Source: http://updates.mwbllp.com/2013/12/fyi-third-cir-holds-bankruptcy-code.html
Timestamp: 2019-04-21 00:28:30+00:00

Document:
The U.S. Court of Appeals for the Third Circuit recently held that the federal Bankruptcy Code precludes § 1692e(11) "mini-Miranda" claims, but does not preclude § 1692e(5) and § 1692e(13) claims under the federal Fair Debt Collection Practices Act ("FDCPA").
At issue in the case is whether a debt collector's letter and notice requesting an examination under Federal Rule of Bankruptcy Procedure 2004 and offering to settle a debt, sent in a pending bankruptcy in contemplation of an adversary proceeding to challenge dischargeability, can be the basis for liability under the FDCPA. A creditor and its law firm sent such a letter and attached notice on its behalf to the bankruptcy debtors, through their bankruptcy counsel.
The District Court dismissed the debtors' FDCPA suit arising out of the letter and notice under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The District Court held that the Bankruptcy Code provided the exclusive remedy for the alleged violations, and thus precluded the FDCPA claims. The District Court also held that even if the FDCPA claims were not precluded, the debtors' complaint did not allege sufficient facts to state a claim. The debtors appealed.
The debtors filed for Chapter 7 bankruptcy protection. The schedules that the debtors' submitted to the Bankruptcy Court identified an unsecured, non-priority claim credit-card debt owed to the creditor at issue.
The creditor's law firm sent the letter and attached notice to both debtors through their bankruptcy counsel. The letter stated that the creditor was considering filing an adversary proceeding under 11 U.S.C. § 523 to challenge the dischargeability of the debt.
The letter included an offer to avoid an adversary proceeding if the debtors agreed that the debt was non-dischargeable or if they agreed to pay a reduced amount to settle the debt. The letter stated that a Rule 2004 examination to gather information for filing an adversary proceeding was scheduled, but that the creditor was open to "discuss[ing] with your client whether the matter can be resolved without conducting the examination and/or to reschedule it for an informal telephone conference at a mutually agreeable time prior to the bar date."
The letter set out additional information about how to challenge the debt "[i]n the event that this letter is governed by the FDCPA." The letter also attached a subpoena and a Rule 2004 Notice of Examination. The debtors alleged, and the appellees conceded, that the notice was subject to the requirements for a subpoena under Federal Rule of Bankruptcy Procedure 9016 and Federal Rule of Civil Procedure 45.
At the bottom of the subpoena was a certificate signed by the appellee's counsel. The certificate stated that "a true and correct copy of the foregoing has been mailed on January 28, 2011 to the above address." Two addresses were listed: the debtors' home in New Jersey and their bankruptcy counsel's office. The debtors allege that they did not receive a copy at their home, but the debtors' bankruptcy counsel received the copies.
The debtors filed a motion in the Bankruptcy Court to quash the Rule 2004 examination notices on the ground that they failed to comply with the Bankruptcy Rule 9016 and Civil Rule 45 subpoena requirements. The Bankruptcy Court quashed the Rule 2004 examination notices.
The debtors then filed an adversary proceeding asserting FDCPA claims against the creditor and its law firm. The Bankruptcy Court ruled that it lacked subject-matter jurisdiction over the FDCPA claims and dismissed them without prejudice.
The debtors next sued the creditor and law firm in the federal District Court. They alleged that the letters and subpoenas violated the FDCPA prohibition on false, deceptive, and misleading debt-collection practices under 15 U.S.C. § 1692e (5), (11), and (13).
The appellees moved to dismiss on three grounds: (1) the FDCPA claim was precluded by the Bankruptcy Court's earlier dismissal of the adversary proceeding the debtors had filed; (2) the complaint did not state a claim; and (3) the allegations from which the FDCPA claims arose were governed exclusively by the Bankruptcy Code.
The District Court dismissed the FDCPA suit with prejudice, holding that the Bankruptcy Code precluded all the FDCPA claims and that the complaint "does not appear to set forth sufficient factual allegations to state a claim" under the FDCPA and this appeal followed.
On appeal, the Third Circuit noted initially that § 1692e of the FDCPA prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." The debtors alleged that the letter and notice violated § 1692e (5), (11), and (13). Section 1692e(5) states that a debt collector may not make a "threat to take any action that cannot legally be taken or that is not intended to be taken." Section 1692e(11) contains the requirement of the FDCPA "mini-Miranda" statement. Section 1692e(13) prohibits a debt collector from making a "false representation or implication that documents are legal process."
The debtors alleged that by sending the letter and attached notice, the law firm and creditor violated § 1692e(5) and (13) in four ways: (1) by intentionally failing to send the letter and subpoena to the debtors and instead sending the documents to their attorney, violating Civil Rule 45(b)(1)'s requirement that subpoenas be served directly on the individuals subpoenaed; (2) by specifying the location for the Rule 2004 examinations as the law firm's office in New York, rather than in New Jersey. The debtors alleged that this violated Civil Rule 45(a)(2)(B)'s requirement that a subpoena be issued "from the court for the district where the deposition is to be taken"; (3) by failing to include in the subpoena the text of Civil Rule 45(c) and (d), as Civil Rule 45(a)(1)(A)(iv) requires; and (4) by failing to include in the subpoena the method of recording the Rule 2004 examinations.
The debtors also allege that the law firm violated the FDCPA by failing to include the § 1692e(11) "mini-Miranda" warning. Section 1692e(11) requires a debt collector to disclose in the initial communication with the debtor that "the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose." 15 U.S.C. § 1692e(11).
(4) that the Bankruptcy Code did preclude the debtors' allegations that the defendants' failed to comply with the FDCPA's § 1692e(11) "mini-Miranda" warning requirement.
The Third Circuit remanded the case for proceedings consistent with its ruling.

References: § 1692
 § 1692
 § 1692
 § 523
 § 1692
 § 1692
 § 1692
 § 1692
 § 1692
 § 1692
 § 1692