U.S. district court judge dismisses suit against loan servicer for trying to collect discharged debt

By Karen Kidd | Mar 8, 2018

TAMPA — A U.S. district court judge has dismissed a Florida man's complaint against a loan servicing company for trying to collect on a debt discharged through bankruptcy, saying he cited the wrong law in the wrong court.

Mark S. Campbell's claim against Seterus under the Florida Consumer Collection Protection Act (FCCPA) failed to invoke jurisdiction under the federal Class Action Fairness Act (CAFA), Judge Steven D. Merryday of the Tampa Division of U.S. District Court for Florida's Middle District said in an order handed down Feb. 15

The district court was not the place to decide the matter, "the bankruptcy court must decide in the first instance if Seterus violated the bankruptcy court's injunction," Judge Merryday said in his four-page order.

Merryday also declined Campbell's request to declare that Seterus violated the FCCPA and the bankruptcy court's injunction. He also ruled that "Campbell identifies no persuasive reason to exercise supplemental jurisdiction over the FCCPA claim," and dismissed that count without prejudice. 

In making those rulings, Judge Merryday granted Seterus's motion to dismiss Campbell's claim, doing so without prejudice.

Merryday's order is the latest development in Campbell's lawsuit filed against Seterus in August.

The case stems from Campbell filing for bankruptcy in 2013 in Florida's Middle District U.S. Bankruptcy Court, which issued a discharge, but Seterus attempted to collect on the debt in 2017, according to background information provided in Judge Merryday's order. Campbell sued under the FCCPA and asked the district court to sanction Seterus for violating the bankruptcy court's discharge, according to the order.

Campbell also asked the district court to declare Seterus in violation of the FCCPA and the bankruptcy court's injunction discharge, according to the order. Meanwhile, Seterus asked the district court to dismiss Campbell's claims, alleging failure to invoke the district court's jurisdiction and for failure to state a claim, according to the order.

Campbell's complaint against Seterus tries to use the FCCPA claim to invoke district court jurisdiction under the federal Class Action Fairness Act. The CAFA jurisdiction became more important in debt collection cases a couple of months before Campbell filed his case against Setereus. In June 2017 the U.S. Second Circuit Court of Appeal ruled that plaintiffs in allegedly unlawful debt collection cases must invoke CAFA jurisdiction if there is a "reasonable probability that plaintiffs’ damages totaled at least $5 million."

The flaw in Campbell's complaint is that FCCPA allows for plaintiffs to recover as little as $1,000 while class action limits are set at $500,000, but Campbell requested punitive damages, which Florida law limits to three times the amount of compensatory damages, Merryday said in his order. 

"Because Florida law prohibits a judgment greater than $2,004,000 in this instance, Campbell fails to invoke jurisdiction under CAFA," the order said.

Campbell's case also is flawed because the bankruptcy code provides "no private right to sue a creditor in the district court for allegedly violating a bankruptcy court's injunction," Merryday said in his order. "If a creditor violates the bankruptcy court’s injunction, the debtor must move for relief in the bankruptcy court rather than sue in the district court."

Trying to bypass the bankruptcy court by filing in district court amounts to Campbell having failed to state a claim, the order said.

Campbell also "identifies no persuasive reason for the district court to exercise supplemental jurisdiction in this circumstance," the order said.

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Seterus Inc. U.S. District Court for the Middle District of Florida Tampa Division

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