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Hunter v. Palisades Acquisition XVI, LLC

United States District Court, S.D. New York

November 16, 2017



          Edgardo Ramos U.S.D.J.

         Patricia Hunter (“Plaintiff”) brings this action against Defendants Palisades Acquisition XVI, LLC (“Palisades”), Sharinn & Lipshie, P.C. (“S&L”), and Harvey Sharinn (“Sharinn”) alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and New York General Business Law § 349 (“Section 349”). Before the Court is Defendant Palisades' motion to dismiss the First Amended Complaint (“FAC”) in its entirety pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and, in the alternative, to strike Exhibits C and S from the FAC pursuant to Rule 12(f) of the Federal Rules of Civil Procedure.

         For the following reasons, Palisades' motion is DENIED.

         I. BACKGROUND [[1]]

         Palisades is a Delaware limited liability company that purchases charged-off consumer debt in bulk or purchases the right to collect consumer debts already in default and attempts to collect on the debt. FAC (Doc. 30) ¶¶ 10, 150(c). In April 2007, Palisades sued Plaintiff, a home health aide, in Bronx County Civil Court, claiming that Palisades had purchased a debt of $2, 572.21 from Direct Merchants Bank resulting from Plaintiff's credit card debt. FAC ¶¶ 14- 18; Ex. A. Palisades was represented in that action (the “Collections Lawsuit”) by Wolpoff & Abramson, L.L.P. and filed an affidavit of service sworn to by Loai F. Sarsour (“Sarsour”). Id. ¶¶ 21, 25.[2]

         However, Plaintiff never had an account with Direct Merchants Bank and believes she has fully paid off every credit card she has ever owned. Id. ¶ 19. Plaintiff claims she was unable to raise these points in the Collections Lawsuit because she was never served with the summons and complaint. Id. ¶ 22. The affidavit of service filed by Sarsour in the Collections Lawsuit claimed that service was effectuated on April 18, 2007 (a Wednesday) at 2:36 p.m. by leaving the documents with a relative of Plaintiff named James Hunter, who was described as “a 55-year old black man with black hair who was approximately 6' tall and weighed around 210 pounds.” Id. ¶¶ 25, 28; Ex. B. Plaintiff does not know and is not related to anyone by the name of James Hunter. Id. ¶ 29. Plaintiff's husband, who lived with her, was named Samuel Hunter. Id. In 2007, he “worked every weekday” and did not arrive home until 9:00 p.m. Id. ¶ 30. Mr. Hunter did not match the physical description listed in Sarsour's affidavit. Id. Plaintiff did not live with any other adult men. Id. ¶ 29. Sarsour also attested that he mailed a copy of the summons and complaint to the same address. Id. ¶ 27.[3] Neither Plaintiff nor her husband, however, received any papers relating to the Collections Lawsuit in the mail. Id. ¶ 31.

         In June 2007, Palisades moved for a default judgment against Plaintiff. Id. ¶ 39. In doing so, one of Palisades' employees swore to having “personal knowledge of the facts of the case, ” including that Plaintiff had opened an account with Direct Merchants Bank, incurred charges, and defaulted on her debt. Id. ¶ 40. On June 19, 2007, Palisades obtained a default judgment against Plaintiff for $2, 834.13. Id. ¶ 45. Plaintiff never received a copy of the judgment or any notice that judgment had been entered against her. Id. ¶ 47.

         In early 2014, nearly seven years later, Plaintiff first learned of the Collections Lawsuit when she and her husband attempted to modify the mortgage loan for their house. Id. ¶¶ 48-59. At that point, they were informed that a judgment had been entered against Plaintiff in the Collections Lawsuit. Id. She filed a pro se Order to Show Cause in the Collections Lawsuit, seeking to vacate the default judgment because she was never served. Id. ¶ 50; Ex. E. A hearing on Plaintiff's Order to Show Cause was held on March 12, 2014. Id. ¶ 55. Palisades did not appear at the hearing; the presiding judge vacated the judgment and set a trial for April 21, 2014. Id. ¶ 56. Palisades also did not appear at the trial; at that point, the presiding judge dismissed the Collections Lawsuit. Id. ¶ 58. The order vacating the Collections Lawsuit is publicly accessible through the New York Unified Court System's eCourts website. Id. ¶ 71; Ex. I.

         Over a year later, on November 11, 2015, Palisades, now represented by S&L, [4] sent an Information Subpoena and Restraining Notice (the “Notice”) to JP Morgan Chase Bank (“Chase”). Id. ¶ 66; Ex. H. The Notice stated that Palisades had a judgment against Plaintiff for $2, 834.13 and demanded that Chase restrain any bank accounts owned by Plaintiff. Id. Plaintiff had a consumer checking account and a savings account with Chase at that time. Id. ¶ 68. On November 16, 2015, Chase placed a hold on Plaintiff's checking account. Id. ¶ 69.

         The Notice was signed by Defendant Sharinn and listed the index number for the vacated Collections Lawsuit. Id. ¶ 66.[5] The managing attorney of S&L, Amanda Moreno (“Moreno”) explained, in a 2014 deposition, the process S&L attorneys undertake to review a consumer's file before commencing debt collection activities. Id. ¶ 81. Moreno explained that, when a different law firm litigated the underlying judgment, S&L's policy was not to undertake debt collection activity until S&L had copied the entire court file or been forwarded the pleadings. Id. ¶ 83; Ex. J. According to Moreno, S&L “review[s] what is done by other attorneys to make sure that [they]'re following in the correct footsteps.” Id. ¶ 84; Ex. J.

         S&L was not the law firm of record in the Collections Lawsuit. Id. ¶¶ 61-62, 86. The law firm of record, Wolpoff & Abramson, was accused in a 2010 lawsuit of “perpetrat[ing] a massive scheme of debt collection fraud” and subsequently “abandoned a huge volume of pending debt collection suits in New York.” Id. ¶¶ 60, 87. The process server who signed an affidavit of service in the Collections Lawsuit, Sarsour, was accused in a 2013 lawsuit of perpetrating sewer service.[6] Id. ¶¶ 34-35, 74. That lawsuit was brought against Palisades' parent company, Asta Funding. Id.; Ex. C; Ex. S. Had Sharinn or another attorney working for S&L copied the court file or researched the Collections Lawsuit before issuing the Notice, they would have seen that the Collections Lawsuit had been vacated in 2014. Id. ¶ 71; Ex. I.

         On November 16, 2015, the same day Chase placed a hold on Plaintiff's account, $75.00 was debited from Plaintiff's checking account under the transaction heading “Nas-Coal 16 Nov15678.” Id. ¶¶ 94-95; Ex. K. On November 25, 2015, Chase sent Plaintiff a letter explaining that there was a $5, 668.26 hold placed on her account at the request of a judgment creditor. Id. ¶ 97. Chase also sent Plaintiff a copy of the Notice, as required by New York law. Id. ¶ 97-100; Ex. L. The letter Chase sent Plaintiff was labeled at the bottom left with the phrase “COAL-16Nov15-678.” Id. Ex. L. The letter also explained that Chase “may charge [Plaintiff] a Legal Processing Fee of $75.00” for processing the Notice. Id.

         Plaintiff never received a notice of assignment when Palisades purchased Plaintiff's alleged credit card debt from Direct Merchants Bank. Id. ¶ 91. Plaintiff also never received any notice of the Collections Lawsuit. Id. ¶ 31. The Notice forwarded to her by Chase was therefore the first communication she received from Palisades concerning the alleged debt. Id. ¶ 101. Plaintiff alleges that the Notice did not contain certain disclosures required by § 1692g(a) of the FDCPA. She also alleges that she did not receive those disclosures within five days of receiving the Notice. Id. ¶ 102.

         When Plaintiff learned of the hold on her account, she was very upset. Id. ¶ 103. She needed the restrained money in order to pay her monthly bills, including her mortgage payment. Id. While Plaintiff's Chase account was restrained, she suffered emotional distress, including anger, frustration, and anxiety. Id. ¶ 136. She was afraid that late payments on her mortgage would increase her monthly mortgage to a level that she could not afford. Id. ¶ 140. Plaintiff also suffered from physical symptoms during this time period, including severe, recurring headaches, high blood pressure, a diminished appetite, and insomnia. Id. ¶¶ 142-43.

         In November 2015, Plaintiff's daughter attempted to use the checking account to pay Plaintiff's monthly bills despite the hold; the payments did not go through and Plaintiff incurred additional “returned item fees” on her account. Id. ¶¶ 104, 109. Plaintiff went to a local Chase office multiple times to release the hold, but was told she needed to contact S&L. Id. ¶¶ 105-06.

         At one point, a Chase employee transferred $2, 100 to Plaintiff's savings account for her use. Id. ¶ 107. This transfer caused an insufficient funds fee to be charged to Plaintiff's account. Id. ¶ 109. The Chase employee also used funds from Plaintiff's savings account to pay her mortgage bill. Id. ¶ 107. Although the bill was paid, it was late, and Plaintiff incurred a late fee from her mortgage lender. Id. ¶ 110. Plaintiff was able to pay the remainder of her bills without using her bank account by using, among other methods, a Western Union wire transfer. Id. ¶ 111. Plaintiff alleges that this resulted in additional charges to her accounts. Id. On December 2, 2015, Chase debited an additional $937.01 from Plaintiff's account in a transaction labeled “NAS-COAL.” She incurred an extended overdraft fee and a service fee from that debit. Id. ¶ 112.

         Seeking to lift the hold on her account, Plaintiff retained CAMBA Legal Services, Inc. (“CAMBA”) for assistance. Id. ¶ 114. On December 15, 2015, Plaintiff sent a letter to S&L informing them that the judgment in the Collections Lawsuit had been vacated and demanding the release of the restraint on her account. Id. ¶ 115; Ex. M. Plaintiff demanded that the S&L Defendants provide her with documentation and information on the alleged debt pursuant to the FDCPA and New York City laws. Id. Plaintiff also informed S&L that they should contact CAMBA regarding the debt in the future. Id. However, neither Palisades nor S&L responded to Plaintiff's letter. Id. ¶ 117. Because the hold remained on her Chase account, Plaintiff again paid her monthly bills “using unconventional means, ” which she alleges resulted in additional fees being charged to her accounts. Id.

         On December 23, 2015, Chase sent Plaintiff a letter informing her that her account was overdrawn by $238.00 and that she needed to make a deposit in that amount to keep her account open. Id. ¶ 127. Chase sent another letter informing Plaintiff of her account status on or around January 5, 2016. Id. Plaintiff did not deposit any money into her account because she believed that any additional funds she deposited would be frozen by Defendants. Id. ¶ 130. For this same reason, Plaintiff cashed her paychecks instead of depositing them at Chase, and was required to pay $6 for every check she needed to cash. Id. ¶ 135. She also believed that the overdraw was caused by the “NAS-COAL” debits of almost $1, 000, the hold on her checking account, and the returned item and late fees incurred as a result of Plaintiff's attempts to remain in timely payment of her bills despite the hold on her account. Id. ¶ 130.

         On January 8, 2016, Plaintiff checked her Chase account and saw that the hold remained. Id. ¶ 118. That day, a CAMBA employee called S&L and spoke with an attorney there, Mike Ponzio (“Ponzio”). Ponzio requested that CAMBA send S&L a copy of the vacatur of the Collections Lawsuit judgment. Id. ¶ 119. An attorney at CAMBA sent the letter on January 11, 2016, again demanding that S&L lift the restraint and return the funds to Plaintiff's Chase account. Id. ¶ 120. On January 13, 2016, an employee working for S&L faxed a letter to CAMBA informing them that S&L had reached out to Chase to withdraw the restraint on Plaintiff's account. Id. ¶ 122; Ex. P.

         On January 27, 2016, S&L mailed CAMBA a letter enclosing a check to Plaintiff for $830.16, which they stated represented “monies received from the Marshal in connection with a levy at JP Morgan Chase Bank.” Id. ¶ 124. S&L also informed CAMBA that an additional check for $106.85 would be sent to Plaintiff from the Marshal's office for additional Marshal fees. Id. On February 3, 2016, Plaintiff received a check for $106.85. Id. ¶ 126.

         At some point after January 8, 2016, Chase closed Plaintiff's checking and savings accounts because Plaintiff's accounts remained overdrawn. Id. ¶ 131. After receiving the checks from the Marshal's office and S&L, Plaintiff opened a new checking account at a different bank. Id. ¶ 132.

         Plaintiff filed this lawsuit on November 11, 2016. Complaint (Doc. 1). Plaintiff filed the FAC on February 24, 2017 (Doc. 30). Plaintiff asserts three causes of action: (1) violations of the FDCPA, 15 U.S.C. §§ 1692c, 1692e, 1692f, and 1692g based on Defendants' Notice and restraint of Plaintiff's Chase account; (2) violations of New York General Business Law § 349 based on Defendants' conduct in connection with the Collections Lawsuit as well as the subsequent Notice and restraint of Plaintiff's Chase account; and (3) conversion based on Defendants' restraint of Plaintiff's Chase account. FAC ¶¶ 146-79.

         Palisades filed its motion to dismiss or to strike on March 30, 2017. See Memorandum of Law in Support of Defendant Palisades' Motion to Dismiss and Motion to ...

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