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Where Debtors Sit and Where They Stand

On Behalf of | Dec 18, 2020 | Firm News |

One of the more deceptively complicated areas of litigation is the principle of “standing.” The idea, based usually in Article III of the U.S. Constitution, had a bit of time in the spotlight recently because it was the stated cause for the U.S. Supreme Court denying action on the Texas lection case. Very generally, “standing” ensures that the courts are issuing rulings on actual adverse parties who have suffered damages, not just issuing advisory opinions to a party who believes the law has been violated and is willing to make that argument in court. Although some view it as a way for courts to “punt” on cases they don’t want to address, the “standing” requirement, it is fundamentally a restriction on the power of the judicial branch by limiting it to the “cases” and “controversies” that are contemplated in the text of the Constitution. Of course, that doesn’t make it any less frustrating for parties when courts appear to minimize their very real concerns through such dismissals.

A good illustration of a “standing” issue on a much smaller scale is the recent decision of the U.S. Seventh Circuit Appellate Court in Gunn v. Thrasher, Buschmann & Voelkel, PC, No. 19-3514 (7th Cir. 2020). The facts in this case are straightforward: The Gunns fell about $2,000.00 behind on their Homeowner’s Association fees, and the Association-hired law firm sent them a letter threatening that “it may seek to foreclose such mechanic’s lien, covenants, mortgage, or security agreement.” The Gunns sued under the Fair Debt Collection Practices Act, arguing that it would have been obviously economically nonsensical for the firm to file a foreclosure action over $2,000.00 and therefore the threat was “false or misleading” in violation of the statute. The court dismissed the Gunns claims, not because they disagreed with the Gunns’ interpretation of the statute but because it found that they didn’t actually have standing to bring the suit.

The question was one of injury. The Gunns argued that they had been injured because they were annoyed or intimidated by the letter, in the same way that people have legally recognizable invasion of privacy injuries in cases of intrusive phone calls or text messages. The court rejected this argument because the collections letter in and of itself was in no way illegal—people are allowed to send letters in attempts to collect on a debt, after all. What the Gunns were arguing is that the language of the letter was in violation of the law, not the physical arrival of the letter itself. And they were unable to point to any injury that they had suffered from that language other than annoyance or indignation or infuriation or disgust, all of which have previously been ruled to not be injuries that confers standing. The court points out that the language of the letter was not reported to a credit agency or any outside party, and in fact the Gunns never did pay their Association fee so it is difficult to argue they took the (very severe) threat particularly seriously in the first place. The court thus found that, even if there had been a violation of the Fair Debt Collection Practices Act, the Gunn had not suffered the concrete injury that would confer standing and allow the court to consider the dispute.

This ruling seems pretty unfair on its face: a party gets away with (possibly) violating the law, and the court has said that there is nothing that they can do about it. And perhaps the Gunns could have framed their argument that would have given them standing if they took that particular foreclosure threat so hard that they required mental health treatment or lost sleep over it or suffered other physical effects, although it seems that no such evidence was ever presented to the court. The concept of standing is part of the principles underpinning our system of separation of powers in government, so as attorneys we work with its framework.

Attorney Travis Dunn