For understandable reasons, many consumer and business debtors that come to us with collection issues are focused overwhelmingly on the monetary terms of any potential settlement with the creditor or debt collector. Particularly for those pressed for cash, there are hard-to-ignore bottom line issues such as: Will they have to pay? How much? Lump sum or over time?
Without detracting from the obvious importance of these questions, it is important to note that the non-money terms can often be critical and failure to adequately address non-money terms can leave the debtor at a severe disadvantage.
Here are just a few examples:
Example #1: Where a judgment has been taken against the client, the creditor typically does not care whether payment results in vacatur and dismissal vs. satisfaction of judgment. But the difference can be hugely important to the consumer in terms of credit reporting. Vacatur and dismissal cleans up the person’s credit, removing the judgment from the public record that is reflected in the credit report. Satisfaction of judgment, in contrast, memorializes the lawsuit as one in which the consumer was sued for non-payment, lost the suit and then paid the judgment. There is typically no reason not to condition settlement with the creditor on the parties entering into a stipulation of vacatur and dismissal.
Example #2: Where appropriate, does the settlement agreement characterize the debt as disputed and/or specifically address the fact that this is not a case of “forgiveness of debt”? Creditors are big on boilerplate and that boilerplate is rarely if ever favorable to the consumer. Where the debt is legitimately disputed, there is no reason (in fact, every reason not to) agree to boilerplate language that has the defendant acknowledging indebtedness and/or that characterizes a reduction or elimination of the purported balance as “forgiveness of debt”. By leaving this language in, the defendant/alleged debtor is virtually assuring that he or she will be issued a 1099-MISC characterizing the reduction in principle as income on which taxes are to be paid while simultaneously limiting his or her ability to effectively challenge that characterization. It is an avoidable and common mistake. (The appropriate alternative language will, of course, depend on the facts of the case.)
Example #3: Does the settlement provide for a reasonable “right to cure” procedure? It seems basic, but many standard creditor agreements contain no or only very limited right to cure language. The result is that the debtor can find themselves arguably in breach and owing the full amount originally sought based upon a purported one-day delay in payment. One common trap is to provide for a very short cure window plus notification by USPS regular mail. By the time the notice arrives, the window to fix any alleged deficiency may have closed! Our practice is to insist on at least 7 days, with notice by multiple, fast communication channels (e.g. fax plus email) and notice to both the debtor and his or her attorney. That way, we and our clients have a meaningfully window to address any purported delay in payment without adverse consequence.
I could keep going (and don’t even get me started with regard to overly broad confidentiality provisions), but you get the idea: to paraphrase the old Smokey The Bear public service announcements: Only You Can Stop Anti-Debtor Boilerplate.
The new year brings a higher minimum wage rate for New York State workers, as the minimum wage increased for workers statewide on December 31, 2016. One big change is that the generally-applicable minimum wage rate now varies depending upon an employer’s size and an employee’s work location. In addition, the higher minimum wage rate for workers at fast food chains with 30 or more locations (which could include locations outside of New York State) increased again on December 31st.
The new rates are as follows:
- Fast food workers in New York City: $12 per hour
- Fast food workers in other parts of the state: $10.50
- Employees of New York City large employers (11 or more employees): $11 per hour
- Employees of New York City small employers (10 or fewer employees): $10.50 per hour
- Employees in Westchester & on Long Island: $10 per hour
- Employees in the rest of New York State (“upstate”): $9.70 per hour
A few things to note:
- For determining the size of a New York City employer, employees both inside and outside of New York City (during the prior or current calendar year) are counted. But the New York City wage rate only applies to employees working in New York City.
- All of the wage rates above depend on where an employee works, not where an employer is located.
- If an employee works in multiple regions (say, New York City and Rockland County), an employer will comply with the law by either paying the higher rate for all work (in this example, New York City), or by paying the applicable minimum wage rate for each region for all work done in that region (for example, New York City rate for all hours worked in New York City, and the upstate rate for work done upstate).
Have questions about the new minimum wage law? Give us a call at (212) 500-6114, or email Tricia Kakalec at firstname.lastname@example.org.
On November 22, 2016, a district judge in the Eastern District of Texas in the case State of Nevada v. U.S. Department of Labor (16-CV-731) issued an injunction against the implementation of U.S. Department of Labor (“DOL”) regulations related to eligibility for overtime pay for those who might be subject to the executive, administrative, and professional exemptions under the Fair Labor Standards Act. Then new regulations, which were to go into effect on December 1, 2016, would have increased the salary threshold for exemption from overtime from $23,665 to $47,476, and also provided for automatic future increases.
In issuing its injunction, the district court held that the DOL “exceed[ed] its delegated authority and ignor[ed] Congress’s intent” by creating a “de-factor salary only test” for overtime eligibility. The injunction means that the rule did not go into effect, and the salaries of employees around the country were effected.
Workers’ rights groups and others argue that the decision was both wrongly decided and problematic as a matter of public policy. Christine Owen, the Executive Director of the National Employment Labor Project says that “[s]upporters of the rule are considering a range of legal strategies, and it’s premature to speculate about the course they’ll pursue if an appeal is filed. We believe the judge’s analysis and decision are deeply flawed and should be reversed on appeal.” The DOL, which says it “strongly disagrees with the decision,” has filed a notice of appeal, although it is not clear that the incoming administration will continue with the appeal.
Despite this decision, some employers have gone ahead and implemented planned changes and salary increases. For example, Pennsylvania-based, Sheetz, Inc. – which operates gas stations and convenience stores/quick service restaurants – announced its plans to continue with planned wage increases, stating that its decision “represents our constant efforts toward attracting and retaining the best talent and being a great place to work. It is a commitment that reaches beyond compensation, to the offering of excellent benefits and a great balance between work and family.”
UPDATE: On January 3, 2017, the Texas court denied the USDOL’s motion to stay the decision pending appeal.
Stay tuned for further developments on the case.
Although auto loan deficiencies are not the most common form of debt we see in our office, we do regularly see (and represent) folks who are being sued (after their vehicles have been repossessed or “voluntarily returned”) for alleged deficiencies between their outstanding balance and the price at which the vehicle was purportedly sold for.
Although many of the defenses in these types of action are common to collection cases more generally (assignment, statute of limitations, service of process, etc.), others are specific to this particular type of debt.
Over the next couple of months, I will be reviewing various substantive defenses specific to vehicle repossession deficiency cases. Many of these defenses are less well-known but nonetheless powerful and worth considering. Today, we start with defenses rooted in Article 9 of New York’s Uniform Commercial Code
The New York Uniform Commercial Code Provides Significant Protections. For example,
- NYUCC 9-614 provides for detailed notice prior to sale of a consumer’s vehicle. These notice requirements are in addition to the notice required in commercial cases, and include, e.g. a description of any liability for a deficiency, a telephone number to call in order to redeem the collateral and a telephone number or mailing address to obtain more details regarding the disposition of the vehicle; the time and place of any public sale, etc.
- NYUCC 9-615 requires a detailed written explanation of any deficiency to be sent to the consumer following the sale of the vehicle.
- NYUCC 9-610 provides that every aspect of the sale of the collateral must be commercially reasonable, including the method, manner, time, place and other terms of the sale.
- NYUCC 9-623 provides the debtor with a right to redeem the collateral prior its disposition.
All of this would be interesting but academic were it not for powerful but underutilized remedies with regard to consumer UCC deficiency cases:
Some Courts, including those in New York’s Second Department, have held that there is an absolute bar against recovery of a deficiency where the repossessing party has failed to meet its Article 9 UCC obligations in a consumer transaction. Most other Courts have held that non-compliance in consumer and non-consumer cases triggers a rebuttable presumption against recovery of the deficiency. See Coxall v. Clover Commer. Corp., 781 N.Y.S.2d 567, 574, 4 Misc. 3d 654, 661, 2004 N.Y. Misc. LEXIS 714, *15-16 (N.Y. Civ. Ct. 2004) (collecting cases)
Statutory damages, fees and costs may also be available. For example, NYUCC 9-625 entitles a consumer to statutory damages for non-compliance to the interest on the loan plus 10 percent of the principal amount of the loan, as well as actual damages.
Bottom line: If the debt the consumer is being sued on stems from an auto loan or other secured transaction, be sure to go over the facts, including all correspondence, carefully for potential UCC related defenses and counterclaims. A repo notice violation or other UCC non-compliance can completely change the dynamics of the case.
I am excited to report that I will be presenting a Lawline CLE this coming February titled “Using the Truth in Lending Act to Challenge Predatory Auto Lending”. The webinar will be presented live on February 8, 2016 at 2:30 PM EST, and should be available as part of Lawline’s catalog after that.
For more information about the presentation, and to sign up, click here.
Second Circuit Addresses Standing In Statutory Damages Class Actions: Finds Standing Where Procedural Rights Protect Consumer’s Concrete Interests
The Second Circuit issued an interesting and significant decision on standing in statutory damages class actions just before Thanksgiving. The case, Strubel v. Comenity Bank, 2016 U.S. App. LEXIS 21032 (2nd Cir. November 23, 2016) contains a lengthy discussion of the Supreme Court’s decision in Spokeo, Inc., v. Robins, 136 S.Ct. 1540 (2016). The District Court in Strubel dismissed Plaintiff’s claims on summary judgment without addressing Article III standing. On appeal, the bank argued that the District Court was correct on the merits and that, in addition, Plaintiff lacked standing under Spokeo.
Addressing standing, the Second Circuit found that two of the four statutory claims alleged a sufficiently concrete injury and that two others did not. The Second Circuit that upheld the District Court’s decision on the merits with regard to the two claims for which there was standing.
So, the Defendants won. Nonetheless, on the way to finding for Defendants, the Second Circuit’s discussion contains good news for consumers, as the standard the Court articulated for determining Article III standing was largely consumer-friendly. Specifically, the Second Circuit affirmed that violations of a purely procedural right (e.g. the right to receive a given disclosure or notice) are sufficient to confer standing “where Congress confers a procedural right in order to protect a plaintiff’s concrete interests and where the procedural violation represents a ‘risk of real harm’ to that concrete interest.”
Applying this standard, Court found that two of the alleged violations were sufficient because the disclosures in question “each serve[d] to protect a consumer’s concrete interest in ‘avoiding the uninformed use of credit,’ a core object of the” Truth in Lending Act. Thus, the connection between the procedural right that was violated and the purpose of the statute is critical. Where consumers can tie the two together, they should be on solid ground. This is good news for consumer advocates.
The Court’s discussion also emphasized that “risk of harm” was sufficient to confer standing, and noted that a showing of risk of harm did not mean that the “consumer must have occasion to use challenged procedures to demonstrate concrete injury from defective notice”. Again, this is good news, as shuts the door to reliance or actual damages based arguments.
The violations that were found insufficient are telling with regard to the sorts of situations that do not meet the “risk of harm” standard. To wit, the Court found failure to provide a disclosure regarding procedures relating to stopping automatic payment of disputed credit card charges insuffient and immaterial because it was “undisputed that [the bank] did not offer an automatic payment plan at the time Strubel held the credit card at issue.” The Court concluded that, in light of this, there was no risk of injury that could be tied to the purpose of the statute. Likewise, an alleged defect regarding disclosure of the bank’s obligation to correct a billing error was immaterial where it was undisputed that the bank had already corrected the error at the time it sent the notice. These sorts of facts point to something more akin to impossibility or mootness than reliance or actual damages,
Bottom line: Although dismissal of the particular allegations set forth by plaintiff in Strubel was upheld, consumer advocates should generally be happy with how Spokeo was applied here.
Frequently Asked Questions Regarding Mandatory Reimbursement For Purchase And Maintenance Of Work Uniforms In New York State
FREQUENTLY ASKED QUESTIONS REGARDING MANDATORY REIMBURSEMENT FOR PURCHASE AND MAINTENANCE OF WORK UNIFORMS IN NEW YORK STATE
1. Does your employer require you to wear a uniform on the job?
If so, under New York law your employer may be required to pay the cost of your uniform and the cost of your uniform maintenance.
2. Do you work in a RESTAURANT OR HOTEL?
If so, your employer must pay for your uniform. Your employer must also pay you a uniform maintenance allowance unless you are provided with enough “wash and wear” uniforms. (See below).
3. Do you work in ANOTHER INDUSTRY?
If so, your employer must in most cases follow the uniform cost and uniform maintenance allowance rules if your uniform cost and maintenance would reduce your hourly wage to below the New York State minimum wage, which is currently $9.00 per hour.
4. What is a required uniform?
- A required uniform is clothing worn by an employee, at the request of the employer, while performing job-related duties or to comply with State or local law.
- Clothing that may be worn as part of your ordinary wardrobe is not a required uniform.
- For example, if your employer requires that you wear black pants and a white shirt to work, that is probably not a required uniform.
5. If I work in a restaurant or hotel (i.e., the HOSPITALITY INDUSTRY), is my employer required to reimburse me for my uniform and uniform maintenance?
- When you purchase a required uniform, you must be reimbursed by your employer for the cost of your uniform on your next pay date.
- In addition, your employer is required to maintain that uniform, which generally means laundering or dry cleaning the uniform, depending on its materials. If your employer does not maintain your uniform directly, the employer must pay you a weekly uniform maintenance allowance to cover the cost of your maintaining the uniform yourself.
- Currently, the uniform maintenance allowance in New York State is $11.20 per week for employees who work at least 30 hours per week.
- The amount of the allowance is lower employees who work fewer hours.
Are there any situations in which an employer in the hospitality (restaurant or hotel) industry does not need to pay for uniform laundering?
Yes. As applies to hotels and restaurants, there is a limited exception to the uniform maintenance requirement:
- Your employer can avoid paying you the uniform maintenance allowance if it provides you enough uniforms for the average number of days you work in a week.
- For example, if you work six days a week and are required to wear a shirt with a company logo each day, you should get six shirts for your use.
- This exception only applies to “wash and wear” uniforms – that is, uniforms that can be regularly washed and dried with other personal garments, and which do not require ironing, dry cleaning, daily washing, or other special treatment.
- If your employer does not give you sufficient uniforms to meet this exception, your employer must pay you a uniform maintenance allowance weekly, which is currently $11.20 per week.
6. OUTSIDE of the hospitality industry, what are the rules regarding purchasing and laundering of uniforms?
- Your employer must pay your uniform cost and your uniform maintenance allowance if the cost of the uniform and its maintenance would reduce your hourly wage to below the state minimum wage of $9.00 per hour.
- Uniform maintenance allowance is currently $11.20 per week.
- Uniform maintenance allowances must be paid in addition to your hourly wage, and cannot be credited toward the minimum wage.
7. Are there any types of workers that are exempt from the rules described above?
These rules apply to all employees in New York State except:
- Government employees;
- Farm employees;
- Those working in an executive, administrative, or professional capacity;
- Taxi drivers;
- Outside salespeople; and
- Certain other categories
In addition to the rules under New York State law, federal law (the Fair Labor Standards Act) also imposes some limitations on uniform charges.
Do you have questions about your rights on the job with respect to uniforms? Our attorneys have deep experience litigating uniform violations. Call Kakalec & Schlanger at (212) 500-6114 x103 for a consultation.
Kakalec & Schlanger, LLP is pleased to announce that partner Dan Schlanger will be presenting a Lawline CLE webcast on July 27th at 9:30 a.m. The course description for the CLE, titled The Fair Debt Collection Practices Act: Bringing Suit Based on State Court Litigation and Judgment Enforcement Misconduct, is available here.
Update: Dan’s CLE on FDCPA litigation re: state court collection misconduct was well-received (95% recommendation rate). To purchase and view, click here.
Kakalec & Schlanger Obtains Reversal of Report & Recommendation Dismissing American Suzuki Financial Services From Consumer’s Truth In Lending Act Suit
Kakalec & Schlanger recently obtained reversal of a report and recommendation in a Truth In Lending Act suit brought in the Eastern District of New York on behalf of an elderly consumer who alleges that she was forced by an auto dealer to purchase numerous supplemental products as a condition of financing.
The decision, issued in Pierre v. Planet Automotive, Inc, docket #, 2016 U.S. Dist. LEXIS 80884 (E.D.N.Y. June 21, 2016), reversed multiple aspects of a magistrate judge’s report and recommendation, pursuant to which all of the consumer’s claims against the loan assignee, American Suzuki Financial Services, would have been dismissed. The District Court declined to adopt the magistrate’s report and the consumer retains her claims against the assignee under the Truth In Lending Act, New York’s false advertising statute (New York General Business Law Section 350) and for fraud. The consumer is represented by Kakalec & Schlanger, LLP partner Dan Schlanger.
U.S. Supreme Court Denies Certiorari In re Midland Funding, LLC Interest Rate Litigation: Consumer’s Victory Before Second Circuit Stands
The U.S. Supreme Court recently denied certiorari in re Midland Funding, LLC Interest Rate Litigation, in which Kakalec & Schlanger, LLP represents a putative class of approximately 50,000 consumers seeking to hold debt buyer Midland Funding, LLC liable for attempting to collect interest in excess of New York’s criminal usury rate of 25 percent.
The Second Circuit held in May 2015 that National Bank Act preemption does not apply to third party debt buyers in situations where there is no continuing national bank involvement post-assignment, reversing the District Court’s ruling on this issue. Following the Second Circuit’s opinion, Midland sought re-hearing, with several major banking and financial industry organizations filing amicus briefs in support. After rehearing was denied, Midland petitioned the Supreme Court to review the case, again with the support of numerous industry amici. The Supreme Court denied Midland’s petition without discussion.
Dan Schlanger, who heads Kakalec & Schlanger’s consumer practice, handled Plaintiff’s Second Circuit appeal. Before the Supreme Court, Plaintiff was represented by Dan Schlanger, Tejinder Singh of Goldstein & Russell, and Professor Sam Bagenstos of University of Michigan Law School. The case is currently pending before the District Court, with cross motions for class certification and summary judgment pending.