The opinion of the court was delivered by: Kennelly, District Judge.
MEMORANDUM OPINION AND ORDER
This case requires the Court to determine whether a chapter 13
debtor may bring a claim under the Fair Debt Collection Practices
Act based on a creditor's filing of an allegedly inflated proof
of claim. For the reasons explained below, we hold that the
debtor cannot attack the proof of claim under the FDCPA; she must
instead pursue, in the bankruptcy proceedings, the remedies
outlined in the Bankruptcy Code.
Facts & Procedural Background
In the fall of 1996, Anita Gray-Mapp bought $2,217.50 in used
furniture on credit from Heilig Meyers. In December 1997, before
paying off the furniture, Gray-Mapp filed for bankruptcy
protection under Chapter 13 of the Bankruptcy Code. On February
5, 1998, Heilig Meyers, through its attorneys Michael Sherman and
his law firm, Sherman & Sherman, filed a proof of claim in
Gray-Mapp's bankruptcy proceeding for a secured claim in the
amount of $2,556.18. Gray-Mapp did not object to the claim,
although it was more than $300 greater than the value of the
furniture when she originally purchased it, and the bankruptcy
court confirmed Gray-Mapp's Chapter 13 plan on February 12. The
plan did not specify the amounts of the claims; it simply
guaranteed that Gray-Mapp would pay secured and priority claims
at 100% and estimated that she would pay unsecured claims at 100%
Six months later, in August 1998, Gray-Mapp filed this lawsuit.
In her complaint, she alleges that Michael Sherman and S & S
filed an inflated proof of claim in her Chapter 13 proceeding.
Gray-Mapp alleges that under the Bankruptcy Code a claim
is secured only to the extent of the value of the collateral
(here, used furniture), that Sherman and S & S knew this, and
that they intentionally overvalued their client's secured claim
by claiming the entire balance due on the debt, including
interest, finance charges, taxes, and credit insurance. Gray-Mapp
claims that Sherman and S & S routinely inflate claims on behalf
of their clients and that this conduct violates the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692, et seq. She asserts
claims on her own behalf and on behalf of an as-yet-uncertified
class of plaintiffs.
Sherman and S & S have moved to dismiss Gray-Mapp's complaint
under Federal Rule of Civil Procedure 12(b)(6). Gray-Mapp asks
the Court to deny the motion to dismiss and moves for
certification of the proposed class of plaintiffs.
Defendants move to dismiss plaintiff's complaint on a number of
grounds, most of which are unpersuasive. For example, defendants
argue that Gray-Mapp lacks standing to bring this claim and that
the claim must be pursued, if at all, by the Chapter 13 trustee.
We reject this argument for the reasons explained in Einoder v.
Mount Greenwood Bank (In re Einoder), 55 B.R. 319, 323
(Bankr.N.D.Ill. 1985) (Chapter 13 trustee's essential role is to
review plans, advise the Court with respect to plans and act as a
disbursing agent under confirmed plans; trustee has neither the
resources nor the incentive to pursue avoidance litigation). It
would be unrealistic and impractical to expect the trustee to
litigate a fraud claim based on the proof of claim.
Additionally, Michael Sherman argues that he cannot be held
personally or individually liable and should therefore be
dismissed from the case. At this stage of the game, the Court
cannot say that Sherman cannot be held personally liable.
Gray-Mapp alleges that he prepared and signed the proof of claim
and that he is the sole attorney in his law firm, which
specializes in debt collection. These facts may be enough to show
that Sherman was intimately involved with the unlawful collection
practices of his firm, and that may be enough to hold him
personally accountable for those unlawful practices. See Pettit
v. Retrieval Masters Creditors Bureau, Inc., 42 F. Supp.2d 797,
804-05 (N.D.Ill. 1999).
Defendants also argue that the claim is barred by Illinois'
litigation privilege and under the doctrine of res judicata. We
reject these arguments as well. The litigation privilege, a
creation of Illinois state law, cannot bar Gray-Mapp's claim
under the FDCPA. See Steffes v. Stepan Co., 144 F.3d 1070, 1074
(7th Cir. 1998) ("A state absolute litigation privilege
purporting to confer immunity from suit cannot defeat a federal
cause of action.") (citing Kimes v. Stone, 84 F.3d 1121, 1127
(9th Cir. 1996); Martinez v. California, 444 U.S. 277, 284 n.
8, 100 S.Ct. 553, 62 L.Ed.2d 481 (1980); Scheib v. Grant,
22 F.3d 149 (7th Cir. 1994)). Nor does res judicata bar Gray-Mapp's
claim, because the claim asserted here was neither raised nor
litigated in the bankruptcy court. Gray-Mapp's confirmed Chapter
13 plan does not value S & S's (really Heilig Meyers') claim; the
plan simply calls for 100% payment of the secured and unsecured
The real question presented by defendants' motion is whether we
should force Gray-Mapp to attack defendants' proof of claim in
the bankruptcy court, not because she lacks standing or because
her claim is barred by some technicality, but because the
Bankruptcy Code provides the exclusive remedy for attacking false
or inflated proofs of claim. Two cases are particularly
instructive here: Holloway v. Household Automotive Finance
Corp., 227 B.R. 501 (N.D.Ill. 1998) (Castillo, J.), and Baldwin
v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., No.
98 C 4280, 1999 WL 284788 (N.D.Ill. 1999) (Coar, J.).
The facts in both cases are largely the same as the facts in
this case. Both involve a Chapter 13 debtor whose confirmed plan
provided for payment of 100% of secured claims without actually
specifying the amounts of the allowed claims. Both involve an
attack on an allegedly inflated proof of claim to which the
debtor filed no objection. In Holloway, the defendant filed a
proof of claim for a secured claim in an amount that exceeded the
value of the collateral (a car); the debtor never objected to the
claim. Instead, the debtor filed an adversary proceeding in the
bankruptcy court on behalf of herself and others similarly
situated, alleging that the defendant filed inflated proofs of
claim that intentionally misrepresented the value of its
collateral. The bankruptcy court dismissed the complaint because
it lacked jurisdiction to hear class actions. The debtor then
filed her putative class action in the district court, alleging
that the defendant violated 11 U.S.C. § 105 and the Illinois
Consumer Fraud and Deceptive Practices Act by filing the inflated
proofs of claim in the various plaintiffs' Chapter 13
proceedings. Judge Castillo dismissed the complaint because the
debtors' claims "depend solely upon, and thus are intricately
related to, alleged violations of the Bankruptcy Code" — namely
violations of 11 U.S.C. § 506, which allows secured claims only
to the extent of the value of the collateral. 227 B.R. at 508.
Thus, Judge Castillo held, the Bankruptcy Code, which "provides a
comprehensive scheme reflecting a `balance, completeness and
structural integrity that suggests remedial exclusivity,'"
preempted any claim of fraud or deceptive practices predicated on
state law. Id. at 507-08 (quoting In re Shape, Inc., 135 B.R. 707,
708 (Bankr. D.Me. 1992); Periera v. Chapman, 92 B.R. 903,
908 (C.D.Cal. 1988)). In short, the court concluded, the debtor
could attack the proof of claim only in bankruptcy court and only
by using the remedies provided in the Bankruptcy Code.
In Baldwin, the debtor (like Gray-Mapp) opted to attack an
allegedly inflated proof of claim in a separate suit in the
district court, rather than pursuing an objection or other
remedies in the bankruptcy proceedings. Unlike Holloway, Baldwin
alleged a violation of federal, not state, law — namely the
FDCPA. In ruling on defendant's motion to dismiss, Judge Coar
analyzed in detail the language and purposes of the FDCPA and the
Bankruptcy Code and noted the conflict between, on the one hand,
the desire "to adjudicate and conciliate all competing claims to
a debtor's property in one forum and one proceeding" — which is
the central purpose of the Bankruptcy Code — and, on the other
hand, allowing debtors to bypass the Bankruptcy Code's objection
process in favor of pursuing a claim under FDCPA. 1999 WL 284788,
at *5. Judge Coar reconciled the conflict by deciding that the
FDCPA, like the Consumer Credit Protection Act, is designed to
protect debtors from having to file bankruptcy and therefore
applies before a debtor files for bankruptcy protection. But
the FDCPA does not apply to claims arising out of the bankruptcy
itself; once the debtor is in the bankruptcy court, the debtor's
remedies are limited to those provided for in the Bankruptcy
Code. Id. at *4. Thus, Judge Coar concluded, an FDCPA claim
cannot be premised on proofs of claim filed during the bankruptcy
proceeding. Id. at *6.
The Court finds these cases persuasive. The statutory framework
governing bankruptcy proceedings gives Gray-Mapp a means to
challenge the proof of claim and to obtain relief from the
overvaluation of the collateral, at least with respect to the
claims she asserts on her own behalf. Nothing in either the
Bankruptcy Code or the FDCPA suggests that a debtor should be
permitted to bypass the procedural safeguards in the Code in
favor of asserting potentially more lucrative claims under the
FDCPA. And ...