In a ground-breaking decision, the Second Circuit took the extraordinary step of overruling one of its own holdings, concluding that the government could not use the Federal Debt Collection Procedures Act (“FDCPA”) as a basis to sue Carter Ledyard’s clients. As the Court explained, the FDCPA is much more limited in scope than the government claimed, and it simply does not allow the government to collect money owed to a private party.
Carter Ledyard’s clients hired a foreign employee under the H-1B visa program and she later alleged that she had not been paid all of the wages required by the federal regulations governing the program. The United States commenced a lawsuit in federal district court, basing its claim for recovery of the wages owed on the FDCPA. The district court acknowledged language in the FDCPA appearing to limit its scope to recovery of amounts “owing to the United States,” but relying on N.L.R.B. v. E.D.P. Medical Computer Systems, Inc., 6 F.3d 951 (2d Cir. 1993), the court granted the government’s motion for summary judgment. In E.D.P., the Second Circuit had held, 28 years earlier, that the National Labor Relations Board could use the FDCPA to collect back-pay owed to an employee where the employee’s wages are a function of government regulation.
Carter Ledyard appealed to the Second Circuit, arguing primarily that E.D.P. had been wrongly decided and that the FDCPA does not authorize collection lawsuits by the government unless the amounts allegedly owed are owed to the government directly. The Second Circuit agreed with Carter Ledyard and reversed, holding that the government may only use the FDCPA to collect a debt when it has a “direct financial stake in recovering” the amount due – and not to collect money owing to a private party. In so holding, the Second Circuit explicitly overruled E.D.P., describing it as having been “wrongly decided” and noting that it had no support in the FDCPA’s statutory language or legislative history. In overruling one of its own holdings, the panel took a step that is exceedingly rare and, in this case, required the unanimous consent of every active judge on the Second Circuit.
Alan Lewis, Leonardo Trivigno and Nicholas Tapert wrote the appellate briefs. Mr. Lewis argued the appeal.