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Author: Steven Uhrich

7th Circuit: Spokeo Dooms FCRA 1681b Claim

Link: Crabtree v. EXPERIAN INFORMATION SOLUTIONS, INC., Court of Appeals (7th Cir. 2020).

The 7th Circuit, in a decision by Judge Scudder, affirmed an opinion by District Court Judge Norgle dismissing a consumer’s FCRA claim—and, interestingly, a counterclaim by Experian—for lack of Article III standing and thus subject matter jurisdiction.

The claim was simple: Experian, through an agent, sold a copy of his consumer report for a purpose not allowed under the Fair Credit Reporting Act, 15 U.S.C. 1681b(a). The Complaint is available here.

The Complaint notes that Western Sierra (the company Experian sold the data to) is a debt settlement company and thus can’t make a firm offer of credit, but the 7th Circuit decision doesn’t mention that.

Instead, the decision focuses in on the fact that the Plaintiff couldn’t testify that he had not received a firm offer of credit from Western Sierra, and that the disclosure was made five years prior to filing the lawsuit.

After reviewing the 7th Circuit progeny of Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016): Gubala v. Time Warner Cable, Inc., 846 F. 3d 909, Robertson v. Allied Solutions, LLC, 902 F. 3d 690, and Casillas v. Madison Avenue Associates, 926 F.3d 329 (7th Cir. 2019) (Discussed on this blog here), the panel concluded that the injuries were not sufficient to meet the Article III standard:

Crabtree has identified no harm of any kind. Like the plaintiff in Casillas who never attempted to respond to the debt collector and therefore was not affected by the incomplete instructions, Crabtree admitted in sworn testimony that he would have thrown any firm offer from Western Sierra in the trash. Indeed, he only learned about these events after being contacted by his lawyer nearly five years later. If this communication had not occurred, Crabtree would have gone on completely unaware of and unaffected by any prescreen list. This all falls well short of the concreteness mandated by Article III. Crabtree had to come forward with something showing that he did not receive a firm offer, that Western Sierra would not have honored a firm offer, that he was affected by the lack of a firm offer, or that he suffered any actual emotional damages. He failed on each possible ground, leaving him without the concrete injury necessary for Article III standing.

However, the panel clearly left the door open to similar claims on different facts:

Do not overread our conclusion to mean that a claim like Crabtree’s fails as a matter of course. Based on Spokeo‘s principles, there is no question that a consumer reporting agency’s unauthorized disclosure of consumer credit information can be a concrete injury. The common law recognized some right to privacy that “encompass[es] the individual’s control of information concerning his or her person.” U.S. Dep’t of Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749, 763 (1989). And FCRA specifically articulates a statutory right to privacy in consumer credit reports. See 15 U.S.C. § 1681(a). We have previously recognized this right to privacy in such information. See Cole v. U.S. Capital, Inc., 389 F.3d 719, 728 (7th Cir. 2004) (holding that a plaintiff stated a claim when a lender obtained her credit data without giving her the benefit of a firm offer, one of the permissible purposes under FCRA).

The disclosure of consumer credit information, absent any exchanged-for consumer benefit contemplated by FCRA, can constitute an injury-in-fact for the purpose of Article III standing. (emphasis added).

Experian’s counterclaim alleged that the Plaintiff also obtained consumer reports for an unlawful purpose: for the purpose of initiating the lawsuit at issue. The panel mostly agreed with the District Court judge that Experian could not rely on its costs incurred in defending the case under Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998), but found on independent grounds that Experian did not sufficiently allege how its reputation was injured by Plaintiff’s suit. The panel also said that attorney fees were not enough by themselves to sustain a counterclaim:

Put more simply, a party injured only by incurring defense costs—while injured for constitutional purposes—must find some statutory or common law hook for its motion or claim to recover those costs.

and the FCRA provided no such “hook”:

These statutory provisions make clear that Congress passed FCRA to protect consumers’ right to privacy in their credit data. The statutory objective was to confer protections on consumers, not to arm consumer reporting agencies with rights against consumers.

7th Circuit Rejects Plaintiff’s FDCPA Claim For Listing Two Creditors

Link: Dennis v. Niagara Credit Solutions, Inc., No. 19-1654 (7th Cir. 2019)

The Seventh Circuit rejected an appeal seeking to overturn a decision by Richard L. Young of the Southern District of Indiana. Judge Young dismissed plaintiff’s claim via judgment on the pleadings.

Plaintiff filed suit alleging that the defendants violated § 1692g(a)(2) of the FDCPA by “fail[ing] to identify clearly and effectively the name of the creditor to whom the debt was owed:”

“Listing two separate entities as “creditor” — one of them a debt buyer, which would likely be unknown to the consumer — and not explaining the difference between those two creditors, then stating that Niagara was authorized to make settlement offers on behalf of an unknown client — could very likely confuse a significant portion of consumers who received the letter as to whom the debt was then owed.”

Since the standard of review is de novo, the panel dove into its own analysis of the claim and agreed with the district court:

This is a meritless claim. In Smith, the original and current creditors were the same. In this case, where a consumer’s debt has been sold, it is helpful to identify the original creditor (which the customer is likely to recognize as he had done business with them in the past) and the current creditor (which the customer may not recognize, and which the FDCPA requires the letter to identify). An unsophisticated consumer will understand that his debt has been purchased by the current creditor—an example of the type of “basic inference” we believe such consumers are able to make. The defendants’ letter thus “provides clarity for consumers; it is not abusive or unfair and does not violate § 1692g(a)(2).” Smith, 926 F.3d at 381.

The case was argued by David Philipps and Boyd Gentry.

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.