A District Court judge in Utah has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act class action case, ruling that it did not need a license to collect in that state in order to file collection lawsuits against the two named plaintiffs. The judge ruled that the Petition Clause of the First Amendment, which affords individuals the right to petition the government for redress of grievances, preempted the defendant’s need for a license to collect in the state.
A copy of the ruling in the case of Holmes v. Crown Asset Management can be accessed by clicking here.
The plaintiffs were sued by the defendant to recover unpaid credit card debts. In both cases the defendant was successful in winning its collection suits in state court. The plaintiffs filed suit against the defendant, ruling it violated the FDCPA and Utah Collection Agency Act (UCAA) because it did not have a license to collect in Utah, as required under the UCAA.
In issuing his ruling, Judge Howard C. Neilson, Jr. of the District Court for the District of Utah went against a precedent from the Sixth Circuit Court of Appeals that had previously ruled that the Petition Clause does not apply to FDCPA claims. Judge Neilson looked at other cases from the Supreme Court and the Tenth Circuit Court of Appeals to bolster his decision that FDCPA claims are covered under the Petition Clause. ” … the Supreme Court’s cases strongly imply – and the Tenth Circuit has squarely held – that this immunity applies as a matter of constitutional right,” Judge Neilson wrote. “Second, as the court has previously recognized, the Supreme Court cases on which these other courts rely did not address Petition Clause immunity and nothing in their analysis suggests that the FDCPA eliminates this immunity.”
The only circumstance that would invalidate the Petition Clause in this case would be if the underlying collection suits were sham petitions, Judge Neilson wrote. But, as mentioned, the defendant won its underlying collection lawsuits. By definition, Judge Neilson ruled, those suits can not be considered to be sham petitions.
Furthermore, Judge Neilson wrote that the UCAA does not apply to entities that are collecting debts on behalf of itself, only those that are collecting debts on behalf of others. “The court concludes that even if Defendant believed it was a collection agency, bureau, or office, it could have reasonably believed that it was not subject to the UCAA registration requirement because its business was based in Georgia, not Utah,” Judge Neilson ruled.
