Foster Swift Finance, Real Estate & Bankruptcy News
August 27, 2015
Is a corporation a person? This oft-debated topic has been the subject of many legal disputes, and even found its way into the headlines during the 2012 presidential campaign. The U.S. Supreme Court recently, famously and controversially grappled with the issue of whether corporations are “persons” with the same rights as citizens in the Citizens United and Hobby Lobby cases. In another context, the U.S. Court of Appeals for the Sixth Circuit weighed in with its opinion in late July in the case of Anarion Investments LLC v. Carrington Mort. Serv., LLC, et al., Case Nos. 14-5781/5993, holding that a legal entity is a “person” under the Fair Debt Collection Practices Act (the “FDCPA”).
The case involved Anarion Investments LLC (“Anarion”), a Delaware limited liability company, which brought suit against the defendants under the FDCPA. Anarion alleged that the defendants made false representations in connection with the foreclosure sale of a home on which Anarion held an option to buy. The case was dismissed by the district court, which held that Anarion is not a “person” under the FDCPA, and thus had no right to bring suit. The Sixth Circuit reversed.
The language at issue on appeal was the FDCPA’s enforcement provision, 15 U.S.C. § 1692k, which states that “any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person[.]”
The Sixth Circuit began its analysis by pointing out that the federal Dictionary Act states that “[i]n determining the meaning of any Act of Congress,” the word “person” includes artificial entities unless “the context indicates otherwise[.]” In this case, the court found there to be “plenty of relevant context,” citing 24 instances in which “person” appears in the FDCPA. It noted that in some places within the statute, “person” refers exclusively to artificial entities. In other places “person” includes artificial entities and “as a practical matter refers primarily to them."
The defendants countered that in certain instances the FDCPA refers to “persons” as only natural persons. The court disputed this interpretation, holding that the references cited by defendants to “any person” (meaning, in defendants’ interpretation, natural persons) could apply to artificial entities as well.
The defendants’ final argument was that extending the FDCPA’s protections to an entity such as Anarion, which is an investment company, is inconsistent with the FDCPA’s purpose. While § 1692a of the FDCPA prevents any person, natural or artificial, from bringing suit to collect a debt owed to a business, the court noted that in this case the entity brought suit based on an attempt to collect the entity’s individual owner’s personal debt. Also, the court noted that nothing in its decision means that Anarion - or any other artificial entity - can bring suit under the FDCPA. It explained that its opinion only answered (in the affirmative) the narrow question of whether Anarion is a “person” under the FDCPA.
Whether artificial entities are “persons” remains a controversial issue, as evidenced by the dissent in the case, which argued that including artificial entities in the definition of “person” under the FDCPA would “contradict the law’s overall aim.”
This is a frequently litigated issue. Before making assumptions about whether a legal entity - corporation, LLC or otherwise - either has, or does not have, rights and protections under a particular statute, contact any member of Foster Swift's Finance, Real Estate & Bankruptcy Practice.
This article originally appeared in the Foster Swift Finance, Real Estate & Bankruptcy News in August. The article was then reprinted in the October Commercial Litigation News.