American Express v Nath

[*1] American Express v Nath 2011 NY Slip Op 50203(U) Decided on February 17, 2011 Civil Court Of The City Of New York, Richmond County Straniere, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 17, 2011
Civil Court of the City of New York, Richmond County

American Express, Plaintiff,

against

Charles Nath, Defendant



22507/07



Plaintiff

Mel S. Harris & Associates

5 Hanover Square, 8th floor

New York, NY 10004

Defendant (self represented)

Philip S. Straniere, J.

Plaintiff, American Express, commenced this action against the defendant, Charles Nath, alleging that the defendant owed for charges incurred on his credit card. Defendant defaulted in appearing and answering and on January 24, 2008 a default judgment was entered against the defendant in favor of American Express in the amount of $11,794.01 which included interest, costs and disbursements. Plaintiff was represented by Mel Harris & Associates, LLC in this litigation.

Thereafter a "civil judgment" on default was issued by the clerk of the court on January 30, 2008 in favor of LR Credit 14, LLC in the amount of $11,835.92. The document lists Mel Harris & Associates, LLC as the attorney of record. In December 2009, defendant filed an order to show cause seeking to vacate his default. Service of the motion was made upon Mel Harris at the address appearing in the court file. On January 13, 2010, defendant's motion was granted without the court receiving any written opposition. The court issued an order vacating both defendant's default and any restraining notices or income executions, allowing the judgment to stand as security and permitting the defendant to file an answer. Defendant filed an answer with the court and served a copy on named counsel alleging that he was never properly served and that he did not owe the debt. In his affirmation in support of an order to show cause he denied owing American Express any money. [*2]

As the defendant did not have an attorney, the case appeared on the trial calendar for self-represented individuals initially on January 26, 2010. It was adjourned to May 4, 2010, October 5, 2010 and then to February 8, 2011. On February 8, 2011, counsel for Mel Harris & Associates, LLC appeared and informed the court that they were no longer counsel for the plaintiff. As a result of that, the court on the second call of the calendar, dismissed the plaintiff's action and issued an order vacating the default and permanently lifting any stays and restraining notices previously served on his bank accounts or garnishments served upon his employer.

A review of this file revealed several substantial problems. First, there is no record of an assignment of the judgment from American Express to LR Credit 14,LLC. If no such assignment had been made and the clerk made an error in the caption, then why was there no attempt by anyone on behalf of the plaintiff to correct the court file? Discussion with the parties at the bench leads to the conclusion that American Express is the proper plaintiff and the parties were proceeding with that as the fact. An order was subsequently issued directing the clerk to correct the paperwork in the file to eliminate LR Credit 14, LLC as the plaintiff.

Second, no matter which is the correct entity to be designated as plaintiff, Mel Harris & Associates, LLC, is listed as the attorney of record. There is nothing in the file to indicate that Mel Harris is no longer counsel. If that law firm has been relieved as attorney of record, some notice should have been given to the court and to the defendant. Although it is a common practice in the consumer debt industry to sell delinquent accounts faster than George Steinbrenner would send a rookie pitcher back to the minors after one bad outing, no such right exists for attorneys.

In fact, the Civil Practice Law & Rules sets forth a procedure to follow in order for an attorney to be relieved as counsel in litigation. CPLR §321(b) provides:

(b) Change or withdrawal of attorney. 1. Unless the party is a person specified in section 1201, an attorney of record may be changed by filing with the clerk a consent to the change signed by the retiring attorney and signed and acknowledged by the party. Notice of such change of attorney shall be given to the attorneys for all parties in the action or, if a party appears without an attorney, to the party.2. An attorney of record may withdraw or be changed by order of the court in which the action is pending, upon motion on such notice to the client of the withdrawing attorney, to the attorneys for all other parties in the action or, if a party appears without an attorney, to the party, and to any other person, as the court may direct.

Counsel in the current action has filed neither a consent to change attorney nor a motion to be relieved as required by the statute. The situation presented in this case is not unique. On a regular basis counsel for a creditor in a consumer credit transaction will inform the court that they are no longer representing the plaintiff because either the debt has been assigned to a new creditor or the law firm has lost the account. Neither occurrence relieves the attorney from his or her obligation to comply with the CPLR.

There are in fact serious implications from the failure to comply with the statute. First, the law firm is still legally "in the case" as counsel for the plaintiff with all attendant legal and ethical obligations attaching and requiring all notices to be directed to the named counsel.

Second, the plaintiffs are almost always corporate entities which CPLR §321(a) requires to be represented by counsel. This requirement has been extended to limited liability companies as well [Michael Reilly Design, Inc., v Houraney, 40 AD3d 592 (2007)]. If designated counsel informs the court that it is no longer representing the corporate plaintiff for whatever reason and there has been no new counsel substituted, that attorney would not be relieved absent proof of compliance with the statute. If counsel has been relieved and the client has not designated a new attorney, the corporate plaintiff would be precluded from continuing the action. The court could either mark the case "off-calendar" subject to restoration when new counsel is obtained or dismiss the action in its entirety owing to the inability of the corporate plaintiff to proceed. If the attorney of record failed to comply with the CPLR procedure for substitution of counsel, and informed the court that the firm was no longer representing the plaintiff, then that lawyer might be subject to a malpractice claim from the client.

Third, a debtor seeking to vacate a default judgment either with or without the assistance of counsel would be sending notices to the wrong attorney. If there was no opposition to such an application, the plaintiff's judgment might ultimately be vacated and the action dismissed, not because of a meritorious defense but because of legal malpractice.

This court constantly encounters situations where judgments are assigned to a new creditor and there is no indication that new counsel has been substituted. As a result notices are being sent to an attorney who might rightly believe he or she has been relieved without them being forwarded to the plaintiff or new counsel. It would seem that if purchasers of consumer debt want to protect their interests, they must either designate new counsel along with the assignment or affirmatively indicate that the counsel of record is remaining.

Fourth, the failure to comply with the procedure for being relieved as counsel may also constitute a violation of the Rules of Professional Conduct [Rule 1.16].

Conclusion:

The court record indicates that Mel Harris & Associates remains the attorney of record in that there is no evidence that counsel complied with CPLR §321(b) for the proper substitution of counsel. As a result of no counsel appearing for the plaintiff in this action, plaintiff American Express' litigation against this defendant is dismissed with prejudice for failure to appear.

The foregoing constitutes the decision and order of the court. [*3]

Dated:

Staten Island, NYHon. Philip S. StraniereJudge, Civil Court

ASN byon