Nov. 2, 2007

Private Collection Agency Is Not Exempt From Federal Suit, Court Says

In Win for Consumers, Court Says Contract With Prosecutors’ Offices Does Not Give Sovereign Immunity to Private Business

WASHINGTON, D.C. – In a ruling that could have widespread implications for the accountability of private government contractors, the U.S. Court of Appeals for the Eleventh Circuit ruled Thursday that a private, for-profit debt collector that operates as a contractor for local prosecutors cannot claim sovereign immunity from lawsuits.

The company, American Corrective Counseling Services, Inc. (ACCS), is a so-called “check diversion” company, meaning that it uses its contract with local prosecutors to threaten consumers who have written bad checks with criminal prosecution or jail unless they pay the company exorbitant collection fees. The company then gives the prosecutors a share of the profits. In the suit, Rosario v. ACCS, Florida consumers claimed that ACCS’s threats of prosecution violated their rights under state and federal consumer protection laws. 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. Public Citizen represents the Florida consumer plaintiffs.

The appellate court on Thursday disagreed with the district court, concluding that giving the private company sovereign immunity would contradict precedent and create an extensive new immunity defense for private government contractors in all sectors. The court noted that attorneys in prosecutors’ offices do not review the cases before ACCS threatens consumers with prosecution, and that the prosecutors exercise virtually no control over ACCS. Sovereign immunity, the court said, “has never been held to apply simply because an independent contractor performs some government function.”

“This decision has broad implications for government-employed contractors of all stripes,” said Deepak Gupta, the Public Citizen attorney who argued the case. “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.”

The case will now go back to the district level so the court can decide the merits of the suit.

READ Thursday’s decision.

LEARN MORE about the case.

###