Press "Enter" to skip to content

7th Cir. Requires Evidentiary Hearing for Factual Disputes as to Standing

interest on medical debtThe U.S. Court of Appeals for the Seventh Circuit recently vacated a trial court’s judgment of dismissal and remanded with instructions to hold an evidentiary hearing limited to the issue of whether the trial court had subject-matter jurisdiction over a plaintiff’s claim that a dunning letter violated the federal Fair Debt Collection Practices Act because it did not clearly state that interest would accrue on the debt.

In so ruling, the Seventh Circuit held that, “[o]nce the allegations supporting standing are questioned as a factual matter — either by a party or by the court — the plaintiff must support each controverted element of standing ‘with competent proof,'” which requires “‘a showing by a preponderance of the evidence, or proof as to a reasonable probability, that standing exists[.]’”

A copy of the opinion in Bazile v. Finance System of Green Bay, Inc. is available at:  Link to Opinion.

A debt collector sent a consumer a collection letter seeking to collect medical debts. The letter stated the date and the total balance of the debt but didn’t indicate whether the amount may increase due to accrued interest.

The consumer sued, alleging that the letter was misleading because it “did not provide the amount of the debt.” The debt collector moved to dismiss the complaint, arguing that the plaintiff lacked standing to sue and failed to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6).

The trial court held that the plaintiff had sufficiently alleged standing because “the violation she alleged amounted to a concrete injury by itself.”  Nevertheless, the trial court agreed with the debt collector on the merits and dismissed the complaint. The debtor appealed.

On appeal, the Seventh Circuit explained that it was presented with two questions: “one question about subject-matter jurisdiction (whether [the plaintiff] has Article III standing to sue), and one question about the merits of the parties’ dispute (whether [the plaintiff’s] complaint states a claim upon which relief can be granted).”

The Court never reached the merits, however, “because jurisdiction is a threshold matter that needs to be further assessed on remand.”

The Seventh Circuit explained that “[s]tanding is a threshold requirement because it derives from the Constitution’s limit on federal courts’ authority to resolve ‘cases’ and ‘controversies.’ … The plaintiff, as the party invoking the court’s jurisdiction, must establish the elements of standing: she must prove that she has suffered a concrete and particularized injury that is both fairly traceable to the challenged conduct and likely to be redressed by a favorable judicial decision.”

In the words of the Court, “[b]ecause standing is an essential ingredient of subject-matter jurisdiction, it must be secured at each stage of the litigation. … At the pleading stage, ‘general factual allegations of injury resulting from the defendant’s conduct may suffice.’”

“But even when a plaintiff’s allegations sufficiently demonstrate standing at the outset of the action, they don’t show standing for long. Once the allegations supporting standing are questioned as a factual matter — either by a party or by the court — the plaintiff must support each controverted element of standing ‘with competent proof,’ … which we’ve understood as ‘a showing by a preponderance of the evidence, or proof as to a reasonable probability, that standing exists[.]’”

The Court reasoned that there are two ways to raise the defense of lack of subject-matter jurisdiction under Rule 12(b)(1): “a facial or a factual attack on the plaintiff’s allegations. … A facial attack tests whether the allegations, taken as true, support an inference that the elements of standing exist. … In this way, a facial attack does not challenge the alleged facts themselves. But a factual attack does, testing the existence of jurisdictional facts underlying the allegations. … Accordingly, a plaintiff undergoing only a facial attack enjoys treatment of her allegations as true, but that benefit does not carry into the context of a factual challenge. … In that context, the court may consider and weigh evidence outside the pleadings to determine whether it has power to adjudicate the action.”

The Court pointed out that although the debt collector did not make clear “whether it was launching a facial or factual attack on [the plaintiff’s] allegations,” the debt collector did make “a factual assertion that conflicts with an inference one could reasonably draw from [the plaintiff’s] complaint: while [the plaintiff’s] allegations support an inference that interest was accruing on the debt, the collector asserted that interest was not accruing.”

Because the trial court did not address this factual dispute and “instead decided the jurisdictional matter on the pleadings, alone, based on its reasoning in Larkin[,] the Court explained that although the trial court “concluded that an alleged violation of § 1692e or § 1692f of the FDCPA by itself amounts to a concrete injury[,] … ‘[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.’ So a plaintiff must do more than allege an FDCPA violation to establish standing; she must also show personal harm.”

The Seventh Circuit then turned to address “the key question in this case: Did [the plaintiff] suffer — or has she faced a real risk of suffering — a concrete injury from the collection letter’s lack of information about whether the debt amount was increasing from the accrual of interest?”

The Court reasoned that “[t]he nonreceipt of information to which a plaintiff is entitled under a statute may amount to a concrete injury, but only if it impairs the plaintiff’s ‘ability to use [that information] for a substantive purpose that the statute envisioned.’ … In other words, a ‘bare procedural violation, divorced from any concrete harm,’ does not satisfy the injury-in-fact requirement of Article III.”

The Seventh Circuit then found that the plaintiff’s “allegations may support an inference that she suffered a concrete injury” because she alleged that the letter did not contain information to which she was entitled, “which resulted in a misleading or inaccurate statement of the debt’s amount. … Her complaint thus suggests that interest was accruing on the debt. And her allegations may also support an inference that the lack of information about accruing interest detrimentally altered her choice about how to respond to and repay her debts.”

For example, the Court noted, discovery could reveal that “not knowing that the debt mentioned in the letter was accruing interest, [she] chose to pay another debt with a lower interest rate, causing her to lose the difference between the interest that accrued under the two rates.

Thus, the Seventh Circuit held, even if the plaintiff “may have sufficiently alleged a concrete injury” at the pleading stage, “the action may not proceed without additional inquiry into whether she actually suffered such a harm … because the collector has challenged the truth of the jurisdictional facts underlying [her] allegations, and that factual dispute about the court’s adjudicatory competency must be resolved before the court can address the merits (if the court has jurisdiction to do so.) The collector specifically maintains that no interest has or will accrue on the debt, implying that [the plaintiff] could not have suffered an injury from the letter’s omission concerning interest accrual. The truth of this assertion, along with [the plaintiff’s] actions or inactions in response to the letter’s exclusion of information about interest, should be determined through an evidentiary hearing.”

Even though the debt collector did not “highlight its factual challenge to [the plaintiff’s] standing, waiver is off the table when it comes to subject-matter jurisdiction. Federal courts ‘have an independent obligation to ensure that they do not exceed the scope of their jurisdiction, and therefore they must raise and decide jurisdictional questions that the parties either overlook or elect not to press.’”

Accordingly, the Seventh Circuit vacated the judgment and remanded the case “for an evidentiary hearing on whether [the plaintiff] has standing to sue.”

Print Friendly, PDF & Email

Hector E. Lora manages the firm’s Florida office and has substantial experience in all phases of complex commercial litigation, including bench and jury trials as well as appellate practice. Hector represents lenders, servicers, debt collectors and debt buyers in complex mortgage foreclosure actions, quiet title actions, federal TILA, RESPA, TCPA, and FDCPA actions and Florida FCCPA actions brought by borrowers or debtors. He also represents creditors in bankruptcy litigation, purchasers of accounts receivable or factoring companies that provide revenue-based financing to small and mid-sized businesses in collection actions, and landlords in commercial and residential evictions. Hector’s broad litigation experience includes over a decade of defending civil enforcement actions filed by the Federal Trade Commission as well as real estate contract disputes and partition actions, contested mortgage foreclosure and condominium lien foreclosure actions and the foreclosure of UCC Article 9 security interests. Hector also has advised a variety of types of businesses regarding their compliance with applicable federal and state consumer protection laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act (TCPA), the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida. For more information, see

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.