On Monday and Tuesday of this week, the United States Court of Appeals for the Seventh Circuit issued a series of decisions addressing the Article III standing of consumer plaintiffs alleging violations of the Fair Debt Collection Practices Act (“FDCPA”). The court—in five opinions resolving six different appeals arising out of putative class actions—revisited the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), clarifying how an FDCPA plaintiff must allege and prove an “injury in fact” sufficient to establish subject-matter jurisdiction in a federal court.
Two of the five opinions resulted in converting Rule 12(b)(6) dismissals of complaints for failure to state a claim to Rule 12(b)(1) dismissals for lack of subject-matter jurisdiction: Larkin v. Finance Sys. of Green Bay, Inc., Nos. 18-3582 & 19-1557 (7th Cir. Dec. 14, 2020); and Gunn v. Thrasher, Buschman & Voelkel, P.C., No. 19-3514 (7th Cir. Dec. 15, 2020). A third opinion vacated a summary judgment order in favor of the defendant on the merits with an instruction to dismiss the case for lack of Article III standing: Brunett v. Convergent Outsourcing, Inc., No. 19-3256 (7th Cir. Dec. 15, 2020). The fourth decision vacated summary judgment for the plaintiff and directed the district court to dismiss for lack of subject-matter jurisdiction: Spuhler v. State Collection Service, Inc., No. 19-2630 (7th Cir. Dec. 15, 2020). Finally, in its fifth opinion, the Seventh Circuit ruled that, although the plaintiff’s complaint adequately pleaded an Article III injury, factual challenges had called the existence of subject-matter jurisdiction into question, and the court remanded for further evidentiary proceedings: Bazile v. Finance Sys. of Green Bay, Inc., No. 19-1298 (7th Cir. Dec. 15, 2020).
All five opinions were unanimous, with eight of the Seventh Circuit’s current nine active judges joining at least one of the decisions (Judge Hamilton did not sit on any of the panels).
This rapid-fire set of opinions highlights for defendants the importance of carefully scrutinizing FDCPA plaintiffs’ allegations regarding their alleged injuries and testing them through appropriate factual challenges throughout the progression of a case.
The FDCPA has become a hotbed of class action litigation activity in recent years. Consumer protection attorneys routinely monitor debt collection efforts for any potentially false or misleading statements or failures to comply with the statute’s strict disclosure requirements. While the precise facts vary slightly among the cases recently decided by the Seventh Circuit, each arises out of debt collection letters sent to consumer debtors.
In Larkin, the plaintiffs alleged the defendant debt collector violated Sections 1692e and 1692f of the FDCPA by making false, deceptive, or misleading representations regarding the plaintiffs’ need to take action to preserve their credit ratings. Homeowners who fell behind on their HOA fees alleged in Gunn that the defendant violated various subsections of Section 1692e by threatening to bring a foreclosure action. The plaintiff in Brunett contended that a debt collection letter violated Section 1692e(5) & (10) because it stated that the creditor might report a release of indebtedness to the Internal Revenue Service. Finally, the Spuhler and Bazile opinions dealt with debt collection letters that lacked adequate disclosures regarding interest accrual, in violation of Sections 1692e(2), 1692f, and 1692g(a)(1).
Reading the Seventh Circuit’s decisions together, a number of important points become apparent:
The FDCPA decisions handed down by the Seventh Circuit this week go a long way in clarifying the Article III standing analysis in similar statutory-based putative class actions. Industry participants and lawyers (on both sides of the class action bar) should review these opinions to better understand the Constitutional requirements for a cognizable statutory violation capable of being brought in a federal court.