Class Action Certification Granted In “Sewer Service” Case

U.S. Circuit Court Judge Denny Chin recently certified a class of Plaintiffs, Sykes, who had been sued for unpaid consumer debts by Defendants, Leucadia National Corp. and Mel S. Harris Associates, resulting in default judgments against them. The procedure for filing a class action is to file suit with one or several named plaintiffs—in this case, Plaintiff Sykes—on behalf of a proposed class. The proposed class must consist of a group of individuals that have suffered a common injury—in this case, default judgments—and must meet several other criteria. After the complaint is filed, the plaintiff must file a motion to have the class action certified. In some cases class action certification may require discovery in order to determine its size—in this case, the class is estimated to include several thousand people.Defendant, Leucadia, is a company that purchases consumer debt. Defendant, Mel S. Harris, is a law firm specializing in debt collection. Plaintiffs allege that, in the pursuit of collections for Leucadia, Defendant law firm violated debt collection laws and that Defendants conspired together to carry out their plan. In particular, it is alleged that the firm purposefully and improperly served consumers/debtors, or did not serve them at all, with complaints for collections, so that the consumers would only first become aware of the proceedings after a default judgment had already been entered against them. After the collector had obtained a default judgment, it then attempted to collect on the judgments by either garnishing the consumers’ wages or by freezing their bank accounts. Between 2006 and 2009, Defendant, Leucadia, filed over 100,000 such cases in the New York civil courts and was represented by Defendant Mel Harris law firm in over 99% of those cases. In the vast majority of cases, Defendants did not appear and so a default judgment was obtained. Commonly known as “sewer service” (akin to throwing a document into a sewer), this tactic of failing to properly serve a defendant is said to be common in the debt collection industry (especially in the mortgage industry). Hopefully, this case will shed more light on the practice.Judge Chin has already stated that Plaintiffs have provided “substantial support” for their claims; however, the battle has only just begun. Plaintiffs will enjoy many advantages from being part of a class action, including shared, and therefore, lower litigation costs, increased efficiency, and may now focus their combined efforts on proving the merits of their case. If Leucadia National Corp., Mel S. Harris Associates, or any other collector, has served you with a lawsuit using “sewer service,” or has harassed you over a debt, whether they called you excessively, threatened you, made misrepresentations when trying to collect old debts, called you at work despite knowing you cannot receive these type of calls at work, disclosed your debt to a third party, tried to collect a debt from you that you did not owe, or left you a voicemail message without the proper disclosures, contact Agruss Law Firm, LLC, for a free case evaluation. Founding attorney, Michael Agruss, has settled over 1,500 debt collection harassment cases. Now, Agruss Law Firm, LLC, wants to help you, too.

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