Midland Funding Sanctioned by NY Court for Frivolous Collection Case


By: Robert J. Nahoum

A man in suit and tie with his arms crossed.

In a scathing opinion, Judge Mark A. Gross of the Mount Vernon City Court sanctioned infamous debt buyer Midland Funding, LLC and two of its in-house attorneys, Amanda Perez, Esq. and Crystal Scott, Esq., for filing a frivolous lawsuit and other wrong doing.

In the matter Midland Funding LLC v. Vivia Austinnam A/K/A Vivia Nam, six months after having been awarded a default judgment, Midland asked the court to vacate the default without prejudice because “on further review of its file [Midland] had determined that MetaBank was the original creditor of the subject credit account, rather than WebBank as alleged in its complaint, and based upon the new information [Midland] no longer wished to proceed with the action.

While the “Court found plaintiff’s explanation for its decision to vacate the judgment and discontinue the action with prejudice patently incoherent and nonsensical, it nevertheless granted plaintiff’s request to vacate the default judgment so that the defendant would no longer be prejudiced by having a default judgment on her record.â€Â  However, the court also ordered Midland and its attorney to appear before the Court for a hearing to determine whether sanctions should be imposed for commencing a frivolous debt collection lawsuit.

Midland’s explanation for its conduct is a lucid illustration of the flaws and evidentiary short comings common to debt buyer cases.  In a parade of affidavits of debt buyer representatives claiming to be “custodians of records†and purported bills of sales, each pointing to other records (some computer records), Midland and its in-house counsel was ultimately unable to convince Judge Gross that it could have ever certified that the lawsuit was not frivolous as required by New York law.  In so concluding Judge Gross stated that:

“Under 22 NYCRR § 130-1.1-a a proper certification of a complaint can only be made after an inquiry reasonable under the circumstances establishes that the claim asserted in the complaint has merit in law and asserts truthful factual allegations. Plaintiff’s counsel should have known what documentary proof was required for a meritorious lawsuit under New York law and knew that they did not have the required proof in the instant case when they filed suit. In order for any inquiry by counsel into the merits of the instant matter to be reasonable, counsel had an obligation to obtain the required documentation substantiating a prima facie case, including proof of the entire chain of assignment(s) of the alleged debt, prior to filing the instant action. As such, since plaintiff’s counsel failed to obtain the requisite documentation substantiating the merits of plaintiff’s alleged cause of action against the defendant, plaintiff’s counsel, Ms. Scott, could not properly certify the complaint as required under 22 NYCRR § 130-1.1-a.â€

 

Additionally, looking beyond the frivolity of the filing the complaint, Judge Gross examined Midland and is counsel’s “continuing duty to assess the legal and factual basis of a claim in order to avoid imposition of sanctions under Part 130 of the Rules of the Chief Administrator of the Courtsâ€.  Judge Gross reasoned that:

“In the case at bar, counsel was repeatedly presented with additional opportunities to re-evaluate the claim, to wit; when it applied for a default judgment against defendant, when it sought vacatur of the default judgment, when it was ordered by the Court to produce documentary proof of the alleged claim, including the entire chain of assignment of the debt, when it appeared for the sanctions hearing and was given the opportunity to produce evidence of the claim, and finally, after the hearing when it was given a final opportunity to make a post-hearing submission. First, it appears clear that plaintiff relied upon incomplete and inaccurate computer generated records to justify the commencement of this action and to support its application for a default judgment. Thereafter, plaintiff’s counsel continued, repeatedly, to ignore their obligations to produce proof of their claim by submitting woefully inadequate documentation and unsubstantiated hearsay allegations, even at and after a sanctions hearing. The apparent lack of a factual basis for the claim herein renders plaintiff’s counsel’s conduct in commencing this action without having proof of its merit frivolous within the meaning of 22 NYCRR § 130-1.1(c).â€

 

After reiterating the multiple opportunities given to Midland and its counsel to explain and cure its prior conduct, Judge Gross admonished that “[t]he conduct of plaintiff’s counsel not only improperly denied defendant the due process of law but is egregious, careless and unprofessional, and holds the courts and the entire legal profession up for public scorn and ridicule. Such conduct shall not be countenanced by the Court.â€

Based on his findings, Judge Gross imposed a $10,000.00 sanction on Midland and $5,000.00 on each of its two in-house attorneys involved in the case.

Midland Funding, LLC and its affiliates are notorious violators of federal debt collection laws known as the Fair Debt Collection Practices Act (FDCPA) and are sued regularly by consumers for these violations.  The FDCPA is a federal law that regulates the collection of consumer debts. It precludes third party debt collectors from using false, misleading, deceptive and harassing debt collection tactics.

If a debt buyer like Midland Funding, LLC violates the FDCPA, you can sue it for statutory damages up to $1,000.00 plus actual damages (like pain and suffering) and your attorney’s fees.  In FDCPA cases, The Law Offices of Robert J. Nahoum, P.C. doesn’t charge our clients a penny out of pocket.

If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.  With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.

The Law Offices of Robert J. Nahoum, P.C
Phone: (845) 232-0202
email: info@nahoumlaw.com
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www.nahoumlaw.com
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