Civil Rights
Block on Trump's Asylum Ban Upheld by Supreme Court
The Third Circuit recently decided a case that now results in a circuit split with two circuits on each side of the issue. With so many circuit splits heading to the Supreme Court, this case has us wondering whether it will be one of them.
Stacey Helene and Robert Maxwell Simon ("the Simons") filed for the protections of Chapter 7 of the Bankruptcy Code. One of their creditors, FIA, was represented by Weinstein & Riley, who sent a letter to the Simons through their bankruptcy counsel. Though the letter did not make an explicit demand for payment, it did state that FIA would consider adversary proceedings, among other things.
The Simons filed Fair Debt Collection Practices Act ("FDCPA") claims in bankruptcy court, but the court dismissed them without prejudice for lack of jurisdiction. Next, the Simons filed FDCPA claims in district court, which the court dismissed because the "FDCPA claims [were] precluded by the Bankruptcy Code."
On appeal, the Third Circuit had to determine "whether a debt collector's letter ... sent in a pending bankruptcy in contemplation of an adversary proceeding to challenge dischargeability, can be the basis for liability under the FDCPA." Because it was an issue of first impression, the Third Circuit reviewed other circuit decisions in its analysis.
The court noted that the Second Circuit and Ninth Circuit have "taken a broad approach" holding that communications that arise within the context of a bankruptcy proceeding cannot form the basis for FDCPA claims. On the other hand, the Seventh Circuit's analysis revolved around the issue of repeal, stating "[w]hen two federal statutes address the same subject in different ways, the right question is whether one implicitly repeals the other."
The Third Circuit found the Seventh Circuit's analysis more convincing, and held that within the context of a bankruptcy proceeding, FDCPA claims, regardless of whether the communications violated bankruptcy rules or not, are not precluded. The only situation where preclusion may be appropriate is where there is a direct conflict between the two laws.
With four circuits not taking a position on this now equally-divided issue, it will be interesting to see whether FIA will petition for cert.
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