No FDCPA Standing for Procedural Violation

March 30, 2017 in Credit Reporting, FDCPA, Ohio Courts by Brad Council

In Johnston v. Midland Credit Management, the U.S. District Court for the Western District of Michigan, Southern Division, held that a mere “procedural violation” did not satisfy the concrete-harm requirement of standing, and that a complaint alleging an FDCPA violation did not automatically establish a claim upon which relief may be granted.  Johnston v. Midland Credit Management, W.D. Mich. No. 1:16-cv-437, 2017 WL 370929 (Jan. 26, 2017).

In Johnston, Plaintiff defaulted on credit card debt.  Defendant, Midland Credit Management (“MCM”), sent a letter to Plaintiff, which stated that Plaintiff had been pre-approved for a discount program to pay off his debt, and the letter provided Plaintiff with three repayment options.  The second option for repayment—the option under contention in the case—listed a blank discount rate percentage and a monthly payment of $0.000 due about one month from the date of the letter. After receiving the letter, Plaintiff retained counsel, who advised Plaintiff to call MCM and proceed with the second option.  During a phone call between Plaintiff and MCM, an MCM customer-service representative explained that there was an error in the letter Plaintiff had received; the second option—the option with $0.00 due—was a mistake. 

Plaintiff brought an action under the Fair Debt Collection Practices Act (FDCPA) alleging false, deceptive, and misleading statements in violation of 15 U.S.C. § 1692e.  Specifically, Plaintiff alleged that the second option in the letter was false, misleading, or deceptive, in violation of §§ 1692e(10) and 1692e.  Defendants subsequently filed a motion to dismiss for lack of subject matter jurisdiction under rule Fed. R. Civ. P. 12(b)(1) and for failure to state a claim under Fed. R. Civ. P. 12(b)(6).  The District court found in favor of Defendants, and dismissed the case.

The Johnston court held that the plaintiff did not have standing to bring his claim in federal court.  To establish standing in an Article III court, a party must demonstrate an injury-in-fact that is fairly traceable to the challenged conduct of the defendant, and the injury is likely to be redressed by a favorable judicial decision.  Lujan v Defenders of Wildlife, 504 U.S. 555, 560-561 (1992).   The Johnston court followed the rationale in Spokeo, Inc. v Robins, 136 S. Ct. 1540 (2016), a recent case in which the Supreme Court held that a plaintiff must, at the pleading stage, plausibly allege facts supporting an inference of a concrete injury in order to have standing under the Fair Credit Reporting Act.  Spokeo at 1548.  The Spokeo court also held that the violation must constitute a “real risk of harm” to the plaintiff.  Id.  The court in Johnston found the plaintiff’s claim, which alleged a statutory violation, was not enough to establish standing, as the violation alone did not articulate a “real risk of harm” to the plaintiff.  Just as in Spokeo, the Johnston court held a party must allege more than just a “bare procedural violation” to satisfy Article III’s injury-in-face requirement.

Johnston is one of many post-Spokeo cases, in which courts have held that standing requires a plaintiff to allege an injury that is both concrete and particularizedId. at 1545. District courts in the Sixth Circuit have similarly held that while Congress may create new legal rights by statute, a plaintiff must be able to show that she suffered “a concrete, particularized, and personal injury . . . as a result of the violation of the newly created legal rights in order to have Article III standing.”  See Macy v GC Servs. L.P., 2016 U.S. Dist. LEXIS 13421 at *6 (W.D. Ky. Sept. 29, 2016), (quoting Imhoff Inv., LLC v Alfoccino, Inc., 792 F.3d 627, 633 (6th Cir. 2015).

For example, in Smith v. Ohio State Univ., 191 F.Supp. 3d 750 (S.D. Ohio 2016), the court found a plaintiff’s concession that she did not suffer “concrete consequential damage” as a result of an alleged procedural violation of the FCRA was fatal to standing.  Id. at 757.  In Smith, plaintiff argued they had standing based only on an alleged FCRA violation.  Id. at 756.  However, the court, relying on the Spokeo analysis, found that plaintiff must allege more than the violation itself to establish standing; plaintiffs must also allege that the violation resulted in a concrete and particularized injury-in-fact.  Id. at 757.  Without an injury, plaintiffs did not have standing, and thus the court lacked subject-matter jurisdiction to hear the case.  Id.

As Johnston illustrates, the post-Spokeo analysis places a higher burden on a plaintiff to clearly state how an alleged statutory violation has resulted in a concrete injury-in-fact. If a court follows the Spokeo analysis, that court is likely to reject and dismiss a party’s claims for lack of standing, unless a plaintiff is able to allege a concrete and particularized injury-in-fact.

The Full Text of the Johnston Opinion May Be Found HERE