Sykes v. Mel S. Harris: judgments against people who were never served
A debt buyer, its law firm and its process server filed tens of thousands of collection suits in New York City courts, and most of the people sued never appeared. A federal class action said many of them were never served at all. In November 2015 the defendants agreed to a $59 million settlement and to help vacate the default judgments.
A public record, not a client of this firm. Everything on this page comes from the court decision, the reporting and the class counsel statement cited at the end. Usher Law Group did not represent anyone in this matter, we publish no results of our own, and nothing here predicts the outcome of any other case.
Most people who are sued on an old credit card in New York City never go to court. Some decide not to. Some do not understand the papers. And some, the plaintiffs in Sykes v. Mel S. Harris & Associates said, never receive the papers at all.
The case was filed in federal court in Manhattan in 2009 by a group of New Yorkers who had been sued by debt buyers. The defendants were three businesses that worked together. A group of debt-buying companies owned by Leucadia National Corporation bought old consumer debts. The law firm Mel S. Harris and Associates sued on those debts in New York City Civil Court. A process server, Samserv, was supposed to hand the summons and complaint to each person being sued.
The scale is in the appellate decision. Between 2006 and 2009, the Leucadia entities filed 124,838 cases, and Mel Harris represented them in 99.63 percent of those cases. Between 2007 and 2010 they obtained default judgments in 49,114 cases. The Second Circuit noted that the "vast majority" of the cases went forward without the person who was sued ever appearing.
A default judgment is what a court enters when the defendant does not answer. It can be used to freeze a bank account and take part of a paycheck. People found out about these judgments the way people usually do: when the money was already gone.
What the plaintiffs said happened
The complaint described a scheme with two moving parts, and the court of appeals agreed that both were needed for it to work.
- Sewer service. Samserv, the plaintiffs said, did not actually serve many of the people named in the suits, but filed sworn affidavits of service saying it had. The court found "substantial support" for that claim, including hundreds of instances of process servers apparently serving papers at more than one location at the same time.
- Affidavits of merit no one could have checked. To get a default judgment, the creditor must show the court proof of the debt. A Mel Harris employee used software to generate form affidavits claiming personal knowledge of each debt. The district court found he would have had to issue an average of twenty affidavits of merit per hour, one every three minutes.
- Default judgments at volume. With no one showing up to contest the case and an affidavit on file, the court entered judgment. Collection followed.
The defendants argued the claims were too individual to try as a class, because whether each person was served is a separate question. The Second Circuit disagreed. On February 10, 2015, it affirmed the certification of two classes: one of everyone sued by Mel Harris for the Leucadia entities, seeking an order to stop the practice, and one of everyone against whom a default judgment was entered, seeking money. The court said the scheme, with its several parts, could be treated as one course of conduct.
What the law said
The plaintiffs sued under four laws at once, and each one reached a different part of the scheme.
The Fair Debt Collection Practices Act covers debt buyers who collect as a principal purpose and lawyers who regularly collect consumer debts, including through lawsuits (15 U.S.C. § 1692a(6); Heintz v. Jenkins, 514 U.S. 291 (1995)). It forbids false representations in collecting a debt (§ 1692e) and unfair means (§ 1692f). A false affidavit filed to win a collection case is a false representation made to collect a debt.
New York's General Business Law § 349 prohibits deceptive acts in business and gives a private right to sue. The plaintiffs also sued under Judiciary Law § 487, which covers deceit by attorneys, and under the federal racketeering statute, RICO, which reaches a pattern of fraud carried out through an enterprise.
The class device mattered as much as the statutes. One person with one bad judgment has an individual FDCPA claim capped at $1,000 in statutory damages plus actual damages. A class of tens of thousands, with a claim that the whole machine was rigged, is a different case.
What it cost
Sykes v. Mel S. Harris & Associates
The law firm agreed to pay about $8 million, Samserv $517,500, and Leucadia $46 million plus disgorgement of more than $4.5 million it had collected in 2015. The settlement provided for transferring and vacating about 192,000 default judgments.
Source: ABA Journal. A public record of someone else's case, not a result of this firm and not a prediction.
The ABA Journal reported that the defendants had collected about $113 million on roughly $800 million in judgments. New Economy Project, one of the organizations that represented the class, says about 353,000 New Yorkers had debts eliminated. That figure is class counsel's own statement.
What it means for you now
New York has changed its rules since Sykes. The Consumer Credit Fairness Act, signed in November 2021, now requires a collector's complaint to identify the original creditor, the last payment and an itemized balance, and requires sworn proof of the chain of ownership before a default judgment on a purchased debt (CPLR 3016(j), 3215(j)). It also shortened the time to sue on consumer credit to three years (CPLR 214-i). Our post on being sued on an old credit card in New York walks through what those rules mean.
Three things from this case still apply to anyone reading it.
- If you have been sued, do not ignore the papers. The time to answer is short, and a default judgment is far harder to undo than a case you answered. Read sued by a debt collector first.
- If you learn of a judgment you never knew about, the service affidavit in the court file is the first document to get. A motion to vacate a judgment is filed in the court that entered it.
- Watch the one-year clock. An FDCPA claim must be filed within one year of the violation, and there is no general discovery rule (Rotkiske v. Klemm, 589 U.S. 8 (2019)). The Rotkiske story shows how that works when the violation was a lawsuit you never saw.
The FDCPA requires a collector found liable to pay the consumer's reasonable attorney's fees and costs, and so does GBL 349. Our page on who pays your lawyer explains how that works.
The pages this story points to
Sued by a debt collector
The answer deadline, the defenses, and the claims you can raise back.
Read →New York law
GBL 349, CPLR 214-i and the city and state collection rules.
Read →Public verdicts and settlements
Other people's cases, with the amount, the payer and the source.
Read →Sources. Sykes v. Mel S. Harris & Assocs. LLC, No. 13-2742 (2d Cir. Feb. 10, 2015), opinion text (FindLaw); Martha Neil, "$59M settlement in 'sewer service' debt-collection suit," ABA Journal (Nov. 16, 2015); New Economy Project, Sykes v. Mel S. Harris and Associates (class counsel); N.Y. Senate Bill S153 (2021), Consumer Credit Fairness Act.
Common questions
What is sewer service?
It is the practice of not delivering court papers to the person being sued while filing a sworn statement that says they were delivered. The name comes from the idea that the papers were thrown away. In Sykes, the Second Circuit described evidence of process servers claiming to serve people at more than one place at the same time.
Did the people in Sykes get their money back?
The settlement announced in November 2015 created a fund of about $59 million paid by the law firm, the process server and the debt buyer, and it provided for vacating the default judgments. How much each class member received depended on the claims process, which this page does not report.
I found a judgment against me for a case I never knew about. What can I do?
A default judgment entered without proper service can be challenged by a motion to vacate in the court that entered it. That is a separate step from any claim you may have against the collector under the FDCPA or GBL 349, and the one-year FDCPA clock usually runs from the collector's conduct, not from the day you found out. Talk to a lawyer quickly.
Tell us what they did.
One conversation with an attorney, in your language. We tell you which laws the collector or the credit bureau broke, which deadline runs first, and what to save this week. If it is not a case we can take, we say so and tell you where to go.
(718) 484-7510The FDCPA and the FCRA require a company found liable to pay the consumer’s reasonable attorney’s fees and costs. Our fee arrangement is confirmed in a written retainer before we begin. English, Russian and Spanish in-house; an interpreter for any other language.