Monday, May 1, 2017

FYI: 6th Cir Rejects FDCPA Allegations of State Procedural Violations and Misrepresentations, Citing Spokeo

Relying on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the U.S. Court of Appeals for the Sixth Circuit recently held that alleged violations of the federal Fair Debt Collection Practices Act ("FDCPA") arising out of state procedural violations were not sufficient to confer subject matter jurisdiction without any corresponding concrete harm.


A copy of the opinion is available at:  Link to Opinion


A law firm brought a collection action in Ohio against a debtor.  The law firm served the debtor with discovery requests, but allegedly did not sent a separate electronic copy as required, and also allegedly incorrectly indicated that debtor's responses to request to admit had to be sworn and notarized.  In response, debtor sued alleging that the law firm violated the FDCPA.


The law firm moved to dismiss arguing that the debtor did not plead any concrete injury in connection with the alleged violation of the state procedural rules.  As you may recall, standing is an issue of the court's subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1).


The trial court, relying on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), granted the law firm's motion to dismiss concluding that it lacked subject matter jurisdiction under Rule 12(b)(1).  This appeal followed.


Initially, the Sixth Circuit observed that Article III of the Constitution limits federal court's jurisdiction to actual cases and controversies.  U.S. Const. art. 3, § 2. 


The Sixth Circuit next noted that to establish standing, the plaintiff must establish: (1) that they suffered an injury in fact that is (a) concrete and particularized and (b) actual or imminent instead of conjectural or hypothetical; (2) a causal connection between the injury and the defendant's alleged wrongdoing; and (3) that the injury can likely be redressed. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992).


The Sixth Circuit recounted that Spokeo concerned a plaintiff's standing to sue under the Fair Credit Reporting Act ("FCRA"). Spokeo clarified than an injury must be concrete to satisfy the injury-in-fact requirement for standing. Id. at 1549. Further, Congress may "elevat[e] to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law." Id. (alteration in original) (quoting Lujan, 504 U.S. at 578).


Yet, a plaintiff must still actually suffer a concrete harm. Although Congress can "identify intangible harms that meet minimum Article III requirements," id. at 1549, Congress cannot "erase Article III's standing requirements by statutorily granting the right to sue," id. at 1547–48 (quoting Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997)). Thus, although Spokeo did not decide whether the circuit court errored when it found that the plaintiff had standing, it held that "bare procedural violation[s]," like the violation alleged by the plaintiff, could not satisfy the injury-in-fact requirement if it is "divorced from any concrete harm." Id.


The debtor argued that, under Spokeo, the FDCPA established a concrete harm — receiving false information in connection with debt collection activities — that he suffered when the law firm's discovery requests made misstatements regarding state procedural rules. The Sixth Circuit found this view of the law untenable.


Initially, the Sixth Circuit observed that "a violation of a state law procedure not required under FDCPA is not the type contemplated by Spokeo, which dealt with the failure to comply with a statutory procedure that was designed to protect against the harm the statute was enacted to prevent."  Instead, the Court noted, the FDCPA's goal is to eradicate abusive debt collection practices. See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010).


The Court held that the harm alleged by debtor -- i.e., that the discovery requests required him to visit a notary and to contact the law firm to obtain electronic copies of the discovery -- is "not the type of harm the FDCPA was designed to prevent."  Further, the Sixth Circuit held that the debtor did not allege that he suffered this harm or that he is at risk to suffer this harm. Therefore, the Court held that the alleged harm did not confer standing.


Specifically, the Sixth Circuit previously interpreted Spokeo and concluded that "a statutory violation in and of itself is insufficient to establish standing." For example in Soehnlen v. Fleet Owners Insurance Fund, the mere allegation that defendants violated ERISA was insufficient to establish standing because by itself this allegation did not "satisfy the concreteness prong of the injury-in-fact requirement." Id. at 582. Here, the Court noted that the debtor's case provides an even weaker argument for standing as the alleged procedural violations alleged are not of the FDCPA.


In Galaria v. Nationwide Mutual Insurance Co., plaintiffs sued under the FCRA alleging hackers stole their personal information from the defendants and that someone may use their data for fraudulent purposes.  There plaintiffs satisfied the injury-in-fact requirement because they alleged that stealing their personal information constituted "a substantial risk of harm, coupled with reasonably incurred mitigation costs." 663 F. App'x 384, 385, 388 (6th Cir. 2016). In contrast to debtor, the Galaria plaintiffs alleged a concrete harm arising out of the statutory violation instead of just a statutory violation.


The Sixth Circuit next turned to the debtor's argument that Church v. Accretive Health, Inc., 654 F. App'x 990 (11th Cir. 2016) (per curiam) supports his position. In Church, the Eleventh Circuit held that plaintiff's allegation that the defendant violated the FDCPA by failing to send required disclosures established standing despite no allegation that she suffered actual harm. Id. at 991, 995.


The Sixth Circuit declined to follow Church. 


First, the Court noted that Church is an unpublished decision and therefore is not binding. See U.S. Ct. of App. 11th Cir. Rule 36-2. Second, the Eleventh Circuit later rejected Church's reasoning in the published decision Nicklaw v. CitiMortgage, Inc., that concerned a mere violation of a state law procedural rule. 839 F.3d 998, 1000 (11th Cir. 2016). Specifically, Nicklaw held that no standing existed where plaintiff merely alleged that defendant did not timely record a satisfaction of the plaintiff's mortgage without alleging a concrete harm and the state-law violation had subsequently been remedied.


The Sixth Circuit also noted that Church is at odds with "the weight of the authority of our sister circuits." Braitberg v. Charter Commc'ns, Inc., 836 F.3d 925 (8th Cir. 2016) (claim that defendant kept personally identifiable information in violation of the Cable Communications Policy Act did not by itself establish standing because plaintiff failed to allege harm); Strubel v. Comenity Bank, 842 F.3d 181, 190 (2d Cir. 2016) (a procedural violation may establish standing if Congress conferred that procedural right to protect plaintiff's concrete interest and the violation presents a risk of material harm to plaintiff's interest, but a plaintiff lacks standing if plaintiff cannot show a risk of material harm to their interest).


The Sixth Circuit further observed that other circuits reached analogous results. See, e.g., Beck v. McDonald, 848 F.3d 262, 271 n.4 (4th Cir. 2017) (plaintiffs allegation of more than just statutory violations constituted an injury in fact); Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1043 (9th Cir. 2017) ("Unlike in Spokeo, where a violation of a procedural requirement minimizing reporting inaccuracy may not cause actual harm or present any material risk of harm, the telemarketing text messages at issue here, absent consent, present the precise harm and infringe the same privacy interests Congress sought to protect in enacting the [Telephone Consumer Protection Act]." (internal citations omitted)); In re Horizon Healthcare Servs. Inc. Data Breach Litigation, 846 F.3d 625, 637–40 (3d Cir. 2017) (a mere procedural violation may fail to establish an injury in fact, but that that issue was not before the court because plaintiffs alleged that defendants disseminated their private information—"the very injury that FCRA is intended to prevent"); Meyers v. Nicolet Rest. of De Pere, LLC, 843 F.3d 724, 727 (7th Cir. 2016) (plaintiff's claim that the defendant did not truncate the expiration date on his receipt, as the Fair and Accurate Credit Transactions Act required failed to establish harm or risk of harm sufficient to confer standing); Lee v. Verizon Commc'ns, Inc., 837 F.3d 523, 530 (5th Cir. 2016) ("[B]ecause [the plaintiff's] 'concrete interest' in the plan . . . was not alleged to be at risk from the purported statutory deprivation, [the plaintiff has] not suffered any injury that was sufficiently 'concrete' to confer standing.").


Finally, the Sixth Circuit concluded that the debtor's "reliance on pre-Spokeo cases is misplaced" because those rulings did not address the issue of whether allegations of a procedural violation sufficiently demonstrated a concrete harm to confer standing.


Accordingly, the Sixth Court affirmed the trial court's dismissal order because the plaintiff's mere allegations of state procedural violations did not result in a concrete harm sufficient to confer standing.






Ralph T. Wutscher
Maurice Wutscher LLP
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