cases that are before us.

A. Iowa Law

The Iowa law at issue in this case states:
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5. A debt collector shall not engage in the following

conduct to collect or attempt to collect a debt:

. . .

e. A communication with a debtor when the debt

collector knows that the debtor is represented by an

attorney and the attorney’s name and address are

known, or could be easily ascertained, unless the

attorney fails to answer correspondence, return phone

calls or discuss the obligation in question, within a

reasonable time, or prior approval is obtained from

the debtor’s attorney or when the communication is

a response in the ordinary course of business to the

debtor’s inquiry.

Iowa Code Ann. § 537.7103(5)(e) (West 1998) (hereinafter “§ 537.7103(5)(e)”).

B. The O’Brien Case

On May 3, 1995, Bonnie Patrick O’Brien and her spouse filed a Chapter 7

bankruptcy petition listing Sears as an unsecured creditor. O’Brien was represented

by attorney Steven Hahn (“Hahn”). 

On June 23, 1995, Sears sent a letter to Hahn regarding its purchase money

security interest in certain merchandise O’Brien owned when the petition was filed.

The letter advised Hahn that Sears had not yet received O’Brien’s statement of

intention as to the secured merchandise in accordance with section 521(2)(A) of the

Bankruptcy Code (11 U.S.C. § 521 (2)(A)). The letter identified O’Brien’s options

with respect to her account: redeem the merchandise with a lump sum payment, return

the items, or reaffirm her account balance. The letter also stated that O’Brien could reestablish a line of credit with Sears by reaffirming all her debt and offered a line of

credit if she reaffirmed. Sears mailed a copy of the letter to O’Brien stamped “for
3For example, Sears claimed that it was necessary to write the letter to protect

its purchase money security interest in property of the bankruptcy estate.

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information purposes only” and to the bankruptcy trustee. Sears enclosed two

reaffirmation agreements with the letter it sent to Hahn, but not to O’Brien. The letter

requested a response from Hahn regarding O’Brien’s intentions.

After Hahn complained to Sears that the letter violated Iowa law, on July 26,

1995, Sears commenced an adversary proceeding by filing a complaint for a declaratory

judgment. See 28 U.S.C. § 2201(a) (providing for declaratory judgments in any “court

of the United States” where there is an “actual controversy”). With exceptions not

present here, the bankruptcy court has the power to issue declaratory judgments when

the matter in controversy regards the administration of a pending bankruptcy estate.

See, e.g., National Union Fire Ins. Co. v. Titan Energy, Inc., (In re Titan Energy, Inc.)

837 F.2d 325, 329-30 (8th Cir. 1988) (bankruptcy court had jurisdiction to issue

declaratory judgment in a proceeding brought by debtor’s insurer to determine scope

of products liability policy as proceeding could conceivably have significant impact on

debtor’s estate by reducing claims against debtor). See also Kings Falls Power Corp.

v. Mohawk Paper Mills, Inc., (In re Kings Falls Power Corp.) 185 B.R. 431, 436-38

(N.D. N.Y. 1995); Korhumel, Inc. v. Korhumel Indus., Inc., 103 B.R. 917, 925-26

(N.D. Ill. 1989); Fed. R. Bankr. P. 7001(9); 1 Lawrence P. King, Collier on

Bankruptcy, ¶ 3.09[4] at 3-110 to 3-112 (15th ed. rev. 1999). Since Sears’ dispute

with the debtor was a “matter[] concerning the administration of the estate,” the

bankruptcy court had jurisdiction to hear Sears’ request for declaratory relief.3 28

U.S.C. § 157 (b)(2)(A). 

Sears requested that the Bankruptcy Court declare that: (1) § 537.7103(5)(e) is

preempted by federal bankruptcy law and policy; (2) Sears did not violate federal

bankruptcy law by sending a copy of the letter to O’Brien; and (3) Sears did not violate
4Upon the filing of a petition, the Bankruptcy Code imposes a stay against “any

act to collect, assess, or recover a claim against the debtor that arose before the

commencement of the case under this title.” 11 U.S.C. § 362(a)(6).

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§ 537.7103(5)(e) by such action. In her Answer, O’Brien claimed the letter was an

attempt to collect a debt because it was harassing.

Sears moved for summary judgment, seeking the declaratory relief it requested

in its Complaint. The motion was briefed by both parties. The Bankruptcy Court, the

Honorable Lee M. Jackwig presiding, held that: (1) there were no genuine issues of

material fact; (2) Sears was barred under principles of issue preclusion from litigating

the preemption issue; (3) even if issue preclusion did not apply, § 537.7103(5)(e) was

not preempted; (4) the automatic stay provision of the Bankruptcy Code (11 U.S.C. §

362(a)(6)4) prohibited Sears’ act of sending a copy of the letter to O’Brien because the

letter was at least in part an attempt to collect an unsecured debt; and (5) Sears’ act

violated § 537.7103(5)(e).

Sears appealed to the District Court and sought reversal of the Bankruptcy Court

on several grounds. The District Court concluded that Sears was not barred under the

concept of issue preclusion from litigating the preemption issue. However, the court

held that federal bankruptcy law did not preempt the relevant Iowa law. It further held

that Sears violated the Iowa law. The District Court concluded that in light of its

rulings, it did not need to reach the issue of whether Sears violated federal bankruptcy

law. Accordingly, the decision of the bankruptcy court was affirmed. 

C. The Siverly Case

Lois M. Siverly filed a petition for relief under Chapter 7 of the Bankruptcy

Code on June 28, 1995. Hahn represented Siverly in the Chapter 7 proceeding.
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On August 9, 1995, Sears sent Hahn a letter concerning its purchase money

security interest in goods purchased by Siverly. Like the letter relating to O’Brien, the

letter regarding Siverly advised Hahn that Sears had not received Siverly’s statement

of intention with respect to the secured property in accordance with § 521(2)(A) of the

Bankruptcy Code. The letter further advised Hahn of Siverly’s options with respect

to the account: redeem the merchandise with a lump sum payment, return the

merchandise, or reaffirm the account balance. In addition, the letter explained that

Siverly could re-establish a line of credit with Sears by reaffirming all her debt and

offered a line of credit if she reaffirmed. Sears mailed a copy of the letter to Siverly

and the bankruptcy trustee.

Hahn advised Sears that he objected to Sears’ sending of a copy of the letter to

Siverly and threatened legal action pursuant to § 537.7103(5)(e). Sears then initiated

an adversary proceeding seeking a declaratory judgment that: (1) federal bankruptcy

law and policy preempt § 537.7103(5)(e); (2) Sears did not violate federal bankruptcy

law by sending Siverly a copy of the letter; and (3) Sears’ act did not violate Iowa law.

In her Answer, Siverly maintained that the letter was harassing and constituted an

attempt to collect a debt.

On January 16, 1996, Sears filed a motion for summary judgment seeking the

declaratory relief. On June 24, 1997, after Sears’ motion was fully briefed, the

Bankruptcy Court, the Honorable Russell T. Hill presiding, granted Sears’ motion

insofar as it sought declaratory relief based on there being no genuine issue of material

fact, but otherwise, it ruled in favor of Siverly.

More specifically, the Bankruptcy Court held that: (1) the concept of issue

preclusion barred Sears from litigating the preemption issue; (2) even if the concept of

issue preclusion did not apply, federal bankruptcy law does not preempt Iowa law

because no direct conflict existed and the federal statute did not expressly address the

conduct in issue; (3) Sears’ communication violated Iowa law; and (4) Sears’ sending
5That disciplinary rule states in pertinent part:

(A) During the course of representing a client a lawyer

shall not:

(1) Communicate or cause another to communicate on the

subject of the representation with a party known to be represented

by a lawyer in that matter except with the prior consent of the

lawyer representing such other party or as authorized by law.

Iowa Code Ann., Code of Prof. Resp., D.R. 7-104(A)(1) (West. 1998).

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of the letter to the debtor constituted a violation of Iowa Disciplinary Rule 7-

104(A)(1).5 The Bankruptcy Court also stated that it did not need to resolve the issue

of whether Sears violated § 362(a)(6) of the Bankruptcy Code.

Sears appealed to the District Court. On April 16, 1998, the District Court

affirmed the Bankruptcy Court’s holdings that federal bankruptcy law does not preempt

the Iowa law and that Sears violated § 537.7103(5)(e). The District Court did not

address whether the Bankruptcy Court erred in failing to find that Sears’

communication was not an improper attempt to collect the debt under the Bankruptcy

Code and in applying Disciplinary Rule 7-104(A)(1) to Sears.

II. Discussion

The parties agree that no material facts are in dispute. The issues before us are

legal and not factual. Our standard of review is de novo. See, e.g., National Bank of

Commerce v. Dow Chemical Co., 165 F.3d 602, 606-07 (8th Cir. 1998) (the granting

of summary judgment, involving a claim of preemption, would be reviewed de novo);

Stillmunkes v. Hy-Vee Employee Benefit Plan and Trust, 127 F.3d 767, 769-70 (8th

Cir. 1997) (bankruptcy court’s preemption ruling is reviewed de novo). With this in
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mind, we next state the reasons for our conclusion that the decisions of the district court

should be affirmed.

A. Iowa Law

Sears claims that Iowa law is preempted by federal law, and, even if it is not, the

letters that Sears sent did not violate Iowa law. We disagree on both counts.

1. Preemption

Under the Supremacy Clause of the Constitution, whether a federal law preempts

a state law generally turns on the answers to four questions. See, e.g., Nordgren v.

Burlington Northern R.R. Co., 101 F.3d 1246, 1248 (8th Cir. 1996) (FELA did not

preempt railroad’s counterclaim for property damages). Is the state law explicitly

preempted by the federal law? Id. Is the state law implicitly preempted by the federal

law because Congress has regulated the entire field? Id. (quoting Fidelity Fed. Sav. &

Loan Ass’n v. De la Cuesta, 458 U.S. 141, 153 (1982)). Is the state law implicitly

preempted because compliance by a private party with federal and state law is

impossible? Id. (quoting Freightliner Corp. v. Myrick, 514 U.S. 280, 287 (1995)). Is

the state law implicitly preempted because it creates an obstacle to accomplishment and

execution of the full purpose of federal law? Id. Here, the answer to all of these

questions is “no.”

We find no statement on the part of Congress expressing an intention to preempt

laws like the Iowa statute. Moreover, while federal bankruptcy law is expansive,

Congress has not exclusively regulated the relationship of private lawyers and clients

and the permissible range of third-party conduct that may properly interfere with that

relationship. On the contrary, that arena is particularly one of local concern, and we

are loath to find preemption in such a case. Id. (quoting CSX Transp., Inc. v.
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Easterwood, 507 U.S. 658, 663-64 (1993)). As a result, we find no “field” preemption

either.

Furthermore, Sears does not claim that it is impossible to comply with federal

and state law. In fact, Sears could easily comply with Iowa law by simply addressing

letters to counsel as opposed to the debtor. Thus, it is not impossible for Sears to

pursue its rights under federal bankruptcy law while complying with Iowa law.

Finally, on the facts and circumstances of this case, there is no reason to think

that Sears has been or will be meaningfully impeded in the pursuit of any federal

bankruptcy rights if it is required to deal with a debtor’s lawyer as required by Iowa

law. Sears certainly presented no evidence to the district court which would support

such a finding. We emphasize, as did the district court, that the Iowa law permitted

Sears to deal directly with the debtor if counsel was unresponsive. 

Simply put, federal bankruptcy law does not preempt § 537.7103(5)(e) because

the state law presents no obstacle to the full enjoyment of Sears’ federal rights. In a

similar case, the bankruptcy appellate panel for this Circuit has come to the same

conclusion. Greenwood Trust Co. v. Smith, 212 B.R. 599, 602-03 (B.A.P. 8th Cir.

1997) (reaffirmation provision of Bankruptcy Code did not preempt § 537.7013(5)(e),

but only restricted persons with whom the creditors could communicate in attempt to

secure such agreements). We agree with that decision. Likewise, we are not

persuaded by Sears’ attempt to distinguish these cases from Greenwood. 

2. Violation of Iowa Law

Sears argues that even if Iowa law is not preempted, the letters that Sears sent

did not violate Iowa law. We make short work of that argument. 
6We express no opinion on Sears’ true business purpose or motivation.

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The statute is clear. With exceptions not pertinent here, § 537.7103(5)(e)

provides that an “attempt to collect a debt” by means of a “communication with a

debtor” is prohibited if the debt collector “knows that the debtor is represented by an

attorney and the attorney’s name and address are known, or could be easily

ascertained.” The letter Sears sent to the debtors not only inquired about pledged

collateral, but also offered a Sears credit line if the debtors would reaffirm all of the

debt, including the unsecured portion of the obligation. Applying the plain meaning of

words of the statute to the conduct of the creditor, Sears was obviously trying to collect

a debt. See Greenwood, 212 B.R. at 603 (“[W]e determine that the conduct of inviting

reaffirmation falls squarely within Iowa Code § 537.7103(5)(e) as ‘an act to collect’

a debt”). Sears did so by writing a party that was represented by a lawyer. Sears knew

that counsel had been retained, and Sears knew the lawyer’s address. 

That Sears may have had a valid business reason for sending an “information

copy” to the debtor or that Sears acted with a benevolent motive or that Sears also

addressed the letter to counsel for the debtor6, are irrelevant when the unambiguous

words of the Iowa statute are applied to the undisputed facts. Iowa law plainly

prohibited what Sears did notwithstanding the excuses now advanced by the company.

B. The Other Issues

The district court found it unnecessary to address whether the Sears collection

letter independently violated federal bankruptcy law or an Iowa ethical rule. We too

agree that it is unnecessary to resolve those issues, and we express no opinion on them.
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In addition, and perhaps more importantly, we do not think that those issues

were properly presented to the bankruptcy court because there was no real controversy

about them. See 28 U.S.C. § 2201 (requiring an “actual controversy” as a condition

for declaratory relief). See also Marine Equipment Management Co. v. United States,

4 F.3d 643, 647 (8th Cir. 1993) (absent a substantial probability of future claims, fear

of future liability did not satisfy the “case or controversy” requirement for bringing a

declaratory judgment action). As Sears alleged in its complaints, the letters from the

debtors’ counsel threatening legal action--which motivated Sears’ declaratory

judgment requests--alleged only a violation of § 537.7103(5)(e). (App. at 71-72 ¶ 10;

91-92 ¶ 10.) Therefore, the only “actual controversy” properly before the bankruptcy

court was whether a specific Iowa law was preempted by federal bankruptcy law, and,

if not, whether, during the administration of the estate, Sears violated that Iowa law by

sending the letter.

III. Conclusion

The Iowa law that prohibited Sears from corresponding with debtors represented

by counsel is not preempted by federal bankruptcy law. That law does not impede

Sears in the exercise of its federal bankruptcy rights. In addition, the letters that Sears

sent to the debtors, which offered a new credit line if they would reaffirm their prior

debt (including the unsecured portion), violated the Iowa statute as an attempt to collect

a debt by corresponding directly with a client represented by a lawyer. Accordingly,

we affirm the decisions of the district court. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.