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                                                                   [DO NOT PUBLISH]

                 IN THE UNITED STATES COURT OF APPEALS

                          FOR THE ELEVENTH CIRCUIT
                            ________________________

                                   No. 13-13538
                             ________________________

                        D.C. Docket No. 8:12-cv-00731-SDM,
                           Bkcy No. 8:08-bk-20150-CPM


V. JOHN BROOK, as Chapter 7 Trustee of the Estate
of Claudia Acosta-Garriga,

                                                                    Plaintiff - Appellant,


                                          versus


CHASE BANK USA, N.A.,

                                                                   Defendant - Appellee.
                             ________________________

                     Appeal from the United States District Court
                         for the Middle District of Florida
                           ________________________

                                     (May 14, 2014)

Before WILSON and JORDAN, Circuit Judges, and ROTHSTEIN, * District
Judge.


       *
        Honorable Barbara Jacobs Rothstein, United States District Judge for the District of
Columbia, sitting by designation.
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PER CURIAM:

      The question in this case is whether the bankruptcy court abused its

discretion when it declined to set off statutory damages and attorney’s fees

awarded under the Florida Consumer Collection Practices Act (hereinafter, “the

FCCPA”) against a pre-petition debt discharged in bankruptcy. Chase Bank

(USA), N.A. (hereinafter, “Chase”) appealed from the bankruptcy court’s ruling

and the district court reversed. Because we conclude that the bankruptcy court did

not abuse its discretion in denying the set off, we reverse the district court and

remand.

      Debtor Claudia Acosta-Garriga filed a bankruptcy petition for Chapter 7

protection on December 18, 2008. Chase held a pre-petition claim against Ms.

Acosta-Garriga in the amount of approximately $30,000 for outstanding debt on

two Chase-issued credit cards. Chase did not file a proof of claim and the credit

card debt was ultimately discharged through the bankruptcy. In an adversary

proceeding brought by the Chapter 7 Trustee for the estate of Claudia Acosta-

Garriga (hereinafter, “the Trustee”), the bankruptcy judge found that Chase, while

attempting to collect the credit card debt, violated Sections 559.72(7) and

559.72(18) of the FCCPA. Incorporating a ruling from another adversary

proceeding, Meininger v. Chase (In re Gutshall), 8:10-ap-977, Doc. 52 (Bankr.




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M.D. Fla. July 24, 2011), the bankruptcy court awarded the Trustee the maximum

statutory damages of $1,000 and statutorily-mandated attorney’s fees.

      The bankruptcy court denied Chase’s request to set off the FCCPA award

against Chase’s pre-petition claim against Ms. Acosta-Garriga (i.e., the

approximately $30,000 in credit card debt). Relying on a case from the former

Fifth Circuit, Newton v. Beneficial Finance Company of New Orleans, 

(5th Cir. 1977), the bankruptcy court concluded that set off is not available in

this case because the FCCPA is a penal statute and, in the bankruptcy court’s view,

an award under a penal statute cannot be set off against a debt discharged in

bankruptcy. The bankruptcy court also determined that set off is not available here

because, according to the bankruptcy court, the FCCPA award and the credit card

debt did not satisfy the mutuality requirement for set off under Florida law. Lastly,

the bankruptcy court, employing its discretion, concluded that even if Chase had

the right to set off its FCCPA obligation against the discharged credit card debt

under Florida law, the equities weighed against set off.

      While not entirely clear, it appears that the district court reviewed the

bankruptcy court’s decision de novo. The district court rejected the bankruptcy

court’s reliance on Newton, stating that Newton has little precedential value, and

further rejected the bankruptcy court’s determination that mutuality did not exist

between Chase’s FCCPA obligation and Ms. Acosta-Garriga’s debt. Instead, the


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district court noted Florida’s preference for the entry of a single judgment and

concluded that Florida law requires set off. The district court also rejected the

bankruptcy court’s conclusion that it would be inequitable to allow Chase to set off

its obligation against the discharged debt. Accordingly, the district court reversed.

      In the bankruptcy context, this Court sits as a second court of review and

examines independently the factual and legal determinations of the bankruptcy

court. In re Optical Techs., Inc., 

, 1299–1300 (11th Cir. 2005). The

right to set off pre-petition mutual debts is preserved by Section 553 of the

Bankruptcy Code. In re Prudential of Florida Leasing, Inc., 

, 1297

(11th Cir. 2007); 11 U.S.C. § 553. Set off under Section 553 is the “right to cancel

out mutual debts against one another in full or in part ... to avoid ‘the absurdity of

making A pay B when B owes A.’” In re Patterson, 

, 508–09 (11th

Cir. 1992) (quoting Studley v. Boylston Nat’l Bank, 

, 528 (1913)).

However, the right to set off is not absolute. 

Whether to allow set off is

a decision that lies within the sound discretion of the bankruptcy court. In re

Kingsley, 

, 877(11th Cir. 2008); In re The Sec. Group 1980, 

, 1114 (11th Cir. 1996) (“[T]he right to set off under § 553 is merely

permissive and subject to the discretion of the bankruptcy court.”); In re Diplomat

Electric, Inc., 

, 346 (5th Cir. 1974) (the right of set off is governed by

the discretion of the court); Meyer Medical Physicians Group, Ltd. v. Health Care


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Service Corporation, 

, 1041 (7th Cir. 2004) (“The allowance of a

setoff is a decision that lies within the sound discretion of the bankruptcy court.”).

      Thus, we review the bankruptcy court’s refusal to reduce the FCCPA

damages and attorney’s fees award by the amount of the credit card debt owed by

Ms. Acosta-Garriga before her bankruptcy and discharge for abuse of discretion. In

reviewing for abuse of discretion, we recognize the existence of a “range of

possible conclusions the [bankruptcy court] may reach,” and “must affirm unless

we find that the…court had made a clear error of judgment, or has applied the

wrong legal standard.” In re 

(quoting Amlong & Amlong,

P.A. v. Denny’s, Inc., 

, 1238 (11th Cir. 2007)).

      We have also held that “[s]ubstantive law, usually state law, determines the

validity of the right [of set off]” under the Bankruptcy Code. In re 

; see also 5 Collier on Bankruptcy ¶ 553.04 (2004) (“[T]he Bankruptcy

Code does not create any setoff right; it merely preserves certain rights of setoff

that exist under applicable non-bankruptcy law.”). Here, the bankruptcy court

correctly notes that Florida law is silent as to whether an obligation incurred under

the FCCPA can be set off against a pre-petition debt. In reversing the bankruptcy

court, the district court interpreted Florida law’s silence to mean that such an

obligation must be set off against a pre-petition debt. The district court’s error is

that it fails to recognize that the right to set off debts is within the sound discretion


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of the bankruptcy court. As long as Florida law neither mandates nor prohibits set

off under the FCCPA—and it does not—it is entirely within the bankruptcy court’s

discretion whether to allow set off under the circumstances of the case.

      In declining to set off the FCCPA award against the credit card debt, the

bankruptcy court noted that the purpose of the FCCPA is to deter bad collection

practices, noting that “[t]he FCCPA…seeks to protect Florida consumers from

illegal and/or unscrupulous practices of debt collectors and other persons.”

Meininger v. Chase (In re Gutshall), 8:10-ap-977, Doc. 52 (Bankr. M.D. Fla. July

24, 2011) (citing Schauer v. General Motors Acceptance Corp., 

,

811-812 (Fla. 4th DCA 2002)). Thus, the bankruptcy court concluded, it would be

“inequitable to permit” Chase to set off its FCCPA obligation because it would

allow Chase “to take illegal action without consequence.” In the bankruptcy

court’s view, if a creditor can simply set off an award under the FCCPA against the

outstanding debt the creditor is attempting to collect, there would be little to no

incentive to comply with the FCCPA. The bankruptcy court was also concerned

that allowing a creditor to set off its FCCPA obligation would “reward” the

creditor’s illegal actions by giving it “a shortcut in the collection process.” Further,

the bankruptcy court noted that the Florida legislature included a mandatory

attorney’s fee provision in the FCCPA. The bankruptcy court determined that the

Florida legislature included the mandatory attorney’s fee provision in order to


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encourage private attorneys to bring FCCPA claims. In the bankruptcy court’s

view, if a creditor is allowed to set off its FCCPA obligation against the

outstanding debt, private attorneys would be discouraged from bringing FCCPA

claims and bad collection practices—the very practices the statute is meant to

curb—would never be aired in a court of law.

      As the bankruptcy court noted, the FCCPA was enacted as a means of

regulating the activities of consumer collection agencies within the state. LeBlanc

v. Unifund CCR Partners, 

, 1190 (11th Cir. 2010); 10A FLA.

JUR.2D CONSUMER § 138 (2010) (“The FCCPA is a laudable legislative attempt

to curb what the legislature evidently found to be a series of abuses in the area of

debtor-creditor relations.”). The bankruptcy court exercised its discretion to deny

set off here reasoning that the stated purpose of the FCCPA would be undermined

if set off was allowed. Such a determination is well within the sound discretion of

the court.

      We find that the bankruptcy court’s refusal to reduce the Trustee’s FCCPA

damages and attorney’s fees award by the amount of the credit card debt owed by

Ms. Acosta-Garriga before her bankruptcy and discharge was well within the

bankruptcy court’s reasoned and sound discretion. We therefore reverse the district

court’s decision and remand for a determination of the award of attorney’s fees.

      REVERSED AND REMANDED.


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