Attorney Elie Poltorak of Poltorak PC Sanctioned for Holding Back Theory of Debt Case

by

Andrew Keshner, New York Law Journal

An attorney who raised new allegations after an initial conference on his Fair Debt Collection Practices Act case has been sanctioned for not participating in the proceedings in good faith.

Eastern District Judge Brian Cogan slapped Elie Poltorak of Poltorak PC in Brooklyn with a $500 sanction in Huebner v. Midland Credit Management, 14-cv-6046, saying Poltorak was “apparently seeking to hold back his theory of the case for some later date.”

In a May 1 decision, the judge rebuffed as “frivolous” Poltorak’s bid to recuse Cogan premised on the judge’s statements about some Fair Debt Collection Practices Act suits and his alleged financial interest in the case.

Though Cogan did not fine Poltorak on the removal bid, he said it was arguable that motion was subject to sanctions. However, Cogan said the case would proceed “in the normal course” based on Poltorak’s new theory of the case.

Poltorak filed a putative class action on behalf of his client Levi Huebner, an attorney, which challenged Midland Credit Management for breaching the Fair Debt Collection Practices Act.

The suit said the debt collector wrongfully told Huebner during an October 2013 call that he could not orally dispute the debt.

At the initial status conference, Poltorak said his client’s case was solely based on the recorded conversation. He told Cogan that when he heard the recording, he would see that Huebner had been told incorrectly that a challenge could only be in writing.

Cogan heard the recording and issued an order to show cause on why he should not dismiss the case, award costs and mete out sanctions.

In the February order to show cause, Cogan said the case represented a “deliberate and transparent attempt by a sophisticated debtor to entrap a collection company into a technical violation. Even more problematically, plaintiff chose to bring this action even though there is a tape recording showing that the attempt at entrapment utterly failed.”

The judge noted the word “writing” was never mentioned in the call. He also noted it was undisputed that Midland Credit immediately sent a cessation letter and made no collection efforts.

In his order to show cause, Cogan said lawmakers created the statute to protect debtors from harassing collection calls and the law served an “important purpose” for a number of cases. But he said he saw the law’s use morphing into “something quite different than its original purpose would suggest.”

The majority of these cases, he said, are generated by a handful of attorneys who filed complaints “seiz[ing] on the most technical alleged defects in collection notices or telephone communications.”

These sorts of cases, Cogan said, “are often brought for the non-salutary purpose of squeezing a nuisance settlement and a pittance of attorneys’ fees out of a collection company, which it will often find cheaper to pay than to litigate.”

Cogan said the Huebner case went “beyond anything that the court has seen.”

The case involves a debt assumed by Midland Credit that originated at Verizon. Poltorak claims his client was improperly billed by Verizon, which failed to process a bill cancellation. Poltorak’s response also said Huebner maintained he did not get a cessation letter from Midland Credit.

Poltorak claimed Cogan’s impartiality on Fair Debt Collection cases was “easily questioned” because the judge owned shares in an exchange-traded fund, which had holdings in Midland Credit Management’ parent company.

Poltorak said Cogan also showed through his order to show cause and other remarks that he was not impartial.

The judge noted Poltorak took the time to go through his publicly filed financial disclosure reports.

“Had plaintiff done his research, he would have learned that I have no financial interest, as that term is defined in the Code of Conduct for United States Judges,” Cogan said, adding it was a “serious matter” for a party argue a judge had an undisclosed financial stake in a case.

The judge said his purported interest in the parent company through the exchange-traded fund amounted to about $9.

Even if he owned that sum in shares of the parent company, recusal was justified. But Cogan said the law was “quite clear” that judges owning shares in mutual funds or exchange-traded funds did not consequently own the securities within those investment vehicles.

Cogan said he did not know the questioned securities were held in the exchange traded fund or another portfolio until the recusal motion was filed.

The judge defended his general criticism of some Fair Debt Collection Practices Act cases. “Judges have to be free to be able to relate those kinds of observations without triggering recusal. The public, and indeed Congress, are entitled to have the perspective of judges who witness litigation abuse, and who are in a unique position to identify such abuses for the public,” he wrote.

In fact, he added that Eastern District Judge Raymond Dearie released a decision weeks ago saying the Fair Debt Collection Practices Act was evolving “into something dramatically different.”

The sanction focused on provisions of Federal Rules of Civil Procedure 16, which discuss the goals of initial conferences and require good faith cooperation from the parties to push along cases.

The case, however, will proceed. Cogan said the new allegations, disputed by the defendants, were not recently discovered, were relevant and would have changed the case posture.

“Plaintiff’s accusation of bias based on my prejudging the case is thus particularly ironic since the order to show cause was premised on an entirely different description of his claim than he now asserts,” Cogan said.

Poltorak could not be reached for comment.

Midland Credit Management is represented by Matthew Johnson and Richard Lane Jr., associates at Marshall Dennehey Warner Coleman & Goggin.

Johnson declined to comment.

Read more: http://www.newyorklawjournal.com/id=1202725569650/Attorney-Sanctioned-for-Holding-Back-Theory-of-Debt-Case#ixzz3nOFBZDnu

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