Eleventh Circuit Deepens Split on Standing in FDCPA Cases

Business Litigation Update

Date: July 09, 2020

On July 6, the Eleventh Circuit dismissed the plaintiffs’ claims under the Fair Debt Collection Practices Act (FDCPA) in Trichell v. Midland Credit Management, holding that they lacked standing because they had not been personally misled by the defendant’s representation. The court found that dismissal was required even if the misrepresentations would have misled the “least sophisticated consumer,” because to have standing to sue in federal court, plaintiffs themselves must have suffered tangible or intangible injuries. The case deepens an existing circuit split on standing in FDCPA litigation, underscores the necessity for FDCPA defendants to aggressively challenge standing issues, and increases the potential for FDCPA claims to be filed in state court where, depending on the jurisdiction, standing may not be an issue.

Background

The FDCPA allows consumers to sue debt collectors who use “false, deceptive, or misleading representation[s]” to collect a debt. When evaluating an FDCPA claim on the merits, most courts use an objective standard that asks whether the hypothetical “least sophisticated consumer” or, in some jurisdictions, “unsophisticated consumer” would have been misled.

Defendant Midland Credit Management sent collection letters to two debtors, John Trichell and Keith Cooper, offering debt-repayment plans even though the expiration of the statutes of limitations meant that Midland could not legally enforce those debts. The letters contained a disclaimer indicating that the age of the debts meant that Midland would not sue. Trichell and Cooper sued Midland for violating the FDCPA, claiming the collection letters were misleading. Neither plaintiff alleged that they themselves were misled, contending instead that the letters were misleading as a matter of law under the least sophisticated consumer standard. The district courts considered the FDCPA claims on the merits and dismissed them for failure to state a claim. Neither considered whether Trichell or Cooper had Article III standing to bring their FDCPA claims.

Trichell Decision

The Eleventh Circuit held that the plaintiffs lacked standing because they did not allege the collection letters caused them any tangible injury such as the payment of money or wasting of time.

The court applied Spokeo’s two-part analytical framework for determining whether an alleged intangible injury is sufficiently concrete to demonstrate standing. First, the court found that “the common law furnishes no analog to the FDCPA claims asserted here.” Second, it found that Congress’s concerns in creating the FDCPA (e.g., a potential increase in bankruptcies, job loss, marital instability or invasion of individual liberty) were not implicated by the plaintiffs’ receipt of a misleading communication “that fails to mislead.”

The court held that the plaintiffs failed to allege that the collection letters posed a risk of harm to them (as opposed to someone else) and that the risk the letters may have posed to them had dissipated. In doing so, the court differentiated the plaintiffs’ personal, subjective injuries from the potential injury to other least sophisticated consumers:

[W]hat matters is whether the plaintiff has suffered a concrete injury, not whether other parties have; … With no plausible allegation that they were ever misled, Trichell and Cooper cannot show standing based on such a risk to others; … [T]he likely reaction of ‘unsophisticated consumer[s]’ may inform a merits determination whether a communication is misleading, but it cannot allow ‘those who have not been injured to vindicate the rights of parties who have.’

The court also rejected the plaintiffs’ contention that the FDCPA provides a right to receive truthful communications from debt collectors, which by itself gave them standing, reasoning that absent any allegation of “concrete downstream consequences” from their receipt of the collection letters, the plaintiffs were left to complain only about receiving information that had no impact on them. The court deemed such allegations insufficient because “an asserted informational injury that causes no adverse effects cannot satisfy Article III.”

The court vacated the district courts’ judgments and remanded the cases with instructions to dismiss for lack of Article III standing.

Dissent and Circuit Split

As noted in Judge Martin’s dissenting opinion, the Trichell decision deepened an existing circuit split on how to evaluate standing. The Eleventh Circuit agreed with the D.C. and Seventh Circuits (and arguably went further by dismissing at the pleadings stage) in concluding that a plaintiff must personally have an injury, even when the elements of the cause of action turn on whether a least sophisticated consumer would have been misled.

In contrast, cases from the Second and Sixth Circuits have held that standing may be demonstrated based on increased risk of harm to consumers generally, without showing that the plaintiffs themselves were placed at greater risk. The Eleventh Circuit concluded that the D.C. and Seventh Circuits’ precedent was “more faithful to Article III.”

Conclusion

The Eleventh Circuit’s decision in Trichell and recent cases from the D.C. and Seventh Circuits (discussed in a previous Business Litigation Update) underscore the necessity for a defendant to challenge whether the plaintiff can allege and demonstrate a personal, subjective and concrete injury, and whether a hypothetical least sophisticated consumer would also be misled. Without demonstrating a personal injury, the plaintiff may not be able to open the courthouse door. But even if the door is opened, without demonstrating that the least sophisticated consumer would have been misled, the plaintiff may not be able to prevail on the merits. As a result, an FDCPA defendant must be vigilant in challenging a plaintiff’s standing while also building the case that no hypothetical least sophisticated consumers were put at risk of injury.

FOR MORE INFORMATION

For more information, please contact:

Jessica E. Salisbury-Copper
937.443.6854
Jessica.Salisbury-Copper@ThompsonHine.com

Scott A. King
937.443.6560
Scott.King@ThompsonHine.com

Joe Barton
937.443.6805
Joe.Barton@ThompsonHine.com

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