A New York federal district court has dismissed for lack of Article III standing six class action cases alleging that debt collectors violated the FDCPA by sharing data about the plaintiffs’ debts with mailing vendors.  In making these claims, the plaintiffs relied on the Eleventh Circuit’s ruling in Hunstein v. Preferred Collection and Management Services that a debt collector’s transmittal of debt information to its letter vendor could violate the FDCPA’s limits on third party communications.

In his decision in In Re FDCPA Mailing Vendor Cases, Judge Gary R. Brown first criticized plaintiffs’ lawyers for filing “legions of FDCPA cases that have little to do with the purposes of the statute.”  He commented that “[i]ncentivized by the promise of easy settlements and attorneys’ fees, counsel representing FDCPA plaintiffs have applied considerable imagination in devising theories of violation.”

Turning to his standing analysis, Judge Brown discussed the U.S. Supreme Court’s recent ruling in TransUnion, LLC. v. Ramirez that only class members who were concretely harmed by TransUnion’s FCRA violation had Article III standing to seek damages.  The named plaintiff in TransUnion alleged that his credit report provided by TransUnion to an auto dealer incorrectly indicated that his name matched a name found on the OFAC terrorist list.  The Supreme Court found that the only class members who had demonstrated concrete harm sufficient to confer Article III standing were those whose credit reports containing misleading OFAC alerts had been provided to third parties.  It found that class members whose credit files contained such misleading information but whose credit reports had not been provided by TransUnion to any potential creditors (the vast majority of the class) did not have standing because no harm was caused by credit file information that was not disclosed to a third party.

As an initial matter, Judge Brown indicated that he was not bound by Hunstein.  He then discussed why TransUnion casts significant doubt on Hunstein’s continued viability.  First, he noted the plaintiffs’ argument in TransUnion that although TransUnion had not shared their credit information with third parties, it had nevertheless published the information internally to TransUnion employees and to the vendors that printed and sent the mailings that class members received advising them that their names were a potential match to names on the OFAC list.  The Supreme Court rejected this argument, observing that many American courts did not traditionally recognize intracompany disclosures as actionable publications for purposes of the tort of defamation nor have they necessarily recognized disclosures to printing vendors as actionable.  Judge Brown commented that while dicta, the Supreme Court’s language appeared to be dispositive of Hunstein’s vendor theory.

Judge Brown also rejected the plaintiffs’ attempt to show concrete harm through the assertion that they suffered a material risk of future harm.  He noted that TransUnion emphasizes that the mere risk of future harm standing alone cannot qualify as a concrete harm.  Judge Brown concluded that the plaintiffs’ speculative claims of potential future harm through the release of information by the mailing vendors “cannot support plaintiffs’ claim of Article III standing.”

As further support for his conclusion that the plaintiffs lacked Article III standing, Judge Brown observed that the facts in the vendor cases were distinguishable from cases in which plaintiffs can plausibly demonstrate injury-in-fact.  He noted that “[i]n contrast to the spurious information at issue in TransUnion, to wit: erroneously branding class members as terrorists, the cases at issue involve debts ranging from $482.28 to as little as $25.00”  Commenting that “[i]t is one thing to falsely brand someone a drug trafficker; reporting that they failed to satisfy a modest obligation is quite another,” Judge Brown was unwilling to accept the plaintiffs’ attempt to analogize their alleged harms to a traditional common law tort, whether defamation or invasion of privacy.

Judge Brown “[f]or avoidance of doubt” dismissed the complaints in the six cases without prejudice subject to repleading within 14 days.  He indicated that this period would allow the plaintiffs to amend their pleading to allege facts, if any, demonstrating actual damages, or in the alternative, other forms of relief they might be able to pursue.  He also noted that the dismissal was without prejudice to refiling in state court if appropriate.

Hundreds of Hunstein “copycat” cases have been filed nationwide.