District Court (Cal.) Orders FCRA-Bankruptcy Reporting Case to Arbitration; Says Arbitration Clause Survives Bankruptcy

Delgado also opposes the enforcement of the arbitration provision on the basis his bankruptcy discharge rendered the arbitration provision unenforceable. (Doc. No. 25 at 4.) This assertion, however, is mistaken. A bankruptcy discharge does not render an arbitration agreement unenforceable. A bankruptcy discharge extinguishes the debtor’s obligation to pay, but the other contractual provisions remain enforceable.⁹See, e.g., Gadomski v. Wells Fargo Bank, N.A., 281 F.Supp.3d 1015 (E.D. Cal. 2018). The Ninth Circuit has stated that a bankruptcy discharge does not mean the whole contract has been merged into the judgment. Siegel v. Fed. Home Loan Mortg. Corp., 143 F.3d 525, 531 (9th Cir. 1998). A bankruptcy discharge “extinguishes only the personal liability of the debtor.” Johnson v. Home State Bank, 501 U.S. 78, 83 (1991). Further, post-bankruptcy discharge arbitration is appropriate where there would be no adverse effect on the underlying purposes of the bankruptcy code. See e.g. Bigelow v. Green Tree Fin. Servicing Corp., No. CV-99-6644, 2000 WL 33596476, at *6 (E.D. Cal. Nov. 30, 2000). Moreover, another district court has applied this reasoning to a post-bankruptcy claim brought under FCRA and found arbitration appropriate. See e.g. Mann v. Equifax Info. Servs., LLC, No. 12-CV-14097, 2013 WL 3814257, at *3 (E.D. Mich. July 22, 2013).   The facts of Mann are strikingly similar to this case. In Mann, the plaintiff brought claims under FCRA and state law after obtaining a bankruptcy discharge, alleging the defendants incorrectly listed debts on his credit report that were discharged. (Id. at *5.) In its analysis, the court distinguished Jernstad v. Green Tree Servicing, LLC, No. 11 C7974, 2012 WL 8169889, at *1 (N.D. Ill.Aug. 2, 2012), which is relied on by Delgado. (Id. at *8-9.) The Court explained the plaintiff’s claims in Jernstad all arose from the bank’s attempt to collect on a discharged debt, unlike the claims brought under the FCRA and state law.¹⁰ (Id. at *8.) The court then analyzed, In re Eber, 687 F.3d 1123, 1125 (9th Cir. 2012), and concluded that the proper inquiry was whether compelling arbitration conflicts with the underlying purpose of the bankruptcy code. (Id.) In rejecting the plaintiff’s argument that arbitration would prevent him from obtaining the “fresh start” granted by the bankruptcy code, the court explained “the mere fact that Mann was granted a discharge of the debt owed to [the creditor] does not mean that the Arbitration Agreement … cannot be enforced with respect to their future disputes.” (Id.) (emphasis retained). The Court finds this reasoning persuasive.  Here, Delgado’s claims relate solely to CashCall’s alleged inaccurate reporting of a debt as “charged off,” rather than “discharged in bankruptcy,” and not CashCall’s attempts to collect a discharged debt. (Doc. No. 1.) Delgado’s argument that compelling arbitration conflicts with the bankruptcy code and prevents him from obtaining a fresh start is unsubstantiated by the facts presented. (Doc. No. 25 at 10-11.) Thus, the Court agrees with the Court’s reasoning in Mann that “simply enforcing a provision which defines the venue for resolving the instant dispute does not deprive [Delgado] of [a] ‘fresh start’ granted by the bankruptcy code.” (Id. at 9.)  The Court concludes that the Arbitration Provision remains enforceable despite Delgado’s bankruptcy discharge and CashCall may compel arbitration under the Federal Arbitration Act.