Taylor-Burns v. AR Resources, Inc.
1:16-cv-01259
S.D.N.Y.Jul 17, 2017Background
- Plaintiff Tonya Taylor‑Burns sued AR Resources, Inc. (ARR) under the FDCPA, alleging ARR failed to report a debt as "disputed" after receiving a dispute letter. The case was removed to SDNY and later reopened; ARR moved for summary judgment.
- Burns testified she did not write, sign, or send the June 5, 2015 dispute letter; Collection Shield 360 (CS360), a credit‑repair company, sent it by fax from Colorado.
- Burns engaged CS360 for credit repair; CS360 produced an undated agreement bearing Burns’s purported electronic signature. That agreement authorized CS360 to share potential claims with RC Law Group.
- Burns also produced an undated retainer agreement with RC Law Group (her counsel) signed electronically; the retainer allocated 80% of statutory FDCPA awards (leaving plaintiff a minimum of $200) and large percentages of actual damages, and contemplated sharing information with CS360.
- The court found the CS360 contract failed to comply with the Credit Repair Organizations Act (CROA) (missing required disclosures, dates, cancellation notice, etc.), rendering the CS360 agreement void and unenforceable. Because CS360 lacked authority to act for Burns, the court held ARR received no valid dispute and thus could not be liable under FDCPA §1692e(8).
- The court also held the RC Law Group arrangement implicated New York champerty and ethical rules (lawyer acquiring proprietary interest; fee‑sharing with nonlawyers; paying for referrals) and dismissed the claim for attorneys’ fees. Summary judgment for ARR was granted and the complaint dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ARR violated FDCPA §1692e(8) by failing to report a debt as disputed after receiving the letter | Burns contends the letter disputed the debt and ARR failed to mark it as disputed | ARR contends the letter was sent by CS360 without authority because CS360’s contract with Burns is void under CROA, so no valid dispute was communicated | Court held the CS360 agreement violated CROA and was void; CS360 had no authority, so ARR did not receive a valid dispute and is not liable under §1692e(8) |
| Whether plaintiff’s counsel’s fee/ referral arrangements bar recovery of attorneys’ fees (champerty / ethical violations) | Burns sought fees under FDCPA; implicit argument that retainer is valid | ARR argued RC Law Group’s retainer and CS360 referral/payment scheme created champerty, gave counsel a proprietary interest, and involved improper fee‑sharing/paid referrals in violation of NY rules | Court held RC Law Agreement/CS360 scheme implicated champerty and violated NY rules of professional conduct; plaintiff’s claim for attorneys’ fees dismissed |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard and genuine‑issue inquiry)
- Celotex Corp. v. Catrett, 477 U.S. 317 (movant may show absence of evidence on essential element)
- Highland Capital Mgmt. LP v. Schneider, 607 F.3d 322 (agent must have authority to bind principal)
- Jaramillo v. Weyerhaeuser Co., 536 F.3d 140 (nonmovant must produce evidence sufficient for a jury when movant shows lack of evidence)
- Westinghouse Elec. Corp. v. N.Y. City Transit Auth., 735 F. Supp. 1205 (S.D.N.Y. case on weighing evidence at summary judgment)
- Bluebird Partners, L.P. v. First Fidelity Bank, N.A., 731 N.E.2d 581 (discussion of champerty and commercialization of litigation)
- In re Clark, 77 N.E. 1 (historical application of sanctions for improper client‑recruiting/third‑party payments)