United States District Court, Southern District of New York
August 15, 2001
SARAH GOLDSTEIN, PLAINTIFF
HUTTON, INGRAM, YUZEK, GAINEN, CARROLL & BERTOLOTTI, DEFENDANT.
The opinion of the court was delivered by: Cedarbaum, J.
Sarah Goldstein commenced this purported class action against defendant
Hutton, Ingram, Yuzek, Gainen, Carrol & Bertolotti ("Hutton"), a New York
City law firm, for alleged violations of the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692 et seq. ("FDCPA"). In a prior
opinion, I denied Hutton's motion to dismiss, but stated that "[a]ll the
factual issues, including the conclusory allegation that Hutton is a debt
collector, are subject to reexamination after the completion of discovery
on a motion for summary judgment." Goldstein v. Hutton, Ingram, Yuzek,
Gainen, Carrol & Bertolloti, 39 F. Supp. 2 d 394, 396 (S.D.N.Y. 1999).
Hutton now moves for summary judgment pursuant to Fed.R.Civ.P. 56. For
the following reasons, Hutton's motion is granted.
The following facts are undisputed. Plaintiff Goldstein leased an
apartment at 415 East 64th Street in Manhattan from Stahl York Avenue Co.
("Stahl") from 1992 through 1998. Beginning in 1996, Goldstein and Stahl
had several disputes and engaged in periodic litigation stemming from
Goldstein's alleged violations of the lease and failure to pay rent.
Defendant Hutton represented Stahl in connection with these disputes.
In September 1997, Hutton served Goldstein with a notice to cure a
breach of the lease based on Goldstein's alleged unauthorized subletting
and altering of the apartment. Hutton then served a notice of termination
in October 1997. After the notice was served, Goldstein tendered payment
of rent for August, September and November. Stahl did not accept the rent
checks so as to avoid waiving its claim that the lease had been
On November 14, 1997, Stahl commenced a holdover proceeding in state
court to recover possession of the apartment. Goldstein was served with a
notice of petition, prepared by Hutton, that, inter alia, demanded
payment of $1,290.81 in back rent for August, September and October, and
payment of rent on an ongoing basis from November 1. In a court appearance
on January 6, 1998, at which Stahl was represented by a Hutton attorney,
the parties settled the dispute "without prejudice" based on Goldstein's
representation that no illegal subtenant resided in the apartment. The
issue of Goldstein's unpaid rent for August through November was not
resolved in the settlement.
On January 7, 1998, Goldstein was served with the three day notice at
issue in this case (the "Notice"). The Notice was prepared by Hutton, and
contained Hutton's name and return address at the bottom of the Notice
and on both the envelope in which the Notice was mailed and the certified
mail receipt. The Notice sought payment of the outstanding rent for
August 1997 through January 1998 and stated the following:
PLEASE TAKE NOTICE that you are hereby required to pay
Stahl York Avenue Co., landlord of the above premises,
the sum of $2,583.02 for rent of the premises [from
August 1997 through January 1998 at the rate of $430.27
You are required to pay within three days from the day
of service of this notice, or to give up possession of
the premises to the landlord. If you fail to pay or to
give up the premises, the landlord will commence
proceedings against you to recover possession
of the premises.*fn1
On January 15, 1998, Stahl commenced a summary eviction proceeding
against Goldstein. Goldstein filed her complaint in this action on
February 27, 1998. The summary eviction action was settled by stipulation
on April 1, 1998.
Over the one-year period from February 27, 1997 through February 27,
1998, Hutton issued, through a process server, 145 three day notices.
Hutton received approximately $5,000 in revenue from the issuance of the
three day notices, which constitutes .05% of Hutton's roughly $10,000,000
in revenue for that period.*fn2
Goldstein alleges that the Notice violates the FDCPA because (1) it
lacks a thirty day validation notice, in violation of
15 U.S.C. § 1692g; (2) it fails to disclose that Hutton was
attempting to collect a debt and that any information obtained would be
used for that purpose, in violation of 15 U.S.C. § 1692e(11); and (3)
it contains threats to take actions that could not legally be taken, in
violation of 15 U.S.C. § 1692e(5).
Hutton moves for summary judgment on the grounds that (1) the Notice
did not violate the FDCPA "given the entire context in which the parties'
communications took place", Pl. Br. at 11, and (2) it is not a "debt
collector" as defined by the statute.
Standard For Summary Judgment
A motion for summary judgment should be granted when "the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett,
477 U.S. 317, 322-23(1986). The judge's role in summary judgment is not
"to weigh the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249(1986). In deciding whether a
genuine issue exists, a court must "examine the evidence in the light
most favorable to the party opposing the motion, and resolve ambiguities
and draw reasonable inferences against the moving party." In re
Chateaugay Corp., 10 F.3d 944, 957 (2d Cir. 1993). Nonetheless, "Rule
56(c) mandates the entry of summary judgment . . . against a party who
fails to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that party will bear
the burden of proof at trial." Celotex, 477 U.S. at 322.
Application of the FDCPA to Hutton
The FDCPA "prohibits debt collectors from making false and misleading
and from engaging in various abusive and unfair
practices." Heintz v. Jenkins, 514 U.S. 291(1995);
15 U.S.C. § 1692d-f. It also requires that, within five days of the initial
communication with a consumer in connection with the collection of a
debt, a debt collector send the consumer a written notice containing the
amount of the debt, the creditor to whom the debt is owed, a statement
that unless the consumer disputes the validity of the debt within thirty
days, the debt collector will assume the debt is valid, and a statement
that if the consumer notifies the debt collector in writing within thirty
days that the debt is disputed, the debt collector will provide the
consumer with verification of the debt or a copy of the judgment against
the consumer. 15 U.S.C. § 1692g.
To defeat summary judgment, Goldstein must present evidence
establishing that Hutton is a debt collector under the statute. See,
e.g., White v. Simonson & Cohen P.C., 23 F. Supp.2d 273 (E.D.N.Y. 1998).
The FDCPA defines a "debt collector" as
any person who uses any instrumentality of interstate
commerce or the mails in any business the principal
purpose of which is the collection any debts, or who
regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or
15 U.S.C. § 1692a(6). The statute "applies to attorneys that
`regularly' engage in consumer-debt-collection activity, even when that
activity consists of litigation." Heintz v. Jenkins, 514 U.S. at 299. The
Second Circuit has held that three day notices qualify as debt collection
activity under the statute, and that attorneys who send such notices are
not exempt under 15 U.S.C. § 1692a(6)(D), which excludes from the
definition of debt collector those "serving or attempting to serve legal
process." Romea v. Heiberger & Associates, 163 F.3d 111, 116-19 (2d Cir.
1998) (affirming denial of attorney defendants' motion to dismiss).
Whether attorney defendants "regularly" collect consumer debt for
purposes of the FDCPA is determined on a case by case basis. Courts have
considered several factors in making that determination, including the
percentage of revenue generated by debt collection activities, the sheer
volume of debt collection activities, and whether defendants have an
ongoing attorney-client relationship with a collection agency. See,
e.g., White, 23 F. Supp.2d at 274 (E.D.N.Y. 1998); Von Schmidt v.
Kratter, 9 F. Supp.2d 100, 102 (D.Conn. 1998); Cacace v. Lucas,
775 F. Supp. 502, 504 (D.Conn. 1990).
The 145 three day notices sent by defendants between February 27, 1997
and February 27, 1998 are the only evidence of debt collection by Hutton
proferred by plaintiff. These notices generated $5,000 in revenue,
amounting to approximately .05% of Hutton's revenue over that period.
Courts have uniformly held as a matter of law that law firms for which
debt collection activities constitute such a small percentage of their
revenues are not debt collectors under the FDCPA. See, e.g., Shroyer v.
Finkel, 197 F.3d 1170, 1172 (6th Cir. 1999) (affirming judgment of trial
court that law firm for which debt collection constituted less than 2% of
firm's practice was not a debt collector); Argentieri v. Fisher
Landscapes, Inc., 15 F. Supp.2d 55, 60 (D.Mass. 1998) (granting summary
judgment to firm based on affidavit from attorney that .4% of firm's
practice was debt collection); Von Schmidt, 9 F. Supp.2d at 102-103
(granting summary judgment to firm that billed $807.79 from debt
collection over two years); Hartl v. Presbrey & Assoc., No. 95 C 4728,
1996 WL 529339 (N.D.Ill. 1996) (granting summary judgment
collection comprised less than 1% of firm's practice); Nance v. Petty,
Livingston, Dawson & Devening, 881 F. Supp. 223, 225 (W.D.Va. 1994)
(granting motion to dismiss where debt collection made up 1.07% of firm's
Cacace v. Lucas, on which plaintiff relies, is not to the contrary. Not
only did the lawyer defendant in Cacace use the collection letter there
at issue 125 to 150 times in a 14 month period, but he also filed 144
small claims actions and 10 other actions in collection matters in the
prior year. In addition, the lawyer had an on-going attorney-client
relationship with four collection agencies and more than 60% of his work
for those agencies involved the collection of debt. Cacace, 775 F. Supp.
at 505; see also Stojanovski v. Strobl & Manoogian, P.C., 783 F. Supp. 319,
322 (E.D.Mich. 1992) (holding that firm representing a large corporate
client with many overdue accounts was a debt collector despite fact that
debt collection comprised only 4% of firm's activity). The Cacace court
held that the lawyer was a debt collector because of the volume of his
debt collection activity, notwithstanding that debt collection was
incidental to his practice.
In this case, the volume of Hutton's debt collection is significantly
less, the percentage of revenue generated by that activity is minuscule
and there is no evidence that Hutton represents traditional collection
agencies. To the contrary, Hutton issued the Notice at issue, as well as
the other 144 three day notices, on behalf of its real estate clients.
Hutton does not advertise itself as being in the business of debt
collection, nor does it maintain a specialty listing as a debt collector
in Martindale-Hubbell or any other attorney guide. See Argentieri,
15 F. Supp.2d at 59. Accordingly, Hutton is not a debt collector under the
In her Supplemental Memorandum of Law in Opposition to Hutton's
motion, Goldstein requests additional discovery as to other possible debt
collection activity by Hutton. The Second Circuit requires a party
seeking additional discovery to forestall summary judgment to file an
affidavit under Fed.R.Civ.P. 56(f) setting forth the following:
1) the nature of the uncompleted discovery, i.e., what
facts are sought and how they are to be obtained; 2)
how those facts are reasonably expected to create a
genuine issue of material fact; 3) what efforts the
affiant has made to obtain those facts; and 4) why
those efforts were unsuccessful.
Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919,
926 (2d Cir. 1985). Goldstein's counsel has not submitted such an
affidavit. "Failure to file an affidavit under Rule 56(f) is itself
sufficient grounds to reject a claim that the opportunity for discovery
was inadequate." Paddington Partners v. Bouchard, 34 F.3d 1132, 1137 (2d
Cir. 1994) Moreover, Goldstein had more than enough time to obtain the
information she is now seeking. The case has been pending since 1998. It
is clear from oral argument that Goldstein's counsel did not consider
Hutton's debt collector status to be an issue, despite notice in my
earlier opinion that I would consider the question on a motion for
summary judgment. Nevertheless, I permitted him to submit supplemental
briefing on the question after oral argument. However, Goldstein's
eleventh hour request for additional discovery after oral argument,
without the required Rule 56(f) affidavit, is denied. Plaintiff has had
more than two years in which to pursue discovery on the essential
elements of her claim.
For the foregoing reasons, Hutton's motion for summary judgment is