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147150 - Badeen v Par, Inc

George Badeen/All Others Similarly Situated and Midwest Recovery and Adjustment, Inc.,
 
Joseph M. Xeureb
 
Plaintiffs-Appellants,
 
v
(Appeal from Ct of Appeals)
 
 
(Wayne  – Sapala, M.)
 
Par, Inc., d/b/a Par North America, et al,
 
Clifford W. Taylor
 
Defendants-Appellees,
 
and
 
 
MV Connect, L.L.C., d/b/a IIA, L.L.C., GE Money Bank and Manheim Recovery Solutions,
 
 
 
Defendants.
 

Summary

​Plaintiff George Badeen, a licensed collection agency manager, owns plaintiff Midwest Recovery and Adjustment, Inc., a licensed collection agency that is hired by automobile lenders to repossess vehicles.  Collection agencies are required to be licensed by the Occupational Code, MCL 339.901(b).
 
According to Badeen, with increasing frequency, lenders are hiring unlicensed “forwarding companies” or “forwarders” to handle collection services on delinquent accounts.  The forwarder will then, in turn, retain a licensed collection agency, like Midwest Recovery, to carry out the actual repossession of collateral. Badeen asserts that this practice has caused him to lose money, because repossession agents are paid less for their services when retained by a forwarder than when hired directly by a lender. 

In 2010, Badeen, along with other owners and licensed collection agencies, sued the defendant lenders and forwarders, alleging that the defendants violated the Occupational Code.  Badeen contended that the forwarders were in violation of the Occupational Code because they were acting as collection agencies, but were not licensed.  MCL 339.901(b) defines “collection agency” generally as a “person directly or indirectly engaged in soliciting a claim for collection or collecting or attempting to collect a claim owed or due or asserted to be owed or due another, or repossessing or attempting to repossess a thing of value owed or due or asserted to be owed or due another arising out of an expressed or implied agreement. . . .”  Under MCL 339.904, a “collection agency” must be licensed to operate in Michigan. The defendant lenders were at fault, Badeen asserted, for hiring unlicensed collection agencies. The plaintiffs also alleged violations of the Michigan Regulation of Collection Practices Act [the MRCPA], MCL 445.251, which prohibits a regulated person from employing a person required to be licensed by the Occupational Code to collect a claim unless that person is licensed. Badeen sought to represent a class of similarly situated automobile repossession agencies and their owners.

The defendants filed motions for summary disposition, arguing that a forwarder is not a “collection agency” under the Occupational Code, and asking the trial court to dismiss the lawsuit.  In response, the plaintiffs argued that forwarders must be licensed because they solicit lenders to collect claims, and are “indirectly” involved in collections. The trial court agreed with the defendants, and granted the motions for summary disposition. 

The plaintiffs appealed the dismissal of their claims to the Court of Appeals, which affirmed in a published opinion. The panel agreed with the trial court that “the forwarder defendants and the lender defendants have not violated the Occupational Code or the MRCPA because the forwarder defendants are not ‘collection agencies’ under Article 9 of the Occupational Code.” Forwarders do not, the panel held, “solicit a claim for collection” when they hire collection agencies. Nor are they “directly or indirectly engaged in repossessing or attempting to repossess” collateral. The fact that the forwarders contracted out the work demonstrates that they were not occupied or involved with the act of repossession themselves.  The Court of Appeals held that the trial court did not err in granting the defendants’ motions for summary disposition.

 The plaintiffs appealed to the Michigan Supreme Court, which has scheduled oral argument on the application for leave to appeal. The parties are directed to address “whether the defendant forwarding companies engage in ‘soliciting a claim for collection’ and therefore are ‘collection agenc[ies]’ as defined by MCL 339.901(b).”