Plaintiffs charging that a law firm and two other entities schemed to fraudulently obtain more than 100,000 consumer debt default judgments through the use of “sewer service” cleared a major hurdle on Sept. 4 by winning class certification.
Judge Denny Chin (See Profile) certified two classes alleging that the law firm of Mel Harris and Associates in Lower Manhattan and two other entities engaged in sewer service—the intentional failure to serve a summons and complaint followed by the filing of a phony affidavit attesting to service.
Sewer service, named after the practice of throwing a summons and complaint into the sewer outside of a defendant’s home and then claiming to have effectuated service, leaves defendants unaware they are due in court.
Chin, a Second Circuit judge who continues to preside over cases from his time on the Southern District bench, agreed with the plaintiffs that class treatment is appropriate for their claims under the Fair Debt Collection Practices Act, 15 U.S.C. 1693; the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §1961; New York General Business Law §349; and New York Judiciary Law §487, under which an attorney can be liable for damages, and charged with a misdemeanor, for engaging in “any deceit, or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party.”
Plaintiffs in Sykes v. Mel Harris and Associates, 09 Civ. 8486, charged the Harris firm engaged in a “massive” debt collection litigation scheme along with Leucadia National Corp., a debt-buying company, and Samserv Inc., a Brooklyn-based process serving agency.
Harris and Leucadia allegedly joined to purchase debt portfolios and begin en masse debt collection, filing 104,341 debt collection actions in New York City Civil Court between 2006 and 2008. While Samserv was hired to serve process, the plaintiffs charge that more than 90 percent of the debtors were never served.
They claim that once the consumer failed to appear, Harris and Leucadia provided proof of service, proof of additional mailed notice and, allegedly, a bogus “affidavit of merit” swearing to their personal knowledge of the facts substantiating their claims.
Chin said the record showed the defendants obtained “tens of thousands” of defaults “based on thousands of affidavits attesting to the merits of the action that were generated en masse by sophisticated computer programs and signed by a law firm employee who did not read the vast majority of them and claimed to, but apparently did not, have personal knowledge of the facts to which he was attesting.”
That employee was Todd Fabacher, the director of information technology at Mel Harris, who signed as many as 350 affidavits of merit per week, or, as Chin said in a prior opinion “one every three minutes.”
Chin also said the record shows that “on hundreds of occasions the defendant process servers purported to serve process at two or more locations at the same time.”
He added, “There were also many other occasions where multiple services were purportedly made so close in time that it would have been impossible for the process server to travel from one location to the other as claimed.”
All told, between 2006 and 2009, Leucadia or its subsidiaries filed 124,838 cases in Civil Court, and Mel Harris lawyers were counsel in over 99 percent of those cases. Between 2007 and 2010, Leucadia entities obtained defaults in 49,114 cases.
Chin last year denied the defendants’ motion to dismiss (NYLJ, Jan. 4, 2011) and heard oral argument on the class certification issue last Oct. 11.
The first class he certified on Sept. 4 is defined as “all persons who have been or will be sued by the Mel Harris defendants as counsel for the Leucadia defendants in New York City Civil Court and where a default judgment has been or will be sought.”
The second class is “nearly identical” but is limited to persons who “have been sued” and had a default judgment entered against them.
The Mel Harris defendants are represented by Brett Scher of Kaufman Dolowich Voluck & Gonzo.
“Needless to say, we are very disappointed in Judge Chin’s decision and intend to appeal to the [Second] Circuit,” Scher said yesterday in a statement. “It’s important to note that this decision in no way addresses the merits of the case, and has no bearing on liability, but simply allows the case to move forward as a class.”
The Samserv defendants are represented by Jordan Sklar of Babchik & Young in White Plains. Sklar declined to comment.
Lewis Goldfarb of McElroy, Deutsch, Mulvaney & Carpenter, in Morristown, N.J., who represents the Leucadia defendants, said his clients intend to appeal the class certification decision to the Second Circuit.
The plaintiffs are represented by Matthew Brinckerhoff and Elisha Jain of Emery Celli Brinckerhoff & Abady; Susan Shin, Claudia Wilner and Josh Zinner of the Neighborhood Economic Development Advocacy Project; and Carolyn Coffey, Andrew Goldberg and Anamaria Segura of MFY Legal Services Inc.
@|Mark Hamblett can be contacted at email@example.com.