For the second time, Hughes Hubbard & Reed and the New York Legal Assistance Group (NYLAG) beat back a New Jersey debt collector's bid to send to arbitration a high-stakes pro bono lawsuit seeking class action status and alleging fraudulent and illegal debt collection practices.
On March 30, U.S. District Judge Loretta Preska denied defendants' motions to compel arbitration, strike class action allegations and dismiss claims in the complaint.
The plaintiffs—Charlette Mayfield, Claude Millien and Ebony Porter—are members of a purported class of approximately 15 thousand individuals who have been or will be sued in New York City over alleged AT&T Wireless debts. The defendants include Asta Funding, one of the nation's largest debt buyers, its wholly owned subsidiary, Palisades Collection, which brought the thousands of consumer debt actions on Asta's behalf, and Asta's law firm, Pressler & Pressler, which litigated the actions.
The plaintiffs allege that the defendants violated federal and state laws by fraudulently obtaining and enforcing judgments against low-income New Yorkers, extracting millions of dollars that the defendants could never prove are owed to them. Specifically, the defendants obtained the judgments on the basis of mass-generated and baseless verified complaints, retained process serving agencies known to engage in "sewer service" to avoid notifying consumers of the lawsuits filed against them and obtained entry of default judgments based on fraudulent affidavits.
Hughes Hubbard and NYLAG brought the original action in June 2013 on behalf of four named representatives of the purported class, which alleged the same scheme by defendants. In December 2013, U.S. District Judge Robert Patterson denied Asta Funding's motion to compel arbitration in its entirety, relying on cases Hughes Hubbard cited in its opposition brief. The four representatives then reached a settlement with the defendants and the original action was dismissed without barring members of the purported class from filing a new lawsuit on the same claims.
Hughes Hubbard and NYLAG filed the action on behalf of the three plaintiffs in April 2014. Three months later, Asta filed a motion to compel arbitration and Pressler filed a partial motion to dismiss. Both sides argued the motions before Judge Patterson on Oct. 30, 2014. The case recently was reassigned to Judge Preska.
In denying Asta's motion to compel arbitration, Judge Preska cited the same two reasons in Judge Patterson's ruling: the defendants failed to establish that a binding agreement was made between any of the plaintiffs and defendants requiring arbitration; and even if plaintiffs entered into an agreement similar to sample contracts presented by the defense, the arbitration clause provides an exception for claims relating to debt collection.
Diane Lifton, Shannon Green, Meaghan Gragg, Taylor Reynolds, Elizabeth Houghton and Debbie Placid represent the plaintiffs, with Danielle Tarantolo, Jane Stevens and Julia Russell of NYLAG.