Supreme Court sidesteps hard questions in consumer financial services cases

By Richard A. Roth

Supreme Court opinions addressing debt collection and credit reporting laws issued on May 16, 2016, avoided deciding the questions that had led the Court to grant certiorari. In Spokeo, Inc. v. Robins, an 8-to-2 majority of the Court decided to send a Fair Credit Reporting Act suit back to the appellate court for a more complete analysis of whether the consumer had Constitutional standing to sue. In Sheriff v. Gillie, the Court unanimously decided a Fair Debt Collection Practices Act suit on narrow grounds, allowing it to avoid the question of who was a state official that was exempt from the act's requirements.

Standing to sue. Spokeo, Inc. v. Robins, dealing with standing to sue, had the potential to affect suits under a number of different federal laws. The precise issue was whether a consumer who did not describe an actual, present injury from a consumer reporting agency's FCRA violations could nevertheless describe an injury in fact that gave him standing. In the absence of an injury in fact there would be no case or controversy, meaning there would be no federal court jurisdiction.

The problem for the Court, however, was that there are two distinct parts of an injury in fact: the injury must be both particular to the consumer and concrete. There was no question that any injury from reporting incorrect information about a consumer would be particular to that consumer, the Court conceded, but that did not mean the injury also was concrete.

In its 2014 decision (Robins v. Spokeo, Inc.), the U.S. Court of Appeals for the Ninth Circuit had not adequately considered whether there was a concrete injury--an injury that was actual or imminent, not simply hypothetical--the Court's majority decided. Over the objections of two dissenting justices, the case was returned to the Ninth Circuit for a specific analysis of the concreteness factor.

Concreteness. In returning the case to the Ninth Circuit, the majority opinion did not foreclose the possibility that the suit will survive. The opinion explicitly recognized that when it passed the FCRA, Congress intended to “curb the dissemination of false information by adopting procedures designed to decrease that risk.” It also recognized that an intangible injury can be concrete. However, the majority also said that “a bare procedural violation” that resulted in no harm would not cause a concrete injury.

Debt collection violation. Sheriff v. Gillie was presented as an opportunity for the Court to decide whether private attorneys who collected debts on behalf of the state of Ohio were state officials who were exempt from the FDCPA. The Court instead simply assumed that the special counsel were covered by the act and then decided they had not violated it.

In collection letters sent to consumers who owed the state money, the special counsel used the Ohio attorney general's letterhead, signing as special counsel. The consumers claimed this practice misrepresented the private attorneys' status as state officials and that this misrepresentation violated the FDCPA. The private attorneys and the state of Ohio argued that the attorneys were state officials and thus exempt from the act.

Noting that the state of Ohio described the special counsel as independent contractors, the U.S. Court of Appeals for the Sixth Circuit decided they therefore could not be state officers (Gillie v. Law Office of Eric A. Jones, LLC). The Supreme Court decided the case without reaching the question.

No misrepresentations. The use of the official letterhead was neither false nor misleading, the Court said. Instead, it “accurately conveys that special counsel, in seeking to collect debts owed to the State, do so on behalf of, and as instructed by, the Attorney General.” The consumer’s attorneys admitted that the FDCPA would not have been violated if the collection letters, rather than using the letterhead, had stated that the private attorneys were acting as special counsel to the attorney general to collect a debt. It would be irrational to say that using a combination of the official letterhead and the private attorney’s signature block to convey the same information was somehow misleading, according to the opinion.

Federalism. The Court also was more receptive to the state's federalism argument than the Ninth Circuit had been. Collecting money owed is a “core sovereign function,” the Court said. Federal law should not unnecessarily be interpreted in a way that impinged on the state’s choice of how to carry out a sovereign function.

No consumer harm. The Court also was unconcerned about whether consumers might be confused or intimidated by the letterhead’s appearance on a collection letter. First, a single telephone call to the AG’s office would resolve any confusion, the opinion pointed out.

The letters in question did not threaten criminal prosecution, civil penalties, or any other enforcement actions that were unique to the state, the opinion continued. However, there was nothing wrong with the possibility that consumers might be coerced into putting their obligations to the state above other debts, the Court added. The state did have unique collection powers, and the FDCPA “does not protect consumers from fearing the actual consequences of their debts.”

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