Garfield v. Ocwen Loan Servicing, LLC

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
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DONNA GARFIELD, 1
Plaintiff-Appellant, 2
3
v. 4
5
OCWEN LOAN SERVICING, LLC, 6
Defendant-Appellee. 7
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9
Before: NEWMAN, WINTER, and CABRANES, Circuit Judges. 10
11
Appeal from the January 26, 2015, judgment of the 12
United States District Court for the Western District of New 13
York (Elizabeth A. Wolford, District Judge), dismissing 14
claims brought under the Fair Debt Collection Practices Act 15
for seeking to collect a debt discharged in bankruptcy, and 16
requiring the plaintiff to seek relief in the bankruptcy 17
court. 18
Judgment reversed and case remanded with instructions 19
to reinstate the FDCPA claims. 20
21
1

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Kenneth R. Hiller, Law Offices of 1
Kenneth Hiller, PLLC, Amherst, 2
NY, for Appellant. 3
4
Gary Neal Smith, Houser & Alison, 5
APC, Newark, NJ, for Appellee. 6
7
(Daniel L. Geyser, Stris & Maher 8
LLP, Los Angeles, CA, for 9
amicus curiae National 10
Association of Consumer 11
Bankruptcy Attorneys, in 12
support of Appellant.) 13
14
15
JON O. NEWMAN, Circuit Judge. 16
The principal issue on this appeal is whether a 17
debtor who has received a claim on a debt that has been 18
discharged in a bankruptcy proceeding can sue the claimant 19
in a district court under the Fair Debt Collection Practices 20
Act (“FDCPA”) or must seek relief in the bankruptcy court. 21
The issue arises on an appeal by Plaintiff-Appellant Donna 22
Garfield from the January 26, 2015, judgment of the United 23
States District Court for the Western District of New York 24
(Elizabeth A. Wolford, District Judge), in favor of 25
Defendant-Appellee Ocwen Loan Servicing, LLC (“Ocwen”). The 26
judgment dismissed Garfield’s complaint alleging various 27
causes of action under the FDCPA. 28
We conclude that Garfield may pursue her FDCPA claims 29
in a district court and therefore reverse and remand. 30
2

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Background 1
The complaint alleges the following facts, which are 2
assumed to be true on this appeal from dismissal for failure 3
to state a claim on which relief can be granted. See Bell 4
Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). 5
Garfield obtained a mortgage from Ocwen’s predecessor-in- 6
interest, Litton Loan Servicing L.P. and became personally 7
obligated on a mortgage loan. Garfield failed to make 8
payments on the mortgage loan and filed for Chapter 13 9
Bankruptcy in the United States Bankruptcy Court for the 10
Western District of New York. During the bankruptcy 11
proceedings, Ocwen acquired Garfield’s mortgage loan. 12
Under her bankruptcy plan, Garfield paid the arrears on 13
her mortgage loan through monthly payments made during the 14
bankruptcy proceeding. Critical to the pending appeal, in 15
August 2013 she obtained a discharge of her entire personal 16
obligation for the mortgage loan. 1 However, Garfield agreed 17
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

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to pay $938 per month to prevent foreclosure of the 1
mortgaged property. 2
2
Garfield concedes that she made only one monthly 3
payment after her bankruptcy discharge and that by March 4
2014 the arrears on her monthly obligation totaled 5
$6,672.34. In February 2014 Ocwen contacted Garfield and 6
demanded that she pay $21,825.15 or face foreclosure on her 7
home. Ocwen sent a delinquency notice in April 2014 for 8
$22,684.36. These amounts reflected both Garfield’s conceded 9
arrears for post-bankruptcy monthly payments and the 10
mortgage loan arrears that had been discharged. Ocwen also 11
reported to Equifax that Garfield owed the discharged 12
amount. 13
In July 2014, Garfield filed her FDCPA complaint 14
against Ocwen in the United States District Court for the 15
Western District of New York. She alleged that Ocwen’s 16
attempt to collect the arrears on her mortgage loan, which 17
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

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had been discharged, 3 violated several provisions of the 1
FDCPA: 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2), 15 U.S.C. § 2
1692e(5), 15 U.S.C. § 1692e(8), 15 U.S.C. § 1692e(10), 15 3
U.S.C. § 1692e(11), 15 U.S.C. § 1692f, 15 U.S.C. § 1692f(1), 4
and 15 U.S.C. § 1692g(a)(3). 5
Garfield also alleged that Ocwen violated the FDCPA in 6
the manner it attempted to collect the post-bankruptcy 7
monthly mortgage payments that she concedes she owes. 8
Specifically, she alleges (1) that Ocwen violated subsection 9
1692e(11), which requires a so-called “mini-Miranda 10
warning,” during conversations with a debtor, and (2) that 11
Ocwen failed to send within five days of its initial 12
communications a 30-day notice of a debtor’s right to 13
dispute a debt, as required by subsection 1692g(a)(3). 14
The District Court dismissed Garfield’s complaint. The 15
Court held that the Bankruptcy Code provides the exclusive 16
remedy for Garfield’s claim that Ocwen attempted to collect 17
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

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an allegedly discharged debt. 4 The Court also stated that, 1
even if the Code does not broadly preclude all FDCPA claims 2
for conduct that violates the discharge injunction, 3
Garfield’s particular FDCPA claims conflict with the Code’s 4
remedies and were therefore precluded. 5
Discussion 6
I. Implied Repeal of All FDCPA Provisions Invoked for Claims 7
After Discharge 8
The District Court held that the Bankruptcy Code 9
precludes all claims under the FDCPA for conduct that 10
violates a discharge injunction. Acknowledging Garfield’s 11
argument that the Supreme Court “should only rarely infer 12
statutory repeal,” the District Court ruled that “many of 13
Plaintiff’s allegations directly conflict with the 14
Bankruptcy Code’s discharge injunction provisions.” 15
When it is claimed that a later enacted statute creates 16
an irreconcilable conflict with an earlier statute, the 17
question is whether the later statute, by implication, has 18
repealed all or, more typically, part of the earlier 19
statute. See National Ass’n of Home Builders v. Defenders of 20
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

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Wildlife, 551 U.S. 644, 662-63 (2007). Repeal by implication 1
is disfavored. “In the absence of some affirmative showing 2
of an intention to repeal, the only permissible 3
justification for a repeal by implication is when the 4
earlier and later statutes are irreconcilable.” Morton v. 5
Mancari, 417 U.S. 535, 550 (1974). 6
Where, as in this case, the later statute is the 7
Bankruptcy Code, 5 a distinction must be made between claims 8
brought under the earlier statute during the pendency of a 9
bankruptcy proceeding and those brought after a discharge. 10
Four circuits have considered FDCPA claims brought during 11
the pendency of a bankruptcy proceeding. 12
Our Court has ruled that the FDCPA does not authorize 13
suit during the pendency of bankruptcy proceedings. See 14
Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir. 15
2010). This ruling appears to construe FDCPA provisions to 16
be inapplicable when invoked for claims made during 17
bankruptcy, rather than determine that such provisions have 18
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

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been impliedly repealed by the provision of the Bankruptcy 1
Code authorizing a discharge injunction. See id. at 94. Our 2
Court’s opinion does not include the word “repeal.” 3
In Simmons, the debtors, while engaged in a bankruptcy 4
proceeding, objected to the amount of a creditor’s proof of 5
claim, which the bankruptcy court reduced. The debtors then 6
brought a putative class action, contending that the 7
creditor’s filing of an inflated proof of claim violated the 8
FDCPA. See id. The creditor moved to dismiss, arguing that 9
the Bankruptcy Code exclusively provides whatever remedies 10
exist for filing an inflated proof of claim. See id. 11
Affirming dismissal of the complaint, we said, “The 12
FDCPA is designed to protect defenseless debtors” and 13
“[t]here is no need to protect debtors who are already under 14
the protection of the bankruptcy court.” Id. at 96 (emphasis 15
added). Noting that some courts had broadly rejected all 16
FDCPA claims (even claims filed after discharge) predicated 17
on acts alleged to have violated the Bankruptcy Code, we 18
observed that “[t]his broader rule has not been universally 19
accepted, and we are not compelled to consider it in this 20
case.” Id. at 96-97 n.2 (citation omitted). 6
21
6 In a non-precedential decision, Yaghobi v. Robinson,
145 F. App’x 697 (2d Cir. 2005), we affirmed the dismissal
8

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The Ninth Circuit has ruled that the Bankruptcy Code 1
precludes FDCPA claims brought during the pendency of 2
bankruptcy proceedings. See Walls v. Wells Fargo Bank, N.A., 3
276 F.3d 502, 511 (9th Cir. 2002). This Court, like the 4
District Court in the pending appeal, appears to have said 5
“precludes” FDCPA claims to reflect that the FDCPA 6
provisions invoked for such claims have been repealed by 7
implication with respect to conduct that violates the 8
discharge injunction. 9
Two circuits have ruled to the contrary. In Randolph v. 10
IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004), the debtors 11
brought FDCPA claims against creditors for seeking to 12
collect debts in violation of the automatic stay. The 13
creditors asserted that the Bankruptcy Code’s remedies for 14
violations of the automatic stay, see 11 U.S.C. § 362(h) 15
(now § 362(k)), precluded relief under the FDCPA. 16
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

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The Seventh Circuit acknowledged that there were some 1
“operational differences between the statutes,” but stated 2
that these differences constituted “overlap” between the 3
statutes rather than “irreconcilable conflict,” id. at 730, 4
and that “[o]verlapping statutes do not repeal one another 5
by implication,” Id. at 731. “The Bankruptcy Code of 1986 6
does not work an implied repeal of the FDCPA, any more than 7
the latter Act implicitly repeals itself.” Id. at 732. 8
Judge Easterbrook helpfully assembled a chart comparing 9
the statutes’ differing treatment of conduct that violates 10
both the automatic stay and the FDCPA: 11
Bankruptcy FDCPA 12
Who Anyone Debt collector only 13
14
Scienter Willfulness S t r i c t l i a b i l i t y ( § 15
1692e(2)(A) 16
17
Defense None Bona fide error plus due 18
care (§ 1692k(c)), or 19
reliance on FTC opinion 20
(§ 1692k(e)) 21
22
Statutory Damages None $ 1 , 0 0 0 m a x i m u m 23
(§ 1692k(a)(2)(A) 24
25
Compensatory Damages Yes Yes (§ 1692k(a)(1)) 26
27
Punitive Damages Yes No 28
29
Cap on Class Recovery No Yes (§ 1692k(a)(2)(B)(ii)) 30
10

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Maximum recovery No Yes, $500,000 or 1% of net 1
worth, whichever is less 2
(§ 1692k(a)(2)(B)(ii)) 3
4
Attorneys' fees to debtor No Yes (§ 1692k(a)(3)) 5
6
Attorneys' fees to creditor No Yes (§ 1692k(a)(3)) 7
8
Statute of limitations None (laches defense only) One year (§ 1692k(d)) 9
10
Id. 11
The Seventh Circuit concluded, “It is easy to enforce 12
both statutes, and any debt collector can comply with both 13
simultaneously.” Id. 14
The Third Circuit has also ruled against implied repeal 15
of FDCPA provisions invoked for claims brought during the 16
pendency of bankruptcy proceedings, see Simon v. FIA Card 17
Services, N.A., 732 F.3d 259, 274 (3d Cir. 2013), concluding 18
that the Bankruptcy Code effected “no broad preclusion” of 19
FDCPA claims, id. at 278. 20
The pending appeal concerns FDCPA claims brought after 21
discharge, the context we explicitly distinguished in 22
Simmons. Now facing the issue of implied repeal of FDCPA 23
provisions invoked for claims in the post-discharge context, 24
we conclude that the Bankruptcy Code does not broadly repeal 25
the FDCPA for purposes of FDCPA claims based on conduct that 26
would constitute alleged violations of the discharge 27
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injunction. No irreconcilable conflict exists between the 1
post-discharge remedies of the Bankruptcy Code and the 2
FDCPA. There is no reason to assume that Congress did not 3
expect these two statutory schemes to coexist in the post- 4
discharge context. The Seventh Circuit’s analysis of FDCPA 5
and Bankruptcy Code provisions, although leading that Court 6
to a result that differs from our Simmons decision in the 7
pre-discharge context, argues against preclusion of FDCPA 8
claims after discharge. At that point the former debtor no 9
longer has the “protection of the bankruptcy court,” 10
Simmons, 622 F.3d at 96, which we deemed decisive on the 11
preclusion issue prior to discharge. Indeed, the Bankruptcy 12
Code provision concerning the discharge injunction, see 11 13
U.S.C. § 524(a)(2), does not explicitly create a cause of 14
action for its violation, whereas the automatic stay 15
provision provides such a remedy, see id. § 362(k). 7
16
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

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II. Implied Repeal of Specific FDCPA Provisions Invoked for 1
Claims After Discharge 2
Even though the Bankruptcy Code does not impliedly 3
repeal all FDCPA provisions to remedy conduct that violates 4
the discharge injunction, it might impliedly repeal some 5
specific provisions invoked to remedy such conduct. Ocwen 6
focuses first on Garfield’s claim that Ocwen’s failure to 7
provide a so-called “mini-Miranda” warning in its initial 8
communication violated subsection 1692e(11) of the FDCPA. 8
9
This claim, Ocwen contends, irreconcilably conflicts with 10
the Bankruptcy Code’s post-discharge remedies. 11
In Simon, the Third Circuit held that the FDCPA could 12
not require the creditor to include a mini-Miranda warning 13
with its examination notice and subpoenas because a 14
communication that included such a warning, sent prior to a 15
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.”
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discharge, would constitute a collection attempt forbidden 1
by the automatic stay. See 732 F.3d at 279-80. Sending the 2
notice and subpoenas prior to discharge did not violate the 3
Bankruptcy Code. See id. The Third Circuit ruled that 4
subsection 1692e(11) conflicted with the Bankruptcy Code 5
because including the warning would violate the Code and 6
omitting it would violate the FDCPA. See id. at 280. 7
This holding in Simon, however, whether or not we would 8
agree with it, has no application to Garfield’s subsection 9
1692e(11) claim. Ocwen’s communication, even without a mini- 10
Miranda warning, was an attempt to collect a discharged debt 11
in violation of the Bankruptcy Code. The absence of a mini- 12
Miranda warning also violated the FDCPA. There is no 13
conflict. 14
Two of Garfield’s FDCPA claims allege that Ocwen 15
violated subsections 1692e(11) and 1692g(a)(3) in the manner 16
that Ocwen sought to collect Garfield’s delinquent post- 17
bankruptcy monthly payments, which she agreed to make to 18
avoid foreclosure. Subsection 1692g(a)(3) requires notice of 19
an opportunity to dispute a debt. 9 Both of these subsections 20
9 Subsection 1692g(a)(3) provides:
“Within five days after the initial communication
with a consumer in connection with the collection
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regulate Ocwen’s collection of debt that Garfield concedes 1
she owes. 2
Garfield alleges that Ocwen sent her a bill on March 3
17, 2014, for her monthly payment as well as her arrears for 4
post-discharge monthly payments missed from July 2013 to 5
February 2014. She claims that Ocwen violated the mini- 6
Miranda warning requirement of subsection 1692e(11) “during 7
conversations with [her],” and that it violated subsection 8
1692g(a)(3) by failing to send a 30-day right-to-dispute 9
notice within five days of the initial communication. These 10
alleged violations do not conflict with any provisions of 11
the Bankruptcy Code. 10
12
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

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Ocwen challenges several of Garfield’s other FDCPA 1
claims on a somewhat perverse ground. These are Garfield’s 2
claims under subsections 1692e, 1692e(2), 1692e(5), 3
1692e(8), 1692e(10), 1692f, and 1692f(1), all of which 4
regulate collection of a debt. Subsection 1692e, for 5
example, prohibits use of “any false, deceptive, or 6
misleading representation or means in connection with the 7
collection of any debt.” Ocwen contends that these 8
provisions conflict with the Bankruptcy Code because, by 9
regulating how to collect a debt, they imply that it can 10
collect the discharged debt, an action that the discharge 11
injunction prohibits. But, as Garfield responds, Ocwen can 12
avoid violating both the cited provisions and the Bankruptcy 13
Code simply by not attempting to collect the discharged 14
debt. And once Ocwen tries to collect the discharged debt, 15
it risks violation of both the cited provisions and the 16
Bankruptcy Code. Either way, there is no conflict. 17
In sum, none of Garfield’s individual FDCPA claims 18
conflicts with the discharge injunction under the Bankruptcy 19
Code. 20
III. Piecemeal Litigation 21
The District Court ruled that, even if some of 22
Garfield’s claims do not pose a conflict with the discharge 23
16

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injunction, the Court should dismiss them and require 1
Garfield to bring them in the Bankruptcy Court. The District 2
Court relied on the “clear federal policy . . . [of] 3
avoidance of piecemeal adjudication,” Joint App’x at 39 4
(alteration in original), citing Colorado River Water 5
Conservation District v. United States, 424 U.S. 800, 819 6
(1976). That decision created a limited abstention doctrine 7
in the context of ongoing, parallel state proceedings, which 8
do not exist here. See id. at 817-18. 9
We do not rule out the unlikely possibility that in 10
adjudicating a debtor’s FDCPA claims, a district court might 11
consider it useful to stay its proceedings to permit the 12
plaintiff to seek clarification from a bankruptcy court as 13
to the proper interpretation of some aspect of that court’s 14
rulings, including the discharge injunction. But the remote 15
possibility of a need for such clarification provides no 16
basis for routing all FDCPA claims exclusively into the 17
bankruptcy court. 18
Conclusion 19
The judgment of the District Court is reversed, and the 20
case is remanded with instruction to reinstate Garfield’s 21
FDCPA claims against Ocwen. 22
17

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