In Alcivar v. Enhanced Recovery Company, the United States District Court for the Eastern District of New York awarded nearly $37,000 in attorneys’ fees and costs to a debt collection agency over a Fair Debt Collection Practices Act claim that the plaintiff’s attorneys brought in bad faith.
Plaintiff Imelda Alcivar owed approximately $1,100 on an account that defendant Enhanced Recovery Company (“ERC”) serviced. Desiring to improve her credit score, Alcivar engaged credit specialist Tawanda Frazier. Without Alcivar’s authorization, Frazier telephoned ERC and informed ERC that Alcivar was disputing the debt. Frazier then asked ERC if the dispute should be submitted in writing or if the oral dispute was sufficient. ERC accepted the oral dispute but added that Alcivar should still submit a written dispute.
Based on these facts, a suit was filed by M. Harvey Rephen & Associates (“Rephen Firm”) under Alcivar’s name alleging that ERC violated the FDCPA prohibitions on communicating credit information that is known to be false and using deceptive means to collect a debt. See 15 U.S.C. § 1692e(8) & (10). According to the complaint, Alcivar had the right to orally dispute her debt, and ERC’s instruction to Frazier that Alcivar submit a written dispute was a false representation about that right.
In the Court’s words, “[d]iscovery proved contentious.” First, despite her central role in the matter, Frazier refused to comply with ERC’s subpoena. Second, Alcivar’s counsel denied ERC’s repeated requests to depose Alcivar. When ERC offered to extend discovery so that Alcivar could be deposed at her convenience, her counsel offered to stipulate to dismissal with prejudice. Determined to fight the baseless allegations, ERC’s counsel rejected the dismissal offer and persisted in its demand to depose Alcivar. Eventually, Alcivar’s counsel informed ERC that Alcivar would not appear for a deposition.
Thereafter, Magistrate Judge Lois Bloom ordered Alcivar to appear at a status conference. Alcivar did not show. Finally, Judge Bloom ordered an evidentiary hearing to explain Alcivar’s absence. At the hearing, Alcivar was surprised to learn that a court case was pending in her name. She testified that she had “no involvement in bringing the case, other than signing an initial retainer whose true purpose she did not understand.” She further was unaware of the discovery requests and interrogatories answered in her name. Alcivar stated that she “had no reason to dispute her debt. She simply fell behind on payments and wanted her credit repaired.”
Due to Frazier’s refusal to respond to a subpoena, the Court considered Frazier’s deposition testimony in another case regarding her relationship with the Rephen Firm. The Court summarized the testimony as follows: “Frazier would call debt collectors and ask them leading questions to elicit violations of the FDCPA. . . She would dispute the account in every instance, irrespective of any justification to do so. . . Conversations containing purported violations were then funneled to the Rephen Firm.”
Following the evidentiary hearing, the Court allowed the parties to dismiss the case with prejudice on the condition that ERC be permitted to subsequently move for attorneys’ fees. ERC then moved for attorneys’ fees under 15 U.S.C. § 1692k(a)(3), 28 U.S.C. § 1927, and the Court’s inherent authority.
The Court found that the facts compelled the conclusion that Alcivar’s counsel brought the case without their client’s knowledge, alleging facts that they knew or should have known to be false. A sanction consisting of ERC’s attorneys’ fees and costs was warranted. The Court specifically noted that one purpose of the FDCPA is “to protect debt collectors from nuisance lawsuits.” According to the Court, “[a] case more precisely tailored to violate this statute would be difficult to imagine.”
In summary, the Court observed that Alcivar’s counsel’s behavior was “not merely ‘harassment.’ . . . It is nothing less than an attempt to transform a consumer protection statute into an ATM machine.” Such an attempt justified granting the debt collector its attorneys’ fees and costs in their entirety.