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
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