No, that headline is not a typo. In two cases, in what could easily be confused for a live-action version of Gary Larson’s comic “The Far Side,” the consumers, represented by the law firm of Edelman, Combs, Latturner & Goodwin LLC argued they did not have the requisite standing to have their cases heard in federal court. In response, the debt collectors argued the consumers had met the requirements for standing in federal court. The two cases are Keller v. Northstar Location Svcs, Case Number 21-cv-3389 (N.D.
Ill 2021), Thomas v. Unifin, Inc. Case Number 21-cv-3037 (N.D. Ill 2021).
Background:
2021
has certainly been an active year for impactful case law. In April 2021, the 11th
Circuit published its decision in Hunstein,
inviting a flurry of copycat cases nationwide. In June of 2021, the Supreme
Court published its decision in Transunion,
causing an increase in defendants seeking dismissals based on consumers’
lack of standing to bring actions in federal court. While these two cases dealt with two different issues, as the
year has progressed, they have become increasingly intertwined in
deciding where and whether a consumer can bring a claim for an alleged ‘Hunstein’
violation.
So
far, we’ve seen the legal concepts addressed Hunstein and Transunion
come together where a defendant debt collector has asked a court to find Hunstein
plaintiffs lack standing because they have not alleged a concrete injury in
fact (see the original Transunion
article for a run-down of injury in fact). For example, in July, the Eastern
District of New York dismissed six Hunstein copycat cases and questioned Hunstein’s
viability after the Transunion decision.
In
an interesting recent twist, debt collectors in Keller and Thomas (defended
by two different law firms) argued that the Hunstein copycat plaintiffs
indeed had met the standing requirements for federal court. It was the consumers who
argued they lacked standing! In each case, on August 20, 2021, Judge Sharon
Coleman in the Northern District of Illinois found in favor of the debt collectors
holding the consumers had standing in federal court.
Why
would a debt collector ask the court to find a consumer has standing in federal court?
First,
it’s essential to recognize that standing to bring a case in federal court derives
from Article III of the U.S. Constitution; the same standing limitations do not
bind state courts. Also, a dismissal for lack of standing is a procedural
function; it is not a ruling on the case’s merits. Therefore, just because a
plaintiff does not have standing to bring a case in federal court does not preclude
that same plaintiff from filing the same lawsuit in state court. As noted
recently in
this article authored by Manny Newburger of Barron & Newburger, PC., there are various reasons a defendant might want to have a
case heard in federal court over state court. In such instances, where federal court
is a better venue for a defendant, that defendant may choose, and may even have
to fight, to have that case heard in federal court.
The
cases:
In
Keller and Thomas, the consumers filed Hunstein copycat lawsuits in the state
court of Illinois. In each case, the defendants used a civil procedure mechanism
called removal to shift the cases from state court to federal court. After removal
to federal court, the consumers asked the court to shift the case back down to
state court alleging the consumers lacked standing in federal court. To keep the cases in
federal court, the defendant debt collectors argued the opposite: that the consumers met the requirements for standing in federal
court.
After
hearing arguments, Judge Coleman rejected the consumers’ arguments that the
line of Seventh Circuit cases regarding standing required the cases to be sent
back to state court. Instead, she
found in favor of the debt collectors, holding that the consumers met the federal Court standing requirements, even where the consumers did not seek actual damages. In reaching this conclusion, Judge Coleman relied
on the Hunstein opinion itself, which found that disclosing information
to a third-party letter vendor constituted an injury in fact because it closely
mirrored the common law tort of invasion of privacy and public disclosure of private
facts. As such, Judge Coleman held that each case would remain in federal court
since the consumers had standing to bring the actions in that venue.
insideARM
Perspective:
Reading
these cases felt a little bit like being in the Upside Down. The arguments
looked the same, they read the same, but everything was a little off; the plaintiffs’
counsel made arguments we typically see from defense counsel and vice versa. Arguing
in favor of standing in federal court was likely a strategic decision by
defense counsel to have the case heard in a venue that might be more suited to
hear the case. After all, state courts are typically not known for having an intricate understanding
of the FDCPA.
Again,
it’s important to remember that standing is procedural; it does not impact the case’s
merits. Arguing that a consumer has standing to bring an action in federal court based on the
allegations of the complaint does not mean that defense counsel agreed or admitted
that there is any merit to the consumers’ allegations. It simply means the defendants
wanted to have the case heard in federal court and advocated for that position.
Another
interesting takeaway from these cases is we now have district court opinions on
both sides of the argument. As such, debt
collectors who find themselves on the receiving end of the Hunstein copycat
cases can have real discussions with their counsel about whether state court or
federal court is the correct venue to defend.
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