Friday, January 29, 2021

FYI: 7th Cir Holds Plaintiff's Annoyance, Infuriation, Aggravation, Indignation Not Enough for Standing to Sue

The U.S. Court of Appeals for the Seventh Circuit recently vacated the dismissal of a complaint alleging that a dunning letter violated the federal Fair Debt Collection Practices Act (FDCPA) because it mentioned foreclosure as a potential avenue for collection when a foreclosure action was never actually intended to be pursued.

 

In so ruling, the Seventh Circuit held that: 

 

-  In order "to litigate over such acts in federal court, the plaintiff must show a concrete and particularized loss, not infuriation or disgust", annoyance, indignation, or aggravation.

 

-  Here, the trial court lacked subject matter jurisdiction because the complaint did not allege any such concrete injury.

 

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

 

Husband and wife stopped paying their homeowners' association dues.  The association hired a law firm, which sent a collection letter that stated "[i]f the Creditor has recorded a mechanic's lien, covenants, mortgage or security agreement, it may seek to foreclose such mechanic's lien, covenants, mortgage, or security agreement."

 

The husband and wife sued the law firm, alleging the letter was false and misleading and violated subsections 1692e(2), (4), (5) and (10) of the FDCPA because "the law firm would have found it too costly to pursue foreclosure to collect a $2,000 debt."

 

The trial court dismissed the complaint, "ruling that a true statement about the availability of legal options cannot be condemned under the [FDCPA] just because the costs of collection may persuade a law firm to seek one remedy (damages) rather than another (foreclosure)."

 

On appeal, the Seventh Circuit did not reach the merits, instead directing "the parties to file supplemental briefs addressing the question whether plaintiffs have standing to sue" under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), and Casillas v. Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019).

 

The plaintiffs argued that "they were annoyed or intimidated by the letter, which as a matter of law satisfies the constitutional injury requirement" under Gadelhak v. AT&T Services, Inc., 950 F. 3d 458 (7th Cir. 2020).

 

The Seventh Circuit disagreed.

 

It distinguished Gadelhak because it involved "uninvited and unintelligible text messages, which intruded on the plaintiffs' seclusion[,]" from the case at bar, which did not allege that "the law firm's letter was a forbidden invasion of privacy."

 

Thus, the Court rejected the plaintiffs' argument that the letter violated the FDCPA's express prohibition on threatening action "that is not intended to be taken" 15 U.S.C. 1692e(5)) was sufficient, because "[n]othing in Gadelhak implies that this has ever been deemed a concrete injury."

 

Annoyance, indignation, infuriation, disgust or aggravation are not enough. The Seventh Circuit explained the issue as follows:

 

"Consider the upshot of an equation between annoyance and injury. Many people are annoyed to learn that governmental action may put endangered species at risk or cut down an old-growth forest. ...Similarly many people are put out to discover that a government has transferred property to a religious organization, but Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464 (1982), holds that a sense of indignation (= aggravated annoyance) is not enough for standing."

 

Instead, "the Supreme Court has held that, to litigate over such acts in federal court, the plaintiff must show a concrete and particularized loss, not infuriation or disgust."

 

The Court also rejected the plaintiffs' argument that "Spokeo and Casillas involved procedural rights, while their claim arises under one of the [FDCPA]'s substantive provisions" because "Article III of the Constitution does not distinguish procedural rights from substantive claims; it makes injury essential to all litigation in federal court."

 

Because the plaintiffs did not allege that the "contested sentence in the defendant's letter caused them any concrete harm", the trial court's judgment was vacated and the case remanded with instruction to dismiss for want of subject-matter jurisdiction.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Wednesday, January 27, 2021

FYI: 7th Cir Holds FDCPA Consumer's Confusion and Hiring Attorney Not Enough for Article III Standing

The U.S. Court of Appeals for the Seventh Circuit recently vacated judgment in favor a debt collector against putative class action claims raised by a consumer that its collection letter violated the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA") by threatening action that could not legally be taken and amounting to a false representation.

 

In so ruling, the Seventh Circuit concluded that dismissal for lack of subject matter jurisdiction was appropriate because the collection letter did not include a false statement, and that the consumer conceded that the letter had not injured her, instead only causing "confusion" that led to her retaining counsel, all of which was not sufficient as a concrete injury to confer standing under Article III.

 

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

 

A consumer ("Consumer") received a letter from a debt collector ("Debt Collector") demanding repayment of outstanding debt.  In the letter the Debt Collector offered to accept 50% of the balance in satisfaction of the debt, and invited the Consumer to contact it to discuss other options if this was unaffordable. 

 

The letter further informed the Consumer that if more than $600 of the debt was forgiven, it would be required to report the forgiven amounts to the Internal Revenue Service as taxable income on a Schedule 1099-C in accordance with federal law.  Thus, because the Consumer's debt of $1,012 exceeds $600, a report would be required in the Debt Collector accepted $412 or less as full payment. 

 

The Consumer filed a putative class action complaint against the Debt Collector on behalf of herself and all other recipients of similar letters, alleging that the statement about reporting to the IRS violates the sections §1692e(5) and (10) of the FDCPA as threatening action that could not be legally taken, amounting to a false representation.  

 

At summary judgment, the trial court considered the Consumer's offer to pay the Debt Collector $5 a month —- an amount less than the interest accruing on the debt.  Because this amounted to a request that the whole debt be forgiven, thus opening a possibility of reporting to the IRS, the trial court held that the Consumer failed to proffer evidence owing that she had been misled to her detriment.

 

The trial court granted summary judgment in the Debt Collector's favor.  The instant appeal ensued.

 

As in every other federal suit, as a threshold issue the Seventh Circuit discussed the Consumers' Article III standing to bring their claims in federal court, citing several decisions holding that a plaintiff who lacks a concrete injury cannot sue under the FDCPA or a similar statute just because a statement in a letter is incorrect or misleading.  See, e.g., Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016); Casillas v. Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019)

 

Here, the Consumer testified at her deposition that the letter had not injured her, and it is undisputed that she did not pay any amounts not owed (or anything at all), and the statement about the possibility of reporting to the IRS did not affect her credit rating or creditworthiness. 

 

Nevertheless, she argued that Spokeo and Casillas were not controlling because they concern "procedural" rights rather than "substantive" rights —- which is how she characterizes her claim for alleged violation of § 1692.

 

The Seventh Circuit rejected this argument citing the SCOTUS' decision in Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), a case in which the plaintiff asserted the violation of a substantive right, found no standing using the approach of Spokeo, and its own recent holding that the asserted violation of a substantive right conferred by the Fair Debt Collection Practices Act does not guarantee the plaintiff's standing, and a concrete injury still must exist. See Larkin v. Finance System of Green Bay, Inc., No. 18-3582 (7th Cir. Dec. 14, 2020).

 

Turning then to the question of whether the Consumer suffered an injury, the Seventh Circuit noted that while a debtor confused by a dunning letter may be injured if she acts, to her detriment, on that confusion, that the state of confusion is not itself an injury. See, e.g., Trichell v. Midland Credit Management, Inc., 964 F.3d 990 (11th Cir. 2020).

 

The Court reasoned that if that were the case, "everyone would have standing to litigate about everything." 

 

The Seventh Circuit further reasoned that the fact the Consumer's confusion led her to retain counsel did not change its evaluation, as a desire to obtain legal advice is not a reason for universal standing, and the plaintiffs in Thole, Spokeo and related decisions all had counsel, nor did her claims that the letter was "intimidating" or "confusing."

 

For these reasons, the Seventh Court concluded that the Consumer lacked Article III standing, and vacated the trial court's judgment with instructions to dismiss for lack of subject-matter jurisdiction.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

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