OSURE BROWN V. TRANSWORLD SYSTEMS, INC., ET AL, No. 22-35244 (9th Cir. 2023)
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From 2003 to 2007, Plaintiff took out ten student loans to attend college in Washington state. Defendants National Collegiate Student Loan Trusts (collectively, “the Trusts”) ultimately purchased Plaintiff’s loans. The Trusts appointed Defendant U.S. Bank as their special servicer. The Trusts also hired Defendant Transworld Systems, Inc. (“Transworld”), to collect the defaulted loans, and hired Defendant Patenaude & Felix (“Patenaude”), a law firm specializing in debt collection, to represent them in debt collection actions. Several years after taking out the loans, Plaintiff filed for Chapter 13 bankruptcy relief.
The Ninth Circuit affirmed in part and reversed in part the district court’s dismissal for failure to state a claim, Plaintiff’s action alleging that Defendants’ attempts to collect debts that were discharged in bankruptcy violated the Fair Debt Collection Practices Act and the Bankruptcy Code. Affirming the dismissal of Plaintiff’s claims that were based on a violation of his bankruptcy discharge order, the panel reiterated that Walls v. Wells Fargo Bank, 276 F.3d 502 (9th Cir. 2002), precludes FDCPA claims and other claims based on violations of Bankruptcy Code Section 524. The panel reversed the district court’s dismissal, as barred by the one-year statute of limitations, of Plaintiff’s remaining FDCPA claim based on the theory that Defendants knowingly brought a meritless post-discharge debt collection lawsuit because they knew they could not prove ownership of Plaintiff’s debts. The panel concluded that Plaintiff sufficiently alleged one post-filing FDCPA violation in the filing of an affidavit that presented a new basis, not contained in the complaint, to show that Defendants owned the debts.
Court Description: Fair Debt Collection Practices Act / Bankruptcy Law. The panel affirmed in part and reversed in part the district court’s dismissal, for failure to state a claim, of an action brought by Osure Brown, a student loan borrower who had received a bankruptcy discharge, alleging that defendants’ attempts to collect debts that were discharged in bankruptcy violated the Fair Debt Collection Practices Act and the Bankruptcy Code.
Affirming the dismissal of Brown’s claims that were based on a violation of his bankruptcy discharge order, the panel reiterated that Walls v. Wells Fargo Bank, 276 F.3d 502 (9th Cir. 2002), precludes FDCPA claims and other claims based on violations of Bankruptcy Code § 524.
The panel reversed the district court’s dismissal, as barred by the one-year statute of limitations, of Brown’s remaining FDCPA claim based on the theory that defendants knowingly brought a meritless post-discharge debt collection lawsuit because they knew they could not prove ownership of Brown’s debts. Agreeing with other circuits, the panel held that certain litigation acts, including service and filing, can constitute distinct violations of the FDCPA that each trigger the statute of limitations. In determining which acts constitute independent violations, the court considers (1) the debt collector’s last opportunity to comply with the statute and (2) whether the date of the violation is easily ascertainable. The panel concluded that Brown sufficiently alleged one post-filing FDCPA violation in the filing of an affidavit that presented a new basis, not contained in the complaint, to show that defendants owned the debts. Disagreeing with the Tenth Circuit, the panel further held that when service occurs before the filing of a suit, filing constitutes an independent violation of the FDCPA.
Concurring in the judgment, Judge VanDyke agreed with the outcome and much of the reasoning of the majority opinion, but he wrote that the rule announced in Part III.B of the majority opinion—that when service occurs before the filing of a suit, filing constitutes an independent violation of the FDCPA—was an unnecessary conclusion and failed to anticipate the intricacies that future cases are bound to raise.
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