807 F.

2d 285
55 USLW 2357

NATIONAL REVENUE CORPORATION, Plaintiff,

Appellant,
v.
Arlene VIOLET, Attorney General of the State of Rhode
Island, Defendant, Appellee.
No. 86-1422.

United States Court of Appeals,

First Circuit.
Argued Sept. 9, 1986.
Decided Dec. 18, 1986.

William C. Hillman with whom Strauss, Factor, Hillman & Lopes, P.C.
was on brief for plaintiff, appellant.
Basil J. Mezines, John A. Pirko and Stein, Mitchell & Mezines on brief
for American Collectors Ass'n, amicus curiae.
Richard P. Woolley, Sp. Asst. Atty. Gen., with whom Arlene Violet, Atty.
Gen., was on brief for defendant, appellee.
Daniel J. Murray, Robert D. Fine and Licht & Semonoff on brief for
Rhode Island Bar Ass'n, amicus curiae.
Before TORRUELLA, Circuit Judge, WISDOM* and ALDRICH, Senior
Circuit Judges.
BAILEY ALDRICH, Senior Circuit Judge.

Before addressing the questions in this case, all of which are of a strictly legal
nature, we state an overview. Plaintiff, National Revenue Corp., is an Ohio
corporation engaged nation-wide in the debt-collection business. In late 1980 it
inquired as to the steps necessary to operate in Rhode Island and was informed
by the state banking commissioner that because a Rhode Island statute, G.L. c.

11-27, defined debt collecting as the practice of law, plaintiff, as a non-member

of the Rhode Island bar, was foreclosed. Plaintiff brought an action in the
district court seeking a declaratory judgment that the statute was
unconstitutional, inter alia, as an imposition on interstate commerce, and asking
for an injunction. On July 20, 1982, with the consent of the special assistant
attorney general attending, the court entered a judgment declaring the statute
invalid, adding the words, "by agreement of the parties."1 Plaintiff, having,
since, extensively engaged in business in Rhode Island, is now faced with the
district court's reversal of that judgment on the motion of the attorney general.
It contends that the motion was procedurally improper, and that the initial
judgment was substantively correct in any event. We agree with this last, but
disagree with everything else that took place. Before we reach our final ruling,
we review these earlier steps.
2

The first, possible, mistake was in the entry of the original judgment. Local
Rules 22(a) and 22(b) require that stipulations and settlement agreements,
respectively, be in writing, signed by counsel. The court accepted the oral
assent of the assistant attorney general. This possibly was a procedural error.
Alternatively, rather than an oversight, it may have been a conscious, and
permissible, determination that Rule 22 was inapplicable. If not, we at least
think it unduly harsh for the district court to have found, post, that plaintiff was
on notice that the court's signature, in the presence of both counsel, was an
empty act, and that plaintiff has itself to thank for relying on it.

In June 1983 the Rhode Island Supreme Court, having learned of this judgment,
suggested to the attorney general that he consider filing a motion to have the
federal court vacate the judgment and rule on the merits. A mistake followed.
The attorney general's motion to vacate, filed under F.R.Civ.P. 60(b)2 on July
20, 1983, asserted the wrong grounds. The motion was filed under subsections
(1) and (6).3 The subsection (1) "[m]istake, inadvertence, surprise, or excusable
neglect" asserted by a special assistant attorney general was that, although the
attorney general was aware of the discussions about a proposed consent
judgment, there was no record indicating his approval. This was an important
case. "[A] judgment entered upon an agreement by the attorney of record will
be set aside only upon affirmative proof by the party seeking to vacate the
judgment that the attorney had no right to consent to its entry." Thomas v.
Colorado Trust Deed Funds, Inc., 366 F.2d 136, 139 (10th Cir.1966). In spite of
the absence of a writing it would be difficult to believe, without confirmation
by the attorney general himself, that he was so lax as to have given no thought
to the proposal, or to what happened to it. If that did occur, it might, indeed, be
called "unique and extraordinary," cf. Spound v. Mohasco Industries, Inc., 534
F.2d 404, 411 (1st Cir.1976), cert. denied, 429 U.S. 886, 97 S.Ct. 238, 50

L.Ed.2d 167, but not in the excusable sense. Given the importance of a
judgment's finality, there is a substantial duty of attention. See id.; cf. Airline
Pilots v. Executive Airlines, 569 F.2d 1174 (1st Cir.1978).
4

The magistrate himself, however, committed a mistake when he entered an

order denying the motion. As the district court pointed out, this order was
beyond his authority. The court, properly, treated the magistrate's action as a
recommendation, to be reviewed de novo, and on consideration it rejected the
recommendation and granted the motion. It did so, however, sua sponte, on a
different ground, namely, the asserted violation of Local Rule 22. This, too, was
a mistake.

While we agree that the district court has broad discretion, the invocation of
this rule was an abuse. If Rule 22 was in fact applicable, not only does Rule
22(a) itself recognize an exception to prevent injustice, but Local Rule 2
provides for exceptions for all rules if their application in the particular case
would be "unjust." As the court itself pointed out, the purpose of Rule 22 is to
avoid having to resolve disputes as to whether counsel had agreed, or as to what
they had agreed to. There was no such dispute here; the court's statement that
the rule was "intended to prevent the kind of bickering present in this action"
was misplaced. The only disputed claim was that the special assistant attorney
general had not been given authority to agree, a Rule 60(b) matter, which, we
have said, was not established. Hence we are concerned only with form; if the
special assistant had signed instead of giving an oral assent, Rule 22 would not
have been in the case.

As to injustice, as a result of this judgment plaintiff had been licensed, and had
been carrying on business for over a year. Talking counsel's signature at this
point, when the court itself had accepted oral consent, is a clear case of
elevating form over substance, and we reject it.

Moving on, the ultimate mistake was the motion's designating the wrong
subsection of Rule 60(b). As the present attorney general implicitly recognizes
in her brief, the appropriate subsection was (4), "the judgment is void." For an
attorney general to stipulate that an act of the legislature is unconstitutional is a
clear confusion of the three branches of government; it is the judicial branch,
not the executive, that may reject legislation. This is not to say that at a fulldress review an attorney general may not inform the court that, in his opinion, a
statute is flawed, e.g., Delchamps, Inc. v. Alabama State Milk Control Board,
324 F.Supp. 117 (M.D.Ala.1971), but this would be in the context that the court
was to make the final, considered ruling. Here the court expressly recited that it
was not doing this. An attorney general can have no authority to be the binding

determiner that legislation is unconstitutional. The agreed judgment was void

on its face.
8

Coming thus to the merits, Rhode Island Gen.Laws Sec. 11-27-2 states that the
term "practice of law" "shall be deemed to include ... (3) the undertaking or
acting as a representative or on behalf of another person to commence, settle,
compromise, adjust or dispose of any civil or criminal case or cause of
action...." The district court held, and we accept, that this language applies to
persons seeking payment of debts owed to others in the normal course, even
though there has been no mention or threat of legal proceedings. Creditors'
Service Corporation v. Cummings, 57 R.I. 291, 190 A. 2 (1937). The court
further held, and we agree, that debt collecting, as by plaintiff, involves
interstate commerce directly, and also it affects it indirectly because parties
engaged in interstate commerce frequently rely upon such services. Hence, the
constitutional issue was squarely raised.

The court commenced its review by observing, though conceding it was not the
answer, that the state has a right to define the practice of law. Only the Rhode
Island Bar Association, as amicus, attempts this easy solution. The attorney
general, to her credit, does not assert that the state's recognized authority over
the practice of law, see, e.g., Goldfarb v. Virginia State Bar, 421 U.S. 773, 793,
95 S.Ct. 2004, 2016, 44 L.Ed.2d 572 (1975), insulates its actions from
challenge under the commerce clause. She says, however, that the present
definition is reasonable because "debt collection practices are intimately related
to the use of state courts and the regulation of the practice of law in those
courts." It may be reasonable in one sense, but the question remains whether,
by including activities that fall short of court proceedings, the state has put an
impermissible burden on interstate commerce. This question is not, of course,
restricted to, or measured by, plaintiff individually.4

10

It is common ground that debt collecting is a matter of public concern and is

subject to regulation in the public interest. Congress, in fact, has so recognized.
See Fair Debt Collection Practices Act Sec. 802, 15 U.S.C. Sec. 1692
(congressional findings). It has recognized, too, that a state statute may be more
stringent than the federal act in its substantive provisions. Section 1692n
provides as follows.

11 subchapter does not annul, alter, or affect, or exempt any person subject to the
This
provisions of this subchapter from complying with the laws of any State with respect
to debt collection practices, except to the extent that those laws are inconsistent with
any provision of this subchapter, and then only to the extent of the inconsistency. For
purposes of this section, a State law is not inconsistent with this subchapter if the

protection such law affords any consumer is greater than the protection provided by
this subchapter.
12

To the district court this was the answer. It is not. It is true that Congress may
authorize state legislation that would otherwise offend the commerce clause.
Western & Southern Life Insurance Co. v. State Board of Equalization, 451
U.S. 648, 655, 101 S.Ct. 2070, 2076, 68 L.Ed.2d 514 (1981); Southern Pacific
Co. v. Arizona, 325 U.S. 761, 769, 65 S.Ct. 1515, 1520, 89 L.Ed. 1915 (1945).
However, this exemption must be "unmistakably clear." South-Central Timber
Development, Inc. v. Wunnicke, 467 U.S. 82, 91, 104 S.Ct. 2237, 2242, 81
L.Ed.2d 71 (1984), quoted in Maine v. Taylor, --- U.S. ----, 106 S.Ct. 2440,
2448, 91 L.Ed.2d 110 (1986). We do not read the last quoted sentence of Sec.
1692n, ante, in any such light. Nor did the Second Circuit, even before the
Supreme Court in Maine v. Taylor had emphasized the state's heavy burden.
See Silver v. Woolf, 694 F.2d 8, 14 (2d Cir.1982), cert. denied, 460 U.S. 1071,
103 S.Ct. 1525, 75 L.Ed.2d 948. We view Maine v. Taylor, decided two
months before the attorney general's brief (not since supplemented), as fully
rejecting the state's contention that mere Congressional authorization of
consistent state legislation lowered the intensity of scrutiny with respect to the
commerce clause. See 106 S.Ct. at 2448.

13

Nor can we think that a statute that forecloses out-of-state debt collectors, en
masse, from seeking to collect debts from Rhode Island citizens imposes a
"merely incidental" burden on interstate commerce.5 This is a substantial
burden, both "on its face [and] in practical effect." See Maine v. Taylor, 106
S.Ct. at 2448 (quoting Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727,
1736, 60 L.Ed.2d 250 (1979)). Hence, "the burden falls on the State to
demonstrate both that the statute 'serves a legitimate local purpose,' and that
this purpose could not be served as well by available nondiscriminatory
means." Id. It has demonstrated neither.

14

We begin with the attorney general's contention that the statute is evenhanded:
it prohibits all debt collection activities (apart from specified exceptions not
here relevant), whether the companies engaging in those activities are located
within the state or without. This does not prevent a discrimination against outof-state commerce. By defining all debt collection as the practice of law, and
limiting this practice to members of the Rhode Island bar, Rhode Island
effectively bars out-of-staters from offering a commercial service within its
borders and confers the right to provide that service--and to reap the associated
economic benefit--upon a class largely composed of Rhode Island citizens. Cf.
Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 957, 102 S.Ct. 3456, 3464,
73 L.Ed.2d 1254 (1982); Hunt v. Washington Apple Advertising Comm'n, 432

U.S. 333, 348-53, 97 S.Ct. 2434, 2444-46, 53 L.Ed.2d 383 (1977). There is no
basis shown for the district court's speculation that "lawyers [can] provide the
same services which debt collection agencies provide at the same expense to
the customer." This would seem rebutted not only by the savings normally
attributable to large scale operation, but by the very existence of national
companies like the plaintiff. Furthermore, even if the speculation were correct,
the statute deprives the citizens of Rhode Island of any benefits arising from
competition. Cf. H.P. Hood & Sons v. Du Mond, 336 U.S. 525, 539, 69 S.Ct.
657, 665, 93 L.Ed. 865 (1949) ("Our system, fostered by the Commerce
Clause, is that ... every consumer may look to the free competition from every
producing area in the Nation to protect him from exploitation by any."), cited in
New Hampshire Automobile Dealers Association v. General Motors Corp., 801
F.2d 528, 532 (1986). In this circumstance it might appear that the local
purpose, rather than being legitimate, is, in substantial part, to benefit the local
bar. This appearance can be rebutted only by showing a legitimate purpose that
could not be served as well by non-discriminatory means.
15

No such showing has been made. Plaintiff asserts, without contradiction, that of
all the states that have seen fit to regulate debt collection--some 27 states, for
example, have established a licensing program--only Rhode Island restricts all
collection activities to members of the bar. Faced with this unique position, the
attorney general's counsel, even after repeated questioning, produced at oral
argument nothing beyond an assertion that the legislature had chosen a
reasonable means of regulation, seemingly because machinery was already in
place to screen lawyers' ethical behavior. Passing the thought that requirements
specifically directed to the collection business might be more appropriate than
existing generalizations directed to lawyers, the fact that the other states have
found it practical to supervise the collection business by less-restrictive means
puts a heavy burden on the state. Administrative convenience is no answer.

16

Reversed and remanded.

17

TORRUELLA, Circuit Judge (dissenting).

18

With all due respect I cannot agree that the Rhode Island statute in question,
Gen.Laws ch. 11-27-2, unconstitutionally burdens interstate commerce. See
Maine v. Taylor, --- U.S. ----, 106 S.Ct. 2440, 91 L.Ed.2d 110 (1986). That
statute, which undertakes to define what constitutes the practice of law,1 has
been interpreted to generally prohibit nonlawyers from engaging in third party
debt collection, Creditors' Service Corporation v. Cummings, 57 R.I. 291, 306
(1937). There is, however, nothing in its content or in the judicial
interpretations circumscribing its reach, to indicate that it is a state-protectionist

statute. On its face, and as far as the record is concerned, the statute applies
with equal force to local as well as interstate debt collections.
19

The Supreme Court in Taylor reminded us of the long-standing constitutional

proposition to the effect that "[t]he limitation imposed by the Commerce Clause
on state regulatory power 'is by no means absolute', and [that] 'the States retain
authority under their general police powers to regulate matters of 'legitimate
local concern', even though interstate commerce may be affected." Taylor, 106
S.Ct. at 2447. 2

20

In my opinion the statute as interpreted is nothing more than the exercise of

Rhode Island's police power in determining how best to protect its citizens from
what is an acknowledged "wide spread and serious national problem." 1977
U.S.Code Cong. & Admin.News 1695, 1696. Except for the fact that the
Federal Fair Debt Collection Practice Act, 15 U.S.C. Sec. 1692, et seq., postdates the Rhode Island statute, it could very well be argued that Congress
encouraged such legislation when it stated that "[t]he primary reason why debt
collection abuse is so widespread is the lack of meaningful legislation on the
state level." 1977 U.S.Code Cong. & Admin.News 1695, 1696. The effect of
Section 1692n3 of the federal law is not only to reduce the areas of possible
conflict between the Federal statute and relevant state legislation, but also to
allow for more stringent local protection for affected citizens; it quite pointedly
licensed the states to place burdens on interstate commerce.

21

The Court in Taylor indicated that "[i]n determining whether a State has
overstepped its role in regulating interstate commerce, [there is a distinction]
between state statutes that burden interstate transactions only incidentally, and
those that affirmatively discriminate against such transactions ... [S]tatutes in
the first group violate the Commerce Clause only if the burdens they impose on
interstate trade are 'clearly excessive in relation to the putative local benefits', ...
statutes in the second group are subject to more demanding scrutiny." Taylor,
106 S.Ct. at 2447-2448 (emphasis supplied). Because, as previously stated, the
statute in question does not distinguish or differentiate in any way between
Rhode Island and interstate transactions of the nature here involved, it cannot
be said that the statute discriminates against interstate transactions. 4
Furthermore, it cannot be said that the method chosen by Rhode Island is
"clearly excessive" in relation to the perceived benefits to its citizenry (i.e.,
third party collection of debts by persons subject to a strict code of ethics and
disciplinary control), any more than if that state had opted to license all debt
collectors indiscriminately. See Silver v. Woolf, 694 F.2d 8 (2d Cir.1982)
(Connecticut statute requiring licensing of all consumer collection agencies
within the state not an invalid burden on interstate commerce even as applied to

a corporation which had no offices or employees in Connecticut).

22

Because I consider that any burden on interstate commerce imposed by

R.I.Gen.Laws ch. 11-27-2 is incidental and thus not unconstitutional, I would
affirm the decision of the district court.

Of the Fifth Circuit, sitting by designation

The court's order provided, in relevant part,

The application of Chapter 11-27 of the Rhode Island General Laws of 1956
(1969 Reen.), as amended, to prohibit plaintiff from conducting its debt
collection business in Rhode Island, so long as such conduct is in compliance
with the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1692a et seq. and
comparable state laws, would be unconstitutional under the Interstate
Commerce Clause of the Constitution of the United States, Article I, Sec. 8,
Clause 3.

60(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence;

Fraud, etc. On motion and upon such terms as are just, the court may relieve a
party or his legal representative from a final judgment, order, or proceeding for
the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence which by due diligence could not have been
discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether
heretofore denominated intrinsic or extrinsic), misrepresentation, or other
misconduct of an adverse party; (4) the judgment is void; (5) the judgment has
been satisfied, released, or discharged, or a prior judgment upon which it is
based has been reversed or otherwise vacated, or it is no longer equitable that
the judgment should have prospective application; or (6) any other reason
justifying relief from the operation of the judgment. The motion shall be made
within a reasonable time, and for reasons (1), (2), and (3) not more than one
year after the judgment, order, or proceeding was entered or taken

We disregard subsection (6), a catch-all provision that courts invoke only in

extraordinary circumstances, see, e.g., Griffin v. Swim-Tech Corp., 722 F.2d
677, 680 (11th Cir.1983), and not presently pressed by appellant

The attorney general correctly says that the issue is not whether plaintiff "is a
model debt collector, or an unethical and ruthless debt collector, or somewhere
in between." Rather, the question must be whether all Rhode Island commercial
debt collection operations in interstate commerce, no matter how properly and
ethically conducted, are to be forbidden unless carried on by Rhode Island

lawyers
5

In light of our dissenting brother's viewing the burden as "merely incidental,"

we observe that we would find the statute failing even under the "incidental"
requirement. For the reasons hereinafter discussed, we believe the burden on
interstate commerce "clearly excessive in relation to the putative local
benefits." Pike v. Bruce Church, 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25
L.Ed.2d 174 (1970)

R.I.Gen.Laws Sec. 11-27-2, the term "practice of law":

shall be deemed to include ... (3) the undertaking or acting as a representative or
on behalf of another person to commence, settle compromise, adjust or dispose
of any civil or criminal case or cause of action.

Citing from Lewis v. B.T. Investment Managers, Inc., 447 U.S. 27, 36, 100
S.Ct. 2009, 2015, 64 L.Ed.2d 702 (1980)

15 U.S.C. Sec. 1692n

This subchapter does not annul, alter, or affect, or exempt any person subject to
the provisions of this subchapter from complying with the laws of any State
with respect to debt collection practices, except to the extent that those laws are
inconsistent with any provision of this subchapter, and then only to the extent of
the inconsistency. For purposes of this section, a State law is not inconsistent
with this subchapter if the protection such law affords any consumer is greater
than the protection provided by this subchapter.

See Webster's Third New International Dictionary, p. 648