Badeen v. Par, Inc
496 Mich. 75
| Mich. | 2014Background
- Plaintiff George Badeen, a licensed collection-agency manager, and his licensed agency sued forwarding companies and lenders, alleging the forwarders acted as unlicensed collection agencies in Michigan by obtaining and allocating creditors’ unpaid accounts to local collectors.
- Forwarding companies nationwide obtain assignments or placements of delinquent accounts from creditors and then allocate those accounts to local collection agents; they typically do not contact debtors directly.
- Plaintiffs asserted violations of MCL 339.904(1) (licensing requirement for collection agencies) and MCL 445.252(s) (lenders hiring unlicensed collection agencies), claiming economic injury to licensed local collectors.
- Defendants moved for summary disposition arguing the phrase “soliciting a claim for collection” in MCL 339.901(b) means soliciting debtors (i.e., requesting payment), so forwarders—who contact creditors, not debtors—are not collection agencies.
- Trial court and Court of Appeals agreed with defendants; Michigan Supreme Court granted review to decide the statutory meaning and remanded for further proceedings on other defenses (including the interstate-communications exemption in MCL 339.904(2)).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether forwarding companies fall within the statutory definition of “collection agency” in MCL 339.901(b) | Badeen: “Soliciting a claim for collection” includes contacting creditors to obtain unpaid accounts to assign to local agents, so forwarders must be licensed. | Forwarders: The phrase means soliciting debtors (asking for payment); because forwarders do not contact debtors, they are not collection agencies. | The Court held forwarding companies meet the definition: “soliciting a claim for collection” includes asking creditors for unpaid debts to allocate to local collectors. |
| Whether reading “soliciting a claim for collection” as creditor-directed renders other statutory language redundant | Badeen: Creditor-directed solicitation is a distinct first step in the collection continuum and is necessary to avoid surplusage. | Defendants: If solicitation means asking debtors to pay, it is covered by “attempting to collect,” so no separate meaning is needed. | The Court agreed with Badeen: interpreting solicitation as creditor-directed avoids rendering the next clause (“collecting or attempting to collect”) nugatory. |
| Whether forwarding companies’ lack of debtor contact removes them from the Occupational Code’s reach | Badeen: The statutory language covers actors at the first step (soliciting claims), so lack of debtor contact is irrelevant. | Defendants: The Legislature did not foresee forwarders; absent debtor contact they should be excluded. | The Court held the statutory text controls; inclusion of forwarders is for the Legislature to change, not the courts. |
| Applicability of interstate-communications exemption (MCL 339.904(2)) | Badeen did not press this as dispositive at the Supreme Court level. | Defendants: Alternatively, their activities in Michigan are limited to interstate communications and thus exempt from licensure. | The Court did not decide this issue and remanded for the trial court to address it in the first instance. |
Key Cases Cited
- Bay County Bar Ass’n v. Finance System, Inc., 345 Mich. 434 (Mich. 1956) (describing asking creditors for unpaid accounts as soliciting claims for collection)
- LeBlanc v. Unifund CCR Partners, 601 F.3d 1185 (11th Cir. 2010) (characterizing debt buyers/collectors who seek charged-off accounts from creditors as soliciting debt accounts)
- Grange Ins. Co. v. Lawrence, 494 Mich. 475 (Mich. 2013) (statutory terms ordinarily given their common and ordinary meaning)
- Herald Co. v. Bay City, 463 Mich. 111 (Mich. 2000) (courts must discern legislative intent from statutory language)