Banking and Finance Law Daily Proposed FDCPA class actions claiming misleading, unfair collection letters rejected
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Wednesday, July 8, 2020

Proposed FDCPA class actions claiming misleading, unfair collection letters rejected

By Thomas G. Wolfe, J.D.

The consumers’ theory of their concrete and particularized injury did not meet the threshold necessary for Article III standing.

Although a pair of consumers in their respective, proposed class actions alleged that a debt collector’s letters to them were "misleading" or "unfair" in violation of the federal Fair Debt Collection Practices Act, the majority of a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit determined that it did not need to address the merits of those claims on appeal because the consumers lacked standing under Article III of the U.S. Constitution as a threshold matter. The consumers failed to claim that they, in fact, were misled by the collection letters and failed to establish a resulting concrete or particularized injury from their concededly intangible harm. According to the panel majority, the historical tradition of Article III, the FDCPA itself, and the factual context of the case did not support a finding that the consumers relied on the debt collector’s representations, "much less that the reliance caused them any damages." From the majority’s perspective, the plaintiffs’ theory of their standing, which was "based on risk and informational injuries," did not suffice (Trichell v. Midland Credit Management, Inc., July 6, 2020, Katsas, G.).

Eleventh Circuit Judge Beverly Martin concurred in part and dissented in part from the panel’s majority opinion.

Collection letters. Defendant Midland Funding, LLC, buys defaulted consumer debt, and its sister company, defendant Midland Credit Management, Inc., attempts to collect the debt. The plaintiffs, John Trichell and Keith Cooper, each received debt collection letters during 2017 from Midland Credit.

According to the panel’s opinion, Midland Credit sent three collection letters to plaintiff Trichell, an Alabama resident who purportedly had "defaulted on credit-card debt sometime before 2011" and owed about $43,000. The collection letters stated that Trichell was "pre-approved for a discount program" designed to save him money and offered three repayment plans, "all seemingly generous." However, under Alabama law, the governing statute of limitations provides a defense if a lawsuit to recover on a debt is filed more than six years after the last payment on the debt. Since Trichell had not made any payments for over six years, a lawsuit to recover the debt would be time-barred. At the same time, Midland Credit’s collection letters contained disclaimers at the bottom of each letter: "The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau."

Likewise, Midland separately sent a 2017 collection letter to plaintiff Cooper, a Georgia resident who supposedly had defaulted on his credit-card debt in 2010. The letter offered Cooper "seemingly attractive options for paying off his balance at steep discounts." In Cooper’s case, because the debt had been delinquent since 2010, any claim on it would be time-barred under Georgia law. Further, Midland Credit included the same type of disclaimer in the collection letter to Cooper as it did for Trichell, stating that Midland Credit would neither sue Cooper on the debt nor report the debt to credit bureaus.

FDCPA lawsuits. Trichell sued Midland Funding and Midland Credit under the FDCPA, alleging that Midland Credit’s collection letters were "misleading" (15 U.S.C. § 1692e) and "unfair" (15 U.S.C. § 1692f) in violation of the FDCPA by falsely suggesting that he could be sued or that the underlying debt could be reported to consumer credit reporting agencies. Similarly, Cooper alleged that Midland Credit’s collection letter to him was "misleading" because "it failed to warn that making a partial payment on the debt could constitute a new promise to pay giving rise to a new limitations period." Both Trichell’s and Cooper’s respective actions proposed to represent similarly situated debtors and sought damages for the alleged FDCPA violations.

Procedural context. In Trichell’s case, the federal trial court determined that Midland Credit’s debt collection letters were "neither misleading nor unfair" under the pertinent FDCPA provisions, and the court dismissed Trichell’s complaint for failure to state a claim. Similarly, in Cooper’s case, the federal trial court determined that Midland Credit’s collection letter was not misleading; the court dismissed his complaint for failure to state a claim. Notably, both lower courts did not address the issue of Article III standing before addressing the merits of the case at hand.

Appellate panel: no standing. At the outset, the appellate panel for the Eleventh Circuit observed, "In briefing the appeals, no party raised the question of Article III standing. In both cases, however, we ordered the parties to address that issue at argument."

In sketching the historical tradition and principles of Article III standing, the panel noted that the injury for a justiciable case or controversy must be both "concrete" and "particularized." In the view of the panel majority, Trichell’s and Cooper’s complaints "do not allege that the collection letters caused Trichell or Cooper any tangible injury" under the FDCPA. Neither plaintiff alleged that he "made any payments in response to the defendants’ letters—or even that he wasted time or money in determining whether to do so." Moreover, during oral argument, "Trichell and Cooper asserted only intangible injuries, in the form of alleged violations of the FDCPA."

While the requirement for concreteness may involve an intangible harm, intangible injuries "sometimes qualify as concrete, but not always," the panel explained. "The claims asserted here depart dramatically from these centuries of tradition," the panel asserted. "The plaintiffs seek to recover for representations that they contend were misleading or unfair, but without proving even that they relied on the representations, much less that the reliance caused them any damages."

In assessing the existence of an injury in fact, the panel also considered "the judgment of Congress" and legislative history of the FDCPA. "Here, the judgment of Congress disfavors Trichell and Cooper," the panel majority concluded. Pointing to the FDCPA’s own finding of harms addressed by abusive debt collection practices—from "personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy" (15 U.S.C. § 1692(a))—the panel majority contended that these "serious harms are a far cry from whatever injury one may suffer from receiving in the mail a misleading communication that fails to mislead."

According to the panel, "Trichell and Cooper assert standing based on risk and informational injuries. Neither theory works." In the panel’s view, the FDCPA’s "narrow findings and cause of action affirmatively cut against Cooper and Trichell and, in any event, suggest no congressional judgment firm enough to break with centuries of tradition indicating that misrepresentations are not actionable absent reliance and ensuing damages." Accordingly, the panel vacated the federal district courts’ judgments and remanded the cases with instructions to "dismiss for lack of Article III standing."

Concurring, dissenting opinion. In her separate opinion, Judge Beverly Martin concurred in part and dissented in part. From Judge Martin’s viewpoint, both plaintiffs satisfied Article III’s requirement of a concrete injury by alleging that "Midland sent them deceptive letters in violation of §§ 1692e and 1692f." Martin expressed concern that the majority’s opinion "trivializes the harm resulting from misleading debt collection letters."

Further, Judge Martin communicated that, because plaintiff Cooper alleged a particularized injury, "I believe he satisfied Article III’s injury-in-fact requirement." However, in connection with plaintiff Trichell, "I agree with the majority that he lacks standing to bring his claim because he failed to allege any particularized harm."

The case is No. 18-14144.

Attorneys: David J. Philipps (Philipps & Philipps, Ltd) for John Trichell. Jason Brent Tompkins (Balch & Bingham, LLP) for Midland Credit Management, Inc. and Midland Funding, LLC.

Companies: Midland Credit Management, Inc.; Midland Funding, LLC

MainStory: TopStory AlabamaNews DebtCollection FloridaNews GeorgiaNews

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