The following is a case update written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.), analyzing a recent decision of interest:
The United States Court of Appeals for the Fifth Circuit (the Court) recently ruled that confusion that a judgment debtor allegedly experienced from receipt of a debt collection letter was not a concrete injury as required for Article III standing under the Fair Debt Collection Practices Act (FDCPA). Perez v McCreary, Veselka, Bragg & Allen, P.C., 2022 WL 3355249 (5th Cir. August 15, 2022).
To view the opinion, click here.
McCreary, Veselka, Bragg & Allen (“MVBA”) is a law firm specializing in collecting debts owed to Texas local governments. In 2019 it sent a form letter to Mariela Perez demanding that she pay a delinquent utility debt that she owed to the City of College Station. The statute of limitations on that debt had run, which the letter failed to disclose. As a result, Perez sued MVBA under the FDCPA, alleging that the failure to disclose that the debt was time-barred was a misrepresentation in connection with an attempt to collect her debts, a violation under 15 U.S. C. § 1692e. She also sought to certify a class of Texans with time-barred debt who had received the same form letter.
Perez’s complaint asserted three injuries that she suffered as a result of the form letter. First, she alleged that the letter “created a significant risk of harm” in that she might have paid the time-barred debt. Second, she claimed the letter misled and confused her about the enforceability of the debt. Third, she said the letter caused her to waste time consulting an attorney to determine if the debt was enforceable.
Perez moved to certify the class and both parties moved for summary judgment. As relevant here, MVBA contended that Perez lacked a concrete injury-in-fact required for Article III standing under Spokeo, Inc. v Robins, 578 U.S. 330 (2016). While the motions were pending, the Supreme Court decided TransUnion LLC v Ramirez, ___ U.S.___, 141 S. Ct. 2190 (2021). The following day the district court rejected the standing argument and certified the class, concluding that Perez’s statutory rights under the FDCPA constituted a concrete injury-in-fact because they were substantive, not procedural, distinguishing TransUnion on its facts in a footnote. Disputed factual issues precluded a grant of summary judgment for either party, however.
MVBA appealed the class certification to the Court, which vacated the order based on Perez’s lack of Article III standing.
The Court recited the requirements for Article III standing as recently established by TransUnion: a plaintiff must “show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief.” TransUnion, 141 S. Ct. at 2203. At issue here was the necessary concrete injury in fact. TransUnion established that an injury is not concrete unless it has a “ ‘close relationship’ to a harm traditionally recognized as providing a basis for a lawsuit in American courts.” Id. at 2000. The Court noted that the Fifth Circuit recognized that it must “focus  on types of harms protected at common law.” It is not the level of harm at issue, but the type that common law would have recognized.
On appeal, Perez advanced five reasons that she had suffered a concrete injury: (1) that the statutory violation of the FDCPA alone was sufficient; (2) that the letter subjected her to the risk of financial harm; (3) that it confused or misled her; (4) that it required her to consult with an attorney; and (5) that the unwanted letter was analogous to the tort of intrusion on seclusion. None were adequate for the Court to accord Article III standing.
TransUnion foreclosed the statutory violation alone as not being concrete – an “injury in law is not an injury in fact.” It also squelched the risk of harm except in the context of declaratory or injunctive relief to prevent future harm from occurring. The new theory proposed was the letter’s creation of confusion, which the district court had adopted. The Court analogized the assertions to fraudulent misrepresentation torts, but rejected that it created concrete harm because confusion is not the type of harm recognized by the tort of fraud, where the damages element is satisfied by tangible harm, usually pecuniary loss. Confusion is an intangible harm without any direct pecuniary loss; therefore, it did not qualify as a type of harm recognized by a common law tort.
Addressing the “time lost seeing an attorney” argument, the Court concluded that no common law tort would consider that a redressable harm. Finally, the intrusion upon seclusion theory failed on these facts because the alleged violation was the one-time receipt of the form letter, not a barrage of repeated communications, whether written or oral, which might be found to “intrude on seclusion.” Concluding that all five theories of concrete harm failed, the Court ruled Perez lacked standing and vacated the class certification order.
The new theories asserted at the Circuit Court after TransUnion were the confusion element and the time lost element. The Court’s rejection of those arguments is easily understood when one considers whether traditional common law torts would redress that type of intangible harm. The Court said “no” and this author agrees. Not only would consideration of such harm as adequate open up a flurry of nebulous claims, but creating a monetary measure for damages would be nye-on-impossible, whether in the individual or class context. Plaintiffs’ lawyers need to find a harm traditionally addressed by common law torts to survive Article III standing arguments after TransUnion.
This review was written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.), a member of the ad hoc group. Thomson Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.