Court Says No Immunity for Government-Outsourced Collectors

A collection agency/check diversion firm Thursday was dealt a blow by an Appeals Court in Atlanta that ruled the company could not hide behind its government client and must defend itself in a case brought by debtors.

American Corrective Counseling Services, Inc. (ACCS) was sued last year by a group of Florida consumers over fees it collected related to its work with local prosecutors collecting bad checks. In November 2006, a federal district court ruled that ACCS had the same sovereign immunity as does the state, because ACCS is a state contractor, thereby effectively dismissing the civil case against ACCS.

Advocacy group Public Citizen then appealed the case to the U.S. Court of Appeals for the Eleventh Circuit in Atlanta last month (“Appeals Court Hears Arguments in Check Collection Case,” 10/15). In its ruling, the appeals court said that ACCS was not shielded from civil cases because of its relationship with a public entity. Sovereign immunity, the court said, “has never been held to apply simply because an independent contractor performs some government function.

The case now returns to the district level.

In a press release on the decision, Public Citizen attorney Deepak Gupta became the second person in less than a month to compare government outsourcing of the collection function to the military’s use of Blackwater security personnel in Iraq. “This decision has broad implications for government-employed contractors of all stripes. From debt collectors and private prisons to Blackwater in Iraq, the court made clear that private contractors will remain responsible for their actions and can’t hide behind the cloak of sovereign immunity,” he said.

Last month, a U.S. Representative compared the IRS private debt collection program to Blackwater in Iraq (“House Votes to Kill IRS Collection Program; Veto Threatened,” 10/11).