Erin Servs. Co., LLC. v Bohnet

[*1] Erin Servs. Co., LLC. v Bohnet 2010 NY Slip Op 50327(U) [26 Misc 3d 1230(A)] Decided on February 23, 2010 District Court Of Nassau County, Second District Ciaffa, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 23, 2010
District Court of Nassau County, Second District

Erin Services Co., LLC., Plaintiff(s)

against

Patricia Bohnet, S/H/A PATRICIA BONNET, Defendant(s)



19984/04



Eltman, Eltman & Cooper, P.C. 90 William Street, New York, NY 10038, attorney for Plaintiff

Patricia Bohnet, 15 Dorothy Place, Lynbrook, NY 11563, Defendant Pro se

Lawyers' Fund for Client Protection

Michael A. Ciaffa, J.

"High volume" debt collection law practices are subject to the same ethical rules as apply to lawyers handling any other civil litigation matter. While mistakes can be made by any law office, lawyers engaged in the collection of assigned debts seem especially prone to pursuing claims improperly, often at the expense of the most vulnerable members of our society.

On a case-by-case basis, improper litigation practices in such cases are typically corrected through vacatur of a default judgment and dismissal of the complaint. Sometimes, it turns out that the plaintiff has obtained judgment based upon faulty proof of service, and/or inadequate proof. The debts, in many cases, are quite old, having been "written off" long ago by the original creditor. Proof of assignment is usually lacking. And when the debtor asks for verification and documentation, the plaintiff rarely is in a position to provide it.

This matter, regrettably, involves a veritable "perfect storm" of mistakes, errors, misdeeds, and improper litigation practices by plaintiff's counsel, Eltman, Eltman & Cooper, P.C. Defendant, Patricia Bohnet, was the victim of these improper actions. As explained more fully below, plaintiff's counsel are being sanctioned for multiple acts of frivolous conduct throughout the course of this matter. On no fewer than 18 occasions, counsel failed to satisfy its ethical obligation under Rule 130. Based upon the record adduced before this Court, substantial sanctions, totaling $14,800.00, are wholly warranted.

HISTORY OF PROCEEDINGS[*2]

The Court file indicates that this assigned-debt lawsuit was commenced in August 2004, and resulted in a default judgment entered by the Clerk on October 21, 2004. Nearly five years later, by Order to Show Cause dated July 10, 2009, defendant Bohnet moved for an order vacating and setting aside the default judgment and dismissing the complaint.

This Court signed the Order to Show Cause based upon defendant's facially

meritorious affidavits, which raised bona fide issues respecting the underlying judgment. Among other claims, defendant presented sworn allegations concerning false and faulty service of process, the absence of notice and an opportunity to be heard before a judgment was entered, improper debt-collection practices, and plaintiff's failure to provide verification of the underlying debt in response to defendant's repeated requests.

The Order to Show Cause included an explicit direction requiring "Personal Appearance" by all parties. Notwithstanding this direction, plaintiff's counsel failed to appear on the return date, without excuse or explanation.

Defendant Bohnet appeared as required on the return date. After hearing testimony from her, in open court, I concluded, upon her affidavits and sworn testimony, that the 2004 default judgment had been obtained through a demonstrably false affidavit of service. That affidavit, on its face, claimed that defendant had been personally served at a certain Lynbrook address on July 30, 2004. However, defendant hadn't lived at that address since 1998. Moreover, defendant, in fact, had no actual notice of the action until June 2009, when she was contacted and harassed at her job by someone affiliated with plaintiff's counsel's office. Defendant repeatedly sought verification from plaintiff's counsel regarding the underlying alleged debt and the judgment plaintiff had obtained. Plaintiff's counsel were completely uncooperative and abusive to her.

In the face of defendant's sworn statements, counsel's failure to appear, and defendant's testimony in open court, I issued an order vacating the default judgment and dismissing the complaint with prejudice. My order specifically ordered counsel for plaintiff to appear for a hearing on sanctions under Rule 130 for frivolous conduct in connection with the prosecution of this action.

When the matter was next heard, a per diem attorney with no personal knowledge appeared in lieu of plaintiff's counsel. Defendant complained, at that time, that representatives of plaintiff's counsel had been continuing to hound her for payment of the alleged debt, through multiple calls to her home and cell phone. The latter acts took place after the Court had issued an order dismissing the action. The Court accordingly issued a further order directing counsel to refrain from calling defendant, and again directing counsel to appear for a sanctions hearing.

An inexperienced associate appeared on November 12, 2009, bringing with him little from his file. The associate had no proof from the firm's file establishing any of the facts underlying the claim. He had no proof that defendant once owed a debt to First USA, as alleged. He had no proof that defendant ever defaulted on any such debt. He had no proof that his firm's [*3]client Erin Services Co., LLC., had ever obtained a lawful assignment of any such debt. He had no proof that anyone actually provided defendant with notice of the assignment. He offered no proof that anyone from Erin Services ever contacted defendant, before bringing suit, attempting to collect the alleged debt. Although he claimed, in conclusory fashion, that his firm currently followed certain

procedures for verifying the address of persons they intended to sue, he could notdescribe the procedures followed in 2004, when defendant was first sued.

In the face of this meager presentation, defendant testified convincingly that her experience with Erin Services and its counsel had scared her. In order to contest its baseless claims, she was required to take off several days from work. And the continued calls she kept getting, after the judgment had been vacated, were extremely disturbing to her.

The proceedings on November 11, 2009, ended with a direction requiring counsel to produce its "complete" file, save privileged documents, for the Court's review. The Court's expectation was that the file would show, better than any other evidence, whether counsel had satisfied its ethical duty, at each step in the process, to move forward with the claim only if it had a valid factual and legal basis for doing so. Regrettably, counsel, once again, failed to produce its complete file, and it failed to present a further defense of its misconduct.

Instead of providing its complete file, counsel submitted a CD-ROM to the court, containing a jumble of computer entries. The submission raised more questions than it answered. Most notably, the computer entries show that in May 2004, the firm records incorrectly listed defendant's address as being in East Rockaway, New York. However, the following month, in June 2004, the records show an unexplained change from that address to a second incorrect address - her former residence in Lynbrook. The latter listing was apparently the factual predicate for sending the process server to defendant's former residence address, where service was purportedly made upon her, personally.

No explanation is offered for why the firm believed that one address or the other was the correct one. No proof of due diligence in investigating the accuracy of the different listings is submitted. The computer records are also notable for what they fail to include: namely, proof of the assignment of the original account by First USA, proof that defendant actually owed money on that account at the time of the assignment, and proof that plaintiff had a good faith basis for pursuing the claim at the time the action was commenced in 2004. Indeed, to this day counsel has failed to provide a scintilla of evidence that defendant was actually indebted to First USA many years ago, or that plaintiff Erin Services acquired a lawful assignment of a bona fide debt.

FINDINGS RESPECTING BASIS FOR SANCTIONS

Based upon the papers before me, the testimony submitted, and the absence of contrary evidence, from which an adverse inference may be drawn, the Court finds that plaintiff's counsel, [*4]Eltman, Eltman & Cooper, P.C., has engaged in the following frivolous and sanctionable conduct under Part 130 of the Uniform Court Rules:

1.Failing to properly investigate in 2004 whether defendant actually resided at the Lynbrook address listed on the summons;

2.Advising its process server, without making a diligent investigation, to make service at that address;

3.Failing to supervise/oversee its process server with respect to making proper service upon defendant;

4.Filing an affidavit of service that it knew or should have known included a false claim of personal service upon defendant;

5.Filing a "verified complaint" without investigating the factual basis for its claims that First USA extended credit to defendant, that defendant failed to make required payments, and that $3,158.68 was duly demanded by First USA and was then due and owing.

6.Filing a "verified complaint" without investigating whether First USA had duly and properly assigned all right, title and interest in the account to the plaintiff, Erin Services Co., LLC, prior to commencement of the action;

7.Failing to investigate whether plaintiff had taken an assignment of a claim for the sole purpose of bringing suit upon it, in violation of Judiciary Law §489;

8.Failing to investigate whether defendant had been given notice of the assignment before plaintiff commenced suit against defendant as an alleged assignee;

9.Filing with the complaint an affidavit from an assistant secretary of the plaintiff, falsely claiming "personal knowledge" of facts respecting the alleged underlying debt;

10.Requesting and obtaining a default judgment against defendant which it knew or should have known was supported by insufficient proof and/or

false and/or fraudulent affidavits;

11.Attempting to enforce a default judgment it knew or should have known was invalidly obtained;

12.Failing to investigate, in good faith, defendant's protests in 2009, that the judgment had been improperly obtained; [*5]

13.Failing to investigate, in good faith, whether the underlying claim had a valid factual and legal basis when filed, upon defendant's verification request in 2009;

14.Failing to appear in Court, as ordered, in response to defendant's order to show cause;

15.Disobeying the Court's order of dismissal by continuing efforts to collect the alleged debt from defendant following dismissal of the complaint;

16.Harassing and/or maliciously injuring defendant through phone calls to her home and cell phone following dismissal of the complaint;

17.Failing to send an attorney with knowledge of the facts to Court on the October 21, 2009 hearing date, causing its rescheduling;

18.Failing to produce counsel's complete file, as directed, in connection with the sanctions hearing.

SANCTIONS AWARDED

The sanctions to be awarded must, necessarily, be sufficient to deter the kind of egregious conduct presented. Keeping in mind the limits imposed by §130-1.2, the Court grants sanctions in the amount of $2,500.00 for the service of process-related violations (#1-4), $2,500.00 for failing to assess the legal and factual basis for the claim (#6-9), $2,500.00 for improperly obtaining and trying to enforce a default judgment against defendant (#10-11); $1,000.00 for delaying final resolution by ignoring defendant's protests and objections (#12-13), $1,000.00 for failures to appear in Court and/or sending persons lacking knowledge (#14 and 17); $500.00 for disobedience of the Court's order requiring production of plaintiff's complete file (#18); and $4,800.00 payable to defendant, directly, as compensation for being subjected to continued harassing and improper phone calls (#15-16) and for having to take time off from work to obtain judicial relief in this matter. Except for the last amount, the sanctions shall be payable to the Lawyers' Fund for Client Protection. All payments shall be made within

30 days.

SO ORDERED:

DISTRICT COURT JUDGE

Dated: February 23, 2010

CC:Eltman, Eltman & Cooper, P.C.

Patricia Bohnet, Pro se

Lawyers' Fund for Client Protection

MAC:ju 12/1/09