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Law firms that engage in collecting debts are not subject to constraints under federal debt collection law if their activities constitute only a small percentage of their overall revenues, a Southern District of New York judge has held. Sara Goldstein, a tenant who lived in a Manhattan apartment owned by Stahl York Avenue Company, sued Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti in Manhattan, (now known as Ingram Yuzek Gainen Carroll & Bertolotti) over the New York law firm’s attempts to collect unpaid rent from her on behalf of Stahl. In January 1998, the firm had served Goldstein with a notice demanding she pay $2,583 in unpaid rent or risk eviction. The notice threatened to commence an eviction proceeding against Goldstein if she did not comply within three days of the date of service. While Goldstein settled a summary eviction proceeding brought against her when she did not comply, she nevertheless continued her complaint against Hutton Ingram in February 1998, alleging the notice they sent violated the federal Fair Debt Collection Practices Act. According to Goldstein, the notice violated the act because it lacked a required 30-day validation notice; it failed to disclose that Hutton Ingram was attempting to collect a debt and that any information obtained would be used for that purpose; and it contained threats to take actions that could not be legally taken. Federal Judge Miriam Goldman Cedarbaum of the Southern District, hearing Hutton Ingram’s motion for summary judgment in Sara Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 98 Civ. 1464, ruled that debt collection did not amount to a sufficient percentage of the firm’s practice to meet the debt collection act’s definition of a debt collector as a person or entity that “regularly collects” debts. The decision will be published Friday. “Whether attorney defendants ‘regularly’ collect consumer debt for purposes of the FDCPA is determined on a case by case basis,” the judge wrote. “Courts have considered several factors in making that determination, including the percentage of revenue generated by debt collection activities, the sheer volume of debt collection activities, and whether defendants have an ongoing attorney-client relationship with a collection agency.” Judge Cedarbaum determined that, in the 12 months before Goldstein filed her complaint, Hutton Ingram issued 145 debt collection notices with the three-day response requirement. These notices generated $5,000, or approximately 0.5 percent of the firm’s revenue over that period, according to the opinion. Cedarbaum held that such a small percentage of the overall practice did not amount to the regular collection of debts by the firm. “Courts have uniformly held as a matter of law that law firms for which debt collection activities constitute such a small percentage of their revenues are not debt collectors under the FDCPA,” Cedarbaum wrote. “[Hutton Ingram] does not advertise itself as being in the business of debt collection, nor does it maintain a specialty listing as a debt collector in Martindale-Hubbell or any other attorney guide … . Accordingly, Hutton is not a debt collector under the FDCPA.” the judge concluded. DISCOVERY REQUEST Goldstein’s request for additional discovery as to other possible debt collection activity by Hutton Ingram was denied by the judge because it was untimely, and because she did not file a required affidavit under Federal Rule of Civil Procedure 56(f). Judge Cedarbaum wrote, “The case has been pending since 1998 … . Plaintiff has had more than two years in which to pursue discovery on the essential elements of her claim.” Hutton Ingram was represented by Alan M. Gelb and Peter T. Shapiro of Manhattan’s Jones Hirsch Connors & Bull. Goldstein was represented by Victor M. Serby, also of Manhattan.

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