Berry et al v. National Financial Systems, Inc.

Filing 11

DECISION AND ORDER awarding damages and attorneys fees. Clerk of Court to close case. Signed by Hon. Richard J. Arcara on 8/27/2009. (JMB)

UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF NEW YORK

S T E P H E N BERRY and G W E N D O L Y N BERRY, P la in t iffs , D E C IS IO N AND ORDER 0 8 -C V - 1 8 A v.

NATIONAL FINANCIAL SYSTEMS, INC., D e fe n d a n t.

IN T R O D U C T IO N P la in tiffs Stephen and Gwendolyn Berry filed a complaint in this case on J a n u a ry 10, 2008, accusing defendant National Financial Systems, Inc. of m u ltip le violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § § 1692­1692p. Plaintiffs served defendant with the summons and complaint, b u t defendant failed to answer or appear. On July 10, 2009, this Court granted p la in tiffs ' motion for default judgment and ordered an evidentiary hearing as to d a m a g e s . The hearing occurred on August 13, 2009, at which plaintiffs testified a n d submitted exhibits pertaining to defendant's conduct. Given the allegations th a t defendant is deemed to have admitted by default, and given the evidence th a t plaintiffs submitted at the evidentiary hearing, the Court awards damages a lo n g with costs and fees as described below.

B AC K G R O U N D T h is case concerns defendant's conduct in attempting to collect on a credit c a rd debt totaling less than $800. In early 2007, Mr. Berry incurred a debt (the "D e b t") on a Household Bank Platinum MasterCard account maintained by HSBC B a n k . Exhibit 1 from the evidentiary hearing, an undated statement for this a c c o u n t, states that Mr. Berry's balance in early 2007 was $691.99, with a p a ym e n t due on March 8, 2007. The statement also contains a notice that the a c c o u n t "has been placed with a collection agency." Plaintiffs do not contest that M r. Berry defaulted on the Debt. A c c o rd in g to the complaint, defendant called Mr. Berry by telephone in J u n e 2007. During the ensuing conversation, defendant asked Mr. Berry to issue a post-dated check that would pay the Debt in part. Mr. Berry objected, telling d e fe n d a n t that he did not have sufficient funds in his checking account to cover a n y such check that he issued. Defendant pressured Mr. Berry to issue a postd a te d check anyway, claiming that if he did not then HSBC Bank would take him to court and the Debt would increase to $12,000. In response to this threat, Mr. B e rry reluctantly agreed to issue a post-dated check. Exhibit 2 from the e vid e n tia ry hearing is a letter from defendant to Mr. Berry, dated June 21, 2007, s ta tin g that the Debt at that time was $770.09 and that Mr. Berry's post-dated c h e c k would be cashed on June 29, 2007 in that amount. When defendant

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a tte m p te d to cash Mr. Berry's check, the check did not clear due to insufficient fu n d s . Mr. Berry incurred bank fees as a result. In July 2007, defendant called plaintiffs' residence and spoke to Mrs. Berry b y telephone. During the conversation, Mrs. Berry specifically requested the c a lle r to identify himself. The caller refused to do so. On or about July 30, 2007, d e fe n d a n t called plaintiffs' residence and left a message on plaintiffs' answering m a c h in e . The microcassette tape containing defendant's message was entered in to evidence at the evidentiary hearing as Exhibit 3. Defendant's message p la y e d as follows: G o o d morning Stephen Berry, Mr. Holbert's 1 office, uh, Mr. Berry you've g o t quite a serious situation here on your hands regarding the a rra n g e m e n t s that you and I had set forth. Uh, literally you've gone fro m the pot directly into the fire but I don't think that you did it on p u rp o s e . There must have been a problem that was out of your control a n d if you're having a difficult time that's understandable, I can a p p re c ia te that but I need to hear from you immediately. Uh, I got a call fro m my client Friday so as long as you give me a call we'll do what we c a n to help you straighten this out but if I don't hear back from you, Mr. B e rry , rest assured, my client's already given me the authorization to d o what's necessary to protect their interests so, I explained to them yo u were sincere, I don't think it was done intentionally, they seem to th in k otherwise, but . . . . [answering machine beeps to signal that the m a xim u m message length has been reached, ending the call]. In or about August 2007, Mr. Berry called defendant with the intention of n e g o tia tin g a payment plan to repay the Debt. During that conversation, d e fe n d a n ts informed Mr. Berry that "it has gone too far, our client has authorized

1

An approximate spelling. The exact name is difficult to hear on the tape. 3

u s to sue you." Defendants then asked Mr. Berry for the name of his lawyer. Later that month, defendant called plaintiffs' residence and spoke with Mrs. Berry. W h e n Mrs. Berry answered the telephone, defendant asked to speak with Mr. B e r ry. W h e n Mrs. Berry informed defendant that Mr. Berry was not available, d e fe n d a n t responded, "W h a t did you do, kick him out?" Mrs. Berry then asked th e caller to identify himself and his company. The caller refused to do so. O n January 10, 2008, plaintiffs filed the complaint in this case. The c o m p la in t contained a single claim that defendant committed multiple violations of th e FDCPA. Specifically, plaintiffs alleged the following: D e fe n d a n t violated 15 U.S.C. § 1692e, 15 U.S.C.§ 1692e(5), 15 U.S.C. § 1692e(10), [15] U.S.C. § 1692f, and 15 U.S.C.§ 1692f(1) by m is re p re s e n tin g that 1 . Defendant and/or HSBC Bank had intended to, or had d e c id e d to, file a lawsuit against Stephen Berry to collect th e subject debt, and that Bank of America had authorized th e commencement of such a suit. 2 . That the debt would increase from $770.00 to $12,000.00 if S te p h e n Berry was sued on the subject debt. D e fe n d a n t violated 15 U.S.C. § 1692d and 15 U.S.C. § 1692d(2) by a s k in g Gwendolyn Berry if she had kicked Stephen Berry out of their hom e. D e fe n d a n t violated 15 U.S.C. § 1692b(1) and [15] U.S.C. § 1692d(6) by fa ilin g to identify himself during their two telephone conversations with G w e n d o ly n Berry. D e fe n d a n t violated 15 U.S.C. § 1692d and 15 U.S.C. § 1692d(2) by s ta tin g to Plaintiff Gwendolyn Berry, "W h a t did you do, kick him out?" a s alleged in paragraph 19 herein. (D k t. No. 1 ¶¶ 24­25.) 4

A c c o rd in g to the docket, plaintiffs served defendant on January 24, 2008. Defendant never answered the complaint or otherwise appeared. Accordingly, p la in tiffs requested an entry of default on March 1, 2009. The Clerk of the Court file d an entry of default on March 2, 2009. On March 23, 2009, plaintiffs filed a m o tio n for default judgment as to liability and for a jury trial as to damages. In the p a p e rs in support of the motion for default judgment, counsel for plaintiffs set fo rth that they had communicated with in-house counsel for defendant but that a tte m p ts to settle the case failed. Counsel for plaintiffs set forth also that d e fe n d a n t did not respond to their last two letters, and that defendant appeared to h a ve employed a strategy of intentional default. The Court held oral argument on th e motion for default judgment on July 10, 2009. The Court granted the motion o ra lly and decided that an evidentiary hearing as opposed to a jury trial would s u ffic e to establish damages. On August 13, 2009, the Court held the evidentiary hearing. Mr. Berry te s tifie d at the hearing. He is 59 years old and worked for 28 years as a New Y o rk State corrections guard, but stopped working in 2004 because of injuries. His current income consists of Social Security Disability in the amount of a p p ro xim a te ly $1,000 per month, plus a pension that amounts to approximately $ 1 ,0 0 0 per month. Along with other testimony that corroborated the allegations in th e complaint, Mr. Berry authenticated all three exhibits introduced into evidence.

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M r. Berry explained that he incurred the Debt because he was spending money a t that time to care for his 88-year old father, and he simply fell behind with his c re d it card bill. Mr. Berry recalled the June 2007 telephone conversation during w h ic h defendant stated that the Debt would grow to $12,000 if legal action b e c a m e necessary. Mr. Berry testified that he felt "highly disturbed" and "d is g u s te d " upon hearing that he might owe $12,000, since he did not have the fin a n c ia l means to pay that amount of money and since that amount of money "w a s like a million dollars to us." Mr. Berry testified further that his wife cried in re s p o n s e to the possibility of owing $12,000, and that among other reactions, he lo s t sleep and felt fearful whenever he heard the telephone ring at home. Mrs. Berry then testified at the hearing. She is 56 years old and has been m a rrie d to Mr. Berry for 16 years. Mrs. Berry worked at a plastics company for 29 ye a rs , but was laid off in 2006. She has looked for work since and would like to w o rk again, but has found difficulty finding new employment in part because she p e rc e ive s employers as hesitant to hire someone of her age. Along with other tes tim o n y that further corroborated the allegations in the complaint, Mrs. Berry re c o u n te d defendant's August 2007 telephone call to her and confirmed the s tre s s fu l impact of defendant's statement that the Debt could grow to $12,000. She added that the stress from defendant's communications caused her to lose h e r hair, and that weeks passed before they could settle down after defendant's la s t call to them. During that time, according to Mrs. Berry, communicating with 6

h e r husband was difficult because the possibility of owing $12,000 to defendant w e ig h e d on his mind constantly. O n August 17, 2009, counsel for plaintiffs submitted affirmations with e x h ib its in support of plaintiffs' request for an award of costs and attorney fees. D IS C U S S I O N L i a b i li t y "W h ile a party's default is deemed to constitute a concession of all well p le a d e d allegations of liability, it is not considered an admission of damages." Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1 9 9 2 ) (citations omitted). Here, the Court ordered an evidentiary hearing as to d a m a g e s because defendant's default, by itself, could neither quantify nor sustain a n award of damages. Plaintiffs' complaint contains well pleaded allegations, c o rro b o ra te d at the evidentiary hearing, that defendant called plaintiffs four times in the summer of 2007 regarding the Debt. In these four telephone calls, d e fe n d a n t refused to identify itself; claimed that HSBC Bank authorized its a c tio n s without any basis for saying so; threatened a lawsuit that it never filed and th a t HSBC Bank almost certainly never knew that it was threatening; claimed that th e Debt would increase by over 15 times without any basis for this claim; h a ra s s e d Mr. Berry through its comment about going "from the pot directly into th e fire"; made a vague threat against Mr. Berry to "do what's necessary to p ro te c t their interests"; and harassed Mrs. Berry through derisive comments in 7

A u g u s t 2007 about the reason for Mr. Berry's unavailability when it called. The C o u rt finds that these actions violated the provisions of the FDCPA cited in p la in tiffs ' complaint. Defendant's actions, accordingly, will serve as the basis for th e Court's assessment of damages. S t a tu t o r y Damages S e c tio n 1692k(a)(1) of the FDCPA provides for statutory damages of up to $ 1 ,0 0 0 per plaintiff. See also Savino v. Computer Credit, Inc., 164 F.3d 81, 86 (2 d Cir. 1998) ("All that is required for an award of statutory damages is proof that th e statute was violated, although a court must then exercise its discretion to d e te rm in e how much to award, up to the $1,000.00 ceiling.") (citations omitted). Mr. and Mrs. Berry each seek the maximum amount of statutory damages in this c a s e given the frequency and nature of defendant's harassing conduct. "In d e te rm in in g the amount of liability in any action under subsection (a) of this s e c tio n , the court shall consider, among other relevant factors . . . the frequency a n d persistence of noncompliance by the debt collector, the nature of such n o n c o m p lia n c e , and the extent to which such noncompliance was intentional." 15 U .S .C . § 1692k(b)(1). Here, the Court notes that defendant called plaintiffs four tim e s within three months in the summer of 2007. Each of these telephone calls fe a tu re d conduct by defendant that violated the FDCPA. Defendant's re p re s e n ta tio n that the Debt would explode from approximately $770 to $12,000 w a s particularly outrageous and utterly without factual or statutory justification. 8

T h e Court finds also that defendant most likely never communicated with HSBC B a n k about possible litigation and never intended to commence a lawsuit to c o lle c t the Debt. Rather, the Court finds that defendant engaged in a pattern of h a ra s s in g communications with intent to intimidate plaintiffs into paying the Debt b e fore investigating their rights under the FDCPA. For these reasons, the Court fin d s that the maximum statutory damages award is appropriate for each plaintiff. A c tu a l Damages T h e FDCPA provides for compensation for "any actual damages sustained b y such person as a result of [FDCPA violations]." 15 U.S.C. § 1692k(a)(1). "Actual damages compensate a plaintiff for out of pocket expenses, personal h u m ilia tio n , embarrassment, mental anguish, and/or emotional distress that re s u lts from defendant's failure to comply with the FDCPA." Milton v. Rosicki, R o s ic k i & Assocs., P.C., No. 02-CV-3052, 2007 W L 2262893, at *3 (E.D.N.Y. A u g . 3, 2007) (citation omitted). Here, plaintiffs have requested actual damages in the amount of $4,000 for Mr. Berry and $2,000 for Mrs. Berry based on the s tre s s that they experienced from defendant's communications, particularly d e fe n d a n t's representation that the Debt could grow from approximately $770 to $ 1 2 ,0 0 0 . The Court has some reservation about the amount of plaintiffs' request, g ive n the absence of documentation from a medical or psychological professional a b o u t stress that was presented to the Court as severe enough to cause physical m a n ife s ta tio n s . Additionally, the Court finds that plaintiffs should have harbored 9

a t least a little skepticism about the outrageous increase in the Debt that d e fe n d a n t described without foundation. Nonetheless, the Court finds plaintiffs' te s tim o n y generally credible. Plaintiffs are a middle-aged married couple living o n a fixed income while caring for a parent now living in a nursing home. Plaintiffs' employment history, while suggesting some level of education, does not s u g g e s t the type of financial or legal sophistication needed to know exactly why d e fe n d a n t's representation about the increase in the Debt was unfounded, even if th e y should have sensed that the representation was dubious. Adding in the fre q u e n c y of defendant's calls and defendant's vague threat in its telephone m e s s a g e that it and HSBC Bank were prepared "to do what's necessary to p ro te c t their interests," plaintiffs did not act unreasonably in fearing that s o m e th in g bad would happen to them soon at the hands of persons unknown w h o refused twice to identify themselves. Accordingly, the Court finds that Mr. B e rr y, as the debtor of record, should receive $2,000 in actual damages, while M rs . Berry should receive $1,000. C o s t s and Attorney Fees T h e FDCPA authorizes successful litigants to receive "in the case of any s u c c e s s fu l action to enforce the foregoing liability, the costs of the action, to g e th e r with a reasonable attorney's fee as determined by the court." 15 U.S.C. § 1692k(a)(3). The prevailing plaintiff in a FDCPA action is entitled to an award o f reasonable attorneys' fees and expenses regardless of whether any statutory 10

o r actual damages are awarded. See Savino, 164 F.3d at 87; Pipiles v. Credit B u r e a u of Lockport, Inc., 886 F.2d 22, 28 (2d Cir. 1989) (citation omitted). As to h o w district courts should calculate attorney fees when such an award is a p p ro p ria te , this Court noted in a recent FDCPA case that A reasonable hourly rate is the "prevailing market rate," i.e., the r a t e "prevailing in the [relevant] community for similar services by la w ye rs of reasonably comparable skill, experience, and reputation." B lu m v. Stenson, 465 U.S. 886, 896 n.11, 104 S. Ct. 1541, 79 L. Ed. 2d 8 9 1 (1984); see also Cohen v. W. Haven Bd. of Police Comm'rs, 638 F .2 d 496, 506 (2d Cir. 1980) ("[F]ees that would be charged for similar w o rk by attorneys of like skill in the area" are the "starting point for d e te rm in a tio n of a reasonable award."). The relevant community, in tu rn , is the district in which the court sits. Polk v. New York State Dep't o f Corr. Servs., 722 F.2d 23, 25 (2d Cir. 1983). D e te r m in a tio n of the "reasonable hourly fee" requires a c a s e -s p e c ific inquiry into the prevailing market rates for counsel of s im ila r experience and skill to the fee applicant's counsel. Farbotko v. C lin to n County of New York, 433 F.3d 204, 209 (2d Cir. 2005). This in q u iry may include judicial notice of the rates awarded in prior cases, th e court's own familiarity with the rates prevailing in the district, and a n y evidence proffered by the parties. Id. The fee applicant has the b u rd e n of showing by "satisfactory evidence" that the requested hourly ra te is the prevailing market rate. Blum, 465 U.S. at 896 n.11. F o n ta n a v. C. Barry & Assocs., LLC, No. 06-CV-359, 2007 W L 2580490, at *2 (W .D .N .Y. Sept. 4, 2007) (Arcara, C.J.). T h e Second Circuit revisited case law governing attorney fee calculations re c e n tly and explained just weeks ago that In [Arbor Hill Concerned Citizens Neighborhood Ass'n v. County o f Albany, 493 F.3d 110 (2d Cir. 2007), amended on other grounds by 5 2 2 F.3d 182 (2d Cir. 2008)], we undertook to simplify the complexities s u rro u n d in g attorney's fees awards that had accumulated over time u n d e r the traditional "lodestar" approach to attorney's fees (the product o f the attorney's usual hourly rate and the number of hours worked, w h ic h could then be adjusted by the court to set "the reasonable fee"), 11

a n d the separate "Johnson" approach (a one-step inquiry that c o n s id e re d twelve specified factors to establish a reasonable fee). 493 F .3 d at 114. Relying on the substance of both approaches, we set forth a standard that we termed the "presumptively reasonable fee." Id. at 1 1 8 . W e directed district courts, in calculating the presumptively re a s o n a b le fee, "to bear in mind all of the case-specific variables that w e and other courts have identified as relevant to the reasonableness o f attorney's fees in setting a reasonable hourly rate." Id. at 117 (e m p h a s is in original). The presumptively reasonable fee boils down to "what a reasonable, paying client would be willing to pay," given that s u c h a party wishes "to spend the minimum necessary to litigate the c a s e effectively." Id. at 112, 118. S im m o n s v. N.Y. Trans. Auth., ___ F.3d ___, 2009 W L 2357703, at *3 (2d Cir. A u g . 3, 2009). H e re , counsel for plaintiffs have submitted detailed affirmations specifying th e amount of time spent litigating this case. In reviewing the time listed in c o u n s e l's affirmations, the Court finds that one minor correction in Mr. Hiller's a ffirm a tio n is necessary. In his affirmation, Mr. Hiller lists 0.3 hours spent on M a rc h 3, 2008 reacting to a text order from this Court that contained an order to s h o w cause. A review of the docket does not reveal any orders to show cause th a t the Court issued in this case, let alone on March 3, 2008. Therefore, the C o u rt will disregard that item in Mr. Hiller's affirmation. Otherwise, the hours that counsel claim to have spent on this case appear re a s o n a b le . In assessing whether a reasonable, paying client looking to minimize e xp e n s e s would be willing to pay for the hours claimed here, the Court bears in m in d the provision of the FDCPA awarding attorney fees to successful litigants. W ith o u t that provision, a reasonable, paying client likely would not spend

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a p p ro xim a te ly $6,000 in fees and costs to obtain a damages award of $5,000. Factoring in that provision, however, a reasonable, paying client likely would e n d o rs e the investment of time that counsel claim here. Counsel's affirmations s h o w that well over half of the 25.1 hours claimed were invested after the d e c isio n to apply for an entry of default was made. W h e re a debt collector fails to a p p e a r in an FDCPA case, meaning that judgment as to liability is assured and a n award of attorney fees is likely, a reasonable, paying client likely would want c o u n s e l to prosecute the case to a successful resolution. Additionally, the Court n o te s that the total amount of time spent by counsel here roughly equals the a m o u n t of time that it considered reasonable in a recent FDCPA case that also e n d e d with a default judgment. See Fontana, 2007 W L 2580490, at *3 (a p p ro vin g a claim of 22.6 attorney hours and 4.0 paralegal hours). The Court finds further that counsel's requested hourly rate is reasonable a s well. In Fontana, the Court set the attorney hourly rate at $200 for partners a n d $150 per hour for associates. The Court still finds these 2007 rates re a s o n a b le , with a slight upward adjustment as determined in another FDCPA c a s e in this District earlier this year. See Miller v. Midpoint Resolution Group, L L C , 608 F. Supp. 2d 389, 395 (W .D .N .Y . 2009) (McCarthy, M.J.) (setting the h o u rly rate in an FDCPA case at $215 per hour for Mr. Hiller and $175 per hour for his associate, Amanda Jordan). One very minor correction is necessary, h o w e ve r. Although counsel cite to Miller in support of their requested hourly

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ra te s , their calculation of associate attorney fees uses a rate of $180 per hour. The Court will disregard this discrepancy as a typographical error and will use the $175 associate hourly rate determined in Miller. L a s tly , the Court will note for the record that it agrees with counsel's re q u e s t for reimbursement of the $350 filing fee that they incurred, along with the $ 6 0 fee that they incurred in relation to service of process. P la in tiffs ' award of costs and fees thus totals $5,999 as follows: 25.1 hours fo r Kenneth Hiller at $215 per hour, totaling $5,396.50; 1.1 hours for Amanda J o rd a n at $175 per hour, totaling $192.50; $350 for the court filing fee; and $60 fo r a service fee. C O N C L U S IO N F o r all of the foregoing reasons, the Court awards plaintiffs $2,000 in s ta tu to ry damages, $3,000 in actual damages, and $5,999 in costs and attorney fe e s . S in c e all proceedings here now have concluded, the Clerk of the Court is d ire c te d to close this case upon entry of judgment.

SO ORDERED.

s/ Richard J. Arcara
HONORABLE RICHARD J. ARCARA CHIEF JUDGE UNITED STATES DISTRICT COURT DATED: August 27, 2009 14