United States Court of Appeals,
Fifth Circuit.
No. 95-31237.
Dixie Vidrine POIRIER, Plaintiff-Appellant,
v.
ALCO COLLECTIONS, INC. and James Allen, Defendants-Appellees.
March 17, 1997.
Appeal from the United States District Court for the Middle
District of Louisiana.
Before HIGGINBOTHAM, DUHÉ and BENAVIDES, Circuit Judges.
DUHÉ, Circuit Judge:
Dixie Vidrine Poirier sued Alco Collections, Inc., and Alco's
president, James Allen, for violations of the Fair Debt Collection
Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. The district
court granted summary judgment in favor of Alco and Allen, and
Poirier appealed. Because of an intervening Louisiana Court of
Appeals decision, we reverse the district court and remand.
BACKGROUND
Poirier allegedly owed Savoy Plaza Apartments $1655.00 for
three months' unpaid rent and late fees on her lease. Savoy Plaza
assigned Poirier's debt to Alco Collections, Inc., a collection
agency. Alco promised to make a good faith effort to collect the
debt, and agreed to pay Savoy Plaza fifty percent of any sum it
collected from Poirier.
Alco mailed a demand to Poirier demanding payment for three
months' rent and late fees, plus an additional $68 for the court
costs of an eviction proceeding brought earlier by Savoy Plaza.
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Poirier did not pay and Alco, through its president, James Allen,
filed suit against Poirier in Baton Rouge City Court. Neither
Allen nor Alco is an attorney at law. The complaint against
Poirier claimed $1655.00, and did not include the additional $68 in
court costs Alco had initially demanded. Allen later claimed it
inadvertently omitted the $68 fee from its complaint.
Poirier answered Alco's petition, denying she was indebted to
Savoy Plaza and contending that Savoy Plaza's assignment to Alco
was invalid. She then filed a peremptory exception of no cause of
action, arguing that Savoy Plaza's assignment was void as it
purported to authorize Alco, a lay entity, to take legal action
against her. The city court denied the motion, and Poirier applied
for supervisory writs with the Louisiana Court of Appeals, alleging
the city court erred in denying the exception.
While the state court case proceeded, Poirier filed this suit
in federal district court against Alco and Allen, alleging
violations of the FDCPA. She claimed Alco and Allen had engaged in
the unauthorized practice of law by filing suit against her. She
also contended Alco and Allen misrepresented the amount of her
alleged debt when they demanded one sum in the demand letter and
another in the complaint.
Poirier moved for partial summary judgment against both
defendants, and Alco and Allen responded with a cross motion for
summary judgment. The district court held in favor of Alco and
Allen. It found the assignment of a debt to a collection agency,
and the collection agency's subsequent lawsuit on that debt, was
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not against the law or public policy of Louisiana. The court then
found Poirier failed to establish Alco and Allen made a false
representation. It stated that even if the defendants
misrepresented the amount of the debt by inadvertently omitting the
$68 eviction fee from the petition, 15 U.S.C. § 1692k(c) provides
debt collectors with a "bona fide error" defense.
Poirier now appeals the judgement of the district court.
DISCUSSION
Poirier first contends the district court erred in holding the
assignment of a debt to a collection agency on a contingency fee
basis is not against public policy and therefore void. Next, she
claims the district court erred in finding the Collection Agency
Regulation Act ("CARA"), LSA-R.S. 9:3576.1 et seq., supported its
holding that the assignment of debts to collection agencies on a
contingency fee basis is not against public policy. Her third
claim is that the district court incorrectly found the omission of
the $68 eviction fee from the state court petition was not a
misrepresentation under the FDCPA. Finally, she argues this error
was not protected by the "bona fide error" defense of 15 U.S.C. §
1692k(c).
I.
Congress passed the FDCPA to eliminate abusive debt collection
practices by debt collectors. 15 U.S.C. § 1692. As such, the
FDCPA enumerates several practices considered contrary to that
goal, and forbids debt collectors from taking such action. Poirier
alleges that Alco and Allen violated both 15 U.S.C. § 1692e(5) and
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15 U.S.C. § 1692e(2)(A).
Congress provided in § 1692e that:
A debt collector may not use any false, deceptive, or
misleading representation or means in connection with the
collection of any debt. Without limiting the general
application of the foregoing, the following conduct is a
violation of this section:
* * * * * *
(5) The threat to take any action that cannot legally be
taken....
15 U.S.C. § 1692e. Any debt collector who fails to comply with a
provision of the FDCPA, with respect to any person, is liable to
such person for civil damages. 15 U.S.C. § 1692k(a).
To violate § 1692e(5), Alco and Allen must have threatened to
take action which they were in fact prohibited by law from taking.
Poirier claims the assignment from Savoy Plaza to Alco, allowing
Alco a 50% contingency fee, had an unlawful purpose under Louisiana
law and was null and void. She argues that non-lawyer debt
collectors who attempt to collect for clients in this manner are
engaged in the unauthorized practice of law. Since Louisiana law
prohibits non-lawyers from practicing law, LSA-R.S. 37:213; Duncan
v. Gordon, 476 So.2d 896, 897 (La.App. 2nd Cir.1985), Alco and
Allen threatened to take, and actually took, action they were not
legally permitted to take.
When it granted summary judgment for Alco and Allen, the
district court focused on the validity of the assignment itself
under CARA. The court found CARA created a presumption that a claim
assigned to a collection agency is conclusively presumed valid as
long as a copy of the assignment is filed with the petition when
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the collector files suit, and the debtor does not object. The
court reasoned that the fact that a presumption of validity of an
assignment can arise, even if a non-lawyer collection agency is the
party to file suit, showed that non-lawyer collection agencies
filing suit to collect on debts are not against the law or public
policy of Louisiana. Alco's suit therefore did not constitute the
unauthorized practice of law. The district court then declined to
address whether CARA infringes upon the judicial function of
regulating the practice of law.
II.
While Poirier's federal action has proceeded through the
courts, her state court appeal in the original action has
continued.1 The Louisiana Court of Appeals for the First Circuit
granted Poirier's application for writ of certiorari, and issued a
thorough opinion which now guides our decision. Alco Collections,
Inc. v. Poirier, 680 So.2d 735 (La.App. 1 Cir.1996), writ denied,
--- So.2d ----, No. 96-CC-2628 (La., Dec. 13, 1996).
In its opinion, issued after briefs were filed and argument
heard in this federal action, the Court of Appeals held that the
act of assignment from Savoy Plaza to Alco did not convey an
ownership interest in Poirier's debt. The court first stated
Savoy's Act of Assignment2 did not state any monetary consideration
1
We learned this only during oral argument. We then suspended
this proceeding pending final decision in the state courts.
2
Savoy Plaza and Alco had effected their "transfer" in an
agreement titled merely "Assignment." That document provided:
SAVOY PLAZA APARTMENTS, (hereinafter "Client"), hereby
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for the transfer, making the payment of consideration contingent
upon the success of Alco's collection efforts, and therefore failed
to provide for a price. Poirier, 680 So.2d at 741. As well, while
some of the language in the agreement purported to transfer the
debt, the plain wording of the entire agreement did not manifest an
intent to transfer ownership of the debt to Alco. Id.
assigns unto Alco Collections, Inc. (hereinafter "Alco"),
the following debt, presently owed to Client:
DIXIE V. POIRIER # 264
As consideration for the above assignment, ALCO hereby
agrees to make a good faith effort to collect this debt,
including the filing of suit in the appropriate court of
law in order to enforce that debt, and remit to client
50.00% of all sums collected through suit or otherwise on
said debt. ALCO further agrees to adhere to the Far Debt
Collection Practices Act and the laws of the State of
Louisiana, and hold client harmless from any and all
liabilities arising out of or in connection with ALCO's
breach of the laws governing collection practices or
terms of this agreement, and will indemnify client of any
loss resulting from the breach.
Client hereby agrees to notify ALCO immediately if any
payments on the above account are received in Client's
office, and to the extent necessary, adhere to the Fair
Debt Collection Practices Act and the laws of the State
of Louisiana, and hold ALCO harmless from any and all
liabilities arising out of or in connection with Client's
breach of the laws governing collection practices or
terms of this agreement and will indemnify ALCO for any
loss resulting from the breach.
Additionally, the parties agree that ALCO shall pay all
costs of collecting the above account, including but not
limited to, filing fees, sheriff's fees, and the cost of
certified mailings.
In addition to transferring ownership of the above debt
to ALCO, it is also the intent of Client hereby to
transfer to ALCO all security rights which accompany that
debt, including, but not limited to any lessor's
privilege to which Client is entitled.
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The Louisiana court then proceeded to determine whether, since
the assignment did not transfer an ownership interest in the
Poirier debt to Alco, its filing suit to enforce that debt
constituted the unauthorized practice of law. LSA-R.S. 37:213(1)
makes it unlawful for an unlicensed person to practice law.
LSAR.S. 37:212(A) defines the "practice of law" as appearing in a
representative capacity as an advocate in any court in the state,
or advising, helping or acting for another in legal matters for
compensation. LSA-R.S. 37:212 does not prevent persons from acting
on behalf of themselves in legal matters.
"Any contract made by a non-lawyer to render services in
violation of LSA-R.S. 37:213 is for an unlawful cause." Poirier,
680 So.2d at 743. Alco was not licensed to practice law in
Louisiana. Alco's actions in filing suit to collect the debt
constituted the practice of law. Since the assignment between
Savoy Plaza and Alco did not transfer an ownership interest in
Poirier's debt, Alco was not authorized under Louisiana law to
collect this debt. Its actions therefore constituted the unlawful
practice of law. Id. at 744.3
III.
As the Louisiana courts have found Alco's actions in filing
suit against Poirier constituted the unauthorized practice of law,
3
The Louisiana Court of Appeals specifically declined to reach
an issue which Poirier also raises in her appeal to this Court:
whether the Collection Agency Regulation Act, LSA-R.S. 9:3576.1 et
seq., which purports to authorize a non-lawyer to institute a
lawsuit on behalf of a client to collect a debt, infringes upon the
judicial function. Poirier, 680 So.2d at 745.
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there is no longer any dispute that Alco violated § 1692e(5) of the
FDCPA when it took "action that cannot legally be taken" against
Poirier. As such, Poirier has a valid FDCPA action. Alco and
Allen are liable to Poirier for civil damages under § 1692k(a).
Since we find Alco and Allen violated the FDCPA when they
engaged in the unauthorized practice of law, we resolve this appeal
on those grounds and decline to address the other issues raised by
Poirier.
Judgment is REVERSED, and the case is REMANDED for entry of
partial summary judgment for Poirier that Alco and Allen are liable
under the FDCPA, and for determination of damages.
REVERSED AND REMANDED.
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