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The 2d U.S. Circuit Court of Appeals has held that a law firm regularly collecting debts on behalf of clients is a “debt collector” under the federal Fair Debt Collection Practices Act and is subject to its terms. The July 1 decision could alter the tactics used by law firms that litigate a large number of landlord-tenant disputes seeking eviction, by imposing different federal standards on their practices. In Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, No. 01-9085, the circuit overturned a lower court opinion by Southern District Judge Miriam Goldman Cedarbaum. Cedarbaum had ruled that the law firm did not fit the statutory definition because it earned very little revenue from its debt collection practices. The lower court held that the insubstantial earnings-less than .05% of its revenue-meant that debt collection was not the “principal purpose” of New York-based Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti’s enterprise as defined by the federal statute. In an opinion written by Southern District Judge Laura Taylor Swain, sitting by designation, the panel classified Hutton as a debt collector. Judges Barrington Parker and Reena Raggi joined in the decision. The panel found that Hutton Ingram “regularly” engaged in debt collection because of the many eviction notices it sent for its clients. “The large number of notices clearly could support a determination that Hutton’s debt collection practices were regular,” the panel said, in what it called a case of first impression. Because of this regularity, it held, the law firm qualified as a debt collector under the act and was required to follow its procedures. The case involved a dispute between tenant Sarah Goldstein and Hutton Ingram’s client, the landlord. In 1997, Hutton Ingram sent Goldstein a “three-day notice” demanding payment of outstanding rent or her immediate departure. New York’s laws on landlord-tenant relations require three days’ notice. The federal act requires 30 days’ notice. Goldstein sued, but the lower court said that since the law firm made $5,000 a year from its debt collection practices-less than 1% of its revenue-it was excluded from the law, although it had sent 145 three-day notices within 12 months. The appellate court reversed, focusing on the frequency of notices. Victor Serby represented Goldstein. Laurel Wedinger of New York’s Barry, McTiernan & Moore represented Hutton.

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