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Federal Court Rules for Accounts Receivable Management Industry in Case Supported by ACA’s Industry Advancement Program

The U.S. District Court for the District of Nebraska ruled in favor of the accounts receivable management industry in the April 2018 case of Robinson v. Accelerated Receivables Solutions (A.R.S.), Inc. and David W. Brostrom, 17-00056, 2018 WL ------- (D.Neb. April 19, 2018). The key issues in Robinson were:

Whether Nebraska law allows for the recovery of attorney fees or interest when suing to collect medical debt; and

Whether Nebraska law allows a collection agency to seek and recover an award of attorney’s fees when such fees are incurred by its in-house counsel.

The federal district court in Nebraska held that under Nebraska statute, creditors and their assignees are entitled to request attorney fees and interest on claims for “services rendered” and “material furnished,” which includes unpaid debt for medical services and supplies. 

The district court reasoned that regardless of how the collection agency characterized its claim in the state court, debt collection action as one for “services and supplies” rather than as “an action on account,” the medical “debts at issue were incurred for services rendered or materials furnished” and, therefore, fell within the scope of the Nebraska law allowing the collection agency to request an award of interest and attorney fees.

The district court also found that there is “no basis for disallowing attorney’s fees under [Nebraska statute] by reason of [the collection agency’s] employment of in-house counsel.” In doing so, the district court rejected the consumer’s argument that the collection agency was acting like “a law firm suing pro se, and attorney fees are not recoverable by pro se litigants, even those who are attorneys.” [Editor’s note: When a litigant proceeds without legal counsel, they are said to be proceeding “on one’s own behalf” or “pro se.”] 

The district court explained that while “pro se litigants cannot recover attorney’s fees,” there is no legal reason to define the collection agency as a “pro se law firm.”  In Robinson, the collection agency sought to collect payment from the consumer for unpaid medical bills. Through its in-house counsel, the agency filed a lawsuit in county court against the consumer seeking recovery of the debt, along with an award of pre-judgment interest and attorney’s fees allowed under Nebraska state law. 

The consumer responded by filing a class action Fair Debt Collection Practices Act and Nebraska Consumer Protection Act lawsuit against the agency. The consumer did so to try to end-around common practice in Nebraska in which collection agencies routinely request state law authorized pre-judgment interest and attorney’s fees.  Since the collection of pre-judgment interest is an important and integral part of ACA member businesses, ACA filed an amicus brief in the Robinson case on February 13, 2018. 

ACA submitted the “friend of the court” brief to support its member’s case, and to provide assistance and insight to the federal district court in Nebraska with respect to how the issues raised in Robinson have potential impact well beyond Nebraska. 

ACA asserted that if the district court were to embrace the consumer’s arguments in Robinson it would “subject [the collection agency] to liability for following a practice that many prior judicial precedents had authorized. To impose liability under these circumstances would violate [constitutional] due process. This Court should . . . apply the law in the same way that the Nebraska state courts have applied it for decades.”

ACA is encouraged that this important decision will positively impact its members’ ability to seek and collect payment of interest and attorney’s fees to which they are entitled. And had the consumer’s claims in Robinson been left unchallenged, the consumer’s counsel would be emboldened to continue developing a cottage industry of pursuing identical class actions lawsuits against various collection agencies and their in-house counsel throughout Nebraska on the same theories.

ACA International’s efforts to proactively support the accounts receivable management industry are part of the association’s Industry Advancement Program, and are made possible by funding through ACA’s Industry Advancement Fund. (https://www.acainternational.org/industryadvancement-program)

 

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