Corpac v. Rubin & Rothman, LLC et al
MEMORANDUM OF DECISION AND ORDER - The Court finds for the following: (1) The attorney Robert L. Arleo is directed to withdraw from this case within twenty (20) days of the date of this Order. He is also requested to advise the Court by letter when this withdrawal has been accomplished. (2) The request to refer this matter for disciplinary proceedings is denied. (3) The attorney for the plaintiff is directed to advise the Court by letter on or before February 8, 2013 as to his request for notice to possible class members, in accordance with the instructions set forth in Hecht. (4) The Clerk of the Court is directed to terminate Docket Number 27, 43 and 48. Ordered by Judge Arthur D. Spatt on 1/24/2013. (Coleman, Laurie)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
JOHN T. CORPAC, an individual; on behalf of
himself and all others similarly situated,
DECISION AND ORDER
CV 10-4165 (ADS)
- against RUBIN & ROTHMAN, LLC, a New York,
Limited Liability Company; and JOHN AND
JANE DOES NUMBERS 1 THROUGH 25,
A P P E A R A N C E S:
LAW OFFICES OF WILLIAM F. HORN
Attorney for the Plaintiffs
188-01B 71st Crescent
Fresh Meadows, New York 11365
BY: William F. Horn, Esq., of Counsel
RUBIN & ROTHMAN
Attorneys for the Defendant Rubin & Rothman
1787 Veterans Memorial Highway
Islandia, New York 11722
BY: Joseph Latona, Esq., of Counsel
ROBERT L. ARLEO, ESQ.
Attorney for the Defendant Rubin & Rothman
164 Sunset Park Road
Haines Falls, New York 12436
BROMBERG LAW OFFICE, P.C.
Attorneys for the Objector, Patrick Sejour
40 Exchange Place, Suite 2010
New York, New York 10005
BY: Brian L. Bromberg, Esq., of Counsel
CAMBA Legal Services
Attorneys for the Objector, Patrick Sejour
885 Flatbush Avenue, 2nd Floor
Brooklyn, New York 11266
BY: Matthew A. Schedler, Esq., of Counsel
SPATT, District Judge.
As stated by the Court in a prior Order, this case involves allegations by John T.
Corpac, on behalf of himself and a putative class (the “class” or “the plaintiffs”), that
Rubin & Rothman, LLC (“the defendant”) sent written collection communications that
falsely represented or implied that an attorney had meaningfully reviewed the plaintiff’s
account and was meaningfully involved with the decision to send the communication, in
violation of the federal Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et. seq.
This law suit was commenced on September 8, 2010. On March 3, 2011, the
parties notified the Court that they had settled the case. On January 16, 2012, the
parties filed a motion to certify the class and grant preliminary approval of the class
On June 25, 2012, the Court held a fairness hearing on the proposed settlement
of the case. Patrick Sejour (“Sejour” or “the objector”) opposed the settlement on the
grounds that: (1) there was a conflict of interest between counsel for the plaintiffs,
William F. Horn, Esq., of the Law Office of William F. Horn (“Horn” or “class counsel”)
and counsel for the defendant, Robert L. Arleo, Esq. (“Arleo”); (2) the terms of the
settlement relating to the size of the class; the defendant’s net worth; and the release of
claims were vague and unfair; and (3) the provision of the settlement providing for an
award of attorney’s fees for class counsel of $75,000 was excessive. The objector was
represented at this hearing by Brian L. Bromberg, Esq., of Bromberg Law Office, P.C.
(“Bromberg”) and Matthew A. Schedler, Esq., of CAMBA Legal Services (“Schedler”
and together with Mr. Bromberg, “objector’s counsel”).
At the conclusion of the hearing, the Court granted the parties an opportunity to
submit papers addressing the alleged conflict of interest involving Horn and Arleo. Also
reviewed in this decision is a charge of an alleged “kickback scheme” attributed to
Bromberg and a request for disciplinary proceedings against Bromberg, Schedler and
The Court will now review the evolving law suit, the proposed settlement and the
notice to potential class members events that proceeded this claim of “conflict of
interest” and alleged attorney misconduct.
The proposed settlement of this class action law suit is for the total sum of
$87,900, apportioned as follows:
To the named plaintiff, John T. Corpac consisting
of $1,000 as damages and $2,500 for his services
to the class members
To a charitable organization as a cy pres payment
For attorneys fees to plaintiff’s counsel
The Fair Debt Collection Practices Act, 15 U.S.C. § 1692K provides in relevant
§ 1692K. Civil Liability
(a) Amount of damages
Except as otherwise provided by this section, any debt collector who fails
to comply with any provision of this subchapter with respect to any person
is liable to such person in an amount equal to the sum of –
(1) any actual damage sustained by such person as a result
of such failure;
(2)(A) in the case of any action by an individual, such
additional damages as the court may allow, but not
exceeding $1,000; or
(B) in the case of a class action, (I) such amount for each
named plaintiff as could be recovered under subparagraph
(A), and (ii) such amount as the court may allow for all other
class members, without regard to a minimum individual
recovery, not to exceed the lesser of $500,000 or 1 per
centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the
foregoing liability, the costs of the action, together with a
reasonable attorney’s fee as determined by the court. On a
finding by the court that an action under this section was
brought in bad faith and for the purpose of harassment, the
court may award to the defendant attorney’s fees
reasonable in relation to the work expended and costs.
Under the provisions of this statute, the plaintiff would be entitled to damages in
the sum of $1,000. The other class members would be entitled to 1 per centum of the
net worth of the debt collector or the sum of $500,000 whichever is less. Here,
according to the plaintiff’s counsel the net worth of the defendant law firm is
approximately $960,000 and the settlement figure of $9,400 is almost the full value of
the statutory sum.
II. THE NOTICE ISSUE
The notice to the class agreed to by the plaintiff and the defendant is set forth in
the “Joint Motion For An Order Conditionally Certifying Class and Granting Preliminary
Approval of Class Action Settlement” submitted on January 16, 2012. The notice
agreed upon at page 10 is a “a summary advertisement notifying settlement class
members of the settlement in a weekday edition of the New York Post, which is a
publication with statewide distribution in the State of New York.” According to an
affidavit sworn to by one Lisa Modica, the principal clerk of the publisher of the New
York Post, a Notice of Class Action and Proposed Settlement was published in the New
York Post “once” on April 14, 2012.
In the letter from attorney Brian L. Bromberg dated June 22, 2012, he
complained of a “Deficient Notice.” In particular, Bromberg stated:
Second, the one-time publication notice given in the New
York Post was plainly not the “best notice that is practicable
under the circumstances, including individual notice to all
members who can be identified through reasonable effort.”
Fed.R.Civ.P. 23(c)(2)(B). Mr. Sejour did not learn of the
proposed settlement until today . . . Because this class
action arises from allegations concerning letters sent and
complaints served by Rubin & Rothman, there is no valid
excuse for not sending class notice by regular first-class
mail. Moreover, Rubin & Rothman does business statewide,
so publication notice through the New York Post is unlikely
to reach anyone outside of New York City. The method of
class notice chosen appears to have been calculated not to
apprise Mr. Sejour and the other class members of their
opportunity to opt out and object to this settlement.
With regard to the notice, in a letter from plaintiff’s counsel, William F. Horn,
dated August 18, 2012, he states the following:
I am Class Counsel in the referenced matter. Defendant’s
counsel, Robert L. Arleo, joins me in this letter.
Mr. Arleo and I believe it is our ethical duty to promptly
advise Your Honor of the ruling issued yesterday by the
Second Circuit Court of Appeals in the matter of Hecht v.
United Collection Bureau, Inc., 2012 U.S. App. LEXIS
17374. A copy of the Hecht decision is attached for the
Court’s convenience. In short, the Parties believe the
Second Circuit’s decision in Hecht raises due process
concerns with respect to the manner/frequency of notice
provided to the class in this case and, therefore, the Parties
believe Your Honor may wish to re-examine the Court’s
preliminary certification ruling.
Should the Court decide that additional class notice is
required, the Parties will thereafter engage in discussions as
to the proper course of revisionary action, if any, to
undertake in order to satisfy the mandates of the recent
In Hecht v. United Collection Bureau, Inc., 691 F.3d 18 (2d Cir. Aug. 17, 2012),
the plaintiff contended that she did not receive constitutionally adequate notice of class
certification and settlement. The publication of the notice was in a single issue of USA
Today. The Second Circuit held that the single notice in a single publication did not
satisfy either due process or the provisions of Rule 23(b)(3). The opinion clearly states
that the single notice in a single publication, under these circumstances, is a due
process violation. In this regard, the Court stated:
Having established that Hecht was entitled to the protections
afforded under Shutts, we next consider whether the USA
Today notice satisfied due process requirements. We
conclude that it did not. To comport with due process, the
notice provided to absent class members must be “the best
practicable, ‘reasonably calculated, under all circumstances,
to apprise interested parties of the pendency of the action
and afford them an opportunity to present their objections.’”
Shutts, 472 U.S. at 812 (quoting Mullane v. Cent. Hanover
Bank & Trust Co., 399 U.S. 306, 314-15 (1950)). “[W]hen
notice is a person’s due, process which is a mere gesture is
not due process. The means employed must be such as
one desirous of actually informing the absentee might
reasonably adopt to accomplish it.” Mullane, 330 U.S. at
315. “The standard for the adequacy of a settlement notice
in a class action under either the Due Process Clause or the
Federal Rules is measured by reasonableness.” Wal-Mart
Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 113-14 (2d Cir.
We are aware of no case in our Circuit holding that a single
notice published in a single publication satisfied either due
process or Rule 23(b)(3). To the contrary, when courts have
approved notice by publication, they have tended to do so
where the notices either ran more than once or appeared in
more than one publication. See, e.g., In re Agent Orange
Prod. Liab. Litig., MDL No. 381, 818 F.2d at 167-68
(notification procedure included individual mailings and
various substitute notice, such as notice in national
publications and on radio and television); Handschu v.
Special Servs. Div., 787 F.2d 828, 833 (2d Cir. 1986)
(approving publication over a period of weeks in several
metropolitan New York newspapers); In re MetLife
Demutualization Litig., 689 F. Supp. 2d 297, 345, 349
(E.D.N.Y. 2010) (approving notice of settlement via
“publication over a two-week period, four times in each of
four widely read newspapers”); Buxbaum v. Deutsche Bank,
AG, 216 F.R.D. 72, 76-77 (S.D.N.Y. 2003) (notice adequate
where individual notice was “mailed to all class members
. . ., and also published in the national edition of the Wall
Street Journal and USA Today”); see also In re GAC Corp.,
681 F.2d 1295, 1300 (11th Cir. 1982) (notice “published
twice in 53 leading newspapers worldwide” satisfied due
Hecht persuasively argues that “aside from individual mailed
notice, the defendant could have also undertaken a more
extensive notification campaign - - including electronic
media, local publications, and the like - - that would have
been more than the ‘mere gesture’ exemplified by the onetime USA Today notice.” We agree. Reasonableness is
admittedly a flexible standard, but to hold that this notice
satisfied due process would rob the words of the Supreme
Court of their meaning. It is difficult to imagine a manner of
providing notice more akin to the “mere gesture” deprecated
in Mullane, 339 U.S. at 315, or less “reasonably calculated
. . . to apprise interested parties of the pendency of the
action,” Shutts, 472 U.S. at 812 (internal quotation marks
omitted), than the Gravina notice.
Another consideration persuades us further that the USA
Today notice did not satisfy due process. In assessing the
adequacy of class action notice, we have sometimes
considered whether any class members responded to the
notice. See, e.g., Handschu, 787 F.2d at 833. Thus, we
rejected a due process challenge to the notice of settlement
in Handschu in part because “[w]here . . . the notice of
settlement prompts widespread reaction from class
members, it would appear that the notice has served its due
process.” Id. Here, in contrast - - and unsurprisingly, given
the quality of the notice - - no class member came forward.
691 F.3d at 254-55.
In the defendant’s Reply Memorandum of Law by attorney Arleo, he states the
Based upon Hecht v. United Collection Bureau, 2012 U.S.
App. LEXIS 17374, a decision issued by the Second Circuit
Court of Appeals on August 17, 2012 which directly affects
the notice provision of the CSA herein, the parties are now
obligated to withdraw their request for final approval of the
CSA. The parties will soon present the Court with a revised
plan of providing notice to the class members so as to
satisfy the Hecht mandates.
Accordingly, the Court withdraws its previous denial of the objector’s application
to vacate the notice to potential class members. The Court finds that the single notice
in the single New York Post publication violated due process requirements and is
determined to be insufficient and invalid. The attorney for the plaintiff is directed to
determine a proper and constitutionally valid method of notice, by a renewed
application to the Court and counsel on or before February 8, 2013. Also, final approval
of the settlement will await the results of the renewed application by counsel, the
resolution of the conflict of interest issue, and the new method of notice to the potential
III. THE CONFLICT OF INTEREST ISSUE
In the letter dated June 22, 2012, from Bromberg, the attorney for Patrick Sejour,
the objector, he contends that William F. Horn, cannot serve as class counsel for the
plaintiff because he has a conflict of interest that cannot be remedied. Bromberg
asserts that Horn failed to disclose that he is a “client of Robert Arleo, Esq., counsel for
defendant Rubin & Rothman, LLC, and that he and Mr. Arleo have co-counseled
numerous FDCPA cases.” Bromberg further asserts that Arleo represented Horn as
plaintiff in a class action law suit in 2009. Also after 2009, Arleo and Horn “have cocounseled in at least 25 individual and class action FDCPA cases, at least some of
which remain open.” Bromberg cites fourteen cases in which Horn and Arleo cocounseled, and says that “this is only a partial list of the cases that Mr. Horn and Mr.
Arleo have co-counseled.” According to Bromberg’s letter, a partial list of the cases in
which Arleo and Horn have co-counseled since 2009 is as follows:
Arleo and Mr. Horn have co-counseled dozens of individual
and class action FDCPA cases, at least some of which
remain open. See, e.g., Felix v. Capital Management v.
Capital Management Services, L.P., WDNY, No. 11-cv-7
(RJA)(LGF); Felix v. Mercantile Adjustment Bureau, LLC,
WDNY, No. 11-cv-8 (WMS)(JJM); Felix v. Mercantile
Adjustment Bureau, LLC, WDNY, 11-cv-296 (WMS)(JJM);
Felix v. Northstar Location Services, LLC, WDNY, 11-cv-166
(JJM); Harb v. Northstar Location Services, LLC, WDNY,
No. 11-cv-253 (JJM); Harrigan v. Receivables Performance
Management, LLC, NDNY, No. 09-cv-1351 (RFT); Harrigan
v. Weltman, Weinberg & Reis Co., LPA, NDNY, No. 11-cv268 (GTS)(DRH); Inman v. QAR, LLC, WDNY, No. 11-cv295 (RJA); Kavalin v. CR-One Solutions, WDNY, No. 11-cv6 (WMS)(HBS); Kavalin v. Global Credit & Collection Corp.,
WDNY, No. 10-cv-314(JTC); Krug v. Mercantile Adjustment
Bureau, LLC, WDNY, No. 10-cv-689 (WMS)(LGF); Leidl v.
Tritium Card Services, Inc., EDNY, No. 10-cv-3599
(LDW)(ETB); Meloskie v. Northstar Location Services, LLC,
WDNY, No. 11-cv-9 (WMS)(JJM); Pawelczak v. Cardworks
Servicing, LLC, EDNY, No. 10-cv-3600 (JFB)(AKT). This is
only a partial list of the cases that Mr. Horn and Mr. Arleo
Bromberg concludes his conflict of interest argument by stating that “At the very least,
Mr. Horn and Mr. Arleo’s relationship raises questions as to whether the settlement –
which provides no tangible benefit to the class members – was negotiated at arms
In response to the Bromberg conflict contentions, Horn asserts that Arleo was
not the attorney for the defendant at the time of the settlement in this case; Arleo had
nothing to do with the settlement; and he never spoke to Arleo about the settlement.
According to Horn, the attorney representing the defendant at the inception of the law
suit and who was solely involved in the settlement filed with the court on March 1, 2011
was Joseph A. Latona, Esq. Both Horn and Arleo state that Arleo was not brought into
the case as another attorney for the defendant until December 21, 2011. Apparently,
Arleo was added as additional counsel for the defendant because, as stated by attorney
Latona in his affirmation, he “sought his professional advice regarding procedural class
action issues as I do not typically litigate class action matters.” Latona further states
that, “At no time, however, did Mr. Arleo ever seek to influence settlement discussions
which were occurring between Mr. Horn, Mr. Rothman and me, nor did he otherwise
request to participate in the settlement negotiations.”
So that the issue is this: Arleo and Horn have been associated together as
counsel in at least 23 other cases; Arleo represented Horn in another case, and they
obviously have a close relationship. When this case commenced Joseph A. Latona
represented the defendant Rubin & Rothman, LLC. Latona and Horn negotiated a
settlement in March 2011, very shortly after the commencement of this action.
Apparently, Arleo was not involved in the settlement in any way. Arleo first became
involved nine months later, on December 21, 2011, when he filed his notice of
appearance as another attorney for the defendant.
Perhaps, if the class notice was effective and the settlement negotiated by Horn
and Latona was approved, the close relationship between Horn and Arleo would not
have been relevant and could have been permitted. However, the present status of the
case is that the notice of settlement has been determined to be invalid; the settlement
has not been approved; and additional legal work is required. The questions now
before the Court are: (a) is there a conflict of interest with regard to the relationship
between Horn and Arleo, and (2) if so, what remedy should be applied?
A. The Applicable Conflict of Interest Law
The authority of federal courts to disqualify attorneys derives from their inherent
power to ‘preserve the integrity of the adversary process.” Hempstead Video, Inc. v.
Incorporated Village of Valley Stream, 409 F.3d, 127, 132 (2d Cir. 2005) (citing Board
of Education v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979)). In exercising this power,
the Court must “attempt  to balance a client’s right freely to choose his counsel against
the need to maintain the highest standard of the profession.” Hempstead Video, Inc.,
409 F.3d at 1322.
In the Eastern District of New York, ethical standards are governed by the New
York State Lawyer’s Code of Professional Responsibility. See Local Civil Rule 1.3.
Canon 5 of this Code states that “[a] lawyer should exercise independent professional
judgment on behalf of a client.” Canon 9 requires that “[a] lawyer should avoid even the
appearance of professional impropriety.” Similarly, DR 5-105 provides that: “(A) A
lawyer shall decline proffered employment if the exercise of [the lawyer’s] independent
professional judgment in behalf of a client will be or is likely to be adversely affected by
the acceptance of the proffered employment, or if it would be likely to involve [the
lawyer] in representing differing interests, except to the extent permitted under DR-5105(C).”
A motion to disqualify is “committed to the discretion of the District Court.”
Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir. 1990). Because
disqualification so seriously affects a client’s right to select his or her own counsel,
“such relief should ordinarily be granted only when a violation of the Canons of the
Code of Professional Responsibility poses a significant risk of trial taint.” Glueck v.
Jonathan Logan, Inc., 653 F.2d 746, 748 (2d Cir. 1981), citing Armstrong v. McAlpin,
625 F.2d 433, 444-46 (2d Cir. 1980) (en banc), vacated on other grounds and
remanded, 449 U.S. 1106 (1981); Board of Ed. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.
1979). In view of their potential for abuse as a tactical device, motions to disqualify
opposing counsel are subject to particularly strict scrutiny. Lamborn v. Dittmer, 873
F.2d 522, 531 (2d Cir. 1989); Decora, Inc. v. DW Wallcovering, Inc., 1899 F. Supp. 132,
135 n.2 (S.D.N.Y. 1995).
It is the duty of the Court “to preserve, to the greatest extent possible, both the
individual’s right to be represented by counsel of his or her choice and the public’s
interest in maintaining the highest standards of professional conduct and the
scrupulous administration of justice.” Hull v. Celanese Corp., 513 F.2d 568, 569 (2d
Cir. 1975). A “district court is obliged to take measures against unethical conduct
occurring in connection with any proceeding before it.” In re American Airlines, Inc.,
972 F.2d 605, 611 (5th Cir. 1992), quoting Musicus v. Westinghouse Elec. Corp., 621
F.2d 742, 744 (5th Cir. 1980); Woods v. Covington County Bank, 537 F.2d 804, 810
(5th Cir. 1976). There are no hard and fast rules for striking the balance between
enforcement of ethical rules and the preservation of client rights. Instead, “the
conclusion in a particular case can be reached only after a painstaking analysis of the
facts and precise application of precedent.” Board of Ed. v. Nyquist, 590 F.2d 1241,
1246 (2d Cir. 1979), citing Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225,
227 (2d Cir. 1977).
Also, federal courts have, disqualified an attorney where the attorney was in a
position to use privileged information giving his or her client an unfair advantage. In this
case, in accordance with the rule, as stated above, will the current representation of the
defendant by Robert Arleo create an “appearance of impropriety”? See, for example
General Motors Corp. v. City of New York, 501 F.2d 639, 648 (2d Cir. 1949) (quoting
A.B.A. Code of Professional Responsibility, Canon 9). Further, when in doubt on an
application such as this, the Second Circuit urges courts to lean in favor of
disqualification. Hull v. Celanese Corp., 513 F.2d 568, 571 (1975). Hull requires that in
the disqualification situation, “any doubt is to be resolved in favor of disqualification.”
513 F.2d at 571.
Here, as stated above, if the notice to the class members was valid and if the
Court were to approve the settlement, there would be no reason to disqualify Robert L.
Arleo. His prior extensive business relationship with Horn did not, in any manner,
involve the prosecution or the proposed settlement of the case. The settlement was
consummated between Horn and defendant’s counsel Joseph A. Latona in March
2011. Arleo signed in as an attorney for the defendant on December 21, 2011. There
is no evidence that attorney Arleo had anything to do with the settlement. However,
that settlement has not yet been approved by the Court. The notice used by the parties
has been held to be invalid. Now, the plaintiff’s counsel must initiate a new proposed
notice to the prospective class members. The result of such a more publicized notice is
unknown. However, with reasonable certainty, a more publicized notice may bring in
additional prospective class members and objectors. The potential class is large.
Whether this new and much more publicized procedure will result in a settlement
approved by the Court is also unknown.
This means that if Robert Arleo remains as co-counsel for the defendant, he will
have an opportunity to be involved in the future notice, possible objection hearings,
settlement procedures, and a trial if necessary. In the Court’s view this presents a
future potential serious problem.
As stated by Judge Bianco in Filippi v. Elmont Union Free School District Board
of Education, 722 F. Supp. 2d 295, 351 (E.D.N.Y. 2010). “It is reasonable to conclude
that Ferrigno possess confidential, relevant information and was privy to defendant’s
discussions regarding the Filippi matter” including discussions “regarding the merits of
the claim . . . and any possible steps to resolve the claims.” Here, in this case, it is
reasonable to assume that Arleo knows Horn well; that Arleo knows confidential matters
about Horn, his method of handling a FDCPA cause of action and his settlement
methods and techniques. They were together as co-counsel in at least 23 other class
actions under the same statute. They have an extraordinary business relationship
handling a particular type of case together. It is reasonable to conclude that Arleo
possesses confidential relevant information about Horn’s likes, dislikes, strengths and
weaknesses and his techniques and procedures. Arleo is in a position to use privileged
information in support of his client, and against the interests of the plaintiff class.
In light of the intervening change in the posture of this case attributable to Hecht,
there may be additional class action members, additional objectors and the chance of a
revised class action settlement or even a trial. In view of these circumstances, the
Court is well aware of its obligation to protect the class members and to make sure that
the processes involved in this case are transparent to the class members and to the
defendant. Balancing the right of a client to counsel of his or her choice against the
enforcement of ethical rules and fair play, Robert Arleo should no longer be in this
IV. AS TO THE ALLEGED “KICKBACK” SCHEMES AND
THE REQUEST FOR DISCIPLINARY PROCEEDINGS
There are allegations of improper conduct asserted by Horn and Arleo against
Bromberg and Schedler. Also, there are assertions by Bromberg against Horn and
Arleo. The first indication of alleged improper conduct was raised at the Fairness
Hearing on June 25, 2012 by Arleo, as follows:
Once you see what is going on here - - Judge, I will tell you
what is going on. This attorney likes to break up these
lawsuits under the Fair Debt Collection Practices Act. You
know what he does? He did it in another case. He swoops
in when he sees a settlement happening, then he tries to
intervene so he can break it up. Once he sees there is
attorneys’ fees involved, then he brings what is called micro
class actions. In other words, what he wants to do here is
he wants to break up this whole New York State case and
he wants to file class actions which are limited to maybe
people on Smith Street in Brooklyn, then another class
action for Jones Street in Queens. And why does he do
that? Here is why, because in every one of those he gets
I will give the Court a citation to a case in California which
addressed this very issue, Guevarra. In this case the judge
out there filed an Order to Show Cause to direct the
attorneys to show cause why they should not be reported to
the state disciplinary committee for colluding to break these
things up, to churn attorneys’ fees.
Guevarra, G.U.E.V.A.R.R.A., v. Progressive Financial.
That’s 497 F. Sup. 2d 1090. It’s Northern District of
So what Mr. Bromberg’s sole job here today is is to
bust up this settlement. He is coming here to create
havoc with Matthew Schedler.
I know you will let Mr. Bromberg be heard, if he still
wants to walk up here and affirm this letter, okay, but
I can tell you the only thing that’s going on here is an
attempt by two lawyers to break this case up and to
file micro class actions for no other reason but to
generate additional attorneys’ fees.
Tr. at 10, 11, 13 and 14.
In an Order of the Court dated July 18, 2012, the Court addressed the allegation
by Horn that Bromberg and Schedler are involved in an improper kickback scheme. In
this Order it was noted that “Mr. Horn has alleged that Mr. Bromberg and Mr. Schedler
are involved in an improper kickback scheme.” While the Court stated that such
allegations “are on their face unrelated to this case,” the Court commented that these
allegations are serious. Also, the Court stated that “equally serious are the implications
of Mr. Horn’s allegations about the kickback scheme as he made them to this Court
without any basis in fact.” As to this issue, the Court requested submissions from
Bromberg, Schedler, and Horn, “as to why this case should not be referred to the Chief
Judge for possible disciplinary proceedings under Local Rule 1.5(f).”
A. The Horn and Arleo Memorandum of July 23, 2012
Annexed to a joint memorandum of law from Horn and Arleo, dated July 23,
2012, is a letter from Bromberg to former United States Magistrate Judge Michael L.
Orenstein dated August 24, 2010, referring to a case entitled Gravina v. National
Enterprise Systems, Case No: 09-CV-2942 (JFB)(MLO), in which Horn and Arleo were
co-counsel for the plaintiff and negotiated a class action settlement. As in this case,
Bromberg planned to file a motion to intervene in order to object to the proposed
settlement. In the letter Bromberg refers to a “payoff to Richard Gravona and the other
named plaintiffs . . .”, implicitly to obtain their consent to the class settlement
agreement. Horn and Arleo refer to these allegations as “patently baseless and false”;
and demanded that Bromberg refract this “false allegation of serious attorney
misconduct.” Horn and Arleo then refer to the “inherent power” of this Court to levy
monetary sanctions in response to the above litigation practices.
B. The Response of Horn dated July 27, 2012
Horn described in detail his education and legal background. He is now a sole
practitioner “and has maintained a growing practice representing consumers on claims
under the Fair Debt Practice Act.” He listed the numerous FDCPA cases he is now
involved in as class counsel. About one and one-half years ago, Horn received
information from an “individual” who is unnamed, that a non-profit entity would refer
cases only to Bromberg and no other attorney. Upon further investigation, Horn found
that other non-profits in the area also regularly referred consumer-related plaintiffs
cases to Bromberg and few, if any, other attorneys. From this information, Horn
“extrapolated” that there was a financial arrangement between such not-for-profit
entities and Bromberg or his firm. When he reviewed Rules 1.5(g) and 7.2(a), Horn
believed that this violated, “at the minimum”, the spirit of the Rules in relation to referral
fees. “In this sense, Horn believed the arrangements between Bromberg and non-profit
entities was potentially improper . . . to the extent the statement has offended counsel
or the Court or is otherwise viewed as undignified conduct, Mr. Horn respectfully
apologizes to both counsel and the Court.” (Horn July 27, 2012 Response at 5, 6).
Therefore, under the circumstances presented, Horn respectfully submits that his
prior letter regarding Bromberg and the alleged “payoffs” “is not violative of the Rules as
required by Local Rule 1.5(b)(5) and respectfully requests that the Court discharge its
order to show cause based thereon and decline reference to the Chief Judge for
possible disciplinary proceedings.” (Horn July 27, 2012 Response at 6).
Further, Horn attempts to explain why he injected the issue of possible
“kickbacks” in this case. He does recognize the Court’s concern with regard to his
statements, and “again offers his sincere apology to the Court and counsel if his
suspicion was viewed as being either discourteous or undignified, or both.” (Horn
Response at 7). In sum, Horn requests that no referral to the Committee on Grievance
should be made.
C. Declaration of Bromberg dated July 27, 2012
Bromberg asserts that neither he nor Matthew Schedler should be referred to the
Chief Judge for disciplinary proceedings, but that Horn should be so referred. He
points to the original letter from Horn dated June 29, 2012, as the basis for his request
for the referral. The Horn letter, in part, states:
Nor has Mr. Sejour disclosed to the Court the improper
financial motives of his counsel – namely, that Mr. Bromberg
has an improper financial arrangement of kicking back
money to an attorney (Matthew Shedler [sic]) and his nonprofit employer (CAMBA Legal Services, Inc.).
Bromberg unequivocally states that “these allegations are false . . . at no time
have any kickbacks been paid, promised or agreed to.” He then repeats his request to
remove Horn as class counsel, “when he is facing with an irremediable conflict of
interest that makes him inadequate class counsel . . ..” Bromberg concludes his
response as follows:
18. In sum, there is no basis for referring me or Mr.
Schedler to the Chief Judge, because no kickback scheme
exists and Mr. Horn’s allegations were made without any
basis in fact.
D. Declaration of Matthew Schedler dated July 27, 2012
Matthew Schedler corroborates the factual statements made by Bromberg in his
Declaration. He also states that while neither he or Bromberg should be referred to the
Chief Judge for a disciplinary proceeding. Horn should be referred.
E. The Disposition of This Claim for Referral for Disciplinary Action
The only conduct that seriously concerned the Court was the allegation by Horn
and Arleo concerning “kickbacks” by Bromberg. That accusation has been withdrawn
by Horn who stated, “. . . to the extent the statement has offended counsel or the Court
or is otherwise viewed as undignified conduct, Mr. Horn respectfully apologizes to both
counsel and the Court.” The Court accepts this apology. It is this Court’s policy to err
on the side of caution when considering a referral for disciplinary proceedings that could
affect an attorney’s ability to practice law. There is no such showing here as to any of
the lawyers in the case. It is true that lawyers should not make unfair or derogatory
comments with regard to opposing counsel. Offensive tactics by lawyers interfere with
the orderly administration of justice and have no proper place in our legal system. Such
an unfair and derogatory comment was made by Horn regarding Bromberg. However,
Horn has apparently realized his error and has withdrawn the comment and apologized
to counsel and to the Court, which apology was accepted by the Court.
Reviewing all the events in this vigorously contested matter, the Court finds no
reason to impose sanction or to refer any attorney for disciplinary proceedings.
The Court finds for the following:
(1) The attorney Robert L. Arleo is directed to withdraw from this case within
twenty (20) days of the date of this Order. He is also requested to advise the Court by
letter when this withdrawal has been accomplished.
(2) The request to refer this matter for disciplinary proceedings is denied.
(3) The attorney for the plaintiff is directed to advise the Court by letter on or
before February 8, 2013 as to his request for notice to possible class members, in
accordance with the instructions set forth in Hecht.
(4) The Clerk of the Court is directed to terminate Docket Number 27, 43 and 48.
Dated: Central Islip, New York
January 24, 2013
/s/ARTHUR D. SPATT
ARTHUR D. SPATT
United States District Judge
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