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7th Cir. Holds FDCPA ‘Debt Validation Notice’ and ‘Caller Identification’ Issues Not Enough for Standing

fdcpaThe U.S. Court of Appeals for the Seventh Circuit recently reversed and remanded a trial court’s entry of summary judgment in favor of the plaintiff alleging violations of the federal Fair Debt Collection Practices Act with instructions to dismiss the case for lack of subject matter jurisdiction.

In so ruling, the Court held that the FDCPA violations alleged by the plaintiff did not cause her any concrete harm and were simply procedural violations that Article III precludes federal courts from adjudicating.

A copy of the opinion in Wadsworth v. Kross, Lieberman & Stone, Inc. is available at:  Link to Opinion.

A company hired the plaintiff and, in its offer letter, described a signing bonus: $3,750 payable after 30 days of employment, followed by another $3,750 after 180 days of employment. If the plaintiff voluntarily ended her employment or the company fired her for cause within 18 months, she was obligated to repay the full bonus.

The plaintiff collected both signing payments, but after she completed one year of employment, the company fired her. A debt collection agency, the defendant, attempted to recover the bonus payments. The debt collector mailed the plaintiff a collection letter and an agency employee called the plaintiff by telephone four times.

The plaintiff sued the debt collector, claiming that its letter and phone calls violated the FDCPA, 15 U.S.C. § 1692, et seq., by failing to provide complete written notice of her statutory rights within five days of the initial communication and because the caller never identified herself as a debt collector.

The trial court entered summary judgment for the plaintiff and the debt collector timely appealed.

On appeal, the Seventh Circuit addressed the requirement of standing. To establish standing to sue in federal court, “[t]the plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).

At issue in this case was whether the plaintiff suffered an injury in fact.

The injury analysis often occurs at the pleading stage, where the court is limited to the complaint’s “general factual allegations of injury resulting from the defendant’s conduct” to evaluate standing. Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992).

But the burden increases at the summary-judgment stage: The plaintiff must “suppl[y] evidence of ‘specific facts’ that, taken as true, show each element of standing.” Spuhler v. State Collection Serv., Inc., 983 F.3d 282, 286 (7th Cir. 2020) (quoting Lujan, 504 U.S. at 561).

To be cognizable in federal court, an injury must be concrete, which is to say “‘real,’ and not ‘abstract.’” Spokeo, 136 S. Ct. at 1548 (quoting Webster’s Third New Int’l Dictionary 472 (1971)). Though “traditional tangible harms, such as physical harms and monetary harms,” most readily qualify as concrete injuries, “[v]arious intangible harms can also be concrete.” TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2204 (2021).

However, a plaintiff cannot establish standing simply by pointing to a mere procedural violation of a statute. Spokeo, 136 S. Ct. at 1549; Casillas, 926 F.3d at 333. Rather, she “must show that the violation harmed or ‘presented an “appreciable risk of harm” to the underlying concrete interest that Congress sought to protect.’” Casillas, 926 F.3d at 333 (quoting Groshek v. Time Warner Cable, Inc., 865 F.3d 884, 887 (7th Cir. 2017)).

Applying those principles here, the Seventh Circuit held that the plaintiff would have suffered a concrete injury only if the debt collector’s failure to provide notice of the plaintiff’s statutory rights caused her to suffer a harm identified by the FDCPA, “such as paying money she did not owe” or would have disputed. Smith v. GC Servs. Ltd. P’ship, 986 F.3d 708, 710 (7th Cir. 2021).

In her complaint and testimony, the plaintiff alleged only that she suffered emotional harm, specifically personal humiliation, embarrassment, mental anguish, and emotional distress. Furthermore, the plaintiff testified at her deposition that she never paid the debt collector or the company any money after the debt collector contacted her, nor did she rely on the debt collector’s communication to her detriment in any other way. Instead, she stated that she got less sleep and felt intimidated, worried, and embarrassed.

The Seventh Circuit concluded that anxiety and embarrassment are not injuries in fact for the purposes of FDCPA standing. Indeed, the Court pointed out that it already expressly rejected “stress” as constituting a concrete injury following an FDCPA violation. Pennell v. Global Tr. Mgmt., 990 F.3d 1041, 1045 (7th Cir. 2021). Likewise, the Court already found that it is not enough for a plaintiff to be “annoyed” or “intimidated” by a violation. Gunn v. Thrasher, Buschmann & Voelkel, P.C., 982 F.3d 1069, 1071 (7th Cir. 2020).

Accordingly, the Seventh Circuit reversed the judgment and remanded with instructions to dismiss the case for lack of jurisdiction.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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