Bank v. CreditGuard of America, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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TODD C. BANK, individually and on behalf of

all others similarly situated,

Plaintiff,

MEMORANDUM & ORDER

-against- 18-CV-1311 (PKC) (RLM)

CREDITGUARD OF AMERICA, INC., FREEDOM

DEBT RELIEF, LLC, FREEDOM FINANCIAL

NETWORK, LLC, and FREEDOM FINANCIAL

NETWORK FUNDING, LLC,

Defendants.

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PAMELA K. CHEN, United States District Judge:

Pending before the Court are Defendant CreditGuard of America’s (“CGA”) and Plaintiff

Todd C. Bank’s cross-motions for sanctions pursuant to Federal Rule of Civil Procedure (“FRCP”)

11. For the reasons that follow, both motions are denied.

BACKGROUND

On March 1, 2018, Plaintiff filed this pro se1 action against Defendants CGA and Freedom

Debt Relief, LLC, Freedom Financial Network, LLC, and Freedom Financial Network Funding,

LLC (the “Freedom Defendants”). In his complaint, Plaintiff alleges that Defendants made

unsolicited automated commercial telemarketing and advertising calls, in violation of the

Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, and New York General Business

Law (“NYGBL”) § 399-p, and that Defendants failed to provide disclosures required by state law.

(See Complaint (“Compl.”), Dkt. 1.) On June 11, 2018, Plaintiff filed an amended complaint.

(Dkt. 20.)

1 Although proceeding pro se, Plaintiff is an attorney.

All Defendants moved to dismiss the amended complaint. (Dkt. 25.) The Court granted

CGA’s motion in its entirety and terminated CGA as a party to this action, finding that it was

“shielded from liability” under the non-profit exemption of the TCPA. See Bank v. CreditGuard

of Am., No. 18-CV-1311 (PKC) (RLM), 2019 WL 1316966, *5–6 (E.D.N.Y. Mar. 22, 2019),

reconsideration denied sub nom. Bank v. Freedom Debt Relief, LLC, 2019 WL 1865196 (E.D.N.Y.

Apr. 24, 2019). The Court also dismissed Plaintiff’s § 399-p claims and putative § 399-p class

claims as to all Defendants and struck all class allegations relating to Plaintiff’s putative § 399-p

class claims from the amended complaint. Id. at *13. The Court denied the Freedom Defendants’

motion to dismiss Plaintiff’s TCPA claims, as well as their motion to strike Plaintiff’s putative

federal TCPA class claims, thus allowing those claims to proceed. Id.

Plaintiff filed a Motion for Reconsideration on April 5, 2019 (Dkt. 39), which the Court

denied on April 24, 2019 (Dkt. 45). The Court then twice denied Plaintiff’s Motions to Amend

the Order on Motion for Reconsideration on April 29, 2019 (Dkt. 46), and May 1, 2019 (Dkt. 47).

On May 6, 2019, CGA filed its motion for Rule 11 sanctions, asserting that Plaintiff’s claim

against CGA in this lawsuit was “frivolous” and “factually baseless.” (See Defendant’s Motion

for Sanctions (“Def.’s Mot.”), Dkt. 54-8, at 3.)

Plaintiff then filed two motions for Sanctions—the first on May 20, 2019 (Dkt. 51), and

the second on June 12, 2019 (Plaintiff’s Motion (“Pl.’s Mot.”), Dkt. 62). Plaintiff’s initial motion

(Dkt. 51, at ECF 64), was against Defendant CGA’s counsel, Neil E. Asnen, and his law firm,

Klein Moynihan Turco LLP, and asserted that Defendant CGA’s FRCP 11 motion itself was

“frivolous.” (See Pl.’s Mot., Dkt. 62, at ECF2 62.) Plaintiff acknowledged in his first motion that

2 “ECF” refers to the pagination generated by the court’s CM/ECF docketing system and

not the document’s internal pagination.

he might not have complied with the statutory “safe-harbor” provision3 (Dkt. 51, at ECF 62–63),

and indeed CGA objected to the filing as violative of the safe-harbor rule (Dkt. 53). On June 12,

2019, Plaintiff re-filed his sanctions motion against attorney Asnen and his law firm, presumably

to comply with the statutory requirements, making it Plaintiff’s operative sanctions motion in this

matter. (See Pl.’s Mot., Dkt. 62.)

During the intervening period, on May 7, 2019, Plaintiff filed a second amended complaint

(“SAC”) per the Court’s directive.4 (Dkt. 50.)

LEGAL STANDARD

FRCP 11(b) provides, inter alia, that

[b]y presenting to the court a pleading, written motion, or other paper[,] . . . an

attorney or unrepresented party certifies that to the best of the person’s knowledge,

information, and belief, formed after an inquiry reasonable under the

circumstances[,] . . . the claims, defenses, and other legal contentions are warranted

by existing law[,] . . . [and that] the factual contentions have evidentiary support.

Fed. R. Civ. P. 11(b).

“If, after notice and a reasonable opportunity to respond, the court determines that Rule

11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm,

or party that violated the rule or is responsible for the violation.” Fed. R. Civ. P. 11(c)(1). In

implementing this rule, “courts have long held that an attorney could be sanctioned for conduct

3 “Rule 11 contains a 21-day ‘safe harbor’ provision, under which a motion ‘shall not be

filed with or presented to the court’ unless the movant first serves its adversary with the proposed

motion and gives the adversary a three-week opportunity to withdraw or correct the ‘challenged

paper, claim, defense, contention, allegation, or denial.’” Camprubi-Soms v. Aranda, No. 00-CV-

9626 (DLC), 2002 WL 10439, at *1 (S.D.N.Y. Jan. 3, 2002) (quoting Fed. R. Civ. P. 11(c)(1)(A)).

4 Plaintiff, however, disregarded the April 12, 2019 deadline set by the Court to file the

SAC (see Order on Motion to Dismiss, Dkt. 38), despite filing seven other motions, memoranda,

and replies in the interim. (Dkts. 39, 40, 42, 43, 46, 47, 49.)

that was objectively unreasonable,” Muhammad v. Walmart Stores E., L.P., 732 F.3d 104, 108 (2d

Cir. 2013), which can include “misrepresenting facts or making frivolous legal arguments,” id.

(citing Storey v. Cello Holdings, 347 F.3d 370, 388 (2d Cir. 2003)). “‘[W]hen divining the point

at which an argument turns from merely losing to losing and sanctionable, . . . courts [must]

resolve all doubts in favor of the signer’ of the pleading.” Umar Oriental Rugs, Inc. v. Carlson &

Carlson, Inc., 757 F. Supp. 2d 218, 228 (E.D.N.Y. 2010) (emphasis omitted) (alterations in

original) (quoting Rodick v. City of Schenectady, 1 F.3d 1341, 1350 (2d Cir. 1993)). Additionally,

“Rule 11 sanctions are appropriate where an attorney or party declines to withdraw a claim ‘upon

an express request by his or her adversary after learning that [the claim] was groundless.”’ Fuerst

v. Fuerst, 832 F. Supp. 2d 210, 220 (E.D.N.Y. 2011) (alterations in original) (quoting Carlton

Grp., Ltd. v. Tobin, No. 02-CV-5065 (SAS), 2003 WL 21782650, at *6 (S.D.N.Y. July 31, 2003)).

DISCUSSION

I. Defendant CGA’s Motion for Sanctions

In its motion, CGA argues that “Plaintiff improperly asserted, maintained[,] and defended

a frivolous and factually baseless” TCPA claim against CGA. (Def.’s Mot., Dkt. 54-8, at 3.) More

specifically, CGA contends that, on numerous occasions, Plaintiff was provided with “actual

knowledge” and “documentary evidence” demonstrating its non-profit status, which exempts it

from liability under the TCPA. (Id.) CGA notes that Plaintiff was expressly told during the initial

telemarketing call at issue in this action (the “Telemarketing Call”) that CGA is a non-profit

company, and, because Plaintiff is “an experienced TCPA attorney with at least constructive

knowledge of the TCPA’s Nonprofit Exemption,” he should have known not to bring this claim.

(Id. at 4.) Moreover, CGA argues that Plaintiff “compounded the frivolity” by maintaining the

TCPA claim after amending the original pleading, citing seven instances of “actual notice” that

were provided to Plaintiff that CGA is a non-profit organization. (Id. at 5.) Essentially, CGA

asserts that, because there was never a legal basis for Plaintiff to assert his TCPA claim, as

evidenced by the Court’s dismissal of that claim, Plaintiff’s continued prosecution of it is

sanctionable under Rule 11. CGA seeks both monetary and injunctive relief (in the form of a filing

injunction) against Plaintiff. The Court denies both requests.

A. Monetary Relief

The Court finds that Plaintiff’s actions are not sanctionable under FRCP 11. Simply

maintaining a claim that does not survive a motion to dismiss is not in and of itself frivolous. “The

appropriateness of sanctions is distinct from the underlying merits of a claim.” E. Gluck Corp. v.

Rothenhaus, 252 F.R.D. 175, 179 (S.D.N.Y. 2008) (citation omitted); see also Abdelhamid v.

Altria Grp., Inc., 515 F. Supp. 2d 384, 392 (S.D.N.Y. 2007) (“When divining the point at which

an argument turns from merely losing to losing and sanctionable[,] courts must resolve all doubts

in favor of the signer of the pleading.” (internal quotation marks and citation omitted)). FRCP 11

motions should not be used “to test the legal sufficiency or efficacy of allegations in the pleadings;

other motions are available for those purposes.” E. Gluck Corp., 252 F.R.D. at 179 (citing the

FRCP 11 Advisory Committee’s Note to the 1993 amendments).

Although the Court found that Plaintiff’s amended complaint failed to state a TCPA claim

against CGA, given the ambiguous relationship between Defendants in this case5—against one of

5 Plaintiff points to the Court’s discussion at oral argument of a potential agency reference

at the pleadings stage:

[U]nder the dual[-]purpose standard, I think they—CGA, at least at this stage, can’t

really rest on this immunity under—or exception under the TCPA. Again, at the

pleading stage, there seems to be a very close relationship established in not one,

not two, but it seems like three different calls with representatives of both

defendants’ companies.

whom Plaintiff was able to state a TCPA claim—such a claim as to CGA was not so obviously

foreclosed by precedent as to make it legally indefensible and wholly unreasonable. The same

may be said with respect to Plaintiff’s agency and vicarious liability theories asserted in response

to Defendant’s motion to dismiss. See Bank, 2019 WL 1316966, at *5. Failing to pass the motion-

to-dismiss threshold does not mean that Plaintiff’s claim and arguments clearly had no chance of

success or that there was no reasonable argument to extend the law. See Sid Bernstein Presents,

LLC v. Apple Corps Ltd., 16-CV-7084 (GBD), 2017 WL 4640149, at *8 (S.D.N.Y. July 26, 2017)

(“Although Plaintiff has failed to state a plausible claim, the filings do not support a conclusion

that the claims were clearly frivolous or were alleged in bad faith.”); see also In re Merrill Lynch

Tyco Research Sec. Litig., 03-CV-4080 (MP), 2004 WL 305809, at *5 (S.D.N.Y. Feb. 18, 2004)

(“Even though the Court concludes that the Consolidated Amended Complaint warrants dismissal,

the Court need not conclude that the factual allegations are so unreasonable as to warrant Rule 11

sanctions.”). “Rule 11 ‘is targeted at situations where it is patently clear that a claim has absolutely

no chance of success under the existing precedents, and where no reasonable argument can be

advanced to extend, modify or reverse the law as it stands.’” Sid Bernstein Presents, 2017 WL

4640149, at *8 (quoting Stern v. Leucadia Nat’l Corp., 844 F.2d 997, 1005 (2d Cir. 1988)).

Moreover, “[t]he fact that a legal theory is a long-shot does not necessarily mean it is sanctionable.”

Fishoff v. Coty Inc., 634 F.3d 647, 654 (2d Cir. 2011). Although unsuccessful, and perhaps fairly

categorized as “long-shot” legal arguments, Plaintiff’s assertion, maintenance, and defense of his

TCPA claims against CGA do not rise to the level of sanctionable conduct.

(Pl.’s Mot., Dkt. 62, at ECF 63 (citation omitted)).

B. Injunctive Relief

The Court also denies CGA’s request for injunctive relief in the form of a filing injunction

against Plaintiff. “In determining whether to restrict a litigant’s future ability to sue, a court must

consider ‘whether a litigant who has a history of vexatious litigation is likely to continue to abuse

the judicial process and harass other parties.’” Eliahu v. Jewish Agency for Israel, 919 F.3d 709,

713–14 (2d Cir. 2019) (quoting Safir v. U.S. Lines, Inc., 792 F.2d 19, 24 (2d Cir. 1986)). That

inquiry includes an analysis of the following factors:

(1) the litigant’s history of litigation and in particular whether it entailed vexatious,

harassing or duplicative lawsuits; (2) the litigant’s motive in pursuing the litigation,

e.g., does the litigant have an objective good faith expectation of prevailing?; (3)

whether the litigant is represented by counsel; (4) whether the litigant has caused

needless expense to other parties or has posed an unnecessary burden on the courts

and their personnel; and (5) whether other sanctions would be adequate to protect

the courts and other parties.

Id. at 714 (quoting Iwachiw v. N.Y.S. Dep’t of Motor Vehicles, 396 F.3d 525, 528 (2d Cir. 2005)

(per curiam)). Although Plaintiff Todd Bank is a frequent litigant, and is often sanctioned, see

McCabe v. Lifetime Entm’t Servs., 761 F. App’x 38, 42 (2d Cir. 2019) (summary order) (collecting

cases where “[Todd Bank’s] arguments have been consistently rejected by this Court and by other

circuits”), there is no evidence in this matter that his intention was or is to abuse the judicial process

or harass specific parties.

The Court finds, for the reasons previously discussed, that Plaintiff Bank’s arguments,

while not meritorious, were not frivolous and therefore cannot form the basis for a filing injunction.

Moreover, even if Plaintiff’s arguments had been frivolous, the Court finds that a monetary

sanction would be more appropriate than a filing injunction.

II. Plaintiff’s Motion for Sanctions and Attorneys’ Fees

The Court also denies Plaintiff’s motion for sanctions against both CGA’s attorney and his

law firm. (See Pl.’s Mot., Dkt. 62, at ECF 63.) While “the filing of a motion for sanctions is itself

subject to the requirements of Rule 11 and can lead to sanctions[,]” Safe-Strap Co., Inc. v. Koala

Corp., 270 F. Supp. 2d 407, 421 (S.D.N.Y. 2003) (quoting Fed. R. Civ. P. 11 Advisory

Committee’s Note to 1993 amendments); see also Gissendaner v. Credit Corp Sols., Inc., 358 F.

Supp. 3d 213, 225 (W.D.N.Y. 2019), that result is not warranted here.

First, CGA’s motion for sanctions was not wholly without merit. See McBurnie v.

Rutledge, 646 F. App’x 108, 113 (2d Cir. 2016) (summary order) (affirming denial of sanctions

when “arguments, though close to frivolous, contained enough of a kernel of a theory to avoid

being objectively unreasonable” (internal quotation marks and citation omitted)). This Court

previously acknowledged problems with Plaintiff’s conduct in this matter.6 (See, e.g., May 24,

2019 Order (“Plaintiff is advised, again, to focus on moving this case forward and forgo filing

further vexatious motions.”)).

Second, Plaintiff fails to establish the requisite burden of proof to succeed. He merely puts

forth arguments opposing Defendant’s FRCP 11 motion rather than demonstrating how CGA’s

legal contentions are not supported by existing law or were brought for an improper purpose. (See

Pl.’s Mot, Dkt. 62, at ECF 63–70.) Plaintiff fails to detail any conduct associated with CGA’s

6 As previously noted, though proceeding pro se, Plaintiff is an attorney, and one, the Court

also notes, of some notoriety in this Circuit, including as a self-proclaimed “annoyance” attorney.

See McCabe, 761 F. App’x at 42 (collecting cases where Plaintiff’s “arguments have been

consistently rejected by this Court and by other circuits”); Tom McParland, Lawyer Removed

From 2nd Circuit Arguments Petitions for En Banc Rehearing, N.Y. L.J., Jan. 2, 2020,

https://www.law.com/newyorklawjournal/2020/01/02/lawyer-removed-from-second-circuit-

arguments-petitions-for-en-banc-rehearing (describing Plaintiff as “a solo attorney who has

branded himself the ‘annoyance lawyer’”).

motion for sanctions that violates FRCP 11(b). See Sid Bernstein Presents, 2017 WL 4640149, at

*8. For these reasons, Plaintiff’s motion is denied.

The Court also denies Plaintiff’s request for costs.7 FRCP 11 provides that, “[i]f

warranted, the court may award to the prevailing party the reasonable expenses, including

attorney’s fees, incurred for the motion.” Fed. R. Civ. P. 11(c)(2) (emphasis added). Costs are

not warranted here, as Plaintiff has not shown that the FRCP 11 motion was frivolous, nor is there

an extensive history of bad faith litigation in this matter. See ED Capital, LLC v. Bloomfield Inv.

Res. Corp., 316 F.R.D. 77, 82 (S.D.N.Y. 2016) (denying the plaintiff’s motion to award “costs and

fees associated with defending the Rule 11 Motion” because it was not “filed for an improper

purpose” or “utterly without support” (internal quotation marks and citation omitted)); cf. Bunnell

v. Haghighi, 183 F. Supp. 3d 364, 367 (E.D.N.Y. 2016) (adopting report and recommendation

recommending the award of attorneys’ fees to the prevailing party in an FRCP 11 motion after

detailing significant “bad faith” litigation). “Moreover, the situation in which all of the parties

now find themselves hardly engenders sympathy.” Wheeler v. Twenty-First Century Fox, 322 F.

Supp. 3d 445, 458–59 (S.D.N.Y. 2018) (declining to award attorneys’ fees and costs to both parties

in competing motions for sanctions). For these reasons, Plaintiff’s cross-motion for sanctions

against CGA’s attorneys is denied.

7 The Court notes that in Plaintiff’s initial motion he also requested attorneys’ fees, as the

prevailing party in the event that the Court denies CGA’s motion. (Dkt. 51, at ECF 62.) That

request was not reiterated in the operative motion where Plaintiff only asks for “reasonable

expenses, including, but not limited to, $243.36 for the cost of the transcript of the oral argument

before this Court on December 11, 2018.” (Pl.’s Mot., Dkt. 62, at ECF 70.) In any event, even if

the initial request for attorneys’ fees had been reiterated, it would be denied for the same reasons

the Court is denying costs.

CONCLUSION

For the foregoing reasons, Defendant CGA’s motion for sanctions (Dkt. 54) and Plaintiff’s

cross-motion for sanctions against CGA’s attorneys (Dkt. 62) are denied.

As previously ordered on February 21, 2020, because neither the Freedom Defendants nor

Plaintiff filed a letter indicating a forthcoming motion for summary judgment, this case will

proceed to trial. A pre-trial conference, via telephone, will be held on April 20, 2020, at 2:00 p.m.

SO ORDERED.

/s/ Pamela K. Chen

PAMELA K. CHEN

UNITED STATES DISTRICT JUDGE

Dated: March 30, 2020

Brooklyn, New York