In Hagy v. Demers & Adams, the Sixth Circuit looked to Spokeo, Inc. v. Robbins to hold that not all inaccuracies cause real harm sufficient to confer standing to bring suit under the Fair Debt Collections Practices Act (FDCPA).
The Hagys took out a loan to purchase a mobile home and some property on which to park it. After they defaulted on the loan, Green Tree Servicing initiated foreclosure proceedings. Mrs. Hagy contacted the law firm of Demers & Adams, which represented Green Tree to settle the claim. Because of this call, Demers sent two letters: one to the Hagys offering to waive any deficiency on the loan in exchange for the execution of a deed in lieu of foreclosure, which the Hagys signed, and one to the Hagys’ lawyer confirming receipt of the deed in lieu and the terms of the agreement. The Hagys, sued Green Tree, and the lower court granted summary judgment in favor of the Hagys, finding that the second letter failed to disclose that it was a communication from a debt collector in violation of the FDCPA. Demers and his firm appealed to the Sixth Circuit.
The Sixth Circuit concluded that the Hagys were not harmed by Demers and his firm’s alleged violation of the FDCPA because the contents of the letter were truthful, and the letter gave them peace of mind. Relying on Spokeo, the Sixth Circuit rejected what it called an anything-hurts-so-long-as-Congress-says-it-hurts theory of Article III injury, holding instead that the Hagys had pled only a bare procedural harm. Although the Sixth Circuit acknowledged Congress’s power to define injuries, the Court held that it cannot do so without justification and that nowhere in the FDCPA or legislative history did Congress explain why the absence of such a disclosure that something is a communication from a debt collector always creates an Article III injury.
In reaching its decision, the Sixth Circuit specifically questioned whether a recent Eleventh Circuit opinion, Church v. Accretive Health, Inc. was still good law in the Eleventh Circuit. In Church, the Eleventh Circuit had held that the FDCPA created a statutory right to certain information, which when violated, is sufficient injury to confer standing. Since the Eleventh Circuit decided Church, the Eleventh Circuit found in Nicklaw v. CitiMortgage, Inc., that a similarly bare statutory violation had not caused any actual harm to a plaintiff and dismissed his case for lack of standing.
While Spokeo arguments have met resistance by courts in many areas, standing challenges remain viable under the FDCPA in the Sixth Circuit and elsewhere. Litigants should neither dismiss nor blindly file motions arguing a lack of standing. However, a well-reasoned challenge to truly procedural violations can prove fatal to consumer suits, including those under the FDCPA.
