Appeals Court Overturns Ruling in Favor of Defendant in FDCPA Case

The Court of Appeals for the Ninth Circuit has overturned a lower court’s ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act by attempting to collect on a debt that had been paid off nearly two years earlier.

A copy of the ruling in the case of Manikan v. Peters & Freedman can be accessed by clicking here.

The plaintiff fell behind on dues that were owed to his homeownership association. The defendant initiated foreclosure proceedings based on the unpaid HOA debt, after which the plaintiff filed for bankruptcy protection. The plaintiff indicated his plan to pay off the debt in his bankruptcy filing, which was approved. The debt was paid to a separate collection agency, which notified the bankruptcy trustee that the debt had been paid in full. The plaintiff’s bankruptcy was ultimately discharged.

The defendant, however, hired a process server to re-serve the notice of default to the plaintiff. The plaintiff contacted the defendant and notified it that the debt had been paid. At first, the defendant said its records indicated the debt had not been paid, but after further review, it located a communication from the second collection agency that stated the debt had been paid in full.

The plaintiff sued, alleging the defendant violated the FDCPA by engaging in unfair collection practices because it was attempting to collect on a debt that had already been paid. A District Court judge granted the defendant’s motion for summary judgment, ruling that the plaintiff’s claim was precluded because the debt was discharged in a bankruptcy proceeding.

But, the Appeals Court noted in overturning the lower court’s decision, the bankruptcy proceeding had nothing to do with the defendant’s second attempt to collect on a debt, a debt that had been fully repaid.

“So, even if Manikan had never received a discharge in his bankruptcy case, he could still assert P&F acted unlawfully by attempting to collect a debt that he fully satisfied,” the Appeals Court wrote. “Manikan’s FDCPA claims are therefore premised on a wholly independent theory of relief.”

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