Court denies motion to dismiss in NCO debt collection class action

October 30, 2013 by

Final noticeA New York federal judge on Wednesday denied a motion to dismiss finding that the lead plaintiff offered a strong case that the company and its attorneys illegally called and sued him when he owed nothing.

Plaintiff James LaCourte is suing NCO for allegedly employing a “factory approach” to debt-collection litigation whereby it pressures attorneys at co-defendant Forster & Garbus LLP and other firms into filing large numbers of lawsuits against consumer debtors based on scant and unverified information regarding their finances.

LaCourte said that he was contacted with letters and phone calls and later sued in New York state court over a $4,128 American Express debt that NCO later admitted had already been settled.  U.S. District Judge Jed Rakoff determined that LaCourte had “amply” alleged that Forster & Garbus filed a lawsuit against him without conducting a reasonable inquiry into his debt, a violation of the New York Judiciary Law.

“According to the complaint, after LaCourte settled and paid off his debt, received further collection notices, and disputed them, Forster & Garbus nevertheless filed the New York action without reviewing the back-up documents or otherwise verifying with American Express that the debt was in fact valid and unpaid,” the judge said.

The allegations “are more than sufficient” to raise a reasonable inference that Forster & Garbus knowingly failed to conduct a reasonable inquiry before certifying to the New York court that the lawsuit was not groundless, Judge Rakoff said.

LaCourte mounted his complaint in December, arguing that NCO regulates a nationwide network of attorneys — named in the suit as John Doe defendants — who are under contract to collect consumer debts. According to his complaint, the attorneys are prohibited from communicating directly with creditors despite the creditors’ status as the nominal plaintiff when a debt collection suit is ultimately filed.

NCO also blocks its contract attorneys from requesting documents backing up the alleged debts they are charged with collecting, according to the complaint, and ties their compensation to the number of debts that are quickly reduced to court-ordered judgments, resulting in frivolous lawsuits that bully consumers into paying down debts that were either inflated, nonexistent or had already been paid off.

The case is LaCourte v. JPMorgan Chase & Co. et al, case number 1:12-cv-09453 in the U.S. District Court for the Southern District of New York.

Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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