Why Your FDCPA Plaintiff May Lack Standing To Sue You

Tomio Narita

Thousands of Fair Debt Collection Practices Act (FDCPA) lawsuits are filed in federal courts across the country each year, and in most cases, the plaintiff has not suffered any actual damages resulting from the alleged violation. Most consumers are pursuing only statutory damages, which are capped at $1,000, while their attorneys seek thousands more in fees as compensation for proving technical violations of the Act that have caused no harm to their clients.

Unfortunately, the courts have made these “no injury” cases easy to pursue by repeatedly ruling that consumers do not need to prove “actual damages” under the FDCPA in order to recover statutory damages and attorney’s fees. But are these decisions correct? Probably not, and there is a case pending before the Supreme Court that may help clarify that all plaintiffs in “no injury” cases lack standing to sue.

But first, what exactly is “standing” and why should anybody care about it?

Standing is the most basic component of any federal court case. Standing is the plaintiff’s key to the courthouse door; he must demonstrate that he has it in order to get in, and he must maintain it during the entire course of his lawsuit against you. If the plaintiff lacks standing at any time during the suit, then there is no real “case or controversy” worthy of the court’s time, and the court lacks jurisdiction to proceed.

The standing doctrine has its roots in the Constitution. Article III of the Constitution limits the judicial authority of the federal courts to “cases” and “controversies.” See U.S. Const. art. III, § 2; see also Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 471 (1982) (the existence of a “case” or “controversy” is a “bedrock requirement” of federal court jurisdiction); Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 37 (1976) (“No principle is more fundamental to the judiciary’s proper role in our system of government than the constitutional limitation of federal court jurisdiction to actual cases or controversies.”).

The Supreme Court developed the doctrine of “standing” to ensure that only true “cases or controversies” can proceed in federal court. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). “In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues.” Warth v. Seldin, 422 U.S. 490, 498 (1975) (standing is “a threshold issue in every federal case, determining the power of the court to entertain the suit.”).

What is the test used to determine who has standing to sue, and who does not? The Supreme Court has explained that the “irreducible constitutional minimum” requirements of standing include proof that the plaintiff has suffered “injury-in-fact” resulting from the unlawful conduct – meaning the plaintiff suffered “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560.

Put simply, if a plaintiff has not suffered “injury in fact” as a result of the alleged FDCPA violation, then he lacks standing to sue you.

The “injury in fact” test for standing “requires more than an injury to a cognizable interest. It requires that the party seeking review be himself among the injured.” Lujan, 504 U.S. at 563 (emphasis supplied); see also Raines v. Byrd, 521 U.S. 811, 819 (1997) (“We have consistently stressed that a plaintiff’s complaint must establish that he has a personal stake in the alleged dispute, and that the alleged injury suffered is particularized as to him.”) (emphasis supplied); Warth, 422 U.S. at 498 (“The Art. III judicial power exists only to redress or otherwise to protect against injury to the complaining party, even though the court’s judgment may benefit others collaterally. A federal court’s jurisdiction therefore can be invoked only when the plaintiff himself has suffered some threatened or actual injury resulting from the putatively illegal action…”) (emphasis supplied); Valley Forge, 454 U.S. at 473 (Article III’s standing requirements prevent “the conversion of courts of the United States into judicial versions of college debating forums.”).

If “injury in fact” is so critical to proving standing, then why have so many courts allowed FDCPA plaintiffs to pursue cases when they have suffered no actual harm? Courts have repeatedly held that a plaintiff may recover statutory damages under the FDCPA without alleging or proving any actual damages resulting from the violation. But most courts have reached this conclusion without addressing the decisions of the Supreme Court governing standing.

The first circuit court to do this was the Ninth Circuit in Baker v. G.C. Servs. Corp., 677 F.2d 775, 780-81 (9th Cir. 1982). The plaintiff in Baker challenged the contents of a collection letter, and the district court determined letter violated sections 1692e and 1692g of the FDCPA. See id. at 777. Even though the court held that plaintiff suffered no actual damages resulting from the letter, it awarded him $100 in statutory damages, plus attorneys’ fees. Id. The Ninth Circuit affirmed, noting there is “no indication in the statute that [an] award of statutory damages must be based on proof of actual damages.” Id. at 780. But the Baker court never addressed whether a consumer who had not alleged or proved actual damages stemming from an FDCPA violation had standing.

After Baker, other circuit courts held that plaintiffs may pursue claims for statutory damages under the FDCPA without proving any actual damages. Like Baker, however, most of these courts made their rulings without addressing the Supreme Court’s decisions on Article III standing. See, e.g., Keele v. Wexler, 149 F.3d 589, 593-94 (7th Cir. 1998); Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 307 (2d Cir. 2003); Carroll v. Wolpoff & Abramson, 53 F.3d 626, 629 (4th Cir. 1995); Harper v. Better Business Servs, Inc., 961 F.2d 1561, 1563 (11th Cir. 1992). One court did address the standing issue directly, and ruled that a consumer who suffers no actual damages still has standing based solely upon their claim for statutory damages. See Robey v. Shapiro, Marianos & Cejda, LLC, 434 F.3d 1208, 1212 (10th Cir. 2006).

So where does this leave us?

A case now pending in the Supreme Court may help clarify things. In Edwards v. First American Corp., 610 F.3d 514 (9th Cir. 2010), the Ninth Circuit allowed a consumer to pursue a claim for statutory damages under the Real Estate Settlement Procedures Act (RESPA), even though there was no allegation the consumer was overcharged as a result of the violation. Id. at 517-18. The Supreme Court has granted certiorari and it will address whether Article III standing exists in these circumstances. See First American Financial Corp. v. Edwards, _ S. Ct. _, 2011 WL 2437037 (U.S. June 20, 2011).

Edwards may help clarify that plaintiffs who sue under consumer protection statutes like the FDCPA must plead and prove that they have suffered actual damages in order to demonstrate standing to sue. Congress can pass laws that provide consumers with a new cause of action, but Congress does not have the power to erase Article III’s minimum standing requirements. See Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 100 (1979) (“In no event, however, may Congress abrogate the Art. III minima: A plaintiff must always have suffered a distinct and palpable injury to himself…that is likely to be redressed if the requested relief is granted.”) (internal quotation marks and citations omitted); see also Summers, 129 S.Ct. at 1151 (“Unlike redressability, however, the requirement of injury in fact is a hard floor of Article III jurisdiction that cannot be removed by statute.”) (emphasis added); Valley Forge, 454 U.S. at 488, n.24 (“Neither the Administrative Procedure Act, nor any other congressional enactment, can lower the threshold requirements of standing under Art. III.”); Simon, 426 U.S. at 39 (“broadening the categories of injury that may be alleged in support of standing is a different matter from abandoning the requirement that the party seeking review must himself have suffered an injury.”) (citation omitted).

ACA International has filed an amicus curiae brief in the Edwards case, urging the Court to reverse the Ninth Circuit. A copy of the brief can be downloaded here.

A decision in the Edwards case is not expected until 2012, and the Edwards opinion may or may not address the specific FDCPA issues raised here. But FDCPA defendants should still evaluate today whether the plaintiff who has filed suit has standing to do so. If the consumer has not suffered any “injury in fact” as a result of alleged FDCPA violation, they lack standing and the case should be dismissed.

Tomio Narita is a partner of Simmonds & Narita LLP, a California law firm specializing in defending claims arising under the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Rosenthal Act.