On November 22, the Third Circuit Court of Appeals issued a decision finding that the plaintiff lacked Article III standing in a putative class action brought under the Fair Debt Collection Practices Act (FDCPA).
In Morales v. Commonwealth Financial Systems, Inc., the plaintiff incurred a debt to a medical services provider. The debt was assigned to another entity and then referred to the defendant for collection. In late 2021, the defendant sent the plaintiff a collection letter containing a statute of limitations disclosure: “The law limits how long you can be sued on a debt. Because of the age of your debt, the creditor cannot sue you for it. In many circumstances, you can renew the debt and start the time period for the filing of a lawsuit against you if you take specific actions such as making certain payments on the debt or making a written promise to pay. You should determine the effect of any actions you take with respect to this debt.”
The plaintiff filed a putative class action on behalf of herself and other similarly situated New Jersey residents who received the defendant’s letter alleging a violation of § 1692e of the FDCPA because the disclosure is false, deceptive, or misleading. Specifically, the plaintiff alleged that the disclosure is misleading because by writing the “creditor cannot sue you for [the debt],” the defendant failed to inform her that she could be sued on the debt, despite having a complete legal defense to such a suit. She also alleged that the statute of limitations disclosure is misleading because by writing “[i]n many circumstances, you can renew the debt and start the time period for the filing of a lawsuit against you if you take specific actions such as making certain payments on the debt or making a written promise to pay,” the defendant misrepresents the actions required to revive debt under New Jersey law.
The district court granted the defendant’s motion to dismiss for failure to state a claim relying on numerous district court opinions analyzing substantially similar debt collection letters and finding the language did not violate the FDCPA. The plaintiff appealed.
While the appeal was pending, the Third Circuit issued a decision in Huber v. Simon’s Agency, Inc., which we discussed here. In Huber, the appellate court rejected a district court’s finding that the so-called informational injury doctrine, which stands for the proposition that the omission of statutorily required information can result in a cognizable injury, established Article III standing for the named plaintiff and putative class in a class action brought under the FDCPA. The Third Circuit requested supplemental briefing from the parties in Morales on how Huber affected the appeal.
After briefing concluded, the Third Circuit held that the plaintiff had not established Article III standing. Specifically, the court found that the plaintiff only showed a “mere risk” of harm, which cannot support standing. Under either the informational injury doctrine or traditional standing principles, the plaintiff must plead facts showing that she suffered some adverse consequence from her receipt of the allegedly false or misleading letter. The court found that the plaintiff did not plead any facts showing either that she relied upon the defendant’s letter or that she suffered any consequence flowing from that reliance. Instead, the plaintiff simply pled that she received an allegedly misleading letter with nothing more. The court found this insufficient because “[m]ere confusion and the speculative risk of a lawsuit are not enough to confer standing to an FDCPA plaintiff.”
The court vacated the order dismissing the complaint with prejudice for failure to state a claim and remanded the case to the district court to decide whether to grant the plaintiff leave to plead additional facts in an attempt to show standing or dismiss without prejudice due to lack of jurisdiction.