Everything you need to know about ranked-choice voting in one spot. Click to learn more!

Midland Funding v. Johnson

From Ballotpedia
Jump to: navigation, search


Supreme Court of the United States
Midland Funding v. Johnson
Reference: 16-348
Issue: Fair Debt Collection Practices Act
Term: 2016
Important Dates
Argued: January 17, 2017
Decided: May 15, 2017
Outcome
Eleventh Circuit Court of Appeals reversed
Vote
5-3 to reverse
Majority
Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Stephen Breyer • Samuel Alito
Dissenting
Ruth Bader Ginsburg • Sonia Sotomayor • Elena Kagan


Midland Funding v. Johnson is a case argued during the October 2016 term of the U.S. Supreme Court. Argument in the case was held on January 17, 2017. The case came on a writ of certiorari to the United States Court of Appeals for the 11th Circuit.

On May 15, 2017, in an opinion by Justice Stephen Breyer, the court reversed the judgment of the United States Court of Appeals for the 11th Circuit. Justice Sonia Sotomayor authored a dissenting opinion which was joined by Justices Ruth Bader Ginsburg and Elena Kagan.

In the case the court held that, during Johnson's Chapter 13 bankruptcy case, Midland Funding's filing a proof of debt owed claim that was knowingly time-barred under Alabama law did not constitute a "false, deceptive, misleading, unfair, or unconscionable debt collection practice under the Fair Debt Collection Practices Act."

HIGHLIGHTS
  • The case: Midland Funding purchased an overdue credit debt owed by Johnson in Alabama in 2003. Alabama law time-bars collections of such debts after six years. In 2014, Johnson filed for Chapter 13 bankruptcy. Midland filed a claim for the debt under the U.S. Bankruptcy Code (Code), but Johnson claimed Midland was in violation of the Fair Debt Collection Practices Act (FDCPA) because Midland knowingly filed a claim that was time-barred by law.
  • The issue: Does the Code preempt liability under the FDCPA for filing a statutorily time-barred claim for payment in Chapter 13 bankruptcy proceedings?
  • The outcome: On May 15, 2017, the court reversed the judgment of the United States Court of Appeals for the 11th Circuit.


    • In brief: Midland Funding filed a claim under the U.S. Bankruptcy Code (Code) for funds owed to them by Johnson when she declared Chapter 13 bankruptcy in 2014. Johnson alleged that Midland violated a federal law, the Fair Debt Collection Practices Act (FDCPA), for knowingly filing a claim made during a Chapter 13 bankruptcy proceeding that was known to be time-barred by statute. Alabama law allows creditors six years to collect unpaid debts, but eleven years had passed between Midland taking ownership of the debt collection and Johnson filing for bankruptcy. A federal district court dismissed Johnson's suit, but the Eleventh Circuit reversed and remanded the district court's decision, finding no "irreconcilable conflict" between the Code and the FDCPA. Oral argument in the case was held on January 17, 2017.

    You can review the Eleventh Circuit's opinion here.[1]

    Click on the tabs below to learn more about this Supreme Court case.

    Case


    Background

    In May 2003, the petitioner in this case, Midland Funding, purchased an overdue balance that the respondent, Aleida Johnson, owed to Fingerhut Credit Advantage. Midland Funding purchases accounts with overdue balances that go unpaid and then seeks to collect on those accounts. Midland raised its claim in the state of Alabama. Under Alabama law, the statute of limitations for a creditor to collect debt that is overdue is six years. In March 2014, Johnson filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code (Code). Two months later, in May 2014, Midland filed a proof of claim against Johnson seeking $1,879.71 in payment. This claim traced to the overdue balance that Midland originally filed in May 2003.[2]

    Johnson sued Midland Funding in federal district court claiming Midland violated the Fair Debt Collection Practices Act (FDCPA). Under the FDCPA, "'a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt' ... This includes attempting to collect a debt that is not 'expressly authorized by the agreement creating the debt or permitted by law.'" Johnson alleged in her lawsuit that the Alabama statute of limitations for collecting on her debt, six years, had passed by the time Midland filed a claim during her 2014 Chapter 13 bankruptcy proceedings. Accordingly, Johnson argued that Midland's claim was misleading, deceptive, and false, in violation of the FDCPA.[2]

    Midland filed a motion to dismiss Johnson's suit claiming Johnson failed to state a claim. The district court granted Midland's motion. According to the Eleventh Circuit's opinion,[2]

    “

    The District Court read the Bankruptcy Code as affirmatively authorizing a creditor to file a proof of claim—including one that is time-barred—if that creditor has a 'right to payment' that has not been extinguished under applicable state law. The District Court identified tension between this provision of the Code and the FDCPA, which makes it unlawful to file a proof of claim known to be time-barred. The court found this conflict to be irreconcilable and applied the doctrine of implied repeal to hold that a creditor’s right to file a time-barred claim under the Code precluded debtors from challenging that practice as a violation of the FDCPA in the Chapter 13 bankruptcy context. [3]

    		”

    Johnson appealed to the Eleventh Circuit Court of Appeals. In her appeal, Johnson alleged that the district court's holding was in conflict with a precedent of the Eleventh Circuit, Crawford v. LVNV Funding, LLC, In Crawford, the Eleventh Circuit held that the FDCPA was violated when a debt collector knowingly filed a proof of claim on a debt known to be time-barred in any bankruptcy proceeding. In this case, a three-judge panel of the circuit court considered if the Bankruptcy Code precluded an FDCPA claim under a Chapter 13 bankruptcy when a debt collector files a proof of claim the collector knows to be time-barred. In the panel's view, the Code did not preclude a FDCPA claim.[2]

    “

    We recognize that the Code allows creditors to file proofs of claim that appear on their face to be barred by the statute of limitations. However, when a particular type of creditor—a designated 'debt collector' under the FDCPA—files a knowingly time-barred proof of claim in a debtor’s Chapter 13 bankruptcy, that debt collector will be vulnerable to a claim under the FDCPA. Our examination of these statutes leads us to conclude that the Code and the FDCPA can be read together in a coherent way. [3]

    		”

    The panel concluded that while creditors can, under the Code, file proofs of claim they know to be time-barred by the relevant statute of limitations, "those creditors are not free from all consequences of filing these claims. The FDCPA does not allow a debt collector to 'use unfair or unconscionable means to collect or attempt to collect any debt.' ... Neither may they 'use any false, deceptive, or misleading representation or means in connection with the collection of any debt.' ... A debt collector who violates one of these rules may face civil liability to the debtor."[2]

    In rejecting that the Code and the FDCPA are in irreconcilable conflict, the panel reversed and remanded the district court's findings.[2]

    Petitioner's challenge

    Midland Funding, the petitioner, is challenging the Eleventh Circuit's holding that the Code does not preempt liability under the FDCPA for filing a statutorily time-barred claim for payment in Chapter 13 bankruptcy proceedings.

    Certiorari granted

    On September 16, 2016, Midland Funding, the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the 11th Circuit. The U.S. Supreme Court granted Midland Funding's certiorari request on October 11, 2016. Oral argument in the case was held on January 17, 2017.

    Arguments


    Questions presented

    Questions presented:

    "1. Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act.
    2. Whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt."[4]


    Audio

    • Audio of oral argument:[5]



    Transcript

    • Transcript of oral argument:[6]

    Outcome

    Decision

    Justice Stephen Breyer delivered the opinion for a five justice majority. Justice Sonia Sotomayor authored a dissenting opinion which was joined by Justices Ruth Bader Ginsburg and Elena Kagan. In the case the court held that, during Johnson's Chapter 13 bankruptcy case, Midland Funding's filing a proof of debt owed claim that was knowingly time-barred under Alabama law did not constitute a "false, deceptive, misleading, unfair, or unconscionable debt collection practice under the Fair Debt Collection Practices Act."[2]

    Opinion

    After a review of the factual and procedural history of the case, Justice Breyer addressed the key words in the Fair Debt Collection Practices Act (FDCPA) applied to Midland's filing a proof of debt owed claim. He wrote,[2]

    “

    We believe it reasonably clear that Midland’s proof of claim was not 'false, deceptive, or misleading.' Midland’s proof of claim falls within the Bankruptcy Code’s definition of the term 'claim.' A 'claim' is a 'right to payment.' ... State law usually determines whether a person has such a right. ... The relevant state law is the law of Alabama. And Alabama’s law, like the law of many States, provides that a creditor has the right to payment of a debt even after the limitations period has expired.[3]

    		”

    Justice Breyer also wrote that while Midland's filing in a civil case might be unfair or unconscionable under the FDCPA, that such a filing occurred in a Chapter 13 bankruptcy proceeding was neither unfair nor unconscionable. He noted that the bankruptcy system already treats untimeliness as an affirmative defense and that "protections available in a Chapter 13 bankruptcy proceeding minimize the risk to the debtor. ... At the same time, we do not find in either the Fair Debt Collection Practices Act or the Bankruptcy Code good reason to believe that Congress intended an ordinary civil court applying the Act to determine answers to these bankruptcy-related questions."[2]

    As a result of the court's opinion, the judgment of the Eleventh Circuit Court of Appeals was reversed.

    Concurring opinions

    There were no dissenting opinions filed in this case.

    Dissenting opinions

    Justice Sonia Sotomayor filed a dissenting opinion in the case which was joined by Justices Ruth Bader Ginsburg and Elena Kagan. Justice Sotomayor stated that, in her view, the court was wrong to hold that the practices of entities like Midland Funding were legal under the FDCPA. She wrote,[2]

    “

    Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts. This practice is both 'unfair' and 'unconscionable.' ... It does not take a sophisticated attorney to understand why the practice I have described ... is unfair. It takes only the common sense to conclude that one should not be able to profit on the inadvertent inattention of others. It is said that the law should not be a trap for the unwary. Today’s decision sets just such a trap. I take comfort only in the knowledge that the Court’s decision today need not be the last word on the matter. If Congress wants to amend the FDCPA to make explicit what in my view is already implicit in the law, it need only say so.[3]

    		”


    The opinion

    Filings

    The court granted Midland Funding's certiorari request on October 11, 2016.

    Merits filings

    Patries' filings

    • Midland Funding, the petitioner, filed a merits brief on November 14, 2016.
    • Aleida Johnson, the respondent, filed a merits brief on December 14, 2016.
    • Midland Funding filed a reply brief on the merits on January 6, 2017.

    Amicus curiae filings

    The following groups filed amicus curiae briefs in support of the petitioner, Midland Funding.

    • Brief of ACA International
    • Brief of DBA International, Inc.
    • Brief of NARCA - National Creditors Bar Association et al.
    • Brief of Resurgent Capital Services, L.P.

    The following groups filed amicus curiae briefs filed groups in support of the respondent, Aleida Johnson.

    • Brief of bankruptcy attorney and professor G. Eric Brunstad, Jr.
    • Brief of the National Association of Chapter 13 Trustees
    • Brief of the National Association of Consumer Bankruptcy Attorneys et al.
    • Brief of the United States of America

    Certiorari filings

    Parties' filings

    • Midland Funding, the petitioner, filed a petition for certiorari on September 16, 2016.
    • Aleida Johnson, the respondent, filed a brief in opposition to certiorari on September 19, 2016.

    See also

    Footnotes

    1. ↑ U.S. Court of Appeals for the Eleventh Circuit, Aleida Johnson f.k.a. Aleida Hill, individually and on behalf of all similarly situated individuals v. Midland Funding, LLC, May 24, 2016
    2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Supreme Court of the United States, Midland Funding, LLC, v. Johnson, decided May 15, 2017
    3. ↑ 3.0 3.1 3.2 3.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    4. ↑ Supreme Court of the United States, Midland Funding v. Johnson, October 11, 2016
    5. ↑ Supreme Court of the United States, Midland Funding v. Johnson, argued January 17, 2017
    6. ↑ Supreme Court of the United States, Midland Funding v. Johnson, argued January 17, 2017
    Retrieved from "https://ballotpedia.org/wiki/index.php?title=Midland_Funding_v._Johnson&oldid=8891868"