High Court OKs State Debt-Collection Tactics

(CN) — Private lawyers appointed by a state attorney general to collect debts can use the attorney general's official letterhead, the Supreme Court ruled Monday.

The underlying case centered on whether special counsel - those appointed by attorney generals to collect a debt owed to the state - are state "officers" under federal law.

Pamela Gillie and Hazel Meadows sued two law firms - the Law Office of Eric Jones and Wiles, Boyle, Burkholder & Bringarder - in 2013, claiming they violated the Fair Debt Collection Practices Act, or FDCPA, by using misleading ways to collect debt that Gillie and Meadows owed to the state of Ohio.

The Ohio attorney general intervened in the case, saying that the law firms' use of attorney general letterhead was authorized and was not a misrepresentation.

A Southern Ohio District Court ruled in favor of the law firms, finding that special counsel are officers of the state and are specifically exempt from FDCPA rules. It also held that, even if special counsel were considered debt collectors, use of state attorney general letterhead was not "false, deceptive or misleading."

However, a divided Sixth Circuit vacated the lower court's decision last year and remanded the case.

Judge Eric Clay found that a jury could consider use of the state letterhead to be a violation of the FDCPA.

"Whether or not the use of the letterhead by special counsel was compelled by the [Ohio Attorney General], a jury could reasonably find that special counsel's use of the letterhead is confusing," Clay wrote for the majority. "We recognize the importance of a state's ability to collect on its own accounts, but once it has assigned debts to an independent, third-party debt collector, the federal rules apply."

Judge Jeffrey Sutton dissented, finding the law firms' use of state letterhead allowable.

"The stationary, which the attorney general requires each special counsel to use, accurately describes the relevant legal realities - that the law firm acts as an agent of the attorney general and stands in the shoes of the attorney general in collecting money owed to the state," Sutton wrote. (Emphasis in original.)

Last July, the Sixth Circuit denied petitions for an en banc hearing.

The U.S. Supreme Court granted the law firms' petition for review in December. The high court heard arguments from both sides in March.

On Monday, a unanimous Supreme Court reversed the Sixth Circuit and ruled that special counsel's use of a state attorney general's letterhead does not violate the FDCPA.

"For purposes of this decision, we assume, arguendo, that special counsel are not 'officers' within the meaning of the Act and, therefore, rank simply as 'debt collectors' within the FDCPA's compass," Justice Ruth Bader Ginsburg wrote for the high court. "We conclude, nevertheless, that petitioners complied with the Act, as their use of the at­torney general's letterhead accurately conveys that special counsel act on behalf of the attorney general."

Ginsburg noted that the letterhead in question identifies the principal as the Ohio attorney general's office and the private lawyer as an agent for the office.

"Special counsel create no false impression in doing just what they have been instructed to do. Instead, their use of the attorney general's letterhead conveys on whose authority special counsel writes to the debtor," the ruling states. "As a whole, the communication alerts the debtor to both the basis for the payment obligation and the official responsi­ble for enforcement of debts owed to the State, while the signature block conveys who the attorney general has engaged to collect the debt."

The official letterhead also "encour­ages consumers to use official channels to ensure the legitimacy of the letters, assuaging the very concern the Sixth Circuit identified," Ginsburg wrote.

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