In a recent decision, the U.S. Court of Appeals for the Sixth Circuit affirmed the dismissal of federal claims brought by a mortgagee against Trinity Financial Services, LLC (Trinity) under the Fair Debt Collection Practices Act (FDCPA). While the appellate court agreed that the plaintiff lacked standing, its holding was rooted in different grounds, namely that the plaintiff’s injuries were not traceable to any independent FDCPA violation.

In 2003, the plaintiff secured a second mortgage on her home for $28,000. By 2013 or 2014, she had ceased making payments. Trinity acquired the loan in October 2018 and initiated foreclosure proceedings the following month. However, the foreclosure action was dismissed without prejudice in December 2019 when Trinity’s attorneys failed to appear at trial.

According to the complaint, during the foreclosure process, the plaintiff incurred significant legal fees and experienced severe stress, exacerbating her diabetes. Specifically, by the time the action was dismissed, the plaintiff had already paid her attorneys $6,685.00 and incurred another $6,715.00 in outstanding fees and costs. She also received numerous communications from third parties interested in purchasing her home, adding to her distress.

The plaintiff subsequently filed a lawsuit against Trinity, alleging violations of the FDCPA and other consumer protection laws. The plaintiff alleged that Trinity violated these laws by pursuing foreclosure and by failing to respond to certain letters her attorneys sent requesting information regarding her mortgage. The district court granted summary judgment in favor of Trinity, dismissing the federal claims for lack of standing and declining to exercise jurisdiction over the state claims. The court ruled that the “[c]osts, attorney’s fees, and emotional harm incurred while defending against a foreclosure action are not the sorts of injuries that confer standing on a plaintiff seeking to recover damages against a mortgage company under the federal and state consumer laws relied upon in this case.” The plaintiff appealed the decision.

The Sixth Circuit reviewed the district court’s standing determination de novo. To establish standing, a plaintiff must demonstrate: (1) an injury in fact; (2) a causal connection between the injury and the defendant’s conduct; and (3) that the injury is likely to be redressed by a favorable court decision.

Injury in Fact

The plaintiff argued that her legal fees and emotional distress constituted injuries under the FDCPA. Unlike the district court, the Sixth Circuit agreed that such injuries could be recognized under the FDCPA. “Where a plaintiff [] seeks to recover for attorney’s fees incurred in separate foreclosure proceedings, we have squarely held that those fees ‘constitute a concrete, particularized injury.'”

Causal Connection

Despite recognizing the potential injuries, the court found that the plaintiff failed to establish a causal connection between her injuries and any FDCPA violation by Trinity. The plaintiff admitted to ceasing payments on the loan. The court emphasized that the lawful consequences of failing to pay debts break the causal chain necessary for standing. The plaintiff “failed to adduce any evidence at summary judgment demonstrating that Trinity violated the FDCPA specifically by bringing or continuing to pursue the Foreclosure Action. Thus, [the plaintiff] can demonstrate that the attorney’s fees she incurred are traceable to the Foreclosure Action, but not that they are traceable to any violation of the FDCPA, if such violation occurred … For this same reason, [the plaintiff] has not established that her emotional damages are traceable to an FDCPA violation. While [the plaintiff] contends that ‘she would not have experienced the stress associated with the case’ had Trinity not filed the Foreclosure Action, [] she does not then draw a line between the Foreclosure Action and any FDCPA violation. “

Conclusion

The Sixth Circuit affirmed the district court’s dismissal of the plaintiff’s FDCPA claims, concluding that while her injuries were recognized, they were not traceable to any FDCPA violation by Trinity.