Eric M. Berman, P.C., et al., Respondents,v.City of New York, et al., Appellants.BriefN.Y.November 17, 2014 To be argued by: JANET L. ZALEON (15 MINUTES REQUESTED) State of New York Court of Appeals ERIC M. BERMAN, P.C., LACY KATZEN, LLP, Plaintiffs-Respondents, -against- CITY OF NEW YORK NEW YORK CITY COUNCIL, NEW YORK CITY DEPARTMENT OF CONSUMER AFFAIRS, JONATHAN MINTZ, in his official capacity as the Commissioner of the New York City Department of Consumer Affairs, Defendants-Appellants. REPLY BRIEF FOR APPELLANTS RICHARD DEARING NICHOLAS R. CIAPPETTA JANET L. ZALEON of Counsel April 23, 2015 ZACHARY W. CARTER Corporation Counsel of the City of New York Attorney for Appellants 100 Church Street New York, New York 10007 Tel: (212) 356-0860 or 2500 Fax: (212) 356-2509 jzaleon@law.nyc.gov TABLE OF CONTENTS Page TABLE OF AUTHORITIES ....................................................................... ii PRELIMINARY STATEMENT .................................................................. 1 POINT I THE LOCAL LAW REGULATING THE DEBT- COLLECTION PRACTICES OF ATTORNEYS IS NOT PREEMPTED BY STATE LAW ........................................................ 3 A. Regulation of Nonlegal Debt-Collection Practices Creates No Conflict with State Law.............................................................. 3 1. Plaintiffs’ claim is based on a selective quotation of the statute ............................................................................. 3 2. The City Council properly distinguished attorney conduct from traditional debt-collection practices.. .............................. 6 3. Local Law 15 properly regulates traditional debt-collection practices .............................................................................. 11 B. Field Preemption Also Does Not Apply .................................... 15 POINT II CITY CHARTER § 2203(c) AUTHORIZES DCA’S LICENSING SCHEME ................................................................... 19 POINT II THE VAGUENESS CLAIM IS NOT A PROPER CERTIFIED QUESTION, AND IN ANY EVENT, IS MERITLESS .................................................................................... 20 CONCLUSION......................................................................................... 25 ii TABLE OF AUTHORITIES Cases Page Aponte v. Raychuk, 140 Misc. 2d 864 (Sup. Ct., NY Co., 1988), aff’d, 160 A.D.2d 636 (1st Dep’t 1990) .................................................... 17 Aponte v. Raychuk, 160 A.D.2d 636 (1st Dep’t 1990) ............................................................ 17 Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996) .................................................................... 10 Matter of Chwick v. Mulvey, 81 A.D.3d 161 (2d Dep’t 2009) .............................................................. 16 Cloman v. Jackson, 988 F.2d 1314 (2d Cir. 1993) .................................................................. 10 Greco v. Trauner, Cohen & Thomas, LLP, 412 F.3d 360 (2d Cir. 2005) .................................................................... 10 Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 374 F.3d 56 (2d Cir. 2004) ..................................................................... 22 Matter of Hamburg v. McBarnette, 83 N.Y.2d 726 (1994) ............................................................................ 14 Heintz v. Jenkins, 514 U.S. 291 (1995). .............................................................................. 22 Hester v. Graham, Bright & Smith, P.C., 289 Fed. Appx. 35 (5th Cir. 2008) ...................................................... 22-23 Lansdown Entertainment Corp. v. New York City Dep’t of Consumer Affairs, 74 N.Y.2d 761 (1989), aff’g 141 A.D.2d 468 (1st Dep’t 1988) ................... 16 iii Page Liriano v. Hobart Corp., 92 NY2d 232 (1998) .............................................................................. 21 Miller v. Wolpoff & Abramson, LLP, 321 F.3d 292 (2d Cir.) cert. denied, 540 U.S. 823 (2003) ..................... 10, 11 N.Y.A.A.D., Inc. v. State of New York, 1 N.Y.3d 245 (2003) ................................................................................ 6 Matter of New York State Bankers Ass’n v. Albright, 38 NY2d 430 (1975) ................................................................................ 6 Nielsen v. Dickerson, 307 F.3d 623 (7th Cir. 2002) .................................................................. 10 People v. De Jesus, 54 N.Y.2d 465 (1981) ........................................................................... 16 People v. Diack, 24 N.Y.3d 674 (2015) ............................................................................ 16 Riley v. County of Broome, 95 N.Y.2d 455 (2000) .......................................................................... 6, 9 Matter of Roth v. Turoff, 127 Misc. 2d 998 (Sup. Ct., Bronx Co., 1985), aff'd, 124 A.D.2d 471 (1st Dep’t 1986) ................................................ 12-13 Statutes and Regulations Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692a(6) .............................................................................. 22 15 U.S.C. § 1692e .................................................................................. 10 New York Constitution Article VI .............................................................. 15 iv Page Judiciary Law § 53 ......................................................................................................... 2 § 90 ......................................................................................................... 2 § 90(2) ................................................................................................... 13 Municipal Home Rule Law § 11(1)(e) ......................................................... 14 N.Y. Code of Rules and Regulations (N.Y.C.R.R.) Court Rule, 22 N.Y.C.R.R. § Rule 500.27(a) .......................................... 20 Rules of Professional Conduct (22 N.Y.C.R.R. § 1200.0), Rules 1.0, 7.1 ...................................................................................... 17 State Debt Collection Regulations, 23 N.Y.C.R.R. § 1.1(e)(7)............. 14 n.1 New York City Charter § 2203(c) ........................................................ 2, 19-20 Administrative Code of the City of New York § 20-489(a) .............................................................................................. 6 § 20-489(a)(5) .......................................................................................... 4 Other Authorities 1986 U.S.C.C.A.N. at 1752, 1755 ............................................................... 10 McKinney’s Cons Laws of NY, Book 1, Statutes § 92(a), at 177 .......................................................................................... 6 § 124, at 253 ............................................................................................ 9 PRELIMINARY STATEMENT Plaintiffs’ preemption arguments offer no persuasive basis for immunizing law firms and attorneys from the New York City debt-collection law, Local Law 15 of 2009, and its implementing regulations, where law firms or attorneys regularly engage in traditional debt-collection activities that do not require the possession of a law license. Although plaintiffs argue that defendants have rewritten the law in the course of defending it, plaintiffs are the ones who ignore the law’s plain language. The law makes clear that it applies to “activities traditionally performed by debt collectors,” and, equally importantly, that it does not cover law firms or attorneys “collecting a debt on behalf of and in the name of a client solely through activities that may only be performed by a licensed attorney.” Plaintiffs’ contention that the City’s law regulates legal practice or imposes additional preconditions to the practice of law cannot be squared with the express carve-out for attorney conduct in the statutory text. In arguing to the contrary, plaintiffs distort the law’s language to try to make it appear that a debt-collection law firm or attorney would be subject to licensing and regulation by DCA for every telephone call made or letter sent to a debtor. Plaintiffs thus disregard the phrase “activities traditionally performed by debt collectors,” which modifies the statute’s reference to contacting a 2 debtor by telephone or mail. Plaintiffs also ignore or unjustifiably dismiss defendants’ representation before this Court that the law would not apply where an attorney contacts a debtor on behalf of a client based on the attorney’s evaluation of the validity of a particular debt, or when an attorney represents a client in litigation. Once the scope of the City’s law is properly understood, it is plain that the application of Local Law 15 to attorneys’ regular performance of traditional debt-collection practices is not preempted by Judiciary Law §§ 53 and 90. Further, in the absence of preemption, New York City Charter § 2203(c) authorizes the DCA’s licensing and regulatory functions concerning these practices. The Court should therefore answer both certified questions in the negative. The additional vagueness issue raised in plaintiffs’ brief is not properly before the Court, because it is not the subject of any question certified to this Court by the U.S. Court of Appeals for the Second Circuit. Plaintiffs have litigated the vagueness question as a matter of federal law, not as a matter of New York law, so this Court lacks jurisdiction to address it here. In any event, while the application of Local Law 15’s provision concerning attorneys may require the exercise of judgment in particular cases—as is true with most statutes—the provision is not unconstitutionally vague. 3 POINT I THE LOCAL LAW REGULATING THE DEBT- COLLECTION PRACTICES OF ATTORNEYS IS NOT PREEMPTED BY STATE LAW A. Regulation of Nonlegal Debt-Collection Practices Creates No Conflict with State Law. 1. Plaintiffs’ claim is based on a selective quotation of the statute. Plaintiffs contend that a “plain language” interpretation of the provision of Local Law 15 concerning attorneys is the basis for their preemption claim, but they are mistaken for two reasons. First, plaintiffs do not analyze the actual language of the provision. Second, the history of debt-collection practices provides further context for understanding the provision. That history demonstrates ample basis for the distinction in Local Law 15 between the practice of law by a licensed attorney–which is not subject to regulation by the DCA–and the regular performance of traditional debt-collection activities– which are regulated by the DCA, whether or not performed by attorneys, to protect vulnerable consumers from abusive tactics. Local Law 15 provides that a “debt collection agency” subject to licensing and regulation does not include “any attorney-at-law or law firm collecting a debt in such capacity on behalf of and in the name of a client solely through activities that may only be performed by a licensed attorney,” but this 4 exclusion does not cover “any attorney-at-law or law firm or part thereof who regularly engages in activities traditionally performed by debt collectors, including, but not limited to, contacting a debtor through the mail or via telephone with the purpose of collecting a debt or other activities as determined by rule of the [DCA] commissioner” (Appendix [“A”] at A77-78, A99). Admin. Code § 20-489(a)(5). Plaintiffs’ brief repeatedly elides critical statutory language, misquoting the last half of the definition as covering an attorney or law firm that “regularly … contact[s] a debtor through the mail or via telephone with the purpose of collecting a debt” (Resp. Br. at 25, 28, 32, 45, 50, 55). Plaintiffs’ argument about the interpretation of the provision is therefore lacking the full statutory language, including the crucial reference to the “activities traditionally performed by debt collectors,” and the preceding clause exempting activities solely available to a licensed attorney. Having rewritten the statute, plaintiffs then assert that the statute as they have edited it subjects an attorney to licensing and regulation by the DCA for every telephone call or letter made by the attorney (Resp. Br. at 11). Based on this misreading of the statute, plaintiffs contend that the local law encroaches on the courts’ authority to regulate attorney conduct because “[w]hen an attorney contacts a debtor and holds herself out as an attorney, she 5 is practicing law” (Resp. Br. at 27). When the statute is read in full and properly understood, however, this argument loses all force. Local Law 15’s provision concerning attorneys implements a recognized distinction between the practice of law, on the one hand, and traditional debt-collection activities that do not constitute the practice of law, on the other. As explained in our main brief (App. Br. at 26-32), the statute specifies that an attorney is not subject to licensing and regulation under the local law when he or she contacts a debtor based on the exercise of legal judgment that the particular debt is owed to the attorney’s client, or brings a lawsuit on a client’s behalf to collect a debt. Local Law 15 reaches attorneys and law firms to the extent that they regularly engage in mass debt-collection activities, when an attorney has not reviewed an individual debtor’s file, just as the statute covers lay debt-collection firms that engage in the same activities. Indeed, when a debt buyer has purchased thousands of debts on a mass basis, it is likely that a firm providing debt-collection services for the debt buyer— including a law firm or attorney providing such services—will not have reviewed each of the debts. 6 2. The City Council properly distinguished attorney conduct from traditional debt-collection practices. As this Court has held, “[t]he primary consideration of courts in interpreting a statute is to ‘ascertain and give effect to the intention of the Legislature,’” and even where statutory language is clear, “it is appropriate to examine the legislative history.” Riley v. County of Broome, 95 N.Y.2d 455, 463 (2000) (quoting McKinney’s Cons Laws of NY, Book 1, Statutes § 92[a], at 177); accord N.Y.A.A.D., Inc. v. State of New York, 1 N.Y.3d 245, 249 (2003) (“we must ascertain and give effect to the intention of the Legislature, as evidenced both by the language of the statute and its legislative history”). As this Court explained, “‘[w]hen aid to construction of the meaning of words, as used in the statute, is available, there certainly can be no ‘rule of law’ which forbids its use, however clear the words may appear on ‘superficial examination.’” Riley, 95 N.Y.2d at 463-464 (quoting New York State Bankers Ass’n v. Albright, 38 NY2d 430, 437 (1975)). The New York City Council enacted Local Law 15 in 2009, to strengthen the City’s consumer-protection law regarding debt-collection practices in the wake of the 2008 financial crisis (A181; App. Br. at 8-11). The impetus for amending the definition of “debt collection agency” in the local law, New York City Administrative Code § 20-489(a), was to encompass debt buyers (A174, A176, A182-183). 7 At a hearing on the bill, the City Council’s Committee on Consumer Affairs received detailed testimony and written testimony on the practices used to collect the massive amounts of consumer debt purchased by debt buyers, which had transformed the debt-collection industry (A181, A185, A327). Debt buyers purchased thousands of defaulted debts at a steep discount and then tried to collect the face amounts of the debts, routinely using only a computer printout that lacked documentation demonstrating that the debts were actually due and owing (A197-198). The City Council also received testimony that debt buyers often sought to avoid the licensing requirement by portraying themselves as “passive” investors in consumer debt and outsourcing the work of collecting the debts to another entity such as a debt-collection law firm (A89, A391-392). Debt- collection tactics included threatening letters and harassing phone calls that afforded the consumer no basis to dispute or even understand the source of the alleged debt (A294, A354). That is, debt collectors, relying on computer printouts, failed to maintain records of disputed or paid debts, which could show that the consumer did not owe the money because, for instance, the debt was paid or discharged in bankruptcy, or the consumer was the victim of identity theft (A198-190). When testifying about abusive debt-collection practices, DCA’s legislative director cited as examples “contacting the debtor 8 at his place of employment, contacting debtors late at night, or refusing to or failing to provide documentation of the debt,” as well as failing to credit payments made by the debtor (A221-222). The City Council recognized the distinction between such debt- collection tactics and an attorney’s pursuit of legal action in a particular case (A185, A279-280). Even plaintiffs quote the sponsor of the bill, Council Member Daniel Garodnick, as explaining that the amended law would “make sure that lawyers and law firms that are engaging in debt collection activities and not just litigation are registered” with DCA (Resp. Br. at 10-11 (quoting A185)). Furthermore, plaintiffs ignore the fact that the City Council amended the bill in response to a concern raised by representatives of debt-collection law firms (A12, A224, A231, A331-342). Those representatives argued to the Council that language in the original draft of the bill, requiring licensing for an attorney who sends “demand letters,” would affect an attorney’s ability to pursue litigation on behalf of a client, because a demand letter must be sent before a lawsuit is initiated (A176, A230-232). Accordingly, that phrase was eliminated from the bill that became Local Law 15 (A99). This amendment to the law further confirms that the Council took pains to avoid encroaching on the regulation of legal practice. 9 Additionally, the background of debt-collection regulation illustrates the distinction between traditional debt-collection practices and an attorney‘s practice of law. As this Court has held, pertinent sources of statutory construction include “‘the history of the times’” and “‘the circumstances surrounding the statute’s passage.’” Riley, 95 N.Y.2d at 464 (quoting McKinney’s Cons Laws of NY, Book 1, Statutes § 124, at 253). The history of the federal Fair Debt Collection Practices Act (“FDCPA”) highlights the distinction between nonlegal debt-collection practices lacking an attorney’s involvement, and an attorney’s exercise of legal judgment to enforce a debt. Contrary to plaintiffs’ claim, the City does not discuss the FDCPA and the case law applying that statute to suggest that a municipality has the same regulatory authority as the federal government (Resp. Br. at 27-29). Rather, we have cited precedent under the FDCPA to show that courts have distinguished between (a) the practice of law and (b) nonlegal debt-collection practices that are merely conducted under the aegis of an attorney or law firm. As pointed out in the City’s main brief (App. Br. at 5-6), Congress amended the FDCPA in 1986 to eliminate the exemption for attorneys and bring debt-collection law firms under its scope, precisely because those firms were engaging in abuses similar to those already prohibited for other debt collectors. These included “late night telephone calls to consumers, calls to 10 consumers’ employers concerning the consumers’ debts, frequent and repeated calls to consumers, disclosure of consumers’ debt to third parties, [and] threats of legal action on small debts where there is little likelihood that legal action will be taken.” 1986 U.S.C.C.A.N. at 1752, 1755. Case law developed under the FDCPA has established that an attorney or law firm that sends out mass-produced dunning letters without reviewing the facts relevant to the collectability of particular debts “is not, at the time of the letter’s transmission, acting as an attorney,” and is not “providing actual legal services.” Greco v. Trauner, Cohen & Thomas, LLP, 412 F.3d 360, 364 (2d Cir. 2005); Miller v. Wolpoff & Abramson, LLP, 321 F.3d 292, 305 (2d Cir.), cert. denied, 540 U.S. 823 (2003) (noting that mass dunning letters sent on attorney letterhead often may not reflect “meaningful attorney involvement” or any exercise of “professional judgment”). See also Nielsen v. Dickerson, 307 F.3d 623, 634-636 (7th Cir. 2002); Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996). Thus, the Second Circuit has held that, absent an appropriate disclaimer, mass dunning letters sent on attorney or firm letterhead may violate the FDCPA’s ban on the use of false, deceptive or misleading statements in the collection of a debt under 15 U.S.C. § 1692e, because such letters falsely imply that they are “from” an attorney acting as such. See Cloman v. Jackson, 988 F.2d 1314, 1316, 1320-1321 (2d Cir. 1993) (affirming judgment that New York 11 attorney whose signature appeared on about a million debt-collection letters annually had violated the FDCPA); Miller, 321 F.3d at 305-306 (remanding for further proceedings as to law firms that sent out around 110,000 dunning letters per month). These federal cases support our argument that debt- collection activities do not constitute the practice of law or the provision of legal services merely because an attorney or law firm is involved. And the federal cases also undercut plaintiffs’ contention that attorneys or law firms will be left at sea in determining which activities constitute legal practice that falls outside the reach of the City’s law, and which constitute traditional debt- collection practices that are covered by the law. 3. Local Law 15 properly regulates traditional debt-collection practices. As we have shown, Local Law 15 seeks to regulate longstanding, traditional methods of debt collection, by licensing entities that engage in such practices and requiring that these activities be performed with appropriate disclosure to the consumer. Plaintiffs claim that an attorney cannot be required to provide adverse parties, during every conversation, with “a call-back number to a telephone answered by a natural person, the identity of the originating creditor of a given debt, and the amount of a given debt at the time of the conversation” (Resp. Br. at 22). But the listed requirements will apply 12 where the attorney engages in traditional non-legal debt-collection activities, and plaintiffs’ suggestion that the requirements are unduly onerous is hard to take seriously. It would be the Appellate Division’s prerogative to decide whether the omission of the information described above would violate Rules of Professional Conduct requiring attorneys to deal with adversaries honestly (see Resp. Br. at 26 (listing those rules)). Local Law 15 does not attempt to address that question. From the City’s standpoint in enacting and enforcing Local Law 15, DCA was confronted with thousands of dunning letters or phone calls made to debtors on behalf of a debt-buyer client who has bought a portfolio of thousands of defaulted debts noted on a computer tape or printout. Efforts to collect on these debts are not being made by an attorney who has exercised legal judgment as to each debt, even if the mass calls and letters are being generated at a debt-collection law firm’s offices. To be distinguished are the activities of an attorney handling a particular transaction for a client. Contrary to plaintiffs’ claim, Local Law 15 does not impose additional restrictions on an attorney’s ability to take legal action on behalf of a client (Resp. Br. at 23). The primary case cited by plaintiffs, Matter of Roth v. Turoff, 127 Misc.2d 998, 999-1000 (Sup. Ct., Bronx Co., 1985), aff’d, 124 A.D.2d 471 (1st Dep’t 13 1986), held that a local law requiring the licensing of taxicab brokers could not be applied to an attorney who represented clients associated with the taxicab industry (App. Br. at 28-29; Resp. Br. at 29-30). The Court reasoned that attorneys commonly “participate[d] in negotiations of all aspects of the prospective transaction including price, terms, security and a myriad of other issues between the parties,” and the regulation of attorneys’ conduct was reserved for the State Legislature and the judiciary under Judiciary Law § 90(2). Roth, 127 Misc. 2d at 999-1000. Roth actually works against preemption and in favor of the type of distinction made by Local Law 15. In its ruling on preemption, the Roth court specified that it was “not passing upon the applicability of the law as to persons who, while they may be attorneys are in no way functioning as such but are merely acting as brokers in the literal sense of that word.” Roth, 127 Misc. 2d at 1000. Local Law 15 presents the question that the court reserved in Roth: the local law carves out an exemption for attorneys performing functions that are reserved to licensed attorneys, such as litigation, but properly authorizes licensing and regulation of attorneys or law firms who are actually functioning as typical debt collectors. Significantly, although the new State Department of Financial Services (DFS) debt-collection regulations do not include a licensing requirement, they 14 also do not contain an exemption for all debt-collection activities engaged in by attorneys or law firms, but rather contain a limited exemption for specified conduct in the course of legal proceedings.1 Plaintiffs dismiss the relevance of the DFS regulations on the ground that they were adopted by a state agency, not by a local government. But state administrative agencies, just like local governments, may adopt only those rules that consistent with the statutes enacted by the State Legislature. See, e.g., Matter of Hamburg v. McBarnette, 83 N.Y.2d 726, 733 (1994). DFS’s debt-collection regulations thus further refute plaintiffs’ suggestion that all regulation of debt-collection activities engaged in by or under the aegis of attorneys or law firms intrudes upon the Judiciary’s province of regulating the practice of law. Additionally, plaintiffs still fail to establish preemption by Municipal Home Rule Law § 11(1)(e). That section prohibits a local legislative body from adopting a local law that supersedes a state statute, if the local law “[a]pplies to or affects the courts as required or provided by article six of the constitution.” Section 11(1)(e) is inapplicable because Local Law 15 does not supersede a 1See 23 N.Y.C.R.R. § 1.1(e)(7) (providing that “debt collector” does not include “any person with respect to (i) serving, filing, or conveying formal legal pleadings, discovery requests, judgments or other documents pursuant to the applicable rules of civil procedure; (ii) communicating in, or at the direction of, a court of law or in depositions or settlement conferences or other communications in connection with a pending legal action to collect a debt on behalf of a client; or (iii) collecting on or enforcing a money judgment.” 15 state statute. Moreover, article six of the State Constitution concerns only the jurisdiction of the courts and the organization of the court system—areas upon which Local Law 15 in no way intrudes. Plaintiffs rely on cases involving the prerequisites for bringing a lawsuit or the process of assigning counsel to indigent defendants in criminal actions (Resp. Br. at 21, 34-35). But Local Law 15 specifically exempts from regulation the activities of attorneys related to litigation. Thus, conflict preemption does not preclude the application of Local Law 15’s licensing and regulatory requirements to attorneys’ debt-collection activities. B. Field Preemption Also Does Not Apply. Plaintiff’s effort to establish field preemption is also unavailing. Their discussion of the requirements for admission to the bar is beside the point, as Local Law 15 does not regulate attorney admission (Resp. Br. at 37-38). Plaintiffs also list the categories of ethical behavior required by the Rules of Professional Conduct (id. at 38-39), but Local Law 15 also does not seek to regulate in the area of attorney discipline for violation of those rules. Whether or not an attorney violates the local law with regard to his or her debt- collection activities, and whether or not DCA takes enforcement action against an attorney for violations of the local law, the individual will remain an 16 attorney authorized to practice law in this state, unless or until the Appellate Division imposes discipline. The field preemption cases cited by plaintiffs address situations very different from that presented here, i.e., the invalidation of local attempts to regulate in an area covered by a comprehensive state regulatory scheme (Resp. Br. at 40-42). People v. Diack, 24 N.Y.3d 674 (2015) (holding that comprehensive State regulatory scheme, encompassing the housing of registered sex offenders, preempted a local law limiting where such an individual could reside); Matter of Lansdown Entertainment Corp. v. New York City Dep’t of Consumer Affairs, 74 N.Y.2d 761, 762-763 (1989), aff’g 141 A.D.2d 468 (1st Dep’t 1988) (because the Alcoholic Beverage Control Law included provisions concerning the operation of premises licensed to sell alcohol, including their hours of operation, local laws could not regulate those subjects); People v. De Jesus, 54 N.Y.2d 465, 469 (1981) (same as Lansdown). Similarly inapposite is Matter of Chwick v. Mulvey, 81 A.D.3d 161, 163, 170-172 (2d Dep’t 2009) (Resp. Br. at 42-43). The Chwick court held that Penal Law § 400.00 preempted a county ordinance banning the possession of “deceptively colored” firearms, where the State statute provided for a comprehensive and detailed licensing system, uniform throughout the State, which authorized license holders “to carry or possess a pistol or revolver.” 17 Here, by contrast, the local law regulates traditional debt-collection activities that are distinct from the practice of law, and thus does not intrude upon the field of regulation of legal practice that is comprehensively addressed by the State. Field preemption also fails because the local law, by promoting consumer protection and offering remedies that are unavailable in the Appellate Division’s disciplinary process, serves different purposes from the attorney disciplinary rules. In Aponte v. Raychuk, 160 A.D.2d 636, 636 (1st Dep’t 1990), the Appellate Division found “no inconsistency” between New York City’s Consumer Protection Law against deceptive advertisements and the “legislative delegation of authority to this court to regulate the conduct of attorneys” or “any implied legislative intent to preempt this area of regulations.” 160 A.D.2d at 636. Attorney advertising has been included in the Rules of Professional Conduct. See 22 NYCRR § 1200.0, Rules 1.0, 7.1. As the Supreme Court pointed out in Aponte, “although the State has a comprehensive scheme to regulate attorneys’ conduct, it does not appear to preempt the City’s attempt to protect its consumers,” and the City’s law supplemented the regulation of attorneys by “providing additional protection to the consuming public.” Aponte v. Raychuk, 140 Misc. 2d 864, 869 (Sup. Ct., NY Co., 1988), aff’d, 160 A.D.2d 636, 636 (1st Dep’t 1990). 18 Like the truth-in-advertising law upheld in Aponte, Local Law 15 specifies debt-collection practices that are required or forbidden, adding protections directed at consumers, which are not addressed in the Rules of Professional Conduct. Moreover, another ground for field preemption is unavailable here. Field preemption may occur if the local law would thwart the operation of state policy (Resp. Br. at 36), but the DFS regulations demonstrate that the regulation of attorneys’ non-litigation debt-collection practices is consistent with state policy. In sum, for all the reasons stated here and in our main brief, the application of Local Law 15 to the licensing and regulation of attorneys’ nonlegal debt-collection activities is not preempted by the Judiciary Law. Furthermore, because this local law does not regulate conduct that is solely reserved to licensed attorneys, plaintiffs have no basis for suggesting that upholding Local Law 15 would lead to non-uniform requirements for the practice of law in different areas of the state (Resp. Br. at 1, 24, 47-48). Thus, the first question certified by the Second Circuit should be answered in the negative. 19 POINT II CITY CHARTER § 2203(c) AUTHORIZES DCA’S LICENSING SCHEME Plaintiffs have not refuted our argument that the second certified question should be reformulated to ask only whether New York City Charter § 2203(c) precludes the DCA’s exercise of licensing and regulatory authority over attorneys only if preemption does exist under the Judiciary Law (App. Br. at 38-39). Plaintiffs’ only argument about the Charter provision is that licensing authority is reserved to another agency, i.e., the judiciary, which licenses attorneys (Resp. Br. at 49-51). Thus, in asking whether § 2203(c) offered an additional ground to preclude enforcement of Local Law 15, apart from preemption, the Second Circuit asked a question that the parties had not contemplated. Considering the question raised by the parties, this Court could decline to reach the second certified question, since it would be fully resolved by the preemption analysis covered in the first question. If the Court does reach the second certified question, it should hold that § 2203(c) does not preclude the application of Local Law 15, because licensing and regulation with regard to attorneys’ regular performance of debt-collection activities is not preempted by the Judiciary Law. Moreover, the City Charter provision addresses only the allocation of licensing authority among city agencies, not the allocation of 20 authority between city and state agencies, as the legislative history of that provision demonstrates (App. Br. at 41-42). POINT III THE VAGUENESS CLAIM IS NOT A PROPER CERTIFIED QUESTION, AND IN ANY EVENT, IS MERITLESS The issue of unconstitutional vagueness (Resp. Br. at 52-56) was not certified to this Court and is not proper for a certified question. Thus, it should be disregarded. Under this Court’s Rule 500.27(a), the Second Circuit may certify to this Court “determinative questions of New York law … for which no controlling precedent” of this Court exists. As shown in plaintiffs’ complaint in the federal action, they asserted their vagueness claim under the Due Process Clause of the federal constitution, not under the New York Constitution (A18-19, A31-32, A36-37, A41-42). The District Court rejected the vagueness claim, while agreeing with plaintiffs’ contention that the local law was preempted by state law (A625-627). In the Second Circuit, plaintiffs offered their vagueness argument under the United States Constitution as an additional ground for affirmance, and it was argued by both parties under federal law. Thus, vagueness was not a dispositive question of New York law available for 21 certification to this Court, and the Second Circuit did not purport to certify any such question. If plaintiffs had raised the vagueness issue under New York constitutional law, it still would not have been a question suitable for certification, because deciding the question would entail only the application of the settled standard under state law to this particular statute. The mere application of law to facts is not appropriate for a certified question. See Liriano v. Hobart Corp., 92 NY2d 232, 243 (1998) (declining to answer a certified question that required applying substantive law to the facts). Even if the issue of constitutional vagueness were properly before this Court, the claim lacks merit. The Second Circuit did express a “concern that Local Law 15 could be read as not providing a clear basis for differentiating” between conduct performed only by a licensed attorney and an attorney’s regular performance of traditional debt-collection activities (A645-646 n.2). We have demonstrated, however, the distinction between those types of activities. To be sure, questions may arise down the road as to whether the statute applies to particular facts, but most statutes present those kinds of questions, and a licensee could raise those issues before the DCA. The local law contains more than sufficient standards to defeat any claim that it is unconstitutionally vague. 22 The vagueness claim is undercut by substantial federal precedent rejecting similar arguments under analogous statutory language in the FDCPA. Thus, courts have upheld the definition of a “debt collector” under the FDCPA, 15 U.S.C. § 1692a(6), as one who “regularly collects or attempts to collect” a debt. See Heintz v. Jenkins, 514 U.S. 291, 299 (1995) (holding that the FDCPA “applies to attorneys who ‘regularly’ engage in consumer-debt- collection activity”). In Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 374 F.3d 56 (2d Cir. 2004), the Second Circuit developed a list of non-exclusive factors for determining whether a lawyer or law firm “regularly” engages in debt collection, involving “assessment of facts closely relating to ordinary concepts of regularity” in each case. 374 F.3d at 62. After Goldstein was decided, the Fifth Circuit cited it in Hester v. Graham, Bright & Smith, P.C., 289 Fed. Appx. 35 (5th Cir. 2008) (summary order). In Hester, the Court rejected the contention that the phrase “regularly collects” in the FDCPA’s definition of “debt collector” was void for vagueness. Applying the lower standard of review applicable to economic regulations, the Court held that the definition provided sufficient information for persons of ordinary intelligence to determine whether they would be considered debt collectors. Id. at 43. The Court explained that “[t]he term ‘regularly’ is generally understood to mean ‘at fixed and certain intervals, regular in point of time,’ or ‘[i]n 23 accordance with some consistent or periodical rule or practice.’” Hester, 289 Fed. Appx. at 43 (internal citation omitted). Thus, the Fifth Circuit concluded that “any person engaging in frequent debt collection activities should be aware that he may be considered a debt collector.” Hester, 289 Fed. Appx. at 43. The Court further noted that decisions interpreting the FDCPA “do not seem to have varied significantly in determining what parties are ‘regular’ debt collectors, so there has not been arbitrary or discriminatory enforcement of the statute.” Indeed, the Court emphasized that none of the hundreds of cases interpreting the FDCPA had “questioned the constitutional clarity” of the statutory definition of “debt collector.” Thus, the Hester Court upheld the determination that the definition is not unconstitutionally vague. And as we have shown above and in our opening brief, the federal case law under the FDCPA demonstrates the courts’ ability to distinguish between activities constituting the practice of law, and nonlegal debt-collection activities that are merely conducted by or under the aegis of an attorney. In this case as well, considering that economic regulations outside the area of criminal law are subjected to minimal judicial scrutiny, the definition of a “debt collection agency” in Local Law 15 is far from being so vague as to provide no standard at all. The definition in the local law can be interpreted by 24 assessing factors such as those enunciated in Goldstein, thereby eliminating any danger of standardless enforcement. As is apparent from plaintiffs’ own statements and their decision to apply for licenses as debt collection agencies, plaintiffs’ conduct is subject to Local Law 15’s requirements. Furthermore, plaintiffs are reading the challenged phrases in isolation; when read in the context of the entire definition of “debt collection agency” and the purposes of the local law as explained in the legislative history, there is no confusion. Indeed, plaintiff Lacy Katzen, LLP, acknowledged that it “regularly seeks to recover amounts due and owing on consumer debt portfolios held by passive debt investors, including consumer debts owed by New York City debtors” (A110 ¶ 2). Evidently realizing that Local Law 15 was not vague, both plaintiff firms initially applied for and received licenses as debt collection agencies (A520 529, A531-539). 25 CONCLUSION For all these reasons, the first certified question should be answered in the negative. The second certified question should be reformulated to ask whether, if the application of Local Law 15 to attorneys is preempted, application of the law would also violate City Charter § 2203(c), and the Court should decline to reach the question because Local Law 15 is not preempted, or should answer it in the negative. If the second question is not reformulated, then the question as originally presented should be answered in the negative. Dated: New York, NY April 23, 2015 RICHARD DEARING NICHOLAS R. CIAPPETTA JANET L. ZALEON of Counsel Respectfully submitted, ZACHARY W. CARTER Corporation Counsel of the City of New York Attorney for Appellants By: ________________________ JANET L. ZALEON Assistant Corporation Counsel 100 Church Street New York, NY 10007 Tel: (212) 356-0860 or 2500 Fax: (212) 356-2509 jzaleon@law.nyc.gov
