     15-527
     Garfield v. Ocwen Loan Servicing, LLC

                                  UNITED STATES COURT OF APPEALS

                                         FOR THE SECOND CIRCUIT

                                             August Term 2015

                   Argued: October 20, 2015                       Decided: January 4, 2016

                                              Docket No. 15-527

        - - - - - - - - - - - - - - - - - - - - - -
 1      DONNA GARFIELD,
 2           Plaintiff-Appellant,
 3
 4                                v.
 5
 6      OCWEN LOAN SERVICING, LLC,
 7           Defendant-Appellee.
 8      - - - - - - - - - - - - - - - - - - - - - -
 9
10      Before: NEWMAN, WINTER, and CABRANES, Circuit Judges.
11
12              Appeal from the January 26, 2015, judgment of the

13      United States District Court for the Western District of New

14      York (Elizabeth A. Wolford, District Judge), dismissing

15      claims brought under the Fair Debt Collection Practices Act

16      for seeking to collect a debt discharged in bankruptcy, and

17      requiring the plaintiff to seek relief in the bankruptcy

18      court.

19              Judgment reversed and case remanded with instructions

20      to reinstate the FDCPA claims.

21


                                                     1
 1                                Kenneth R. Hiller, Law Offices of
 2                                  Kenneth Hiller, PLLC, Amherst,
 3                                  NY, for Appellant.
 4
 5                                Gary Neal Smith, Houser & Alison,
 6                                  APC, Newark, NJ, for Appellee.
 7
 8                                (Daniel L. Geyser, Stris & Maher
 9                                  LLP, Los Angeles, CA, for
10                                  amicus     curiae     National
11                                  Association     of     Consumer
12                                  Bankruptcy    Attorneys,     in
13                                  support of Appellant.)
14
15
16   JON O. NEWMAN, Circuit Judge.

17            The principal issue on this appeal is whether a

18   debtor who has received a claim on a debt that has been

19   discharged in a bankruptcy proceeding can sue the claimant

20   in a district court under the Fair Debt Collection Practices

21   Act (“FDCPA”) or must seek relief in the bankruptcy court.

22   The issue arises on an appeal by Plaintiff-Appellant Donna

23   Garfield from the January 26, 2015, judgment of the United

24   States District Court for the Western District of New York

25   (Elizabeth   A.   Wolford,   District   Judge),   in   favor   of

26   Defendant-Appellee Ocwen Loan Servicing, LLC (“Ocwen”). The

27   judgment dismissed Garfield’s complaint alleging various

28   causes of action under the FDCPA.

29       We conclude that Garfield may pursue her FDCPA claims

30   in a district court and therefore reverse and remand.


                                    2
 1                                 Background

 2       The complaint alleges the following facts, which are

 3   assumed to be true on this appeal from dismissal for failure

 4   to state a claim on which relief can be granted. See Bell

 5   Atlantic   Corp.   v.    Twombly,       550   U.S.   544,    556   (2007).

 6   Garfield obtained a mortgage from Ocwen’s predecessor-in-

 7   interest, Litton Loan Servicing L.P. and became personally

 8   obligated on a mortgage loan. Garfield failed to make

 9   payments on the mortgage loan and filed for Chapter 13

10   Bankruptcy in the United States Bankruptcy Court for the

11   Western    District     of   New   York.      During   the    bankruptcy

12   proceedings, Ocwen acquired Garfield’s mortgage loan.

13       Under her bankruptcy plan, Garfield paid the arrears on

14   her mortgage loan through monthly payments made during the

15   bankruptcy proceeding. Critical to the pending appeal, in

16   August 2013 she obtained a discharge of her entire personal

17   obligation for the mortgage loan.1 However, Garfield agreed

         1
           Garfield’s claim that her personal obligation on the
     mortgage debt was discharged is inferable from her
     complaint, but not precisely stated. The complaint alleges
     that Garfield’s “bankruptcy was discharged,” ¶ 14, and that
     Ocwen reported to Equifax that she “still owed the amount
     which was included in her Chapter 13 bankruptcy,” ¶ 19. Her
     brief in this Court explicitly alleges that her debt “had
     been discharged in her prior bankruptcy case,” Br. for
     Appellant 1, and that “the Bankruptcy Court entered an order
     discharging Plaintiff’s indebtedness on all of the debts

                                         3
 1   to   pay     $938     per     month    to        prevent    foreclosure        of   the

 2   mortgaged property.2

 3          Garfield       concedes        that       she   made      only   one    monthly

 4   payment after her bankruptcy discharge and that by March

 5   2014       the    arrears       on    her        monthly      obligation       totaled

 6   $6,672.34. In February 2014 Ocwen contacted Garfield and

 7   demanded that she pay $21,825.15 or face foreclosure on her

 8   home. Ocwen sent a delinquency notice in April 2014 for

 9   $22,684.36. These amounts reflected both Garfield’s conceded

10   arrears      for      post-bankruptcy             monthly      payments       and   the

11   mortgage loan arrears that had been discharged. Ocwen also

12   reported         to   Equifax    that       Garfield       owed    the    discharged

13   amount.

14          In    July     2014,     Garfield          filed    her    FDCPA    complaint

15   against Ocwen in the United States District Court for the

16   Western District of New York. She alleged that Ocwen’s

17   attempt to collect the arrears on her mortgage loan, which



     listed on her bankruptcy petition, including her debt to
     Ocwen,” id. 3-4 (citing Complaint ¶ 14).
            2
            Ocwen contends that it is only the “servicer” of
     Garfield’s mortgage, “not the owner of the security
     instrument,” and “is not a secured creditor enforcing a
     valid security interest.” Br. for Appellee 27 n.8. Ocwen
     does not dispute that Garfield’s failure to make required
     payments risks foreclosure.

                                                  4
 1   had been discharged,3 violated several provisions of the

 2   FDCPA: 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2), 15 U.S.C. §

 3   1692e(5), 15 U.S.C. § 1692e(8), 15 U.S.C. § 1692e(10), 15

 4   U.S.C. § 1692e(11), 15 U.S.C. § 1692f, 15 U.S.C. § 1692f(1),

 5   and 15 U.S.C. § 1692g(a)(3).

 6       Garfield also alleged that Ocwen violated the FDCPA in

 7   the manner it attempted to collect the post-bankruptcy

 8   monthly   mortgage    payments    that      she    concedes      she   owes.

 9   Specifically, she alleges (1) that Ocwen violated subsection

10   1692e(11),   which     requires       a     so-called         “mini-Miranda

11   warning,” during conversations with a debtor, and (2) that

12   Ocwen   failed   to   send   within       five    days   of    its   initial

13   communications a 30-day notice              of a debtor’s right to

14   dispute a debt, as required by subsection 1692g(a)(3).

15       The District Court dismissed Garfield’s complaint. The

16   Court held that the Bankruptcy Code provides the exclusive

17   remedy for Garfield’s claim that Ocwen attempted to collect




         3
           The Bankruptcy Code’s discharge provision, 11 U.S.C.
     § 524, provides in relevant part that a discharge in
     bankruptcy   “operates   as  an   injunction   against   the
     commencement or continuation of an action, the employment of
     process, or an act[] to collect, recover or offset any such
     debt as a personal liability of the debtor, whether or not
     discharged of such debt is waived.” Id. § 524(a)(2).

                                       5
 1   an allegedly discharged debt.4 The Court also stated that,

 2   even if the Code does not broadly preclude all FDCPA claims

 3   for   conduct     that    violates       the     discharge   injunction,

 4   Garfield’s particular FDCPA claims conflict with the Code’s

 5   remedies and were therefore precluded.

 6                                   Discussion

 7   I. Implied Repeal of All FDCPA Provisions Invoked for Claims

 8   After Discharge

 9         The   District     Court   held     that    the   Bankruptcy    Code

10   precludes all claims under the FDCPA for conduct that

11   violates a discharge injunction. Acknowledging Garfield’s

12   argument that the Supreme Court “should only rarely infer

13   statutory repeal,” the District Court ruled that “many of

14   Plaintiff’s       allegations      directly       conflict     with    the

15   Bankruptcy Code’s discharge injunction provisions.”

16         When it is claimed that a later enacted statute creates

17   an irreconcilable conflict with an earlier statute, the

18   question is whether the later statute, by implication, has

19   repealed    all   or,    more    typically,      part   of   the   earlier

20   statute. See National Ass’n of Home Builders v. Defenders of

           4
           Specifically, it held that the appropriate means to
     redress conduct that violates the discharge injunction is a
     motion for contempt filed in the bankruptcy court under 11
     U.S.C. § 105(a).

                                          6
 1   Wildlife, 551 U.S. 644, 662-63 (2007). Repeal by implication

 2   is disfavored. “In the absence of some affirmative showing

 3   of   an   intention   to    repeal,    the     only    permissible

 4   justification for a repeal by implication is when the

 5   earlier and later statutes are irreconcilable.” Morton v.

 6   Mancari, 417 U.S. 535, 550 (1974).

 7        Where, as in this case, the later statute is the

 8   Bankruptcy Code,5 a distinction must be made between claims

 9   brought under the earlier statute during the pendency of a

10   bankruptcy proceeding and those brought after a discharge.

11   Four circuits have considered FDCPA claims brought during

12   the pendency of a bankruptcy proceeding.

13        Our Court has ruled that the FDCPA does not authorize

14   suit during the pendency of bankruptcy proceedings. See

15   Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir.

16   2010). This ruling appears to construe FDCPA provisions to

17   be   inapplicable   when   invoked    for    claims   made   during

18   bankruptcy, rather than determine that such provisions have

          5
            The subsections of the FDCPA under which Garfield
     makes claims, with one exception discussed below, see note
     11, infra, were enacted on September 20, 1977, and came into
     effect on March 20, 1978. See Pub. L. No. 95-109, §§ 807,
     808, 809, 91 Stat. 874, 877, 879 (1977). The current version
     of the discharge injunction, 11 U.S.C. § 524(a), was enacted
     on November 6, 1978. See Pub. L. No. 95-958, 92 Stat. 2549,
     2592 (1978).

                                    7
 1   been impliedly repealed by the provision of the Bankruptcy

 2   Code authorizing a discharge injunction. See id. at 94. Our

 3   Court’s opinion does not include the word “repeal.”

 4       In Simmons, the debtors, while engaged in a bankruptcy

 5   proceeding, objected to the amount of a creditor’s proof of

 6   claim, which the bankruptcy court reduced. The debtors then

 7   brought      a    putative    class   action,   contending   that    the

 8   creditor’s filing of an inflated proof of claim violated the

 9   FDCPA. See id. The creditor moved to dismiss, arguing that

10   the Bankruptcy Code exclusively provides whatever remedies

11   exist for filing an inflated proof of claim. See id.

12       Affirming dismissal of the complaint, we said, “The

13   FDCPA   is       designed    to   protect   defenseless   debtors”   and

14   “[t]here is no need to protect debtors who are already under

15   the protection of the bankruptcy court.” Id. at 96 (emphasis

16   added). Noting that some courts had broadly rejected all

17   FDCPA claims (even claims filed after discharge) predicated

18   on acts alleged to have violated the Bankruptcy Code, we

19   observed that “[t]his broader rule has not been universally

20   accepted, and we are not compelled to consider it in this

21   case.” Id. at 96-97 n.2 (citation omitted).6

         6
           In a non-precedential decision, Yaghobi v. Robinson,
     145 F. App’x 697 (2d Cir. 2005), we affirmed the dismissal

                                           8
 1       The Ninth Circuit has ruled that the Bankruptcy Code

 2   precludes   FDCPA    claims   brought    during     the    pendency    of

 3   bankruptcy proceedings. See Walls v. Wells Fargo Bank, N.A.,

 4   276 F.3d 502, 511 (9th Cir. 2002). This Court, like the

 5   District Court in the pending appeal, appears to have said

 6   “precludes”   FDCPA    claims    to     reflect     that    the   FDCPA

 7   provisions invoked for such claims have been repealed by

 8   implication   with    respect   to    conduct     that    violates    the

 9   discharge injunction.

10       Two circuits have ruled to the contrary. In Randolph v.

11   IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004), the debtors

12   brought   FDCPA   claims   against     creditors     for    seeking    to

13   collect debts in violation of the automatic stay. The

14   creditors asserted that the Bankruptcy Code’s remedies for

15   violations of the automatic stay, see 11 U.S.C. § 362(h)

16   (now § 362(k)), precluded relief under the FDCPA.



     of claims, alleging violations of a discharge injunction,
     brought in a district court under the Bankruptcy Code’s
     contempt provision, 11 U.S.C. § 105(a), the Code’s discharge
     provision, id. § 524, the FDCPA, and state law provisions.
     After affirming dismissal of claims brought under the
     Bankruptcy Code’s provisions, we also affirmed the dismissal
     of “plaintiff’s parallel federal and state unfair debt
     collection practice claims,” adding, “We need not here
     decide whether debtors in bankruptcy can ever maintain such
     claims based on violations of the Bankruptcy Code,” noting
     the circuit split discussed above. See id. at 698.

                                      9
 1         The Seventh Circuit acknowledged that there were some

 2   “operational differences between the statutes,” but stated

 3   that these differences constituted “overlap” between the

 4   statutes rather than “irreconcilable conflict,” id. at 730,

 5   and that “[o]verlapping statutes do not repeal one another

 6   by implication,” Id. at 731. “The Bankruptcy Code of 1986

 7   does not work an implied repeal of the FDCPA, any more than

 8   the latter Act implicitly repeals itself.” Id. at 732.

 9         Judge Easterbrook helpfully assembled a chart comparing

10   the statutes’ differing treatment of conduct that violates

11   both the automatic stay and the FDCPA:

12                           Bankruptcy         FDCPA

13   Who                     Anyone             Debt collector only
14
15   Scienter                Willfulness        Strict    liability (§
16                                              1692e(2)(A)
17
18   Defense                 None               Bona fide error plus due
19                                              care (§ 1692k(c)), or
20                                              reliance on FTC opinion
21                                              (§ 1692k(e))
22
23   Statutory Damages       None               $1,000 maximum
24                                              (§ 1692k(a)(2)(A)
25
26   Compensatory Damages    Yes                Yes (§ 1692k(a)(1))
27
28   Punitive Damages         Yes                No
29
30   Cap on Class Recovery    No                 Yes (§ 1692k(a)(2)(B)(ii))

                                    10
 1   Maximum recovery                    No                                Yes, $500,000 or 1% of net
 2                                                                         worth, whichever is less
 3                                                                        (§ 1692k(a)(2)(B)(ii))
 4
 5   Attorneys' fees to debtor               No                            Yes (§ 1692k(a)(3))
 6
 7   Attorneys' fees to creditor             No                            Yes (§ 1692k(a)(3))
 8
 9   Statute of limitations                  None (laches defense only)    One year (§ 1692k(d))
10
11   Id.

12          The Seventh Circuit concluded, “It is easy to enforce

13   both statutes, and any debt collector can comply with both

14   simultaneously.” Id.

15          The Third Circuit has also ruled against implied repeal

16   of FDCPA provisions invoked for claims brought during the

17   pendency of bankruptcy proceedings, see Simon v. FIA Card

18   Services, N.A., 732 F.3d 259, 274 (3d Cir. 2013), concluding

19   that the Bankruptcy Code effected “no broad preclusion” of

20   FDCPA claims, id. at 278.

21          The pending appeal concerns FDCPA claims brought after

22   discharge,          the       context     we    explicitly           distinguished            in

23   Simmons. Now facing the issue of implied repeal of FDCPA

24   provisions invoked for claims in the post-discharge context,

25   we conclude that the Bankruptcy Code does not broadly repeal

26   the FDCPA for purposes of FDCPA claims based on conduct that

27   would      constitute           alleged        violations        of      the     discharge

                                                    11
 1   injunction. No irreconcilable conflict exists between the

 2   post-discharge remedies of the Bankruptcy Code and the

 3   FDCPA. There is no reason to assume that Congress did not

 4   expect these two statutory schemes to coexist in the post-

 5   discharge context. The Seventh Circuit’s analysis of FDCPA

 6   and Bankruptcy Code provisions, although leading that Court

 7   to a result that differs from our Simmons decision in the

 8   pre-discharge context, argues against preclusion of FDCPA

 9   claims after discharge. At that point the former debtor no

10   longer   has   the   “protection       of   the   bankruptcy   court,”

11   Simmons, 622 F.3d at 96, which we deemed decisive on the

12   preclusion issue prior to discharge. Indeed, the Bankruptcy

13   Code provision concerning the discharge injunction, see 11

14   U.S.C. § 524(a)(2), does not explicitly create a cause of

15   action   for   its   violation,    whereas        the   automatic   stay

16   provision provides such a remedy, see id. § 362(k).7

17

18



         7
           In noting this distinction, we do not decide whether
     the discharge injunction provision should be construed
     implicitly to create a cause of action for its violation, in
     addition to a contempt remedy. See 11 U.S.C. § 105(a);
     Bessette v. Avco Financial Services, Inc., 230 F.3d 439, 445
     (1st Cir. 2000) (discharge injunction enforceable by
     contempt proceeding).

                                       12
 1   II. Implied Repeal of Specific FDCPA Provisions Invoked for

 2   Claims After Discharge

 3          Even though the Bankruptcy Code does not impliedly

 4   repeal all FDCPA provisions to remedy conduct that violates

 5   the discharge injunction, it might impliedly repeal some

 6   specific provisions invoked to remedy such conduct. Ocwen

 7   focuses first on Garfield’s claim that Ocwen’s failure to

 8   provide a so-called “mini-Miranda” warning in its initial

 9   communication violated subsection 1692e(11) of the FDCPA.8

10   This claim, Ocwen contends, irreconcilably conflicts with

11   the Bankruptcy Code’s post-discharge remedies.

12          In Simon, the Third Circuit held that the FDCPA could

13   not require the creditor to include a mini-Miranda warning

14   with       its   examination   notice   and   subpoenas   because   a

15   communication that included such a warning, sent prior to a



            8
                Subsection 1692e(11) prohibits

            “[t]he failure to disclose in the initial written
            communication with the consumer and, in addition,
            if the initial communication with the consumer is
            oral, in that initial oral communication, that the
            debt collector is attempting to collect a debt and
            that any information obtained will be used for
            that purpose, and the failure to disclose in
            subsequent communications that the communication
            is from a debt collector, except that this
            paragraph shall not apply to a formal pleading
            made in connection with a legal action.”

                                        13
 1   discharge, would constitute a collection attempt forbidden

 2   by the automatic stay. See 732 F.3d at 279-80. Sending the

 3   notice and subpoenas prior to discharge did not violate the

 4   Bankruptcy Code. See id. The Third Circuit ruled that

 5   subsection 1692e(11) conflicted with the Bankruptcy Code

 6   because including the warning would violate the Code and

 7   omitting it would violate the FDCPA. See id. at 280.

 8       This holding in Simon, however, whether or not we would

 9   agree with it, has no application to Garfield’s subsection

10   1692e(11) claim. Ocwen’s communication, even without a mini-

11   Miranda warning, was an attempt to collect a discharged debt

12   in violation of the Bankruptcy Code. The absence of a mini-

13   Miranda   warning    also     violated    the     FDCPA.    There   is   no

14   conflict.

15       Two     of   Garfield’s    FDCPA     claims    allege    that   Ocwen

16   violated subsections 1692e(11) and 1692g(a)(3) in the manner

17   that Ocwen sought to collect Garfield’s delinquent post-

18   bankruptcy monthly payments, which she agreed to make to

19   avoid foreclosure. Subsection 1692g(a)(3) requires notice of

20   an opportunity to dispute a debt.9 Both of these subsections

         9
             Subsection 1692g(a)(3) provides:

         “Within five days after the initial communication
         with a consumer in connection with the collection

                                       14
 1   regulate Ocwen’s collection of debt that Garfield concedes

 2   she owes.

 3       Garfield alleges that Ocwen sent her a bill on March

 4   17, 2014, for her monthly payment as well as her arrears for

 5   post-discharge monthly payments missed from July 2013 to

 6   February 2014. She claims that Ocwen violated the mini-

 7   Miranda warning requirement of subsection 1692e(11) “during

 8   conversations with [her],” and that it violated subsection

 9   1692g(a)(3) by failing to send a 30-day right-to-dispute

10   notice within five days of the initial communication. These

11   alleged violations do not conflict with any provisions of

12   the Bankruptcy Code.10

13



         of any debt, a debt collector shall . . . send the
         consumer a written notice containing . . . a
         statement that unless the consumer, within thirty
         days after receipt of the notice, disputes the
         validity of the debt, or any portion thereof, the
         debt will be assumed to be valid by the debt
         collector . . . .”
         10
            Had there been a conflict, the analysis with respect
     to subsection 1692e(11) would differ from that applicable to
     the FDCPA as a whole because this subsection was
     substantially reworded in a 1996 amendment, see Pub. L. 104-
     208 § 2305, 100 Stat. 3009 (Sept. 30, 1996), and therefore
     is a later statute compared to the injunction provision of
     the Bankruptcy Code. In the absence of a conflict, the
     sequence of these provisions need not be considered on the
     issue of implied repeal.

                                  15
 1       Ocwen challenges several of Garfield’s other FDCPA

 2   claims on a somewhat perverse ground. These are Garfield’s

 3   claims     under    subsections         1692e,       1692e(2),       1692e(5),

 4   1692e(8), 1692e(10), 1692f, and 1692f(1), all of which

 5   regulate    collection      of    a    debt.       Subsection    1692e,      for

 6   example,     prohibits     use    of        “any   false,   deceptive,       or

 7   misleading representation or means in connection with the

 8   collection     of   any     debt.”      Ocwen       contends     that    these

 9   provisions conflict with the Bankruptcy Code because, by

10   regulating how to collect a debt, they imply that it can

11   collect the discharged debt, an action that the discharge

12   injunction prohibits. But, as Garfield responds, Ocwen can

13   avoid violating both the cited provisions and the Bankruptcy

14   Code simply by not attempting to collect the discharged

15   debt. And once Ocwen tries to collect the discharged debt,

16   it risks violation of both the cited provisions and the

17   Bankruptcy Code. Either way, there is no conflict.

18       In sum, none of Garfield’s individual FDCPA claims

19   conflicts with the discharge injunction under the Bankruptcy

20   Code.

21   III. Piecemeal Litigation

22       The     District      Court   ruled        that,   even     if    some   of

23   Garfield’s claims do not pose a conflict with the discharge

                                            16
 1   injunction,   the   Court   should    dismiss   them   and   require

 2   Garfield to bring them in the Bankruptcy Court. The District

 3   Court relied on the “clear federal policy . . . [of]

 4   avoidance of piecemeal adjudication,” Joint App’x at 39

 5   (alteration   in    original),   citing   Colorado     River   Water

 6   Conservation District v. United States, 424 U.S. 800, 819

 7   (1976). That decision created a limited abstention doctrine

 8   in the context of ongoing, parallel state proceedings, which

 9   do not exist here. See id. at 817-18.

10       We do not rule out the unlikely possibility that in

11   adjudicating a debtor’s FDCPA claims, a district court might

12   consider it useful to stay its proceedings to permit the

13   plaintiff to seek clarification from a bankruptcy court as

14   to the proper interpretation of some aspect of that court’s

15   rulings, including the discharge injunction. But the remote

16   possibility of a need for such clarification provides no

17   basis for routing all FDCPA claims exclusively into the

18   bankruptcy court.

19                               Conclusion

20       The judgment of the District Court is reversed, and the

21   case is remanded with instruction to reinstate Garfield’s

22   FDCPA claims against Ocwen.


                                      17
