Bankruptcy Code Doesn’t Preclude Unfair Debt Collection Claims

Nov. 27, 2020, 9:36 PM

A Southern California man who was served with a notice of default for a debt that was already paid will get another chance to pursue his Fair Debt Collection Practices Act claims against the law firm that sent him communications on behalf of his homeowners’ association, the Ninth Circuit ruled.

Vincent Manikan, who fell behind on his dues to the Pacific Ridge Neighborhood Homeowners’ Association in San Diego filed for Chapter 13 bankruptcy after foreclosure proceedings were initiated due to the lien. Despite the debt being paid off in the bankruptcy and an order of discharge entered in his case, Manikan was once again served with a notice of default recorded by law firm Peters & Freedman LLP.

P&F hired a process server who entered Manikan’s backyard without permission by breaking a closed gate and banging on windows. Police arrived and the process server served Manikan with the original notice of default, prompting the lawsuit.

The district court ruled against Manikan, saying the FDCPA claims were precluded under Walls v. Wells Fargo Bank NA because “they are premised upon violations of the bankruptcy post-discharge injunction.”

The U.S. Court of Appeals for the Ninth Circuit reversed that decision Nov. 25, saying the claims were not precluded by the Bankruptcy Code because the debt was fully satisfied through a Chapter 13 plan before the discharge was entered.

The appellate court ruled that Walls v. Well Fargo, which held that a debtor is precluded from bringing a FDCPA claim based on a violation of a bankruptcy discharge order, didn’t preclude Manikan’s case because he didn’t “seek to remedy a violation of his discharge order. Instead, he alleges P&F acted unlawfully because it tried to collect a debt that he fully paid nearly two years before his discharge,” Judge Danielle J. Hunsaker wrote.

Finding that Manikan’s FDCPA claims are based on “the wholly independent ground of full payment,” the appeals court concluded that they are not premised on a violation of the discharge order and are therefore not precluded. The district court’s grant of summary judgment was reversed and the case was remanded for further proceedings.

Judges Kim McLane Wardlaw and Deborah L. Cook, the latter sitting on designation from the Sixth Circuit, joined in the decision.

Manikan is represented by BLC Law Center APC. P&F is represented by Solomon Ward Seidenwurm & Smith LLP.

The case is Manikan v. Peters & Freedman LLP, 9th Cir., No. 19-55393, 11/25/20.

To contact the reporter on this story: David McAfee in Los Angeles at dmcAfee@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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