The sanctions paid by plaintiffs to defendants add to the heat from the judge’s earlier dismissal of the cases in March for lack of standing.
6/25/2021 10:00
U.S. District Court Judge Brett H. Ludwig has issued two nearly identical sanction orders against plaintiffs in two separate cases which had alleged the various defendants violated the Fair Credit Reporting Act and did not correct and report consumers’ accurate credit information.
The sanctions against the plaintiffs are an added win for the defendants after the court dismissed the cases, all filed by the same counsel, in March.
In this latest order, Judge Ludwig summarized earlier requirements imposed on the plaintiffs’ counsel.
In addition to dismissing the cases for lack of standing, the court required plaintiff’s counsel, Paul Strouse and Thomas Napierala, to show cause why the court should not sanction them for their handling of these cases. Counsel filed a response on April 12, 2021. They included a supporting declaration and exhibits filed under seal, but did not file a separate motion to seal, as required under General L.R. 79. Three days later, Napierala filed a motion to withdraw, citing differences with his co-counsel’s litigation preferences and philosophy. (Citations omitted.)
Defendants in one of the cases, Dante Butler v. 1st Franklin Financial Corporation et. al., (Case No. 20-cv-0842-bhl), Enhanced Recovery Company LLC (ERC) and Americollect Inc., filed responses to the counsel’s April 12 filing.
“ERC filed a motion for sanctions not just for itself, but also the other defendants, and even requested the court to force counsel to purge the settlement funds received in settlements from the former defendants in the matter,” said Shelly Gensmer-Cleek, CCCO, vice president of legal and compliance at ERC, in a statement to ACA International.
In response to the defendants’ motion, the judge ordered each counsel to pay $2,000 to the defendants.
The court took the same approach in another case, Theresa Herron v. Credit One Bank et. al. (Case No. 20-cv-0842-bhl), which has the same case number as Butler but was filed against defendants ERC, Capital One Recovery Corporation and Credit One Bank. Each of these defendants also responded to the counsel’s April 12 filing against the sanctions.
As in the Butler decision, the judge ordered each of the counsel in the Herron case to pay $2,000 to the defendants.
Of note in the judge’s order dismissing the case, Judge Ludwig directly criticized Napierala and Strouse for their behavior in the case, the lack of standing, and their poor use of grammar in court filings.
Additionally, the court rejected the argument by Napierala and Strouse that Judge Ludwig should follow guidance in a case where a judge denied a motion to dismiss. Allen v. Portfolio Recovery Assocs.
Counsel state that they “had been operating under the goo[d] faith assumption that the FCRA cases they filed had standing” because of Judge Adelman’s ruling. Quoting from the Allen decision at length, they assert “Judge Adelman held that Plaintiff’s duplicitous complaint had standing.” And they insist that the standing ruling in this case is “a contradictory holding from that of Judge Adelman.” Citations omitted.
However, Judge Ludwig rejected that argument and in his dismissal order pointed out various failings in the counsel’s brief.
In many ways, the response to the order to show cause typifies the level of care counsel have employed throughout their handling of this and the other cases. As a basic matter, it is wrong to describe a case and complaint as having standing; the issue is whether a particular plaintiff has standing to pursue the claims presented in a case or complaint. Counsel’s ham-handed attempt at discussing this issue is unfortunately par for the course. But the greater problem … is that Judge Adelman’s decision in Allen says not a word about standing! The decision addresses only whether the complaint filed in that case (per Counsel’s admission, a “cookie-cutter” version of the one filed here) included sufficient facts to survive a motion to dismiss …
Judge Ludwig went on to note counsel’s response was “plagued with errors” and that he incorrectly filed supporting documents under seal without a separate motion for court permission.
Ludwig concluded:
Counsel propose no innocent explanation for their conduct. Instead, counsel simply repeat generic assertions that the credit agencies’ differing reports of plaintiff’s status with each creditor necessarily means that the creditors were themselves inaccurately reporting the credit information. The court explained why that is a flawed assumption in its March 29, 2021 Order. See Weeks v. Credit One Bank, No. 20-cv-836 at 1 (E.D. Wis. March 29, 2021) … Counsel’s error-filled handling of this case and their failure to come forward with facts even suggesting a proper purpose for filing it warrant a sanction.
Read the sanction order in the Butler case here and the order from Herron here.
For more case summaries, visit ACA International’s Industry Advancement Fund website.
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