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7th Circuit: No Harm No Foul on FDCPA Claim

Link: Casillas v. Madison Ave. Associates, Inc., 926 F. 3d 329 (7th. Cir. 2019)

Plaintiff, represented by the law firms Philipps & Philipps and Berger Montague, brought a claim under the Fair Debt Collection Practices Act 15 U.S.C. § 1692g(a). Since the decision creates a circuit split, the opinion was circulated but a majority did not favor a rehearing en banc. Chief Judge Wood, joined by Circuit Judges Rovner and Hamilton, filed a dissent from the denial of rehearing en banc.

The Court briefly described the claim before finding it insufficient under the 7th Circuit’s prior Article III standing analysis in Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017):

[A] notice must include, among other things, a description of two mechanisms that the debtor can use to verify her debt. First, a consumer can notify the debt collector “in writing” that she disputes all or part of the debt, which obligates the debt collector to obtain verification of the debt and mail a copy to the debtor. Id. § 1692g(a)(4). A failure to dispute the debt within 30 days means that the debt collector will assume that the debt is valid. Id. § 1692g(a)(3). Second, a consumer can make a “written request” that the debt collector provide her with the name and address of the original creditor, which the debt collector must do if a different creditor currently holds the debt. Id. § 1692g(a)(5). Madison’s notice conveyed all of that information, except that it neglected to specify that Casillas’s notification or request under those provisions must be in writing.

The only harm that Casillas claimed to have suffered, however, was the receipt of an incomplete letter—and that is insufficient to establish federal jurisdiction. As the Supreme Court emphasized in Spokeo, Inc. v. Robins, Casillas cannot claim “a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” ___ U.S. ___, 136 S.Ct. 1540, 1549, 194 L.Ed.2d 635 (2016). Article III grants federal courts the power to redress harms that defendants cause plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions. Because Madison’s violation of the statute did not harm Casillas, there is no injury for a federal court to redress. (Emphasis added).

The panel ( Sykes and Barrett, Circuit Judges, and Durkin, District Judge) emphasized that they were disagreeing with the recent 6th Circuit Macy case:

Casillas’s best case is from the Sixth Circuit, which sees things differently than we do. In Macy v. GC Services Limited Partnership, the defendant violated the very same requirements that Madison did here: it failed to notify the plaintiffs that they had to dispute their debts in writing to trigger the protections of the Fair Debt Collection Practices Act. 897 F.3d 747, 751 (6th Cir. 2018). Like Casillas, the plaintiffs did not allege that they tried or had any intention of trying to contact the debt collector to verify the debt. Id. at 758. Instead, they claimed that not knowing about the writing requirement “could lead the least-sophisticated consumer to waive or otherwise not properly vindicate her rights under the [Act].” Id. The Sixth Circuit held that the plaintiffs had alleged a concrete injury because “[w]ithout the information about the in-writing requirement, Plaintiffs were placed at a materially greater risk of falling victim to `abusive debt collection practices.'” Id. (quoting 15 U.S.C. § 1692(e)).

Judge Wood had two major objections, one procedural and one substantive.:

 In demanding proof of injury, we need to guard against pushing a merits judgment into the Article III injury-in-fact inquiry; we also need to ensure that we are not, de facto, demanding fact pleading. The Supreme Court under-scored the standing/merits distinction in Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014), in which it took care to distinguish between an adequate allegation of injury-in-fact for standing purposes and the question whether that asserted injury fell within the scope of the statute on which the plaintiff was relying (there, the Lanham Act). Id. at 125-28, 134 S.Ct. 1377. It is possible to point to a real injury (and thus pass the Article III hurdle) but still lose on the merits for failing to state a claim on which relief can be granted. See FED. R. CIV. P. 12(b)(6).
We additionally need to be sure that we are not returning to a fact pleading regime, as it is not required or even acceptable under Federal Rule of Civil Procedure 8(a)(2) and it is not specifically required under this Act. We repeatedly have stressed that the Federal Rules of Civil Procedure use a notice-pleading standard, not a fact-pleading standard. A complaint need not include allegations about every element of a claim, as long as it meets the plausibility standard established in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

As for the substantive issue, she felt the panel got it dead wrong:

[P]eople might not appreciate the need for a written record of their dealings with the debt collector and thus without a reminder that they must reduce their concerns to writing, they are likely to forfeit the important substantive rights the Act provides for them. When they receive a letter, they are often encouraged to call a 1-800 telephone number. But someone who responds to a debt-collection letter in that way will be put into a “Gotcha!” situation. No notification in writing equals greatly diminished protection under the Act.
It is a fair inference from Casillas’s complaint that Madison’s omissions at a minimum put her in imminent risk of losing the many protections in the Act that are designed to regulate the debt-collection process as it goes forward. The right to verification, the right to have the name and address of the original creditor, the right to cessation of debt-collection activities, and others, are far from bare procedural protections—they are protections that serve as the gateway to the Act’s substantive regime.

I am no fortune teller, but something tells me this split will end up before the Supreme Court sooner or later. Stay tuned.

Posted in FDCPA

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