In Johnston v. Midland Credit Mgmt., No. 16-437, 2017 U.S. Dist. LEXIS 10610 (W.D. Mich. Jan. 26, 2017), the court recently dismissed a class action complaint alleging a violation of the Fair Debt Collection Practices Act (“FDCPA”) for lack of Article III standing. Johnston is notable as the first FDCPA claim dismissed for lack of Article III standing in the Sixth Circuit. In addition, Johnston provides an interesting case study regarding some of the issues that may need to be considered prior to filing a motion premised on lack of Article III standing.
Johnston alleged a putative class action premised on particular language in a collection letter he received, which he claimed was false, misleading, and deceptive under section 1692e of the FDCPA. He contended the alleged violation of the FDCPA alone established Article III standing because Congress deemed a violation of the rights enumerated in the FDCPA to be a concrete injury. The court disagreed and, applying the Sixth and Seventh Circuits’ recent holdings in Soehnlen v. Fleet Owners Ins. Fund, No. 16-3124, 2016 U.S. App. LEXIS 22914 (6th Cir. Dec. 21, 2016), Meyers v. Nicolet Restaurant of De Pere, Case No. 16-2075, 2016 U.S. App. LEXIS 22139 (7th Cir. Dec. 13, 2016), and Gubala v. Time Warner Cable, Inc. No. 16-2613, 2017 U.S. App. LEXIS 1058 (7th Cir. Jan 20, 2017), held that “a bare statutory violation . . . alone is not enough to satisfy a concrete injury” under Article III.
Johnston argued in the alternative, that even if a bare statutory violation did not suffice, he nevertheless suffered a concrete injury because he altered his behavior by keeping this letter—unlike prior letters which he had thrown in the trash—and sought advice of counsel, thus incurring de minimis travel expenses and loss of time that he spent to evaluate the letter. The court rejected this argument as well, holding that Johnston “has not shown any concrete interest affected by Defendants’ letter” and that expenses related to consulting an attorney do not satisfy Article III’s concrete injury requirement. The court explained that like Soehnlen and Meyers, Johnston did not plead sufficient facts to allow the court to draw the inference of a concrete injury, and if it accepted Johnston’s argument, “the federal courts would be flooded with cases based not on proof of harm but on an implausible and at worst trivial risk of harm.”
In Johnston, the defendants brought their motion to dismiss for lack of Article III standing at the pleadings stage under Rule 12(b)(1). When and how to bring a motion for lack of Article III standing may vary from case to case depending on the jurisdiction where the case is pending, as well as other considerations. In Johnston, for example, Johnston generally alleged that he suffered “actual damages” as a result of receiving the subject letter and that he altered his behavior and had to seek advice of counsel. Some courts have been quite liberal at the pleadings stage, finding standing based on general allegations of harm, which those courts take as true and construe in the light most favorable to the plaintiff.
Motions to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), however, fall into two general categories: facial attacks and factual attacks. See United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). “A facial attack is a challenge to the sufficiency of the pleading itself. On such a motion, the court must take the material allegations of the petition as true and construed in the light most favorable to the non-moving party.” Id. However, a factual attack challenges the factual existence of subject matter jurisdiction. “On such a motion, no presumptive truthfulness applies to the factual allegations” and “the court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Id.
This facial/factual distinction was relevant in Johnston, where the parties had exchanged Rule 26(a)(1) disclosures prior to the defendants’ motion to dismiss. In his Rule 26(a)(1) disclosures, Johnston disclosed he was seeking only statutory damages despite his general allegations that he also suffered “actual damages.” Thus, the defendants attacked Article III standing both facially and factually, arguing that Johnston had not pled facts sufficient to support a concrete injury and also that, contrary to the allegations in his complaint, Johnston did not suffer “actual damages” as disclosed in his Rule 26(a)(1) disclosures. Johnston asked the court to convert defendants’ motion to a Rule 56 motion as a result, but the court declined and considered Johnston’s Rule 26(a)(1) disclosures under Rule 12(b)(1). Whether to bring a facial or factual attack under Rule 12(b)(1) may vary depending on the facts and the jurisdiction in which the action is pending.
In fact, in certain class action cases, even where one thinks a Rule 12(b)(1) motion may simply result in an amended pleading, the motion may still ferret out facts pertaining to the named plaintiff that, while supporting the named plaintiff’s Article III standing, may undermine the requirements for class certification. For example, the facts supporting the named plaintiff’s Article III standing may be unique and not applicable to the putative class members and, thus, preclude class certification under Rule 23. See, e.g., Halvorson v. Auto-Owners Ins. Co., 718 F.3d 773 (8th Cir. 2013) (holding that “a district court may not certify a class . . . if it contains members who lack standing” and, based on the facts alleged pertaining to plaintiff, “[s]ome of the members likely have standing, and some likely do not.”).
The defendant also should consider whether the plaintiff will file a new complaint in state court, and the practical effect if the plaintiff does. The potential new state court action and the jurisdiction in which it would be brought should be analyzed. For example, many state law consumer protection statutes require actual injury for statutory standing. Thus, where the federal court has already determined there is no actual injury and the state law claim requires actual injury, the defendant should be well positioned to seek dismissal of those claims if they are filed. Where an actual injury is not required under state law, however, the defendant may find itself facing the same or similar claims in a less favorable venue. In addition, some states’ laws preclude class actions for claims that result in no actual injury and are premised simply on statutory damages. In such cases, while the plaintiff may be free to file the action in state court after the federal court dismissal, the liability exposure may be minimized where the class-action claims cannot be maintained. Moreover, some state laws limit or preclude the plaintiff’s recovery of attorneys’ fees, which may be the motivating factor for certain class action claims. In those cases, the federal dismissal may effectively be the death knell of those claims.
Defendants also must consider the fact that, even where there may be reasons to forgo challenging Article III standing in certain cases, subject matter jurisdiction may be challenged at any time, even by the court sua sponte, or by an appellate court. Thus, the action may ultimately be dismissed for lack of Article III standing only after considerable time and expense. Also, in cases originating in state court which were removed to federal court, the defendant must also be aware that it may be subject to substantial costs and fees if there is no basis for Article III standing. See, e.g., Mocek v. Allsaints USA Ltd., No. 16 C 8484, 2016 U.S. Dist. LEXIS 168781 (N.D. Ill. Dec. 7, 2016) (concluding defendant “lacked an ‘objectively reasonable basis for seeking removal’” and awarding plaintiff $58,112.50 in fees).
The aforementioned are just a few of the issues that may be relevant to the Article III standing inquiry. Whatever the case may be, a thorough and thoughtful analysis should precede any motion to dismiss for lack of Article III standing.