Analysis of district court proceedings and appeal confirms that Article III standing remains alive and well in federal court and in the 9th Circuit. Editor’s note: This article is available for members only.
12/17/2020 14:00
In a case supported by ACA International’s Industry Advancement Fund (IAF), a three-judge panel of the U.S. Court of Appeals for the 9th Circuit has affirmed the dismissal of a consumer’s Fair Debt Collection Practices Act claim against Skagit Bonded Collectors LLC (Skagit Bonded), an ACA member company, finding that the consumer lacked standing to sue under Article III of the U.S. Constitution.
Skagit Bonded was represented in the appeal by ACA Members Attorney Program (MAP) attorneys David Kaminski, partner at Carlson & Messer LLP, and Charles Messer, senior partner at Carlson & Messer LLP. The company was also represented by MAP attorney Michael O’Meara, president of The O’Meara Law Office, who was the counsel of record in the district court proceedings.
The District Court Proceedings
The consumer filed a putative class-action suit against Skagit Bonded in the U.S. District Court for the Eastern District of Washington, alleging that Skagit violated FDCPA Sections 1692g(a)(2) and 1692e. The complaint alleged that four letters sent by Skagit Bonded failed to identify the creditor, as required by the FDCPA, although each letter included a reference to the “Original Creditor,” Skagit Regional Health (identified by name), and itemized amounts due to the creditor on the consumer’s four specified account numbers.
Judge Thomas Zilly of the Eastern District of Washington dismissed the complaint on the pleadings under Federal Rule of Civil Procedure 12(c), finding that—consistent with the rule in the 7th Circuit and the District of Oregon—the plaintiff could not establish his claim as a matter of law because “[t]he FDCPA does not require a debt collector to use the term ‘current’ when naming the ‘creditor to whom the debt is owed’” and because “when only one creditor is listed in a dunning letter, as was the situation here, no plausible argument can be made that the least sophisticated debtor, reading the correspondence as a whole, would be confused about the identity of “‘the creditor to whom the debt is owed.’” For those reasons, Zilly granted Skagit Bonded’s motion for judgment on the pleadings and dismissed the plaintiff’s claims with prejudice.
The Appeal
The plaintiff, unhappy with this result, appealed to the 9th Circuit. After principal briefing, including an amicus brief filed by ACA, the 9th Circuit sua sponte (i.e., spontaneously, on its own) ordered a briefing as to whether the consumer had Article III standing to bring his FDCPA claims.
After receiving the parties’ briefs on standing and conducting an oral argument, the 9th Circuit issued a concise, five-page unpublished disposition on Dec. 2, 2020, which focused solely on the issue of the plaintiff’s standing under Article III. (If the order for supplemental briefing hadn’t forecast the court’s focus on this issue, the oral argument would have done so: during plaintiff’s principal oral argument, Judge Stephen Bough, U.S. District judge for the Western District of Missouri, sitting by designation, asked at the first pause about standing and inquired how the plaintiff in this case had suffered a concrete injury.)
In its analysis of the standing issue, the 9th Circuit reiterated that after “Spokeo III,” i.e., the 9th Circuit decision that followed the Supreme Court’s remand of Spokeo v. Robins, the 9th Circuit applies a “two-step approach to assess whether a statutory violation causes a concrete injury sufficient to satisfy Article III.”
Citing Patel v. Facebook Inc., 932 F.3d 1264, 1270 (9th Cir. 2019)—which, in turn, cited Spokeo III—the 9th Circuit observed that it has adopted a two-part analysis for evaluating standing in cases implicating violations of procedural statutory rights. This test asks (1) whether the procedural statutory provisions at issue were established to protect the plaintiff’s concrete interests, as opposed to establishing purely procedural rights, and (2) if the statutory provisions were intended to protect concrete interests, whether the specific procedural violations alleged in the case actually harmed or presented a material risk of harm to such concrete interests.
Step One: Do the FDCPA Provisions at Issue Protect Substantive or Procedural Rights?
To ascertain whether FDCPA Sections 1692g(a)(2) and 1692e were designed to protect “concrete interests” (as opposed to establishing “purely procedural rights”), the court evaluated both “historical practice” and “legislative judgment” related to these provisions. In the court’s view, both factors pointed to “reliance” as the hallmark of the interest at issue, analogizing these statutory provisions to common-law fraud and noting that Congress, when including these provisions in the FDCPA, had suggested a concern with “genuinely misleading statements that may frustrate a consumer’s ability to intelligently choose his or her response.” And, in the 9th Circuit’s view, “[s]tatements that induce no reliance do not impede a consumer’s ability to intelligently respond to a debt collector.”
From there, the court noted that “not every misleading statement in a debt collection letter necessarily threatens the recipient’s concrete interests.” The court found “the alleged violation here [to be] more procedural than substantive.”
Additionally, in a footnote, the court expressly declined the plaintiff’s invitation to extend to violations of the FDCPA the doctrine of “informational injury,” which the court found protects “a consumer’s right to ‘understand, make informed decisions about, and participate fully and meaningfully in the debt collection process,’” rather than protecting a right to information per se.
Step Two: Did the Alleged Violation of These Procedural Provisions Cause Actual Harm or Material Risk of Harm?
Turning to the second part of its two-step analysis for statutory violations, the 9th Circuit observed that the plaintiff did not allege actual harm (or even a material risk of harm) to the interests protected by the FDCPA: “Nothing in the Complaint suggests he took or forewent any action because of the allegedly misleading statements in the letter. Rather, the complaint includes a bare allegation of confusion. Without more, confusion does not constitute an actual harm to [Plaintiff’s] concrete interests.”
Moreover, because the plaintiff’s argument that he “might have relied on allegedly misleading statements” was—without additional facts— entirely “conjectural” or “hypothetical,” the 9th Circuit found that the plaintiff here had failed to adequately plead a “material risk of injury.”
Accordingly, the 9th Circuit vacated the judgment on the pleadings and remanded it to the Eastern District of Washington with instructions to dismiss without prejudice for lack of subject matter jurisdiction.
ACA’s Take
According to defense counsel David Kaminski, “given the Democratic bent of the three-judge panel, it was a surprising and welcome shift for the 9th Circuit to take such a strong focus on standing on a consumer FDCPA claim. The 9th Circuit has now joined the 7th, 11th, and D.C. Circuits in holding that certain allegations of violations of the FDCPA must allege additional harm beyond a mere statutory violation in order to invoke standing under Article III.”
And, as Kaminski notes in an email to ACA, this decision—unpublished for the moment, but the 9th Circuit has already received requests for publication— represents a clear victory for the accounts receivable management industry, confirming that Article III standing remains alive and well in federal court and in the 9th Circuit. Every member facing an FDCPA lawsuit should include an assessment of the plaintiff’s standing in their preliminary case evaluation.
ACA congratulates its member, Skagit Bonded, for having the foresight and fortitude to see this matter all the way through the successful the 9th Circuit appeal. In addition, ACA commends the effective representation provided in the appellate court by MAP attorneys Kaminski and Messer, as well as the local representation provided by O’Meara.
Cases like this represent the bricks in the fortification that ACA’s Industry Advancement Fund has been trying to build in an effort to protect the industry from frivolous litigation in which no consumer has been harmed and to rebalance the scales of justice that, for too long, have weighed hypothetical harm to consumers as more important than actual judicial harm to the industry and the larger economic systems it supports.