The Sixth Circuit dismissed a claim under the Fair Debt Collection Practices Act against an attorney for lack of standing because the letter sent by the debt collector could not have caused the plaintiff a cognizable injury.

In 2010, consumer plaintiffs James and Patricia Hagy defaulted on the loan payments for their mobile home, and the mortgage servicing company initiated foreclosure proceedings.  The parties agreed that the mortgage servicer would waive any deficiency if the Hagys executed a Warranty Deed in Lieu of Foreclosure.  The Hagys executed the Deed, and David Demers, the attorney representing the mortgage servicer, sent a letter to the Hagys’ attorney confirming receipt of the Deed and reaffirming that the mortgage servicer would not attempt to collect any deficiency balance after the sale of the mobile home.  Thereafter, the mortgage servicer called the Hagys, attempting to collect on the debt, but ceased after realizing its mistake.

The Hagys filed suit against Demers and the mortgage servicer.  They alleged that Demers violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e(11), by failing to disclose that the letter was a communication from a debt collector.

The district court denied Demers’ motion to dismiss and, subsequently, his motion to reconsider in light of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).  The case finally made its way to the Sixth Circuit, which dismissed the Hagys’ claim for lack of standing.

The Court determined that the Hagys had “not shown, in truth have not even tried to show, that this failure to disclose caused them any actual harm beyond that of a bare procedural violation.”  The Court also concluded that the letter could only have helped the Hagys, not hurt them.  In fact, they used it to prove that they no longer owed the debt when collection efforts resumed.  Therefore, it could not confer standing.

The Court offered encouraging language for defendants regarding standing.  In rejecting the “anything-hurts-so-long-as-Congress-says-it-hurts” approach to an Article III injury, the Court stated that Congress “may not simply enact an injury into existence, using its lawmaking power to transform something that is not remotely harmful into something that is.”  The Court continued with language regarding Congress’ power to define and create injuries, which “cannot override constitutional limits.” 

The Court’s decision demonstrates yet another interpretation of Spokeo as limiting Congress’ ability to create an injury-in-fact.  Although some circuits continue to take a more liberal approach to standing, defendants in the Sixth Circuit now have more ammunition when challenging standing.

The case is Hagy v. Demers & Adams, et al., No. 17-3696 (6th Cir. 2018).  The decision can be found here.