Appeals Court Hears Arguments in Check Collection Case

The U.S. Court of Appeals in Atlanta heard arguments Thursday in a case that could have far-reaching consequences for ARM companies working for government entities.

The case involves a company that works with states’ attorney offices around the country to collect on bad checks referred for prosecution by merchants.

Collection agency and check diversion firm American Corrective Counseling Services (ACCS) was the target of a lawsuit from a consumer in Florida that claimed breaches of the FDCPA when ACCS was collecting bad checks on behalf of the state’s attorneys office of Florida. The lawsuit was turned into a class action and a District Court in Florida ruled in November of last year that ACCS could not be sued because it had immunity under its arrangement with the state.

Non-profit consumer group Public Citizen then got involved and launched an appeal on behalf of the consumer. The case, Rosario v. American Corrective Counseling Services, Inc., heard oral arguments Thursday before a three-judge panel in the 11th U.S. Circuit Court of Appeals in Atlanta.

Deepak Gupta, an attorney with Public Citizen, argued that as a for-profit private company, ACCS does not enjoy the “sovereign immunity” granted to it by the lower court’s decision. The idea of sovereign immunity generally protects governments in the U.S. from civil lawsuits and criminal prosecution.

ACCS’ attorney David Hartsell, however, argued that since the company was acting on behalf of the state’s attorneys office, with explicit instructions and guidance from the government and with recovered funds flowing directly to the office, it does enjoy the sovereign immunity extended to government entities. Hartsell pointed out that ACCS does not act independently and conducts all of its business under the government entity’s name.

A spokesperson for the Clerk’s office in the 11th Court of Appeals told insideARM.com that since oral arguments had been heard only on Thursday, “it would be quite a while before an opinion was handed down.” Neither Public Citizen nor ACCS returned calls.