A District Court judge in New York has denied a defendant’s motion to dismiss a consumer’s Fair Debt Collection Practices Act lawsuit alleging that a process serving company knew or should have known one of its process servers was engaging in sewer service, adopting a magistrate judge’s recommendation and finding that the company’s pay structure and one server’s implausible output pushed the claims “just across the plausibility line.”
The background: The plaintiff alleged she was the target of a collection lawsuit nearly two decades ago in which the affidavit of service filed on behalf of the plaintiffs in that case was false, allowing a default judgment to be obtained without her ever receiving notice.
- The lawsuit names a collection law firm, one of its attorneys, a debt buyer, the process serving company, the company’s sole shareholder and president, and the individual process server who completed the affidavit. The motion at issue was filed only by the process serving company and its owner.
- The plaintiff sued the process serving company under the FDCPA, and sued both the company and its owner under New York’s deceptive practices statute, a New York City Administrative Code provision governing process servers, and for negligence and gross negligence.
- The plaintiff alleged the company paid process servers as little as $3 per service, paid nothing in consumer collection cases unless service was completed, and used at least one server who claimed 4,000 services in 2008, a server whose license was revoked the following year.
- The defendants argued the company could not have known the affidavit was false because the other false affidavits cited in the complaint were filed after 2008, that the pay allegations came from the owner’s testimony about housing cases rather than collection cases, that the server was an independent contractor rather than an employee, and that the server was licensed by the city and in good standing at the time.
The ruling: Judge Rachel P. Kovner of the District Court for the Eastern District of New York overruled every objection to the report and recommendation issued by the Magistrate Court judge and adopted it in full, holding that the FDCPA’s exception for those serving legal process does not cover a company that engages in sewer service.
- Judge Kovner set aside the allegations about affidavits filed after 2008 entirely and still found the complaint adequate. A server claiming 4,000 services in a year “would require completing more than 10 services every single day of the year,” and that figure, combined with the pay-only-on-success structure, supported an inference the company was “turning a blind eye” to fraudulent service practices.
- The judge rejected the argument that the pay allegations were drawn from testimony about housing cases, noting that a motion to dismiss is directed at what the complaint says, and the complaint alleged those practices applied across the board.
- The same allegations were enough to keep the state and city law claims alive, though the judge described them as sufficient “albeit narrowly so.”
- On the negligence claims, whether the server was an employee or an independent contractor was too fact-intensive to resolve on a motion to dismiss, and the defendants “cite no authority” for the idea that hiring a licensed server with no prior complaints on record defeats a gross negligence claim by itself.
