Nelson v. St. Catherine University

Background

Amanda Marie Nelson alleged that the defendants pursued a Dakota County District Court collection action concerning a debt incurred while she was a student at St. Catherine University. Nelson filed a Chapter 7 bankruptcy case on May 12, 2023. She alleged that the University received notice of the bankruptcy, but that the defendants did not dismiss or pause the collection action, ask the state court to cancel a pending bench warrant, or tell that court about the bankruptcy.

The state court issued a bench warrant after Nelson failed to appear or complete a financial disclosure form. Nelson was arrested, booked, and fingerprinted on May 31, 2023. She completed the form and was released about three hours later. The collection action was not stayed until Nelson’s counsel told the state court about the bankruptcy at a July 17, 2023 hearing. Nelson alleged that the delay caused more than $1,000 in legal fees and costs and caused emotional distress, fear, anxiety, and loss of sleep.

Nelson’s amended complaint asserted three counts: violations of the Bankruptcy Code’s automatic-stay provision against both defendants; violations of the Fair Debt Collection Practices Act (FDCPA) against Quigley Law Firm; and the state-law tort of intrusion upon seclusion against both defendants.

Motions to Dismiss

Quigley Law Firm and St. Catherine University moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that the federal court lacked subject-matter jurisdiction over the automatic-stay claim. They alternatively asked the court to refer the matter to the bankruptcy court. Quigley also argued that the Bankruptcy Code provided the exclusive remedy for the alleged automatic-stay violations and that Nelson had not adequately pleaded an FDCPA claim based on communications with her.

Automatic-Stay Claim and Jurisdiction

The court held that it had subject-matter jurisdiction to hear an action alleging a violation of the Bankruptcy Code’s automatic stay. It relied on the language of 28 U.S.C. § 1334(a), the Supreme Court’s decision in Stern v. Marshall, and authority from several federal courts of appeals and courts within the District of Minnesota. The court rejected the defendants’ reliance on earlier District of Minnesota decisions reaching a different jurisdictional conclusion.

The court did not decide whether the alleged automatic-stay violation occurred or whether either defendant was liable. It decided only that the federal district court had authority to entertain that claim at this stage.

FDCPA Claims Based on the Automatic Stay

The court declined to dismiss the FDCPA claims based on the alleged automatic-stay violation. It concluded that the Bankruptcy Code did not clearly repeal or replace the FDCPA, either expressly or by implication. The court also found no direct and irreconcilable conflict between the statutes because debt collectors could comply with both laws, which impose different requirements and provide different remedies.

The court therefore denied Quigley Law Firm’s request to dismiss the FDCPA claims predicated on the alleged automatic-stay violation.

FDCPA Claim Based on Communication

Nelson alleged that Quigley sent a July 12, 2023 email about the state collection action directly to her even though Quigley knew she was represented by bankruptcy counsel. The court found that Nelson plausibly alleged Quigley knew about her legal representation because Quigley had been added to the bankruptcy matter and had received an email from her bankruptcy counsel before the challenged communication.

The court also found that Nelson plausibly alleged that the email was a communication connected with debt collection. Applying the Eighth Circuit’s “animating purpose” test, the court reasoned that scheduling and maintaining a hearing in the debt collection action could make collection more likely to succeed. The court accordingly denied Quigley’s motion to dismiss the FDCPA communication claim.

Referral to Bankruptcy Court and State Claim

The defendants alternatively asked the court to refer the matter to the bankruptcy court. The court declined to do so. It found that the case included both a bankruptcy claim and non-bankruptcy federal and state claims, that Nelson objected to referral, that she demanded a jury trial, and that retaining the case better served efficiency and reduced delay.

Because the federal claims survived the motions to dismiss, the court exercised supplemental jurisdiction—authority to hear related state-law claims—over Nelson’s intrusion-upon-seclusion claim.

Disposition

The court ordered that Quigley Law Firm, PLLC’s motion to dismiss was DENIED and St. Catherine University’s motion to dismiss was DENIED. The order resolved only the pleading-stage motions; it did not determine the ultimate merits or liability of the claims.