SW Legal studies in Business

Government Contractors Not Due Sovereign Immunity
Description

Appeals court held that a claim against a company that provided some law enforcement administrative services for a District Attorney could proceed as the company was not protected by sovereign immunity.

Topic Court Procedure
Key Words

Sovereign Immunity; Government Contractor

C A S E   S U M M A R Y
Facts

American Corrective Counseling Services (ACCS), a private company, contracts with the District Attorney (DA) for Santa Clara County, California, to run a bad check diversion program. Under the program, the DA agreed not to prosecute for bad checks if the potential defendant provides restitution to the victim of the bad check, completes a course, and pays fees. ACCS’s business is based on collecting fees from those who participate in the program. It receives $100 from each person who attends the training class, 60% of administrative fees collected, and certain other fees. The DA’s office sets the rules, but ACCS runs the whole program as an independent contractor. It ran the program with aggressive letters to those who bounced checks, using DA stationary stating that certain fees must be paid to avoid prosecution. Del Campo sued, claiming equal protection and due process violations and violations of the Fair Debt Collection Practices Act. After district court proceedings the matter was appealed.

Decision

ACCS, a private company that contracts with the DA for services related to the California bad check diversion program, is not an arm of the state entitled to sovereign immunity. Courts look to five factors in a state sovereign immunity inquiry: 1) whether a money judgment would be satisfied out of state funds; 2) whether the entity performs central governmental functions; 3) whether the entity may sue or be sued; 4) whether the entity has the power to take property in its own name or only in the name of the state; and 5) the corporate status of the entity. A government contractor does not have such immunity, so the suit may proceed.

Citation

Del Campo v. Kennedy, 517 F.3d 1070 (9th Cir., 2008)

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