09-4984-cv Simmons v. Roundup Funding, LLC UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2009 (Argued:May 11, 2010 Decided: October 5, 2010) Docket No. 09-4984-cv

LAMONT B. SIMMONS, MELISSA R. SIMMONS, on behalf of themselves and all others similarly situated, Plaintiffs-Cross-Defendants -Appellants,

ROUNDUP FUNDING, LLC, Defendant-Counter-Claimant -Appellee, MALEN & ASSOCIATES, P. C.,

Before: JACOBS, Chief Judse, WINTER and McLAUGHLIN, Circuit Judses. Appeal from a judgment of the United States District Court for the Southern District of New York (Sweet,J.),

* We direct the Clerk of Court to amend the caption as noted.dismissing on the pleadings a Fair Debt Collection Practices Act claim. We hold that a proof of claim filed in bankruptcy court cannot form the basis for a claim under the Fair Debt Collection Practices Act, and therefore affirm the dismissal. We vacate the award of costs and attorneys' fees in favor of defendants. JOSHUAN. BLEICHMAN, Law Offices of Joshua N. Bleichman, Spring Valley, NY, 

### for PlaintiffsCross-Defendants-Appellants. PAUL WILLIAM MAHLER, Malen & Associates, P.C., Westbury, NY, for Defendant-AppelleeMalen & Associates; LINH 

### K. TRAN, Seattle,WA, 

### forDefendant-Counter-ClaimantAppellee Roundup Funding, LLC. DENNIS JACOBS, Chief Judse: Lamont and Melissa Simmons ("the Simmons") allege that

an inflated proof of claim filedby a creditor in their bankruptcy proceeding constituted a violation of the Fair Debt Collection PracticesAct ("FDCPA"), 

### 15 U.S.C. § 1692 

## m. They appeal from a judgment of the United States District Court for the Southern District of New York (Sweet, J.), dismissing their complaint on the pleadings. We hold that such a proof of claim cannot form the basis for a claimunder the FDCPA, and therefore we affirm.

The Simmons sought protection in bankruptcy in October 2007. In December 2007, Roundup Funding, LLC ("Roundup") filed a proof of claim for a debt in the claimed amount of $2,039.21. The Simmons filed an objection, and Roundup's counsel, Malen & Associates ("Malen")

### , filed a response

(which,it is alleged, included no relevant information). At a hearing on April 17, 2008, the bankruptcy court reduced the Roundup claim to $1,100, the amount the Simmons conceded they owed. On July 10, 2008, the Simmonsbrought a putative class action against Roundup and Malen, alleging that they had violated the FDCPAby misrepresenting the amount of the Simmons's debt. An amended complaint reflected the same underlying theory. Malen and Roundup moved to dismiss under Rule 12(b)(6) on the ground that an inflated proof of claim in bankruptcy court cannot form the basis for an FDCPA action as a matter of law, and also sought costs and attorneysf feespursuant to 15U.S.C. § 1692k(a)(3). Their motions to dismiss andtheir requests for attorneys' fees and costs were granted by the district court, Simmonsv. Roundu~ Funding,LLC,No. 08- CV-6263,2009 U.S. Dist. LEXIS 87383 (S.D.N.Y.Sept. 22, 2009)

### , and the Simmons's appeal followed.'

A "We review a district court's grant of a motion to dismiss under Rule 12(b)(6)de novo." VietnamAss'n for Victims ofAuent Oranse v. Dow Chem. Co., 517 F.3d 104, 115

(2dCir. 2008) (internal quotation marks omitted)

## . "A debt collectormay not use any false, deceptive, or misleading representationor means in connection with the collection of any debt." 15 U.S.C. § 1692e. Among other things, the FDCPAbars misrepresentation of "the character, amount, or legal status of any debt." 

### Id. § 1692e(2)(A) 

## . "Congress acted with the aim of eliminating abusive

It is unclear from their briefs whether the Simmons are appealing the dismissal of their claim as-wellas the grant of attorneys' fees and costs or just the latter. Their lawyer failed to clarify the point when asked to do so at oral argument. However, the Simmons's brief at one point states that the district court "erred 

## . . 

## . in 

## . . . dismissing the Plaintiff's [sic]case"; sowe divine that they appeal the dismissal.practices in the debt collection industry, and also sought to ensure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged. These purposes inform the FDCPA's many provisions." Jacobson v. Healthcare Fin. Servs., 516 F.3d 85, 89 (2dCir. 2008) (internal quotation marks omitted) (citing15 U.S.C. § 1692(e) ("It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors....")). Federal courts have consistently ruled that filing a proof of claim in bankruptcy court (even one that is somehow invalid) cannot constitute the sort of abusive debt collection practice proscribed by the FDCPA, and that such a filing therefore cannot serve as the basis for an FDCPA action. See, e.q., B-Real, LLC v. Rogers, 405 B.R. 428, 431-32 (M.D.La. 2009) ("[TIhe Bankruptcy Code itself contemplates a creditor filing a proof of claim on a time-barred debt and the Bankruptcy Court disallowing such claim after objection from the debtor. It is difficult for this Court to understand how a procedure outlined by the Bankruptcy Code could possibly form the basis of a violation under the FDCPA."); Middlebrooks v. Interstate CreditControl, Inc., 391 B.R. 434, 437 (D.Minn. 2008) (holding that an FDCPA action cannot be premised on the filing of a proof of claim in bankruptcy court);Gray-Mapp v. Sherman, 100 F. Supp. 2d 810, 813-14 (N.D.Ill. 1999) (same);Baldwin

v. McCalla, No. 98-C-4280, 1999 U.S. Dist. LEXIS 6933, at *lo-11 (N.D.Ill.Apr. 19, 1999) (same). We join these courts. The FDCPA is designed to protect defenseless debtors and to give them remedies against abuse by creditors. There is no need to protect debtors who are already under the protection of the bankruptcy court, and there is no need to supplement the remedies afforded by bankruptcy itself.

B "The FDCPA 

## . 

## . . was designed to protect against the abusive debt collection practices likely to disrupt a debtor's life." Mace v. Van Ru Credit Corp., 109 F.3d 338, 343 (7th Cir. 1997). "Debtors inbankruptcy proceedings do not need protection from abusive collection methods that are covered under the FDCPA because the claims process is highly regulated and court controlled. While the FDCPA's purpose is to protect unsophisticated consumers from unscrupulousdebt collectors, that purpose is not implicated when 

### a debtor is instead protected by the court system and its officers." B-Real, 405 B.R. at 432 (footnote omitted) (internalquotationmarks omitted). Thus debtors are protected in bankruptcy proceedings--and by discharge afterward.

Bankruptcy provides remedies for wrongfully filed proofs of claim. "It is beyond cavil that past bankruptcy practice, as well as explicit Bankruptcy Code provisions, have left the remedy for fraudulent and otherwise defective proofs of claim to the Bankruptcy Code." Baldwin, 1999 U.S. Dist. LEXIS 6933,at *14 (referencing11 U.S.C. §§ 105, 1330); see also Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002) ("Nothing in either [theBankruptcy Code or the FDCPA] persuades us that Congress intended to allow debtors to bypass the Code's remedial scheme when it enacted the FDCPA. While the FDCPA's purpose is to avoid bankruptcy, if bankruptcy nevertheless occurs, the debtor's protection and remedy remain under the Bankruptcy Code."). These remedies include revocation of fraudulent proofs ofclaim and the court's contempt power. 

### See Baldwin, 1999 U.S. Dist. LEXIS 6933, at*14. Without seeking these remedies, the Simmons filedsuitunder the FDCPA. "Nothing ineitherthe Bankruptcy Code or the FDCPA suggests that a debtor shouldbe permitted tobypass theprocedural safeguards inthe Code infavor of assertingpotentially

more lucrative claimsunder the FDCPA. And nothing inthe FDCPA suggests that it is intended asan overlay tothe protections alreadyinplace inthebankruptcy proceedings." Grav-Mapp, 100 F. Supp. 2d at 814. As the district court held, the filinga proof of claim inbankruptcy court cannot form thebasis for an FDCPA claim.2

I11 "On'a findingby the court that an action under this
Some courtshave ruledmore broadly that no FDCPA action canbe based on an act that violates anyprovision of the Bankruptcy Code, because such violations a;e- dealtwith exclusivelyby the Bankruptcy Code. See, e.~., Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9thCir. 2002); Diamante v. Solomon & Solomon, P.C., 1:99-CV-1339, 2001 U.S. Dist. LEXIS 14818, at *18 (N.D.N.Y. Sept. 18, 2001); Kibler v. WFS Fin., CV-00-5217, 2000 U.S. Dist. LEXIS 19131, at *33 (C.D. Cal. Sept. 12, 2000). Thisbroader rulehas not been universally accepted, 

### see Randol~h v. IMBS, Inc., 368 F.3d 726, 732-33 (7thCir. 2004), andwe arenot compelled to consider it inthiscase.sectionwas brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs." 15 U.S.C. § 1692k(a)(3). "[Wle review for abuse of discretion a district court's decision to award attorneys' fees to a defendant pursuant to the FDCPA." Jacobson, 516 F.3d at 96. The district court granted motions by Roundup and Malen for costs and attorneys' fees related to the motions to dismiss. The finding that this action was brought "in bad faith and for thepurpose of harassment," 

## see 15U.S.C. § 1692k(a)(3), seems to have been premised upon the conclusion that this actionwas meritless and properly dismissed on the pleadings. While we agree with the district court's ruling on the merits of the claim,

## see supra Part 11, the merits turned on a question of law that was, until this opinion, undecided in this Circuit. The assertion of the claim did not by itself prove bad faith. Accordingly, we vacate the judgment insofar as it grants Malen and Roundup attorneys' fees and costs related to the motions to dismiss. Notwithstanding our vacatur, we cannot disagree with the district court's characterization that the Simmons were

### 1 "careless" in their pursuit of this action below, Simmons, 2 2009 U.S. Dist. LEXIS 87383,at *2, and continue to be so 3 here. Therefore, we grant reasonable costs of this appeal 4 in favor of Malen and Roundup. 5 6 

### * * * 7 For the foregoing reasons,we affirm the district 8 court's dismissal of the Simmons's claim, vacate the grant 9 of attorneys' fees and costs related to themotions to 10 dismiss, and grant Malen and Roundup reasonable costs of 

### 11 this appeal.