Appeals Court Denies Creditor’s Bid for Attorney Fees in Spat with Former Collection Agency Partner

A battle between a failed partnership between a creditor and a collection agency has spilled over into the Court of Appeals for the Eleventh Circuit, with a panel of judges yesterday affirming a lower court’s decision not to award the creditor attorney’s fees after it accused the agency of breaching the terms of their agreement because it was not licensed to collect in a state and because the creditor’s clients were complaining about the agency’s conduct.

A copy of the ruling in the case of 24e Fitness v. Internal Credit Systems can be accessed by clicking here.

The two parties began working together in 2016. Four years later, the creditor canceled the contract after learning the agency was not licensed to collect in Alabama and over complaints made by the creditor’s customers. The creditor sued the agency in state court, accusing it of breaching their agreement. The agency had the case removed to federal court, at which point the creditor moved to remand the case back to state court while also filing to have its attorney’s fees covered because it accused the agency of not having a good enough reason to move the case to federal court.

A District Court judge agreed with the creditor that the case should be tried in state court, but denied the motion for attorney’s fees, saying the agency “had an objectively reasonable, albeit incorrect, basis for seeking removal.” The creditor appealed that portion of the ruling to the Eleventh Circuit.

The creditor argued that the decision by the agency to remove the case to federal court was frivolous and nothing more than an attempt to delay litigation. But, the Eleventh Circuit noted, its suit accusing the agency of breaching the agreement between the two parties invoked federal law and federal regulations, which made the decision by the agency to seek removal the case to federal court within the “range of choices” that could have been made.

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