The United States Code — the collection of all bills passed by Congress and signed into law by the president — is comprised of 53 “titles,” each addressing a particular subject matter. They cover the waterfront — literally, as the “Coast Guard” and “Navigation and Navigable Waters” occupy two of the titles, and figuratively, as wide-ranging subjects like “Domestic Security” and the “Public Health and Welfare” also take up considerable space in the Code. One of the titles that come up time and again for financial services professionals is Title 15, which covers “Commerce and Trade.” One of the lengthier titles in the Code, it also represents one of the biggest areas of litigation exposure for financial services companies. The Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Telephone Consumer Protection Act, and the Electronic Funds Transfers Act are just some of the consumer-oriented federal statutes that have the potential to create crippling liability.
The web of statutory obligations to consumers, along with the accompanying regulations promulgated by the various federal agencies that regulate the financial services industry, has resulted in a flood of federal lawsuits. But we also have a rule in our federal judicial system — established in the Constitution itself — that courts may only hear cases if the plaintiff has actually been injured in some way. This is the doctrine of “standing.” For example, to have standing, the plaintiff generally has to show physical harm or monetary loss or damage to property. As a result, courts have been wrestling with a fundamental question: Does every technical violation of a federal consumer-protection statute create standing for a lawsuit, even if the plaintiff did not suffer any actual harm?
Several years ago, in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court gave us one of the first answers to this question in a Fair Credit Reporting Act (FCRA) case. Among many other credit-reporting rules, the FCRA requires credit-reporting companies to follow reasonable procedures to ensure that the reports are accurate. And the plaintiff in that case claimed that the company had published information indicating (among other things) that he was married and had kids when, in fact, he was single and did not have kids. So, the company may have violated the rule, but did that actually harm the plaintiff? The Court reasoned that the answer may be no, holding that that not all technical violations of the FCRA automatically lead to the kind of real and concrete injury that the Constitution requires for standing.
Spokeo spawned disputes in other consumer-protection areas. For example, in Trichell v. Midland Credit Mgmt, Inc., 964 F.3d 990 (11th Cir. 2020), the Eleventh Circuit analyzed the plaintiff’s standing in the context of a claim under the Fair Debt Collection Practices Act (FDCPA). Following the principles outlined in Spokeo, the Eleventh Circuit ruled that a debtor lacked standing to bring an FDCPA claim for an allegedly misleading debt collection letter, absent evidence that the letter had actually misled the plaintiff debtor.
Here are the facts: Two debtors, one from Alabama and the other from Georgia, each brought separate class actions based on collection letters that each plaintiff had received from a debt collection agency. The letters carried brief disclaimers that noted how the debts were stale under state law and how the collector had no intention of suing to collect the debts or reporting the debts to credit reporting agencies. Each of the debtors asserted that these disclaimers were misleading about the debtor’s rights and the threat of suit. Neither of the debtors alleged that the “misleading” letters had misled him or that he had ever had any intention of acting based on the deficient information in the letters. Instead, they assumed that the violation of the FDCPA in itself constituted an injury.
The Eleventh Circuit knocked down that argument. Because the debtors had alleged, at most, an intangible injury resulting from the violation of the FDCPA, the Eleventh Circuit concluded that they had no standing. The debtors did not actually rely on the misleading nature of the debt collection letters and, a fortiori, did not suffer any damages as a result.
The Eleventh Circuit also found no support for the debtors’ asserted injury in Congress’s stated aims within the FDCPA. The FDCPA’s section on congressional findings contains only a single statement about the types of harms the law is meant to prevent: “Abusive debt collection practices contribute to [a] number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” The court concluded that “whatever injury one may suffer from receiving in the mail a misleading communication that fails to mislead” differs materially from any of the potential harms listed in the FDCPA’s congressional findings.
Muransky v. Godiva Chocolatier, 979 F.3d 917 (11th Cir. 2020) (en banc), is another Spokeo standing case that had been simmering at the Eleventh Circuit for several years and led to an en banc decision this past fall. The original panel back in 2018 had explained that the question in the case was whether an alleged violation of the Fair and Accurate Credit Transactions Act (FACTA) constituted “a concrete injury in fact that confers Article III standing.” The plaintiff alleged that Godiva had violated FACTA by printing “more than five digits of his credit card number on a receipt,” and sought to represent a class of similarly situated consumers. While printing more than five digits does violate FACTA, the plaintiff did not allege that this violation caused actual damages, such as stolen identity-type damages. The court nevertheless held that the plaintiff did have standing to pursue this “untruncated credit card numbers” claim:
Thus, the structure and purpose of FACTA show that it provides customers the right to enforce the nondisclosure of their untruncated credit card numbers, similar to the rights and harms asserted in [common law] breach of confidence cases. The resulting harm from the statute’s violation is concrete in the sense that it involves a clear de facto injury, i.e., the unlawful disclosure of legally protected information.
As a result, according to the panel, the printing of more than five digits of a credit card number on a receipt constitutes a concrete injury for standing purposes. And the panel upheld the district court’s approval of the $6.3 million class-action settlement.
But the en banc court, in a majority opinion written by Judge Britt Grant, reversed course. Relying on Spokeo, the court held that the plaintiff’s claim consisted of “nothing more than a bare procedural violation, divorced from any concrete harm.” In other words, alleging a bare statutory violation is not sufficient on its own to establish Article III standing. In the class action context, this holding impacted more than just the plaintiff himself: Without a named plaintiff with standing, the district court had no jurisdiction to approve the class action settlement. As a result, the en banc court vacated the order approving the settlement and directed the district court to dismiss the case on remand.
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When the statutory damages for certain of these consumer protection statutes approach $1,500 per violation, the potential liability can skyrocket — as you can see in the Muransky case, where Godiva was going to be on the hook for $6.3 million. Thus, the stricter view of standing that we are seeing develop in the federal courts will have the effect of narrowing that potential liability. I expect more of these types of cases to reach the Supreme Court in the coming years, but for now, the Eleventh Circuit’s jurisprudence on this issue is solid.
Charles W. Prueter is a trial and appellate lawyer at Waller Lansden Dortch & Davis, LLP, in Birmingham. He can be reached by email at charles.prueter@wallerlaw.com.
