7th Circuit debt collection ruling creates split among circuits

A woman who wasn’t informed she needed to respond to a debt collection letter in writing lost at the 7th Circuit Court of Appeals, whose ruling that the collection agency simply made a mistake that didn’t cause her any injury created a split among circuit courts. Three judges authored a published dissent from a subsequent denial of rehearing en banc. 

When debt collection agency Madison Avenue Associates, Inc. sent Paula Casillas a debt-collection letter for money she allegedly owed to a credit union, it failed to include a required statement saying that Casillas must submit her notification disputing the debt in writing.

That omission prompted Casillas to file a class action against Madison, alleging it failed to comply with a provision of the Fair Debt Collection Practices Act by neglecting to inform her of the writing requirement.

Casillas argued that failure constituted a concrete and material breach of her rights under the act, and she personally sought to recover a $1,000 statutory penalty, as well as a $5,000 statutory penalty for the unnamed class members, along with attorney fees and costs.

However, the U.S. District Court for the Southern District of Indiana concluded that the 7^th Circuit Court of Appeals’ decision in Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017) required it to dismiss Casillas complaint. It ruled that absent an allegation that Madison’s violation had caused her harm or put her at an appreciable risk of harm, Casillas lacked standing to sue.

The 7^th Circuit agreed, noting that Casillas could not demonstrate standing by simply pointing to Madison’s procedural violation. Rather, she must show that the violation harmed or “presented an ‘appreciable risk of harm’ to the underlying concrete interest that Congress sought to protect.” That, the panel concluded, Casillas did not do.

 “The only harm that Casillas claimed to have suffered, however, was the receipt of an incomplete letter — and that is insufficient to establish federal jurisdiction,” Judge Amy Coney Barrett wrote. “As the Supreme Court emphasized in Spokeo, Inc. v. Robins, Casillas cannot claim ‘a bare procedural violation, divorced from any concrete harm, and satisfy the injury‐in‐fact requirement of Article III.’

“Article III grants federal courts the power to redress harms that defendants cause plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions,” the panel continued.  “Because Madison’s violation of the statute did not harm Casillas, there is no injury for a federal court to redress.”

The ruling in Paula Casillas v. Madison Avenue Associates, Inc., 17-3162, conflicts with the 6^th Circuit Court of Appeals holding Macy v. GC Servs. Ltd. P’ship, 897 F.3d 747 (6th Cir. 2018), on materially indistinguishable facts. Because of that conflict, Casillas was circulated to all active 7^th Circuit judges under Rule 40(e), but a majority declined to hear the case en banc.

However, Chief Judge Diane Wood, joined by Circuit Judges Ilana Rovner and David Hamilton, filed a published dissent from the denial of en banc rehearing.

Wood noted that she was troubled by the fact that the panel’s opinion would make it “much more difficult” for consumers to enforce the protections against abusive debt collection practices that Congress conferred in the act.

“But what troubles me even more is the light this case shines on the need for a clear test in this circuit to distinguish between statutory protections that create, on the one hand, a ‘bare procedural injury’ that does not support standing, and, on the other hand, statutory protections for the type of concrete, particularized, and actual or imminent injury that meet Article III standards,” Wood opined.  

“In my view, the rejection of standing in the case before us is not so self‐evident that we should resolve it using the truncated Rule 40(e) process. We should instead have a full adversarial presentation before the en banc court,” Wood wrote.