Source: https://www.schlamstone.com/edny/page/4/
Timestamp: 2019-04-18 18:34:09+00:00

Document:
Section 1692e of the FDCPA provides that a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. The sixteen subsections of Section 1692e set forth a non‐exhaustive list of practices that fall within this ban, including the false representation of the character, amount, or legal status of any debt. Because the list in the sixteen subsections is non‐exhaustive, a debt collection practice can be a false, deceptive, or misleading practice in violation of § 1692e even if it does not fall within any of the subsections of § 1692e. The question presented is whether the sending of a collection notice that states a consumer’s current balance, but does not disclose that the balance may increase due to interest and fees, is a false, misleading, or deceptive practice prohibited by Section 1692e. In considering this question, we are guided by two principles of statutory construction. The first principle is that, because the FDCPA is primarily a consumer protection statute, we must construe its terms in liberal fashion to achieve the underlying Congressional purpose. That purpose is to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses. We have consistently interpreted the statute with these congressional objects in mind.
The second principle is that, in considering whether a collection notice violates Section 1692e, we apply the least sophisticated consumer standard. In other words, we ask how the least sophisticated consumer—one not having the astuteness of a Philadelphia lawyer or even the sophistication of the average, everyday, common consumer—would understand the collection notice. Under this standard, a collection notice can be misleading if it is open to more than one reasonable interpretation, at least one of which is inaccurate.
Applying these principles, we hold that plaintiffs have stated a claim that the collection notices at issue here are misleading within the meaning of Section 1692e. A reasonable consumer could read the notice and be misled into believing that she could pay her debt in full by paying the amount listed on the notice. In fact, however, if interest is accruing daily, or if there are undisclosed late fees, a consumer who pays the current balance stated on the notice will not know whether the debt has been paid in full. The debt collector could still seek the interest and fees that accumulated after the notice was sent but before the balance was paid, or sell the consumer’s debt to a third party, which itself could seek the interest and fees from the consumer. Because the statement of an amount due, without notice that the amount is already increasing due to accruing interest or other charges, can mislead the least sophisticated consumer into believing that payment of the amount stated will clear her account, we hold that the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees. We think that requiring such disclosure best achieves the Congressional purpose of full and fair disclosure to consumers that is embodied in Section 1692e. It also protects consumers such as plaintiffs who may hold the reasonable but mistaken belief that timely payment will satisfy their debts.
A lot of media attention is being devoted to Apple’s fight with the U.S. Government over a California Magistrate Judge’s February 16, 2016, ex parte order requiring Apple to assist in the Government’s investigation of the San Bernardino mass shooting by disabling the password security features on the iPhone of one of shooters. But as EDNY Magistrate Judge James Orenstein notes in In re Order Requiring Apple, Inc. to Assist in the Execution of a Search Warrant Issued by This Court, 15-MC-1902 (EDNY. Feb. 29, 2016), the California case is only one of several—including the one before him—around the country that presents similar issues under the All Writs Act (the “AWA”). In a thorough, 50-page Memorandum and Order, Magistrate Judge Orenstein denied the Government’s motion to compel assistance from Apple, thereby providing one of the first reasoned legal decisions in an important privacy vs. security societal debate.
The facts in the case before Magistrate Judge Orenstein are much more routine than those arising from the San Bernardino attack. It is precisely because of the adage that ‘hard cases”—like ones involving terrorism and national security—can make “bad law,” that Apple has pushed for consideration of the reach of the AWA in everyday criminal cases like this one. Here, the Government had obtained warrants in 2014 to arrest and search the residence of Jun Feng, a Queens resident, suspected of conspiracy to traffic in methamphetamine. Feng was arrested, indicted and one year later pled guilty. In executing the original search warrant, the DEA had seized (among other things) Feng’s iPhone 5s. Shortly before Feng’s guilty plea, the Government obtained another search warrant—this time to search Feng’s devices, including his iPhone—as part of its continuing investigation into Feng and his co-conspirators. The DEA and FBI were stymied, however, by the iPhone’s password security features which, the Government alleged, threatened to damage the data on the device if the federal agents were to query it without Apple’s technical assistance. Apple refused to assist without a “lawful order” of a court requiring it to do so. The Government applied to the EDNY for such an order under the AWA. At first, Apple provided minimal opposition and the matter languished for several months; however, after its loss in the California case on February 16, 2016, Apple pushed for a reasoned decision on the AWA in New York and it got one.
The AWA, only modestly rephrased since enacted by the first Congress as part of the Judiciary Act of 1789, today states that Article III courts ‘may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” 28 U.S.C. §1651. Magistrate Judge Orenstein denied the Government’s application first, for failing to meet the statutory requirement of being “agreeable to the usages and principles of law” and, second, as a matter of judicial discretion based on the statute’s permissive “may” language.
On the “usages and principles of law” issue, the Magistrate noted that in 1994 Congress had passed the Communications Assistance for Law Enforcement Act (“CALEA”), which provides a fairly “comprehensive legislative scheme” on the extent to which private telecommunications carriers and information service providers are required to assist government agents in law enforcement matters. The Court found that the absence “from that scheme of any requirement that Apple provide the assistance sought here implies a legislative decision to prohibit the imposition of such a duty.” Slip op. 16-20. It further held that the Government had failed in its affirmative obligation to cite other “usages and principles of law” where Congress had empowered the federal courts to compel private entities (as opposed to regulated utilities such as phone companies) to assist in law enforcement. The Magistrate declined to read the AWA as a broad legislative grant to allow any and all orders necessary or appropriate in aid of a court’s jurisdiction because such a reading “raises serious doubts about how such a statute could withstand constitutional scrutiny under the separation-of-powers doctrine.” Slip. op. 29.
The Court did not consider the constitutionality of the application of the AWA to the liberty or due process interests of citizens, such as Apple, that might be compelled against their will to assist in government investigations. However, Magistrate Judge Orenstein held that the Government’s application directed to Apple also failed under the three “discretionary factors’ used in AWA cases: (1) the “closeness” of the party being compelled to the criminal activity at issue; (2) the “burdensomeness” of the Government’s demands on compelled party and (3) the “necessity” of the Government’s obtaining the party’s assistance. Slip. op. 31-48. In brief, the Court reasoned that Apple bore no relationship to or responsibility for Feng’s criminal activity, that being required to disable security features of its products would adversely affect Apple’s business in the eyes of consumers, and that there was “conflicting evidence in the record about the availability, from private sources other than Apple, of technology that would allow the government to bypass the security on Feng’s device.” Slip op. 46.
At the time of this writing, the case is on appeal to District Judge Margo Brodie.
On December 9, 2015, the Second Circuit issued a decision in Rodriguez v. Anderson, 14-3828(L), dismissing an appeal because it was from a non-final order.
The historic rule in the federal courts has always prohibited piecemeal disposal of litigation and permitted appeals only from final judgments. Nonetheless, under Rule 54(b), a district court can determine, in its discretion, if an immediate appeal is warranted in the interests of justice by issuing a certification along with an explanation for its determination. But the exercise of this discretion must follow the procedures set out by the Rule, and the requirement of an express determination that there is no just reason for delay has not been taken lightly by this Circuit.
When there is a judgment in a consolidated case that does not dispose of all claims which have been consolidated, there is a strong presumption that the judgment is not appealable absent Rule 54(b) certification. In highly unusual circumstances, a litigant may be able to overcome this presumption and convince us that we should consider the merits of the appeal immediately, rather than waiting for a final judgment.
But the exception identified in Hageman has been restricted to highly unusual circumstances, for example, where the district court clearly intended to enter a final judgment but inadvertently failed to do so.
The parties do not point to any such highly unusual circumstances in this case. . . . [The plaintiff] never sought Rule 54(b) certification, and she does not identify any evidence that the district court intended to but inadvertently failed to certify its order for immediate review. Indeed, it is clear from that order that the district court anticipated that trial would go forward on [the plaintiff’s] claims, and the court scheduled a trial date during the follow-up status conference. . . . We have repeatedly noted that the district court generally should not grant a Rule 54(b) certification if the same or closely related issues remain to be litigated.
Accordingly, [the plaintiff’s] appeal is dismissed. [The plaintiff] may file a motion in the district court requesting Rule 54(b) certification in order to reinstate her appeal, but we note that the district court is under no obligation to grant her request. Respect for the historic federal policy against piecemeal appeals requires that a Rule 54(b) certification not be granted routinely.
On December 22, 2015, the Second Circuit issued a decision in Milan v. Wertheimer, 14‐3527‐CV, holding that court-appointed law guardians are not state actors for the purposes of Section 1983.
The question of whether law guardians so appointed are state actors has not previously been addressed by this Court.
Other circuits, in determining that law guardians are not state actors for the purpose of § 1983, have relied largely on Polk County v. Dodson, 454 U.S. 312 (1981). In Polk County, the Supreme Court held that public defenders do not act under color of state law when performing a lawyer’s traditional functions as counsel to a defendant in a criminal proceeding, notwithstanding the fact that the state pays for the services they provide. We believe that the analogy of a law guardian to a public defender is apt. Although both are supplied and funded by the state, each acts according to the best interests of the client with no obligation to the mission of the state. Accordingly, we hold that law guardians who act as attorneys for the child are not state actors for the purposes of suits filed pursuant to § 1983.
On November 24, 2015, the Second Circuit issued a decision in Eastern Savings Bank, FSB v. Thompson, 14-4520-CV, reversing the EDNY’s grant of summary judgment to a defendant in a foreclosure action on the ground that the plaintiff lacked standing to bring a foreclosure action because of defects in the chain of assignments of title.
Under New York law, a plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note. Notably, either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident. Thus, although assignment of a mortgage without the accompanying note does not provide the assignee with a right to the debt, the delivery or assignment of a note without the accompanying mortgage transfers the debt and can confer standing on the recipient.
. . . The record admits no genuine dispute that [the plaintiff] possessed the original note, indorsed in blank, prior to commencing this action in March 2012. . . . Further, defendants failed to raise any question of fact as to whether [the plaintiff] retained possession of the note.
When a plaintiff demonstrates that upon commencement of the action it possessed a note, indorsed in blank, by way of physical delivery, New York has consistently found the plaintiff to have sufficient interest in the enforcement of the debt to support standing in a foreclosure action.
On November 12, 2015, the Second Circuit issued a decision in Falco v. Justices of the Matrimonial Parts of the Supreme Court of Suffolk County, 15-863-CV, affirming the dismissal of an action against New York State Supreme Court justices on Younger Abstention Doctrine grounds.
In Falco, the plaintiff was ordered by a Suffolk County matrimonial judge to pay half the cost of court-appointed counsel for his children in a divorce proceeding. The plaintiff refused and brought a Section 1983 action in the EDNY “challenging the constitutionality of the New York laws that authorize State judges to order parents to pay for attorneys appointed for their children.” The defendants moved to dismiss on Younger abstention grounds. The EDNY granted the motion. The Second Circuit affirmed.
[o]n de novo review, however, we independently conclude that [the plaintiff’s] case presents circumstances that qualify as “exceptional” under Sprint and that Younger abstention was therefore warranted. [The plaintiff’s] federal lawsuit implicates the way that New York courts manage their own divorce and custody proceedings—a subject in which the states have an especially strong interest. In particular, [the plaintiff] challenges the State court’s order that he pay half the fees of the attorney appointed to represent his children in the divorce proceeding. Although there is some disagreement among New York courts about whether the fees for such court-appointed counsel should be borne by the public or by the parents, . . . there is no discernible disagreement that orders relating to the selection and compensation of court-appointed counsel for children are integral to the State court’s ability to perform its judicial function in divorce and custody proceedings. The circumstances of this case therefore clearly fall within Sprint’s third category: pending State civil proceedings involving orders uniquely in furtherance of the state courts’ ability to perform their judicial functions.
In Marshall v. Deutsche Post DHL, No. 13-CV-1471 (E.D.N.Y. Sept. 21, 2015), Judge Dearie reduced a claim for $500,000 in attorneys’ fees under the Fair Labor Standards Act, 29 U.S.C. § 216(b), to $370,236.50. The parties settled the case for $1.5 million while plaintiffs’ motion for certification as a collective action was pending. Plaintiffs’ claim for compensatory damages was $1,650,000.
Judge Dearie applied the lodestar method, under which a presumptively reasonable fee is determined by multiplying “a reasonable hourly rate by the reasonable number of hours required by the case.” Slip op. 10. He criticized the percentage-of-settlement method for determining fees sought by plaintiffs’ counsel as dependent on one of the prevailing “amorphous multi-factor tests” that “are often outcome driven”—”‘a list of factors without a rule of decision [that] is just a chopped salad.'” Slip op. 12 (quoting In re Synthroid Mktg. Litig., 264 F.3d 712, 719 (7th Cir. 2001)). The judge explained that “[i]t is almost impossible to know what amount of time, litigation magnitude, complexity, and risk justifies a 20 percent versus 30 percent fee award,” and noted that most of the cases awarding a 33 percent fee in employment class actions are “without persuasive force” because they “cite to ‘proposed orders drafted by the class action plaintiffs’ bar'” that reflect minimal, if any, review by judges. Slip op. 12 (quoting Fujiwara v. Sushi Yasuda Ltd., 58 F. Supp. 3d 424, 436 (S.D.N.Y. 2014)).
In applying the “modified” lodestar method, in which the court considers case-specific factors at the outset to determine the reasonable hourly rate (rather than once the lodestar fee is calculated), see Slip op. 14, the Court rejected plaintiffs’ counsel’s requested hourly rates of $400 to $750 for senior partners, $350 and $400, respectively, for a junior partner and senior associate, $190 and $375 for associates, and $85-$150 for paralegals. Judge Dearie observed that prevailing rates in FLSA cases in the Eastern District are “now well established” at $300 to $400 for partners, $200 to $300 for senior associates, and $100 to $150 for junior associates, though he questioned the wisdom of “treating Brooklyn and Manhattan as separate legal markets,” as the Second Circuit does. Slip op. 15 & n.3.
Regarding the number of hours spent, the Court concluded they were “overstated,” finding that many time entries were “vague and evidence redundant work.” Slip op. 20. The Court criticized the “top heavy” approach reflected in the senior partners having spent most of their time reviewing others’ work and “conferring with each other.” Id. Judge Dearie also criticized the firm’s block billing; billing in quarter hour increments, which “tends substantially to overstate” the time spent since “many tasks require only a short time span to complete,” slip op. 21 (internal quotation marks omitted); and billing travel time at full hourly rates, even though the general rule in the District “is that travel time is compensated at one-half the amount of time billed.” Slip op. 22. To “trim the excess” from the billing entries, Judge Dearie imposed an across the board percentage cut of 10%. Slip op. 22. The resulting fee award was $370,236.50. The Court also awarded the total amount of costs requested, some $33,300. See slip op. 23.

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