Consumer Finance Litigation

On September 8, 2022, in Hunstein v. Preferred Collection and Management Services, Inc. , No. 19-14434, the Eleventh Circuit Court of Appeals issued an en banc decision which departs significantly from the panel decision on Article III standing issues and statutory causes of action. The case has broad implications for how the Eleventh Circuit applies Article III standing analysis, particularly in consumer finance cases, but also in other cases where a statutory violation has a dubious relationship to any real harm to the plaintiff.

The plaintiff in Hunstein sued a debt collector who attempted to collect a medical bill incurred by the plaintiff for the medical treatment of his young son. The plaintiff alleged that when the debt collector used a mailing vendor to mail a dunning letter, it had disclosed to that mailing vendor his son’s name, the fact that he had received medical treatment, and the amount allegedly owed for that medical treatment. This, plaintiff alleged, violated the Fair Debt Collections Practices Act (“FDCPA”) prohibition on disclosure of information about a consumers debt to a third party. See 15 U.S.C. 1692c(b). There was no allegation that the information disclosed had caused a pecuniary injury or had travelled any farther than the mailing vendor’s employees. Instead, the alleged injury in fact was the intangible harm associated with an invasion to one’s privacy, as would otherwise be actionable at common law as the tort “public disclosure of private facts.” Plaintiff argued this entitled him to modest statutory damages under the FDCPA, and perhaps most importantly, significant attorney’s fees.

In a now superseded panel decision, the Eleventh Circuit Court of Appeal reversed the district court’s order dismissing the case, stating that plaintiff had plausibly alleged concrete injury in fact sufficient to demonstrate Article III standing. The opinion relied extensively on Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) and TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021) for its analysis. However, in its en banc opinion, the Eleventh Circuit has reached the opposite conclusion, and affirms the dismissal of the case on Article III standing grounds.

The key analysis in Hunstein, as in Spokeo and Ramirez, is whether the plaintiff has alleged more than just a bare statutory violation, and has instead alleged a concrete injury in fact. As the en banc opinion makes clear, “[w]hen considering whether an alleged intangible harm is concrete, or ‘real,’ we look to see if it matches up with a harm ‘traditionally recognized as providing a basis for lawsuits in American courts. . . . Although an ‘exact duplicate’ of a traditionally recognized harm is not required, the new allegations cannot be missing an element ‘essential to liability’ under the comparator tort.” citing Ramirez, 141 S. Ct. at 2204-2209.

In Hunstein, all parties recognized that the comparator common law tort for the FDCPA’s prohibition on third party disclosure is the common law tort “public disclosure of private facts.” The en banc decision found that the alleged statutory violation in question was not suitably analogous to the tort because Hunstein was missing the element that the disclosure be made “public.” Specifically, the Eleventh Circuit held that a public disclosure “requires far more than what Hunstein has offered—it does not include just ‘any communication by the defendant to a third person.’” Citing Restatement (Second) of Torts § 652D cmt. a.

While both the Eleventh Circuit majority and the dissenting opinion recognize the match need not be “exact” the justices disagreed on whether or not Hunstein’s case had a “close relationship” to the alleged harm traditionally recognized by the common law tort. The dissent seemed willing to treat as actionable any disclosure of private facts to a third party company’s employees if it could be inferred the employees read those private facts, even if that was necessary to do their job and not for some other purpose. The implications for such a holding would be widespread and cast doubt on whether debt collectors can employ vendors not just for mailing, but for cloud computing, case management, file storage, or any other service where the information was allegedly read by a vendor’s employees. The majority however, takes a more narrow view, that the “publicity” element of the tort of public disclosure of private facts means the court must make a qualitative inquiry as to whether or not the disclosed information “reaches, or is sure to reach, the public.” This, the Eleventh Circuit has held, generally cannot be inferred from an “electronic transfer between two companies,” without some additional facts to support an inference of actual publicity which bears a close relationship to what was actionable at tort.

Reading the Hunstein opinion more broadly, it is clear that the Eleventh Circuit will require pleading facts that give an inference of real harm from statutory causes of action to satisfy Article III. This is something most litigants will accomplish by alleging physical injury or financial loss as a result of the statutory violation. However, where the alleged harm caused by a statutory violation is intangible, the Eleventh Circuit will take an “element-for-element” approach to determine if the intangible harm alleged has a common law analog, and will not find a concrete injury from intangible harm where “a pleading [] completely fails to allege an element essential to the harm set out as a common-law comparator” because “the common law analogy collapses if we can rewrite a traditional tort to exclude an essential element.” Given the case by case analysis necessary in these kinds of cases, this issue is sure to be litigated extensively in the future.