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DITECH FINANCIAL: “Scally” Suit Precluded by Bankruptcy Discharge

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District Judge William Q. Hayes of the United States District
Court for the Southern District of California granted Defendants’
motion to dismiss the case captioned, KENDALL SCALLY, individually
and on behalf of all others similarly situated, Plaintiff, v.
DITECH FINANCIAL, LLC, Defendant, Case No. 16CV1992-WQH-WVG (S.D.

Plaintiff Kendall Scally is alleged to have incurred certain
financial obligations with HFC Company, LLC, whereby he received a
line of credit for his use within his personal life for everyday
purchases. Plaintiff ultimately had the debt discharged by way of
bankruptcy in the year 1998, while the debt was still in the
possession of the original creditor.

On September 30, 2016, Plaintiff filed the first amended class
action complaint against Defendant. Plaintiff alleges two causes
of action against Defendant on behalf of herself and other
similarly situated: (1) violations of the Fair Debt Collection
Practices Act (FDCPA); and (2) violations of the Rosenthal Fair
Debt Collections Practices Act (Rosenthal Act).

Defendant contends that the first amended complaint must be
dismissed for failure to state a claim. Defendant contends that
Plaintiff’s FDCPA and Rosenthal Act claims are precluded by the
Bankruptcy Code because they arise from Defendant’s alleged
attempts to collect a debt discharged in bankruptcy. Defendant
contends that Plaintiff fails to plead facts to support FDCPA or
Rosenthal Act violations “independent of an alleged bankruptcy
discharge injunction.”

Plaintiff contends that his claims are not precluded by the
Bankruptcy Code because Defendant was not the original creditor
and was not specifically enjoined by the bankruptcy court from
attempting to enforce the debt. Plaintiff contends that Defendant
is not subject to the bankruptcy court’s jurisdiction because it
is not the original creditor, was not served with the discharge
injunction, and was not involved with the bankruptcy proceeding.

In his Order dated January 26, 2017 available at
https://is.gd/B7omoz from Leagle.com, Judge Hayes concluded that
Plaintiff’s allegations are dependent on the discharged nature of
the debt and are properly addressed under the remedial scheme
provided for in the Bankruptcy Code.

Plaintiff shall have 30 days from the date the Order is issued to
file a motion for leave to file an amended complaint.

Kendall Scally, Plaintiff, represented by Babak Semnar, Esq. —
Bob@SemnarLawFirm.com — and Jared M. Hartman, Esq. —
Jared@SemnarLawFirm.com — SEMNAR & HARTMAN LLP

— and —

Asil A. Mashiri, Esq.
9750 Miramar Rd #214, San Diego, CA 92126, USA
Tel: (858)348-4938

Ditech Financial, LLC is represented by Mathew McKenna Wrenshall,
Esq. — mwrenshall@reedsmith.com — and — Perry Anthony
Napolitano, Esq. — pnapolito@reedsmith.com — REED SMITH LLP