In win for the industry and ACA International members, the case was dismissed after the court found the consumers lacked standing in their FDCPA claims. Editor’s note: This article is available for members only.
12/15/2020 9:00
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 7th Circuit has affirmed the dismissal of two consumers’ Fair Debt Collection Practices Act claims against ACA member Finance Systems of Green Bay Inc. (Finance Systems), finding that the consumers lacked standing to sue under Article III of the U.S. Constitution.
Finance Systems was represented in the case by ACA MAP attorney (and ACA Board Member) Michael Klutho and ACA MAP attorney Jessica Klander, both shareholders at Bassford Remele in Minneapolis.
The District Court Cases – Dismissals on Other Grounds
The consumers, through the same attorney, filed separate class action complaints against Finance Systems alleging that it had sent them and other consumers dunning letters that violated the FDCPA’s provisions against false, deceptive, or misleading representations and unfair or unconscionable methods. The letters in question made statements about the consumers’ “good credit rating,” the consumers’ creditworthiness in general, and the creditor’s “faith” in the consumer’s creditworthiness—e.g., “You do not want to lose our confidence. You want to be worthy of the faith put in you by your creditor; yet the above account remains unpaid.”
Judge William Griesbach, chief judge of the U.S. District Court for the Eastern District of Wisconsin, did analyze standing in his dismissal of the claims but found that the consumers had standing under Article III. Nevertheless, he dismissed their claims for lack of merit, finding their interpretations of the letters to be facially “bizarre or idiosyncratic” and therefore insufficient to support a claim under either Section 1692e or Section 1692f.
The Seventh Circuit Consolidated Appeal – Dismissal for Lack of Standing
On appeal, the 7th Circuit affirmed the dismissals, “but on different grounds,” finding that the consumers failed to allege any injury from the statutory violations and therefore that “both cases should have been dismissed for lack of standing.”
In evaluating the consumers’ standing, the 7th Circuit began with the basic requirements for standing as recited in Spokeo Inc. v. Robins, 136 S. Ct. 1540 (2016), and Casillas v. Madison Avenue Associates Inc., 926 F.3d 329 (7th Cir. 2019). “To establish standing, a plaintiff has the burden to establish that he has “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial ruling.”
The court then observed that these consumers’ claims—like so many standing cases—turned on the injury-in-fact requirement. Quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, the 7th Circuit noted that to establish injury in fact, a plaintiff must show that she suffered “’an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical,’” and that the key question in the appeal was whether the consumers had alleged injuries that were “’both concrete and particularized.’”
The 7th Circuit noted that “[p]articularization is generally easy to understand,” as it merely requires that “the plaintiff himself must have personally suffered an actual injury or imminent threat of injury.”
But “concreteness . . . can be trickier.” A concrete injury must “actually exist,” meaning that it must be “real, not abstract,” although that doesn’t necessarily mean “tangible.”
“Intangible harms raise more difficult injury-in-fact questions,” particularly where Congress has identified and elevated a historically unrecognized intangible harm to the status of a recognizable injury” by including it in a statutory provision granting a private right of action. But even if such statutory indicators should be treated as “instructive and important,” the 7th Circuit found, they’re not “conclusive,” meaning that “Article III requires a concrete injury even in the context of a statutory violation.”
With that, the 7th Circuit dove into an analysis of “bare procedural violations,” which can never suffice to support Article III standing in the absence of a concrete personal injury to the claimant. In that vein, the court contrasted the dismissal for lack of standing in Casillas v. Madison Avenue Associates with the finding in Lavallee v. Med-1 Solutions, 932 F.3d 1049 (7th Cir. 2019) that a consumer in fact had standing where she had alleged a complete absence of FDCPA disclosures plus an actual harm in the form of a pending collection lawsuit against her. Here, the 7th Circuit noted that in Lavallee, the collection lawsuit against the consumer “would have been frozen in its tracks” if she had received the FDCPA disclosures and then disputed the debt or sought validation based on those disclosures.
Despite the consumers’ attorney attempts to draw a distinction between “procedural violations” of the FDCPA, e.g., claims under Section 1692g, and “substantive violations,” e.g., claims under Sections 1692g and 1692f, the 7th Circuit found itself unpersuaded that those violations left Casillas inapplicable or changed the “Article III calculus.”
In short, quoting Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1619 (2020), the 7th Circuit reiterated that “[a]n FDCPA plaintiff must allege a concrete injury regardless of whether the alleged statutory violation is characterized as procedural or substantive.” (Emphasis added.)
Applying the Law to the Facts of the Case
In this case, the 7th Circuit found, “neither complaint contains any allegation of harm—or even an appreciable risk of harm—from the claimed statutory violation” and “[n]othing in the plaintiffs’ appellate briefing filled in the gap.” In the 7th Circuit’s view, the plaintiffs had “made no effort to articulate an injury of any kind, either tangible or intangible, [arising] from the violation.”
The court went on to provide a laundry list of potential concrete injuries that the plaintiffs might have claimed, had any of them been true:
[W]e gave the plaintiffs’ attorney several opportunities at oral argument to identify a concrete injury that might support his clients’ standing to sue. He could not do so. He did not contend, for example, that Finance Systems’ communications caused the plaintiffs to pay debts they did not owe or created an appreciable risk that they might do so. He did not claim that his clients were confused or misled to their detriment by the statements in the dunning letters, or otherwise relied to their detriment on the contents of the letters. He did not suggest that it was reasonable to infer that [the consumers] would have pursued a different course of action were it not for the statutory violations (as was the case in Lavallee) . . . . There is no allegation that the letters deterred [the consumers] from seeking medical care or that any provider would refuse to treat them.
Accordingly, the 7th Circuit found that the plaintiffs had sought “to invoke the power of the federal courts to litigate an alleged FDCPA violation that did not injure them in any concrete way, tangible or intangible . . . . [and] that’s impermissible under Article III.” On that basis, the 7th Circuit dismissed the consumers’ claims for lack of standing.
ACA’s Take:
The trend of dismissals for lack of standing under Article III of the U.S. Constitution continues here in the 7th Circuit. The ultimate fallout from this snowballing trend remains to be seen, but overall it’s expected to continue to reduce the number of frivolous lawsuits seeking redress for alleged FDCPA (or TCPA or FCRA) violations in cases in which consumers have not actually been injured.
Any debt collector facing federal consumer protection claims under federal consumer protection statutes should discuss federal standing requirements that courts have finally begun to impose in the wake of Spokeo v. Robins with their in-house counsel and litigation counsel.
Speaking of Spokeo v. Robins, it’s worth noting that ACA also weighed in on that case, filing amicus briefs both in support of the petition for certiorari and on the merits. Those briefs urged the Supreme Court to consider that for too long federal consumer protection statutes had been treated by federal courts as creating liability without requiring an injury in fact, and that the implications of such treatment harmed not only the credit and collection industry but ultimately the entire credit ecosystem.
Cases ACA has supported through the IAF since Spokeo—including this case—have slowly accreted a body of positive decisional law across the country that has protected ACA members without harming consumers and has given courts a ready tool to dismiss the technical, frivolous claims that the plaintiffs’ bar has long feasted upon in violation of our constitutional traditions.
ACA congratulates its member, Finance Systems of Green Bay Inc., on having the fortitude to carry on through the two district court motions to dismiss and the long road to this successful appellate decision. The decision reflects the sort of persistent resistance that members must make to push back against naked claims of technical statutory violations that have for too long sought easy settlements in cases where no injury has, in fact, occurred to a consumer.
In addition, ACA congratulates Klander and Klutho for their excellent representation of Finance Systems’ interests at the district court and at the appellate court level.
For more information about the Industry Advancement Fund and recent case summaries, visit the website here: https://www.acainternational.org/industry-advancement-fund.