16-2363- cv (L)
Huebner, et al. v. Midland Credit Mgmt., et al.
16‐2363‐cv (L)
Huebner, et al. v. Midland Credit Mgmt., et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2017
(Argued: November 9, 2017 Decided: July 19, 2018)
Nos. 16‐2363‐cv, 16‐2367‐cv
––––––––––––––––––––––––––––––––––––
LEVI HUEBNER, on behalf of himself and all other similarly situated consumers,
Plaintiff‐Appellant,
POLTORAK PC, ELIE C. POLTORAK,
Interested Party‐Appellants,
‐v.‐
MIDLAND CREDIT MANAGEMENT, INC., MIDLAND FUNDING, LLC.,
Defendants‐Appellees.
––––––––––––––––––––––––––––––––––––
Before: LEVAL, LIVINGSTON, and CHIN, Circuit Judges.
Levi Huebner, Elie C. Poltorak, and Poltorak PC appeal a final judgment of
the United States District Court for the Eastern District of New York (Cogan, J.).
Huebner sued Midland Credit Management, Inc. and Midland Funding LLC.
(collectively “Midland”), alleging that they violated the Fair Debt Collection
1
Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. Huebner alleged that when he
called Midland to dispute his debt, Midland’s representative harassed him by
asking about the nature of his dispute. Huebner also alleged that, after his call,
Midland did not report the debt as disputed to credit reporting agencies. The
district court concluded that Huebner failed to produce any evidence raising a
material issue as to either claim. Additionally, the court sanctioned: (1) Poltorak
personally for misleading the court during the initial status conference; (2)
Huebner for disregarding a protective order; and (3) both Huebner and Poltorak
PC for needlessly multiplying the proceedings. Huebner, Poltorak, and Poltorak
PC argue on appeal that the court erred in granting summary judgment for
Midland and abused its discretion in sanctioning them. We disagree.
Accordingly, the judgment of the district court is AFFIRMED.
FOR PLAINTIFF‐APPELLANT: LAWRENCE KATZ, Valley Stream, NY,
for Levi Huebner.
FOR INTERESTED PARTY‐APPELLANTS: Elie C. Poltorak, Poltorak PC,
Brooklyn, NY, pro se.
FOR DEFENDANTS‐APPELLEES: ANDREW M. SCHWARTZ, Marshall
Dennehey, Warner, Coleman &
Goggin, P.C., Philadelphia, PA
(Matthew B. Johnson, New York, NY,
on the brief), for Midland Credit
Management, Inc., Midland Funding
LLC.
FOR AMICUS CURIAE: Brian Melendez, Dykema Gossett
PLLC, Minneapolis, MN, for ACA
International.
DEBRA ANN LIVINGSTON, Circuit Judge:
Plaintiff‐Appellant Levi Huebner (“Huebner”) is an attorney who has
litigated several cases under the Fair Debt Collection Practices Act (“FDCPA”), 15
2
U.S.C. § 1692, et seq., which, among other things, prohibits debt collectors from
using “false, deceptive, or misleading representation[s] . . . in connection with the
collection of any debt,” id. § 1692e. In October 2013, Huebner called Defendant‐
Appellee Midland Credit Management, Inc. (“Midland”) to dispute a $131 debt
that it had tried to collect from him.1 Huebner surreptitiously recorded the call.
Asked why he disputed the debt, Huebner would say only that the debt was
“nonexistent.” J.A. 371. After repeatedly declining to clarify what he meant,
Huebner said he would call Midland back after reviewing his “files.” Id. at 372.
He filed this lawsuit instead.
Huebner’s first amended complaint alleged that the Midland representative
told him he could dispute his debt only in writing and then only if he gave cause
for his dispute. Huebner’s then‐attorney, Interested Party‐Appellant Elie C.
Poltorak (“Poltorak”), repeated this allegation in a January 28, 2015 letter to the
district court. During an initial status conference, Poltorak further assured the
The record indicates that Defendant‐Appellee Midland Funding LLC purchased
1
the debt and placed it with Midland Credit Management, Inc. for servicing. Huebner
purported to contest this fact below but, as the district court correctly noted, he raised no
material issue as to the point. In any event, it is immaterial which of the two affiliated
defendants technically owned the debt. For simplicity’s sake, we will refer to both
defendants collectively as “Midland.”
3
district court that Huebner’s recording would show that Midland had told him
that he could not dispute his debt orally. But upon listening to the recording of
Huebner’s call, Judge Cogan of the United States District Court for the Eastern
District of New York learned that this allegation was false. The court sanctioned
Poltorak $500 for failure to participate in the initial status conference in good faith.
To keep his case alive, Huebner amended his complaint twice more. His
third amended complaint ultimately alleged that Midland had made multiple false
or misleading representations in violation of 15 U.S.C. § 1692e. Concluding that
Huebner had not raised a material issue of fact as to any of his claims, the court
granted summary judgment for Midland. It also ordered Huebner and
Poltorak’s law firm, Interested Party‐Appellant Poltorak PC, to pay some of
Midland’s legal fees because, the court determined, Huebner had tried to trick
Midland into violating the FDCPA during his initial call; his claim was meritless
and prosecuted in bad faith; and both he and Poltorak PC had needlessly
multiplied the proceedings with, among other things, a baseless motion for recusal
and a pretrial motion filed in flagrant disregard of the terms of the parties’ joint
protective order.
Huebner, Poltorak, and Poltorak PC now appeal the district court’s grant of
4
summary judgment and three separate sanctions orders issued over the course of
this litigation. For the reasons stated below, we conclude that the district court
did not err in granting summary judgment, nor did it abuse its discretion in
sanctioning Huebner, Poltorak, and Poltorak PC. The judgment below is
therefore AFFIRMED.
BACKGROUND
I. Factual Background2
In August 2013, Midland sent a collection letter to Huebner seeking to
collect $131.21 from him. Verizon had originally billed Huebner for this sum in
connection with work done on Huebner’s phone line, but Huebner had refused to
pay, advising Verizon that he should not have been charged for the work.
Verizon told him that it would remove the charge from his invoice. On October
17, 2013, Huebner called Midland regarding the debt and secretly recorded the
phone call. Huebner asked how he could dispute the debt. He was transferred
to an employee named Emma Elliott (“Elliott”). The merits of this case turn
2 Because we are reviewing this case in part on appeal from a grant of summary
judgment to Midland, the facts outlined below as to Huebner’s substantive claims are
either undisputed or viewed in the light most favorable to Huebner. See, e.g., Raspardo
v. Carlone, 770 F.3d 97, 111 (2d Cir. 2014).
5
largely on their conversation.
Huebner began by asking, “[W]hat do I have to do if I want to dispute the
debt[?]” J.A. 369. “Just advise me what your dispute is[,] and I can see if I can
assist you with that,” responded Elliott. Id. Rather than answer, Huebner
pivoted to a different question, “[H]ow do I get it off my credit report?” Id.
Elliot replied, “Well, we need to . . . work with what your dispute is in order to
remove it, sir. So why are you disputing?” Id. Huebner repeated his question:
“I just can’t get it off my credit report[?]” Id. “No,” replied Elliott. “We just
can’t delete an account because the consumer wants it deleted. We need to know
why [you] want it deleted and what [the] dispute is. I can assist you with your
dispute here, sir.” Id. at 369–70. Huebner tried a third time: “I can’t get it off
my credit card—my account without paying it?” Id. at 370. “That’s not what I
said, sir,” Elliott corrected him. “I need to know what your dispute is before I can
just delete it for you. . . . Why is it that you want to dispute it?” Id.
At last, Huebner answered her (in a manner of speaking): “Because it is a
nonexistent debt.” Id. Elliott asked what he meant by “nonexistent” and even
suggested answers Huebner might give her: “Did you already pay it with Verizon?
Did you never have Verizon?” Id. Huebner claimed not to understand what
6
she meant and declined to elaborate, eventually telling Elliott he would call her
back after he reviewed his “files” to see if he could “find anything.” Id. at 372.
Elliott asked whether Huebner still wanted to dispute the debt. Huebner
responded, “I told you I dispute it.” Id. at 373. “But,” Elliott said again, “[y]ou
are just saying you are disputing. I need to know what you are disputing.” Id.
Restating that the debt was “nonexistent” once more, Huebner then
countered, “If you’re telling me[] you are not going to take my dispute, that’s fine.
I’m just going to try to see if I can get more information.” Id. at 373–74. No,
insisted Elliott, “I am trying to help you with your dispute, sir, but you are not
really helping me help you.” Id. at 374. Shortly after, Huebner ended the call,
saying that he might call back with “more information.” Id. He never did.
According to Midland’s internal procedures for managing debt disputes,
when a consumer calls Midland to challenge a debt, Midland may mark the debt
as “disputed” and report it as such to the credit reporting agencies while Midland
attempts to confirm its validity. But sometimes resolving a difficult dispute is
just not worth it, in which case, Midland will code the disputed account with the
number “289.” This denotes that Midland has deleted the account, that Midland
will cease all collection, and that the credit reporting agencies will be informed of
7
this.
The day Huebner called, Midland marked Huebner’s account with “289”
and sent advisories to the major credit reporting agencies requesting that
Huebner’s debt be deleted from his credit reports. Midland wrote Huebner a
letter informing him that it had deleted his debt, would no longer collect it, and
that Midland had informed the credit reporting agencies that they should delete
the debt as well.3
II. Procedural History
A year later, Huebner sued Midland in the United States District Court for
the Eastern District of New York (Cogan, J.), alleging that Midland violated the
FDCPA. According to Huebner’s first amended complaint, Elliott told him “that
he could not orally dispute” his debt but must do so in writing and “that he must
have a reason to dispute a debt.” J.A. 51. Huebner sought to represent all
consumers who had undergone similar treatment in a class action.
Huebner alleges that Midland never sent him this letter and did not, in fact,
3
inform the credit agencies that they should delete the debt. We agree with the district
court that Huebner has failed to create a genuine dispute of material fact concerning this
matter. See note 5, infra.
8
A
During the court’s initial status conference, Poltorak, Huebner’s counsel,
told the court that Huebner’s case was based exclusively on the recorded
conversation and on the allegation that Elliott had told Huebner that he must
dispute his debt in writing. Judge Cogan listened to the recording and
discovered that Elliott had said nothing of the sort. Concluding that Huebner
and Poltorak had misrepresented Huebner’s call, which had “all the earmarks of
a setup,” the court ordered Huebner and Poltorak to show cause why the “action
should not be dismissed, with fees [and] costs awarded under 15 U.S.C.
§ 1692k(a)(3), and sanctions issued pursuant to Rule 11.” Huebner v. Midland
Credit Mgmt., Inc., 85 F. Supp. 3d 672, 675 (E.D.N.Y. 2015).
Huebner and Poltorak moved to disqualify Judge Cogan. As evidence of
the judge’s purported bias, Huebner and Poltorak pointed primarily to the judge’s
ownership of a few shares in an exchange‐traded fund, which held some shares of
Midland’s parent company Encore Capital Group, Inc. As to sanctions, Poltorak
claimed that he “ha[d] no recollection” of making the no‐verbal‐disputes‐allowed
misrepresentation during the Initial Status Conference. J.A. 192 n.3. Huebner
and Poltorak further insisted that dismissal was not proper because they had a
9
new theory for relief: that Huebner never received a letter from Midland informing
him that it had stopped collection on his debt.
In a May 1, 2015 decision and order, the district court denied the recusal
motion. Huebner v. Midland Credit Mgmt., Inc., No. 14 CIV. 6046 (BMC), 2015 WL
1966280 (E.D.N.Y. May 1, 2015). The judge’s purported financial interest, $9 total,
did not create a conflict because “ownership in a mutual or common investment
fund that holds securities,” like the exchange‐traded fund at issue, does not create
a conflict of interest “unless the judge participates in the management of the fund,”
according to Canon 3C(3)(c)(i) of the Code of Conduct for United States Judges
and the Judicial Conference’s Committee on Codes of Conduct Advisory Opinion
No. 106 (2014). Id. at *2–*3.
Next, the court sanctioned Poltorak $500 under Fed. R. Civ. P. 16(f)(1)(B) for
failure to participate in the initial status conference in good faith. Poltorak had
initially “raised one claim and one claim only—that the recorded conversation
between plaintiff and defendantʹs agent would show that defendant advised
plaintiff that he could only dispute his debt in writing, not orally.” Id. at *6. But
after the status conference, Poltorak raised “new allegations that [were] not
recently discovered, [were] relevant, and would have materially changed the
10
posture of this case had they been disclosed at the proper time,” thus frustrating
the aim of the conference procedure to help cases proceed expeditiously. Id.
The court nonetheless did not dismiss the action but instead scheduled a
conference to plan discovery on Huebner’s new theory. Id. at *7.
B
Three months and two amended complaints later, the district court
approved the parties’ joint protective order, which set out procedures for
preserving documents’ confidentiality. Any letter or memorandum that cited a
protected document was to be filed under seal. A party who wanted to challenge
a document’s designation as “confidential” was to attempt to resolve the dispute
with the other party first. If the parties could not resolve it between themselves,
the challenging party could then ask the court to resolve it after ten days.
On November 4, 2015, Huebner’s counsel wrote the court to outline
contested areas of discovery. This letter, which cited Midland’s confidential
information, was filed on the court’s open docket. The court ordered the letter
sealed and warned the parties that it would sanction them if they failed to resolve
outstanding discovery disputes. Huebner’s counsel later requested, without first
consulting with defense counsel, that the court revoke the confidential
11
designations of certain documents. On November 13, 2015, the court imposed a
$350 sanction on Huebner under Fed. R. Civ. P. 16(f)(1)(C) for filing a frivolous
motion by failing to follow the protective order’s procedures for challenging
documents’ confidential designations.
C
The district court granted Midland’s motion for summary judgment after
almost a year of discovery. See Huebner v. Midland Credit Mgmt., Inc., No. 14 CIV.
6046 (BMC), 2016 WL 3172789 (E.D.N.Y. June 6, 2016). Although Huebner’s third
amended complaint had outlined four distinct claims for relief, his claims had
essentially boiled down to just two theories by summary judgment. First, he
argued that Elliott’s questions about the nature of his dispute led him to believe
that he could not dispute his debt without cause, in violation of 15 U.S.C.
§§ 1692e(8) and 1692e(10). Second, Huebner alleged that Midland reported his
debt to credit reporting agencies without mentioning that the debt was disputed,
in violation of 15 U.S.C. §§ 1692e(5), 1692e(8), and 1692e(10), and also sent him a
letter falsely claiming that Midland notified the credit reporting agencies that the
debt was disputed, thereby violating 15 U.S.C. § 1692e(2)(A).
The district court rejected both arguments. The district court explained
12
that the FDCPA does not make it illegal to ask a consumer questions about the
nature of his dispute when the consumer calls to lodge one. Requesting that sort
of information can help both the collector and the consumer resolve the dispute
faster. To be sure, it might be unlawful to badger a consumer with harassing or
browbeating questions “to deter him from disputing his debt.” Huebner, 2016 WL
3172789 at *5. But here, it was Huebner, not Elliott, who was “bobbing and
weaving, evading the questions and harassing the collection agent, who was just
trying to do her job, find out what the problem was, and perhaps even resolve the
dispute.” Id. The court then concluded that no material issue of fact had been
raised as to whether Midland informed the credit reporting agencies that the debt
was deleted, and the record showed that deleted debts are a subset of disputed
debts.4 The court entered final judgment on June 6, 2016.
D
On June 13, 2016, Midland moved for the district court to sanction Huebner
and Poltorak PC under 15 U.S.C. § 1692k(a)(3), 28 U.S.C. § 1927, and the court’s
inherent authority for pursuing this litigation in bad faith. Specifically, Midland
4 The court separately held that, even if Huebner had not lost on the merits, it
would have declined to certify Huebner’s proposed class. Huebner, 2016 WL 3172789, at
*7–10.
13
sought to recover “all reasonable costs and fees it expended in defending”
Huebner’s suit. J.A. 1082. On November 10, 2016, the court granted Midland’s
motion in part. See Huebner v. Midland Credit Mgmt., Inc., No. 14 CIV. 6046 (BMC),
2016 WL 6652722 (E.D.N.Y. Nov. 10, 2016). The court first noted that Poltorak
PC’s conduct was sanctionable under 28 U.S.C. § 1927 “because it pursued a claim
that had no legal basis, and it acted in bad faith.” Id. at *4. What is more,
Poltorak PC had “unnecessarily multiplied the proceedings” with its “baseless
motion for recusal,” “frivolous motion to remove certain confidentiality
designations,” and frequent pre‐motion conference letters that exceeded the
court’s page limit, all in disregard of Midland’s warnings that it would seek fees
and costs if the litigation continued. Id. at *4.
The court also ordered Huebner to pay fees under 15 U.S.C. § 1692k(a)(3)
and the court’s inherent authority to sanction. Id. at *5. Not only did Huebner—
a lawyer so experienced with the FDCPA that he “whispered virtually every
question into his attorneyʹs ear” during a deposition, id. at *5 n.3—change his legal
theory several times, he also “attempt[ed] to entrap [Elliott] into committing an
FDCPA violation” for the purpose of pursuing this lawsuit, id. at *5. Indeed,
Huebner suggested in his opposition to sanctions that he had called Midland not
14
to dispute his debt, but rather to “test[]” its FDCPA compliance. Id. at *5.
But Midland also deserved some blame, the court determined, because it
“did not take its discovery obligations as seriously as it should have,” having
delayed document production several times. Id. at *6. “Under these
circumstances, a substantial sanctions award would only further distort what
should have been a minor litigation.” Id. The court therefore ordered Huebner
and Poltorak PC, jointly and severally, to pay only “the attorneys’ fees and costs
incurred in connection with [Midland’s] motion for sanctions and some portion of
[its] attorneys’ fees and costs incurred in connection with opposing [Huebner’s]
class certification motion.” Id. On December 23, 2016, after reviewing
Midland’s bill of fees, the court further reduced the award to only the fees that
Midland incurred in connection with its motion for sanctions. This number was
ultimately calculated as $9,850, less than a tenth of the full attorney’s fees and costs
that Midland incurred over the course of the litigation.
DISCUSSION
On appeal, Huebner—as well as Poltorak, and Poltorak PC, who have joined
this case as interested parties—challenge the district court’s June 6, 2016 final
judgment and its three sanctions orders. For the reasons that follow, we AFFIRM
15
the judgment of the district court and its sanctions orders.
I
We first address the district court’s grant of summary judgment to Midland.
“We review a grant of summary judgment de novo, examining the evidence in the
light most favorable to, and drawing all inferences in favor of, the non‐movant.”
Blackman v. New York City Transit Auth., 491 F.3d 95, 98 (2d Cir. 2007) (per curiam)
(quoting Sheppard v. Beerman, 317 F.3d 351, 354 (2d Cir. 2003)). “Summary
judgment is appropriate only if it can be established ‘that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter
of law.’” Sheppard, 317 F.3d at 354–55 (quoting Fed. R. Civ. P. 56(c)). Huebner
argues on appeal that the district court erred in granting summary judgment on
each of his two principal theories under the FDCPA: (1) that Elliott’s questions
about the nature of his credit dispute amounted to a “misleading” communication
about his debt; and (2) that Midland failed to report to the credit reporting agencies
that he had “disputed” the debt. For the following reasons, we disagree.
A
Section 1692e of the FDCPA prohibits all “false, deceptive, or misleading
representation[s] or means in connection with the collection of any debt.” Apart
16
from this blanket ban, § 1692e(8) more specifically renders it unlawful for a debt
collector knowingly to communicate (or threaten to communicate) false credit
information, while § 1692e(10) bars “deceptive means . . . to obtain information
concerning a consumer.” When interpreting § 1692e, we test whether a
communication is “deceptive” by asking how the “least sophisticated consumer”
would interpret it. Eades v. Kennedy, PC Law Offices, 799 F.3d 161, 173 (2d Cir.
2015) (quoting Easterling v. Collecto, Inc., 692 F.3d 229, 233 (2d Cir. 2012)). This “is
an objective standard, designed to protect all consumers, ‘the gullible as well as
the shrewd.’” Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 135 (2d Cir. 2010)
(quoting Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 90 (2d Cir. 2008)).
Huebner’s first theory of liability is that Midland violated § 1692e when
Elliott, responding to Huebner’s call, supposedly “overwhelm[ed]” him with
“hassl[ing]” questions as to why he wished to dispute his debt. Br. for Pl.‐
Appellant at 38. This sort of questioning, he contends, misleads consumers into
believing that they cannot dispute their debts without explaining the nature of
their dispute, deters them from disputing their debts in violation of § 1692e(8), and
allows collectors “to improperly extract information concerning the consumer,” in
violation of § 1692e(10). Id. In short, according to Huebner, as soon as he said
17
the words “I want to dispute the debt,” Elliott was obligated to record the dispute
and end the conversation; she thus violated the FDCPA when she asked any
follow‐up questions inquiring into the nature of Huebner’s dispute. We
disagree.
Like the district court, we assume without deciding that at some point, a
debt collector’s questions about the nature of a consumer’s dispute could become
sufficiently inquisitorial to violate the FDCPA. But no reasonable jury could
conclude that Elliott’s questions were misleading or abusive in any way. See, e.g.,
Ellis, 591 F.3d at 135 (“While protecting those consumers most susceptible to
abusive debt collection practices, this Court has been careful not to conflate lack of
sophistication with unreasonableness.”). The “least sophisticated consumer”
would have interpreted Elliott not as threatening Huebner, or even conveying
false information about his debt, but rather as endeavoring to learn more about
Huebner’s dispute so that Midland could resolve it. After all, Huebner had asked
Elliott how he could “get [the debt] off [his] credit report.” J.A. 369. Had she
simply accepted his dispute and hung up the phone at that point, the debt would
have stayed on his report pending a determination of the validity of the debt,
rather than been deleted. And despite Huebner’s purported misunderstanding
18
of Elliott’s basic questions throughout the call, Elliott remained patient, going so
far as to feed him possible answers to her questions. See Ellis, 591 F.3d at 135
(explaining that, although a “hypothetical least sophisticated consumer” lacks
“the sophistication of the average, everyday, common consumer,” he is “neither
irrational nor a dolt” (internal quotation marks omitted) (quoting Russell v. Equifax
A.R.S., 74 F.3d 30, 34 (2d Cir. 1996)). Finally, even if Huebner had been at all
confused about the status of his credit dispute when he ended the call, Midland
sent him a letter that day telling him that his debt had been deleted.5
We thus agree with the district court that Huebner failed to raise a material
issue on the theory that Midland violated § 1692e when Elliott politely asked
Huebner what he meant when he said that his debt with Verizon was
“nonexistent.” See id. (“[T]he FDCPA does not aid plaintiffs whose claims are
based on ‘bizarre or idiosyncratic interpretations of collection notices.’” (quoting
Jacobson, 516 F.3d at 90)); Jacobson, 516 F.3d at 90 (noting that our “least
sophisticated consumer” objective test “protects debt collectors from unreasonable
constructions of their communications”). The district court properly concluded
5 As mentioned earlier, Huebner alleged below that Midland never sent him this
letter, but on the evidence in the record, a reasonable jury could only find that Midland
sent the letter.
19
that there were no genuine questions of fact as to whether Elliott misled Huebner
with her questions, and was right to grant summary judgment to Midland on this
issue.
B
Huebner next argues that Midland violated § 1692e(8), which requires debt
collectors “to communicate that a disputed debt is disputed,” by failing to so
inform the credit reporting agencies. Nothing in the record, however, supports
this meritless allegation either. Midland marked Huebner’s debt with the code
“289” the day he called, meaning that it deleted the account. Midland also sent
several messages to the credit reporting agencies telling them to delete the debt,
as well as a letter to Huebner informing him of this. Huebner has not pointed to
any record evidence that creates a material question of fact on these issues.6 As a
result, we hold that summary judgment was also properly granted as to Huebner’s
second claim for relief.7
For the first time in his reply brief, Huebner argues that there is a legally
6
significant difference between informing a credit reporting agency that a debt is
“disputed” and instructing the agency to delete the debt. Whatever the merits of
Huebner’s argument, we need not address it. See McCarthy v. SEC, 406 F.3d 179, 186 (2d
Cir. 2005) (declining to consider “arguments not raised in an appellant’s opening brief,
but only in his reply brief”).
7 We need not consider Huebner’s challenge to the district court’s denial of class
certification because we hold as a matter of law that Huebner did not suffer a legally
20
II
We next review the district court’s sanctions orders. As discussed above,
the district court sanctioned:
(1) Poltorak under Federal Rule of Civil Procedure 16(f)(1)(B) for failing to
participate in the initial status conference in good faith;
(2) Huebner under Rule 16(f)(1)(C) for breaching the district court’s
protective order;
(3) Poltorak PC under 28 U.S.C. § 1927 for unreasonably multiplying the
district court’s proceedings; and
(4) Huebner under 15 U.S.C. § 1692k(a)(3) and the district court’s inherent
authority for pursuing a frivolous legal claim in bad faith.
We review the imposition of sanctions for abuse of discretion. See Virginia
Properties, LLC v. T‐Mobile Ne. LLC, 865 F.3d 110, 113 (2d Cir. 2017). “An abuse of
discretion occurs when a district court bases its ruling on an erroneous view of the
law or on a clearly erroneous assessment of the evidence, or renders a decision
that cannot be located within the range of permissible decisions.” Star Mark
Mgmt., Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170, 175 (2d
Cir. 2012) (quoting Kiobel v. Millson, 592 F.3d 78, 81 (2d Cir. 2010) (quotation marks
cognizable injury. See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982) (“[A] class
representative must be part of the class and possess the same interest and suffer the same
injury as the class members.” (internal quotation marks omitted) (quoting East Texas
Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403 (1977))).
21
and alterations omitted)). When a lower court sanctions a litigant for bad faith,
the court must outline its factual findings with “a high degree of specificity.”
Virginia Properties, 865 F.3d at 113 (quoting Weinberger v. Kendrick, 698 F.2d 61, 80
(2d Cir. 1982)). But more often than not, “the district court is better situated than
the court of appeals to marshal the pertinent facts and apply the fact‐dependent
legal standard that informs its determination as to whether sanctions are
warranted.” Id. (quoting Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir.
2000)).
A
Poltorak first argues that the district court abused its discretion when it
sanctioned him $500 under Rule 16(f)(1)(B). Rule 16(f)(1)(B) allows a district
court to sanction a party for failing to participate “in good faith” in a pretrial
conference. Rule 16(f)’s “explicit reference to sanctions” reflects the Rule’s
intention to “encourage forceful judicial management.” Fed R. Civ. P. 16(f)
advisory committee’s note to 1983 amendment. It vests a district court with
“discretion to impose whichever sanction it feels is appropriate under the
circumstances.” Id. This sanctioning power accords with a district court’s
broader “‘inherent power’ and responsibility to manage [its] docket[] ‘so as to
22
achieve the orderly and expeditious disposition of cases.’” In re World Trade Ctr.
Disaster Site Litig., 722 F.3d 483, 487 (2d Cir. 2013) (per curiam) (quoting Link v.
Wabash R.R. Co., 370 U.S. 626, 630–31 (1962)). “In deciding whether a sanction is
merited, the court need not find that the party acted in bad faith. The fact that a
pretrial order was violated is sufficient to allow some sanction.” See 6A Charles
Alan Wright et al., Federal Practice and Procedure § 1531 (3d ed. 2010).
Here, Poltorak had informed the court that the case turned on Elliott’s
telling Huebner that she would only accept disputes made in writing. Elliott, of
course, said no such thing. Ordered to show cause why he should not be
sanctioned, Poltorak denied having made the misrepresentation, even though
Huebner’s first amended complaint and Poltorak’s statements in a January 28,
2015 pre‐conference letter made the very same allegation. Then Poltorak
changed the subject, moving to recuse Judge Cogan and alleging for the first time
that Midland failed to tell credit reporting agencies that the debt was disputed.
Because Poltorak’s bait‐and‐switch routine delayed the litigation, the court
sanctioned him $500. See Fed. R. Civ. P. 16(a) (explaining that pretrial
conferences are meant to “expedit[e] disposition of the action,” “discourag[e]
wasteful pretrial activities,” and “facilitate[] settlement”); see also 6A Charles Alan
23
Wright et al., Federal Practice and Procedure § 1531 (3d ed. 2010) (describing orders
to pay fees or costs under Rule 16(f) as “[l]ess drastic sanctions”).
On appeal, Poltorak and Huebner suggest that any references to a “writing”
were inadvertent and that, importantly, they never changed positions as to their
legal theory. Huebner points out that both his first amended complaint and his
third amended complaint allege that Elliott refused to accept his dispute unless he
explained it. The third amended complaint, he asserts, is altogether in line with
the first, but is just more specific in explaining that Elliott refused to acknowledge
his dispute by asking him questions about it. We disagree.
As the district court observed, Poltorak’s January 28, 2015 letter “raised one
claim and one claim only—that the recorded conversation between plaintiff and
defendant’s agent would show that defendant advised plaintiff that he could only
dispute his debt in writing, not orally.” Huebner, 2015 WL 1966280, at *6.
Poltorak’s representation hardly appears inadvertent, since it can also be found in
the first amended complaint. See J.A. 51 (alleging that Elliott “stated to the
Plaintiff that he could not orally dispute the debt”). It does not hint at the theory
that simply asking any follow‐up questions posed a problem. Nor, for that
matter, does the first amended complaint allege that Midland failed to report his
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debt as disputed to the credit reporting agencies: Huebner and Poltorak made this
argument only after the court learned that their no‐verbal‐disputes claim was
false. We therefore do not believe it was clearly erroneous for the district court
to conclude that Poltorak “intentionally misl[ed] the [c]ourt and defendant as to
his theory of the case,” Huebner, 2015 WL 1966280, at *7, and we discern no abuse
of discretion in the district court’s decision to sanction Poltorak under Rule
16(f)(1)(B).
B
We next address Huebner’s contention that the district court erred in
sanctioning him on November 13, 2015 under Rule 16(f)(1)(C) for breaching the
protective order. See Fed. R. Civ. P. 16(f)(1)(C) (authorizing courts to sanction
parties who fail to “obey a . . . pretrial order”). Under the district court’s August
2015 protective order, the parties were forbidden from quoting from confidential
material in documents filed on the open docket. A party who wanted to
challenge a document’s designation as “confidential” was supposed to try to
resolve the dispute with the other party first. If the parties could not resolve the
dispute in ten days, the challenging party could ask the court to step in. In
November 2015, Huebner filed a letter with the court that sought to challenge a
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document’s confidential designations without first consulting Midland.
Concluding that Huebner’s letter was frivolous because he had ignored the
protective order’s procedures, the court sanctioned him $350.
Huebner’s argument is not entirely clear, but he seems to believe that
because the district court did not give him an opportunity to withdraw the
offending submission, he was denied fair “notice of the particular sanctions
sought.” Reilly v. Natwest Markets Grp. Inc., 181 F.3d 253, 270 (2d Cir. 1999). But
attorneys “have no absolute right ’to be warned that they disobey court orders at
their peril.’” Id. (quoting Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357, 1366
(2d Cir. 1991)); see also Fonar Corp. v. Magnetic Resonance Plus, Inc., 128 F.3d 99, 102
(2d Cir. 1997) (“As a general rule, a court is not obliged to give a formal warning
that sanctions might be imposed for violation of the court’s orders.”). What is
more, this was Huebner’s second violation of the protective order in eight days:
on November 4, he had filed a letter on the court’s open docket quoting from
confidential documents. That same day, the court sealed Huebner’s letter and
warned the parties that failure to resolve discovery disputes could lead to
sanctions. The district court’s November 13 imposition of sanctions
consequently “was, or should have been, entirely foreseeable to” Huebner.
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Reilly, 181 F.3d at 270; see also Koehl v. Bernstein, 740 F.3d 860, 863 (2d Cir. 2014)
(affirming a sanctions order in part because the district court had given the litigant
fair warning). We therefore discern no abuse of discretion in the district court’s
decision.
C
We next address the district court’s decision to sanction Poltorak PC under
28 U.S.C. § 1927.8 Section 1927 allows a court to require an attorney “who so
multiplies the proceedings in any case unreasonably and vexatiously . . . to satisfy
personally the excess costs, expenses, and attorneys’ fees reasonably incurred
because of such conduct.” This statute “imposes an obligation on attorneys
throughout the entire litigation to avoid dilatory tactics,” and provides courts with
a cudgel to use, in their discretion, “to deter unnecessary delays in litigation.”
United States v. Int’l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am.,
AFL‐CIO, 948 F.2d 1338, 1345 (2d Cir. 1991) (quoting H.R. Conf. Rep. No. 1234,
96th Cong., 2d Sess. 8). “To impose sanctions under [§ 1927], a court must find
clear evidence that (1) the offending party’s claims were entirely without color,
A court may sanction a law firm under § 1927 for the acts of its attorneys. See
8
Enmon v. Prospect Capital Corp., 675 F.3d 138, 147–48 (2d Cir. 2012).
27
and (2) the claims were brought in bad faith—that is, motivated by improper
purposes such as harassment or delay.” Kim v. Kimm, 884 F.3d 98, 106 (2d Cir.
2018) (internal quotation marks omitted) (quoting Eisemann v. Greene, 204 F.3d 393,
396 (2d Cir. 2000)). A court may infer bad faith when a party undertakes
frivolous actions that are “completely without merit.” In re 60 E. 80th St. Equities,
Inc., 218 F.3d 109, 116 (2d Cir. 2000) (quoting Int’l Bhd. of Teamsters, 948 F.2d at
1345).
Here, the district court cited numerous frivolous and vexatious actions by
Poltorak PC attorneys over the course of this litigation. Poltorak himself, for
example, had misrepresented to the court that Elliott told Huebner that he could
only dispute his debt in writing. After the district court pointed this out, Poltorak
moved to recuse Judge Cogan, citing the judge’s ownership stake in a common
investment fund, even though Canon 3C of the Judicial Code of Conduct and
Advisory Opinion 106 expressly state that this sort of financial interest does not
create a conflict. Poltorak PC also later changed its theory of the case, arguing
first that Elliott, by trying to clarify Huebner’s bewildering answers to her
questions, had somehow misled him, and second that Midland failed to report
Huebner’s debt properly to the credit reporting agencies. At summary judgment,
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the district court correctly concluded that the first claim “had no basis in the
FDCPA,” Huebner, 2016 WL 6652722, at *4, and that the second was plainly untrue.
It also noted that Poltorak PC time and time again filed letters exceeding the
court’s page limit and ignored procedures set out in the court’s protective order.
See generally Chambers v. NASCO, Inc., 501 U.S. 32, 52–53 (1991) (upholding “the
assessment of attorneyʹs fees as a sanction for . . . disobedience of the courtʹs orders
and the attempt to defraud the court itself”). The district court thus had good
reason to conclude that Poltorak PC “unreasonably and vexatiously” multiplied
the proceedings in this case under 28 U.S.C. § 1927. Kim, 884 F.3d at 106.
Poltorak PC and Huebner raise two principal challenges to the district
court’s § 1927 fee award, neither of which we find convincing. First, they both
argue that their principal claim for relief—that asking any questions about the
nature of a consumer’s dispute is a “misleading” statement under the FDCPA—
was not frivolous because it turns on a question of law that was previously
“undecided in this Circuit.” Simmons v. Roundup Funding, LLC, 622 F.3d 93, 97
(2d Cir. 2010). But a legal theory may be frivolous even if we have never said so
before. See, e.g., Gollomp v. Spitzer, 568 F.3d 355, 372 (2d Cir. 2009) (upholding a
district court’s conclusion that a plaintiff’s argument was frivolous when the
29
plaintiff failed to cite any “on point” cases in support of his legal theory). And
the district court found that “any reasonable reading of [Huebner]’s recorded call”
with Midland would show that he was specifically “trying to trick [Midland] into
not complying with the FDCPA.” Huebner, 2016 WL 3172789, at *3 (emphasis in
original). We see nothing clearly erroneous about this finding, and thus nothing
clearly erroneous about the district court’s conclusion that Poltorak PC knew or
should have known that Huebner’s suit was devoid of merit. See, e.g., Enmon, 675
F.3d at 143 (“[A] claim is entirely without color when it lacks any legal or factual
basis.” (internal quotation marks omitted) (quoting Schlaifer Nance & Co. v. Estate
of Warhol, 194 F.3d 323, 337 (2d Cir. 1999))). But even if this claim were not
frivolous, it would not have been an abuse of discretion to award fees in light of
Poltorak PC’s “oppressive tactics” at the initial status conference and “willful
violations of court orders.” Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782 F.2d
329, 345 (2d Cir. 1986).
Second, because the district court did not fully grant Midland’s motion for
sanctions, which requested that the court award its total fees and costs, Huebner
argues that this motion was meritless. And so, he contends, it was an abuse of
discretion to impose a fee award that reimbursed Midland for preparing this
30
motion. Cf. Hensley v. Eckerhart, 461 U.S. 424, 436 (1983) (holding that courts
should not award fees under 42 U.S.C. § 1988 to plaintiffs’ lawyers who achieve
“only partial or limited success”). But Midland’s motion was not meritless. The
court agreed with Midland that Poltorak PC should be sanctioned for their bad
faith conduct; it just declined to give Midland as large a sanction as it requested.
See Enmon, 675 F.3d at 148 (upholding a sanctions award for the cost of litigating
a sanctions motion because the motion was “well founded,” even though the
district court “denied [it] in part”). We therefore conclude that the district court
did not abuse its discretion in sanctioning Poltorak PC under 28 U.S.C. § 1927.
D
Finally, we examine the district court’s decision to sanction Huebner under
15 U.S.C. § 1692k(a)(3) and its inherent authority. Section 1692k(a)(3) allows a
district court to sanction a litigant for bringing an FDCPA suit “in bad faith and
for the purpose of harassment.” A court may also sanction a litigant pursuant to
its inherent authority “if there is clear evidence that the [litigant’s] conduct” was
“(1) entirely without color and (2) motivated by improper purposes.” Wolters
Kluwer Fin. Servs., Inc. v. Scivantage, 564 F.3d 110, 114 (2d Cir. 2009); see also
Chambers, 501 U.S. at 46 (holding that such sanctions “vindicat[e] judicial authority
31
without resort to the more drastic sanctions available for contempt of court”
(quoting Hutto v. Finney, 437 U.S. 678, 689 n.14 (1978)).
Here, the court sanctioned Huebner under § 1692k(a)(3) and its inherent
authority for the same reasons as Poltorak PC, noting that, as an attorney
experienced in FDCPA litigation, Huebner played a substantial role in crafting his
case’s litigation strategy. Huebner has not denied, for example, that at one point
he fed his attorney all the questions he asked at a deposition. Huebner also
suggested in his opposition to sanctions that he had called Elliott to “test”
Midland’s FDCPA compliance. The district court interpreted this as an
admission that Huebner had been purposefully evasive during the call in an effort
to provoke an FDCPA violation, and we see no clear error in this determination.
The district court thus did not abuse its discretion in determining that Huebner’s
decision to initiate this lawsuit “was meritless and brought for improper
purposes,” and that a fee award was therefore appropriate. Kerin v. U.S. Postal
Serv., 218 F.3d 185, 195 (2d Cir. 2000). Huebner’s arguments to the contrary are
virtually identical to Poltorak PC’s outlined above, and we reject them for the same
reasons.
In sum, we conclude that the district court set forth sufficiently detailed
32
factual findings establishing that Huebner, Poltorak, and Poltorak PC brought a
frivolous case and filed several frivolous motions in bad faith. The district court
was therefore well within its discretion to sanction them.
CONCLUSION
We have considered Huebner, Poltorak, and Poltorak PC’s remaining
arguments and find them to be without merit. Accordingly, we AFFIRM the
judgment of the district court.
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