In Pickering v. Coast Center for Orthopedic Arthroscopic Surgery, 2009 WL 932629 (2009), the California Court of Appeal for the Fourth District, in an unpublished decision, reviewed a jury’s finding that an orthopedic doctor’s group was liable under the FDCPA notwithstanding its status as a creditor.  The Court of Appeal affirmed the jury’s finding that the doctor’s group’s retention of an outside, third party debt collector rendered the doctor’s group subject to the FDCPA because, purportedly, the debt collector hired by the doctor’s group was a mere shill for the doctor’s group. 


Evidence at trial showed that Coast was actively involved in, and exercised significant control over, Lake Valley‘s efforts to collect $35,090.72 from Pickering. For example, Coast’s own witnesses testified that Lake Valley did not file the action against Pickering until after obtaining Coast’s authorization and that, during the short pendency of the action, Coast communicated with Lake Valley’s attorneys on several occasions, as well as with Pickering and Aetna. Also, to facilitate the collection efforts, Coast gave Lake Valley a copy of the Contract, despite applicable confidentiality provisions precluding such disclosure. Further, the contract between Coast and Lake Valley permitted Lake Valley to act as Coast’s agent in carrying out “normal collection procedure[s].” During the litigation, Lake Valley was in frequent contact with Coast and upon Lake Valley‘s discovery that Pickering had not succeeded in his underlying action arising out of the accident, Coast instructed it to “hold off” on its plans to put a lien on Pickering‘s property. Finally, Coast rather than Lake Valley ended up collecting on the account.    The Federal Act’s exclusion of creditors who collect their own debts is based on the recognition that creditors have a natural incentive to maintain good will with their customers and thus are less likely to engage in collection abuses and in less need of policing than those who are collecting debts from customers of another. (See Newman v. Boehm, Pearlstein & Bright, Ltd. (7th Cir.1997) 119 F.3d 477, 482, fn. 3.) The statutory scheme, however, further provides that the exception for creditors does not apply (and thus the prohibitions of the Federal Act do) to a creditor who uses a name other than its own in the process of collecting its debts, thus giving the impression that a third party is collecting or attempting to collect those debts. (15 U.S.C. § 1692a(6) [providing that such a creditor is a “debt collector” thereunder].)  ¶ . . . Although the overall evidence presented at trial might reasonably be reconciled with a contrary conclusion, the foregoing evidence, and the inferences drawable therefrom, sufficed to permit a reasonable jury to conclude that Coast used Lake Valley as a mere surrogate in attempting to collect more than it was entitled to under the Contract for the surgical services and thus that Coast qualified as a “debt collector” pursuant to 15 United States Code section 1692a(6)(C). (See Nielsen v. Dickerson (7th Cir.2002) 307 F.3d 623, 633-639.) Accordingly, Coast’s argument that the Federal Act claim is not supported by substantial evidence fails on its merits.


Judge Aaron dissented, explaining:


In this case, there is no evidence that Coast used a name other than its own to imply that a third party was involved in collecting its debts, that it pretended to be someone else, or that it used a pseudonym or alias. ( Maguire, supra, 147 F.3d at p. 235.) Nor is there any evidence that Lake Valley was under the control of Coast to the extent that Lake Valley can be deemed to be Coast’s alter ego. Rather, it is undisputed that Lake Valley is a separate business entity that Coast retained to collect debts owed to Coast, and that Lake Valley in fact conducted collection efforts on behalf of Coast. Unlike in Neilsen, here there is no evidence that Coast used Lake Valley‘s name to give debtors a false impression that an entity other than Coast was attempting to collect the debt.     The majority’s expansion of the breadth of the false name exception to apply to Coast under the circumstances of this case appears to be unprecedented, and is, in my view, an incorrect application of the law.


I agree with the dissent. . .