Idaho Supreme Court upholds limits on collection firms, including House candidate's

The decision involved a collection company owned by U.S. House candidate Bryan Smith.

(Idaho Falls) Post RegisterMay 6, 2014 

Bryan Smith

CORRECTION: The headline of this story originally listed Smith as running for the wrong chamber of Congress.

Firms such as Medical Recovery Services can't ask for attorney's fees that are higher than what patients paid for their medical care, the Idaho Supreme Court unanimously ruled.

The decision upheld a lower court ruling against Medical Recovery Services, the collection company owned by 2nd District Republican primary challenger Bryan Smith.

In a March 19 ruling, the court affirmed that Bonneville County Magistrate Judge Michelle Mallard was justified in cutting down attorney’s fees requested by Medical Recovery Services and rejected a request that the collection agency be awarded further attorney’s fees for work done during the appeal.

The case involved three patients, all from Idaho Falls, who were treated between December 2010 and April 2011 at Community Care, an urgent and primary care clinic.

In each of the cases Medical Recovery Services argued it was owed $350 in attorney’s fees - which was in each case more than the cost of the care provided.

Renee Lewis was treated by Community Care on Dec. 29, 2010. She was charged $192.98 for her care. Medical Recovery Services sought a total of $779.17 for the principle plus interest and fees.

Stephanie Strawn was treated April 28, 2011, resulting in $268.40 in medical bills. Medical Recovery Services asked for a total of $852.36.

Joseph Knight was treated April 8, 2011, at a cost of $342.96. Medical Recovery Services argued he should pay a total of $868.43.

The sign-in form at the clinic included a clause in which the patient agreed to pay either $350 or 35 percent of the principle in attorney’s fees, which ever was more, if their case was sent to collections.

Mallard issued a “default judgment” - meaning the patients lost because they did not respond to the lawsuits - in favor of Medical Recovery Services in each of the cases, but she reduced the attorney’s fees to the amount of the original cost of care, relying on state laws regulating collection agencies.

Bryan Zollinger, an attorney with Smith, Driscoll and Associates, appealed the case to the 7th District Court, where Judge Dane H. Watkins upheld Mallard’s decision Nov. 8, 2012. Zollinger then appealed to the Idaho Supreme Court.

Zollinger argued that state rules governing collection agencies should not apply in the cases at hand because the contracts mandating $350 in attorney’s fees were contracts between the patients and the clinic, not between the patients and Medical Recovery Services.

“That contention is wholly without merit,” wrote Justice Jim Jones in his nine-page opinion. “(Medical Recovery Services) acknowledges that it is a licensee under (state collection agency laws). Indeed, (it) is a collection agency and in the business of collecting debts for other parties.”

Zollinger also argued that state collection agency laws were unconstitutional, a charge the court rejected.

Zollinger argued that Medical Recovery Services should be awarded further fees for expenses appealing the case to the Idaho Supreme Court.

“Since (Medical Recovery Services) failed to prevail on appeal, it is not entitled to a fee award,” Jones wrote.

“We affirm the decision of the district court,” he concluded. “No costs are awarded.”

The Idaho Statesman reports state records show Medical Recovery Services and Diversified Equity Systems, another collection firm from which Smith earns money, have been involved in more than 10,000 court cases across southern and eastern Idaho.

In an email, Zollinger said he was unavailable for a phone interview Monday and suggested the Post Register call Brian Nicholas, a deputy attorney at the state Attorney General's office.

"He is familiar very familiar with the case and I have spoken with him about how this is bad case law that is at (odds) with the (Fair Debt Collection Practices Act) and infringes on any creditor's ability to contract," Zollinger wrote.

Efforts to reach Smith, Lewis, Strawn or Knight for comment were unsuccessful.

Idaho Statesman is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service