Court Asks State Bar to Review Frequent Flyer's License to Practice Law After He Files Frivolous Complaint

On July 17, 2014, a U.S. District Court granted Sergei Lemberg’s motion to dismiss his own client’s Fair Debt Collection Practices Act (FDCPA) and Telephone Consumer Protection Act (TCPA) complaint in the case of Zente v. Credit Management, LP (No. A-14-CA-029-SS) (W.D.Tex July 17, 2014)).

Despite the collection agency’s opposition to the motion to dismiss and its request for sanctions, including costs and attorney’s fees pursuant to Rule 11 of the Federal Rules of Civil Procedure (Rule 11), the court was unable to award sanctions given the 21-day safe-harbor provision of Rule 11 that allows an opposing party the opportunity to correct or withdraw the challenged paper, claim or defense.

The court said that “there are no sanctions available based on the record before the Court” because Lemberg filed the motion to dismiss just 13 days before the collection agency notified the district court about Lemberg’s Rule 11 violation and impropriety in failing to conduct a reasonable investigation and continuing to litigate a frivolous suit.

However, the court unexpectedly ordered (entirely on its own initiative) that its file with respect to the Zente case be sent to the “Admissions Committee of the Western District of Texas for a review and appropriate action, if any, regarding Mr. Lemberg’s license to practice in the Western District of Texas.”

In Zente , Lemberg filed a complaint on behalf of a consumer against a collection agency alleging violations of the FDCPA, TCPA and Texas Debt Collection Act of the Texas Finance Code. However, the collection agency argued that every cause of action in the complaint was based upon numerous false allegations.

Even after the collection agency provided Lemberg with evidence, which the district court found clearly established that the allegations in the complaint were false and no lawsuit should have been filed, Lemberg refused to dismiss the case. Instead, Lemberg unnecessarily forced the collection agency to expend additional time and resources defending against the consumer’s baseless claims (perhaps in an attempt in extract a nuisance settlement as the collection agency opined in its opposition to the motion to dismiss).

After the parties served and filed multiple pleadings as required by federal and local rules, Lemberg finally conceded that he should not have filed the lawsuit and, consequently, offered to dismiss the case with prejudice. Yet Lemberg’s concession and offer were too little, too late. The collection agency refused to just walk away. Rather, the collection agency stood its ground and demanded that the district court hold a hearing to make a determination of appropriate sanctions under Rule 11.

Although the limitations of Rule 11 precluded the court from granting the collection agency’s request for sanctions and awarding it costs and fees, the collection agency’s perseverance paid off. By taking an offensive rather than defensive position against Lemberg, the collection agency successfully provided the court with an opportunity to be able to initiate some action against Lemberg, which puts Lemberg’s ability to practice law and pursue countless ill-founded and frivolous claims in jeopardy, at least in the Western District of Texas.

Although the Admissions Committee of the Western District of Texas may or may not take action based upon the district court’s referral for review of Lemberg’s license to practice, the potential consequences of such referral have enormous intangible benefits for the collection agency and the entire credit and collection industry.

ACA International is committed to providing resources to its members to address extreme cases of frivolous, bad faith and reckless litigation attacking the accounts receivable management industry.  As part of its commitment, ACA, through its Industry Advancement Program, has developed a Sanctions Panel Attorney Review Program.  The Sanctions Panel Attorney Review Program is intended to facilitate the pursuit of appropriate and available sanctions for consumer and/or consumer attorney misconduct arising in litigation brought against ACA members.  ACA encourages its members to visit www.acainternational.org/IAP to access valuable member-exclusive information and content related to the Industry Advancement Program. You will find the latest news and updates concerning ACA’s efforts to proactively advance industry interests; access to information, tools and resources, such as the Sanctions Panel Attorney Review Program; concise summaries of the most recent significant judicial decision involving the accounts receivable management industry along with further analysis designed to help members in understanding how these cases may affect them.