Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—W.D. N.Y.: Debt collection firm owner denied stay of FTC enforcement action, (Feb 10, 2016)

By Linda O’Brien, J.D., LL.M.

In an FTC action against a debt collection firm and its owners for deceptive and abusive debt collection practices, the federal district court in Buffalo, New York has denied the firm owner’s Suggestion of Bankruptcy and request to stay the proceedings (Federal Trade Commission v. Unified Global Group, LLC, February 9, 2016, Foschio, L.).

In May 2015, the FTC filed a complaint against the debt collection operation of Unified Global Group, the related company ARM WNY, LLC, and the company owners, Domenico D’Angelo and Anthony Coppola, for threatening and deceiving consumers via text messages, emails, and phone calls in violation of the FTC Act and Fair Debt Collections Act (FDCA). The Commission sought and obtained an ex parte temporary restraining order that appointed a receiver and imposed an asset freeze. In June 2015, the FTC and Coppola entered into a stipulated preliminary injunction order, which prohibited the defendant from violating the FDCA or disposing of any assets.

Before the court was defendant Coppola’s filing of the Suggestion of Bankruptcy and request for a stay.

The court found that the government unit exception to the automatic staying of judicial proceedings against a bankruptcy debtor applied and the case could proceed. Under the Bankruptcy Code, 11 U.S.C. §362, the filing of a bankruptcy petition automatically stays all judicial proceedings against the debtor-filer. However, under the government unit exception, enforcement actions in which a governmental unit sued a debtor to stop a violation of anti-fraud or consumer protection regulatory laws and sought other than a monetary judgment were not subject to the automatic stay, the court explained.

Coppola’s argument that the exception did not apply because the stipulated injunction made it impossible for him to operate as a debt collector and because continuing the action would serve the FTC’s “pecuniary interest” was rejected. The court noted that the stipulated injunction did not prohibit Coppola from engaging in debt collection; it only prohibited him from violating the FDCA in doing so. Absent the grant of permanent injunctive relief and recoupment of unjust enrichment, Coppola could resume lawful debt collection operations.

Moreover, the FTC did not seek a monetary judgment to enforce its pecuniary interest. Instead, the agency only sought monetary relief that was incidental to the purely equitable remedies of rescission, restitution, refunds, and disgorgement. That action was well within the scope of §362, the court concluded.

The case is No. 1:15-cv-00422-EAW-LGF.

Attorneys: Jonathan E. Neuchterlein for the Federal Trade Commission. Eric M. Soehnlein (Lippes Mathias Wexler Friedman LLP) for Domenico D’Angelo. Jeffrey F. Reina (Lipsitz, Green, Scime, Cambria LLP) for Anthony Coppola.

Companies: Unified Global Group, LLC; ARM WNY, LLC; Audubon Financial Bureau LLC

Cases: ConsumerProtection FederalTradeCommissionNews NewYorkNews