Huebner v. Midland Credit Mgmt., Inc.

Case Information

16-2363- cv (L)

Huebner, et al. v. Midland Credit Mgmt., et al. ‐ 2363 ‐ cv (L)

Huebner, et al. v. Midland Credit Mgmt., et al.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term

(Argued: November Decided: July 2018) Nos. ‐ ‐ cv, ‐ ‐ cv

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L EVI H UEBNER , behalf himself all other similarly situated consumers,

Plaintiff ‐ Appellant, P OLTORAK PC, E LIE C. P OLTORAK , Interested Party ‐ Appellants,

‐ ‐  M IDLAND C REDIT M ANAGEMENT , I NC ., M IDLAND F UNDING , LLC., Defendants Appellees.

––––––––––––––––––––––––––––––––––––

Before: L EVAL L IVINGSTON C HIN , Circuit Judges .

Levi Huebner, Elie C. Poltorak, PC appeal final judgment United States District Court Eastern District New York (Cogan, J. ). sued Credit Management, Inc. Funding LLC. (collectively “Midland”), alleging they violated Fair Debt Collection Practices Act (“FDCPA”), U.S.C. et seq. Huebner alleged when called Midland his debt, Midland’s representative harassed by asking about nature dispute. Huebner alleged that, after call, Midland did report as disputed reporting agencies. court concluded Huebner failed produce any evidence raising material issue either claim. Additionally, sanctioned: (1) Poltorak personally for misleading during initial status conference; (2) for disregarding protective order; (3) both Huebner Poltorak PC for needlessly multiplying proceedings. Huebner, Poltorak, PC argue on appeal erred granting summary judgment for Midland abused discretion sanctioning them. disagree. Accordingly, judgment is AFFIRMED .

F OR P LAINTIFF ‐ A PPELLANT : L AWRENCE K ATZ , Valley Stream, NY,

for Levi . F OR I NTERESTED P ARTY ‐ A PPELLANTS : Elie C. Poltorak, PC,

Brooklyn, NY, pro se . F OR D EFENDANTS ‐ A PPELLEES : A NDREW M. S CHWARTZ Marshall

Dennehey, Warner, Coleman & Goggin, P.C., Philadelphia, PA (Matthew B. Johnson, New York, NY, brief ), Credit Management, Inc., Funding LLC .

F OR A MICUS C URIAE : Brian Melendez, Dykema Gossett

PLLC, Minneapolis, MN, ACA International.

D EBRA A NN L IVINGSTON Circuit Judge :

Plaintiff Appellant Levi (“Huebner”) attorney who has litigated several cases Fair Debt Collection Practices Act (“FDCPA”), U.S.C. § et seq. which, among other things, prohibits debt collectors from using “false, deceptive, misleading representation[s] . . . connection with the collection any debt,” id. 1692e. In October Huebner called Defendant ‐ Appellee Midland Credit Management, Inc. (“Midland”) to dispute $131 debt it tried collect from him. Huebner surreptitiously recorded call. Asked why he disputed debt, would say only debt “nonexistent.” J.A. 371. After repeatedly declining clarify what he meant, said he call Midland back after reviewing his “files.” Id. 372. He filed this lawsuit instead.

Huebner’s first amended complaint alleged Midland representative told debt only writing then only if he gave cause dispute. then ‐ attorney, Interested Party ‐ Appellant Elie C. (“Poltorak”), repeated this allegation January letter court. During initial status conference, further assured Huebner’s recording show Midland had told his orally. But upon listening recording of call, Judge Cogan of United States District Court for Eastern District of New York learned allegation was false. sanctioned Poltorak $500 for failure participate in initial status conference in good faith.

To keep his case alive, Huebner amended his complaint twice more. His third amended complaint ultimately alleged had made multiple false misleading representations violation of U.S.C. 1692e. Concluding had raised material issue fact any of his claims, granted summary judgment Midland. It ordered and Poltorak’s law firm, Interested Party Appellant Poltorak PC, pay some Midland’s legal fees because, determined, had tried trick into violating FDCPA during initial call; claim meritless prosecuted bad faith; both and PC needlessly multiplied proceedings with, among other things, baseless motion recusal pretrial motion filed flagrant disregard terms parties’ joint protective order.

Huebner, Poltorak, PC now appeal grant summary judgment three separate sanctions orders issued over course this litigation. For reasons stated below, we conclude did err in granting summary judgment, nor did it abuse discretion in sanctioning Huebner, Poltorak, PC. The judgment below therefore AFFIRMED.

BACKGROUND

I. Factual Background In August 2013, sent collection letter Huebner seeking to collect $131.21 from him. Verizon had originally billed Huebner this sum connection work done on Huebner’s phone line, but refused pay, advising Verizon should have been charged work. Verizon told remove charge from invoice. On October called regarding secretly recorded phone call. asked how debt. He transferred employee named Emma Elliott (“Elliott”). merits this case turn largely their conversation.

Huebner began by asking, “[W]hat do I have to do if I want to dispute debt[?]” J.A. 369. “Just advise me what your dispute is[,] I can see if I can assist you with that,” responded Elliott. Id. Rather than answer, Huebner pivoted to a different question, “[H]ow do I get it off my credit report?” Id. Elliot replied, “Well, we need . . . work with what your dispute is order remove it, sir. So why are you disputing?” Id. Huebner repeated question: “I just can’t get it off my credit report[?]” Id. “No,” replied Elliott. “We just can’t delete account because consumer wants it deleted. need know why [you] want it deleted what [the] dispute is. I can assist you with your dispute here, sir.” Id. 369–70. Huebner tried third time: “I can’t get it off my card—my account without paying it?” Id. 370. “That’s what I said, sir,” Elliott corrected him. “I need know what your dispute is before I can just delete it you. . . . Why is it you want it?” Id.

At last, answered her (in manner speaking): “Because it nonexistent debt.” Id. Elliott asked what meant by “nonexistent” even suggested answers might give her: “Did you already pay Verizon? Did you never have Verizon?” Id. claimed understand what she meant declined to elaborate, eventually telling Elliott he call her back after reviewed “files” to see if he “find anything.” Id. at 372. Elliott asked whether still wanted to dispute debt. Huebner responded, “I told you I dispute it.” Id. at 373. “But,” Elliott said again, “[y]ou are just saying you are disputing. I need to know what you are disputing.” Id.

Restating debt “nonexistent” once more, then countered, “If you’re telling me[] you are not going to take my dispute, that’s fine. I’m just going try to see if I can get more information.” Id. 373–74. No, insisted Elliott, “I am trying help you with your dispute, sir, but you are really helping me help you.” Id. 374. Shortly after, ended call, saying might call back with “more information.” Id. He never did.

According Midland’s internal procedures managing debt disputes, when consumer calls Midland challenge debt, Midland may mark “disputed” report as such credit reporting agencies while Midland attempts confirm validity. But sometimes resolving difficult just worth it, which case, Midland will code disputed account number “289.” This denotes has deleted account, will cease all collection, reporting agencies will be informed this. day Huebner called, Midland marked Huebner’s account with “289” sent advisories major credit reporting agencies requesting that

Huebner’s debt be deleted from his credit reports. Midland wrote Huebner a letter informing him that had deleted debt, longer collect it, Midland had informed credit reporting agencies they should delete debt well.

II. Procedural History

A year later, Huebner sued Midland in United States District Court Eastern District New York (Cogan, J. ), alleging violated FDCPA. According first amended complaint, Elliott told him “that orally dispute” but must do so writing “that must have reason dispute a debt.” J.A. 51. sought represent all consumers who undergone similar treatment class action.

A

During the initial status conference, Poltorak, Huebner’s counsel, told that Huebner’s case was based exclusively on the recorded conversation and allegation Elliott had told Huebner must writing. Judge Cogan listened recording and discovered Elliott had said nothing of sort. Concluding Huebner and Poltorak had misrepresented call, which had “all earmarks setup,” ordered Huebner and Poltorak show cause why “action should be dismissed, fees [and] costs awarded U.S.C. 1692k(a)(3), sanctions issued pursuant Rule 11.” Huebner Credit Mgmt., Inc. F. Supp. 3d (E.D.N.Y. 2015). Poltorak moved disqualify Judge Cogan. As evidence judge’s purported bias, Poltorak pointed primarily judge’s

ownership few shares exchange ‐ traded fund, which held some shares Midland’s parent company Encore Capital Group, Inc. As sanctions, claimed “ha[d] recollection” making no verbal ‐ disputes ‐ allowed misrepresentation during Initial Status Conference. J.A. n.3. further insisted dismissal proper because they new theory for relief: never received a letter from informing had stopped collection on debt.

In a May decision and order, the denied the recusal motion. Credit Mgmt., Inc. No. CIV. (BMC), WL (E.D.N.Y. May 2015). judge’s purported financial interest, $9 total, did not create conflict because “ownership in mutual common investment fund holds securities,” like exchange traded fund at issue, does not create conflict interest “unless judge participates in management fund,” according Canon 3C(3)(c)(i) Code Conduct United States Judges Judicial Conference’s Committee Codes Conduct Advisory Opinion No. (2014). Id. *2–*3.

Next, sanctioned Poltorak $500 Fed. R. Civ. P. 16(f)(1)(B) failure participate initial status conference good faith. initially “raised one claim one claim only—that recorded conversation between plaintiff defendant ʹ s agent would show defendant advised plaintiff only writing, orally.” Id. *6. But after status conference, raised “new allegations [were] recently discovered, [were] relevant, have materially changed posture case they been disclosed the proper time,” thus frustrating the aim the conference procedure to help cases proceed expeditiously. Id. The court nonetheless did dismiss the action but instead scheduled conference to plan discovery on Huebner’s new theory. Id. *7.

B

Three months two amended complaints later, the court approved the parties’ joint protective order, which set out procedures preserving documents’ confidentiality. Any letter memorandum cited protected document was be filed seal. A party who wanted to challenge document’s designation “confidential” was attempt resolve with other party first. If parties could resolve it between themselves, challenging party then ask resolve it after ten days.

On November Huebner’s counsel wrote outline contested areas discovery. This letter, which cited Midland’s confidential information, filed open docket. ordered letter sealed warned parties sanction them if they failed resolve outstanding discovery disputes. counsel later requested, without first consulting defense counsel, revoke confidential designations certain documents. On November imposed a $350 sanction Fed. R. Civ. P. 16(f)(1)(C) for filing frivolous motion by failing follow protective order’s procedures for challenging documents’ confidential designations.

C

The district granted Midland’s motion summary judgment after almost year discovery. See Midland Credit Mgmt., Inc. No. CIV. (BMC), WL (E.D.N.Y. June 2016). Although third amended complaint outlined four distinct claims relief, his claims had essentially boiled down just two theories by summary judgment. First, argued Elliott’s questions about nature his dispute led him believe debt without cause, violation U.S.C. §§ 1692e(8) 1692e(10). Second, alleged reported debt credit reporting agencies without mentioning debt was disputed, violation U.S.C. §§ 1692e(5), 1692e(8), 1692e(10), sent letter falsely claiming notified reporting agencies disputed, thereby violating U.S.C. 1692e(2)(A). rejected both arguments. The explained the FDCPA does not make it illegal to ask consumer questions about the nature dispute when the consumer calls lodge one. Requesting sort information can help both collector and the consumer resolve the faster. To be sure, it might be unlawful badger consumer harassing browbeating questions “to deter from disputing debt.” Huebner WL *5. But here, it was Huebner, Elliott, who was “bobbing and weaving, evading questions and harassing collection agent, who was just trying do her job, find out what problem was, perhaps even resolve dispute.” Id. The then concluded material issue fact had been raised whether Midland informed reporting agencies deleted, record showed deleted debts are subset disputed debts. The entered final judgment on June 6, 2016.

D

On June 2016, moved sanction PC U.S.C. 1692k(a)(3), U.S.C. § inherent authority pursuing litigation bad faith. Specifically, sought recover “all reasonable costs and fees it expended in defending” suit. J.A. 1082. On November granted Midland’s motion in part. See Credit Mgmt., Inc. No. CIV. (BMC), WL (E.D.N.Y. Nov. 2016). The first noted PC’s conduct sanctionable under U.S.C. § “because it pursued claim had legal basis, it acted bad faith.” Id. at *4. What more, PC had “unnecessarily multiplied proceedings” with “baseless motion recusal,” “frivolous motion remove certain confidentiality designations,” frequent pre motion conference letters exceeded court’s page limit, all disregard Midland’s warnings seek fees costs if litigation continued. Id. at *4. also ordered pay fees U.S.C. 1692k(a)(3) inherent authority sanction. Id. at *5. Not only did Huebner— lawyer so experienced FDCPA he “whispered virtually every question into attorney ʹ s ear” during deposition, id. *5 n.3—change his legal theory several times, “attempt[ed] entrap [Elliott] into committing FDCPA violation” purpose pursuing lawsuit, id. *5. Indeed, suggested opposition sanctions called debt, but rather “test[]” its FDCPA compliance. Id. *5.

But Midland deserved some blame, determined, because it “did take its discovery obligations as seriously as should have,” having delayed document production several times. Id. *6. “Under these circumstances, substantial sanctions award only further distort what should have been minor litigation.” Id. therefore ordered and PC, jointly and severally, pay only “the attorneys’ fees and costs incurred connection with [Midland’s] motion sanctions and some portion [its] attorneys’ fees costs incurred connection with opposing [Huebner’s] class certification motion.” Id. On December after reviewing Midland’s bill fees, further reduced award only fees incurred connection its motion sanctions. This number ultimately calculated as $9,850, less than tenth full attorney’s fees costs incurred over course litigation.

DISCUSSION

On appeal, Huebner—as well as Poltorak, PC, who have joined case interested parties—challenge June final judgment three sanctions orders. For reasons follow, we AFFIRM the judgment of the district sanctions orders.

I first address the grant of summary judgment Midland.

“We review grant of summary judgment de novo , examining evidence in the light most favorable to, drawing all inferences favor of, non movant.” Blackman v. New York City Transit Auth. , F.3d (2d Cir. 2007) (per curiam) (quoting Sheppard Beerman F.3d 2003)). “Summary judgment is appropriate only if can be established ‘that there is genuine issue any material fact moving party entitled judgment as matter law.’” Sheppard 354–55 (quoting Fed. R. Civ. P. 56(c)). argues appeal erred granting summary judgment on each his two principal theories FDCPA: (1) Elliott’s questions about nature credit amounted “misleading” communication about debt; (2) failed report reporting agencies “disputed” debt. For following reasons, we disagree.

A

Section 1692e FDCPA prohibits all “false, deceptive, or misleading representation[s] means connection collection any debt.” Apart from blanket ban, § 1692e(8) more specifically renders unlawful collector knowingly to communicate (or threaten to communicate) false information, while § 1692e(10) bars “deceptive means . . . obtain information concerning consumer.” When interpreting § 1692e, we test whether communication is “deceptive” by asking how “least sophisticated consumer” interpret it. Eades v. Kennedy, PC Law Offices , F.3d 161, 173 (2d Cir. 2015) (quoting Easterling v. Collecto, Inc. , F.3d (2d Cir. 2012)). This “is objective standard, designed protect all consumers, ‘the gullible as well as shrewd.’” Ellis v. Solomon & Solomon, P.C. F.3d (2d Cir. 2010) (quoting Jacobson Healthcare Fin. Servs., Inc. 2008)).

Huebner’s first theory liability violated § 1692e when Elliott, responding call, supposedly “overwhelm[ed]” “hassl[ing]” questions as why he wished dispute debt. Br. Pl. ‐ Appellant 38. This sort questioning, contends, misleads consumers into believing they cannot their debts without explaining nature their dispute, deters them from disputing their debts violation § 1692e(8), allows collectors “to improperly extract information concerning consumer,” violation 1692e(10). Id. In short, according Huebner, soon as said words “I want dispute the debt,” Elliott obligated record the dispute end conversation; she thus violated FDCPA when she asked any follow up questions inquiring into nature Huebner’s dispute. disagree.

Like court, we assume without deciding at some point, debt collector’s questions about nature consumer’s dispute could become sufficiently inquisitorial violate FDCPA. But reasonable jury could conclude Elliott’s questions were misleading or abusive any way. See, e.g. Ellis (“While protecting those consumers most susceptible abusive debt collection practices, Court has been careful conflate lack sophistication unreasonableness.”). “least sophisticated consumer” would have interpreted Elliott as threatening Huebner, even conveying false information about his debt, but rather endeavoring learn more about Huebner’s dispute so could resolve it. After all, asked Elliott how “get [the debt] off [his] report.” J.A. 369. Had she simply accepted hung up phone point, have stayed report pending determination validity debt, rather than been deleted. And despite purported misunderstanding Elliott’s basic questions throughout call, Elliott remained patient, going so far feed him possible answers her questions. See Ellis , 591 F.3d at 135 (explaining that, although a “hypothetical least sophisticated consumer” lacks “the sophistication average, everyday, common consumer,” he “neither irrational nor a dolt” (internal quotation marks omitted) (quoting Russell Equifax A.R.S. , F.3d 1996)). Finally, even if Huebner had been at all confused about status his when he ended call, Midland sent him letter that day telling him that debt been deleted. thus agree with failed raise material

issue on theory Midland violated 1692e when Elliott politely asked what meant when said debt Verizon “nonexistent.” See id. (“[T]he FDCPA does aid plaintiffs whose claims are based on ‘bizarre idiosyncratic interpretations collection notices.’” (quoting Jacobson 90)); Jacobson F.3d (noting our “least sophisticated consumer” objective test “protects collectors from unreasonable constructions their communications”). properly concluded that there were genuine questions of fact as to whether Elliott misled Huebner with her questions, was right to grant summary judgment to Midland on this issue.

B

Huebner next argues that Midland violated 1692e(8), which requires debt collectors “to communicate that a disputed debt is disputed,” by failing to so inform credit reporting agencies. Nothing in the record, however, supports meritless allegation either. marked Huebner’s debt code “289” day called, meaning deleted account. also sent several messages to credit reporting agencies telling them to delete debt, as well as a letter informing this. Huebner has not pointed any record evidence creates a material question fact these issues. As a result, we hold summary judgment properly granted as Huebner’s second claim relief.

II

We next review the district court’s sanctions orders. As discussed above, the district sanctioned:

(1) under Federal Rule of Civil Procedure 16(f)(1)(B) for failing participate the initial status conference good faith; (2) under Rule 16(f)(1)(C) for breaching district court’s protective order;

(3) PC under 28 U.S.C. § 1927 for unreasonably multiplying district court’s proceedings;

(4) 15 U.S.C. 1692k(a)(3) inherent authority pursuing a frivolous legal claim bad faith. review imposition of sanctions abuse of discretion. See Virginia

Properties, LLC v. T Mobile Ne. LLC , 865 F.3d 110, 113 (2d Cir. 2017). “An abuse of discretion occurs when bases ruling on erroneous view law clearly erroneous assessment evidence, or renders decision cannot be located within range permissible decisions.” Star Mark Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd. , F.3d 170, 175 (2d 2012) (quoting Kiobel v. Millson , Cir. 2010) (quotation marks cognizable injury. See Gen. Tel. Co. Sw. v. Falcon U.S. (1982) (“[A] class representative must be part class possess same interest suffer same injury class members.” (internal quotation marks omitted) (quoting East Texas Motor Freight System, Inc. Rodriguez U.S. (1977))). alterations omitted)). When a lower court sanctions a litigant bad faith, court must outline its factual findings with “a high degree specificity.”

Virginia Properties F.3d (quoting Weinberger v. Kendrick , F.2d (2d Cir. 1982)). But more often than not, “the district court is better situated than appeals to marshal pertinent facts apply fact dependent legal standard informs its determination as to whether sanctions are warranted.” Id. (quoting Revson Cinque & Cinque, P.C. 2000)).

A first argues district abused discretion when it

sanctioned $500 under Rule 16(f)(1)(B). Rule 16(f)(1)(B) allows a district to sanction party failing to participate “in good faith” a pretrial conference. Rule 16(f)’s “explicit reference sanctions” reflects Rule’s intention “encourage forceful judicial management.” Fed R. Civ. P. 16(f) advisory committee’s note amendment. It vests with “discretion impose whichever sanction feels appropriate circumstances.” Id . This sanctioning power accords broader “‘inherent power’ responsibility manage [its] docket[] ‘so achieve the orderly and expeditious disposition cases.’” In re World Trade Ctr. Disaster Site Litig. , (2d 2013) (per curiam) (quoting Link Wabash R.R. Co. U.S. 630–31 (1962)). “In deciding whether sanction is merited, need find the party acted bad faith. fact that pretrial order was violated sufficient allow some sanction.” See 6A Charles Alan Wright et al. Federal Practice and Procedure ed. 2010).

Here, Poltorak informed case turned Elliott’s telling she only accept disputes made writing. Elliott, course, said such thing. Ordered show cause why should be sanctioned, denied having made misrepresentation, even though first amended complaint Poltorak’s statements January pre ‐ conference letter made very same allegation. Then changed subject, moving recuse Judge Cogan alleging first time failed tell reporting agencies disputed. Because Poltorak’s bait ‐ switch routine delayed litigation, sanctioned $500. See Fed. R. Civ. P. 16(a) (explaining pretrial conferences are meant “expedit[e] disposition action,” “discourag[e] wasteful pretrial activities,” “facilitate[] settlement”); see 6A Charles Alan Wright et al. Federal Practice and Procedure ed. 2010) (describing orders to pay fees costs Rule 16(f) as “[l]ess drastic sanctions”).

On appeal, and suggest that any references “writing” were inadvertent that, importantly, they never changed positions their legal theory. points out that both his first amended complaint his third amended complaint allege that Elliott refused accept his dispute unless he explained it. third amended complaint, he asserts, is altogether in line first, but just more specific explaining that Elliott refused acknowledge his dispute by asking questions about it. disagree.

As observed, Poltorak’s January letter “raised one claim one claim only—that recorded conversation between plaintiff defendant’s agent show defendant advised plaintiff that could only dispute writing, not orally.” WL *6. Poltorak’s representation hardly appears inadvertent, since can be found first amended complaint. See J.A. (alleging Elliott “stated Plaintiff orally debt”). It does hint theory simply asking any follow up questions posed problem. Nor, matter, does first amended complaint allege failed report as disputed to the reporting agencies: Poltorak made argument only after the court learned their no verbal ‐ disputes claim was false. We therefore do believe was clearly erroneous the district to conclude “intentionally misl[ed] the [c]ourt defendant as to theory the case,” WL *7, we discern abuse discretion in the district court’s decision to sanction under Rule 16(f)(1)(B).

B next address contention the erred

sanctioning on November Rule 16(f)(1)(C) breaching protective order. See Fed. R. Civ. P. 16(f)(1)(C) (authorizing courts to sanction parties who fail “obey a . . . pretrial order”). Under August protective order, parties were forbidden from quoting from confidential material documents filed open docket. A party who wanted challenge document’s designation “confidential” supposed try resolve dispute with other party first. If parties could resolve ten days, challenging party ask step in. In November filed letter sought challenge document’s confidential designations without first consulting Midland. Concluding Huebner’s letter was frivolous because he had ignored protective order’s procedures, court sanctioned him $350.

Huebner’s argument is not entirely clear, but he seems believe because did give opportunity withdraw offending submission, was denied fair “notice particular sanctions sought.” Reilly v. Natwest Markets Grp. Inc. F.3d 253, (2d Cir. 1999). But attorneys “have absolute right ’to be warned they disobey orders their peril.’” Id. (quoting Daval Steel Prods. v. M/V Fakredine, F.2d (2d Cir. 1991)); see Fonar Corp. Magnetic Resonance Plus, Inc. 1997) (“As general rule, is obliged give a formal warning sanctions might be imposed violation court’s orders.”). What more, Huebner’s second violation protective order eight days: November filed letter on court’s open docket quoting from confidential documents. That same day, sealed letter warned parties failure resolve discovery disputes lead sanctions. November imposition sanctions consequently “was, should have been, entirely foreseeable to” Huebner. Reilly , 181 F.3d 270; see Koehl v. Bernstein , 740 F.3d 860, 863 (2d Cir. 2014) (affirming a sanctions order in part because district given litigant fair warning). We therefore discern abuse discretion in court’s decision.

C next address decision sanction PC under U.S.C. § 1927. Section 1927 allows a require an attorney “who so

multiplies proceedings any case unreasonably vexatiously . . . satisfy personally excess costs, expenses, attorneys’ fees reasonably incurred because such conduct.” This statute “imposes obligation attorneys throughout entire litigation avoid dilatory tactics,” provides courts cudgel use, their discretion, “to deter unnecessary delays litigation.” United States v. Int’l Bhd. Teamsters, Chauffeurs, Warehousemen & Helpers Am., AFL CIO F.2d (2d Cir. 1991) (quoting H.R. Conf. Rep. No. 96th Cong., 2d Sess. 8). “To impose sanctions under [§ 1927], must find clear evidence (1) offending party’s claims were entirely without color, (2) claims were brought bad faith—that is, motivated by improper purposes such harassment delay.” Kim v. Kimm , 884 F.3d 106 (2d Cir. 2018) (internal quotation marks omitted) (quoting Eisemann Greene , F.3d (2d Cir. 2000)). A may infer bad faith when party undertakes frivolous actions are “completely without merit.” In re E. 80th St. Equities, Inc. 2000) (quoting Int’l Bhd. of Teamsters F.2d 1345).

Here, cited numerous frivolous vexatious actions by Poltorak PC attorneys over course this litigation. Poltorak himself, example, had misrepresented Elliott told only debt writing. After pointed this out, moved recuse Judge Cogan, citing judge’s ownership stake common investment fund, even though Canon 3C Judicial Code Conduct Advisory Opinion expressly state sort financial interest does create conflict. PC later changed theory case, arguing first Elliott, by trying clarify Huebner’s bewildering answers her questions, somehow misled him, second failed report properly reporting agencies. At summary judgment, the district correctly concluded that the first claim “had basis in the FDCPA,” , 2016 WL 6652722, *4, and second was plainly untrue. It noted Poltorak PC time and time again filed letters exceeding court’s page limit ignored procedures set out court’s protective order. See generally Chambers v. NASCO, Inc. , 501 U.S. 52–53 (1991) (upholding “the assessment attorney ʹ s fees a sanction . . . disobedience ʹ s orders attempt defraud itself”). district thus good reason conclude PC “unreasonably vexatiously” multiplied proceedings this case under U.S.C. § 1927. Kim , F.3d 106. PC raise two principal challenges court’s fee award, neither which we find convincing. First, they both argue their principal claim relief—that asking any questions about nature a consumer’s a “misleading” statement FDCPA— was frivolous because turns a question law was previously “undecided Circuit.” Simmons v. Roundup Funding, LLC , F.3d (2d Cir. 2010). But legal theory may be frivolous even if we have never said so before. See, e.g. Gollomp Spitzer 2009) (upholding conclusion plaintiff’s argument frivolous when plaintiff failed cite any “on point” cases support of legal theory). And district found that “any reasonable reading of [Huebner]’s recorded call” with would show was specifically “trying trick [Midland] into not complying FDCPA.” , WL at *3 (emphasis original). see nothing clearly erroneous about this finding, thus nothing clearly erroneous about conclusion PC knew or should have known suit was devoid of merit. See, e.g. , Enmon , F.3d (“[A] claim entirely without color when it lacks any legal factual basis.” (internal quotation marks omitted) (quoting Schlaifer Nance & Co. v. Estate Warhol F.3d (2d Cir. 1999))). But even if this claim were not frivolous, it have been an abuse discretion award fees light PC’s “oppressive tactics” initial status conference “willful violations orders.” Dow Chem. Pac. Ltd. Rascator Mar. S.A. 1986).

Second, because did fully grant Midland’s motion sanctions, which requested award total fees costs, argues this motion meritless. And so, contends, was abuse discretion impose fee award reimbursed preparing motion. Cf. Hensley v. Eckerhart , 461 U.S. 436 (1983) (holding courts should not award fees under 42 U.S.C. § 1988 plaintiffs’ lawyers who achieve “only partial limited success”). But Midland’s motion was meritless. court agreed PC should be sanctioned for their bad faith conduct; just declined give large a sanction as it requested. See Enmon, F.3d 148 (upholding a sanctions award for cost litigating a sanctions motion because motion was “well founded,” even though district “denied [it] part”). therefore conclude district did abuse its discretion sanctioning PC under U.S.C. § 1927.

D

Finally, we examine decision sanction U.S.C. 1692k(a)(3) its inherent authority. Section 1692k(a)(3) allows sanction litigant bringing FDCPA suit “in bad faith purpose harassment.” A may also sanction litigant pursuant inherent authority “if there clear evidence [litigant’s] conduct” “(1) entirely without color (2) motivated by improper purposes.” Wolters Kluwer Fin. Servs., Inc. Scivantage 2009); see Chambers U.S. (holding such sanctions “vindicat[e] judicial authority without resort to more drastic sanctions available for contempt court” (quoting Hutto v. Finney U.S. n.14 (1978)).

Here, sanctioned Huebner 1692k(a)(3) and its inherent authority for same reasons as PC, noting that, as an attorney experienced in FDCPA litigation, Huebner played substantial role in crafting his case’s litigation strategy. has denied, for example, one point fed attorney all questions he asked deposition. suggested in opposition sanctions had called Elliott “test” Midland’s FDCPA compliance. The district interpreted this an admission been purposefully evasive during call an effort provoke FDCPA violation, we see clear error this determination. thus did abuse discretion determining Huebner’s decision initiate lawsuit “was meritless brought improper purposes,” fee award therefore appropriate. Kerin U.S. Postal Serv. 2000). arguments contrary are virtually identical PC’s outlined above, we reject them same reasons.

In sum, we conclude set forth sufficiently detailed factual findings establishing Huebner, Poltorak, PC brought frivolous case filed several frivolous motions bad faith. therefore well within discretion sanction them.

CONCLUSION have considered Huebner, Poltorak, PC’s remaining

arguments find them be without merit. Accordingly, we AFFIRM judgment court.

[1] record indicates Defendant Appellee Funding LLC purchased placed it Credit Management, Inc. servicing. purported contest fact below but, as correctly noted, raised material issue as point. In any event, immaterial which two affiliated defendants technically owned debt. For simplicity’s sake, we will refer both defendants collectively “Midland.”

[2] Because we are reviewing case part appeal from grant summary judgment Midland, facts outlined below substantive claims are either undisputed viewed light most favorable Huebner. See, e.g. Raspardo Carlone 2014).

[3] alleges never sent this letter did not, fact, inform agencies they should delete debt. agree has failed create genuine material fact concerning matter. See note infra .

[4] separately held that, even if lost merits, have declined certify proposed class. WL *7–10.

[5] As mentioned earlier, alleged below never sent letter, but evidence record, reasonable jury only find sent letter.

[6] For first time reply brief, argues there is a legally significant difference between informing reporting agency a “disputed” instructing agency delete debt. Whatever merits Huebner’s argument, we need not address it. See McCarthy SEC 2005) (declining consider “arguments not raised appellant’s opening brief, but only reply brief”).

[7] need consider challenge denial class certification because we hold matter law did suffer legally

[8] A may sanction law firm acts attorneys. See Enmon Prospect Capital Corp. 147–48 2012).

Case Details

Case Name: Huebner v. Midland Credit Mgmt., Inc.

Court Name: Court of Appeals for the Second Circuit

Date Published: Jul 19, 2018

Citation: 897 F.3d 42

Docket Number: 16-2363- cv (L)

Court Abbreviation: 2d Cir.