7th Cir. Holds Anxiety and Embarrassment Not Enough for Standing
Wadsworth v. Kross, Lieberman & Stone, Inc., No. 19-1400, 2021 U.S. App. LEXIS 26231 (7th Cir. Aug. 31, 2021)
The U.S. Court of Appeals for the Seventh Circuit recently reversed and remanded a trial court’s entry of summary judgment in favor of a plaintiff, holding that the alleged FDCPA violations did not cause any concrete harm and were simply procedural violations that Article III precludes federal courts from adjudicating.
A company hired the plaintiff and, in its offer letter, described a signing bonus: $3,750 payable after 30 days of employment, followed by another $3,750 after 180 days of employment. If the plaintiff voluntarily ended her employment or the company fired her for cause within 18 months, she was obligated to repay the full bonus.
The plaintiff collected both signing payments, but after she completed one year of employment, the company fired her. A debt collection agency, the defendant, attempted to recover the bonus payments. The debt collector mailed the plaintiff a collection letter and an agency employee called the plaintiff by telephone four times.
The plaintiff sued the debt collector, claiming that its letter and phone calls violated the FDCPA, 15 U.S.C. § 1692, et seq., by failing to provide complete written notice of her statutory rights within five days of the initial communication and because the caller never identified herself as a debt collector.
The trial court entered summary judgment for the plaintiff and the debt collector timely appealed.
On appeal, the Seventh Circuit addressed the requirement of standing. To establish standing to sue in federal court, “[t]the plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).
The Seventh Circuit held that the plaintiff would have suffered a concrete injury only if the debt collector’s failure to provide notice of the plaintiff’s statutory rights caused her to suffer a harm identified by the FDCPA, “such as paying money she did not owe” or would have disputed.
In her complaint and testimony, the plaintiff alleged only that she suffered emotional harm, specifically personal humiliation, embarrassment, mental anguish, and emotional distress. Furthermore, the plaintiff testified at her deposition that she never paid the debt collector or the company any money after the debt collector contacted her, nor did she rely on the debt collector’s communication to her detriment in any other way. Instead, she stated that she got less sleep and felt intimidated, worried, and embarrassed.
The Seventh Circuit concluded that anxiety and embarrassment are not injuries in fact for the purposes of FDCPA standing. Indeed, the Court pointed out that it already expressly rejected “stress” as constituting a concrete injury following an FDCPA violation and had found that it is not enough for a plaintiff to be “annoyed” or “intimidated” by a violation.
Accordingly, the Seventh Circuit reversed the judgment and remanded with instructions to dismiss the case for lack of jurisdiction.
6th Cir. Holds No Article III Standing for Mere Confusion
Ward v. Nat’l Patient Account Servs. Sols., No. 20-5902, 2021 U.S. App. LEXIS 24369 (6th Cir. Aug. 16, 2021)
A healthcare provider hired a debt servicer (“defendant”) to collect an outstanding balance from a consumer. The defendant allegedly left several voice messages while attempting to collect the debt.
The consumer filed suit alleging the defendant violated the FDCPA because it did not accurately identify itself in its voicemails, and that this caused confusion resulting the consumer sending a cease and desist letter to the wrong entity.
Specifically, the consumer claimed that the defendant violated § 1692d(6) of the FDCPA, which provides that a “debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt[,]” including the “placement of telephone calls without meaningful disclosure of the caller’s identity.”
The consumer also claimed that the defendant violated § 1692e(14), which provides that a “debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt[,]” including “us[ing] any business, company, or organization name other than the true name of the debt collector’s business, company, or organization.”
The defendant moved for summary judgment arguing that it did not meet the definition of a debt collector under the FDCPA, and the trial court granted the motion. The consumer appealed.
On appeal, the defendant argued that the consumer lacked Article III standing. Although the defendant did not raise this issue with the trial court, the Sixth Circuit observed that it has an independent obligation to determine its jurisdiction to hear an appeal.
The issue was whether the plaintiff suffered an injury in fact and, specifically, whether it was “concrete.” The consumer claimed that he suffered a concrete injury for two reasons. First, he argued that the violation of his procedural rights under the FDCPA established a concrete injury. Second, he claimed that the confusion caused by the phone calls and expense of the counsel that he retained demonstrated that he suffered a concrete injury.
The consumer argued that the FDCPA created an enforceable right to know who is calling about a debt because the defendant’s failure to correctly provide its full legal name concretely harmed him. The consumer further argued that this harm is closely related to the invasion of privacy harm that most states recognize.
Relying on the U.S. Supreme Court’s recent decision TransUnion LLC v. Ramirez, The Sixth Circuit rejected the consumer’s argument because the defendant’s alleged failure to disclose its full legal name did not resemble a traditional harm “regarded as providing a basis for a lawsuit,” as required to establish a concrete injury.
The Sixth Circuit acknowledged that most states recognize actions to enforce the right of privacy, including “the tort of intrusion upon one’s right to seclusion.” However, the Court noted that not receiving full and complete information about the name of a defendant does not closely resemble the tort of intrusion upon seclusion because this common law tort typically requires proof that the defendant “intentionally intrude[d], physically or otherwise, upon the solitude or seclusion of another or his privacy affairs or concerns.”
The consumer’s alleged harm did not impact his privacy. Instead, it merely confused him. The defendant did not share his private information with a third party or publicize his private information. Thus, the Sixth Circuit found that the consumer’s claimed harm did “not bear a close relationship to traditional harms” and the consumer could not establish standing based solely upon the alleged statutory violations. The Court vacated the trial court’s order granting summary judgment and remanded the case to be dismissed without prejudice for lack of subject matter jurisdiction.
7th Cir. Finds Plaintiff Sufficiently Alleged Agency Relationship in TCPA Suit
Bilek v. Fed. Ins. Co., No. 20-2504, 2021 U.S. App. LEXIS 23655 (7th Cir. Aug. 10, 2021)
The U.S. Court of Appeals for the Seventh Circuit recently reversed the dismissal of a plaintiff’s complaint alleging supposed violations of the federal Telephone Consumer Protection Act (TCPA) and the Illinois Automatic Telephone Dialing Act (IATDA), concluding that the plaintiff alleged enough of an agency relationship between the defendants and the entities that placed the subject calls for the complaint to move forward.
The plaintiff received unauthorized robocalls concerning health insurance that allegedly violated the TCPA, 47 U.S.C. § 227, and IATDA, 815 ILCS 305/30(a)(b). The plaintiff sued on a vicarious liability theory, claiming that an insurer contracted with a marketer to sell its insurance. The marketer then hired lead generators to effectuate telemarketing, and the lead generators made the unauthorized robocalls that formed the basis of the plaintiff’s claims. The plaintiff cited three agency theories: actual authority, apparent authority, and ratification.
The insurer and the marketer each moved to dismiss the plaintiff’s complaint. The insurer brought a motion to dismiss for failure to state a claim under Rule 12(b)(6), arguing that the plaintiff failed to plausibly allege an agency relationship between itself and the lead generators. Making the same agency arguments, the marketer moved for dismissal for lack of personal jurisdiction under Rule 12(b)(2). It argued that without alleging a plausible agency relationship, the plaintiff failed to connect the marketer to Illinois through the lead generators’ conduct.
The trial court agreed with the defendants, ruling that the plaintiff failed to plausibly allege that the lead generators acted pursuant to a valid agency theory.
On the actual authority claim, the trial court reasoned that the plaintiff failed to plausibly allege agency because his complaint lacked allegations of the defendants’ control over the timing, quantity, and geographic location of the lead generators’ unauthorized robocalls. It next found the apparent authority claims insufficient because the plaintiff alleged only that the purported agents — not the principals — made manifestations to the plaintiff. Finally, the trial court reasoned that the plaintiff failed to allege agency under the ratification theory because the plaintiff did not allege that he purchased health insurance from the robocalls, so the defendants accepted no benefits from the calls.
In light of its determinations on the plaintiff’s three agency theories, the trial court held that the plaintiff neither stated a claim against the insurer nor established a prima facie case of personal jurisdiction over the marketer.
Accordingly, the trial court dismissed the plaintiff’s complaint and entered final judgment in the defendants’ favor and the plaintiff timely appealed.
The Seventh Circuit began its analysis with the trial court’s Rule 12(b)(6) dismissal of the insurer.
The Court noted that actual authority requires that, at the time of an agent’s conduct, “the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.” Thus, the Seventh Circuit held that to prove that the lead generators in this case had actual authority to act as the agents of the insurer, the plaintiff needed to show evidence that (1) a principal/agent relationship existed, (2) the principal controlled or had the right to control the alleged agent’s conduct, and (3) the alleged conduct fell within the scope of the agency.
The Seventh Circuit determined that it need not decide whether the plaintiff’s allegations were sufficient, if true, to prove his vicarious liability claims. Instead, the Court determined it only needed to ascertain whether the plaintiff’s allegations included enough detail to render his actual authority theory of agency liability plausible.
The plaintiff alleged that the lead generators acted as the insurer’s agents, with actual authority, when they initiated robocalls to the plaintiff’s cellphone without his consent. The plaintiff also claimed that the insurer authorized the lead generators to use its approved scripts, tradename, and proprietary information in making the calls.
The Seventh Circuit held that these allegations, viewed in the light most favorable to the plaintiff, supported the inference that the insurer authorized the lead generators to act on its behalf and subject to its control.
The insurer argued that the plaintiff failed to state a plausible agency claim to survive a Rule 12(b)(6) dismissal because his complaint lacked allegations that the insurer controlled the timing, quantity, and geographic location of the lead generators’ robocalls. However, the Seventh Circuit held that allegations of minute details of the parties’ business relationship are not required to allege a plausible agency claim.
With a plausible agency claim on the actual authority theory, the Seventh Circuit held that the complaint should move forward at the pleading stage. In reaching this result, the Court also decided that it need not rule on the plaintiff’s apparent authority and ratification theories of agency liability.
The Seventh Circuit next addressed the trial court’s dismissal of the marketer for lack of personal jurisdiction.
The Seventh Circuit held that the Illinois long-arm statute authorizes jurisdiction over a non-resident through the conduct of an agent. See 735 ILCS 5/2- 209(a). In addition, § 2-209(c) provides a catch-all provision, permitting a court’s exercise of jurisdiction to the full extent permitted by the Illinois and United States Constitutions. See 735 ILCS 5/2-209(c).
Moreover, to comport with federal due process, a defendant must maintain “minimum contacts” with the forum state such that “the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” When considering due process for specific personal jurisdiction, the court must determine whether “(1) the defendant has purposefully directed his activities at the forum state or purposefully availed himself of the privilege of conducting business in that state, and (2) the alleged injury arises out of the defendant’s forum-related activities.”
The Seventh Circuit concluded that attribution of an agent’s conduct to a principal to establish specific personal jurisdiction comports with federal due process. In doing so, the Court joined other circuits that have recognized the same, specifically, Nandjou v. Marriott Int’l, Inc., 985 F.3d 135, 150 (1st Cir. 2021), Celgard, LLC v. SK Innovation Co., 792 F.3d 1373, 1379 (Fed. Cir. 2015), and Myers v. Bennett Law Offices, 238 F.3d 1068, 1073 (9th Cir. 2001).
Here, the lead generators’ alleged illegal phone calls formed the basis of the plaintiff’s TCPA and IATDA claims. The Seventh Circuit concluded that the plaintiff adequately alleged that the lead generators acted with the marketer’s actual authority, as the Court had ruled regarding the insurer. The plaintiff alleged not only that the marketer contracted with the lead generators directly to telemarket the insurer’s health insurance, but that the marketer participated in the calls in real-time by pairing the agents with the insurer’s health insurance quotes, emailing quotes to call recipients, and permitting the agents to enter information into its system.
These well-pleaded factual allegations were enough, in the Seventh Circuit’s view, to support an agency relationship on actual authority grounds at the pleading stage. As a result, the Court concluded that the plaintiff established a prima facie case of personal jurisdiction over the marketer.
Accordingly, the Seventh Circuit reversed the judgment of the trial court and remanded for further proceedings consistent with its opinion.
9th Cir. Holds TCPA Prohibitions Extend Beyond Marketing or Advertising Calls
Loyhayem v. Fraser Fin. & Ins. Servs., No. 20-56014, 2021 U.S. App. LEXIS 23660 (9th Cir. Aug. 10, 2021)
The U.S. Court of Appeals for the Ninth Circuit recently reversed the dismissal of a plaintiff’s complaint alleging violations of the federal Telephone Consumer Protection Act (TCPA) for placing a job recruitment “robocall” to the plaintiff’s cell phone. In so ruling, the Ninth Circuit concluded that the plaintiff pleaded allegations adequate to survive a motion to dismiss because the TCPA’s prohibition on robocalls to cell phone numbers applies to “any call,” not just marketing or advertising calls.
The plaintiff allegedly received an unauthorized call to his cell phone in which the caller left a “job recruitment” voicemail. The plaintiff alleged the call was placed using an automated telephone dialing system (ATDS) and an artificial or pre-recorded voice.
The plaintiff filed suit against the company identified in the voicemail, claiming that the call violated the TCPA’s prohibitions against calls using “any automatic telephone dialing system or an artificial or prerecorded voice” to “any telephone number assigned to a . . . cellular telephone service.” § 227(b)(1)(A)(iii).
The defendant moved to dismiss, and the trial court granted its motion, concluding that the TCPA, 47 U.S.C. § 227, and its relevant implementing regulation, 47 C.F.R. § 64.1200, did not prohibit calls of this nature, but only robocalls to cell phones when the calls include an “advertisement” or constitute “telemarketing,” which the plaintiff recipient conceded were not included in the voicemail. § 64.1200(f)(1), (13). The plaintiff timely appealed the dismissal.
On appeal, the Ninth Circuit first reviewed the plain language of the TCPA, noting that the Act does not apply only to calls involving advertising or telemarketing, but plainly prohibits “any call,” regardless of content, that is made to a cell phone using an automatic telephone dialing system or an artificial or pre-recorded voice, unless the call is made either for emergency purposes or with the prior express consent of the person being called. 47 U.S.C. § 227(b)(1)(A)(iii).
The Court found that the plaintiff adequately alleged that the call he received was not made for emergency purposes, and that he did not expressly consent to receiving it. Accordingly, the Ninth Circuit concluded that he stated a valid claim for violation of the TCPA pursuant to the plain language of the statute.
The Court also found support in the FCC’s relevant implementing regulation, 47 C.F.R. § 64.1200. The relevant implementing language, which closely tracks the language of the statute, includes a qualifier that prohibits “any telephone call” made to a cell phone unless the call was made either for emergency purposes or with the prior express consent of the person being called “except as provided in paragraph (a)(2) of this section.”
The Ninth Circuit noted that the FCC’s amendment of § 64.1200 in 2012 to add paragraph (a)(2) served to impose a heightened consent requirement only for the subset of robocalls that involve advertising or telemarketing because the agency determined that the existing consent requirements proved ineffective in protecting consumers’ privacy interests. However, the FCC expressly maintained the existing consent requirement in paragraph (a)(1) for all other robocalls made to cell phones.
Thus, the Court held the undisputed fact that the call did not involve advertising or marketing simply meant that the heightened written consent requirement imposed by paragraph (a)(2) did not apply, and the trial court erred by focusing exclusively on paragraph (a)(2) of the FCC’s implementing regulation and overlooking paragraph (a)(1), which governed the allegedly violative call.
Because the recipient plaintiff adequately alleged that he did not consent to the defendant’s job recruiting call orally or in writing, the Ninth Circuit ruled that his complaint pleaded allegations sufficient to state a claim under the TCPA. The trial court’s dismissal was reversed and the case was remanded for further proceedings.