Is emotional distress a concrete injury after TransUnion? 7th Circ divided

(Reuters) - If you thought that the U.S. Supreme Court has already said everything there is to say about constitutional standing and federal consumer rights laws, four judges on the 7th U.S. Circuit Court of Appeals would like a word.

In an impassioned dissent on Wednesday, 7th Circuit Judge David Hamilton, joined by Judges Ilana Rovner, Diane Wood and Candace Jackson-Akiwumi, faulted seven of their appellate colleagues for refusing to reconsider a three-judge panel opinion concluding that Renetrice Pierre suffered no concrete injury when a collection firm sent her a letter demanding repayment of years-old credit card debt for which the statute of limitations had already run out.

Hamilton and his fellow dissenters asserted that the rest of the 7th Circuit had “erred by painting with too broad a brush” in the court's interpretation of Supreme Court’s precedent on Article III standing for statutory claims, 2021’s TransUnion LLC v. Ramirez and 2016’s Spokeo, Inc v. Robins.

That precedent, wrote Hamilton in Wednesday's dissent, left plenty room for plaintiffs like Pierre to establish a right to sue by alleging emotional distress, fear and confusion – all of which have analogues in common law. Congress enacted the Fair Debt Collection Practices Act because abusive debt collection tactics are so disruptive and distressing for consumers, the dissent said. And the Supreme Court, Hamilton wrote, instructed lower courts in TransUnion and Spokeo to show deference to Congress' judgment. So, the dissenters said, by nevertheless insisting that psychological injuries are not concrete enough to confer standing, the dissenters said, the 7th Circuit defied Congress and the Supreme Court.

The dissent asserted that the 7th Circuit majority has also “deepened an important and growing circuit split on the separation of powers between legislative and judicial branches,” the dissent said. And because the court is unwilling to reconsider its precedent, Hamilton wrote, “the Supreme Court may need to revisit the subject of Congress's power to authorize standing for such intangible but real and concrete injuries.”

In other words, brace yourself for the possibility of yet another round of calls for the Supreme Court to clarify exactly when plaintiffs have a constitutional right to sue over violations of federal consumer protection laws.

Those calls may begin, in fact, with the Pierre case. Plaintiffs lawyer Paul Markoff of Markoff Leinberger told me by email that “a petition for certiorari is likely,” after the 7th Circuit’s “disappointing” en banc rejection.

“Long-standing rights, established by Congress, have simply vanished in the past two years at the hands of a court not adhering to the separation of powers,” Markoff said, echoing Hamilton’s dissent in both the en banc decision and the original panel ruling in the Pierre case. (The 7th Circuit decision wiped out a $350,000 jury verdict for a class of consumers who accused Midland Credit Management Inc of violating the debt collection statute by demanding repayment of time-barred, or so-called zombie, debts.)

Midland, which is represented by Jenner & Block and Hinshaw & Culbertson, said in a statement that Hamilton's dissent "attempts to focus attention on whether psychological injuries can ever support standing. But that was not the central issue in this case." The company said the appeals court correctly concluded that the evidence in the case did not support Pierre's claim to have suffered emotional distress. (That argument was, similarly, the primary theme of the company’s brief opposing en banc review.)

Pierre’s initial response to Midland’s demand was to call the debt collector to complain that a related Midland company had long ago dismissed a lawsuit attempting to collect the same debt from her. Then she called a lawyer.

Pierre testified that she was “surprised and confused” by Midland’s suggestion that she still owed money on a time-barred debt, but 7th Circuit Judge Diane Sykes said in the court’s April 1 panel opinion that Pierre’s actions in response to the demand – disputing the claim and calling a lawyer – “are not legally cognizable harms.” Worry and confusion, Sykes wrote, “likewise fall short” in the context of statutory claims based on allegedly improper debt collection practices.

Midland’s brief opposing en banc review also argued that the circuits are not actually split on whether an allegation of emotional distress is sufficient to establish a constitutional right to sue a debt collector for statutory violations.

Hamilton argued otherwise in his original dissent in the Pierre case, which noted that the 3rd, 6th, 10th and 11th Circuits have all issued decisions that advocate a more expansive view than the 7th Circuit on standing and intangible injuries from debt collection practices. Even after the Supreme Court’s TransUnion decision, Hamilton said, the 11th Circuit held in Hunstein v. Preferred Collection and Management Services, Inc that invasion of privacy was an adequate constitutional injury in an debt collection case. (As I’ve reported, that decision was vacated when the 11th Circuit decided to review the Hunstein case en banc.) Hamilton said in his dissent from the panel opinion in Pierre that the 7th Circuit was “at the far end of a circuit split on standing in FDCPA cases based on emotional distress, confusion, and anxiety,” adding that the “entrenched” split seems to call for guidance from the Supreme Court.

But Midland said the purported disagreement arises from variation in the specific facts of each case, not from a philosophical split among the circuits on Article III and intangible injuries. “Whether a plaintiff has standing based on emotional injury is a case-specific question dependent on the plaintiff’s specific theory and allegations,” Midland said in its brief opposing en banc review. “The cases from this court are in accord.”

Interestingly, Hamilton’s dissent from the decision denying en banc review did not reprise the lengthy discussion from his panel dissent of other circuits’ precedent. The en banc dissent simply argued that 7th Circuit precedent is “out of step with the Supreme Court” and is “at the far, most restrictive, end of a range of approaches by different circuits.”

That may not be juicy enough bait to grab the justices’ attention right now. But I’ll be watching as the circuits mull TransUnion and intangible injuries. I have a strong suspicion this is going to take a while to sort out.

Read more:

The epic journey of a pivotal 11th Circuit debt-collection case

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