ERC Wins Sanctions Against Plaintiff and Plaintiff's Counsel, Court Awards Debt Collector its Defense Costs and Fees

Yesterday, ERC secured a tremendous win in an FDCPA lawsuit—the District of Connecticut sanctioned plaintiff and her counsel for continuing to pursue a claim even though it was clear the claim is meritless. Overall, the court awarded ERC $41,871.95 in attorneys' fees and costs.

The Facts

In Cobb v. ERC, No. 3:17-cv-01629 (D. Conn. Mar. 10, 2020), plaintiff filed a lawsuit claiming that ERC failed to identify its true name—Enhanced Recovery Company, LLC—in debt collection communications, and thus violated the FDCPA. Prior to filing an answer, ERC reached out to plaintiff's counsel with evidence showing that ERC is a registered trade name under which the company is licensed to collect consumer debt in Connecticut. In this communication, ERC also stated that if the matter is not voluntarily dismissed, "ERC will litigate and entertain filing for sanctions due to the continuance of the matter knowing that your allegations lack merit." 

Lo and behold, the claim was not dismissed. ERC filed its answer and the litigation continued. Plaintiff's counsel engaged in several interesting tactics, including:

• Attempting to get ERC to stipulate in its Rule26(f) report that it has not filed a trade name certificate in Connecticut;
• Stating that "early settlement should be advisable" since ERC started using its full name in collection communications, despite a very well-known legal doctrine that prohibits evidence of subsequent remedial measures taken after the lawsuit was filed. 
• Sending to ERC an out-of-state court decision that was not on-point, when Connecticut's rules regarding using trade names are different. ERC sent to plaintiff a decision from that same jurisdiction showing that plaintiff's claim is meritless.
• Sending an undated notice of deposition to an ERC representative. 

The sequence of attempted settlement negotiations was a roller coaster ride as well. At first, plaintiff's counsel demanded $5,000. Prior to a court-mandated settlement conference, plaintiff's counsel threatened to increase the demand, only to later lower it. When ERC refused to settle, plaintiff's counsel stated she did not "understand why [ERC] continues to fight this," only to later lower the demand to $1,000 plus fees and costs. 

Ultimately, ERC filed a motion for summary judgment on the case. In her opposition to the motion, plaintiff's counsel "demanded that ERC's counsel confirm with ERC's new CEO whether he had any interest in settling the case." 

The court granted summary judgment in favor of ERC. In its decision, the court states:

The FDCPA protects consumers from unscrupulous debt collectors; the statute does not create an avenue to harass legitimate creditors with litigation through superficial interpretation of its provisions.

Order Granting Sanctions Against Plaintiff's Counsel

To say the court was not impressed is an understatement. Here are some nuggets from the opinion:

• "[I]t is clear that Plaintiff has at best misconstrued and at worst intentionally misinterpreted 15 U.S.C. § 1692e(14)."
• "This is important because it highlights that this case should never have been brought in the first place. A modicum of research would have revealed that this case was baseless, and as noted in the Court’s ruling on summary judgment, 'Plaintiff allege[d] no instances of misleading conduct or misrepresentations' and 'fail[ed] to cite a single case in which a court allowed a § 1692e(14) claim to proceed against an entity for use of an initialism that the entity uses as a registered trade name in that jurisdiction.'"
• "Everything after ERC notified Plaintiff that her claim was baseless was unnecessary and ERC is entitled to attorneys’ fees from that point forward."
• "Those other actions include Plaintiff’s insistence, by the Court’s count not fewer than 15 times, that Defendant pay damages and mounting legal fees to settle the case despite the fact that Defendant presented factual and legal authority soundly proving it was baseless and Plaintiff’s counsel failed to present facts or law to refute it. Bringing a case under the mistaken belief that it has merit is one
  thing. Maintaining a case after learning it is does not have merit is another. Demanding increasing legal fees for a known unmeritorious case is quite another."
• "Plaintiff’s counsel sent an undated, improper deposition notice to Richard Landoll for a deposition to occur the day after the settlement conference, in what appears to be a threat to run up litigation costs for ERC."

And, the biggest gem of them all:

In sum, Plaintiff’s counsel’s communications display an entitlement mentality or at least a firm expectation that ERC should and would simply settle and pay the maximum damages allowed under the statute even though Plaintiff’s claim was baseless. This leads the court to conclude that this case was brought for an improper purpose, to induce ERC to settle rather than to redress wrongs suffered by Plaintiff.

(Emphasis added.)

Overall, the court awarded ERC $40,213.62 in attorneys' fees and $1,658.33 in costs.

insideARM Perspective

insideARM spoke with Shelly Gensmer, Vice President of Legal and Compliance, to get her thoughts on this victory. Gensmer said:

Filing sanctions and going after fees and costs is always a tough gamble; one which ERC didn’t approach without careful consideration. Plaintiff’s counsel was made aware time and again that the case had no merit. Instead of backing down, counsel chose to double down. We’re very pleased and believe the court made the appropriate decision here.

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Needless to say, this case provides great support for debt collectors who choose to seek sanctions against other plaintiffs' counsel who continue pushing meritless cases. For those of us in the industry, at least a few names come to mind.

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