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From Banking and Finance Law Daily, December 14, 2015

Court to decide whether state’s 'special counsel' are debt collectors

By Richard A. Roth, J.D.

The Supreme Court has granted a request that it decide whether private attorneys designated by Ohio’s Attorney General as special counsel for debt collecting purposes are officers or employees of the state who are exempt from the Fair Debt Collection Practices Act. The attorneys, supported by the AG, are appealing a decision by the U.S. Court of Appeals for the Sixth Circuit that they were not acting as officers of the state when they sent dunning letters to two consumers (see Banking and Finance Law Daily, May 11, 2015). The petition was filed in Sheriff v. Gillie.

Under the FDCPA, an officer or employee of a state is not considered to be a debt collector as long as he is collecting debts “in the performance of his official duties,” and Ohio law authorizes the state’s AG to use special counsel to collect debts owed to the state. According to the Sixth Circuit opinion, these special counsel are independent contractors who are compensated on a contingent fee basis and who are required to meet the standards of the FDCPA. They are authorized to use the AG’s official letterhead when they are collecting some unpaid taxes, but not when they are collecting consumer debts such as those at issue in this case.

What is an “officer”? Special counsel are not state officers because their authority to act comes not from state law but rather from contracts with the state AG, the appellate court said.

Moreover, the private attorneys are authorized to perform “the duties of the office.” That phrase only made sense if it referred to all duties of some public office, the Sixth Circuit said. Special counsel are not authorized to perform all of the AG’s duties, and they have no association with any other public office.

State authority. The appellate court also observed that subjecting special counsel to the FDCPA would not be a challenge to the structure of the state government. The private attorneys were third parties.

The Sixth Circuit majority opinion made clear a degree of skepticism over the federalism argument, noting that the AG was not defending the private attorneys. According to the majority, “The Attorney General has legally distanced himself and the OAG [Office of the Attorney General] from special counsel so that the State of Ohio does not suffer the negative consequences of special counsel’s actions. Now, he wishes to see that special counsel get treated as if they are officers of the State of Ohio, directly under his supervision. The Attorney General cannot have it both ways . . .” The AG’s contract makes special counsel independent contractors, so they cannot be officers, the opinion said.

Material misrepresentation. The petition raises a second issue—whether the special counsels’ use of the AG’s letterhead on collection letters constituted a material misrepresentation in violation of the FDCPA. The appellate court opinion said that it was possible the letters would have been confusing to the least sophisticated consumers and that the issue should be decided by a jury.

The petition is No. 15-338.

Supreme Court docket. For details about this and other petitions and cases pending before the Supreme Court, please consult this list of selected banking and finance law cases awaiting action in the 2015 term. Issued opinions, granted petitions, pending petitions, and denied petitions are listed separately, along with a summary of the questions presented and the current status of each case.

Attorneys: Eric E. Murphy, State Solicitor, Office of the Attorney General, for Mark J. Sheriff, Sarah Sheriff, Wiles, Boyle, Burkholder & Bringardner Co., LPA, and Attorney General Michael DeWine. Michael L. close (Isaac Wiles Burkholder & Teeter) for Mark J. Sheriff, Sarah Sheriff, and Wiles, Boyle, Burkholder & Bringardner Co., LPA. James Edward Nobile (Nobile & Thompson Co., LPA) for Pamela Gillie and Hazel Meadows.

Companies: Wiles, Boyle, Burkholder & Bringardner Co., LPA

MainStory: TopStory DebtCollection SupremeCtNews

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