In Mack v. Resurgent Capital Servs., L.P., No. 21-2792 (7th Cir. June 7, 2023), the Seventh Circuit reverses and remands a Fair Debt Collection Practices Act (FDCPA) lawsuit brought to collect $3.95 in postage, a claim held by the panel to confer Article III standing to bring the case in federal court.
Since the Supreme Court’s decision in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016), federal courts have been forced to confront on a virtual case-by-case basis what constitutes a tangible injury for purposes of Article III standing. The availability of statutory damages alone is not necessarily sufficient, nor is the cost of vindicating one’s rights (such as hiring a lawyer and paying the filing fee for a lawsuit). One safe avenue for claiming tangible injury is proving monetary damages, and parties are having to be increasingly resourceful if not downright picayune about locating such claims.
The FDCPA is a federal consumer protection law that prohibits debt collection companies from using abusive, unfair or deceptive practices to collect debts. Among other remedies, 15 U.S.C. § 1692k provides up to $1000 in straight statutory damages without proof of actual loss. But the availability of such a bounty alone does not confer standing in Spokeo-world; the victim must still show a legally cognizable injury.
The plaintiff here received a dunning letter from her credit card company (LVNV) seeking collection of $7,179.87. As was her right under the FDCPA, she mailed a letter requesting validation of that number. “Mack researched her options using her cell phone, drafted a validation request by hand, traveled to her local library to type and print the letter on the library’s computer (she did not have access to a computer or a printer at home), and then went to the post office where she paid $6.70 in postage and $3.45 for a certified mail fee (for a total of $10.15) to send the letter to Frontline. Her letter, postmarked June 5, 2018, was received by Frontline on June 7, 2018.”
Yet the plaintiff received no validation. Instead, she received a letter from a collection agency (Resurgent) making the same demand. “She concluded that she needed to send a second validation request, this time to Resurgent, so that the creditor would not assume that the debt was valid. She once again took the steps necessary to write up her draft letter by hand. She returned to the library to type it into the library computer (because library users can‐ not save previous documents on the library’s computer), printed it, and returned to the post office where she once again paid for postage and a certified letter fee (this time totaling $3.95) to send her July 17, 2018 validation request.” The postage was smaller, the opinion observes, because the first time the plaintiff used Priority Mail.
N.B.: “The defendants do not dispute that Mack paid $3.95 in postage to send the second validation request.” Also “Mack did not testify about the cost of getting to the library, which she testified was approximately five minutes from her home. Nor did she discuss the cost of printing at the library. Without any evidence regarding the costs of travel or printing, we will limit our analysis to the $3.95 that Mack expended on postage for her second validation request.”
“None of this was easy for Mack. She had been unemployed for some time and spent her days caring for family members with serious health problems. Trips to the library and post office meant that she was away from the family members who needed her assistance. The $3.95 postage fee for the second letter was also problematic for Mack.” As she testified, “’the money was—it doesn’t seem like much, but when you don’t have it, even this adds up, you know.’”
Mack became the lead plaintiff in a class action alleging violations of the FDCPA against LVNV and Resurgent. “The defendants ultimately moved to dismiss under Rule 12(b)(1) for lack of standing. The defendants asserted that Mack failed to allege an injury in fact from the Resurgent Letter, claiming only that the Letter confused and alarmed her.” Following discovery on standing, the district court dismissed, holding (among other things) that the $3.95 postage amounted to nothing more than an “’attempt to clear up her confusion,’ and compared this to injuries arising from consulting a lawyer or filing suit, which the court said were insufficient to establish standing.”
The Seventh Circuit reverses and remands. It first addresses an anomaly that the district court treated the standing objection under Fed. R. Civ. P. 12(b)(1) as a motion for summary judgment under Fed. R. Civ. P. 56. This was completely wrong. “Although a district court may transform a motion for dismissal under Rule 12(b)(6) into one for summary judgment when ‘matters outside the pleadings are presented to and not excluded by the court,’ Fed.R.Civ.P. 12(d), ‘the Federal Rules of Civil Procedure contain no analogous recognition that a 12(b)(1) motion can evolve into dismissal pursuant to Rule 56 . . . . A grant of summary judgment is a decision on the merits, but ‘a court must dismiss the case without ever reaching the merits if it concludes that it has no jurisdiction.’ . . . . If the plaintiff lacks Article III standing to sue, the court has no jurisdiction to hear the matter.” The panel cured the defect by “simply review[ing] the case as an appeal from a dismissal under Rule 12(b)(1).”
The panel then gets to the heart of the matter: does $3.95 a federal case make? The panel holds that it does, because the second letter was more than a mere effort to vindicate her rights, and thus constituted a tangible harm. “Mack pled that the Resurgent Letter would confuse any debtor, leading her to believe that her initial dispute of the debt was not valid, and causing her to believe that she must re‐dispute the debt or lose the rights that the FDCPA grants to debtors. She also alleged that she was, in fact, confused in that manner . . . . [I]t is reasonable to infer that Mack re‐disputed the debt, and in doing so suffered a concrete injury at least in the form of postage paid to send the second validation request. Mack’s deposition testimony ‘illuminated these allegations’ . . . . She clarified that she went through the same process to mail the second letter as she did for the first, spending time, effort, and money for postage and certified mail fees . . . . The Resurgent Letter thus caused her to suffer a concrete detriment to her debt‐management choices in the form of the expenditure of additional money to preserve rights that she had already preserved.”
The panel holds that Mack’s letter was more than a simple plan to “clear up her confusion.” “Mack spent extra money not to clear up her confusion but in order to preserve her right to seek validation, which she had been misled to believe she failed to do the first time. This distinguishes Mack’s situation from cases where plaintiffs caused themselves injury or were literally trying to clear up their own confusion, for example, by seeking advice from a lawyer.”
The panel also holds that Mack established the other prongs of Article III standing: that the injury was particular to her, that it is fairly traceable to the challenged conduct of the defendants, and that it is redressable by a money judgment. As to the final point, the defendants stressed that the complaint failed to demand “actual damages,” i.e., her actual monetary loss, the panel is having none of that: “Because the complaint included the catch‐all ‘any other relief’ clause and because Mack made clear at her deposition that the cost of postage was an actual loss to her, this argument falls flat. Even if Mack disclaimed compensatory damages for the postage, statutory damages would more than compensate her for her modest out‐of‐pocket costs and satisfy the redressability prong of the standing test.“
Paul Mollica's Federal Courts Blog 