BANKRUPTCY BULLETIN
Contributing Author:
David M. Tanabe, Messerli & Kramer P.A.
In Nelson v. Saint Catherine University, 2024 WL 2302334 (D. Minn. May 21, 2024), the United States District Court held that claims based on violations of the bankruptcy automatic stay under 11 U.S.C. § 362 and the Fair Debt Collections Practices Act (“FDCPA”) can be enforced concurrently.
In the matter, the university retained a law firm to file a collections action against the debtor in state district court. Thereafter, the debtor commenced a chapter 7 bankruptcy case. The debtor’s bankruptcy counsel emailed the law firm identifying the representation and explaining the bankruptcy automatic stay under § 362. For the collection action, the law firm sent correspondence to the district court, mentioning the automatic stay and a scheduling conflict, but making no attempt to cancel a hearing (“Correspondence”). The law firm also directly mailed the Correspondence to the debtor, without copying her attorney.
The debtor filed a complaint in the United States District Court against the university and law firm (collectively, the “defendants”) alleging the following three counts: violations of the automatic stay provision of § 362 against the defendants (“Count I”); violations of the FDCPA, 15 U.S.C. § 1692, et seq., against the law firm (“Count II”); and common law tort of intrusion upon seclusion against the defendants (“Count III”). The defendants filed motions to dismiss the complaint.
For Count I, the United States District Court found that it had subject matter jurisdiction pursuant to 28 U.S.C. §§ 1334(a) and 157 and previous judicial interpretations across multiple jurisdictions.
For Count II, the law firm contended that the plaintiff’s FDCPA claims under 15 U.S.C. §§ 1692d (harassment or abuse), 1692e (false or misleading representations), 1692e(5) (threat to take action), and 1692f (unfair practices) were precluded by Title 11 (the “Bankruptcy Code”) to the extent those claims were predicated on the alleged violations of the automatic stay provision under § 362. In rejecting the argument, the United States District Court concluded that, where actions alleged to violate the FDCPA also implicate the automatic stay, both statutory schemes can be enforced concurrently.
For Count II, the law firm further argued that the complaint failed to allege facts sufficient to state a claim under 15 U.S.C. § 1692c(a)(2), which prohibits a debt collector from communicating with a consumer in connection with the collection of a debt when the consumer is represented by an attorney with respect to such debt and the creditor has knowledge of, or can readily ascertain, the attorney’s name and address. In denying the motion to dismiss as to the claim, the United States District Court held that the plaintiff plausibly alleged both the law firm’s knowledge of her representation by counsel and that the Correspondence had an animating purpose related to debt collection.
Given that the federal claims remained viable, the United States District Court decided to exercise supplemental jurisdiction over the state law claim of intrusion upon seclusion. Further, the United States District Court denied the defendants’ request to refer the federal action to the bankruptcy court.
To read the full decision, click here.
Editors-in-Chief:
C.J. Harayda, Stinson LLP
David M. Tanabe, Messerli & Kramer P.A.
DISCLAIMER: This document does not constitute legal advice. Neither this document nor the ideas and assertions expressed herein reflect the official position of the Minnesota State Bar Association Bankruptcy Bulletin or its contributing attorneys or their clients. The information provided herein is for informational purposes only and should not be relied upon as a substitute for legal advice.