In December 2020, the Seventh Circuit issued no less than six rulings examining and raising the bar for Article III standing in Fair Debt Collection Practices Act ("FDCPA") suits.
The Court has taken a hard stance, refusing to find standing where plaintiff debtors cannot plausibly allege or prove any concrete harm as a result of defendants’ conduct. The Court’s decisions illustrate the proper approach to standing issues at the pleading stage, discussing its implications in 12(b)(6) and 12(b)(1) motions, as well as at the summary judgment stage.
The issue of standing with respect to statutory violations has been a hot button topic for the past five years, stemming primarily from the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). In its six no-nonsense decisions, each summarized below, the Seventh Circuit continues to develop upon Spokeo and its progeny, charting course for more favorable treatment of debt collectors in FDCPA cases at a fundamental level.
For those in the industry, now is a good time to examine any pending matters to determine whether a push for dismissal or favorable resolution is possible. The Gordon & Rees Consumer Protection Litigation practice group has been very successful in this arena and stands by to assist.
1. Larkin v. Fin. Sys. of Green Bay, Nos. 18-3582, 19-1557, 2020 U.S. App. LEXIS 39058 (7th Cir. Dec. 14, 2020).
Plaintiff debtors appealed their dismissal of allegations under sections 1692e, 1692f, and 1692g of the FDCPA. The plaintiffs received a dunning letter that stated in part: “You want to be worthy of the faith put in you by your creditor.” The complaints failed to provide “any allegation of harm—or even an appreciable risk of harm—from the claimed statutory violation.” Larkin, 2020 U.S. App. LEXIS 39058, at *11.
In finding the plaintiffs lacked standing, the Court, in a decision authored by Chief Judge Sykes, reasoned that the plaintiffs could not identify a concrete injury that might give rise to standing at the pleading stage. Specifically, the Court set forth the following factual allegations that the plaintiffs failed to assert, but would have given rise to standing:
- The communications caused the plaintiffs to pay debts they did not owe or created an appreciable risk that they might do so;
- The plaintiffs were confused or misled to their detriment by the statements in the dunning letters, or otherwise relied on the letters to their detriment;
- The plaintiffs would have pursued a different course of action were it not for the statutory violations; and
- The collection letters deterred the plaintiffs from seeking medical care or prevented providers from wanting to treat them.
The Court relied heavily on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) and Casillas v. Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019), both of which set the stage for the firm and favorable standing decisions described herein.
2. Gunn v. Thrasher, Buschmann & Voelkel, P.C., No. 19-3514, 2020 U.S. App. LEXIS 39267 (7th Cir. Dec. 15, 2020).
The plaintiffs alleged that a law firm seeking to collect $2,000 in overdue homeowner association dues sent a dunning letter containing false or misleading statements. The letter stated that the creditor may seek foreclosure, a remedy the plaintiffs believed to be unreasonable and costly to a law firm in pursuit of only $2,000. The plaintiffs therefore alleged that this statement was false or misleading under the FDCPA.
The Seventh Circuit’s decision, authored by the ever-succinct Judge Easterbrook, reiterated the reasoning in Larkin, holding that a violation of a substantive right conferred by the FDCPA does not necessitate standing. The plaintiffs’ mere allegation that they were “annoyed” was not enough. The plaintiffs failed to illustrate how the defendant’s conduct actually injured them, and therefore could not establish Article III standing.
3. Brunett v. Convergent Outsourcing, Inc., No. 19-3256, 2020 U.S. App. LEXIS 39270 (7th Cir. Dec. 15, 2020).
The plaintiff claimed that the defendant debt collector violated the FDCPA by indicating, on a dunning letter, that it would have to report the release of indebtedness to the IRS if the defendant ended up forgiving more than $600. The plaintiff brought suit under section 1692e(5) and 1692e(10) which forbids taking action that cannot legally be taken as well as false representations in connection with a debt.
In another decision authored by Judge Easterbrook, the Seventh Circuit found the plaintiff lacked standing, reasoning that:
- The plaintiff conceded at her deposition that the letter had not injured her;
- The plaintiff did not pay something she does not owe;
- The statement about the potential report to the IRS did not affect the plaintiff’s credit rating or discourage anyone from doing business with her; and
- The letter requiring her to hire a lawyer is insufficient to establish standing.
Although the plaintiff alleged that she was confused and intimidated by the letter, she did not tie that confusion or intimidation to any injury.
As Judge Easterbrook aptly put it: “Talk is cheap, but where’s the concrete harm?”
4. Spuhler v. State Collection Serv., No. 19-2630, 2020 U.S. App. LEXIS 39434 (7th Cir. Dec. 15, 2020).
The defendant sent the plaintiffs dunning letters that omitted a statement that the debt amounts would increase due to accruing interest. The plaintiffs alleged that the letters were therefore misleading under sections 1692e(2) and 1692f of the FDCPA.
The Seventh Circuit reversed the district court’s grant of summary judgment, finding the plaintiffs failed to supply evidence of specific facts necessary to establish standing.
The Court reasoned that “for a concrete injury to result from a dunning letter's exclusion of a statement about accruing interest, that exclusion must have detrimentally affected the debtors’ handling of their debts.” The plaintiffs failed to meet this standard because they:
1. Did not recall ever seeing the dunning letter;
2. Never looked at any letters sent by the defendant;
3. Never called the defendant; and
4. Did not know if they ever paid a bill sent by the defendant.
Because the plaintiffs could not show that the allegedly missing information affected their response to the defendant or their handling of the debts in question, the Court reversed the district court’s grant of summary judgment for lack of standing.
5. Bazile v. Fin. Sys. of Green Bay, Inc., No. 19-1298, 2020 U.S. App. LEXIS 39433 (7th Cir. Dec. 15, 2020).
Similar to the facts in Spuhler, the plaintiff here alleged that the dunning letter she received failed to indicate whether the balance of the debt may increase with the accrual of interest. The plaintiff argued that allegations under sections 1692e or 1692f were sufficient to establish a concrete injury. However, as the Court found in Larkin, the Court here, too, rejected this notion:
“[i]t’s not enough for an FDCPA plaintiff to simply allege a statutory violation; he must allege (and later establish) that the statutory violation harmed him or presented an appreciable risk of harm to the underlying concrete interest that Congress sought to protect.” (quoting Larkin, 2020 U.S. App. LEXIS 39058, at *4) (internal quotations and citations omitted).
The Court found that the plaintiff had sufficiently shown an inference that she suffered a concrete injury. However, this is not automatically sufficient when the opposition challenges the facts leading to that inference in a Rule 12(b)(1) motion. The Court ultimately remanded the case to the district court to hold an evidentiary hearing on whether the plaintiff has standing to sue.
6. Nettles v. Midland Funding LLC, No. 19-3327, 2020 U.S. App. LEXIS 40012 (7th Cir. Dec. 21, 2020)
The plaintiff alleged that the debt collector sent her a collection letter overstating her balance by about $100. The complaint asserted violations of sections 1692e and 1692f of the FDCPA, stating that the letter was false, misleading, or otherwise unfair or unconscionable.
Again, the Court noted that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Quoting Spokeo, Inc. v. Robins, 136 S. Ct. at 1547 (2016).
Looking to Casillas and Larkin, the Court found that the plaintiff failed to allege that the purported statutory violations caused actual or appreciable risk of harm to her. In fact, the plaintiff admitted that the letter did not affect her at all and that her only injury was a receipt of the noncompliant collection letter. Additionally, relying on Gunn, the Court rejected the argument that becoming annoyed and consulting a lawyer is sufficient for standing purposes.
Richard Daniels, Gordon & Rees Law Clerk in the Chicago office, co-authored this publication.