NY Firm's Debt Collection Practice Violated Federal Law, Judge Finds

NY Firm's Debt Collection Practice Violated Federal Law, Judge Finds
The New York Law Journal by Noeleen G. Walder - October 8, 2009

A law firm that mass produced collection letters and litigation documents violated the federal debt collection act in a matter it filed a decade ago, a federal judge has ruled. In August 2000, Upton, Cohen & Slamowitz, which is now known as Cohen & Slamowitz, sued Arthur Miller, after he failed to respond to a letter signed by Michael Slamowitz. The letter gave Mr. Miller 30 days to contest a $1,678 balance he owed on a Lord & Taylor credit card. In finding the firm liable for violations of §1692(e) of the Fair Debt Collection Practices Act, Eastern District Judge Roslynn R. Mauskopf held in Miller v. Upton, Cohen & Slamowitz, 01-CV-1126, that the "attorney review practices prior to both the issuance of the debt-collection letter signed by Slamowitz and the commencement of legal action were inadequate for [FDCPA] purposes, thus rendering misleading these communications with Miller." The decision "digs a grave for attorneys" who send letters and then file suit on behalf of debt buyers with "no information, no documents, and no meaningful attorney review," said Brian L. Bromberg of the Bromberg Law Office, who has represented Mr. Miller for the past eight years. But Thomas A. Leghorn of Wilson Elser Moskowitz Edelman & Dicker, who represented Upton Cohen, said Judge Mauskopf "got it completely wrong." The evidence showed that "at every step of the procedure a lawyer was indeed involved," he said. In July 2000, after Lord & Taylor's outside counsel, Maryland-based Wolpoff & Abramson, made several unsuccessful attempts to collect Mr. Miller's debt, the firm referred the matter to the Long Island firm of Upton, Cohen & Slamowitz. On July 18, Upton, Cohen sent Mr. Miller, a New York state resident, a letter hand signed by Mr. Slamowitz, warning Mr. Miller he had 30 days to dispute the debt. When Mr. Miller failed to respond, the firm sued him for breach of contract and sought to recover $1,618 of the alleged debt and $324 in attorney's fees. After settling the debt with Lord & Taylor, Mr. Miller turned around and sued Wolpoff; Upton Cohen; and the National Attorney Network, a third-party exchange information service that made the referral between the two law firms. In 2001, then-Eastern District Judge Reena Raggi granted all of the defendants' motions for summary judgment. But on appeal, the U.S. Court of Appeals for the Second Circuit reversed and remanded to determine whether Wolpoff or Upton Cohen had conducted a sufficiently meaningful attorney review of Mr. Miller's file. Wolpoff subsequently settled with Mr. Miller, while Upton Cohen renewed its bid for summary judgment. In January 2007, Judge Raymond Dearie allowed Mr. Miller's suit to proceed, finding that Mr. Slamowitz had relied on Lord & Taylor's review of Mr. Miller's account and had conducted a "largely ministerial" review of the facts.

'Superficial Level of Review'

Last summer, during a two-day bench trial, Mr. Slamowitz's partner, David A. Cohen, maintained that the firm's procedures ensured that every debt collection matter referred to it underwent an additional level of attorney review. "This is not a claim that came into the office magically," Mr. Cohen testified, adding that the firm had been working with Lord & Taylor "for many years." In addition to the firm's internal review procedures, Mr. Cohen, according to the decision, "described his familiarity with and confidence in Wolpoff's debt collection policies." However, "notwithstanding Cohen's description and characterization of the screening procedures," Judge Mauskopf concluded that the firm's computer system allowed a debt collection letter to be generated "on little more than the debtor's identifying information, the client name, and the balance due." She held that the "superficial level of review undertaken by Mr. Slamowitz was insufficient under" §1692(e) of the debt collection act, which prohibits falsely representing or implying "that any individual is an attorney or that any communication is from an attorney." Judge Mauskopf concluded that simply reviewing "basic debtor information— the information equivalent of 'name, rank and serial number'—without more, is insufficient data on which to form a reasoned professional judgment as to the appropriateness of a collection action." In this case, the debt collection act would "at a minimum have required" Mr. Slamowitz to review data that he "wholly ignored," including Mr. Miller's underlying credit card agreement with Lord & Taylor and the store's client file.

At trial, Mr. Slamowitz conceded his "ignorance of two pivotal, though easily ascertainable facts: that Miller's credit card agreement was governed by Ohio law, and that Ohio law precluded" the firm's claim for attorney's fees, Judge Mauskopf wrote. She also pointed out that the firm's computer records confirmed Mr. "Slamowitz's complete lack of involvement" in the Miller case until Nov. 30, 2000—months after the Miller case commenced. Noting that Messrs. Cohen and Slamowitz issued "no fewer than 211 debt collection letters" on July 18, 2000, she said the volume of business by the firm, "coupled with practices followed in the Miller matter, supports the conclusion that debt collection letter and litigation documents were regularly mass-produced at [Upton Cohen] by non-lawyers at the push of a button." And the judge held that Lord & Taylor and Wolpoff's prior review of Mr. Miller's file did not absolve Upton Cohen's attorneys "of their professional obligations" to independently review the matter. Mr. Bromberg acknowledged that Judge Mauskopf's ruling is "somewhat limited" by a 2005 Second Circuit decision allowing a debt collection law firm to limit its liability by including a disclaimer on its letters stating that a file has not been reviewed by an attorney, but he said the decision nonetheless is "a very strong statement by the court that you must absolutely engage in a meaningful review, and not the mere pretense of a review" before you file a collection action. And although Mr. Miller's damages are capped at $1,000, Mr. Bromberg said Upton Cohen's "scorched earth" tactics could cost it hundreds of thousands of dollars in attorney's fees, which he contends it owes under the debt collection statute. However, Mr. Leghorn said the statute provides that attorney's fees must be reasonably related to the recovery obtained and the utility of the decision, which he said was limited. And he noted that Mr. Bromberg's fees go back to when he had multiple causes of action, the bulk of which were dismissed by the Second Circuit. Upton Cohen has not decided whether to appeal, Mr. Leghorn said. The court will hold an inquest to determine fees, but it has not yet been scheduled.