Thousands of residents of Memphis, Tenn., who paid 20 percent fees to collection agency Linebarger Goggan Blair & Sampson, could be affected by a federal judge's ruling last week to certify a class-action suit against the firm.

The case surrounds the interpretation of two Tennessee statutes that provide for additional charges against delinquent taxpayers when they have to be sued for collection. At issue is whether Linebarger can charge a 10 percent or 20 percent fee for collecting delinquent property taxes on homes and businesses.

A Tennessee law says attorneys pursuing back taxes cannot receive compensation greater than 10 percent of all delinquent fees collected. Another statute says a 10 percent penalty can be imposed on those whose taxes are delinquent, and that the penalty will go to the attorney suing to collect the back taxes.

Linebarger has interpreted that wording to allow for a total fee of 20 percent; the plaintiffs argue the two statutes limit the total fees to 10 percent. In a 2010 opinion, the Shelby County (Tenn.) Attorney's office said the fee is limited to a 10 percent penalty, including the delinquent tax attorney fee.

Linebarger won a contract from the city in 2004 to collect delinquent city taxes. As part of the deal, the city does not pay any direct fees to Linebarger, which instead charges delinquent taxpayers fees along with the taxes owed. The debts must be 17 months past due before the city turns them over to the firm. Linebarger’s contract with the city expires in December. A decision on whether to retain the firm has not been made.

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