7th Cir. Holds FDCPA ‘Debt Validation Notice’ and ‘Caller Identification’ Issues Not Enough for Standing

The U.S. Court of Appeals for the Seventh Circuit recently
reversed and remanded a trial court’s entry of summary judgment in favor of the
plaintiff alleging violations of the federal Fair Debt Collection Practices Act
with instructions to dismiss the case for lack of subject matter jurisdiction.

In so ruling,
the Court held that the FDCPA violations alleged by the plaintiff did not cause
her any concrete harm and were simply procedural violations that Article III
precludes federal courts from adjudicating.

A copy of the
opinion in Wadsworth v. Kross,
Lieberman & Stone, Inc. is available at:  Link to Opinion.

A company hired
the plaintiff and, in its offer letter, described a signing bonus: $3,750
payable after 30 days of employment, followed by another $3,750 after 180 days
of employment. If the plaintiff voluntarily ended her employment or the company
fired her for cause within 18 months, she was obligated to repay the full
bonus.

The plaintiff
collected both signing payments, but after she completed one year of
employment, the company fired her. A debt collection agency, the defendant,
attempted to recover the bonus payments. The debt collector mailed the
plaintiff a collection letter and an agency employee called the plaintiff by
telephone four times.

The plaintiff
sued the debt collector, claiming that its letter and phone calls violated the
FDCPA, 15 U.S.C. § 1692, et seq., by failing to provide complete written notice
of her statutory rights within five days of the initial communication and
because the caller never identified herself as a debt collector.

The trial court
entered summary judgment for the plaintiff and the debt collector timely
appealed.

On appeal, the
Seventh Circuit addressed the requirement of standing. To establish
standing to sue in federal court, “[t]the plaintiff must have (1) suffered an
injury in fact, (2) that is fairly traceable to the challenged conduct of the
defendant, and (3) that is likely to be redressed by a favorable judicial
decision.” Spokeo, Inc. v. Robins,
136 S. Ct. 1540, 1547 (2016).

At issue in this
case was whether the plaintiff suffered an injury in fact.

The injury
analysis often occurs at the pleading stage, where the court is limited to the
complaint’s “general factual allegations of injury resulting from the
defendant’s conduct” to evaluate standing. Lujan
v. Defs. of Wildlife, 504 U.S. 555, 561 (1992).

But the burden
increases at the summary-judgment stage: The plaintiff must “suppl[y] evidence
of ‘specific facts’ that, taken as true, show each element of standing.” Spuhler v. State Collection Serv., Inc.,
983 F.3d 282, 286 (7th Cir. 2020) (quoting Lujan,
504 U.S. at 561).

To be cognizable
in federal court, an injury must be concrete, which is to say “‘real,’ and not
‘abstract.’” Spokeo, 136 S. Ct. at
1548 (quoting Webster’s Third New Int’l Dictionary 472 (1971)). Though
“traditional tangible harms, such as physical harms and monetary harms,” most
readily qualify as concrete injuries, “[v]arious intangible harms can also be
concrete.” TransUnion LLC v. Ramirez,
141 S. Ct. 2190, 2204 (2021).

However, a
plaintiff cannot establish standing simply by pointing to a mere procedural
violation of a statute. Spokeo,
136 S. Ct. at 1549; Casillas, 926
F.3d at 333. Rather, she “must show that the violation harmed or ‘presented an
“appreciable risk of harm” to the underlying concrete interest that Congress
sought to protect.’” Casillas, 926
F.3d at 333 (quoting Groshek v. Time
Warner Cable, Inc., 865 F.3d 884, 887 (7th Cir. 2017)).

Applying those
principles here, the Seventh Circuit held that the plaintiff would have
suffered a concrete injury only if the debt collector’s failure to provide
notice of the plaintiff’s statutory rights caused her to suffer a harm
identified by the FDCPA, “such as paying money she did not owe” or would have
disputed. Smith v. GC Servs. Ltd.
P’ship, 986 F.3d 708, 710 (7th Cir. 2021).

In her complaint
and testimony, the plaintiff alleged only that she suffered emotional harm,
specifically personal humiliation, embarrassment, mental anguish, and emotional
distress. Furthermore, the plaintiff testified at her deposition that she never
paid the debt collector or the company any money after the debt collector
contacted her, nor did she rely on the debt collector’s communication to her
detriment in any other way. Instead, she stated that she got less sleep and
felt intimidated, worried, and embarrassed.

The Seventh
Circuit concluded that anxiety and embarrassment are not injuries in fact for
the purposes of FDCPA standing. Indeed, the Court pointed out that it already
expressly rejected “stress” as constituting a concrete injury following an
FDCPA violation. Pennell v. Global Tr.
Mgmt., 990 F.3d 1041, 1045 (7th Cir. 2021). Likewise, the Court already
found that it is not enough for a plaintiff to be “annoyed” or “intimidated” by
a violation. Gunn v. Thrasher,
Buschmann & Voelkel, P.C., 982 F.3d 1069, 1071 (7th Cir. 2020).

Accordingly, the
Seventh Circuit reversed the judgment and remanded with instructions to dismiss
the case for lack of jurisdiction.