In a move that shocked no one, including the Czar of TCPAWorld, the Eleventh Circuit Court of Appeals issued an order vacating its last opinion in Hunstein vs. Preferred Collection & Management Services, Inc., and ordered the case to be reheard en banc. This development is just the latest in one of the most significant financial privacy litigations this year, with widespread implications for the debt collection industry regardless of how the Eleventh Circuit subsequently rules.
First, a recap of the facts and procedural history of the litigation—including all of its twists and turns before the Eleventh Circuit.
In Hunstein v. Preferred Collection and Management Services, Inc., the Eleventh Circuit issued a ground breaking decision concerning application Section 1692c(b) of the Fair Debt Collection Practices Act (“FDCPA”). Plaintiff incurred a debt to a hospital arising out of his son’s medical treatment. The hospital assigned the debt to a debt collector. The debt collector in turn hired a California-based commercial mail vendor to handle the collection. The debt collector transmitted certain information about Plaintiff to the mail vendor. The mail vendor used that information to generate and send a dunning letter to Plaintiff.
Plaintiff filed suit, alleging violations of Florida consumer protection law and the FDCPA. The district court, however, dismissed the Complaint for failure to state a claim, concluding that Plaintiff had not sufficiently alleged that the debt collector’s transmittal to the mail vendor violated Section 1692c(b) of the FDCPA. According to the court, this was because it did not qualify as a communication “in connection with the collection of a[ny] debt.”
The Eleventh Circuit reversed. In a case of first impression, the Court first held that Plaintiff had alleged a concrete statutory injury under Section 1692c(b) for purposes of satisfying Article III, even where he had not alleged a “risk of real harm” or a “tangible harm,” such as a financial loss or emotional distress. The Court additionally held that a debt collector’s transmittal of a consumer’s personal information to its letter vendor constituted a prohibited third-party communication “in connection with the collection of any debt” as used in the FDCPA.
Following Hunstein I, which came out in April 2021, the Supreme Court decided TransUnion in June 2021. In Ramirez v. TransUnion, the Supreme Court reconsidered the question of what constitutes an “injury in fact” under Article III, five years after its significant holding in Spokeo, Inc. v. Robins, 136 S. Ct. 1540. The Supreme Court held that “[o]nly plaintiffs concretely harmed by a defendant’s statutory violation have Article III standing to seek damages against that private defendant in federal court.” (emphasis added).
In a footnote in TransUnion, the Supreme Court additionally addressed (as relevant to Hunstein I) the Plaintiffs’ argument that “TransUnion ‘published’ the class members’ information internally—for example, to employees within TransUnion and to the vendors that printed and sent the mailings that the class members received.” The Supreme Court held that argument had been forfeited and in any event was “unavailing.” This was because:
[T]he plaintiffs’ internal publication theory circumvents a fundamental requirement of an ordinary defamation claim—publication—and does not bear a sufficiently “close relationship” to the traditional defamation tort to qualify for Article III standing.
141 S. Ct. 2190, 2210 n. 6 (emphasis supplied).
Which brings us to Hunstein II. 2021 U.S. App. LEXIS 32325 (Oct. 28, 2021). Confronted with the subsequent TransUnion v. Ramirez decision, the Eleventh Circuit three-judge panel reconsidered its prior, unanimous ruling in a new 2-1 decision.
The Eleventh Circuit in Hunstein II stood by its prior ruling on standing. After citing Spokeo and n. 6 of the TransUnion decision, the Eleventh Circuit nevertheless held that Hunstein had Article III standing. This was based on the determination that Hunstein alleged “an intangible-but-nonetheless-concrete injury, including one resulting from a statutory violation.”
The Eleventh Circuit in Hunstein II then turned to the merits of Plaintiff’s claim under the FDCPA. Section 1692c(b) of the FDCPA states that, subject to several exceptions, “a debt collector may not communicate, in connection with the collection of any debt, with any person” other than the consumer. The sole question before the Court was whether the debt collector’s communication with the mail vendor was “in connection with the collection of any debt,” such that it violates § 1692c(b).
After considering the plain language of the statute and dictionary definitions of terms used, the Eleventh Circuit found that the debt collector’s transmittal to the mail vendor “included specific details regarding Hunstein’s debt: Hunstein’s status as a debtor, the precise amount of his debt, the entity to which the debt was owed, and the fact that the debt concerned his son’s medical treatment, among other things.” As such, the Court held, “[i]t seems to us inescapable that [the debt collector’s] communication to [the mail vendor] at least ‘concerned,’ was ‘with reference to,’ and bore a ‘relationship [or] association’ to its collection of Hunstein’s debt.” According, the Eleventh Circuit ruled that “Hunstein has alleged a communication ‘in connection with the collection of any debt’ as that phrase is commonly understood.”
This ruling was in many ways a double-down on the Eleventh Circuit’s prior decision with broad implications for all debt collectors doing business in that Circuit (which includes Florida, Alabama and Georgia) where Hunstein II is binding precedent for the lower federal courts. Debt collectors (pre-Hunstein II) have historically heavily relied upon mail vendors—a decision that many are likely now reevaluating (including in relation to online platforms that have the same functionality).
Relief, however, may be on the horizon. This week, the Eleventh Circuit decided sua sponte to rehear Hunstein en banc. The sua sponte order was evidently issued after an unidentified Eleventh Circuit judge “requested a poll on whether [Hunstein] should be reheard en banc, and a majority of the judges of this Court in active service having voted in favor.” Moreover, the order this week additionally vacated the panel’s prior ruling in Hunstein, meaning that the opinion is no longer binding precedent in the Eleventh Circuit.