The Fair Debt Collection Practices Act does not protect lawyers for debts they incur in their practice, a New Jersey appeals court has ruled in a case of first impression in the state.

The precedential decision, in DepoLink Court Reporting v. Rochman, A-4117-11, means a Cherry Hill solo can’t use the federal act as a remedy in a dispute over a court reporting company’s attempt to collect its charges.

DepoLink Court Reporting & Litigation Support Services, of Harrison, had been hired to record the deposition testimony of two witnesses in a personal injury case on July 15, 2010.

David Rochman and the lawyers for the four defendants all signed the standard DepoLink order form, which required payment in 30 days, imposed a 1.5 percent per month late fee and reserved the right to request C.O.D. payment for out-of-state law firms for which it had no payment history.

Rochman was not out of state but he was a new customer. On July 22, he received an invoice charging $3,556.65 for the transcript.

When the transcript itself arrived five days later, on July 27, Rochman refused to pay for it, claiming the order form with the payment terms was presented at the end of the deposition without any negotiation of the terms.

Rochman’s version of the events is that he did not hire DepoLink. In an interview, he said that during the deposition, he realized his personal injury case, which was later dismissed, was “going south.” So when DepoLink insisted on C.O.D. terms, he said “keep your transcript” and sent it back when he got it.

DepoLink hired Johnson Morgan & White, a collection agency based in Boca Raton, Fla., to pursue payment.

Rochman continued his refusal to pay the invoice or a reduced amount for the court reporter’s time, taking the position that DepoLink’s rate and charges were usurious and beyond what is customary and reasonable and that he never agreed to them.

In October 2011, DepoLink sued him in Camden County’s Special Civil Part.

Rochman counterclaimed and also filed a third-party complaint against  Johnson Morgan, claiming it violated the FDCPA by pretending to be a law office, and threatening him with an ethics complaint and a criminal charge if he failed to pay. He also sued the agency under the state Consumer Fraud Act and for common-law fraud.

On March 26, 2012, Superior Court Judge Lee Laskin, who is retired and on recall, granted summary judgment dismissing Rochman’s counterclaim and third-party claims — calling them “the ultimate frivolous litigation pleadings” — and required Rochman to pay legal fees. 

Laskin held that DepoLink was entitled to full payment for the transcript plus interest at the 1.5 percent monthly rate for a total judgment of $4,570.30.

While Rochman’s appeal was pending, he settled with DepoLink, leaving only the fate of the third-party claims to be decided.

The Appellate Division affirmed in an April 26 opinion written by temporarily assigned Bergen County Judge Harry Carroll. He was joined by Judges Jack Sabatino and Douglas Fasciale.

Carroll focused on the FDCPA’s definition of the debts to which it applies: obligations of “a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.”

Rochman argued that even though the debt was incurred for his law firm, a business, it still qualified as a personal debt and he was a consumer because the firm was a sole proprietorship. One decision supported his view: Sluys v. Hand, 831 F. Supp. 321(S.D.N.Y. 1993).

But “other courts have explicitly held that sole proprietors do not constitute ‘consumers’ for purposes of the Act simply by virtue of that status,” and  courts and commentators have criticized Sluys for departing from the FDCPA definition of consumer debt, Carroll said.

Rochman failed to raise a genuine issue of disputed fact on whether the transcript cost was a consumer debt, Carroll said, adding that the decision was not “intended to condone the collection agency’s actions if these allegations are true.”

The panel rejected the Consumer Fraud Act claim on the ground that Rochman had not identified any CFA regulation that was violated. He predicated that claim on an alleged violation of the FDCPA, but the judges said it had to be based on a CFA regulation.

The panel added that the CFA prohibits deceptive or unconscionable practices in the sale or advertising of merchandise and thus could not apply to collection of a debt. Even if the CFA did apply, Rochman did not show the “ascertainable loss” required for liability because he never paid the collection agency, Carroll noted.

The common-law fraud claim failed too, because Rochman did not rely on the collection agency’s statements.

Stephen Barrett of Cherry Hill’s Mattleman, Weinroth & Miller, who represents Johnson Morgan, says Rochman’s contentions were “far-fetched” and the court ruled correctly and as expected.

DepoLink attorney Jonathan Goodgold of East Hanover says, “the CFA and FDCPA are clear and they should not cover this type of situation.”

In Rochman’s view, the FDCPA applies because he is not an LLC or a PC and was sued individually.

And he says the CFA applies because Johnson Morgan stood in the shoes of DepoLink.

He says he settled with DepoLink for around $800, roughly the hourly cost, rather than the page rate.

He now plans to ask Laskin to reconsider his order to pay frivolous litigation fees to Johnson Morgan. He says the appeals court, by not mentioning the fees, did not uphold them.