The Bankruptcy Code is not an absolute bar to suits under the Fair Debt Collection Practices Act, the U.S. Court of Appeals for the Third Circuit held in a precedential decision Monday.

Though other federal circuits, like the Second and Ninth, have favored a broad preclusive effect, the court held there is no bar unless there is a direct conflict between the laws, making it impossible to comply with both.

“When, as here, FDCPA claims arise from communications a debt collector sends a bankruptcy debtor in a pending bankruptcy proceeding, and the communications are alleged to violate the Bankruptcy Code or Rules, there is no categorical preclusion of the FDCPA claims,” the Third Circuit said in Simon v. FIA Card Services.

“The proper inquiry … is whether the FDCPA claim raises a direct conflict between the Code or Rules and the FDCPA, or whether both can be enforced,” they said in reversing dismissal of some FDCPA claims and affirming dismissal of others.

The ruling allows an FDCPA suit to go forward against a New York firm, Weinstein, Pinson & Riley, over a letter and notice it sent to bankruptcy counsel for debtors Robert Maxwell Simon and Stacey Simon of Basking Ridge.

The Simons filed a Chapter 7 petition on Dec. 30, 2010, listing credit card debt owed on several Bank of America credit cards, among other liabilities.

On Jan. 28, 2011, the Weinstein firm sent letters on behalf of FIA Card Services, Bank of America’s credit card arm, about an alleged $32,000 debt owed by the Simons.

The letters, addressed to their bankruptcy attorney Andy Winchell, said FIA was contemplating an adversary action, warned the debt might not be discharged in the bankruptcy and offered to forgo suit in exchange for a stipulation to the full sum or a one-time, $23,200 cash settlement.

They further stated that a Rule 2004 examination to gather information for filing an adversary proceeding had been scheduled for Feb. 28, 2011.

But they said the Weinstein firm was open to discussing whether the matter could be resolved without the examination and/or rescheduling it for an informal telephone conference.

The bottom of one letter had additional information about how to challenge the debt in the event the letter was governed by the FDCPA.

Attached was a notice of the Rule 2004 examination that gave the time and place and directed the Simons to bring a variety of documents, including bank records, payroll statements, tax returns and records reflecting expenditures, assets and net worth.

The Weinstein firm certified that it mailed copies of the letter and notice to Winchell and his clients but the Simons denied receipt.

They convinced U.S. Bankruptcy Judge Kathryn Ferguson to quash the notice on the basis that it was equivalent to a subpoena and thus had to comply with Federal Rule of Bankruptcy Procedure 9016 and Federal Rule of Civil Procedure 45, as the Weinstein firm conceded at oral argument.

The Simons then tried to bring their FDCPA suit against the firm and FIA in the Bankruptcy Court, but Ferguson found she lacked subject matter jurisdiction, so they refiled it in THE district court in Newark.

U.S. District Judge Joel Pisano dismissed the case in its entirety on July 16, 2012, holding it was precluded by the Bankruptcy Code.

The portions reinstated on appeal concern the violation of the Federal Rule 45 requirements, incorporated by Bankruptcy Rule 9016, that subpoenas be served on the individuals being subpoenaed, not just their lawyers, and include language from Rule 45 that informs recipients of their duties in responding and how to protect themselves.

The failure to comply with the subpoena rules allegedly violated the FDCPA.

However, the Third Circuit affirmed dismissal of FDCPA claims over the absence of a “mini-Miranda” warning, as precluded by the Bankruptcy Code.

The warning, mandated in initial communications, states the sender is a debt collector trying to collect a debt and any information obtained will be used for that purpose.

The court said inclusion of the warning would run afoul of the automatic stay, which forbids any act to collect or recover a prebankruptcy debt.

The panel also affirmed dismissal of claims over setting the Rule 2004 examination in New York and not specifying how the meeting would be recorded, not because of preclusion but because those aspects did not violate Rule 45.

The opinion was written by U.S. District Judge Lee Rosenthal of the Southern District of Texas, sitting by designation, and joined by U.S. Circuit Judges Marjorie Rendell and Joseph Greenaway Jr.

Winchell, a Summit solo, says the case makes it clear that just because two federal statutes overlap, it doesn’t mean one ceases to apply.

Susan Power Johnston of the Weinstein firm declines comment.