95 F. Supp. 3d 685
S.D.N.Y.2015Background
- Plaintiffs allege a scheme by a debt buyer and law firm to fraudulently obtain and enforce consumer debt judgments in New York City Civil Court.
- Defendants allegedly filed mass-generated verified complaints with fraudulent affidavits and used sewer service to avoid notice, leading to default judgments.
- Plaintiffs sue on FDCPA, RICO, NY GBL § 349, and NY Judiciary Law § 487, seeking damages and injunctive/declaratory relief.
- The Asta Defendants purchased debts, raised funds through Palisades, and partnered with Pressler to pursue collection actions with allegedly defective documentation.
- Defendants move to compel arbitration, strike class allegations, and dismiss various claims; the court denies all motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitration enforceability | No binding agreement to arbitrate with Plaintiffs existed; sample non-party contracts are insufficient. | Welcome Guides/agreements with AT&T require arbitration and carve out debt-collection claims; thus arbitration should be compelled. | Arbitration not compelled; no binding agreement shown and contract terms not proven; exception for debt-collection claims does not bind plaintiffs here. |
| Class action allegations | Class certification proper; common questions predominate given the systemic fraud in filings. | Class should be stricken due to potential waivers and individualized defenses; discovery needed to assess predominance. | Motion to strike class allegations denied; predominance not defeated at this stage. |
| RICO predicate acts | Filed fraudulent affidavits and related mail/wire communications constitute predicate acts and satisfy pattern requirement. | Litigation misconduct cannot be predicate acts; objects to mail/wire fraud in this context. | Predicate acts sufficient; mail/wire fraud in litigation can support RICO claims. |
| RICO pleading and enterprise against Asta/Stern | Complaint adequately pleads particularized participation by Asta and Stern and existence of an association-in-fact enterprise. | Asta mainly grouped with Pressler; lacks specific allegations against Asta/Stern; enterprise not shown. | RICO claim adequately pleaded against Asta and Stern; enterprise adequately pleaded; individual participation sufficiently described. |
| GBL § 349 and individual liability under FDCPA | Defendants’ deceptive acts harm consumers and public interest; individuals liable for personal participation. | Only corporate liability or limited scope; individuals not properly pleaded. | GBL § 349 claim against defendants sustained; individual liability under FDCPA and GBL adequately alleged as to specific individuals. |
Key Cases Cited
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (Supreme Court 2002) (arbitration requires voluntary agreement)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (Supreme Court 1983) (liberal policy favoring arbitration, but not for coerced contracts)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (Supreme Court 1967) (arbitration clause enforceability respects contract terms)
- Opals on Ice Lingerie v. Bodylines Inc., 320 F.3d 362 (2d Cir. 2003) (requires clear terms for arbitration; not every contract is enforceable)
- Dreyfuss v. eTelecare Global Solutions-U.S. Inc., 349 Fed.Appx. 551 (2d Cir. 2009) (incomplete contract pages undermine arbitration enforceability)
- United States v. Eisen, 974 F.2d 246 (2d Cir. 1992) (perjurious pleadings can be mail fraud predicates)
- Sykes v. Mel Harris & Associates LLC, 780 F.3d 70 (2d Cir. 2015) (false affidavits can provide independent bases for RICO liability)
- Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256 (2d Cir. 1995) (consumer-oriented acts and public interest considerations in related actions)