Argument analysis: Justices debate debt-collection practices of state-appointed special counsel?
on Mar 30, 2016 at 10:54 am
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.