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United States Court of Appeals,

Fifth Circuit.

No. 95-31237.

Dixie Vidrine POIRIER, Plaintiff-Appellant,

v.

ALCO COLLECTIONS, INC. and James Allen, Defendants-Appellees.

March 17, 1997.

Appeal from the United States District Court for the Middle

District of Louisiana.

Before HIGGINBOTHAM, DUHÉ and BENAVIDES, Circuit Judges.

DUHÉ, Circuit Judge:

Dixie Vidrine Poirier sued Alco Collections, Inc., and Alco's

president, James Allen, for violations of the Fair Debt Collection

Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. The district

court granted summary judgment in favor of Alco and Allen, and

Poirier appealed. Because of an intervening Louisiana Court of

Appeals decision, we reverse the district court and remand.

BACKGROUND

Poirier allegedly owed Savoy Plaza Apartments $1655.00 for

three months' unpaid rent and late fees on her lease. Savoy Plaza

assigned Poirier's debt to Alco Collections, Inc., a collection

agency. Alco promised to make a good faith effort to collect the

debt, and agreed to pay Savoy Plaza fifty percent of any sum it

collected from Poirier.

Alco mailed a demand to Poirier demanding payment for three

months' rent and late fees, plus an additional $68 for the court

costs of an eviction proceeding brought earlier by Savoy Plaza.
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Poirier did not pay and Alco, through its president, James Allen,

filed suit against Poirier in Baton Rouge City Court. Neither

Allen nor Alco is an attorney at law. The complaint against

Poirier claimed $1655.00, and did not include the additional $68 in

court costs Alco had initially demanded. Allen later claimed it

inadvertently omitted the $68 fee from its complaint.

Poirier answered Alco's petition, denying she was indebted to

Savoy Plaza and contending that Savoy Plaza's assignment to Alco

was invalid. She then filed a peremptory exception of no cause of

action, arguing that Savoy Plaza's assignment was void as it

purported to authorize Alco, a lay entity, to take legal action

against her. The city court denied the motion, and Poirier applied

for supervisory writs with the Louisiana Court of Appeals, alleging

the city court erred in denying the exception.

While the state court case proceeded, Poirier filed this suit

in federal district court against Alco and Allen, alleging

violations of the FDCPA. She claimed Alco and Allen had engaged in

the unauthorized practice of law by filing suit against her. She

also contended Alco and Allen misrepresented the amount of her

alleged debt when they demanded one sum in the demand letter and

another in the complaint.

Poirier moved for partial summary judgment against both

defendants, and Alco and Allen responded with a cross motion for

summary judgment. The district court held in favor of Alco and

Allen. It found the assignment of a debt to a collection agency,

and the collection agency's subsequent lawsuit on that debt, was
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not against the law or public policy of Louisiana. The court then

found Poirier failed to establish Alco and Allen made a false

representation. It stated that even if the defendants

misrepresented the amount of the debt by inadvertently omitting the

$68 eviction fee from the petition, 15 U.S.C. § 1692k(c) provides

debt collectors with a "bona fide error" defense.

Poirier now appeals the judgement of the district court.

DISCUSSION

Poirier first contends the district court erred in holding the

assignment of a debt to a collection agency on a contingency fee

basis is not against public policy and therefore void. Next, she

claims the district court erred in finding the Collection Agency

Regulation Act ("CARA"), LSA-R.S. 9:3576.1 et seq., supported its

holding that the assignment of debts to collection agencies on a

contingency fee basis is not against public policy. Her third

claim is that the district court incorrectly found the omission of

the $68 eviction fee from the state court petition was not a

misrepresentation under the FDCPA. Finally, she argues this error

was not protected by the "bona fide error" defense of 15 U.S.C. §

1692k(c).

I.

Congress passed the FDCPA to eliminate abusive debt collection

practices by debt collectors. 15 U.S.C. § 1692. As such, the

FDCPA enumerates several practices considered contrary to that

goal, and forbids debt collectors from taking such action. Poirier

alleges that Alco and Allen violated both 15 U.S.C. § 1692e(5) and
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15 U.S.C. § 1692e(2)(A).

Congress provided in § 1692e that:

A debt collector may not use any false, deceptive, or

misleading representation or means in connection with the

collection of any debt. Without limiting the general

application of the foregoing, the following conduct is a

violation of this section:

 * * * * * *

(5) The threat to take any action that cannot legally be

taken....

15 U.S.C. § 1692e. Any debt collector who fails to comply with a

provision of the FDCPA, with respect to any person, is liable to

such person for civil damages. 15 U.S.C. § 1692k(a).

To violate § 1692e(5), Alco and Allen must have threatened to

take action which they were in fact prohibited by law from taking.

Poirier claims the assignment from Savoy Plaza to Alco, allowing

Alco a 50% contingency fee, had an unlawful purpose under Louisiana

law and was null and void. She argues that non-lawyer debt

collectors who attempt to collect for clients in this manner are

engaged in the unauthorized practice of law. Since Louisiana law

prohibits non-lawyers from practicing law, LSA-R.S. 37:213; Duncan

v. Gordon, 476 So.2d 896, 897 (La.App. 2nd Cir.1985), Alco and

Allen threatened to take, and actually took, action they were not

legally permitted to take.

When it granted summary judgment for Alco and Allen, the

district court focused on the validity of the assignment itself

under CARA. The court found CARA created a presumption that a claim

assigned to a collection agency is conclusively presumed valid as

long as a copy of the assignment is filed with the petition when
 

1We learned this only during oral argument. We then suspended

this proceeding pending final decision in the state courts. 

 

2Savoy Plaza and Alco had effected their "transfer" in an

agreement titled merely "Assignment." That document provided:

SAVOY PLAZA APARTMENTS, (hereinafter "Client"), hereby

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the collector files suit, and the debtor does not object. The

court reasoned that the fact that a presumption of validity of an

assignment can arise, even if a non-lawyer collection agency is the

party to file suit, showed that non-lawyer collection agencies

filing suit to collect on debts are not against the law or public

policy of Louisiana. Alco's suit therefore did not constitute the

unauthorized practice of law. The district court then declined to

address whether CARA infringes upon the judicial function of

regulating the practice of law.

II.

While Poirier's federal action has proceeded through the

courts, her state court appeal in the original action has

continued.1 The Louisiana Court of Appeals for the First Circuit

granted Poirier's application for writ of certiorari, and issued a

thorough opinion which now guides our decision. Alco Collections,

Inc. v. Poirier, 680 So.2d 735 (La.App. 1 Cir.1996), writ denied,

--- So.2d ----, No. 96-CC-2628 (La., Dec. 13, 1996).

In its opinion, issued after briefs were filed and argument

heard in this federal action, the Court of Appeals held that the

act of assignment from Savoy Plaza to Alco did not convey an

ownership interest in Poirier's debt. The court first stated

Savoy's Act of Assignment2 did not state any monetary consideration
assigns unto Alco Collections, Inc. (hereinafter "Alco"),

the following debt, presently owed to Client:

DIXIE V. POIRIER # 264

As consideration for the above assignment, ALCO hereby

agrees to make a good faith effort to collect this debt,

including the filing of suit in the appropriate court of

law in order to enforce that debt, and remit to client

50.00% of all sums collected through suit or otherwise on

said debt. ALCO further agrees to adhere to the Far Debt

Collection Practices Act and the laws of the State of

Louisiana, and hold client harmless from any and all

liabilities arising out of or in connection with ALCO's

breach of the laws governing collection practices or

terms of this agreement, and will indemnify client of any

loss resulting from the breach.

Client hereby agrees to notify ALCO immediately if any

payments on the above account are received in Client's

office, and to the extent necessary, adhere to the Fair

Debt Collection Practices Act and the laws of the State

of Louisiana, and hold ALCO harmless from any and all

liabilities arising out of or in connection with Client's

breach of the laws governing collection practices or

terms of this agreement and will indemnify ALCO for any

loss resulting from the breach.

Additionally, the parties agree that ALCO shall pay all

costs of collecting the above account, including but not

limited to, filing fees, sheriff's fees, and the cost of

certified mailings.

In addition to transferring ownership of the above debt

to ALCO, it is also the intent of Client hereby to

transfer to ALCO all security rights which accompany that

debt, including, but not limited to any lessor's

privilege to which Client is entitled. 

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for the transfer, making the payment of consideration contingent

upon the success of Alco's collection efforts, and therefore failed

to provide for a price. Poirier, 680 So.2d at 741. As well, while

some of the language in the agreement purported to transfer the

debt, the plain wording of the entire agreement did not manifest an

intent to transfer ownership of the debt to Alco. Id.
 

3The Louisiana Court of Appeals specifically declined to reach

an issue which Poirier also raises in her appeal to this Court:

whether the Collection Agency Regulation Act, LSA-R.S. 9:3576.1 et

seq., which purports to authorize a non-lawyer to institute a

lawsuit on behalf of a client to collect a debt, infringes upon the

judicial function. Poirier, 680 So.2d at 745. 

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The Louisiana court then proceeded to determine whether, since

the assignment did not transfer an ownership interest in the

Poirier debt to Alco, its filing suit to enforce that debt

constituted the unauthorized practice of law. LSA-R.S. 37:213(1)

makes it unlawful for an unlicensed person to practice law.

LSAR.S. 37:212(A) defines the "practice of law" as appearing in a

representative capacity as an advocate in any court in the state,

or advising, helping or acting for another in legal matters for

compensation. LSA-R.S. 37:212 does not prevent persons from acting

on behalf of themselves in legal matters.

"Any contract made by a non-lawyer to render services in

violation of LSA-R.S. 37:213 is for an unlawful cause." Poirier,

680 So.2d at 743. Alco was not licensed to practice law in

Louisiana. Alco's actions in filing suit to collect the debt

constituted the practice of law. Since the assignment between

Savoy Plaza and Alco did not transfer an ownership interest in

Poirier's debt, Alco was not authorized under Louisiana law to

collect this debt. Its actions therefore constituted the unlawful

practice of law. Id. at 744.3

III.

As the Louisiana courts have found Alco's actions in filing

suit against Poirier constituted the unauthorized practice of law,
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there is no longer any dispute that Alco violated § 1692e(5) of the

FDCPA when it took "action that cannot legally be taken" against

Poirier. As such, Poirier has a valid FDCPA action. Alco and

Allen are liable to Poirier for civil damages under § 1692k(a).

Since we find Alco and Allen violated the FDCPA when they

engaged in the unauthorized practice of law, we resolve this appeal

on those grounds and decline to address the other issues raised by

Poirier.

Judgment is REVERSED, and the case is REMANDED for entry of

partial summary judgment for Poirier that Alco and Allen are liable

under the FDCPA, and for determination of damages.

REVERSED AND REMANDED.