Summary
noting that "§ 1692k runs only against a party, not his counsel" and "requires proof of the plaintiff's bad faith, not just his counsel's"
Summary of this case from Hayles v. Aspen Props. Grp., LLCOpinion
17-CV-01240 (LDH) (ST)
2019-08-20
Bradley EISNER, Plaintiff, v. ENHANCED RECOVERY COMPANY, LLC, Defendant.
Edward B. Geller, Edward B. Geller, Esq., P.C., Bronx, NY, for Plaintiff. Edward Joseph Heppt, Smith Gambrell & Russel, LLP, New York, NY, Scott S. Gallagher, Smith, Gambrell & Russell, LLP, Jacksonville, FL, Nicole Haff, Romano Law, New York, NY, for Defendant.
Edward B. Geller, Edward B. Geller, Esq., P.C., Bronx, NY, for Plaintiff.
Edward Joseph Heppt, Smith Gambrell & Russel, LLP, New York, NY, Scott S. Gallagher, Smith, Gambrell & Russell, LLP, Jacksonville, FL, Nicole Haff, Romano Law, New York, NY, for Defendant.
MEMORANDUM AND ORDER
LaSHANN DeARCY HALL United States District Judge:
Plaintiff Bradley Eisner commenced this Fair Debt Collection Practices Act ("FDCPA") action against Defendant Enhanced Recovery Company, LLC, in New York state court. (ECF No. 1-2.) Defendant subsequently removed the action to federal court and answered the complaint, asserting a counterclaim for attorney's fees pursuant to 15 U.S.C. § 1692k(a)(3). (ECF Nos. 1, 4.) Defendant moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment dismissing Plaintiff's claims. (ECF No. 59.) Defendant further moves—pursuant to Rules 36 and 54, § 1692k(a)(3), 28 U.S.C. § 1927, and the Court's inherent authority—for an award of attorney's fees. (ECF Nos. 47, 48.) In addition, on May 9, 2019, pursuant to Rule 11(c)(3), the Court ordered Plaintiff's counsel, Harvey Rephen & Associates, P.C. (the "Rephen Firm"), to show cause why it should not be sanctioned for violating Rule 11(b).
The following facts are taken from the parties' Local Rule 56.1 statements of material facts and, unless otherwise noted, are undisputed.
At some point prior to December 7, 2016, Ms. Wanda Frazier approached Plaintiff, with whom she had a prior business relationship, to discuss his credit. (Resp. Def.'s Local Civ. R. 56.1 Statement Material Facts ("Def.'s 56.1") ¶ 7, ECF No. 25.) Plaintiff gave Ms. Frazier his identifying information, and, on December 7, Ms. Frazier obtained a copy of Plaintiff's credit report, which listed a $1,167 account being collected by Defendant for the creditor AT & T. (Id. ¶¶ 8, 9.) Plaintiff recalled that he had made a payment on the account that was not reflected in the balance on the credit report. (Id. ¶ 11.) On December 8, Ms. Frazier and Plaintiff together called Defendant to dispute the AT & T account balance. (Id. ¶ 13.) Ms. Frazier recorded the call. (Id. ¶ 25.)
Ms. Frazier is identified in the parties' various filings as both Wanda and Tawanda.
On the call, Ms. Frazier learned that Defendant was also collecting on a T-Mobile USA, Inc. ("T-Mobile") account in Plaintiff's name and in the amount of $66.08. (Id. ¶¶ 4, 14–16.) At the time, Plaintiff's T-Mobile balance was not listed on his credit report, and neither Plaintiff nor Ms. Frazier was aware that Plaintiff's T-Mobile account had also been placed with Defendant for collection. (Id. ¶¶ 10, 12.) With Plaintiff's permission, Ms. Frazier obtained information about the account from Defendant's representative. (Id. ¶¶ 14–16.) Ms. Frazier then stated that Plaintiff wished to dispute the T-Mobile account and asked whether it would be possible to do so over the phone. (Id. ¶ 17.) Defendant's representative responded, "Absolutely." (Id. ¶ 17.) The representative then inquired as to the grounds for the dispute. (Id. ¶ 18.) Ms. Frazier stated that Plaintiff "believe[d] he paid something for that account and that [the credit report reflected] an incorrect amount." (Id. ¶ 18.) Defendant's representative confirmed that the basis of the dispute was an incorrect balance and asked if Plaintiff would be following up in writing. (Id. ¶ 20.) Ms. Frazier responded, "You would like the dispute in writing, no problem I can send it to [Defendant]?" (Id. ¶ 21.) The representative replied, "You don't have to. I have to ask if y'all intend to dispute in writing." (Id. ) Defendant's representative classified the account as disputed. (Id. ¶ 22.)
Defendant had received the T-Mobile account on October 31, 2016. (Def.'s 56.1 ¶ 4.)
Following the call, Ms. Frazier sent her recording of the call to M. Harvey Rephen ("Mr. Rephen"), principal of the Rephen Firm. (Id. ¶ 26.) Plaintiff did not ultimately submit a written dispute of the T-Mobile account. (Id. ¶¶ 27, 52.) Nonetheless, Defendant ceased all collection activity on the account and did not attempt to collect on any other account in Plaintiff's name. (Id. ¶¶ 23, 29.) By letter dated December 9, 2016, Defendant informed Plaintiff that it had ceased collection efforts on the T-Mobile account. (Id. ¶ 28.)
Plaintiff purports to dispute this statement with the affidavit of Ms. Frazier, who maintains that Plaintiff never received Defendant's December 9, 2016 letter. (Aff. Wanda Frazier ¶ 5, ECF No. 25.) However, such information is beyond Ms. Frazier's personal knowledge, so her testimony on the issue is inadmissible and cannot rebut Defendant's statement of fact.
Plaintiff commenced this action on January 12, 2017, seeking $25,000 in actual damages arising entirely out of Defendant's purported refusal to accept an oral dispute of the T-Mobile account. (Id. ¶¶ 2, 50.) On January 10, 2018, Defendant timely requested a pre-motion conference to discuss the filing of its proposed motion for summary judgment. (ECF No. 19.) The Court received pre-motion letters and statements of material facts pursuant to Local Civil Rule 56.1 and held a pre-motion conference on April 20, 2018. Following the conference, the Court permitted Defendant to rest on its submissions and reopened discovery on a limited issue pertinent to Defendant's anticipated motion for attorney's fees and sanctions—Ms. Frazier's relationship to the Rephen Firm.
In June 2018, Defendant apprised the Court of challenges obtaining discovery from the Rephen Firm and moved to compel it. (ECF Nos. 27, 28.) The Court held a status conference on July 13 and ordered the Rephen Firm to produce documents and to prepare and produce a corporate designee to testify at a deposition. Mr. Rephen, the corporate designee, failed to appear at the deposition the parties had scheduled for August 1. (ECF No. 32.) By order dated September 5, the Court granted in part Defendant's request for sanctions against the Rephen Firm for this failure. (ECF No. 40.) On September 8, after subsequent briefing regarding the scope of the deposition and the propriety of Mr. Rephen's stated intention to assert his Fifth Amendment privilege against self-incrimination, the Court ordered that Mr. Rephen must appear in person and would not be permitted to assert such privilege on the Rephen Firm's behalf. On September 18, Defendant formally noticed a Rule 30(b)(6) deposition of the Rephen Firm, scheduled for September 28. On October 9, Defendant informed the Court that Mr. Rephen had appeared for the deposition on behalf of the Rephen Firm but had asserted his Fifth Amendment privilege and refused to answer "the vast majority" of questions posed to the Rephen Firm. (ECF No. 42.) By order dated October 23, the Court granted Defendant's request for leave to file the instant motion for sanctions.
STANDARD OF REVIEW
Summary judgment must be granted when there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The movant bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Feingold v. New York , 366 F.3d 138, 148 (2d Cir. 2004). Where the non-movant bears the burden of proof at trial, the movant's initial burden at summary judgment can be met by pointing to a lack of evidence supporting the non-movant's claim. Celotex Corp. , 477 U.S. at 325, 106 S.Ct. 2548. Once the movant meets its initial burden, the non-movant may defeat summary judgment only by adducing evidence of specific facts that raise a genuine issue for trial. See Fed. R. Civ. P. 56(e) ; Anderson , 477 U.S. at 250, 106 S.Ct. 2505 ; Davis v. New York , 316 F.3d 93, 100 (2d Cir. 2002). The Court is to believe the evidence of the non-movant and draw all justifiable inferences in his favor, Anderson , 477 U.S. at 255, 106 S.Ct. 2505, but the non-movant must still do more than merely assert conclusions that are unsupported by arguments or facts, Bellsouth Telecomms., Inc. v. W.R. Grace & Co. , 77 F.3d 603, 615 (2d Cir. 1996).
DISCUSSION
I. Defendant's Motion for Summary Judgment
Plaintiff asserts claims pursuant to 15 U.S.C. §§ 1692e and 1692f. Section 1692e prohibits a debt collector from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt" and provides a non-exhaustive list of examples of violative conduct. Section 1692f prohibits a debt collector from using "unfair or unconscionable means to collect or attempt to collect any debt." Whether a debt collector's communication is false, deceptive, or misleading or constitutes an unfair or unconscionable means of collection under the FDCPA "is determined from the perspective of the objective least sophisticated consumer." Eades v. Kennedy, PC Law Offices , 799 F.3d 161, 173 (2d Cir. 2015) (quoting Easterling v. Collecto, Inc. , 692 F.3d 229, 233 (2d Cir. 2012) ). "Under this standard, collection [communications] can be deceptive if they are open to more than one reasonable interpretation, at least one of which is inaccurate." Id.
In his complaint, Plaintiff also cites subsection 1692e(10), an illustrative example of a § 1692e violation constituting "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." 15 U.S.C. § 1692e(10).
Here, Plaintiff's claims arise solely out of Defendant's purported refusal during the December 8, 2016 phone call to accept Ms. Frazier's oral dispute of the T-Mobile account on Plaintiff's behalf. (Def.'s 56.1 ¶ 50.) Defendant argues that the factual record belies Plaintiff's claims. (ECF No. 19.) The Court agrees.
The undisputed evidence permits only one reasonable interpretation of Defendant's accurate collection communication to Plaintiff (through Ms. Frazier): that Defendant would accept Plaintiff's oral dispute of the T-Mobile account over the phone. On the call, Ms. Frazier stated, "At the present time, Mr. Eisner would like to dispute this account. Can we dispute it with you over the phone?" (Def.'s 56.1 ¶ 17.) Defendant's representative answered unequivocally: "Absolutely." (Id. ) After the representative asked whether the dispute would also be submitted in writing and Ms. Frazier stated, "You would like the dispute in writing, no problem, I can send it to [Defendant]," the representative corrected her: "You don't have to." (Id. ¶¶ 20–21.) Even the least sophisticated consumer would understand the representative's clear responses to indicate that an oral dispute would be sufficient. Moreover, Plaintiff testified that he understood the statements to mean that Defendant would accept his dispute over the phone and that Plaintiff could but did not have to submit his dispute in writing. (Eisner Dep. 58:11–59:8, 63:15–64:8, 65:14–66:8, ECF No. 20-3.) Ms. Frazier had the same understanding. (Frazier Dep. 117:3–20, 137:9–24, ECF No. 20-4.)
Plaintiff's argument that Defendant "misled [him] in explaining its policy towards accepting oral disputes" is unpersuasive to the point of frivolousness. (ECF No. 22 at 2.) Specifically, Plaintiff contends that Defendant's representative "intended to cast some doubt in the mind [sic ] of Mr. Eisner and Mrs. Frazier as to the sufficiency of an oral dispute" by "imply[ing] that a written dispute was needed." (Id. ) Nonsense. The representative repeatedly explained to Ms. Frazier that an oral dispute sufficed and that, while optional, a written dispute was not necessary. (See Def.'s 56.1 ¶¶ 17, 20–21.) Put simply, Plaintiff has failed to adduce sufficient evidence to support his claims. II. Defendant's Motion for Attorney's Fees and Other Sanctions
In light of Plaintiff's failure to submit a follow-up written dispute, Defendant's subsequent conduct—classifying the account as disputed, ceasing all collection activity on the account, and promptly informing Plaintiff of such cessation—demonstrates that Defendant in fact accepted Plaintiff's oral dispute. (See Def.'s 56.1 ¶¶ 23, 27–29, 52.) Moreover, because the Court holds that Plaintiff's claims are foreclosed by the absence of evidence in the record to establish that Defendant misled Plaintiff into believing that Defendant would not accept an oral dispute of the T-Mobile account, the Court need not reach the parties' arguments regarding the materiality of the communication and whether an FDCPA claim may arise out of a communication to a third party like Ms. Frazier. (See generally Def.'s Mem. 4–5; Pl.'s Opp. 4–5.) Separately, but worth mentioning, the Court is perplexed as to why Plaintiff's counsel saw fit to state in his supplemental briefing that his client "has refused to respond to any of [counsel's] attempts to contact him to discuss and prepare for this and prior responses to Defendant's filings. This has obviously had an adverse impact upon Plaintiff's responses." (ECF No. 26 at 2.) It should go without saying that a motion for summary judgment is not an appropriate forum for counsel to air grievances about the attorney-client relationship.
Defendant argues that it is entitled to attorney's fees and costs pursuant to 15 U.S.C. § 1692k(a)(3) and 28 U.S.C. § 1927 —on the grounds that this action is frivolous and was commenced in bad faith—and pursuant to Rule 37(c)(2)—on the ground that Plaintiff failed to admit facts later established in discovery. (Enhanced Recovery Co., LLC's Mem. Law Supp. Mot. Atty. Fees ("Def.'s Mem.") 5–10, ECF No. 48.) The Court disagrees.
A. Sanctions against Plaintiff under § 1692k(a)(3) and Rule 37(c)(2)
Under § 1692k(a)(3), a district court may award reasonable attorney's fees if it finds that an FDCPA action "was brought in bad faith and for the purpose of harassment." Significantly, § 1692k(a)(3) runs only against a party, not his counsel. As such, several district courts in this circuit have held that prevailing on a § 1692k(a)(3) claim requires proof of the plaintiff's bad faith, not just his counsel's. (Mem. Law Resp. Enhanced Recovery Co., LLC's Mot. Atty. Fees ("Pl.'s Opp.") 2, ECF No. 53 (citing Mellon v. Monarch Recovery Mgmt., Inc. , No. 17-CV-2695, 2017 WL 4776738, at *3 (E.D.N.Y. Oct. 17, 2017) ; Puglisi v. Debt Recovery Sols., LLC , 822 F. Supp. 2d 218, 233 (E.D.N.Y. 2011) ); accord Cohen v. Potenza , No. 15-CV-3825, 2016 WL 6581233, at *10 (E.D.N.Y. Nov. 3, 2016) ; Araujo v. PennyMac Loan Servs., LLC , No. 15-CV-00062, 2015 WL 5664259, at *6 (E.D.N.Y. Sept. 23, 2015). The principal case Defendant cites in support of its motion, Huebner v. Midland Credit Management, Inc. , 897 F.3d 42, 57 (2d Cir. 2018), only confirms this rule. (See Def.'s Mem. 2–3.) Tellingly, Defendant cites no contrary legal authority for its proposition that counsel's conduct may support a claim for attorney's fees under § 1692k(a)(3). (See id. at 1–3.) The Court therefore will consider the application of § 1692k(a)(3) to only Plaintiff's conduct, not that of his counsel.
In Huebner , the Second Circuit upheld an award of attorney's fees under both § 1692k(a)(3) and the district court's inherent authority on the basis of a plaintiff's own bad faith. 897 F.3d at 57, cert. denied , ––– U.S. ––––, 139 S. Ct. 1282, 203 L.Ed.2d 280 (2019). Defendant's contention that the Huebner court sanctioned both the plaintiff and his counsel, while technically accurate, fails to acknowledge that the plaintiff was sanctioned under § 1692k(a)(3) and the district court's inherent authority, while the plaintiff's counsel was sanctioned under different statutory authority, 28 U.S.C. § 1927. Compare 897 F.3d at 55–56 with id. at 57.
Here, Defendant has not adduced any evidence of Plaintiff's own bad faith. There is no evidence that Plaintiff was "purposefully evasive during the call in an effort to provoke an FDCPA violation" or "played a substantial role in crafting the case's litigation strategy." Huebner , 897 F.3d at 57. Indeed, Defendant argues that Plaintiff "never affirmatively authorized suit," "had no real interest in these claims," and was not informed by counsel of "his obligations in litigation." (Def.'s Mem. 8–9.) If true, such conduct is directly inconsistent with a finding that Plaintiff acted in bad faith. As such, Plaintiff shall not be sanctioned under § 1692k(a)(3).
The Court recognizes that "an award made under the court's inherent power may be made against an attorney, a party, or both." Oliveri v. Thompson , 803 F.2d 1265, 1273 (2d Cir. 1986). However, consistent with § 1692k(a)(3), the Court refuses to exercise its inherent authority to award attorney's fees against Plaintiff absent evidence that Plaintiff himself acted in bad faith. " ‘The rule that the sins of the lawyer are visited on the client does not apply in the context of sanctions,’ and [a court] therefore must ‘specify conduct of the client herself that is bad enough to subject her to sanctions.’ " Ransmeier v. Mariani , 718 F.3d 64, 71 (2d Cir. 2013) (quoting Gallop v. Cheney , 660 F.3d 580, 584 (2d Cir. 2011) ).
Defendant's request for sanctions under Rule 37 fails for similar reasons. Rule 37(c)(2) provides, "If a party fails to admit what is requested under Rule 36 and if the requesting party later proves ... the matter true, the requesting party may move that the party who failed to admit pay the reasonable expenses, including attorney's fees, incurred in making that proof." (Def.'s Mem. 9–10.) The Court is required to grant the motion unless "(A) the request was held objectionable under Rule 36(a); (B) the admission sought was of no substantial importance; (C) the party failing to admit had a reasonable ground to believe that it might prevail on the matter; or (D) there was other good reason for the failure to admit." Fed. R. Civ. P. 37(c)(2). However, " Rule 37(c) applies only to a party," not his counsel. Apex Oil Co. v. Belcher Co. of N.Y. , 855 F.2d 1009, 1014 (2d Cir. 1988) ("[W]e must infer from the other subsections of Rule 37 expressly providing for the imposition of sanctions against a party's attorney that the drafters intended to omit attorneys from the coverage of subsection (c)."). Defendant's own characterization of Plaintiff's minimal role in the discovery process demonstrates sufficient reason for his purported failure to admit. (See Def.'s Mem. 8–9.) Again, according to Defendant, Plaintiff was not apprised of "his obligations in litigation." (Id. at 8.) Accordingly, the Court shall not impose the sanction Defendant seeks against Plaintiff.
B. Sanctions against the Rephen Firm under § 1927 and the Court's Inherent Authority
An attorney may be held personally responsible for an award of attorney's fees under either 28 U.S.C. § 1927 or the Court's inherent authority. Oliveri v. Thompson , 803 F.2d 1265, 1273 (2d Cir. 1986). "To impose sanctions under either authority, a court must find clear evidence that (1) the offending party's claims were entirely without color, and (2) the claims were brought in bad faith—that is, ‘motivated by improper purposes such as harassment or delay.’ " Eisemann v. Greene , 204 F.3d 393, 396 (2d Cir. 2000) (quoting Schlaifer Nance & Co. v. Estate of Warhol , 194 F.3d 323, 336 (2d Cir. 1999) ).
The purpose of § 1927 is "to deter unnecessary delays in litigation." Oliveri , 803 F.2d at 1273 (quoting H.R. Conf. Rep. No. 1234, 96th Cong., 2d Sess. 8, reprinted in 1980 U.S. Code Cong. & Ad. News, 2716, 2782). Accordingly, § 1927 provides that "[a]ny attorney ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct."
The Court's summary-judgment decision above leaves no doubt that the claims in this action are entirely without merit. The dispositive question, therefore, is whether the claims were brought in bad faith. Importantly, the Second Circuit has "interpreted the bad faith standard restrictively," requiring a district court to identify counsel's misconduct with a high degree of factual specificity. Eisemann , 204 F.3d at 396. In an effort to persuade the Court that Plaintiff acted in bad faith, Defendant points the Court to (1) the relationship between Ms. Frazier and the Rephen Firm and (2) the latter's history of representing other plaintiffs in similar litigation against Defendant. (Def.'s Mem. 5–9.) However, none of this evidence satisfies the restrictive standard for a finding of bad faith.
With regard to the Rephen Firm's relationship with Ms. Frazier, Defendant argues that it is entitled, under LiButti v. United States , 107 F.3d 110 (2d Cir. 1997), to an inference that the Rephen Firm illegally paid Ms. Frazier to manufacture Plaintiff's claims. (Def.'s Mem. 6–8.) Defendant bases this request on Mr. Rephen's refusal to answer deposition questions posed to him in his capacity as the Rephen Firm's corporate representative. (Def.'s Mem. 6–8.) Defendant's reliance on LiButti is misplaced. LiButti regards the application of adverse inferences against a counterparty on the merits of litigation, not a request for an adverse inference in the context of a motion for attorney's fees as a sanction against opposing counsel. As the Second Circuit has long made clear, sanctions are a serious consequence that must be well-justified:
"To ensure ... that fear of an award of attorneys' fees against them will not deter persons with colorable claims from pursuing those claims, we have declined to uphold awards under the bad-faith exception absent both clear evidence that the challenged actions are entirely without color, and are taken for reasons of harassment or delay or for other improper purposes and a high degree of specificity in the factual findings of the lower courts. "
Eisemann , 204 F.3d at 396 (quoting Dow Chem. Pacific Ltd. v. Rascator Maritime S.A. , 782 F.2d 329, 344 (2d Cir. 1986) ). Defendant does not cite any authority for the proposition that an adverse inference may satisfy the high degree of factual specificity required to sustain a sanctions award, and the Court declines to so hold in this case.
The Court is also not persuaded by Defendant's argument that the nature and extent of the Rephen Firm's representation of at least ten other plaintiffs in FDCPA actions against Defendant supports a finding of bad faith in this case. (Def.'s Mem. 8–9.) Notably, Defendant cites no authority for the proposition that a lawyer's purported bad faith in one matter may support a finding of bad faith another. Moreover, even if Defendant had proffered such authority, the facts of this case do not square with such a finding. Specifically, Defendant contends that the Rephen Firm's modus operandi is to assert claims for $25,000 arising out of Defendant's purported refusal to accept verbal disputes of credit accounts, to seek to settle such claims for amounts less than $25,000, and to resist producing its clients for depositions. (Id. at 8.) In this case, however, Plaintiff was deposed. Moreover, Defendant does not substantiate its contention that the Rephen Firm's other matters were "spurious." (Id. at 9.) Thus, Defendant has not established the Rephen Firm's bad faith, making sanctions unavailable under either § 1927 or the Court's inherent authority. This does not, however, end the Court's inquiry into the Rephen Firm's misconduct.
Defendant also insists that the Rephen Firm has represented at least 23 other plaintiffs in FDCPA actions against other defendants, but Defendant does not indicate whether the Rephen Firm engaged in similar conduct in those cases. (Def.'s Mem. 9.)
III. Rule 37 Discovery Sanctions against the Rephen Firm
Although Defendant cabins its Rule 37 request to subsection (c)(2), the Court is authorized by subsection (b)(2) to sanction the Rephen Firm for defying the Court's September 8, 2018 discovery order. Rule 37(b)(2)(A) provides, in relevant part, "If ... a witness designated under Rule 30(b)(6) ... fails to obey an order to provide ... discovery, ... the court where the action is pending may issue further just orders," including any of the orders enumerated thereunder. "Instead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust." Fed. R. Civ. P. 37(b)(2)(C).
On September 5, 2018, the Court sanctioned the Rephen Firm for Mr. Rephen's failure to appear at his August 1 deposition. (Order, ECF No. 40.) On September 8, the Court denied Mr. Rephen's request to be excused from appearing at his deposition on the ground that he intended to assert his Fifth Amendment privilege against self-incrimination and ordered him to appear at the deposition in person. Because it was unclear at that time whether Mr. Rephen would be deposed in his individual or corporate-representative capacity, or both, the Court set forth the relevant Fifth Amendment standard applicable to each scenario. The Court noted that, insofar as Mr. Rephen would be deposed in his individual capacity, he must appear in person at the deposition and may assert his Fifth Amendment privilege. The Court further explained that a corporation has no Fifth Amendment privilege, so a corporate representative "may not refuse to submit to a Rule 30(b)(6) deposition ... on the grounds that such acts may tend to incriminate it." Louis Vuitton Malletier S.A. v. LY USA, Inc. , 676 F.3d 83, 92 n.5 (2d Cir. 2012).
It would indeed be incongruous to permit a corporation to select an individual to verify the corporation's answers, who because he fears self-incrimination may thus secure for the corporation the benefits of a privilege it does not have. Such a result would effectively permit the corporation to assert on its own behalf the personal privilege of its individual agents.
United States v. Kordel , 397 U.S. 1, 8, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970) (internal quotation marks and citations omitted).
On September 18, Defendant formally noticed a Rule 30(b)(6) deposition of the Rephen Firm, scheduled for September 28. Although Mr. Rephen appeared at the deposition and confirmed his understanding of his appearance as the Rephen Firm's corporate representative, he refused to answer even basic questions. (Status Report, ECF No. 42; Notice Ex. A ("Rephen Dep.") 10:18–25, ECF No. 44-1.) Portions of the deposition are reproduced below:
Q. Do you read the Court's order addressing the indication of the Fifth Amendment privilege with respect to the corporation as opposed to individually?
A. I invoke my Fifth Amendment privilege.
Q. Is there anyone, other than you, that has any information or knowledge that could appear in your place on behalf of the law firm, the law firm being M. Harvey Rephen and Associates?
A. I invoke my Fifth Amendment privilege.
(Rephen Dep. 13:4–13.)
Q. How many times did anyone on behalf of your firm meet with Mr. Eisner in connection with representation of him in this litigation?
A. I invoke my Fifth Amendment privilege.
(Id. at 21:19–22.)
Q. Prior to the filing of the complaint in this case, what investigation or due diligence did your firm conduct into the merits of this case on behalf of Mr. Eisner?
A. I invoke my Fifth Amendment privilege.
(Id. at 22:5–9.)
By failing to designate a corporate representative who would testify at the Rule 30(b)(6) deposition without invoking his Fifth Amendment privilege, the Rephen Firm directly defied the Court's unambiguous September 8, 2018 order. Nothing in the Rephen Firm's papers justifies its failure. Accordingly, pursuant to Rule 37(b)(2)(C), the Rephen Firm must pay Defendant's reasonable expenses, including attorney's fees, incurred in taking the following actions: (1) noticing and serving the September 18, 2018 subpoena; (2) preparing for and taking the September 28, 2018 deposition; and (3) obtaining and filing the deposition transcript. (ECF No. 44.)
IV. Rule 11 Sanctions
On May 9, 2019, pursuant to Rule 11(c)(3), the Court ordered the Rephen Firm to show cause why it should not be sanctioned for violating Rule 11(b). The Rephen Firm filed its response on May 23. (ECF No. 60.) Rule 11(b)(2) provides that, by filing a pleading or other paper, an attorney certifies that, "to the best of [his] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances[,] ... the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law." Although "Rule 11 has no retrospective application to a complaint filed in state court even if the action subsequently is removed to federal court," it "may apply to papers filed in the federal forum once the action has been removed." Mareno v. Jet Aviation of Am., Inc. , 970 F.2d 1126, 1128 (2d Cir. 1992). Ordinarily, the standard for imposing Rule 11 sanctions is objective unreasonableness. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd. , 579 F.3d 143, 150 (2d Cir. 2009). But where, as here, a district court initiates Rule 11 sanctions sua sponte at the end of a litigation—and without the safe-harbor opportunity to withdraw or amend that follows a party's motion for sanctions—a lawyer may be sanctioned only upon a finding of subjective bad faith. Id.
In light of the transcript of the phone call at issue in this litigation, the arguments set forth in the Rephen Firm's February 12, 2018 pre-motion letter and May 4, 2018 supplemental letter were frivolous. (See ECF Nos. 22, 26.) As already noted with respect to summary judgment, Plaintiff's claims are utterly meritless. Had Defendant moved for Rule 11 sanctions in response to these pre-motion letters, the Court would likely have imposed them because the Rephen Firm's arguments were objectively unreasonable. However, at this juncture, a heightened standard applies. As discussed above, there is not sufficient evidence to establish the Rephen Firm's subjective bad faith. Constrained by this standard, the Court is legally precluded from imposing Rule 11 sanctions sua sponte .
CONCLUSION
For the foregoing reasons, Defendant's motion for summary judgment is GRANTED, and Plaintiff's claims are dismissed with prejudice. Defendant's motion for attorney's fees is DENIED. On the Court's initiative and pursuant to Rule 37(b)(2)(C), the Rephen Firm shall pay Defendant's reasonable expenses, including attorney's fees, as detailed in this order. Rule 11 sanctions shall not be imposed against the Rephen Firm.
SO ORDERED.