The United States Court of Appeals for the Eighth Circuit recently reversed a trial court’s judgment in favor of a consumer for alleged violations of the federal Fair Debt Collection Practices Act, concluding that the consumer did not have standing under Article III in federal court as the consumer failed to allege or subsequently demonstrate concrete harm in fact.
A copy of the notice in Ojogwu Law Firm v. Rodenburg is available at: Link to Opinion.
In Minnesota, a creditor may issue a garnishee summons to any third party “at any time after a money judgment is entered in [a] civil action.” Minnesota Stat. § 571.71(3). The statute further provides that a copy of the garnishee summons, copies of other documents served on the garnishee and the garnishment disclosure form applicable judgment “must be served by mail at the debtor’s last known postal address no later than five days after service was made on the garnishee. § 571.72, par. 4 and 5.
This appeal arises from the fact that counsel for a judgment creditor (“creditor”) sent a consumer debtor (“debtor”) a copy of a subpoena that was served on the garnishee and other forms of garnishment required by state law, knowing that the debtor retained the attorney after the default judgment was entered, and knowing that the debtor “contests[d] debt.”
Debtor sued under 15 USC § 1692c(a)(2) of the FDCPA.
The trial court held that § 571.72, subd. 4 was inconsistent with and preempted by the FDCPA provision stating “[w]Without the prior consent of the consumer…or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of a debt…if the debt collector knows that the consumer is represented by counsel with respect to such debt. § 1692c(a)(2). This court expressly disagreed with the opinion of another district judge for the District of Minnesota.
The parties stipulated as to relief, and the trial court entered final judgment awarding the debtor statutory damages plus attorney’s fees and filing. The creditor appealed.
On appeal, the Eighth Circuit found that it could not resolve the merits of the intra-district dispute, concluding that the debtor lacked Article III standing to pursue its claim in federal court because that he did not allege and the record did not show that the debtor suffered any concrete injury in fact from the creditor’s breach of § 1692c(a)(2).
The debtor bore the burden of proving the validity of Article III by showing “(i) that he suffered damage in fact that [wa]s concrete, specific, real or imminent; (ii) that the injury was probably caused by the defendant; and (iii) that the harm would likely be redressed through legal action. » TransUnion LLC vs. Ramirez, 141 S.Ct. 2190, 2203 (2021).
The Court further noted that concrete and specific harm is required even when Congress creates a private cause of action, as it did in the FDCPA. See § 1692k.
The Eighth Circuit found that the creditor’s sending of the garnishment summons to the debtor caused him no tangible harm. The Court further found that serving the summons on the debtor was a benefit to him, as it gave him timely notice and the ability to seek an exemption to satisfy the garnishment in a manner that did not disrupt its relations with the garnishee.
The debtor alleged that sending the garnishment summons resulted in intangible harm, as previous courts have held, “actual damages in the form of fear of answering the phone, nervousness, restlessness , irritability, among other negative emotions. But, “In determining whether intangible damage constitutes an injury in fact, history and the judgment of Congress play an important role.” Spokeo, 578 US 330, 340 (2016).
The historical analysis is used to determine whether the alleged injury has “a close relationship to the harms traditionally recognized as the basis of suits in US courts”. TransUnion, 141 S. Ct. at 2204. The role of Congress is important because, by law, it can “elevate[e] to the status of concrete legally recognizable injuries, de facto injuries that were previously inadequate in law. Spokeo, 578 US at 341 (citation omitted).
However, Congress “cannot simply enact a wound in existence, using its legislative power to turn something that is not remotely harmful into something that is.” TransUnion, 141 S. Ct. at 2205 (citation omitted).
Using this analysis, the Eighth Circuit concluded that the intangible damages alleged by the debtor were insufficient to establish concrete damage in fact. The debtor was not led to act to his detriment or fail to protect his interests. The Court further found that the debtor’s alleged tangible injuries “f[e]ll unless there is an injury recognizable under the general law of tort. Buchholz vs. Meyer Njus Tanick, Pennsylvania946 F.3d 855, 864 (6th Cir. 2020).
The Eighth Circuit also found that the debtor failed to demonstrate that his “negative emotions” were caused by the creditor’s initiating a lawful garnishment action.
Finally, the Court underlined the relevance of the fact that the Debtor’s lawyer advised the Creditor that the Debtor contested the debt.
Subsection 1692c(c)(3) provides that “[i]a consumer notifies a debt collector in writing that he refuses to pay a debt … the debt collector no longer communicates with the consumer about this debt, except … to notify the consumer that the debt collector or the creditor intends to invoke a remedy.”
In Heintz v. Jenkinsthe Court considered this exception concluding that “the courts may interpret these exceptions [in §§ 1692c(c)(2), (3)]presumably, to imply that they authorize the actual invocation of the remedy which the Collector “intends to invoke”.… [This] the interpretation is consistent with the apparent objective of the law to preserve the judicial remedies of creditors. § 514 U.S. 291 (1995).
The Eighth Circuit noted that the comment was clearly not applicable because the debtor had not asserted a violation of § 1692c(c), the Court nevertheless found that it strengthened its conclusion that the debtor had not alleged concrete harm in fact because, under Minnesota law, garnishment is an independent proceeding incidental to “an ordinary debt collection action”.
As such, the Eighth Circuit concluded that the debtor lacked standing under Article III because the debtor had not plausibly alleged or subsequently demonstrated concrete harm in fact. The trial court’s judgment was set aside and the case was sent back with instructions to dismiss the complaint. However, the parties were permitted to file supplemental briefs on the issue of Article III standing.