By Marcia Coyle
Debt collectors who use unfair or deceptive tactics during collection litigation cannot rely on the First Amendment's petition clause as a defense, ruled the Alaska Supreme Court recently in the first appellate decision on the issue.
In an increasing number of consumer cases, debt collection agencies have been arguing that their litigation tactics are immunized from suits under state and federal unfair trade practices laws because those suits burden their constitutional right to petition the courts, according to Deepak Gupta of Public Citizen Litigation Group, appellate counsel to the debtor in the Alaskan case.
“The Alaska Supreme Court’s ruling sends the message that debt collection companies can’t get away with abusive tactics simply by hiring lawyers,” said Gupta. “The court rejected a dangerous new immunity defense that would have created a gaping hole in consumer protection law.”
The Alaskan case—Pepper v. Routh Crabtree—stemmed from an attempt by Checkrite of Anchorage, a collection agency, to collect $518.80 in dishonored checks allegedly written by Robin Pepper, a mentally disabled woman. Checkrite hired the Routh Crabtree law firm in Anchorage to recover the amount owed, and the firm subsequently sued Pepper.
Pepper filed a separate suit alleging the collection agency and law firm had violated the state Unfair Trade Practices Act (UTPA) by not giving her proper notice of the lawsuit. She charged that they sent papers to a nonexistent address, misrepresented to the court that she was competent, and tried to get a default judgment against her without notifying her counsel, Alaska Legal Services.
Routh Crabtree argued that Pepper’s claims impermissibly sought to impose civil liability on the law firm and the collection agency for exercising their constitutional right to petition the government. Pepper contended that the UTPA covered unfair and deceptive debt-collection practices that occur in the context of litigation and that neither the so-called Noerr-Pennington doctrine, nor the petition clause on which that doctrine was based, immunized these practices.
The Alaska Supreme Court on Nov. 20 agreed with Pepper after finding that subjecting Routh Crabtree and its client to potential liability under the UTPA would not chill their exercise of the right to petition.
“As Pepper contends, `no debt collector has a legitimate interest in pursuing collection litigation without notifying debtors, or in seeking to default incompetent debtors without notice to their lawyers or guardian,’” said the court.
Richard Crabtree of Routh Crabtree was not available for comment.
Public Citizen’s Gupta said the right to petition defense has been raised in a number of federal district courts, but the Alaska Supreme Court was the first appellate court to address it.
The state high court, he added, applied the same constitutional analysis that federal courts will apply. “We’re encouraged and think it will be persuasive to federal courts.”