Ms. Alexander’s motion for summary judgment against CDAC on Count TT of the complaint is
granted.
CONCLUSION

If IS THEREFORE ORDERED that the defendant’s motion for summary judgment (doc.
#11) on Count I of the complaint is granted, and the remaining portion is denied. It is further ordered
that the plaintiffs motion for summary judgment (doc. #10) on Count II of the complaint is granted,
and the remaining part of that motion is denied, The matter is set for a status conference on April 3,
2003 to schedule any necessary further proceedings. The parties are directed to discuss scttlement
prior to that status conference.

ENTER:

(hd, 7A QL.

SIDNEY I. §CHENKIER
United States Magistrate Judge

Dated: March 21, 2003



interfere with the authority of the bankruptcy court to enforce its own orders, and would Icad to a
fracturing of the plaintifI’s bankruptcy proceedings that the Bankruptcy Code secks to avoid.®

This same rcasoning leads the Court to find that Ms. Alexander’s Section 1692f claim is
precluded by the Bankruptcy Code. Section 1692(f) states: “[a] debt collector may not use unfarr
or unconscionable means to collect or attempt to collect any debt.” Ms. Alexander asserts that
CDAC’s attempt to collect her alleged debt to Dr. Kannankeril, while that debt was subject to the
automatic stay provision of her bankruptcy proceeding, is unlair or unconscionable and, as a result,
violates Section 1692f. As with the claimed violation of Section 1692e, the collection leiters sent
to Ms. Alexander by CDAC arc alleged to violate Scction 1692f only because they violate the
automatic stay provision of Ms. Alexander’s bankruptcy proceeding. Consequently, this Court finds
Ms. Alexander’s Section 1692f claim precluded by the Bankruptcy Code, 11 U.S.C. § 362.

2.

Count Ll of Ms. Alexander’s complaint alleges CDAC violated 15 U.S.C. § 1692c(a)(2),
which states, in relevant part, that Ms. Alexander alleges that CDAC violated Section 1692c(a)(2)
when it sent the collection letters, dated March 21, 2001 and May 7, 2001, directly to Ms. Alexander
even though Ms. Alexander was then represented by an attorney with respect to the debt that CDAC
sought to collect (Compl., 11). Unlike her FDCPA claim in Count I, Ms. Alexander’s assertion that
CDAC violated Section 1692c(a)(2) does not rest solely — or, indeed, at all — upon CDAC’s alleged

violation a provision of the Bankruptcy Code for which the Bankruptcy Codc provides a remedy.

“Phe court in Hyman v. Tate & Krilin, 02 CV 242 (N.D. Ill. Nov. 1, 2002), declined to extend the reasoning
of Cox to preclude an FDCPA claim based on a violation of the automatic stay provision in a bankruptcy proceeding.
However, in so ruling, the Court observed that the parties had not sufficiently developed the point in briefing, Here, by
contrast, the parties have thoroughly addressed this issue in their summary judgment submissions.

13



Dr. Kannankenil died in the Fall of 2000 (DSOF #10). Thereaftcr, on March 21, 2001, Dr.
Kannankeril’s office referred Ms. Alexander’s account to CDAC for collection (DSOF #12).*
CDAC acts as a debt collector, as defined by 15 U.S.C. § 1692a (PSOF # 4),

When Dr. Kannankeril’s office transferred Ms. Alexandet’s account to CDAC for collection,
it provided CDAC with a statement of Ms. Alexander's account, her social security number, phone
number, and a statement of the amount of Ms. Alexander's outstanding debt (DSOF #13). CDAC’s
policy is not to accept accounts from creditors when the creditor notifics CDAC that the debtor has
filed for bankruptcy (DSOF # 20). If CDAC learns that a debtor has filed for bankruptcy after
CDAC has accepted the debtor’s account, then CDAC stops trying to collect the debt, cancels and
returns the account to the creditor, and notifies both the creditor and the credit bureau of the debtor's
bankruptcy (DSOF # 21, 23, 26, 29). However, CDAC has offered no evidence of any policy or
practice it has to delermine whether a debtor is represented by counsel before contacting him or her

directly.

“This Court finds, contrary to Ms. Alexander’s asscrtion, that no genuine dispute of fact exists regarding the
date on which Dr. Kannankeril’s office referred Ms. Alexander's account to CDAC, Ms. Alexander asserts that CDAC
may not rely on the records cited by CDAC to establish the date on which Dr. Kannankeril transferred Ms. Alexander’s
file to CDAC because those records are hearsay. While Fed. R. Civ. P. 56(@) prevents parties from relying on
inadmissible hearsay in summary judgment proceedings, Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d $60, 562
(7* Cir, 1996) (“The evidence relied on must be competent evidence of a type otherwise admissible at trial. Thus a party
may not rely upon inadmissible hearsay in an affidavil or deposition to oppose a motion for summary judgment”), a party
may rely on evidence submitted in a form not admissible at trial, Celotex Corp., 477 U.S, at 324 (1986),
recognizes merely that evidence may be presented in a form not necessarily admissible at trial, such as an affidavit. But
the facts asscrled must be admissible if put into the proper form, such as live testimony.” Ty, Inte. v. MJC-A World of
Quality, lac, ,93 C3478, 1994 WL 36880, *7 n.3 (NLD. UL, Feb. 8, 1994). See alve American Security Co, y. Hamilton
Glass Co., 254 F.2d 889, 893 (7th Cir. 1958). Here, CDAC the facts asserted in the records in question are capable of
being put into a form admissible at trial by showing that they are business records, see FED. R. Evi. 803(6). Ms.
Alexander offers no evidence to show that CDAC could not lay this foundation at trial,

(Parenthelically, we note that Ms. Alexander raises similar hearsay objections to certain other paragraphs of
CDAC’s fact statement (see DSOF #'s 13, 18, 19,27, 30). For the same reasons stated above, we find that CDAC may
rely on these statements in the form they are presented on these summary judgment motions.)

4


about the debtor’s representation. The facts submitted on summary judgment do not reveal why
Dr. Kannankenl’s office did not disclose to CDAC that Ms. Alexander was represented by counsel
on the debt CDAC was being asked to collect. More tellingly, for purposcs of the “safc harbor”
created by Micare, CDAC has offered no evidence that it ever asked Dr. Kannankeril’s office if Ms.
Alexander was represented. Had CDAC asked whether Ms. Alexander was represented and been
given incorrect information, it would be a harsh result to hold CDAC responsible for the creditor’s
misconduct, But, that is not the case here, because CDAC never asked the question.

Therefore, this Court finds that Dr. Kannankeril had actual knowledge that Ms. Alexander
was represented by an attorncy with respect to the alleged debt in question may be imputed to
CDAC. Asaccsult, when CDAC sought to collect that debt in a letter sent directly to Ms. Alexander
on March 21, 2001 and May 7, 2001, CDAC violated Section 1692c(a)(2), as a matter of law.

CDAC may avoid liability for that violation if CDAC can establish that its violation of
Section 1692c(a)(2) resulted from a bona fide crror as dcfined in Section 1692k(c) of the FDCPA.
Section 1692k states in relevant part:

A debt collector may not be held liable in any action brought under this [subchapter]

if the debt collector shows by a preponderance of evidence that the violation was not

intentional and resulted from a bona fide error notwithstanding the maintenance of

procedures reasonably adapted to avoid any such error.
fd. at §1692k(c) (emphasis added).

In Jenkins v. Heintz, 124 F.3d 824 (7th Cir. 1997), the appeals court affirmed a grant of
summary judgment for a defendant debt collector based on the bona fide error defense. The court
explained that debt collectors are not required to “conduct an independent investigation into the legal

intricacies of the clicnt’s contract” to cnsure that a debt is legally valid. Jd. at 833-834. Further, the

7



the Court held that the plaintiff was limited to the remedy provided by the Bankruptcy Code for such
aviolation, /d. at 917.

In Adair v. Sherman, 230 ¥.34 890 (7" Cir. 2000), the Seventh Circuit affirmed the dismissal
of an FDCPA claim which alleged that a creditor filed a false statement of claim in the plaintiff's
bankruptcy proceeding, Analyzing the plaintilf’s claims under the doctrines of collateral estoppel
and issue preclusion, the Adair court concluded that the plaintiff's failure to use the procedures
provided by the Bankruptcy Code to challenge a creditor’s proof of claim at the time the claim was
filed precluded use of the FDCPA to attack the proof of claim after the claim had been confirmed.
230 F.3d at 896. The Adair court explained that allowing the plaintiff's FDCPA claim to proceed
would threaten the integrity of the bankruptcy system. “Allowing collateral attacks of the type
brought by Mr. Adair would give debtors an incentive to refrain from objecting in the bankruptcy
proceeding and would thereby destroy the finality that bankruptcy confirmation is intended to
provide.” Jd. at 895.

Several courts within this district also have held that the Bankruptcy Code precmpts certain
FDCPA actions. In Bolen v. Bass & Assoes., 97 C 3944, 2001 WL 1249058, (N.D. Ill, Oct. 17,
2001), the debtor brought a class action under the FDCPA, alleging that the defendant creditor had
violated the FDCPA by sccking to collect debts discharged in bankruptcy pursuant to unenforceable
reaffirmation agreements. Applying the holding in Cox, the district court held that the debtor’s
exclusive remedy was “contempt sanctions for violation of § 524's discharge injunction” 2001 WL

1249058, at * 3.


The alleged obligation at the center of the dispute between Ms. Alexander and CDAC is of
the character required by Section 1692a(5). Il is undisputed that Ms. Alexander incurred this
obligation in connection with Dr. Kannankeril’s performance of medical services — a consumer debt
arising out of the performance of scrviccs for personal purposes, as required by Scction 1692a(5).
Tt is also undisputed that, by listing $1,125.00 as allegedly owed to Dr. Kannankeril on “Schedule
F - Creditors Holding Unsecured Nonpriority Claims,” filed in her bankruptcy proceeding (PSOF
# 6), Ms. Alexander asserted the existence of a debt as defined by the FDCPA. Moreover, the
actions of defendant CDAC evidence the existence of an alleged obligation as required by Section
1692a(5):; on March 31, 2001 and again on May 7, 2001, CDAC sent letters dircetly to Ms.
Alexander which alleged that Ms. Alexander had an obligation to pay $1,125.00 to Dr. Kannankeril
(DSOF #22, 25), Based on these material and undisputed facts, the Court finds that Ms. Alexander
has alleged the existence of a debt within the meaning of the FDCPA.'

A.

Given that Ms. Alexander has alleged a debt as detined by the FDCPA, the Court tums to the
question of whcthcr Ms. Alexander is precluded from bringing an action under the FDCPA because
CDAC attempted to collect a debt that, at the time, was subject to the aulomatie stay provision of
Ms. Alexander’s bankruptcy proceeding. To answer this question we must evaluate the interaction
of two federal statutes -- thc Bankruptcy Code and the FDCPA. As cautioncd by the Seventh Circuit,
when two federal statutes provide overlapping rights to a patty, a court must endeavor to construe

the statutes in a manner which gives effect to each. “Congressional intent behind one federal statute

*The present action thus may be distinguished from Arruda. Unlike the defendant in Arruda, CDAC attempted
to collect an alleged obligation from Ms. Alexander that predated her bankruptcy filing, not to contract with Ms.
Alexander regarding post-bankruptcy possessory rights in personal property.

6



Dr. Kannankcril’s office did not notify CDAC of Ms. Alexander’s bankruptcy, or provide
CDAC withinformation that would indicate that Ms. Alexander had retained an attomey to represent
her with respect to the debt allegedly owed to Dr. Kannankeril (DSOF #s 18, 19). After obtaining
Ms. Alexander’s account from Dr. Kannankeril’s office, CDAC attempted to collect the debt
allegedly owed by Ms. Alexander to Dr. Kannankeril. On March 22, 2001, CDAC sent a collection
letter directly to Ms. Alexander seeking a payment of $1,125.00 (DSOF # 22). On May 7, 2001
CDAC sent a second collection letter directly to Ms. Alexander which also sought a payment of
$1,125.00 (DSOF #25). On May 22, 2001, an attomey informed CDAC that Ms. Alexander had
filed a petition for bankruptcy (DSOF # 27). Upon receiving this information, CDAC ceased all
collection activity on Ms. Alexander’s account (DSOF # 30).

Ti.

The FDCPA seeks to eliminate abusive, deceptive, and unfair debt collection practices.
Rutnya v. Collection Accounts Terminal, lac., 478 F.Supp. 980, 981 (N.D. Il]. 1979). To trigger the
protections of the FDCPA, a complaint must allege the existence of a debt as defined by the Act.
Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 23 (Ist Cir. 2002). Section 1692a(5) defines a debt
as: “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in
which the money, property, insurance, or services which are the subject of the transaction arc
primarily for personal, family, or household purposes, whether or not such obligation has been
reduced to judgment.” 15 U.S.C. § 1692(a)(5) (emphasis added). Therefore, the FDCPA covers both

admitted obligations of a consumer, and those that are alleged but may not, in fact, cxist.

w



court cxplained that the defendant's debt collector had demonstrated the cxistence of procedures
rcasonably adapted to avoid a violation of the FDCPA becausc the debt collector required its creditor
clients to state under oath that each charge relating to the referred debt was truc and correct. Jd. at
834. Similarly, in Jenkins v. Union Corp., 999 F. Supp. 1120, 1140 (N.D. TI. 1998), the court
granted summary judgment for a debt collector based upon the bona fide crror defense provided in
Section 1692k(c), In Jenkins, the court found that the debt collector maintained procedures sufficient
to avoid FDCPA violations where the debt collector advised its clicnts in writing “to submit only
those charges to which they are legally entitled,” and also instructed its sales staff to advise
prospective clients of the same. Jenkins, 999 F. Supp. at 1141-1142.

Here, unlike the debt collectors in the two Jenkins cases, CDAC has not offered evidence that
it maintained procedures reasonably adapted to avoid a violation of the FDCPA. CDAC has not
provided evidence that CDAC requires its creditor clients to affirmatively state whether a debtor has
retained counsel with respect to the debi the creditor refers to the CDAC for collection, Nor has
CDAC offered evidence that CDAC advises its creditor clients in writing that CDAC must be
informed if a debtor has retained an attorney with respect to the debt intended for collection.
Although CDAC has a procedure whercby it stops contacting the debtor directly once it learns that
the debtor is represented by counsel (DSOF # 29), that is a procedure that secks to avoid
compounding an error that already has occurred - it is not “reasonably adapted” to avoid the
improper communication from occurring in the first place.

Because this Court finds CDAC has violated Section 1692¢(a)(2) as a matter of law and has

not established that such violation resulted from a bona fide error as provided in Scction 1692k(c),

18



bankruptcy proceedings. Asa result, the debt thal was subject to that agroement was discharged by
the bankruptcy court at the conclusion of the plaintiff's bankruptcy, and was thercfore subject to the
permanent discharge injunction provided by 11 U S.C. § 524, Afler completing performance under
the agreement, the plaintiff filed suit seeking rescission of the debt-affirmation agrecment and refund
of the amounts paid under it. The Seventh Circuit held that the rescission action was preempted by
the Bankruptcy Code.

The Seventh Circuit explained that taken together, Section 524(a)(2) and 524(c) provide “*an
injunction against the commencement or continuation of an action, the employment of process, or
an act, to collect, recover, or offsct any such debt as a personal liability of the debtor, whether or not
discharge of such debt is waived.’ Cox, 239 F.3d at 915. A creditor who attempts to collect a
discharged debt subject to the permanent injunction provided by Section 524 may be found in
contempt of the bankruptcy court thal issued the discharge order, Jd. The court of appeals reasoned
that what plaintiff in substance claimed was that the defendant violated the permanent discharge
injunction provided to the plaintiff by Section 524 of the Bankruptcy Code. The Plaintiff had not
offered any additional reason that the debt-affirmation agreement should be rescinded; if the
defendant had not violated Section 524, the plaintiff's rescission claim would fail, Noting that
Section 524(a)(2) provided the plaintiff with a remedy for a creditor’s violation of the discharge
injunction, the court of appeals stated that the plaintiff could seck affirmative relicf for a violation
of the discharge order only in the bankruptcy court that issued the order. Jd. at 917. The court
reasoned that the bankruptcy court was in a “better position to adjudicate the alleged violation, assess

its gravity, and on the basis of that assessment formulate a proper remedy.” /d. at 916. Asa result,



Minute Ordgr Form (96/97)

United States District Court, Northern District of Illinois

Name of Assigned J i ‘ i Sitting Judge if O1
ror Magistrate Jude Sidney I. Schenkier than assigned Judge
CASE NUMBER 02 C 267 2063 DATE 3/21/2003
CASE Cheryl Alexander vs. Unlimited Progress Corp,
TITLE

Un the following box (a) indicate the purty filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

tion being,
MOTION: of the motion being prescnted,]

DOCKET ENTRY:

(op) im Filed motion of [ use listing in “Motion” box above.] ,

(2) im Brief in support of motion due

(3) a Answer briefto motion due___. Reply to answer bricfdue____.

(4) Oo Ruling/Hearing on set for at

(5) a Status hearing[held/continued to] [set for/re-set for]on.._—sset for at _

(6) Oo Pretrial conference[held/continued to] [set for/re-set for]on set for at
(7) O Trial{set for/re-set for]on at

(8) o [Bench/Jury trial] [Hearing] held/continuedto_ ss at_

(9) a) This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) OLocal Rule 41.1 COFRCP41(@a)(1) Cl FRCP41(a)(2).

(10) Ml [Other docket entry) ENTER MEMORANDUM OPINION AND ORDER. Defendant’s motion
for summary judgment [doc.# 11] on Count T of the complaint is granted, and the remaining portion is
denied. Plaintiff s motion for summary judgment [doc.# 10] on Count II of the complaint is granted, and
the remaining part of that motion is denied. Status hearing is set for 04/03/03 at 9:00 a.m. to schedule any
necessary further proceedings. The parties are directed to discuss settlement prior to the 04/03/03 status

hearing,
(ii) [For further detail see order attached to the original minute order,]
No notices required, advised in open court
No notices required. ner of notices
oY { Notices mailed by judge's statt. MAR 2 4 2003
Notified counsel by telephone. dave docketed
Docketing to mail notices.
Mail AO 450 form, Pee Rarer es ence
Copy to judge/magistrute judge, vi
an 21/2003
courtroom eos Wa Weak ts rales notice
IK, deputy’s. UK
: L sinials . SH
Datetime receiv) bh U3- Us
central Clerk’s Office mailing, deputy initials



while her bankruptcy petition was pending; indeed, she could not have raised these issues there
because all of the creditors’ activities post-dated the conclusion of her bankruptcy case.” /d. at 1.
In other words, the holding in Wagner applicd to a claim that was not part of the bankruptcy case,
but arose later in time.

From these authorities, we derive the principle that the Bankruptcy Code preempts claims
that also would otherwise lie under the FDCPA -— or, as in Cox, under state law — only in those cases
where preemption is necessary to safeguard the integrity of the bankruptcy process. That principle
strikes the balance between the application of the rule that preemption is not lightly inferred,
Palumbo Bros., Inc., 145 F. 3d at 862, and the need to ensure that the bankruptcy court is able to
maintain exclusive control of the assets of the debtor’s estate to ensure an orderly and fair
distribution of assets. In order to properly strike that balance, we believe it necessary to cxamine not
merely whether the action being challenged involves a debt that is subject to the control of the
bankruptcy court, but also whether allowing that action to be challenged in an FDCPA action would
undermine the exclusive control of the bankruptcy court. It is with this framework in mind that we
consider the actions challenged by Ms. Alcxander here: the attempt to collect the debt that was
subject to the automatic stay, and sending the collection letters directly to Ms. Alexander even
though she was represented by counsel.

1.

Ms. Alexander contends that the collection Ictters sent by CDAC on March 22, 2001 and
May 7, 2001 violated Section 1692c(2)(A) because they falsely asserted that Ms. Alexander’s debt
to Dr. Kannankeril was immediately duc, when in fact the debt was subject to the automatic stay

provision of Ms. Alexander’s bankruptcy proceeding provided by 11 U.S.C. § 362. Ms. Alexander

11



In Baldwin v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., No. 98 € 4280,
1999 WL 284788 (N.D. Ul, April 26, 1999), the district court granted a motion to dismiss an
FDCPA claim premised upon a creditor's filing of an allegedly inflated proof of claim in the
plaintiff's bankruptcy procceding. The district court described the plaintiff's FDCPA claim as an
“external challenge to alleged wrongdoing that occurred during bankruptcy proceedings , . ..” 1999
WT. 284788, at * 2. In finding the FDCPA claim precluded by the Bankruptcy Code, the Baldwin
court reasoned that allowing the FDCPA to apply to a proof of claim in a bankruptcy proceeding
would frustrate the central purpose of the Bankruptcy Code ~ “to adjudicate and conciliate all
competing claims to a debtor’s property in one forum and one proceeding.” Jd. at 5. The Court
further stated that allowing a debtor to scek a remedy under the FDCPA for a violation of the
Bankruptcy Code for which the Code provides a remedy would tempt debtors to ignore the
safeguards created by the Code, and thus would “undermine the cntire bankruptcy system,” 1999 WL
284788, * 5. Id. See also Gray-Mapp v, Sherman, 100 F. Supp. 2d 810, 813-14 (N.D. ILI. 1999)
(debtor precluded from bringing an FDCPA claim based on allegation that creditor filed an inflated
proof of claim in a bankruptcy proceeding where debtor did not challenge the proof of claim in the
proceeding as provided for in the Bankruptcy Code).

On the other hand, in Wagner v, Ocwen Federal Bank, FSB, No. 99 © 5404, 2000 WL
1382222 (N.D. Ill, Aug. 28, 2000), the court held that the Bankruptcy Code does not provide the
exclusive federal remedy for a debtor who is the subject of an attempt to collect a debt. In that case,
the claim which the defendant sought to collect did not arise during the pendency of the bankruptcy
proceedings and was not discharged by the bankruptcy court, as in Cox. Thus, the Court reasoned

that the FDCPA action did not attempt to “bypass any remedies provided to her under the Code

10


should not be thwarted by the application of another federal statute if it is possible to give effect to
both laws.” United States v. Palumbo Bros., ne., 145 F.3d 850, 862 (7° Cir. 1998). But, should this
Court determine that the (wo statutes atc incompatible, we must decide which statute Congress
intended to take precedence. Coker v. Trans World Airlines, Inc., 165 F.3d 579, 583-584 (7" Cir.
4999),

While it has not directly addressed whether Congress intended the FDCPA to prevail over
the Bankruptcy Code, or vice versa, the Supreme Court has considered the interaction between the
Bankruptcy Code and the federal statute of which the EDCPA is a part: the Consumer Protection
Act. See Mace y. Van Ru Credit Corp., 109 F.3d 338, 343 (7" Cir. 1997) (holding the FDCPA is
a part of the Consumer Protection Act). {n Kokoszka v. Belford, 417 U.S. 642, 650 (1974), the
Supreme Court held that the Consumer Protection Act’s wage garnishment provisions did not apply
within the context of a bankruptcy proceeding, The Supreme Court explained that the “legislative
history of the Consumer Protection Act makes it clear that, while it was enacted against the
background of the Bankruptcy Act, it was not intended to alter the clear purpose of [the Bankruptcy
Act] to assemble, once a bankruptcy petition is filed, all of the debtor’s assets for the benefit of
creditors.” Kokoszka, 417 U.S. at 650. Surther, the Supreme Court stated “if despite [the protections
of the Consumer Credit Protection Act], bankruptcy did occur, the debtor’s protection and remedy
remained under the Bankruptcy Act.” /d. at 651.

In addition, a number of courts within this Circuit have considered the interplay between the
Bankruptcy Code and various state and federal laws. In Cox v. Zale, 239 F.3d 910 (7* Cir. 2001),
(he plaintiff had filed for bankruptcy. The plaintiff and the defendant then entered into a “debt-

affirmation agreement” that was not filed with the bankruptcy court prior to the close of the


On December 9, 1997, Ms. Alexander filed a Chapter 13 petition in bankruptcy in the United

States Bankruptcy Court for the Northern District of Illinois, which was styled as in re Alexander,
(N.D. Ill Bankr, No. 97-37827) (PSOF #5). During that proceeding, Ms. Alexander filed a
document entitled “Schedule F — Creditors Uolding Unsecured Nonpriority Claims,” and listed
$1,125.00 allegedly owed to Dr. Kannankcril (PSOF #6). On or about January 27, 1998, the Clerk’s
Office of the United States Bankruptcy Court for the Northern District of Illinois sent a notice of Ms.
Alexander’s bankruptcy to Dr, Kannankeril via first class mail (PSOF #7). This notice listed Stuart
B. Handelman as Ms. Alexander’s attomey, provided Mr. Handelman’s address, and listed the
alleged $1,125.00 to Dr. Kannankeril (P1.’s Mem., Ex.3). Dr. Kanmankeril subsequently filed a claim
im Ms. Alexander’s bankruptcy proceeding on February 11, 1998 (PSO #8). On August 21, 1998,
Ms. Alexander’s Bankruptcy Trustee issued a Trustec’s Record of Creditor’s Additional Claim. The
Trustee’s Record also listed Stuart B, Handelman as the attomey for Ms. Alexander, provided Mr.
Handelman’s address, and listed the alleged debt to Dr. Kannankeril as one to be paid (in part) under

the bankruptcy plan (PJ.’s Mem., Ex. 4)?

*Tereatter “PSOF” refers to Plaintiff's Statement of Material Facts in support ofher motion, and “DSOF” refers
to Defendant’s Statement of Material Facts in support of its motion, both submitted in accordance with Local Rule
56.1(b).

*This Court finds that CDAC’s Local Rule 56 response does not create a genuine dispute of material fact as to
whether the January 27, 1998 notice was sent to or received by Dr. Kannankeril. Indeed, the fact that Dr. Kannankeril
shortly thereafter filed a claim in the bankruptcy proceeding (PSOF #8) is strong evidence that he received the notice.
The only argument CDAC raises is that the notice should be disregarded as hearsay. We disagree. Hearsay is a
statement made by an out of court declarant which is offered to prove the truth of the matter asserted in that statement.
FED, R. EVID, 801. Ms, Alexander would not offcr the notice for the truth of the matter asserted in the notice, but instead
to show that Dr. Kannankeri) was sent notice of her bankruptcy proceeding,

3


The FCDPA prohibits a debt collector from sending letters directly to any debtor who is represented
by counsel, without regard to whether the debtor is in bankruptcy. Unlike the claim in Count L,
which is based solely on an alleged violation of the Bankruptcy Code, Ms. Alexander’s claim in
Count HJ is not derivative at all of any violation of the Bankruptcy Code.

In these circumstances, allowing Ms. Alexander to bring an FDCPA claim for CDAC’s direct
communication with Ms. Alexander regarding a debt with respect to which she had retained counsel
docs no violence to the Bankruptcy Code's central objective of consolidating and cvaluating all
competing claims to a debtor’s personal property in one court. Nor would allowing Ms. Alexander
to bring a claim for the violation of Section 1692c(a)(2) permit her to “bypass the procedural
safeguards in the (Bankruptcy) Code” as cautioned against in Baldwin.” 1999 WL 284788, at *2.
Unlike the case with violation of the automatic stay or of the discharge injunction, the bankruptcy
code provides no special remedy for inappropriate contacts with a represented debtor.

Permitting Ms, Alexander to bring an action under the FOCPA for CDAC’ salleged violation
of Section 1692c(a}(2) is consistent with this Circuit’s preferred method of statutory construction.
Palumbo Bros., inc., 145 F.3d at 862 (“Congressional intent behind one federal statute should not
be thwarted by the application of another federal statuc if it is possible to give cffect to both laws”).
With respect to Ms. Alexander’s claim in Count IJ, the Bankruptcy Code and the FDCPA can boih
be given effect by allowing Ms. Alcxander to bring an FDCPA action based on CDAC’s alleged
violation of Section 1692c(a)(2). Consequently, CDAC’s motion for summary judgment against Ms.

Alexander on Count I of the complaint is denied.

14



creditor’s knowledge may be imputed to a debt collector). In Micare, the court denied a motion to
dismiss a plaintiff's FDCPA claim where the plaintiff alleged that a creditor had actual knowledge
that the plaintiff was represented by an attorncy with respect to a debt, but did not allege that the
defendant debt collector had actual knowledge of such representation. Micare, 132 F.Supp.2d at 80-
81. The Micare court reasoned that to permit a creditor to refrain from informing a debt collector
of a debtor’s representation by an allorney would “utterly evisccrate the protections afforded to
debtors by the FDCPA.”” /d. at 80 (quoting Powers v. Prof'l. Credit Services, Inc., 107 F. Supp. 2d
166, 168 (N.D.N.Y 2000)). The court reasoned that cach time a creditor learned a debtor had
retained representation with respect to a debt, the creditor could transfer the debt to a debt collector,
fail to inform the debt collector of the representation, and allow the debt collector “to contact the
debtor directly without fear of liability under the FDCPA.” Micare, 132 F. Supp. 2d at 80.
Consistent with this rationale, Micare created a limited “safe harbor” for a debt collector in these
circumstances: if a debt collector asks a creditor if a debtor is represented by counsel with respect
to the debt referred, and the creditor intentionally or mistakenly fails to inform the debt collector of
such representation, Micare would refrain from imputing the creditor’s actual knowledge to the debt
collector. /d. at 80-81.

We find the reasoning of Micare persuasive, and applicable hcre. The undisputed facts show
that the creditor, Dr. Kannankeril, had actual knowledge that Ms. Alexander was represented by
counsel with respect to the alleged debt referred to CDAC (see PSOF ## 4, 7). On the facts of the
case, imputing Dr. Kannankeril’s knowledge to CDAC is necessary to insure that a debtor like Ms.
Alexander gets the benefits of her retention of counsel, and that her decision to retain counsel is not

circumvented by a creditor’s strategic failure to disclose and the debt collector’s failure to ask

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part and denies in part both motions. We grant CDAC’s motion against Ms. Alexander on Count [
of the complaint, but deny the remaining portion of the motion. The Court further grants Ms.
Alexander’s motion for summary, judgment against C DAC as to Count If of the complaint, and we
deny the remaining portion of the motion.
L

Summary judgment may be granted when the lack of a genuine issue 0 {material fact makes
a trial unnecessary. Fed.R.Civ.P. 56(c). A material fact is one that determines the outcome ofa
motion under the substantive law which governs the motion. Jnsolia v, Phillip Morris Inc., 216 F.3d
596, 598 (7th Cir. 2000). The party sceking summary judgment bears the initial burden of proving
that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the party seeking summary judgment mects that burden, the opposing party may not rely on the
pleadings alone to create a genuine issuc of ‘material fact. Jd. at 324. Local Rule 56. 1(b)(3) states:
“[a]ll material facts set forth in the statement required of the moving party will be decmed admitted
unless controverted by the statement of the opposing party.” The opposing party may show a
genuine issuc exists by serving and filing, pursuant to Local Rule 56.1, a concise statement which
identifies the matcrial facts in dispute and which cites to evidentiary materials (e.g., affidavits,
depositions, answers to interrogatories, admissions, etc.) that support those facts. Insolia, 216 F.3d
at 598.

I.
In this case, no genuine dispute of material fact exists. The following is a summary of the

undisputed material facts.

nN


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
CHERYL ALEXANDER, } ov ouered
Plaintiff, ) ah 103
) 206 wrk
vs. ) No. 02 C 2605
)
UNLIMITED PROGRESS CORP., and ) Magistrate Judge Schenkier
Illinois Corporation, d/b/a CREDITORS )
DISCOUNT & AUDIT CO., )
)
Defendant. )

MEMORANDUM OPINION AND ORDER’

The plaintiff, Cheryl Alexandcr, has filed this action asserting two separate violations by the
defendant, Unlimited Progress Corp., doing business as Creditors Discount & Audit Co. (““CDAC”),
of the Fair Debt Collection Practices Act (“the FDCPA,” or “the Act”), 15 U.S.C. § 1692 et seq.
Count I of Ms. Alexander’s complaint alleges that CDAC violated Sections 1692¢ and 1692{when
CDAC attempted to collect a debt allegedly owed by Ms. Alexander to Dr. Joseph V. Kannankeril,
at the time when that debt was subject to the automatic stay in Ms. Alexander’s Chapter 13
bankruptcy proceeding, In Count I, Ms. Alexander alleges that CDAC violated Section 1692c(a)(2)
when CDAC contacted Ms. Alexander directly in an attempt to collect the debt that she allegedly
owed to Dr. Kannankeril, even though CDAC knew that Ms. Alexander was represented by an
attorncy with respect to that debt.

Presently before the Court are cross-motions for summary judgment filed by Ms. Alexander

(doc. # 10) and CDAC (doc. #11), Based on the material and undisputed facts, the Court grants in

'On June 18, 2002 by consent of the parties, this case was rcassigned to this Court for all proceedings, including

the entry of final judgment, pursuant to 28 U.S.C. § 636(c) and Local Rule 73.1 (see doc. ## 8-9).



does not identify any other CDAC action which allegedly violates Section 1692¢(2)(A). Thus, Ms.
Alexander’s Section 1692¢(2)(A) claim rests entircly on CDAC’s alleged action that also violated
the bankruptcy code (e.g., attempting to collect a debt subject to the automatic stay provision of a
bankruptcy proceeding). Put another way, Ms. Alexander would have no Section 1692e(2)(A) claim
to assert but for the existence of the bankruptcy proceeding and the automatic stay.

The automatic stay under Section 362 cnjoins a debtor’s pre-petilion creditors from taking
any action to collect their debts once the debtor has filed for bankruptcy. Matter of Vitreous Steel
Products Co., 911 F.2d 1223, 1231 (7" Cir. 1990). The primary purpose of the automatic stay is to
prevent a “chaotic and uncontrolled scramble for the debtor’s assets in a varicty of uncoordinated
proceedings in different courts.” In re Holtkamp, 669 F.2d 505, 508 (7 Cir. 1982) (quoting, /a re
Frigitemp Corp., 8 Bankr. 284, 289 (S.D.N.Y. 1981). Section 362(h) a debtor has a right of action
in the bankruptcy court against any creditor who “willfully violates” the automatic stay. 11 U.S.C.
§ 362 (h). Section 362(h) provides that such a debtor “shall recover actual damages, including costs
and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” /d.

In these circumstances, to allow Ms. Alexander to bring an FDCPA claim based on seeking
to collect a debt in violation of the automatic stay would frustrate the purposes of the Bankruptcy
Code. As in Cox and Bolen, which both involved attempts to remedy alleged violations of
bankruptcy court orders, in this case the plaintiff seeks to remedy the alleged violation of a
bankruptcy court order: the order imposing can automatic stay. To permit the plaintiff here to
remedy an alleged violation of the automatic stay through an FDCPA action would encourage

debtors to bypass the remedy provided by Section 362(h) for violations of the automatic stay, could

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B.

Having decided that Count Tl is not preempted by the Bankruptcy Code, we now consider
whether Ms. Alexander should receive summary judgment in her favor on that claim. A debt
collector violates Section ]692c(a)(2) ifthe debt collector contacts a debtor directly regarding a debt
when the collector “knows the consumer is represented by an attomey with respect to such debt and
has knowledge of, or can readily ascertain such attomey’s name and address...” Ms. Alexander
alleges, and CDAC does not dispute, thal CDAC sent Ms. Alexander collection letters seeking
payment ofa debt allegedly owed to Dr. Kannankecril at a time when Ms. Alexander was represented
by an attomey with respect to that debt (PSOF #10). Therefore, to rule on Ms, Alcxander’s motion,
this Court must decide whether, within the meaning of Section 1692c(a)(2): (1} CDAC knew that
Ms. Alexander was represented by an attorney with respect to the debt allegedly owed to Dr.
Kannankeril when CDAC sent Ms. Alexander the collection letters on March 21, 2001 and May 2,
2001; or (2) CDAC had knowledge of or could readily ascertain the name and address of Ms.
Alexander’s attomey.

In this case, it is undisputed that Dr. Kannankeril knew that Ms. Alexander was represented
by counsel with respect to the alleged debt; but, it also is undisputed that Dr. Kannankeril’s office
did not convey that information to CDAC. Thus, at the threshold, we must decide whether the
creditor’s knowledge of the representation may be imputed to the debt collector so as to sulisfy the
“knowledge” prong of Section 1692c¢(a)(2).

in linc with other decisions addressing this question, we believe the answer is yes. See
Micare v, foster & Garbus, 132 \', Supp. 2d 77 (N.D.N.Y. 2001); Powers, 107 F. Supp. 2d at 169;

see generally FTC Official Staff Commentary §805(a)(2), 53 Fed. Reg. 50,097 (1988) (implying a

15