Are lawyers, appointed by the state attorney general to collect debts owed to the state, exempt from the provisions of the Fair Debt Collection Practices Act when collecting such debts; and if not, does using official letterhead of the Attorney General constitute a violation of the Act?
The Supreme Court will consider whether the Fair Debt Collection Practices Act (“FDCPA”) applies to lawyers, known as “special counsel,” appointed by a state Attorney General to collect debts owed to the state, during the performance of their duties. Various lawyers and their firms, appointed as special counsel by the Ohio Attorney General, argue that special counsel are properly defined as state “officers,” making special counsel exempt from the FDCPA. Pamela Gillie and Hazel Meadows, Ohio debtors, counter that special counsel are not “officers” but independent contractors subject to the FDCPA’s requirements. Gillie and Meadows also argue that use of Attorney General letterhead by special counsel to collect a debt is a “false, deceptive, or misleading representation” in violation of Section 1692e of the FDCPA. The Court’s decision could alter state sovereignty to collect debts and the power of state attorneys general.
Questions as Framed for the Court by the Parties
1. Are special counsel—lawyers appointed by the Attorney General to undertake his duty to collect debts owed to the State—state “officers” within the meaning of 15 U.S.C. § 1692a(6)(C)?
2. Is it materially misleading under 15 U.S.C. § 1692e for special counsel to use Attorney General letterhead to convey that they are collecting debts owed to the State on behalf of the Attorney General?
As Ohio’s chief law enforcement officer, the Attorney General (the “OAG”) is charged with collecting debts owed to state entities under Ohio law. The OAG “may appoint special counsel” to assist in collecting such debts. Special counsel have standardized contracts with the OAG which require that special counsel use official OAG letterhead for any debt collection action.
In early 2012, the OAG appointed Eric Jones and Mark Sheriff as special counsel to assist in debt collection. That spring, Pamela Gillie received a letter with the official OAG letterhead, containing the official state seal and the OAG’s name and title, from Eric Jones’ law office. The letter stated that it was from a debt collector and that it was sent in an attempt to collect a debt. Jones signed his name and included his title as “Outside Counsel for the Attorney General’s Office.” Later that summer, Sarah Sheriff sent a similar letter on behalf of Mark Sheriff’s law firm to Hazel Meadows, using the title “Special Counsel to the Attorney General for the State of Ohio.”
Gillie and Meadows (collectively, “the debtors”) filed a complaint against Mark Sheriff, Sarah Sheriff, Eric Jones, and Sheriff and Jones’ law firms (collectively, “OAG special counsel”) on March 5, 2013, charging that OAG special counsel’s use of the OAG letterhead in these debt collection letters was “false, deceptive, or misleading” under the FDCPA. , The district court explained in its decision that § 1692e only applied to defendants that are “debt collectors” under the statute and that the FDCPA excluded state “officers” from its definition of a debt collector. The court held that special counsel were officers under the statute and thus not subject to its provisions. Further, the court found that even if special counsel were “debt collectors,” OAG special counsel did not use the letterhead in a “false, deceptive, or misleading” manner. Thus, the court granted OAG special counsel’s motion for summary judgment.
The debtors appealed the district court decision to the United States Court of Appeals for the Sixth Circuit. The Sixth Circuit held that special counsel are not state officers. The court reasoned that special counsel are hired as independent contractors and that independent contractors are not state officers under the plain language of the Dictionary Act. The court also found that a reasonable jury could find OAG special counsel’s use of the letterhead confusing. Thus, the Sixth Circuit vacated the lower court’s grant of summary judgment for Sheriff and remanded the case with instructions for the district court to have the jury decide whether the letters sent by special counsel were confusing to the “least sophisticated consumer.” The court’s dissent argued that special counsel are state officers under the Gregory clear-statement rule, which the majority decision did not consider. OAG special counsel subsequently petitioned the Supreme Court for a writ of certiorari, which the Court granted on December 11, 2015.
This case hinges on two issues. First, OAG special counsel insist that they fall under the FDCPA’s definition of “officer,” and are thus exempted from the FDCPA’s regulation of debt collectors. The debtors disagree, arguing that the full context of the FDCPA shows that OAG special counsel are not included in the definition of “officer,” as it is used in the FDCPA. Second, OAG special counsel assert that, even if they are not considered “officers” under the FDCPA, they did not violate the FDCPA because their actions were not materially misleading. The debtors, however, contend that OAG special counsel’s actions were per se violations of the FDCPA.
THE DICTIONARY ACT, THE CLEAR-STATEMENT RULE, AND THE DEFINITION OF “OFFICER”
OAG special counsel argue that although the definition of “officer” changes according to the context of the statute in which it is found, here it is particularly appropriate to apply the Dictionary Act’s broadest meaning. Special counsel further explain that both the text and context of the FDCPA support a broad and expansive definition of “officer,” one that includes OAG special counsel. According to special counsel, in the absence of a more specific definition within the FDCPA, the Dictionary Act establishes that “all persons legally authorized to perform public duties” are officers. OAG special counsel also posit that the FDCPA was drafted to avoid interfering with state functions, and that a broad definition of “officer” falls in line with this goal. OAG special counsel invoke the “clear-statement rule,” a guideline for statutory construction that directs courts to avoid reading federal laws as abridging state interests unless it is clear from the language of the statute that Congress intended to do so. Finally, OAG special counsel assert that they are officers by virtue of duties authorized by Ohio state law and that interpreting the FDCPA otherwise would impermissibly violate the clear-statement rule and constitutional principles of federalism.
The debtors, in contrast, contend that Congress intended for the FDCPA to apply to all debt collectors hired by another entity, regardless of whether that entity is private or public. The debtors assert that the exemption within the FDCPA for public officers was intended for individuals holding an office (1) created by law and with duties prescribed by law, (2) permanent and continuing, and (3) likely requiring the taking of an oath. Thus, according to the debtors, OAG special counsel, whose positions are authorized by law but whose duties are prescribed by contract, and whose positions are temporary and do not require an oath of office, cannot be “officers” exempted from the FDCPA. The debtors further argue that the Dictionary Act defines an “officer” as “any person authorized by law to perform the duties of the office,” reinforcing the requirement that an officer be one who holds a position that is permanent, with duties prescribed by law. Additionally, the debtors insist that duties of debt collection are not an exercise of sovereign power, and therefore, OAG special counsel are not officers under the FDCPA by virtue of such duties alone. Finally, the debtors contend that the clear-statement rule does not apply because the FDCPA is not a federal encroachment on state sovereignty.
FDCPA BAN ON MATERIALLY MISLEADING LETTERS AND FALSE IMPRESSIONS
Whether or not OAG special counsel were “officers” informs whether they are subject to the regulations contained in the FDCPA. OAG special counsel maintain that, even if they are not “officers” within the meaning of the FDCPA, none of their actions violated any of the provisions in the statute. OAG special counsel insist that, in determining whether a communication is “misleading,” courts should use the benchmark of an “average consumer in [a] relevant audience.” Accordingly, with respect to persons owing consumer debts, OAG special counsel quote Judge Posner in Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 774 (7th Cir. 2007): “The standpoint is not that of the least intelligent consumer in this nation of 300 million people, but that of the average consumer in the lowest quartile (or some other substantial bottom fraction) of consumer competence.” OAG special counsel also maintain that their use of official OAG letterhead was not materially misleading because the letterhead did not induce the recipients into taking actions they otherwise would not have taken. Furthermore, OAG special counsel contend that the letters were sent on behalf of the OAG and signed by respective counsel as authorized representatives of the OAG and were therefore accurate and not in violation of the FDCPA. OAG special counsel also assert that the debtors were not misled, and that use of the OAG letterhead actually reduced any potential confusion over who to contact with concerns. Lastly, OAG special counsel indicate that the debtors’ other complaints that they were confused and intimidated are groundless and lack merit.
In response, the debtors assert that whether the use of OAG letterhead is misleading or not is irrelevant because use of the letterhead was a per se violation of the FDCPA. The debtors insist that the plain fact that OAG special counsel did not actually work at the “Office of the Ohio Attorney General” made use of OAG letterhead illegal under the FDCPA. The debtors explain that the letters created a false impression as to their source and that the letters were authorized but not issued by the OAG, making use of OAG letterhead expressly illegal. The debtors further contend that the FDCPA expressly prohibits use of any organization name other than the “true name” of the debt collector’s organization and allege that OAG special counsel’s use of OAG letterhead was expressly illegal for this reason also. The debtors go on to argue that, even if subject to a materiality standard, the letters were still misleading from the perspective of the “least sophisticated consumer” because it could affect a debtor’s decision-making. The debtors further assert that an “average consumer” perspective is improper and unnecessary because OAG special counsel failed to raise the issue in the lower court and because the letters in question would still be materially misleading under any perspective, given the plain text of the FDCPA. The debtors conclude by asserting that the difference between the two perspectives is arguably negligible in practice, but that, nonetheless, the proper perspective is that of the “least sophisticated consumer,” as established by a long history of cases and lack of evidence that Congress intended to break from this status quo when drafting the FDCPA.
The outcome of this case will affect the federal-state balance and the power afforded to state attorneys general.
AUTHORITY OF STATE ATTORNEYS GENERAL
In support of OAG special counsel, a group of states led by Michigan (“the State of Michigan”) argue that state attorneys general across the country are responsible for a high volume workload covering a wide variety of issues, which necessitates the ability to delegate their authority to outside counsel. The State of Michigan reasons that the suits special counsel bring on behalf of attorneys general would otherwise be impossible in many states that lack the finances, resources, and expertise to bring such suits. Thus, the State of Michigan argues that the authority of attorneys general to delegate state-officer status should not be infringed upon without a clear statement from the legislature opposing it.
The debtors counter that the authority of state attorneys general is an irrelevant issue because special counsel are not employed by the OAG. They contend that special counsel are independent contractors working on a retention agreement, since they must work out of their own offices, hire their own staff, and pay for operations at their own expense. The debtors argue that the OAG in this case has made this separation clear because OAG special counsel cannot even use the OAG logo on their business cards.
The debtors argue that the FDCPA’s application to special counsel does not alter the traditional federal-state balance. They contend that the FDCPA does not prohibit states from collecting debts, and does not affect state-employed debt collectors. Further, the debtors maintain, states may hire outside debt collectors, and the FDCPA only applies to their activities if they use unethical methods to collect consumer debts on goods and services.
In support of OAG special counsel, the State of Michigan counters that the clear-statement rule protects traditional areas of state authority from federal intrusion. The State of Michigan further contends that states have the sovereign right to govern themselves in a way that meets the needs of their citizens and that the debtors’ interpretation of the word “officer” encroaches on this right. Finally, the State of Michigan argues that states need revenue to govern effectively and that revenue is directly tied to effective debt collection, which in turn requires every single state to use private collection agencies for debt collection.
In this case, the Supreme Court will consider whether the FDCPA applies to special counsel appointed by the Attorney General to collect debts owed to the state. OAG special counsel argue that they are properly defined as state “officers,” making them exempt from the FDCPA, and that notwithstanding their exempt status, use of OAG letterhead is not a violation of the FDCPA. Gillie and Meadows counter that special counsel are not “officers,” but independent contractors subject to the FDCPA’s requirements. Gillie and Meadows maintain that use of OAG letterhead by special counsel to collect a debt is a “false, deceptive, or misleading representation” in violation of Section 1692e of the FDCPA. The Court’s decision could affect the balance between federal and state sovereignty and the power of state Attorneys General to collect debts owed to their respective states.
- Richard Roth, Court to Decide Whether State’s ‘Special Counsel’ are Debt Collectors, Banking and Finance Law Daily (Dec. 14, 2015).