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Liew v. Cohen & Slamowitz, LLP

United States District Court, E.D. New York

April 6, 2017

WAI HOE LIEW a/k/a MICHAEL W. LIEW, KHURRAM KAYANI, and ELIZABETH K. ATWOOD a/k/a ELIZABETH KING Plaintiffs,
v.
COHEN & SLAMOWITZ, LLP, MITCHELL SELIP, MITCHELL G. SLAMOWITZ, and DAVID A. COHEN Defendants.

          MEMORANDUM AND ORDER

          KIYO A. MATSUMOTO UNITED STATES DISTRICT JUDGE.

         On August 15, 2014, Wai Hoe Liew a/k/a Michael W. Liew (“Mr. Liew”), Khurram Kayani (“Mr. Kayani”) and Elizabeth Atwood a/k/a Elizabeth King (“Ms. Atwood”) (collectively, “plaintiffs”) commenced this class action against Cohen & Slamowitz, LLP (“C&S”), and attorneys of that firm Mitchell Selip (“Mr. Selip”), Mitchell G. Slamowitz (“Mr. Slamowitz”) and David A. Cohen (“Mr. Cohen”) (collectively, “defendants”), alleging violations under the Fair Debt Collection Practices Act (“FDCPA”) and New York state law. (Complaint (“Compl.”), ECF No. 1.) Presently before the court is defendants' Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons stated herein, defendants' motion to dismiss is granted in part and denied in part.

         BACKGROUND

         A. The Present Litigation

         Plaintiffs bring a putative class action alleging that defendants engaged in fraudulent practices in the collection and attempted collection of debts allegedly incurred by plaintiffs for personal, family and household purposes in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692d, 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2)(A), 15 U.S.C. § 1692e(5), 15 U.S.C. 1692f, 15 U.S.C. 1692f(1), General Business Law (“GBL”) 349, and New York Judiciary Law § 487. Each plaintiff was sued in state court by different creditors that were represented by C&S in efforts to collect the Debts. (See Compl., ECF No. 1.) Plaintiffs allege that C&S used Midlantic Process, Inc. (“Midlantic”) to serve process in the state court lawsuits, obtained default judgments, and continued attempting to collect the debt after C&S became aware of Midlantic's false and fraudulent “sewer service” practices in October 2006. (Id.) C&S was terminated by its creditor clients in each of the plaintiffs' debt collection lawsuits, and representation was subsequently transferred to other law firms that replaced C&S as counsel, and the new law firms continued attempts to collect plaintiffs' debts. (Id. at ¶ 165.) Plaintiffs allege that C&S failed to notify the new law firms, their clients, the courts and the consumer debtors that the judgments they were attempting to enforce were potentially invalid due to Midlantic's false and fraudulent service practices. (Id. at ¶¶ 113-18.)

         B. The Coble Litigation

         In February 2011, Elizabeth Coble and others filed a class action complaint against C&S, Mr. Cohen, Mr. Slamowitz and other employees of C&S in the United States District Court for the Southern District of New York. See Coble v. Cohen & Slamowitz, et al. No. 11-cv-1037 (“Coble Class Action”). (Compl., ECF No. 1 at ¶ 26.) As in the instant action, Coble plaintiffs alleged, inter alia, that C&S continued to enforce state court judgments it had obtained against plaintiffs even after C&S became aware as of 2006 that its process server, Midlantic, was falsifying affidavits of service.[1] (Id. at ¶ 27.) Midlantic engaged in so-called “sewer service” of the state court complaints that included making no attempts at personal service before serving process by the “nail & mail” method, making false references to neighbors, and forgery and false notarization of the process server's signature. (Id.)

         The Coble court denied the defendants' motion to dismiss and ruled that the Coble plaintiffs sufficiently alleged that the defendants were on notice as of 2006 that any default judgments based on Midlantic's affidavits of service were potentially fraudulent. (Id. at ¶ 28.) In denying the motion to dismiss, the Coble court also ruled that the plaintiffs plausibly alleged that the Coble defendants, including C&S, violated the FDCPA by failing to investigate Midlantic's fraudulent practices and continuing collection efforts to enforce the judgments, thereby concealing the issues relating to Midlantic's false and fraudulent service practices. (Id.) On October 9, 2014, the court approved the final settlement agreement in Coble action. (Id. at ¶ 31.)

         The Coble “Settlement Class” was defined as:

“Settlement Class” means all persons who have been sued in one or more consumer collection actions commenced in New York State between December 30, 2002 and the present in which C&S represented the state court Plaintiff; and the affidavit of service was signed and/or notarized by Midlantic or any owner, agent or employee of Midlantic. Defendants represent that there are approximately 47, 095 members of the Settlement Class.

(Coble Class Settlement Agreement, Exhibit (“Ex.”) D to Affirmation of Joseph Francoeur In Support Of Defendants' Motion to Dismiss (“Francoeur Aff.”), ECF No. 48-4, at ¶ 21.) The Coble settlement class also included a subclass of all class members who made involuntary payments after October 30, 2006, following a judgment entered, on any date before or after October 30, 2006, in a consumer collection action commenced in New York State where C&S represented the state court plaintiff, and the affidavit of service was signed and/or notarized by Midlantic. (Id. at ¶ 22.)

         C. Plaintiff Wai Hoe Liew a/k/a Michael W. Liew

         The Complaint in the instant action alleges that plaintiff Michael Liew's debt arose out of a transaction used primarily for personal, family or household purposes (“Liew Debt”), and is therefore a debt under 15 U.S.C. § 1692a of the FDCPA. (Compl., ECF No. 1 at ¶ 32.) On or before July 25, 2000, C&S, on behalf of North American Capital Corp. (“NAC”), brought an action to collect the Liew Debt against Mr. Liew in the Civil Court of the City of New York (“Liew State Action”), and hired Midlantic to serve the lawsuit on Mr. Liew. (Id. at ¶ 33-34.) Midlantic's affidavit of service for Mr. Liew lists an address at which Mr. Liew alleges his parents lived, but he alleges that his parents moved to that address after he ceased living with them and that he was living in Brooklyn at the time of service. (Id. at ¶ 35-36.) On December 18, 2000, the Civil Court entered a default judgment against Mr. Liew, based on an application by C&S. (Id. at ¶ 37.)

         In October 2006, C&S learned of Midlantic's false and fraudulent service practices through an affidavit by a former Midlantic process server Kenneth Vega in Caprino, et al v. Cohen & Slamowitz, et al., No. 2:05-cv-4814 (E.D.N.Y.) action (“Vega Affidavit”). (Id. at ¶¶ 27, 39.). After October 2006, when C&S learned of issues with Midlantic's false and fraudulent service practices, C&S allegedly continued its efforts, on NAC's behalf, to collect on the debt for which judgment was entered in the Liew State Action by, inter alia, sending out yearly letters “informing Liew that there was a judgment against him” and informing him of his right to claim exemptions of assets from restraint, sending out bank restraints “on at least a yearly basis, ” engaging in searches regarding Mr. Liew's employment and most recent address, and attempting to reach him by phone using automatic and manual dialing. (Id. at ¶ 38.)

         On or before June 21, 2012, NAC terminated C&S's representation in the Liew State Action and retained Eltman, Eltman & Cooper (“EEC”) to collect Mr. Liew's debt. (Id. at ¶ 40.) On or about June 21, 2012, Mr. Cohen, on C&S's behalf, signed and sent a Consent to Change Attorney form to EEC, agreeing that EEC shall take C&S's place as NAC's attorney in the Liew State Action. (Id. at ¶¶ 41-42.) Plaintiffs allege that C&S knew or should have known that EEC, on behalf of NAC, intended to attempt to collect the Liew Debt. (Id. at ¶ 43.) Plaintiffs allege that at no time after the Consent to Change Attorney form was executed did C&S inform the state court, EEC, or NAC that there may be an issue with the validity of the Liew Judgment and the continued right of anyone to continue debt collection efforts in regards to the Liew Debt. (Id. at ¶ 47.)

         On April 3, 2014, Mr. Liew learned that his bank accounts at Citibank were restrained because of a restraining notice issued by EEC on behalf of NAC, to collect the Liew Debt. (Id. at ¶ 48.) Mr. Liew alleges that he had not been served with the Liew State Action and he had no prior knowledge of the Liew State Action and judgment entered therein, until his accounts were restrained. On April 3, 2014, Mr. Liew filed an Order to Show Cause in the Liew State Action seeking to vacate the judgment and dismiss the case. (Id.) On May 8, 2014, EEC signed a stipulation agreeing to vacate the state court judgment and dismiss the action with prejudice. (Id. at ¶ 49.)

         Mr. Liew also alleges that the statute of limitations to commence the instant action is equitably tolled, for the same reasons found by the court in the Coble Class Action, as to any acts or omissions by C&S which occurred prior to one year before the filing of this action. (Id. at ¶ 50.)

         D. Plaintiff Khurram Kayani

         Prior to February 24, 2003, plaintiff Khurram Kayani allegedly incurred a debt (“Kayani Debt”), as defined under 15 U.S.C. § 1692a of the FDCPA. (Compl., ECF No. 1 at ¶¶ 8, 78.) On or before February 24, 2003, C&S, on behalf of Platinum Financial Services (“PFS”), filed an action to collect a debt against Mr. Kayani, in Civil Court of the City of New York (“Kayani State Action”), and hired Midlantic to serve the lawsuit on Mr. Kayani. (Id. at ¶ 79.) Midlantic's February 10, 2003 affidavit of service for Mr. Kayani listed a service address where he did not live at the time. (Id. at ¶ 80-81.) On July 9, 2003, the Civil Court entered a default judgment against Mr. Kayani, based on an application by C&S. (Id. at ¶ 82.)

         In October 2006, C&S learned of Midlantic's fraudulent service practices through the Vega Affidavit in Caprino action. (Id. at ¶¶ 27, 84.) After October 2006, C&S continued its efforts, on NAC's behalf, to collect on the debt for which judgment was entered in the Kayani State Action by, inter alia, “sending out yearly letters informing [Mr.] Kayani that there was a judgment against him, ” “sending out bank restraints on at least a yearly basis, ” and the other collection and enforcement activities and methods as described for plaintiff Liew. (Id. at ¶ 83.)

         On or before June 21, 2014, PFS terminated C&S's legal representation in the Kayani State Action and retained EEC to collect the Kayani Debt. (Id. at ¶ 85.) On or about June 21, 2012, C&S signed and sent a Consent to Change Attorney form to EEC, agreeing that EEC shall by substituted for C&S as PFS's attorney in the Kayani State Action. (Id. at ¶ 86.) Mr. Kayani alleges that C&S knew or should have known that EEC, on behalf of PFS, intended to attempt to collect the Kayani Debt. (Id. at ¶ 87.) He further alleges that at no time after the Consent to Change Attorney form was executed did C&S inform the state court, EEC, or NAC that there may be an issue with the validity of the Kayani Judgment and the continued right of anyone to continue debt collection efforts in regards to the Kayani Debt. (Id. at ¶ 91.)

         On June 22, 2014, Mr. Kayani learned that his bank account at JPMorgan Chase Bank (“Chase”) was restrained because of a restraining notice issued on or before June 21, 2014, by EEC on behalf of PFS, to collect the Kayani Debt. Mr. Kayani alleges that he had not been served with the Kayani State Action, and had no prior knowledge of the Kayani State Action or the judgment entered therein. (Id. at ¶¶ 92-93.) On July 31, 2014, EEC signed a stipulation agreeing to vacate the Kayani judgment and dismiss the action with prejudice in exchange for a payment of $500. (Id. at ¶ 94.)

         Mr. Kayani also alleges that the statute of limitations is equitably tolled for the same reasons found by the court in the Coble class action, as to any actions or omissions which occurred prior to one year before the filing of this action. (Id. at ¶ 95.) On or about July 21, 2014, Mr. Kayani received notice of his right to participate in the Coble Class Action. (Id. at ¶ 96.) Mr. Kayani alleged he was not going to participate in the Coble Class Action. (Id.)

         E. Plaintiff Elizabeth K. Atwood a/k/a Elizabeth King

         Prior to February 27, 2005, plaintiff Elizabeth K. Atwood allegedly incurred a debt (“Atwood Debt”), as defined under 15 U.S.C. § 1692a of the FDCPA. (Compl., ECF No. 1 at ¶¶ 10, 51-52.) On or before February 2, 2005, C&S, on behalf of Portfolio Recovery Associates (“PRA”), brought an action against Ms. Atwood in Civil Court of the City of New York (“Atwood State Action”), and hired Midlantic to serve the lawsuit on Ms. Atwood. (Id. at ¶ 52.) On April 1, 2005, the Civil Court entered a default judgment against Ms. Atwood, based on application by C&S. (Id. at ¶ 53.)

         In October 2006, C&S became aware of issues with lawsuits served by Midlantic. (Id. at ¶ 63.) On October 26, 2006, Ms. Atwood filed a motion to vacate the April 2005 default judgment based, in part, on never having been served with the lawsuit. (Id. at ¶ 54.) On November 8, 2006, C&S appeared in court to oppose Ms. Atwood's motion and, after an unsuccessful attempt at settlement, C&S consented to the default judgment being vacated, provided that Ms. Atwood file an Answer without any jurisdictional defenses. The April 1, 2005 judgment against Ms. Atwood was vacated by the state court on November 8, 2006. (Id.)

         Between December 17, 2006 and February 27, 2008, after C&S became aware, in October 2006, of the issues with lawsuits served by Midlantic, C&S continued its efforts to collect on the Atwood Debt while the Atwood State Action was pending by inter alia, sending several letters to her, attempting to call her, leaving several phone messages at her home, “sending out yearly letters informing [Ms.] Atwood” that a judgment was entered against her, “sending out bank restraints on at least a yearly basis, ” and other actions similar to actions taken to collect on the debts of plaintiffs Liew and Kayani. (Id. at ¶ 55.) On April 30, 2008, Ms. Atwood's file at C&S became dormant, and was reactivated on June 10, 2010, as a result of C&S conducting periodic checks. (Id. at ¶ 57.) On April 22, 2013, C&S used an automated dialer system to call a number believed by C&S to be Ms. Atwood's place of employment. (Id. at ¶ 56.)

         On or about January 8, 2014, PRA terminated C&S's representation in the Atwood State Action and retained Forster & Garbus (“F&G”) to collect the Atwood Debt; C&S closed its Atwood file at PRA's request on this day. (Id. at ¶ 58.) On or before January 30, 2014, C&S signed and returned a Consent to Change Attorney form to F&G, substituting F&G for C&S as PRA's attorney in the Atwood State Action. (Compl., ECF No. 1 at ¶ 58.) Ms. Atwood alleges that C&S knew or should have known that F&G, on behalf of PRA, intended to attempt to collect the Atwood Debt and that delivery of the Consent to Change Attorney amounted to a representation to F&G, PRA, and the Civil Court that there were no issues or potential issues with what had occurred in the Atwood State Action. (Id. at ¶¶ 59-61.) She further alleges that at no time after C&S closed Atwood's file did C&S inform the Civil Court, F&G, or PRA that there may be an issue with the validity of the judgment and the right of anyone to continue debt collection efforts in regards to the Atwood Debt because of Midlantic's false and fraudulent service practices. (Id. at ¶¶ 61-64.)

         On or about January 30, 2014, F&G served Bank of America with an Information Subpoena and Restraining Notice and represented that the vacated April 1, 2005 state court judgment was valid, which resulted in a restraint of $2, 157.00 in two of Ms. Atwood's bank accounts and a $100 non-refundable fee. (Id. at ¶¶ 65-66.) Upon learning that her Bank of America accounts were restrained, Ms. Atwood opened bank accounts at JPMorgan Chase and directed deposits of her salary to her Chase accounts. (Id. at ¶ 67.) On or about February 5, 2014, Ms. Atwood's Chase accounts were restrained by an Information Subpoena and Retraining Notice issued by F&G, and based on the April 1, 2005 judgment. (Id. at ¶ 67-68.)

         After her accounts were restrained, Ms. Atwood contacted C&S on an unspecified date to inquire as to the cause of the restraint. C&S advised her that they did not have her file and referred her to F&G. (Id. at ¶ 69.) Ms. Atwood contacted F&G and they informed her that the restraint was based on a debt she owed and offered to help her set up a repayment plan. (Id. at ¶ 70.)

         Plaintiffs allege that prior to February 5, 2014, Ms. Atwood filed an Order to Show Cause in state court. (Id. at ¶ 71.) Upon receipt of the Order to Show Cause, on February 11, 2014, C&S asked PRA for permission to reopen Ms. Atwood's file to respond to the Order to Show Cause. PRA granted permission to C&S to represent PRA in contesting the Order to Show Cause in the Atwood State Action. (Id. at ¶ 72.) On February 18, 2014, Ms. Atwood, attorneys from C&S and F&G appeared at the Show Cause Hearing. (Id. at ¶ 75.) C&S submitted a response to Ms. Atwood's Order to Show Cause in the state court, which was prepared based on C&S's Atwood file, asserting that C&S's records did not show that PRA had restrained Ms. Atwood's accounts. Allegedly, C&S took no steps to ascertain if F&G had restrained Ms. Atwood's accounts on behalf of PRA. (Id. at ¶¶ 73, 75.) Ms. Atwood explained her reason for the Order to Show Cause to the court. Shortly thereafter, Ms. Atwood was called to another hearing room by an F&G attorney. (Id. at ¶ 75.) She next was called before the judge, who signed a decision and order dismissing the Atwood State Action with prejudice. (Id.)

         Plaintiffs also allege that the statute of limitations is equitably tolled for Ms. Atwood, for the same reasons found by the court in the Coble Class Action, as to any actions or omissions which occurred prior to one year before the filing of this action. (Id. at ¶ 76.) On or about July 21, 2014, Ms. Atwood received a notice of her rights to participate in the Coble Class Action. Ms. Atwood alleged she was not going to participate in the Coble Class Action. (Id. at ¶ 77.)

         On May 11, 2014, three months before she commenced the instant action as a named plaintiff, Ms. Atwood filed a law suit in the Eastern District of New York, No. 14-cv-02973 (JFB)(AYS), against defendants[2] based on many of the same facts alleged in the present action. On March 26, 2015, the Honorable Joseph F. Bianco dismissed Ms. Atwood's first, second, fifth, sixth, seventh and eighth causes of action for failure to state a claim. (See Atwood v. Cohen & Slamowitz, LLP et al., No. 14-cv-02973, ECF No. 53-1 at 16.) On February 8, 2017, Judge Bianco granted defendants' motion for summary judgment on plaintiffs third and fourth claims, thereby dismissing the action in its entirety. (See id., ECF No. 85.)

         Judge Bianco made several findings based on the undisputed factual record that are of significance to Ms. Atwood's overlapping claims in the instant action. In both actions, Ms. Atwood alleged that C&S failed to inform its client, PRA, and successor counsel, F&G, that there were or “may be an issue with the validity of the judgment and the continued right of anyone to continue to attempt to collect the debt represented by the judgment.” (Compl., ECF No. 1 ¶¶ 61-63.) Judge Bianco's summary judgment decision acknowledged that Ms. Atwood had alleged in her complaint that C&S failed to inform PRA and F&G that the state default judgment had been vacated, but found that this allegation and related allegations that form the factual bases for Ms. Atwood's ...


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