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

U.S. one dollar banknotes are seen in this illustration taken February 8, 2021. REUTERS/Dado Ruvic/Illustration

(Reuters) - It’s been a long, strange trip through the 11th U.S. Circuit Court of Appeals for Hunstein v. Preferred Collection & Management Services Inc, a Fair Debt Collection Practices Act case that exemplifies the challenge for appellate courts in applying the U.S. Supreme Court’s test for constitutional standing.

On Wednesday, the 11th Circuit said that it had voted to review the case en banc. The court's order came just a few weeks after an Oct. 28 panel decision that allowed the plaintiff, Richard Hunstein, to proceed with claims that the debt collector violated the FDCPA by sharing sensitive personal information about him with the outside vendor that mails out Preferred’s dunning letters. The en banc 11th Circuit didn't even wait for Preferred's lawyers at Kaufman Dolowich & Voluck to ask for a rehearing.

That Oct. 28 opinion – which was vacated in Wednesday’s en banc order -- has its own unusual history. Judges Adelberto Jordan, Kevin Newsom and Gerald Tjoflat first heard the Hunstein case last March. They issued a unanimous decision only a month later, holding that under the Supreme Court’s 2016 ruling in Spokeo, Inc v. Robins, Hunstein had Article III standing to sue because his allegation was akin to a common-law action for invasion of privacy (more on that later).

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The panel’s April 21 ruling was a jolt not just for debt collectors but for the entire financial services industry, which relies on outside contractors to communicate with consumers. Amicus briefs piled into the 11th Circuit in support of Preferred’s petition for rehearing.

Instead of rehearing the case, the original three-judge panel issued the Oct. 28 opinion, addressing sua sponte the arguments in Preferred’s petition and the amicus briefs – as well as the Supreme Court’s tightened rules for standing from the justices’ June 25 ruling in TransUnion LLC v. Ramirez.

In the revised opinion, Newsom and Jordan insisted that TransUnion did not alter their original conclusion that Hunstein had Article III standing. But Tjoflat sharply dissented, arguing that the majority had focused on secondary considerations in TransUnion instead of the Supreme Court's concentration on "history and the judgment of Congress.”

Presumably, it was Tjoflat's dissent that prompted the 11th Circuit to decide to hear the case en banc. The debt collector’s lead counsel, Richard Perr of Kaufman Dolowich, said he expects the appeals court to issue a subsequent order specifying the issues it wants the parties to brief for en banc consideration. Hunstein counsel Thomas Bonan of Seraph Legal didn’t respond to my query.

It seems likely that the key question in the en banc case will be whether Hunstein’s allegations of a violation of the federal law barring abusive debt collection practices align closely with the common-law tort of invasion of privacy. (There’s not much doubt that Hunstein failed to raise adequate allegations of a concrete injury or imminent risk of one.)

Plaintiffs' lawyers claimed that Preferred ran afoul of the debt collection law when it provided information to the mail vendor CompuMail about debt Hunstein owed to Johns Hopkins All Children’s Hospital for his son’s medical treatment. The transmission of sensitive information about his son’s medical care, Hunstein alleged, was an improper public disclosure of private facts.

The Supreme Court’s TransUnion case, which also arose from an alleged privacy violation, actually addressed the issue of whether a business that shares information with an outside vendor has “published” that information, albeit in a footnote. Citing an unpublished 11th Circuit ruling, the justices cast doubt on the theory that disclosure to a vendor amounts to an actionable publication under tort law.

The majority in the now-vacated Oct. 28 acknowledged that the TransUnion footnote was at odds with Hunstein’s claims. But Jordan and Newsom said it’s not clear from the record in the Hunstein case whether employees at CompuMail read about his son’s medical issues after Preferred sent the data to the mail vendor.

Newsom and Jordan said that under TransUnion and 11th Circuit precedent, “a plaintiff need only show that his alleged injury is similar in kind to the harm addressed by a common-law cause of action, not that it is similar in degree.” So even if Preferred’s disclosure of Hunstein’s sensitive personal information was limited just to CompuMail employees, the majority said, the disclosure was similar in kind, if not degree, to publication that triggers the tort of privacy invasion.

Tjoflat’s dissent said that reasoning was flat wrong: “Communication of a fact to a small group of persons is not publicity,” he wrote. And without showing that Preferred "published" his information, Tjoflat said, Hunstein can’t claim an invasion of his privacy.

The majority’s focus on "kind, not degree," he said, was mere “lip service” to an “ancillary” point in the Supreme Court decision.

Preferred counsel Perr, who came into the case after the debt collector’s initial loss at the 11th Circuit, said in the company’s petition to rehear that first ruling that CompuMail generates dunning letters electronically, without any actual person reading the information in the mailings. Perr also pointed out – as did Tjoflat in his dissent in the Oct. 28 decision – that in the 1977 statute, Congress expressly allowed debt collectors to disclose information to telegraph operators -- an old-school version of mail vendors that send out collection notices.

As I mentioned, the Hunstein case is hugely consequential for debt collectors, who, according to Perr, are now facing a tsunami of lawsuits based on their use of outside electronic mailing services. The 11th Circuit majority recognized those concerns in the Oct. 28 decision, which said the court’s holding might force debt collectors to spend a lot of money to bring services in-house. The majority said it was nevertheless obliged to follow its interpretation of the law, no matter the consequences.

Now we’ll see what the rest of the en banc 11th Circuit thinks of that interpretation.

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.