Jeanette Randolph v. Imbs, Inc .

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-1594
J EANETTE R ANDOLPH ,
Plaintiff-Appellant,
v.
IMBS, I NC .,
Defendant-Appellee.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 02 C 6368—Elaine E. Bucklo, Judge.
____________
Nos. 03-2185 & 03-2340
C HERYL A LEXANDER ,
Plaintiff-Appellee, Cross-Appellant,
v.
U NLIMITED P ROGRESS C ORP .,
Defendant-Appellant, Cross-Appellee.
____________
Appeals from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 02 C 2063—Sidney I. Schenkier, Magistrate Judge.
____________

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2 Nos. 03-1594 et al.
No. 03-3182
J ENNIFER J. C ROSS ,
Plaintiff-Appellant,
v.
R ISK M ANAGEMENT A LTERNATIVES , I NC .,
Defendant-Appellee.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 02 C 8136—Elaine E. Bucklo, Judge.
____________
A RGUED F EBRUARY 11, 2004—D ECIDED M AY 12, 2004
____________
Before E ASTERBROOK , K ANNE , and W ILLIAMS , Circuit
Judges.
E ASTERBROOK , Circuit Judge. A demand for immediate
payment while a debtor is in bankruptcy (or after the debt’s
discharge) is “false” in the sense that it asserts that money
is due, although, because of the automatic stay (11 U.S.C.
§362) or the discharge injunction (11 U.S.C. §524), it is not.
A debt collector’s false statement is presumptively wrongful
under the Fair Debt Collection Practices Act, see 15 U.S.C.
§1692e(2)(A), even if the speaker is ignorant of the truth;
but a debt collector that exercises care to avoid making
false statements has a defense under §1692k(c). Two recent
decisions of this circuit arising out of post- bankruptcy
demands for immediate payment illustrate how these
provisions of the FDCPA work. Turner v. J.D.V.B. & Associ-
ates, Inc., 330 F.3d 991 (7th Cir. 2003); Hyman v. Tate, No.
03-2106 (7th Cir. Apr. 1, 2004).

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Nos. 03-1594 et al. 3
A debtor dunned after filing for bankruptcy has another
potential remedy: ask the bankruptcy judge to hold the
other party in contempt of either the automatic stay or the
discharge injunction. This option is available against both
creditors and debt collectors, but only if the violation is
“willful”. See §362(h); cf. §524(a)(2). Willfulness entails
actual knowledge that a bankruptcy is under way or has
ended in a discharge. If a willful violation can be shown,
both actual and punitive damages are available, while vio-
lations of the FDCPA generally lead to small penalties and
never to punitive damages. In these three cases, which we
have consolidated on appeal, the district courts held that
remedies under the Bankruptcy Code are the only recourse
against post-bankruptcy debt-collection efforts—that the
Code trumps the FDCPA when they deal with the same
subject, even when the two statutes are consistent. On this
view, negligent attempts to collect from debtors during or
after bankruptcy cannot yield liability. That position has
the support of one circuit, see Walls v. Wells Fargo Bank,
N.A., 276 F.3d 502, 510-11 (9th Cir. 2002), but accepting it
would change the outcome of Turner and Hyman. Although
those two decisions did not consider the effect of the
Bankruptcy Code on the FDCPA , they did apply the FDCPA to
situations fundamentally the same as those of the three
cases now before us.
These suits are similar in material respects, so we use one
as an illustration. When Cheryl Alexander filed a petition
under Chapter 13 of the Bankruptcy Code, she owed $1,125
to her dentist, Joseph V. Kannankeril. She listed this debt
on the schedule of unsecured, nonpriority claims.
Kannankeril was notified of the filing and the identity of
Alexander’s lawyer. He filed a timely proof of claim, and the
confirmed plan listed this debt as one to be paid in part over
time. Payments under a Chapter 13 plan can last for years.
About two years after Alexander’s plan was confirmed, Dr.
Kannankeril died; his office hired Unlimited Progress, Inc.,

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4 Nos. 03-1594 et al.
to collect old accounts, including Alexander’s. We must
assume, given the posture of the litigation, that whoever
was managing Dr. Kannankeril’s estate furnished Unlim-
ited Progress with the bills but not with any of the docu-
ments concerning her bankruptcy. Unlimited Progress sent
a dunning letter, which Alexander ignored; it followed up
with another that she relayed to her attorney. He informed
the debt collector about the Chapter 13 proceedings;
Unlimited Progress immediately closed its file and has
never again contacted Alexander. Suit under the FDCPA
followed, and Alexander made two claims: first, that
Unlimited Progress had falsely represented that she was
required to pay Kannankeril’s bill immediately; second, that
Unlimited Progress had violated the FDCPA by writing
directly to her, even though she was represented by counsel.
The parties consented to decision by a magistrate judge,
see 28 U.S.C. §636(c), who concluded that the Bankruptcy
Code “preempts” the FDCPA when the act alleged to trans-
gress the FDCPA also violates the Code. See Alexander v.
Unlimited Progress Corp., 2003 U.S. Dist. L EXIS 5560 (N.D.
Ill. Mar. 21, 2003). Because §362(h) of the Code condemns
only willful debt-collection attempts, while the FDCPA uses
a strict-liability approach (with a due-care defense), the
court deemed them incompatible. The magistrate judge
relied principally on Cox v. Zale, 239 F.3d 910 (7th Cir.
2001), which holds that the Bankruptcy Code occupies the
field, to the exclusion of state common and statute law
bearing on debt adjustment after a federal bankruptcy
proceeding has been commenced, though he also cited
Kokoszka v. Belford, 417 U.S. 642 (1974). Sending the letter
to the debtor rather than to counsel does not independently
violate the Bankruptcy Code, however, and the magistrate
judge ordered Unlimited Progress to pay Alexander $1,000
for what he held to be a violation of 15 U.S.C. §1692c(a)(2).
In the other two suits the district judge held that the Code
supplies the exclusive remedy for any debtor in bankruptcy

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Nos. 03-1594 et al. 5
and applied this understanding to knock out claims under
§1692c(a)(2), §1692e(2)(A), and §1692f (which forbids
harassing or unconscionable collection tactics). See Cross v.
Risk Management Alternatives, Inc., 296 B.R. 758 (N.D. Ill.
2003); Randolph v. IMBS, Inc., 288 B.R. 524 (N.D. Ill.
2003).
We start with the notice-to-counsel theory, because the
difference between §1692c(a)(2) and §1692k(c) may help us
understand the relation between the Bankruptcy Code and
§1692e(2)(A). Section 1692c(a) says that “a debt collector
may not communicate with a consumer in connection with
the collection of any debt . . . (2) if the debt collector knows
the consumer is represented by an attorney with respect to
such debt and has knowledge of, or can readily ascertain,
such attorney’s name and address”. Unlimited Progress did
not know that Alexander was represented by an attorney,
any more than it knew that she had a confirmed Chapter 13
plan. The district court thought this irrelevant, because the
information must have been in Dr. Kannankeril’s files. Yet
the statute asks what the debt collector knows, not what
the creditor knows.
A distinction between creditors and debt collectors is
fundamental to the FDCPA , which does not regulate cre-
ditors’ activities at all. Courts do not impute to debt col-
lectors other information that may be in creditors’ files— for
example, that debt has been paid or was bogus to start
with. This is why debt collectors send out notices informing
debtors of their entitlement to require verification and to
contest claims. 15 U.S.C. §1692g. Verification would be
unnecessary if debt collectors were charged with the cre-
ditors’ knowledge. The due-care defense of §1692k(c) also
would be pointless if creditors’ knowledge were imputed
to debt collectors. Why inquire whether the debt collector
took appropriate precautions to learn something it is bound
to know from the outset? Alexander does not cite, and we
have not found, any appellate opinion imputing creditors’

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6 Nos. 03-1594 et al.
knowledge to debt collectors. Knowledge may be imputed to
agents, but debt collectors are independent contractors; an
agent or employee of the creditor is not covered by the Act
in the first place. See 15 U.S.C. §1692a(6)(a). So the
information in Dr. Kannankeril’s files about Alexander’s
bankruptcy (and the fact that she had counsel) is not
“knowledge” from the perspective of Unlimited Progress
unless it was furnished to that debt collector, and as
Alexander does not contend that this occurred there can be
no liability under §1692c(a)(2).
Although §1692c(a)(2), like §362(h) of the Bankruptcy
Code, makes liability depend on the actor’s knowledge,
§1692e(2)(A) creates a strict-liability rule. Debt collectors
may not make false claims, period. See Turner, 330 F.3d
at 995, and its predecessors, such as Gearing v. Check
Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000), and
Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996).
In lieu of a scienter requirement, the FDCPA provides a
defense “if the debt collector shows by a preponderance of
evidence that the violation was not intentional and resulted
from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error.” 15
U.S.C. §1692k(c). This is the basis of the district court’s
conclusion that liability under §1692e(2)(A) would interfere
with the administration of bankruptcy law— Congress spe-
cified a scienter rule for proceedings under §362(h), yet the
FDCPA allows liability without proof of a mental state.
The district court wrote that §362(h) “preempts”
§1692e(2)(A), but this cannot be right. One federal statute
does not preempt another. See Baker v. IBP, Inc., 357
F.3d 685, 688 (7th Cir. 2004). When two federal statutes
address the same subject in different ways, the right ques-
tion is whether one implicitly repeals the other—and repeal
by implication is a rare bird indeed. See, e.g., Branch v.
Smith, 538 U.S. 254, 273 (2003); J.E.M. Ag Supply, Inc. v.
Pioneer Hi-Bred International, Inc., 534 U.S. 124, 141-44

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Nos. 03-1594 et al. 7
(2001) (collecting authority). It takes either irreconcilable
conflict between the statutes or a clearly expressed leg-
islative decision that one replace the other. Preemption is
more readily inferred, so decisions such as Cox v. Zale—
which held that bankruptcy principles come from federal
rather than state law—are not informative about which
federal laws apply to what transactions. The district court
did not find any clearly expressed decision that the Bank-
ruptcy Code displaces the FDCPA , and the debt collectors do
not contend that Congress made such a decision. The
argument, rather, is one based on the operational differ-
ences between the statutes. These do not, however, add up
to irreconcilable conflict; instead the two statutes overlap,
and if the plaintiff shows a more serious transgression—the
willful violation to which §362(h) refers— then more
substantial sanctions (such as punitive damages) are
available. It is easy to enforce both statutes, and any debt
collector can comply with both simultaneously. A table
shows the differences:

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8 Nos. 03-1594 et al.
Bankruptcy FDCPA
Who Anyone Debt collector only
Scienter Willfulness Strict liability
(§1692e(2)(A))
Defense None Bona fide error plus
due care (§1692k(c)), or
reliance on FTC opin-
ion (§1692k(e))
Statutory
Damages
None $1,000 maximum
(§1692k(a)(2)(A))
Compensatory
Damages
Yes Yes (§1692k(a)(1))
Punitive Dam-
ages
Yes No
Cap on Class
Recovery
No Yes
(§1692k(a)(2)(B)(ii))
Maximum re-
covery
No Yes, $500,000 or 1% of
net worth, whichever is
less
(§1692k(a)(2)(B)(ii))
Attorneys’ fees
to debtor
No Yes (§1692k(a)(3))
Attorneys’ fees
to creditor
No Yes (§1692k(a)(3))
Statute of lim-
itations
None
(laches de-
fense only)
One year (§1692k(d))

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Nos. 03-1594 et al. 9
The regime under §362 tracks that for other proceedings
in the nature of contempt of court. The regime under the
FDCPA sets a lower standard of liability and provides lower
damages. It also deals specifically, as §362 does not, with
matters such as class actions, maximum recovery, attor-
neys’ fees, and the period of limitations. It is not sound to
call §362 of the Code “comprehensive”; the FDCPA comes
closer to that mark. It would be better to recognize that the
statutes overlap, each with coverage that the other
lacks—the Code covers all persons, not just debt collectors,
and all activities in bankruptcy; the FDCPA covers all
activities by debt collectors, not just those affecting debtors
in bankruptcy. Overlapping statutes do not repeal one
another by implication; as long as people can comply with
both, then courts can enforce both.
Kokoszka, the only decision of the Supreme Court relied
on by either the ninth circuit or the district court in our
three cases, is not pertinent. After holding that a refund of
income taxes is property of the bankruptcy estate, 417 U.S.
at 645-48, the Court had to decide whether a provision of
the Consumer Credit Protection Act specifying that no more
than 25% of a debtor’s earnings are subject to garnishment
enabled the debtor to keep 75% of the refund out of his
creditors’ hands. The Court held not, for a tax refund is not
part of “earnings” even though the taxes had been withheld
from the debtor’s wages. Id. at 648-52. A tax refund is a
capital asset, while garnishment deals with apportionment
of periodic wage income. This conclusion meant that the two
statutes did not conflict. Along the way, the Court sug-
gested that, once bankruptcy begins, the Bankruptcy Act of
1898 (the predecessor to the Bankruptcy Code of 1986)
supplies all rules for the disposition of the debtor’s current
income and assets. That view was not expressed as a
holding, but even if it had been it would not affect the
FDCPA , which regulates how debt collectors interact with
debtors, and not what assets are made available to which

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10 Nos. 03-1594 et al.
creditors and how much is left for debtors (the principal
subjects of the Bankruptcy Code).
Whether overlapping and not entirely congruent remedial
systems can coexist is a question with a long history at the
Supreme Court, and an established answer: yes. See, e.g.,
Humana Inc. v. Forsyth, 525 U.S. 299 (1999); General
Motors Acceptance Corp. v. United States, 286 U.S. 49
(1932); United States Shipping Board Emergency Fleet
Corp. v. Rosenberg Brothers & Co., 276 U.S. 202 (1928). Cf.
Verizon Communications, Inc. v. Law Offices of Curtis V.
Trinko, LLP, 124 S. Ct. 872 (2004) (Telecommunications Act
of 1996 and Sherman Act of 1890 both apply to communica-
tions industry, each statute with distinct standards of
conduct and liability). This is so even if the application of
one system is jarring against the background of another.
That’s the lesson of Heinz v. Jenkins, 514 U.S. 291 (1995),
which applied the FDCPA to lawyers engaged in collecting
debts through litigation, despite the many differences be-
tween the FDCPA and the rules of procedure that apply to
other litigation.
In recent decades questions about the compatibility
of overlapping systems have come up most frequently in
civil-rights cases, because the provisions enacted in 1866
and 1871, and now codified at 42 U.S.C. §§ 1981 to 1985,
differ in details both large and small from more recent
statutes, such as the Civil Rights Act of 1964. For example,
most claims under the Civil Rights Act of 1964 must be
presented first to the EEOC , with litigation only when the
agency certifies that conciliation has failed, while claims
under §1981 or §1983 may be commenced in court without
administrative exhaustion. The period of limitations for
filing a charge under the 1964 Act is 90 to 300 days, shorter
than the time (usually derived from state law via 42 U.S.C.
§1988) for litigation under §1981 or §1983. See Wilson v.
Garcia, 471 U.S. 261 (1985). Until the Civil Rights Act of
1991, only equitable remedies (including back pay) were

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Nos. 03-1594 et al. 11
available for violations of the 1964 Act, while compensatory
and punitive damages were available for violations of the
older laws. These differences—and there are many
more—led to contentions that the 1964 Act superceded the
older statutes to the extent they occupied the same ground.
Arguments of that kind have never succeeded, however; the
Supreme Court has held that both old and new remedial
systems may be enforced according to their terms, despite
the substantial differences, because the standards for
implied repeal have not been satisfied. See Johnson v.
Railway Express Agency, Inc., 421 U.S. 454 (1975) (Title VII
and §1981); Runyon v. McCrary, 427 U.S. 160 (1976) (Title
II and §1981); Guardians Association v. Civil Service
Commission, 463 U.S. 582 (1983) (Title VI and §1983);
Patterson v. McLean Credit Union, 491 U.S. 164 (1989)
(Title VII and §1981; declining to overrule earlier deci-
sions). The Supreme Court has never discussed the most
common overlap—Title VII and §1983 when the employer
is a state actor—but like other appellate courts we have
held that employees may resort to both statutes despite the
substantial differences in their terms. See, e.g., Trigg v. Ft.
Wayne Community Schools, 766 F.2d 299 (7th Cir. 1985)
(collecting authority). See also Delgado v. Stegall, No.
03-2700 (7th Cir. May 4, 2004) (Title IX of Educational
Amendments of 1972 does not preclude claim under §1983
against teacher in a public school).
The Bankruptcy Code of 1986 does not work an implied
repeal of the FDCPA , any more than the latter Act implicitly
repeals itself. Consider again Alexander’s two claims: the
first, under §1692c(a), depended on the debt collector’s
“knowledge” of the bankruptcy; the second, under
§1692e(2)(A), invoked a strict-liability rule with a potential
due-care defense. We have been able to address both of
these independently, without saying that it would undercut
the scienter requirement §1692c(a) to permit no-fault
liability under §1692e(2)(A). They are simply different

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12 Nos. 03-1594 et al.
rules, with different requirements of proof and different
remedies. Just so with §1692e(2)(A) and §362(h) of the
Bankruptcy Code. To say that only the Code applies is to
eliminate all control of negligent falsehoods. Permitting
remedies for negligent falsehoods would not contradict any
portion of the Bankruptcy Code, which therefore cannot be
deemed to have repealed or curtailed §1692e(2)(A) by im-
plication. To the extent that Walls holds otherwise, we do
not follow it; instead we reaffirm the approach of Turner
and Hyman.
Because the district court dismissed the complaints on the
pleadings, it is premature to broach the question whether
any of the debt collectors could establish a defense under
§1692k(c). To the extent that plaintiffs seek relief under
§1692f, which prohibits “unconscionable” collection tactics,
there is no incompatibility with the Code (everything we
have said about §1692e(2)(A) applies equally to §1692f) but
also no serious claim: all three debt collectors desisted
immediately on learning about the bankruptcy proceedings.
All claims under §1692f are knocked out by the statutory
language and our holding in Turner, 330 F.3d at 997-98. To
the extent that plaintiffs Cross and Randolph seek relief
under §1692c(a)(2) on the theory that the debt collectors
(and not just the creditors) knew that they had counsel,
again the FDCPA may be enforced, and further proceedings
are required to explore the question whether the debt
collectors themselves (as opposed to the creditors) knew
that the debtors were represented by attorneys. The
judgments are vacated and the matters remanded for
further proceedings consistent with this opinion. But on
Unlimited Progress’s appeal from the award under
§ 1692c(a), the judgment is reversed outright.

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Nos. 03-1594 et al. 13
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—5-12-04

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