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Barnhill v. Firstpoint, Inc.

United States District Court, M.D. North Carolina

May 17, 2017

LARA BARNHILL, on behalf of herself and all other similarly situated individuals, Plaintiffs,
v.
FIRSTPOINT, INC. d/b/a FIRSTPOINT INFORMATION RESOURCES and FIRSTPOINT COLLECTION RESOURCES, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          Loretta C. Biggs, District Judge

         Plaintiff, Lara Barnhill, initiated this putative class action against Defendants, FirstPoint, Inc. and FirstPoint Collection Resources, Inc., alleging violations of federal and state debt collection laws and seeking injunctive relief. Before the Court is Defendants' Motion to Dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 33.) For the reasons that follow, Defendants' motion is granted in part and denied in part.

         Plaintiff alleges in her Second Amended Complaint (“Complaint”) that she had a debt that was discharged on October 8, 2014 through a Chapter 7 Bankruptcy under 11 U.S.C. § 727. (ECF No. 26 ¶ 24.) Following the discharge, Plaintiff alleges that Defendants contacted her on March 23, 2015 in an effort to collect the discharged debt. (Id. ¶ 28.) On October 21, 2015, Plaintiff filed this action, alleging three claims against Defendants: (1) violation of the Fair Debt Collection Practices Act; (2) violation of the North Carolina Collection Agency Act; and (3) temporary and permanent injunctive relief. (Id. at 12-13.) Defendants move to dismiss Plaintiff's claims pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and Rule 12(b)(6) for failure to state a claim. (ECF No. 33.)

         The Court begins with an overview of the Bankruptcy Code, the Federal Debt Collection Practices Act, and the North Carolina Collection Agency Act.

         I.OVERVIEW OF THE RELEVANT STATUTES

         A. The Bankruptcy Code

         The principal purpose of the Bankruptcy Code is to grant debtors a “fresh start.” In re Dubois, 834 F.3d 522, 526 (4th Cir. 2016) (quoting Marrama v. Citizens Bank, 549 U.S. 365, 367 (2007)), petition for cert. filed, 85 U.S.L.W. 3277 (U.S. Nov. 23, 2016) (No. 16-707). The Code “provides a comprehensive federal system of penalties and protections to govern the orderly conduct of debtors' affairs and creditors' rights.” E. Equip. & Servs. Corp. v. Factory Point Nat'l Bank, 236 F.3d 117, 120 (2d Cir. 2001). The Bankruptcy Code's automatic stay provision is one of the fundamental debtor protections in the Code. See Winters by and through McMahon v. George Mason Bank, 94 F.3d 130, 133 (4th Cir. 1996). It provides that the filing of a bankruptcy petition automatically stays all collection efforts during the pendency of the bankruptcy. See id.; see also 11 U.S.C. § 362. The permanent bankruptcy discharge in 11 U.S.C. § 524(a)(2) is another key provision of the Bankruptcy Code, which the court grants at the end of bankruptcy proceedings. See In re Cherry, 247 B.R. 176, 182 (Bankr. E.D. Va. 2000). It “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.” 11 U.S.C. § 524(a)(2). A discharge under § 524(a)(2) gives the debtor her “fresh start.” In re Cherry, 247 B.R. at 182. Bankruptcy courts are authorized to hold creditors in civil contempt for attempting to collect on a discharged debt in violation of § 524(a)(2). See In re Fina, 550 F. App'x 150, 154 (4th Cir. 2014) (unpublished per curiam decision); In re Tucker, 526 B.R. 616, 621 (Bankr. W.D. Va. 2015).

         B. The Fair Debt Collections Practices Act (“FDCPA”)

         “Congress enacted the FDCPA to eliminate abusive debt collection practices . . . .” In re Dubois, 834 F.3d at 526 (citing 15 U.S.C. § 1692(a), (e)). The statute regulates the conduct of “debt collectors, ” defined to include “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” § 1692a(6). In connection with collection of a debt, the FDCPA prohibits, among other things, the use of “any false, deceptive, or misleading representation.” § 1692e. The FDCPA provides a civil cause of action against debt collectors who fail to comply with its requirement, making them strictly liable for actual damages, statutory damages of up to $1, 000, and attorneys' fees and costs. § 1692k(a); Gamble v. Fradkin & Weber, P.A., 846 F.Supp.2d 377, 381 (D. Md. 2012).

         C. The North Carolina Collection Agency Act (“NCCAA”)

         Similar to the FDCPA, the NCCAA regulates the activities of “collection agencies, ” defined to include an agency that “engages, directly or indirectly, in debt collection from a consumer.” N.C. Gen. Stat. § 58-70-90. The statute prohibits collection agencies from engaging in harassing or oppressive conduct and from collecting or attempting to collect a debt by fraudulent, deceptive, or misleading representations. §§ 58-70-100, 58-70-110. For each violation of these provisions, a collection agency faces civil liability of at least $500 and no greater than $4, 000. § 58-70-130(b).

         II. DISMISSAL FOR LACK OF SUBJECT MATTER JURISDICTION UNDER RULE 12(B)(1)

         Defendants argue that Plaintiff's FDCPA and NCCAA claims should be dismissed for lack of subject matter jurisdiction. Specifically, they contend that (1) the bankruptcy code preempts Plaintiff's claims under the FDCPA and the NCCAA, and (2) Plaintiff lacks standing. (ECF No. 34 at 5, 9.)

         A motion for lack of subject matter jurisdiction under Rule 12(b)(1) raises the question of “whether [the plaintiff] has a right to be in the district court at all and whether the court has the power to hear and dispose of [the] claim.” Holloway v. Pagan River Dockside Seafood, Inc., 669 F.3d 448, 452 (4th Cir. 2012). This Court's subject matter jurisdiction is limited in that the Court “possess[es] only the jurisdiction authorized . . . by the United States Constitution and by federal statute.” United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2009). The burden of proving subject matter jurisdiction rests with the plaintiff, the party asserting that jurisdiction exists. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). If the plaintiff fails to prove subject matter jurisdiction, the Court must dismiss the action. Vuyyuru, 555 F.3d at 347.

         A. Whether the Bankruptcy Code Preempts Plaintiff's Claims

         1. FDCPA

         The Court rejects Defendants' argument that Plaintiff's FDCPA claim is preempted by the Bankruptcy Code because “[o]ne federal statute does not preempt another.” Randolph v. IMBS, Inc., 368 F.3d 726, 730 (7th Cir. 2004). “When two federal statutes address the same subject in different ways, the right question is whether one implicitly repeals the other . . . .” Id. “Repeal by implication is disfavored.” Garfield v. Ocwen Loan Servicing, LLC, 811 F.3d 86, 89 (2d Cir. 2016). “In the absence of some affirmative showing of an intention to repeal, the only permissible justification for a repeal by implication is when the earlier and later statutes are irreconcilable.” Id. (quoting Morton v. Mancari, 417 U.S. 535, 550 (1974)). In this case, it is undisputed that the Bankruptcy Code, which is the later enacted statute, does not contain any express or affirmative congressional intention of repealing the FDCPA. See Kline v. Mortg. Elec. Sec. Sys., 659 F.Supp.2d 940, 950 (S.D. Ohio 2009). Rather, the issue is whether the two statutes are irreconcilable.

         While the Fourth Circuit has not addressed this issue, the Second Circuit on facts similar to this case recently considered whether the Bankruptcy Code precluded FDCPA claims based on attempts to collect on a debt discharged in bankruptcy. In Garfield, the Second Circuit held that the Bankruptcy Code does not preclude FDCPA claims based on attempts to collect on post-discharge debts. 811 F.3d at 91, 93. In reaching its holding, the court drew a distinction between FDCPA claims brought during a bankruptcy and those brought following a bankruptcy discharge. Id. at 90. Unlike in the pre-discharge context, where the debtor is still under the protection of the bankruptcy court, after discharge, the court stated the plaintiff-debtor lacked the protection of the bankruptcy court. See Id. at 91. In particular, the court pointed out that the discharge injunction provision of the Bankruptcy Code does not create a cause of action for its violation, whereas the automatic stay provision during bankruptcy provides such a remedy for violations. Id. at 91-92. After concluding that the Bankruptcy Code does not impliedly repeal all FDCPA provisions to remedy conduct that violates the discharge injunction, the Second Circuit then considered whether specific provisions of the Bankruptcy Code might impliedly repeal certain provisions of the FDCPA on post-discharge claims. Id. at 92. As in this case, the plaintiff asserted claims under subsections 1692e, e(2), and e(10). Id. at 89, 93. In concluding that the Bankruptcy Code's discharge injunction did not conflict with these FDCPA provisions, the court stated that the defendant “can avoid violating both the cited provisions and the Bankruptcy Code simply by not attempting to collect the discharged debt. And once [the defendant] tries to collect the discharged debt, it risks violation of both the cited provisions and the Bankruptcy Code.” Id.; see Randolph, 368 F.3d at 730 (concluding that “[i]t is easy to enforce both statutes, and any debt collector can comply with both simultaneously”).

         Numerous district courts, like the Second Circuit in Garfield, have concluded that the Bankruptcy Code does not preclude FDCPA claims based on attempts to collect post-discharged debts at the pleadings stage.[1] The Court finds these cases persuasive. “[T]here is no reason to believe that [the plaintiff] should be allowed only to recover under the Bankruptcy Code and not under the FDCPA” when “[t]he conduct at issue occurred after the discharge of [the plaintiff's] debt.” Gamble, 846 F.Supp.2d at 382. While Defendants point to a number of cases to support their argument of irreconcilable conflict between the Bankruptcy Code and the FDCPA, these cases have been limited by ...


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