Gordon v. United Medical Recovery, LLC

MIKHAIL GORDON PLAINTIFF v. UNITED MEDICAL RECOVERY, LLC DEFENDANT

Civil Action No. 3:19-CV-259 HTW-LGI

United States District Court, S.D. Mississippi, Northern Division

July 29, 2021

ORDER IMPOSING SANCTIONS

HENRY T. WINGATE UNITED STATES DISTRICT JUDGE

BEFORE THIS COURT are: 1) the Defendant's Motion for Sanctions against Plaintiff's Counsel [doc. 21]; and 2) the motion filed by Plaintiff's counsel to be allowed to withdraw [doc. no. 19]. This court previously dismissed this case for Plaintiff's failure to prosecute. David McDevitt, one of Plaintiff's attorneys of record, conceded that his client had abandoned his lawsuit and that this court should dismiss the Complaint. Accordingly, this court ordered that the lawsuit be dismissed with prejudice. [doc. no. 39]. This court's order included a schedule for supplemental briefing on these two remaining motions. That briefing has now been completed, and this court is prepared to make its ruling.

I. BACKGROUND

This is a case brought under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §1692, et seq. The FDCPA is federal legislation, enacted by Congress, thus presenting a federal question and invoking the jurisdiction of this court pursuant to federal question subject matter jurisdiction under 28 U.S.C. §1331.^[1] The stated purpose of the FDCPA, according to the Act, 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.” Title 15 U.S.C. §1692 (e).

Plaintiff Mikhail Gordon, a consumer-debtor, claimed that the Defendant, United Medical Recovery, (“UMR”) a debt collector, violated Title §1692g(a)(4) of the FDCPA by failing to include what is often referred to as the “validation notice” or the “in writing” notice in its letter to him dated May 25 2018. See Koesler v. Beneficial Fin. I, Inc., 267 F.Supp.3d 873, 884 (W.D. Tex. 2016). (quoting Garcia-Contreras v. Brock & Scott, PLLC, 775 F.Supp.2d 808, 812 (M.D. N.C. 2011)). The validation notice is that part of the communication from a debt collector that informs the consumer that he has a right to dispute the debt in writing, within thirty (30) days. The FDCPA requires this notice to be included in the debt collector's “initial communication” to the debtor or within five days thereafter.

If a debt collector does not provide the proper notice under the FDCPA, the Act requires that it pays the consumer's actual damages, additional damages (up to $1, 000), costs of the action, and reasonable attorneys' fees. 15 U.S.C. §1692(k)(a).

The main factual issue presented by this case was whether a 2018 letter received by the Plaintiff comprised the “initial communication” as Plaintiff claimed, or whether Plaintiff had received the initial communication two years earlier, in a 2016 letter, as Defendant claimed. Neither side contends that there was a separate verification notice sent within five days of the letter; so, it is the letters, themselves, that are at issue here.

Once briefing was completed on Defendant's “Motion for Judgment on the Pleadings or to Dismiss or For Summary Judgment, ” [doc. no. 10], but before this court had issued its ruling on the motion, Defendant submitted a supplemental declaration with Exhibits. This supplemental information tended to prove that the 2018 letter, which was the sole basis of Plaintiff's case, was not the initial communication sent to Plaintiff by the Defendant.

Plaintiff's counsel contend that they became unable to reach their client after that point and were, thus, unable to verify Defendant's information or to obtain guidance from their client on how, or whether to proceed. Plaintiff's attorneys also claim that they did not feel they could dismiss the case without their client's knowledge or consent, so they sought, instead, to withdraw from the case. Withdrawal of Plaintiff's attorneys from the case, so opined the attorneys, would have allowed them to wash their hands of the entire episode. This court and the Defendant, however, would have been left to contend with the unresolved, pending litigation that remained.

This court conducted a telephonic hearing on March 18, 2021, during which this court instructed Plaintiff's attorney, David McDevitt, to attempt to contact his client and to document proof of same. Another telephonic hearing was conducted on March 24, 2021. At that hearing, Plaintiff's counsel conceded that the Plaintiff, Mikhail Gordon, had abandoned his lawsuit. This court dismissed the lawsuit with prejudice and established a supplemental briefing schedule for the Defendant's Motion for Sanctions. Plaintiff's Motion for Withdrawal of Counsel also remains pending.

Defendant UMR contends that Plaintiff's claim under the FDCPA was frivolous, that is, without any basis in fact or law. Although this court does not agree that this case was legally groundless, this court agrees with UMR that Plaintiff and his attorneys brought a factually groundless case. Defendant asks this court to sanction Plaintiff's attorneys and require that UMR be reimbursed for its costs, including attorneys' fees, based on one or more of several grounds.

II. LEGAL AUTHORITY FOR IMPOSITION OF SANCTIONS

The legal grounds urged upon this court by Defendant UMR include: (a) the inherent authority of this court to impose sanctions and protect the judicial process; (b) Title 15 § 1692k(a)(3) of the FDCPA; (c) Rule 11of the Federal Rules of Civil Procedure; (d) Rule 41(a)(2) of the Federal Rules of Civil Procedure; or (e) Title 28 U.S.C. §1927. [doc. no. 40 at p. 17].

a. The Court's Inherent Power^[2]

The threshold for the use of this court's inherent power to impose sanctions is high. Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir.1995) (citing Reed v. IowaMarine and Repair Corp., 16 F.3d 82 (5th Cir.1994)). “Indeed, the Supreme Court has cautioned that ‘because of their very potency, inherent powers must be exercised with restraint and discretion.'” Id., (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 44, 111 S.Ct. 2123, 2132, 115 L.Ed.2d 27 (1991)). Moreover, to impose sanctions under its inherent authority this court must make a finding of bad faith. Pena v. Lone Star Nat'l Bank, N.A., 807 Fed.Appx. 353, 356 (5th Cir. 2020) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 49-50 (1991)); See In re Yorkshire, LLC, 540 F.3d 328, 332 (5th Cir. 2008). This court is not persuaded that Plaintiff's counsel acted in bad faith. Plaintiff's counsel appeared to believe, in good faith, that the 2018 letter was the first communication received by their client, for all of the reasons stated in their opposition brief and discussed in this opinion.

b. Title 15 § 1692k(a)(3)

Section §1692k(a)(3)^[3] of the FDCPA, another basis for sanctions suggested by Defendant, would require this court to make a finding that the action was brought a) in bad faith and b) for the purpose of harassment. Both components are required under the language of the statute. This court is not persuaded that either of these findings is appropriate here, but certainly not both.

c. Fed.R.Civ.P. 41(a)(2)

Rule 41(a)(2)^[4] of the Federal Rules of Civil Procedure does not specifically address monetary sanctions, but it does allow the court to dismiss an action at the plaintiff's request on terms that the court considers proper. This provision gives this court broad discretion in fashioning the terms under which the case is finally dismissed, including the imposition of sanctions and/or fees and costs. Rule 41(a)(2) is applicable to the circumstances here, but this court finds that Rule 11 most directly addresses the issues with which we are here concerned.

d. Title 28 U.S.C. §1927

This court does not find that Plaintiff's counsel “unreasonably and vexatiously” multiplied the proceedings, as required for sanctions to be imposed under 28 U.S.C. §1927.^[5]Although Attorney Hussey and Attorney McDevitt did not dismiss or withdraw the Complaint immediately upon receipt of the supplemental proof, they discontinued any further prosecution of the case after that point. They only responded (in order to protect the rights of their client, they say) to motions filed by the Defendant. This court does not find § 1927 applicable to the case at hand.

e. Fed.R.Civ.P. 11

Rule 11 of the Federal Rules of Civil Procedure is most applicable to the circumstances with which we are faced here. This court, then, undertakes to examine the sanctions issue primarily under the provisions of Fed.R.Civ.P. 11.

III. RULE 11 SANCTIONS

The United States Court of Appeals for the Fifth Circuit has interpreted Rule 11^[6] to impose three affirmative duties upon an attorney or litigant. Childs v. State Farm Mut. Auto. Ins. Co., 29 F.3d 1018, 1023 (5th Cir. 1994). These duties are:

1) that the attorney has conducted a reasonable inquiry into the facts which support the document;

2) that the attorney has conducted a reasonable inquiry into the law such that the document embodies existing legal principles or a good faith argument for the extension, modification, or reversal of existing law; and

3) that the modification is not interposed for purposes of delay, harassment, or increasing the costs of litigation.

Childs v. State Farm Mut. Auto. Ins. Co., 29 F.3d 1018, 1023-24 (5th Cir. 1994).

a. Reasonable Inquiry Into the Facts

Defendant claims that Plaintiff's counsel breached the first two duties listed above.

This court begins with the first of the duties allegedly breached, failing to make reasonable inquiry into the facts supporting the Complaint.

Plaintiff's attorneys contend that their decision to initiate this...