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Grandidier v. Quantum3 Group, LLC

United States District Court, S.D. Indiana, Indianapolis Division

December 8, 2014



RICHARD L. YOUNG, Chief District Judge.

Plaintiff, Brent David Grandidier ("Plaintiff"), is a participant in a Chapter 13 bankruptcy proceeding. Plaintiff alleges that Quantum3 Group, LLC ("Quantum3") and Galaxy Asset Purchasing, LLC ("Galaxy") violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692e(5), by filing a proof of claim that was barred by the Indiana statute of limitations and subsequently disallowed by the bankruptcy court. Defendants move to dismiss Plaintiff's claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below, the motion is DENIED.

I. Background

Plaintiff filed a Chapter 13 bankruptcy petition on December 13, 2012. (Complaint ¶ 12). On February 1, 2013, Galaxy, via its agent Quantum3, filed a proof of claim relating to credit card obligations in Plaintiff's bankruptcy proceeding. ( Id. at ¶ 13). According to Indiana Code § 34-11-2, the statute of limitations in Indiana relating to the collection of delinquent credit card debts is six years. ( Id. ). The date of last activity related to the account was 1991. ( Id. at ¶ 11). On June 17, 2013, Plaintiff's bankruptcy counsel objected to the time-barred proof of claim in bankruptcy court. ( Id. at ¶ 14). On July 26, 2013, the objection was sustained and the claim was disallowed. ( Id. at ¶ 15).

II. Motion to Dismiss Standard

Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a claim for "failure to state a claim upon which relief may be granted." FED. R. CIV. P. 12(b)(6). In ruling on a motion to dismiss, the court construes the allegations of the complaint in the light most favorable to the plaintiff, and all well-pleaded, nonconclusory, factual allegations in the complaint are accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Taken in this light, the complaint's "allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a speculative level.'" EEOC v. Concentra Health Servs., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)). "A claim has a facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.

III. Discussion

A. FDCPA Overview and Purpose

The purpose of the FDCPA is "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). Further, the specific FDCPA section allegedly violated by the Defendants, 15 U.S.C. § 1692e, prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e.

B. Interaction of the FDCPA and the Bankruptcy Code

The Seventh Circuit has held that the FDCPA and the Bankruptcy Code can coexist and that a violation of the Bankruptcy Code can be the basis for a cause of action under the FDCPA.[1] See Randolph v. IMBS, Inc., 368 F.3d 726, 732-33 (7th Cir. 2004). The court in Randolph recognized that the FDCPA and the Bankruptcy Code overlap in their coverage of certain activities, but that overlap does not preclude the application of either statute. Id. at 731. Rather, so long as "people can comply with both, then courts can enforce both." Id.

Thus, the requisite question here is whether creditors can comply with both the Bankruptcy Code and the FDCPA. See id. The court finds that they can. See Smith v. Asset Acceptance, No. 1:13-cv-255-WTL, DML, 2013 U.S. Dist. LEXIS 187540 ** 3-4 (S.D. Ind. Aug. 9, 2013). A creditor is not required to file a proof of claim, but rather "may file" one. See 11 U.S.C. § 501(a) ("A creditor... may file a proof of claim."). Thus, it is within the creditor's discretion whether or not to file the claim. Likewise, the creditor can comply with the FDCPA by not using false, deceptive, or unfair means to collect upon a debt. Thus, under Seventh Circuit precedent, the court can apply both the Bankruptcy Code and the FDCPA. As such, the court declines to adopt the position of several other district courts outside of the Seventh Circuit that find the bankruptcy code precludes the application of the FDCPA to time-barred proofs of claim. Such a conclusion would be inconsistent with Seventh Circuit precedent.

C. Application of the FDCPA

Nevertheless, holding that the FDCPA and Bankruptcy Code can be applied simultaneously does not mean that they both must be applied in every potential Bankruptcy Code violation; the communication still must be in an attempt to collect on a debt. See Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 384-85 (7th Cir. 2010) ("[T]he [FDCPA] does not apply to every communication between a debt collector and a debtor." (emphasis in original)). In order for the FDCPA to apply to an activity, including one taking place in a bankruptcy proceeding, there are two threshold criteria that must be met. "First, the defendant must qualify as a debt collector'...." Id. at 384. There is no dispute in this case concerning the Defendants' status as debt collectors. "Second, the communication by the debt collector that forms the basis of the suit must have been made in connection with the collection of any debt.'" Gburek, 614 F.3d at 384 (quoting 15 ...

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