The Tide is Changing: E.D.N.Y. Sanctions Plaintiff's Counsel under FDCPA, Awards ~$37k in Fees/Costs to Debt Collector

In the not-too-distant past, FDCPA litigation was a no-loss game for plaintiff's counsel. That is no longer the case, thanks to a pioneering debt collection agency—ERC—that has taken a stand against hyper-technical and baseless FDCPA claims, and gone after plaintiffs' counsel who engage in such litigation schemes. Back in March, ERC won a sanctions motion against plaintiff and her counsel in Connecticut for a whopping $41,871.95. Yesterday, ERC won a motion for attorneys fees and costs, winning back nearly $37,000 in its attorney fees and costs.

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A call baiting claim we've all seen before

If your agency has seen FDCPA lawsuits and threats of suit in New York, you're likely not a stranger to the facts established here. Plaintiff engaged a "credit specialist" named Tawanda Fraizer, who called ERC on plaintiff's behalf. On the call, the credit specialist stated plaintiff wanted to dispute, and asked if the plaintiff needed to submit the dispute in writing. ERC accepted the oral dispute, but informed plaintiff she would also need to submit the dispute in writing.

Plaintiff then filed a lawsuit—which, according to the court, "[cited] statutes of dubious applicability"—with two FDCPA claims. First, that ERC didn't "affirmatively notify" the credit bureaus of her dispute. Second, that requesting plaintiff to send her dispute in writing was a false representation since she had a right to dispute orally. 

Stonewalling during litigation

During the litigation process, plaintiff's side stonewalled discovery. The credit specialist refused to comply with a subpoena, and plaintiff's counsel refused to allow ERC to depose the plaintiff. After ERC moved to extend the discovery period to depose plaintiff, plaintiff's counsel offered to voluntarily dismiss the case—which ERC rejected. 

The judge ordered plaintiff and her counsel to appear at a status conference to figure out what was going on. According to the court: 

At the evidentiary hearing, Plaintiff was surprised to learn that a federal case in her name was currently pending before this Court. Her testimony revealed that she had no involvement in bringing the case, other than signing an initial retainer whose true purpose she did not understand. She was not aware of any discovery requests, or of interrogatories which were answered in her name. Plaintiff also admitted that she had no reason to dispute her debt. She simply fell behind on payments and wanted her credit repaired. 

The credit specialist was deposed by ERC in another case, and the court found the nature of the scheme:

Frazier’s Eisner testimony, which this Court accepts in accordance with Fed. R. Evid. 804(b)(1), reveals her close working relationship with the Rephen Firm. Following a script, Frazier would call debt collectors and ask them leading questions to elicit violations of the FDCPA. She would dispute the account in every instance, irrespective of any justification to do so. Conversations containing purported violations were then funneled to the Rephen Firm.

The parties agreed to dismiss the case with prejudice if ERC was permitted to move for attorneys' fees. And that is the basis of the instant order.

Court grants attorney fees to ERC

While the court noted that FDCPA sanctions are typically applied to plaintiff's misbehavior, this case warrants "application of the statute consistent with reality" by sanctioning plaintiff's counsel.

According to the court, plaintiff's counsel—not plaintiff—brought this case. Plaintiff had no idea a lawsuit was being filed. The court states, "[plaintiff's] lawyers brought it without her participation, and in spite of the fact that she was not subjected to any abusive debt collection practices by debt collectors that the FDCPA was designed to eradicate."

The court then went to find that in a situation like this—where an attorney brings a case without the client's knowledge or involvement—sanctions under the FDCPA may be brought against the attorneys involved.

Below are a few more quotes from the court's decision which show that the Eastern District of New York is smartening up to these types of schemes:

[The Rephen Firm brought this case] with the purpose of extracting a monetary award from the Defendant, for a harm its client did not suffer.Such behavior is not merely “harassment.” It is, without making a “fortress out of the dictionary,” more than annoyance or unwelcome conduct. It is nothing less than an attempt to transform a consumer protection statute into an ATM machine.

(Internal citation omitted.)

The Rephen Firm’s strategy was to use burdensome litigation to induce a quick settlement. When Defendant refused to settle and instead pushed for discovery, the Rephen Firm offered to dismiss the case rather than produce its client for deposition. At no point did it show any interest—or, indeed, have any interest—in prosecuting this case to vindicate Plaintiff’s rights.

As if this wasn't enough, the court also went to find that the claims in the complaint are "entirely without legal support."

insideARM Perspective

Y'all, the tide is changing. Fighting back works.

Shelly Gensmer, VP of Legal and Compliance at ERC, states, "This has been a long-fought battle against plaintiff’s attorney and his firm. The team put in many long hours of research trying to piece this one together so we could effectively illustrate the behavior of this firm and bring it to the attention of the court. ERC is not at all surprised at the award given the facts of the case. Of course we are very pleased and hope this win is just one more to help tip the scales in the right direction for our industry."

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Want to find out which other plaintiff's counsel/firms have been called out by courts for questionable behabior? The iA Case Law Tracker can help you do that in less time than it takes to pour your morning cup of coffee.