Almost immediately after the 11th Circuit Court of Appeals published its decision in Hunstein vs. Preferred Collection & Management Services, Inc, 994 F.3d 1341 (11th Cir. 2021), opportunistic attorneys began filing copy-cat cases nationwide. Suddenly, overnight, the well-known and long-accepted practice of sending data to a letter vendor for printing morphed from a non-issue into the most egregious of consumer harms. Certain wily attorneys collectively gasped, clutched their pearls, and started serial filing lawsuits to right this newly discovered wrong.
Well- it seems the Eastern District of New York (EDNY) has had enough. On July 23, 2021, Judge Gary Brown in the EDNY issued a memorandum and order dismissing six Hunstein copy-cat cases. Like all Hunstein copy-cat cases, the lawsuits alleged debt collectors violated the Fair Debt Collections Practices Act (FDCPA) by providing data to mailing vendors.
The July 23rd order begins by including a robust recitation of cases wherein the EDNY addressed abuses of the FDCPA. In fact, over three full pages of the barely fourteen-page order were dedicated to discussing cases that held in one form or another that the FDCPA was “abused and perverted into money-making vehicles for individuals and lawyers.” Although the order did not state the six dismissed cases were necessarily abusive, the implication is clear.
Upon concluding its recitation of the abusive FDCPA filings in the EDNY, the memorandum next turned to recent developments in the law: specifically the Supreme Court’s recent ruling in TransUnion v. Ramirez, 594 U.S. ____ (2021).
Background: The TransUnion Decision:
In Transunion, the class of potential plaintiffs alleged, among other causes of action, that TransUnion violated the Fair Credit Reporting Act (FCRA) by failing to follow reasonable procedures, which ultimately resulted in the addition of alerts to credit files that erroneously labeled consumers as potential terrorists. While all potential class members had the terrorist label included in their credit files, many could not demonstrate that the inaccurate information (i.e., the terrorist alert) in their credit files was distributed to a third party.
Ultimately, the Supreme Court held that though credit report inaccuracies may be a procedural violation of the FCRA, the consumers who could not demonstrate the inaccurate information was shared with a third party lacked standing to maintain their claims in federal court. In reaching this conclusion, the Court reasoned that regardless of the potential for future harm, “bare procedural violations, divorced from any concrete harm…do not suffice for Article III standing.”
Additionally, in footnote 6 of the TransUnion decision, the Court rejected the consumer's theory that TransUnion “published” information internally and to vendors, explicitly stating, American courts “have [not] necessarily recognized disclosures to printing vendors as actionable publications.”
Applicability of the TransUnion Decision to the EDNY Cases:
In his analysis, Judge Brown noted that while instructive, Hunstein (an 11th Circuit Court of Appeals case) is not binding on the EDNY. Further illustrating his position on the matter, before turning to the facts of the EDNY cases, he stated unequivocally, “the Supreme Court’s decision in TransUnion casts significant doubt on the viability of Hunstein.”
The analysis and ultimate dismissal of the EDNY cases had three main components. First, Judge Brown found that on its face, footnote 6 of the TransUnion decision appears dispositive of the mail vendor cause of action advanced by the EDNY plaintiffs. Second, the EDNY plaintiffs alleged only potential future harm caused by the mailing vendor. Since the Supreme Court was clear that the risk of future harm is insufficient for standing, the EDNY plaintiffs’ claims were likewise insufficient.
Third, the facts of the EDNY cases distinguish them from cases in which a plaintiff can plausibly demonstrate an injury-in-fact sufficient for Article III standing. Specifically, unlike the spurious false information provided to third parties (erroneously branding class members as terrorists), the EDNY cases involve debts between $25.00 and $482.28. Per Judge Brown,
“the attempts to analogize [these cases] to the harms alleged to a traditional tort simply fail. For example, using the defamation analysis applied in TransUnion, it seems untenable that the possible non-payment of a relatively small invoice could constitute ‘a defamatory statement that would subject plaintiffs to hatred, contempt, or ridicule’, particularly when such information is shared only with a mailing vendor.”
Finally, the [EDNY] plaintiffs could not invoke the common law tort of intentional infliction of emotional distress “because simply mailing a collection letter, even if erroneous, is a far cry from ‘extreme and outrageous conduct.”
The complete memorandum and order can be found here.
When the Transunion opinion was published, counsel for the defendant in Hunstein immediately notified the 11th Circuit of the decision and its potential impact on Hunstein. Rumor has it that some of the more opportunistic consumer attorneys scoffed, claiming that nothing in the TransUnion opinion would affect Hunstein. This order from the EDNY, particularly its reliance on footnote 6 of the TransUnion decision, signals otherwise. Although this memorandum and order might not change the post-Hunstein landscape overnight, it may provide a basis to continue to persuade other courts (particularly those outside the 11th Circuit) that the Hunstein court misapplied the law.
Another note of caution: be careful what you wish for. Dismissal from a federal court for lack of Article III standing doesn’t mean it can’t be filed in state court. Time will tell if that’s where these cases go. It seems the only way to truly be rid of the nonsensical decision that we know as Hunstein will be if the 11th Circuit Court of Appeals grants the debt collector's petition for rehearing en banc.