Locke Lord QuickStudy: Seventh Circuit Reminds Plaintiffs That Article III Standing Cannot be Overlooked in FDCPA Cases

Locke Lord LLP
January 4, 2021

In Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court held that Article III ‎standing requires a plaintiff to have suffered an injury that is both “concrete” and ‎‎“particularized.” Id. at 1545. To be particularized, the injury must have affected the plaintiff in a ‎personal or individual way. Id. But beyond that, an injury must also be concrete, in that it ‎‎“actually exists.” Id. at 1548. In Spokeo, the Supreme Court ultimately reversed the lower court ‎because of a lack of concrete injury. In doing so, the Court discussed whether a bare procedural ‎violation, without more, can ever constitute a concrete injury. Id. at 1550. Generally, the answer ‎is no. Id. But the court left open the idea that a “violation of a procedural right granted by statute ‎can be sufficient in some circumstances to constitute injury in fact.” Id. at 1549. Therefore, a ‎plaintiff need not always “allege any additional harm beyond the one Congress has identified.” ‎Id. (emphasis in original).‎

What this means for purported violations of the Fair Debt Collection Practices Act ‎‎(FDCPA) without an accompanying allegation of concrete harm has been an open question since ‎Spokeo. The FDCPA exists to protect consumers from abusive, deceptive, and unfair debt ‎collection practices. 15 U.S.C. § 1692(a), (e). To accomplish that goal, the FDCPA contains ‎numerous procedural requirements—such as allowing a borrower to request validation of a ‎debt—and also substantive prohibitions, including the prohibition against false and misleading ‎statements and unfair practices. See 15 U.S.C. §§ 1692e, 1692f. Because the FDCPA provides ‎both statutory damages and attorneys’ fees for a prevailing plaintiff, it incentivizes plaintiffs to ‎file lawsuits alleging violations, even if the evidence of harm is limited or non-existent. Thus, ‎additional clarification on the scope of Spokeo has been needed.‎

In December, the Seventh Circuit provided that needed clarification. In a series of six ‎opinions, the court explained that Article III standing requires that a plaintiff do more than ‎simply allege violations of the FDCPA; the plaintiff must allege that the violation either harmed ‎the plaintiff or caused an appreciable risk of harm. See Nettles v. Midland Funding, LLC, No. 19-‎‎3327 — F.3d —, 2020 WL 7488610 (7th Cir. Dec. 21, 2020); Spuhler v. State Collection Service, ‎Inc., No. 19-2630, — F.3d —, 2020 WL 7351098 (7th Cir. Dec. 15, 2020); Gunn v. Thrasher, ‎Buschmann & Voelkel, P.C., No. 19-3514, — F.3d —, 2020 WL 7350278 (7th Cir. Dec. 15, ‎‎2020); Bazile v. Finance Sys. of Green Bay, Inc., No. 19-1298, — F.3d —,  2020 WL 7351092 ‎‎(7th Cir. Dec. 15, 2020); Brunett v. Convergent Outsourcing, Inc., No. 19-3256, — F.3d —, 2020 ‎WL 7350277 (7th Cir. Dec. 15, 2020); Larkin v. Finance Sys. of Green Bay, Inc., Nos. 18-3582, ‎‎19-1557, — F.3d —, 2020 WL 7332483 (7th Cir. Dec. 14, 2020).‎

In Larkin, the plaintiff alleged that the defendant sent collection letters that violated the ‎FDCPA’s prohibition against false, deceptive, or misleading representations. Larkin, 2020 WL ‎‎7332483, at *1. But the plaintiff’s complaint did not include any allegation of harm from the ‎purported statutory violation. Id. at *4. Thus, the appellate court found that the district court ‎lacked jurisdiction over the case and affirmed the dismissal (modifying it from a dismissal for ‎failure to state a claim to a dismissal for lack of jurisdiction). Id.

Similar situations played out in the other cases as well. In Brunett, the debt collector sent ‎a letter demanding the repayment of a debt, which contained an allegedly false statement about ‎reporting to the IRS. Brunett, 2020 WL 7350277, at * 1. The plaintiff alleged that this violated ‎section 1692e for threatening to take action that could not legally be taken, amounting to a false ‎representation. Id. The plaintiff argued that the letter confused her. Rejecting that argument, the ‎Brunett court held that “[a] debtor confused by a dunning letter may be injured if she acts, to her ‎detriment, on that confusion… But the state of confusion itself is not an injury.” Id. at *2 (citing ‎Trichell v. Midland Credit Management, Inc., 964 F.3d 990 (11th Cir. 2020)). Nor was the ‎plaintiff’s decision to seek the advice of counsel an injury. Id. Real harm is required. The ‎remaining cases decided by the Seventh Circuit also reached a similar result for a similar reason. ‎Gunn, 2020 WL 7350278, at * 2 (being annoyed or intimidated by a letter does not constitute ‎concrete harm sufficient for Article III standing); Spuhler, 2020 WL 7351098, at *3 (plaintiffs ‎who fail to plead that the offending statement caused them to take detrimental actions lack ‎Article III standing). In all these cases, the appellate court found lack of Article III standing and ‎remanded with instructions to dismiss for lack of jurisdiction.‎

Conversely, a different result was reached in Bazile, which involved a plaintiff who ‎argued that information missing in the debt collector’s dunning letter—interest being charged on ‎the debt—caused her to pay other debts ahead of the debt at issue, to her detriment. 2020 WL ‎‎7351092, at *4. The Seventh Circuit held that this allegation sufficient for Article III standing. ‎Nevertheless, because the debt collector challenged the truth of those jurisdictional facts, an ‎evidentiary hearing was needed to determine whether the Court had jurisdiction. Id. at *5. ‎

Taken together, these six cases are a reminder to both plaintiffs and defendants of the ‎importance of Article III standing. Likely because statutes such as the FDCPA include statutory ‎damages and attorney fee shifting provisions, plaintiffs’ attorneys sometimes file these lawsuits ‎without confirming whether the plaintiff suffered actual damages. These six cases are a reminder ‎of the risk of taking such action. Defendants in these actions should be cognizant of whether the ‎complaint sufficiently pleads a concrete injury to provide for Article III standing. And when that ‎standing is in doubt, an early challenge to the truth of the jurisdictional facts pleaded in the ‎complaint can force an evidentiary hearing on the issue, which may allow an early dismissal of ‎the case before significant attorneys’ fees accrue, as shown by the result reached in Bazile.‎