Huebner v. Midland Credit Mgmt., Inc.
Huebner v. Midland Credit Mgmt., Inc.
Opinion
Plaintiff-Appellant Levi Huebner ("Huebner") is an attorney who has litigated several cases under the Fair Debt Collection Practices Act ("FDCPA"),
Huebner's first amended complaint alleged that the Midland representative told him he could dispute his debt only in writing and then only if he gave cause for his dispute. Huebner's then-attorney, Interested Party-Appellant Elie C. Poltorak ("Poltorak"), repeated this allegation in a January 28, 2015 letter to the district court. During an initial status conference, Poltorak further assured the district court that Huebner's recording would show that Midland had told him that he could not dispute his debt orally. But upon listening to the recording of Huebner's call, Judge Cogan of the United States District Court for the Eastern District of New York learned that this allegation was false. The court sanctioned Poltorak $500 for failure to participate in the initial status conference in good faith.
To keep his case alive, Huebner amended his complaint twice more. His third amended complaint ultimately alleged that Midland had made multiple false or misleading representations in violation of 15 U.S.C. § 1692e. Concluding that Huebner had not raised a material issue of fact as to any of his claims, the court granted summary judgment for Midland. It also ordered Huebner and Poltorak's law firm, Interested Party-Appellant Poltorak PC, to pay some of Midland's legal fees because, the court determined, Huebner had tried to trick Midland into violating the FDCPA during his initial call; his claim was meritless and prosecuted in bad faith; and both he and Poltorak PC had needlessly multiplied the proceedings with, among other things, a baseless motion for recusal and a pretrial motion filed in flagrant disregard of the terms of the parties' joint protective order.
Huebner, Poltorak, and Poltorak PC now appeal the district court's grant of summary judgment and three separate sanctions orders issued over the course of this litigation. For the reasons stated below, we conclude that the district court did not err in granting summary judgment, nor did it abuse its discretion in sanctioning Huebner, Poltorak, and Poltorak PC. The judgment below is therefore AFFIRMED.
BACKGROUND
I. Factual Background 2
In August 2013, Midland sent a collection letter to Huebner seeking to collect $131.21 from him. Verizon had originally billed Huebner for this sum in connection with work done on Huebner's phone line, but Huebner had refused to pay, advising Verizon that he should not have been charged for the work. Verizon told him that it would remove the charge from his invoice. On October 17, 2013, Huebner called Midland regarding the debt and secretly recorded the phone call. Huebner asked how he could dispute the debt. He was transferred to an employee named Emma Elliott ("Elliott"). The merits of this case turn largely on their conversation.
*47
Huebner began by asking, "[W]hat do I have to do if I want to dispute the debt[?]" J.A. 369. "Just advise me what your dispute is[,] and I can see if I can assist you with that," responded Elliott.
At last, Huebner answered her (in a manner of speaking): "Because it is a nonexistent debt."
Restating that the debt was "nonexistent" once more, Huebner then countered, "If you're telling me[ ] you are not going to take my dispute, that's fine. I'm just going to try to see if I can get more information."
According to Midland's internal procedures for managing debt disputes, when a consumer calls Midland to challenge a debt, Midland may mark the debt as "disputed" and report it as such to the credit reporting agencies while Midland attempts to confirm its validity. But sometimes resolving a difficult dispute is just not worth it, in which case, Midland will code the disputed account with the number "289." This denotes that Midland has deleted the account, that Midland will cease all collection, and that the credit reporting agencies will be informed of this.
The day Huebner called, Midland marked Huebner's account with "289" and sent advisories to the major credit reporting agencies requesting that Huebner's debt be deleted from his credit reports. Midland wrote Huebner a letter informing him that it had deleted his debt, would no longer collect it, and that Midland had informed the credit reporting agencies that they should delete the debt as well. 3
II. Procedural History
A year later, Huebner sued Midland in the United States District Court for the *48 Eastern District of New York (Cogan, J. ), alleging that Midland violated the FDCPA. According to Huebner's first amended complaint, Elliott told him "that he could not orally dispute" his debt but must do so in writing and "that he must have a reason to dispute a debt." J.A. 51. Huebner sought to represent all consumers who had undergone similar treatment in a class action.
A
During the court's initial status conference, Poltorak, Huebner's counsel, told the court that Huebner's case was based exclusively on the recorded conversation and on the allegation that Elliott had told Huebner that he must dispute his debt in writing. Judge Cogan listened to the recording and discovered that Elliott had said nothing of the sort. Concluding that Huebner and Poltorak had misrepresented Huebner's call, which had "all the earmarks of a setup," the court ordered Huebner and Poltorak to show cause why the "action should not be dismissed, with fees [and] costs awarded under 15 U.S.C. § 1692k(a)(3), and sanctions issued pursuant to Rule 11."
Huebner v. Midland Credit Mgmt., Inc.
,
Huebner and Poltorak moved to disqualify Judge Cogan. As evidence of the judge's purported bias, Huebner and Poltorak pointed primarily to the judge's ownership of a few shares in an exchange-traded fund, which held some shares of Midland's parent company Encore Capital Group, Inc. As to sanctions, Poltorak claimed that he "ha[d] no recollection" of making the no-verbal-disputes-allowed misrepresentation during the Initial Status Conference. J.A. 192 n.3. Huebner and Poltorak further insisted that dismissal was not proper because they had a new theory for relief: that Huebner never received a letter from Midland informing him that it had stopped collection on his debt.
In a May 1, 2015 decision and order, the district court denied the recusal motion.
Huebner v. Midland Credit Mgmt., Inc.
, No. 14 CIV. 6046 (BMC),
Next, the court sanctioned Poltorak $500 under Fed. R. Civ. P. 16(f)(1)(B) for failure to participate in the initial status conference in good faith. Poltorak had initially "raised one claim and one claim only-that the recorded conversation between plaintiff and defendant's agent would show that defendant advised plaintiff that he could only dispute his debt in writing, not orally." Id. at *6. But after the status conference, Poltorak raised "new allegations that [were] not recently discovered, [were] relevant, and would have materially changed the posture of this case had they been disclosed at the proper time," thus frustrating the aim of the conference procedure to help cases proceed expeditiously. Id. The court nonetheless did not dismiss the action but instead scheduled a conference to plan discovery on Huebner's new theory. Id. at *7.
B
Three months and two amended complaints later, the district court approved the parties' joint protective order, which *49 set out procedures for preserving documents' confidentiality. Any letter or memorandum that cited a protected document was to be filed under seal. A party who wanted to challenge a document's designation as "confidential" was to attempt to resolve the dispute with the other party first. If the parties could not resolve it between themselves, the challenging party could then ask the court to resolve it after ten days.
On November 4, 2015, Huebner's counsel wrote the court to outline contested areas of discovery. This letter, which cited Midland's confidential information, was filed on the court's open docket. The court ordered the letter sealed and warned the parties that it would sanction them if they failed to resolve outstanding discovery disputes. Huebner's counsel later requested, without first consulting with defense counsel, that the court revoke the confidential designations of certain documents. On November 13, 2015, the court imposed a $350 sanction on Huebner under Fed. R. Civ. P. 16(f)(1)(C) for filing a frivolous motion by failing to follow the protective order's procedures for challenging documents' confidential designations.
C
The district court granted Midland's motion for summary judgment after almost a year of discovery.
See
Huebner v. Midland Credit Mgmt., Inc.
, No. 14 CIV. 6046 (BMC),
The district court rejected both arguments. The district court explained that the FDCPA does not make it illegal to ask a consumer questions about the nature of his dispute when the consumer calls to lodge one. Requesting that sort of information can help both the collector and the consumer resolve the dispute faster. To be sure, it might be unlawful to badger a consumer with harassing or browbeating questions "to deter him from disputing his debt."
Huebner
,
D
On June 13, 2016, Midland moved for the district court to sanction Huebner and Poltorak PC under 15 U.S.C. § 1692k(a)(3),
The court also ordered Huebner to pay fees under 15 U.S.C. § 1692k(a)(3) and the court's inherent authority to sanction.
But Midland also deserved some blame, the court determined, because it "did not take its discovery obligations as seriously as it should have," having delayed document production several times.
DISCUSSION
On appeal, Huebner-as well as Poltorak, and Poltorak PC, who have joined this case as interested parties-challenge the district court's June 6, 2016 final judgment and its three sanctions orders. For the reasons that follow, we AFFIRM the judgment of the district court and its sanctions orders.
I
We first address the district court's grant of summary judgment to Midland. "We review a grant of summary judgment
de novo
, examining the evidence in the light most favorable to, and drawing all inferences in favor of, the non-movant."
Blackman v. New York City Transit Auth.
,
A
Section 1692e of the FDCPA prohibits all "false, deceptive, or misleading representation[s] or means in connection with the collection of any debt." Apart from this blanket ban, § 1692e(8) more specifically renders it unlawful for a debt collector knowingly to communicate (or threaten to communicate) false credit information, while § 1692e(10) bars "deceptive means ... to obtain information concerning a consumer." When interpreting § 1692e, we test whether a communication is "deceptive" by asking how the "least sophisticated consumer" would interpret it.
Eades v. Kennedy, PC Law Offices
,
Huebner's first theory of liability is that Midland violated § 1692e when Elliott, responding to Huebner's call, supposedly "overwhelm[ed]" him with "hassl[ing]" questions as to why he wished to dispute his debt. Br. for Pl.-Appellant at 38. This sort of questioning, he contends, misleads consumers into believing that they cannot dispute their debts without explaining the nature of their dispute, deters them from disputing their debts in violation of § 1692e(8), and allows collectors "to improperly extract information concerning the consumer," in violation of § 1692e(10).
Like the district court, we assume without deciding that at some point, a debt collector's questions about the nature of a consumer's dispute could become sufficiently inquisitorial to violate the FDCPA. But no reasonable jury could conclude that Elliott's questions were misleading or abusive in any way.
See, e.g.
,
Ellis
,
We thus agree with the district court that Huebner failed to raise a material issue on the theory that Midland violated § 1692e when Elliott politely asked Huebner what he meant when he said that his debt with Verizon was "nonexistent."
See
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 the credit reporting agencies. Nothing in the record, however, supports this meritless allegation either. Midland marked Huebner's debt with the code "289" the day he called, meaning that it deleted the account. Midland also sent several messages to the credit reporting agencies telling them to delete the debt, as well as a letter to Huebner informing him of this. Huebner has not pointed to any record evidence that creates a material question of fact on these issues. 6 As a result, we hold that summary judgment was also properly granted as to Huebner's second claim for relief. 7
II
We next review the district court's sanctions orders. As discussed above, the district court sanctioned:
(1) Poltorak under Federal Rule of Civil Procedure 16(f)(1)(B) for failing to participate in the initial status conference in good faith;
(2) Huebner under Rule 16(f)(1)(C) for breaching the district court's protective order;
(3) Poltorak PC under28 U.S.C. § 1927 for unreasonably multiplying the district court's proceedings; and *53 (4) Huebner under 15 U.S.C. § 1692k(a)(3) and the district court's inherent authority for pursuing a frivolous legal claim in bad faith.
We review the imposition of sanctions for abuse of discretion.
See
Virginia Properties, LLC v. T-Mobile Ne. LLC
,
A
Poltorak first argues that the district court abused its discretion when it sanctioned him $500 under Rule 16(f)(1)(B). Rule 16(f)(1)(B) allows a district court to sanction a party for failing to participate "in good faith" in a pretrial conference. Rule 16(f) 's "explicit reference to sanctions" reflects the Rule's intention to "encourage forceful judicial management." Fed R. Civ. P. 16(f) advisory committee's note to 1983 amendment. It vests a district court with "discretion to impose whichever sanction it feels is appropriate under the circumstances."
Id
. This sanctioning power accords with a district court's broader " 'inherent power' and responsibility to manage [its] docket[ ] 'so as to achieve the orderly and expeditious disposition of cases.' "
In re World Trade Ctr. Disaster Site Litig.
,
Here, Poltorak had informed the court that the case turned on Elliott's telling Huebner that she would only accept disputes made in writing. Elliott, of course, said no such thing. Ordered to show cause why he should not be sanctioned, Poltorak denied having made the misrepresentation, even though Huebner's first amended complaint and Poltorak's statements in a January 28, 2015 pre-conference letter made the very same allegation. Then Poltorak changed the subject, moving to recuse Judge Cogan and alleging for the first time that Midland failed to tell credit reporting agencies that the debt was disputed. Because Poltorak's bait-and-switch routine delayed the litigation, the court sanctioned him $500. See Fed. R. Civ. P. 16(a) (explaining that pretrial conferences are meant to "expedit[e] disposition of the action," "discourag[e] wasteful pretrial activities," and "facilitate[ ] settlement"); see also 6A Charles Alan Wright et al. , Federal Practice and Procedure § 1531 (3d ed. 2010) (describing orders to pay fees or costs under Rule 16(f) as "[l]ess drastic sanctions").
*54 On appeal, Poltorak and Huebner suggest that any references to a "writing" were inadvertent and that, importantly, they never changed positions as to their legal theory. Huebner points out that both his first amended complaint and his third amended complaint allege that Elliott refused to accept his dispute unless he explained it. The third amended complaint, he asserts, is altogether in line with the first, but is just more specific in explaining that Elliott refused to acknowledge his dispute by asking him questions about it. We disagree.
As the district court observed, Poltorak's January 28, 2015 letter "raised one claim and one claim only-that the recorded conversation between plaintiff and defendant's agent would show that defendant advised plaintiff that he could only dispute his debt in writing, not orally."
Huebner
,
B
We next address Huebner's contention that the district court erred in sanctioning him on November 13, 2015 under Rule 16(f)(1)(C) for breaching the protective order. See Fed. R. Civ. P. 16(f)(1)(C) (authorizing courts to sanction parties who fail to "obey a ... pretrial order"). Under the district court's August 2015 protective order, the parties were forbidden from quoting from confidential material in documents filed on the open docket. A party who wanted to challenge a document's designation as "confidential" was supposed to try to resolve the dispute with the other party first. If the parties could not resolve the dispute in ten days, the challenging party could ask the court to step in. In November 2015, Huebner filed a letter with the court that sought to challenge a document's confidential designations without first consulting Midland. Concluding that Huebner's letter was frivolous because he had ignored the protective order's procedures, the court sanctioned him $350.
Huebner's argument is not entirely clear, but he seems to believe that because the district court did not give him an opportunity to withdraw the offending submission, he was denied fair "notice of the particular sanctions sought."
Reilly v. Natwest Markets Grp. Inc.
,
*55
That same day, the court sealed Huebner's letter and warned the parties that failure to resolve discovery disputes could lead to sanctions. The district court's November 13 imposition of sanctions consequently "was, or should have been, entirely foreseeable to" Huebner.
Reilly
,
C
We next address the district court's decision to sanction Poltorak PC under
Here, the district court cited numerous frivolous and vexatious actions by Poltorak PC attorneys over the course of this litigation. Poltorak himself, for example, had misrepresented to the court that Elliott told Huebner that he could only dispute his debt in writing. After the district court pointed this out, Poltorak moved to recuse Judge Cogan, citing the judge's ownership stake in a common investment fund, even though Canon 3C of the Judicial Code of Conduct and Advisory Opinion 106 expressly state that this sort of financial interest does not create a conflict. Poltorak PC also later changed its theory of the case, arguing first that Elliott, by trying to clarify Huebner's bewildering answers to her questions, had somehow misled him, and second that Midland failed to report Huebner's debt properly to the credit reporting agencies. At summary judgment, the district court correctly concluded that the first claim "had no basis in the FDCPA,"
Huebner
,
Poltorak PC and Huebner raise two principal challenges to the district court's § 1927 fee award, neither of which we find convincing. First, they both argue that their principal claim for relief-that asking any questions about the nature of a consumer's dispute is a "misleading" statement under the FDCPA-was not frivolous because it turns on a question of law that was previously "undecided in this Circuit."
Simmons v. Roundup Funding, LLC
,
Second, because the district court did not fully grant Midland's motion for sanctions, which requested that the court award its total fees and costs, Huebner argues that this motion was meritless. And so, he contends, it was an abuse of discretion to impose a fee award that reimbursed Midland for preparing this motion.
Cf.
Hensley v. Eckerhart
,
D
Finally, we examine the district court's decision to sanction Huebner under 15 U.S.C. § 1692k(a)(3) and its inherent authority. Section 1692k(a)(3) allows a district court to sanction a litigant for bringing an FDCPA suit "in bad faith and for the purpose of harassment." A court may also sanction a litigant pursuant to its inherent authority "if there is clear evidence that the [litigant's] conduct" was "(1) entirely without color and (2) motivated by improper purposes."
Wolters Kluwer Fin. Servs., Inc. v. Scivantage
,
*57
(quoting
Hutto v. Finney
,
Here, the court sanctioned Huebner under § 1692k(a)(3) and its inherent authority for the same reasons as Poltorak PC, noting that, as an attorney experienced in FDCPA litigation, Huebner played a substantial role in crafting his case's litigation strategy. Huebner has not denied, for example, that at one point he fed his attorney all the questions he asked at a deposition. Huebner also suggested in his opposition to sanctions that he had called Elliott to "test" Midland's FDCPA compliance. The district court interpreted this as an admission that Huebner had been purposefully evasive during the call in an effort to provoke an FDCPA violation, and we see no clear error in this determination. The district court thus did not abuse its discretion in determining that Huebner's decision to initiate this lawsuit "was meritless and brought for improper purposes," and that a fee award was therefore appropriate.
Kerin v. U.S. Postal Serv.
,
In sum, we conclude that the district court set forth sufficiently detailed factual findings establishing that Huebner, Poltorak, and Poltorak PC brought a frivolous case and filed several frivolous motions in bad faith. The district court was therefore well within its discretion to sanction them.
CONCLUSION
We have considered Huebner, Poltorak, and Poltorak PC's remaining arguments and find them to be without merit. Accordingly, we AFFIRM the judgment of the district court.
The record indicates that Defendant-Appellee Midland Funding LLC purchased the debt and placed it with Midland Credit Management, Inc. for servicing. Huebner purported to contest this fact below but, as the district court correctly noted, he raised no material issue as to the point. In any event, it is immaterial which of the two affiliated defendants technically owned the debt. For simplicity's sake, we will refer to both defendants collectively as "Midland."
Because we are reviewing this case in part on appeal from a grant of summary judgment to Midland, the facts outlined below as to Huebner's substantive claims are either undisputed or viewed in the light most favorable to Huebner.
See, e.g.
,
Raspardo v. Carlone
,
Huebner alleges that Midland never sent him this letter and did not, in fact, inform the credit agencies that they should delete the debt. We agree with the district court that Huebner has failed to create a genuine dispute of material fact concerning this matter. See note 5, infra .
The court separately held that, even if Huebner had not lost on the merits, it would have declined to certify Huebner's proposed class.
Huebner
,
As mentioned earlier, Huebner alleged below that Midland never sent him this letter, but on the evidence in the record, a reasonable jury could only find that Midland sent the letter.
For the first time in his reply brief, Huebner argues that there is a legally significant difference between informing a credit reporting agency that a debt is "disputed" and instructing the agency to delete the debt. Whatever the merits of Huebner's argument, we need not address it.
See
McCarthy v. S.E.C.
,
We need not consider Huebner's challenge to the district court's denial of class certification because we hold as a matter of law that Huebner did not suffer a legally cognizable injury.
See
Gen. Tel. Co. of Sw. v. Falcon
,
A court may sanction a law firm under § 1927 for the acts of its attorneys.
See
Enmon v. Prospect Capital Corp.
,
Reference
- Full Case Name
- Levi HUEBNER, on Behalf of Himself and All Other Similarly Situated Consumers, Plaintiff-Appellant, Poltorak PC, Elie C. Poltorak, Interested Party-Appellants, v. MIDLAND CREDIT MANAGEMENT, INC., Midland Funding, LLC., Defendants-Appellees.
- Cited By
- 113 cases
- Status
- Published