The Seventh Circuit dismissed emotional distress and other intangible injuries as a basis for Article III in a class action lawsuit seeking damages under the Fair Debt Collection Practices Act (FDCPA) . In Peter v. Midland Credit Management, Inc.Nos. 19-2993 & 19-3109, 2022 WL 986441 (7th Cir. April 1, 2022), relying on the recent Supreme Court decision in TransUnion LLC vs. Ramirez, 141 S.Ct. 2190 (2021), the Seventh Circuit was vacated and returned with directions to dismiss for lack of subject matter jurisdiction. This is just the latest in a growing number of appellate court decisions dealing with Article III in class action lawsuits for statutory damages.
Factual and Procedural Context
Plaintiff Renetrice Pierre accumulated and defaulted on a credit card account. Years later, in 2015, defendant Midland Credit Management, Inc. (Midland Credit) sent Pierre a letter demanding payment of the debt in his role as collector for Midland Funding – which had purchased Pierre’s debt. The letter said she had been approved for a discount program that would save her money and included a 30-day expiration date. The debt was so old that the statute of limitations had expired – so Midland Credit could seek payment but could not sue for payment. His letter concluded: “The law limits how long you can be sued for a debt. Because of the age of your debt, we will not sue you, we will not report it to any credit reporting agency, and payment or non-payment of this debt will not affect your credit score. .
Pierre reacted to the letter with surprise, confusion and concern, but she did not pay any debt or agree to pay any debt. She alleged that she suffered emotional distress and confusion based on the letter and had to contact Midland Credit to dispute the debt collection and hire a lawyer. She sued Midland Credit under the Fair Debt Collection Practices Act (FDCPA) on behalf of a class of Illinois residents who received similar letters. The Northern District of Illinois certified the class and entered summary judgment for the class, and a jury awarded over $350,000 in damages.
The majority determined that Pierre had not established standing under Article III
Addressing the concreteness requirement of Article III, the Seventh Circuit noted that recent decisions had suggested that “the mere ‘risk of actual harm’ could materially harm plaintiffs seeking damages.” However, the Seventh Circuit ruled that under TransUnion LLC vs. Ramirez, 141 S.Ct. 2190 (2021), a risk of harm can only serve as actual harm for a prospective injunction, and “[a] a plaintiff seeking damages only has standing to sue in federal court for harms that have in fact materialized.
The harm alleged by Pierre, that the letter she received created a risk that she could make a payment on a statute-barred debt, or restart the statute of limitations by paying or promising to pay, represents only one risk of future harm, not actual, harm, such as making a payment. The Seventh Circuit concluded that Peter had therefore failed to establish standing. Consistent with previous rulings, the Seventh Circuit also held that calling to dispute a debt and contacting an attorney for advice were not legally recognizable harms, and that psychological states such as confusion and worry caused by the letter were not concrete enough either. Based on this analysis, the Seventh Circuit reversed the lower court’s judgment and sent the case back for dismissal for lack of subject matter jurisdiction.
The dissent has raised concerns about deference to Congress and a growing split in the circuit
Circuit Judge Hamilton dissented and raised concerns about “zombie debt,” like Pierre’s, and greater division in the circuit over “whether Congress has the power under the Constitution to create private causes of action under the Fair Debt Collection Practices Act and other consumer protection laws. for intangible but real injuries. The dissent asserted that Congress has authorized private actions to seek damages for harms such as emotional distress, stress, anxiety, confusion, and fear. In Justice Hamilton’s view, in passing the FDCPA, Congress specifically prohibited actions that could cause intangible and emotional harm, such as fear and confusion, by including threats, obscene language, and statements that are false or misleading.
The dissent held that Pierre’s claim satisfied Article III under both Spokeo, Inc. vs. Robins578 US 330, 340 (2016), and Trans Union, 141 S.Ct. 2190, “by offering evidence of harms that, first, are central to the protection that Congress has reasonably attempted to provide consumer debtors in the FDCPA, and second, bear close ties to long-recognized harms under common law and constitutional law”.
The dissent pointed out that the Third, Tenth, and Eleventh Circuits were less restrictive in that they provided defenses against intangible injuries such as emotional or psychological harm under the FDCPA, and that the Sixth and Eighth Circuits rendered decisions with a broader approach to defending similar injuries. .
Impact on Companies Facing FDCPA Lawsuits Alleging Emotional or Psychological Harm Only
Firms litigating FDCPA lawsuits in the Seventh Circuit should carefully consider this decision, as it may provide fruitful grounds for dismissing cases for lack of subject matter jurisdiction due to failure to establish standing under of article III. However, as the dissent demonstrated, other circuits interpreted the position more broadly and found the emotional distress to be concrete enough to establish the position. Additionally, dismissal for lack of Article III standing may simply mean that the case is progressing in state court. Due to the differing approaches in different circuits and the important question raised regarding the power of Congress to protect consumers from a multitude of harms through legislation, we expect this to remain a contested area of law until until the Supreme Court provides new guidance.