Lesson. Mere annoyance or intimidation by language in a demand letter, without any concrete harm resulting from such language, is insufficient for a plaintiff to have standing to file a FDCPA action.

Case cite. Gunn v. Thrasher, 982 F.3d 1069 (7th Cir. 2020)

Legal issue. Whether a true statement in a demand letter nevertheless injured the plaintiffs.

Vital facts. Plaintiffs owed their homeowners’ association $2,000. The HOA hired a law firm, which sent a demand letter to plaintiffs that contained this sentence:

If Creditor has recorded a mechanic’s lien, covenants, mortgage, or security agreement, it may seek to foreclose such mechanic’s lien, covenants, mortgage, or security agreement.

The HOA subsequently sued plaintiffs for breach of contract (damages) but not for foreclosure. The plaintiffs responded by filing suit against the HOA’s law firm in federal court under the Fair Debt Collection Practices Act (FDCPA). Although the plaintiffs conceded that the disputed sentence in the letter was both factually and legally true, they contended that the sentence was false and misleading because it would have been too costly to pursue foreclosure to collect the 2k debt.

Procedural history. The USDC for the Southern of Indiana dismissed the complaint on the basis that a true statement about the availability of legal options “cannot be condemned” under the FDCPA. Plaintiffs appealed.

Key rules. “Concrete harm” is essential for a plaintiff to have standing to sue in federal court. Article III of the Constitution “makes injury essential to all litigation in federal court.”

Holding. As a practical matter, the 7th Circuit agreed with the District Court. However, rather than affirming the District Court’s ruling on the defendant’s dispositive motion, the 7th Circuit remanded the case with instructions to dismiss for lack of subject matter jurisdiction.

    See also: Larkin v. Finance System, 982 F.3d 1060 (7th Cir. 2020) and Brunett v. Convergent Outsourcing, 982 F.3d 1067 (7th Cir. 2020). The 7th Circuit decided these two Wisconsin cases at the same time as Gunn and applied the same injury/standing rules.

Policy/rationale. The plaintiffs failed to allege or argue how the contested sentence in the demand letter injured them. Although they were annoyed and intimidated by the letter, that does not constitute a concrete injury. The Court reasoned:

Consider the upshot of an equation between annoyance and injury. Many people are annoyed to learn that governmental action may put endangered species at risk or cut down an old-growth forest. Yet the Supreme Court has held that, to litigate over such acts in federal court, the plaintiff must show a concrete and particularized loss, not infuriation or disgust. Similarly many people are put out to discover that a government has transferred property to a religious organization, but Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464 (1982), holds that a sense of indignation (= aggravated annoyance) is not enough for standing.

__________My practice includes the defense of mortgage loan servicers in consumer finance litigation. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.