Tuesday’s argument in Sheriff v. Gillie brought the Justices into the almost surreal world of the Fair Debt
Collection Practices Act (FDCPA), and it is pretty clear they did not find it
all that appealing. The case involves collections by “special counsel,” lawyers
the state of Ohio has hired to collect debts owed to it. The case is before the
Court because the special counsel sent letters trying to collect those debts,
using the letterhead of the Ohio attorney general rather than the letterhead of
their own law firms. The court of appeals concluded that the use of the
attorney general’s letterhead by the outside collection lawyers violated the
FDCPA, and the Court agreed to review the case.
The case presents two distinct questions, and so far as the inquiries of
the Justices indicate, the Justices were unimpressed with anything they heard.
The first issue in the case is the one that brought the case to the Court:
whether this type of “special counsel” is exempt from the FDCPA under a
provision that protects state “officers.” Because collection attorneys are more
cost effective at debt collection than in-house attorneys, many if not most of
the states use a process much like this one. Accordingly, a large group of
states as amici supported Ohio’s
position here.
But the Justices that spoke in the argument seemed wholly unpersuaded by
the argument of Ohio State Solicitor Eric Murphy, who appeared on behalf of the
special counsel. The basic problem is that as a matter of contract law the
state designates the special counsel as independent contractors, presumably to
avoid any possibility that the state might be liable for the torts of the
collectors. But once the state has designed an independent contracting relationship,
it is quite hard to bring the special counsel within any conventional
understanding of “officer.”
Pressing that point early on, Justice Sonia Sotomayor asked: “In what other
situation have we ever, in any setting, treated someone who is called an independent
contractor as an officer of a company, government agency, anything? This is a
novel sort of idea.” When Murphy tried to defend the characterization as
routine, Sotomayor scoffed, almost incredulous at the suggestion “[t]hat you as
the State say this is an independent contractor and now, by law, we’re going to
deem them an officer?”
That is not to say that the Justices were receptive to the argument that
Joshua Rosenkranz presented on behalf of the debtors. His time at the podium
devolved into a sustained onslaught by Justices who were stunned by the idea
that anything about the debt collectors’ use of letterhead is the least bit
misleading. Indeed, several of the Justices plainly regarded use of the state
attorney general’s letterhead as legitimate and much more likely to be
informative than misleading.
The discussion started early in Rosenkranz’s
presentation, when Justice Stephen Breyer offered a hypothetical in which
Filene’s Basement hires a collection service, which sends out letters on Filene’s
letterhead to collect the debts. When Rosenkranz asserted that the procedure
was surely a violation, Breyer cut in sharply: “Why? Why? Why? Filene’s
Basement hires a service, and they say, ‘Here are 500 letters, and they all say
“Filene’s Basement.” Now, we want you these letters out on letterhead so
they’ll know it’s us and you say you’re a special representative hired by us to
pay the debt.’ Now, what’s wrong with that?”
When Rosenkranz insisted that the procedure was an inappropriate use of
Filene’s name by the collector, Justice Elena Kagan retorted, in the same vein:
“If I use my own letterhead, somebody is likely to throw it out before they get
to the text because they’ve never seen this organization before. You know, the
letterhead is a good way of really making the point, I am acting for the
attorney general.”
The Justices were just as hostile to the efforts of Assistant to the
Solicitor General Sarah Harrington to defend the same position on behalf of the
Consumer Financial Protection Bureau (CFPB). Breyer (perhaps recalling a recent
episode of The Good Wife) emphasized the
assurance the letterhead provides that the debt collector in fact is related to
the creditor:
The [problem] that’s disturbing me is there is a pretty wellknown scam
where people get phone calls from a person who identifies himself as somehow
connected with the IRS, and you better send them $300 or $3,000 immediately to
a certain post office box or you might find yourself in jail. Okay? Now, that’s
a scam. And if you get a letter out of the blue by somebody purporting to be an
official person and there is nothing on the letterhead that suggests that you
are such, you might well think, if you’ve at least had the experience I’m
talking about, that this is a scam.
And so what . . . this letterhead does is it is some indication to the
recipient that it’s not a scam, and the rest of the letter makes clear
precisely what it is. So what I fail to see is anything at all misleading
indeed, to the contrary in respect to using a letterhead.
Indeed, Breyer went so far as to suggest that the view Harrington pressed
on behalf of the government was affirmatively harmful to consumers, because it
“might lead to more scams rather than fewer.”
It surely was a frustrating afternoon for observers from the CFPB and
consumer-advocacy groups. I think the community has assumed more or less as a
matter of course that use of creditor letterhead by outside debt collectors is
almost always a violation of the FDCPA. I suggested in the preview that external
letterhead use is not likely to be all that harmful to consumers. The Justices,
though, seemed to take the matter much farther, regarding the CFPB’s view
itself as more likely to harm consumers than the practices of the debt
collectors that they condemn.
It would be imprudent to read too much into the argument. Several of the
Justices had little to say, and further deliberations might soften some of the
harsh perspectives offered at the argument. But if the argument turns out to be
probative, we well might have a major reworking of FDCPA jurisprudence in the
making. There seems little reason to think the Court will accept the state’s
argument for a wholesale exemption, but the ramifications of a Supreme Court
reworking of the conception of “misleading” activity under the FDCPA would
reach much farther than anything the Court might say about state-authorized
collectors.
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