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Polanco v. NCO Portfolio Mgmt., Inc.

United States District Court, S.D. New York

June 3, 2014


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[Copyrighted Material Omitted]

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For Delia Polanco, Plaintiff: Ahmad Keshavarz, LEAD ATTORNEY, Ahmad Keshavarz, Law Offices, Brooklyn, NY.

For NCO Portfolio Management, Inc., Defendant: Aaron R. Easley, Sessions, Fishman, & Nathan & Israel LLC, Flemington, NJ.

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DEBRA FREEMAN, United States Magistrate Judge.

In this case, involving alleged violations of the Fair Debt Collection Practices Act (" FDCPA" ) by defendant NCO Portfolio Management, Inc. (" Defendant" ), plaintiff Delia Polanco (" Plaintiff" ) moves for leave to amend her Complaint to add claims of (a) conversion of Plaintiff's funds and (b) violation of New York Judiciary Law Section 487. (Dkt. 31.) For the reasons discussed below, Plaintiff's motion is granted as to the claim for conversion and denied as to the claim for violation of New York Judiciary Law.


Plaintiff is a New York resident whose debt was purchased by Defendant, a large Delaware corporation that purchases consumer and commercial debt portfolios for collection. ( See Proposed First-Amended Original Complaint and Jury Demand, dated Sept. 20, 2013 (" Proposed Am. Compl." ) (Dkt. 30-2), ¶ ¶ 3, 6-7.) Defendant attempts to collect on the accounts it purchases by sending collection letters and filing collection lawsuits. ( Id. ¶ 6.) Mel S. Harris and Associates, LLC (" Harris" ) is a debt collection law firm that has represented Defendant in connection with collections lawsuits. ( See id. ¶ ¶ 5, 8.)

A. Bronx Civil Court Proceedings

In early January 2006, Harris, on behalf of Defendant, filed a state court collections lawsuit against Plaintiff in Bronx Civil Court. (Proposed Am. Compl. ¶ 8.) Harris allegedly failed to serve Plaintiff with notice of the lawsuit, but submitted a falsified affidavit of service to the court. ( Id. ¶ 9.) On March 20, 2006, the court entered a default judgment against Plaintiff in the amount of $2,451.45. ( Id.) A New York City marshal executed this judgment, and, shortly thereafter, Plaintiff's funds (minus

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Harris's fee) were forwarded to Defendant. ( Id. ¶ 10.)

On October 27, 2010, proceeding pro se, Plaintiff moved by order to show cause for the Bronx Civil Court to vacate the judgment against her. ( Id. ¶ 11.) In an affidavit supporting the proposed order, Plaintiff swore to specific facts supporting her claim that the affidavit of service was false. ( Id. ¶ 12.) The court granted Plaintiff's application for an order to show cause, and, on November 18, 2010, after a hearing, the court entered an order vacating the debt collection judgment and all liens, restraining orders, and executions based on that judgment. ( Id. ¶ ¶ 15, 17.)

Plaintiff alleges that, starting in October 2010, Defendant's in-house counsel and legal department were involved in the Bronx Civil Court proceedings. ( Id. ¶ 14.) Plaintiff alleges that Harris informed Defendant's in-house counsel of the order to show cause and the hearing to vacate the judgment ( id. ¶ 15): that, despite having knowledge of other cases in which Harris had used false affidavits, Defendant failed to take action to determine if false affidavits were used in Plaintiff's case ( id. ¶ 16); and that Defendant was notified on November 19, 2010 of the November 18, 2010 order vacating the default judgment ( id. ¶ 18).

In early March 2011, Plaintiff moved by order to show cause to have her funds returned. ( Id. ¶ 21.) After a hearing on March 17, 2011, the Bronx Civil Court ordered Defendant to return to Plaintiff " any funds previously or currently . . . in the possession of [Defendant] . . . forthwith" (" March 2011 Court Order" ). ( Id. ¶ 22.) The court also noted that Defendant's failure to comply would subject it to a finding of contempt of court. ( Id.)

Plaintiff alleges that an attorney for Harris was present at the March 17, 2011 hearing ( id. ¶ 23), and that, through Harris, Plaintiff sent a copy of the March 2011 Court Order to Defendant ( id. ¶ 24). Plaintiff further alleges that Defendant received a copy of the order from Harris on April 7, 2011, three weeks after it was entered ( id.¶ 24), and that Defendant's in-house counsel had physical possession of the order no later than April 14, 2011 ( id. ¶ 26).

Defendant returned Plaintiff's funds on August 26, 2011. ( Id. ¶ 27.)

B. Procedural Background

1. Complaint and Motion for Judgment on the Pleadings

Plaintiff commenced this action by filing a Complaint on October 12, 2011 against Defendant and Harris, claiming that they had violated the FDCPA by fraudulently obtaining a default judgment and failing to comply with a court order to return Plaintiff's funds. ( See generally Complaint and Jury Demand, dated Oct. 12, 2011 (" Compl." ) (Dkt. 1).) Plaintiff reached a settlement with Harris, whereby the parties stipulated on March 22, 2012 to dismiss Harris from the action pursuant to Federal Rule of Civil Procedure 41(a)(1), without prejudice to Plaintiff's claims against Defendant. (Dkt. 13.)

Defendant filed a motion for judgment on the pleadings on May 16, 2012, arguing that the FDCPA does not apply to a debt collector's refusal to comply with a court order. (Dkts. 16-17.) On June 20, 2012, Plaintiff filed an opposition to Defendant's motion (Dkt. 19), and, on July 3, 2012, Defendant filed a reply (Dkt. 20). The Court denied Defendant's motion for judgment on the pleadings on March 18, 2013. (Dkt. 21.)

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2. Plaintiff's Motion for Leave To File an Amended Complaint

On September 23, 2013, Plaintiff filed a motion to amend the Complaint (Dkt. 31), together with a supporting memorandum (Plaintiff's Memorandum of Law in Support of Filing an Amended Complaint, dated Sept. 23, 2013 (" Pl. Mem." ) (Dkt. 32).[2] Plaintiff's proposed Amended Complaint would add claims against Defendant for conversion of Plaintiff's funds and for violation of New York Judiciary Law Section 487. ( See generally Proposed Am. Compl.) In addition, the proposed amendment would add additional detail to Plaintiff's damages claims for " personal humiliation, anger, embarrassment, shame, mental anguish, emotional distress, loss of privacy, frustration, anxiety, an inability to sleep, constant fear being of being unable to pay for her most essential needs, and other distress that disrupted her activities of daily living." ( Id. ¶ 28; see also id. ¶ ¶ 29, 30.)

Defendant filed a memorandum of law in opposition to Plaintiff's motion to amend on October 2, 2013, arguing that the proposed amendment would be futile. ( See Memorandum of Law in Support of Defendant's Opposition to Plaintiff's Motion To File an Amended Complaint, dated Oct. 2, 2013 (" Def. Mem." ) (Dkt. 33) at 1.) Specifically, Defendant argues that (a) Plaintiff " cannot establish the elements of a conversion claim," and (b) Defendant is not subject to Section 487 of the Judiciary Law because it is not an attorney and therefore any claim against it under that Section would be subject to dismissal. ( See id.) In connection with its opposition, Defendant also filed a declaration by Aaron Easley, Esq. (" Easley" ), to which it appended a number of exhibits. ( See Declaration of Aaron Easley, Esq., in Opposition to Plaintiff's Motion for Leave To File an Amended Complaint, dated Oct. 2, 2013 (" Easley Decl." ) (Dkt. 33-1).) Those exhibits consist of documents from the Bronx Civil Court proceedings, deposition testimony, emails, notes, a letter written by Plaintiff, and a copy of a check. ( See generally Easley Decl.)

Plaintiff filed a reply memorandum of law on October 9, 2013, arguing that her proposed amendment adequately pleads that Defendant converted her money when it knowingly failed to return the funds " forthwith" in contravention of a valid court order. ( See Plaintiff's Reply in Support of Her Motion to File First Amended Complaint, dated Oct. 9, 2013 (" Pl. Reply" ) (Dkt. 37), at 2-6.) Plaintiff further argues that Defendant can be held to have violated Judiciary Law Section 487 because, according to Plaintiff, a company is directly and vicariously liable for the deceitful actions of its attorneys, including its in-house counsel. ( Id. at 6-10.) With the exception of the documents related to the Bronx Civil Court proceedings, Plaintiff objects to the exhibits Defendant submitted to the Court with its attorney declaration and to Defendant's reliance on those documents in its opposition to the motion to amend. ( Id. at 1-2.)



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