Ashley Nettles v. Midland Funding, LLC

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-3327
ASHLEY NETTLES,
Plaintiff-Appellee,
v.
MIDLAND FUNDING LLC, and
MIDLAND CREDIT MANAGEMENT, INC.,
Defendants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18-cv-7766 — Edmond E. Chang, Judge.
____________________
ARGUED JUNE 4, 2020 — DECIDED DECEMBER 21, 2020
____________________
Before SYKES, Chief Judge, and EASTERBROOK, Circuit
Judge. 1
1The Honorable Amy Coney Barrett, Associate Justice of the Supreme
Court of the United States, was a judge of this court and member of the
panel when this case was submitted but did not participate in the
decision and judgment. The appeal is resolved by a quorum of the panel
pursuant to 28 U.S.C. § 46(d).
2 No. 19-3327
SYKES, Chief Judge. After Ashley Nettles defaulted on her
credit-card account, Midland Funding LLC acquired the
debt. Midland sued Nettles in state court, and the parties
entered a consent judgment requiring a monthly repayment
plan with modest automatic draws from her bank account.
The automatic draws ceased after three months when
Midland’s law firm went out of business. A Midland affiliate
then sent Nettles a collection letter that overstated her
remaining balance by about $100. That prompted this suit
under the Fair Debt Collection Practices Act (“FDCPA” or
“the Act”), 15 U.S.C. §§ 1692 et seq.
The complaint alleges that the letter is false, misleading,
or otherwise unfair or unconscionable in violation of
15 U.S.C. §§ 1692e and 1692f. Nettles proposes to represent a
class of consumers who received similar letters. The credit-
card agreement, however, contains an arbitration provision
giving either party the right to require arbitration of any
dispute relating to the account, including collection matters.
Midland moved to compel arbitration. The district judge
denied the motion, concluding that the arbitration clause
does not cover this claim. As permitted by the Federal
Arbitration Act, Midland appealed, asking us to reverse and
remand with instructions to grant the motion to compel
arbitration.
A jurisdictional defect prevents us from reaching the ar-
bitration question. Nettles sued for violation of §§ 1692e and
1692f, but she has not alleged any injury from the alleged
statutory violations. Applying our recent decisions in Larkin
v. Finance System of Green Bay, Inc., Nos. 18-3582 & 19-1537,
2020 WL 7332483 (7th Cir. Dec. 14, 2020), and Casillas v.
Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019),
No. 19-3327 3
we vacate and remand with instructions to dismiss the case
for lack of standing.
I. Background
In 2015 Ashley Nettles applied for a credit card with
Credit One Bank. The bank accepted her application and
sent her a credit card and a copy of the cardholder agree-
ment. The agreement explained that by using her card, she
became bound by the terms of the cardholder agreement and
that its terms were enforceable not only by Credit One but
also its successors and assigns. The agreement contains a
provision that either party may require arbitration of any
dispute relating to the account, including collection matters.
Nettles used the card after receiving it and thus became
bound by the agreement.
Nettles continued to use her credit card but stopped
making payments in January 2016. In July 2016 Credit One
charged off the $601.97 balance and sold its rights in her
account to MHC Receivables, LLC, which later sold the debt
to Sherman Originator III LLC. Sherman Originator in turn
sold the debt to Midland Funding LLC.
Midland hired the law firm Blatt, Hasenmiller, Leibsker
& Moore LLC, which sued Nettles in Michigan state court to
collect the debt. The parties entered a consent judgment that
required Nettles to pay Midland $689.37 (the $601.97 account
balance plus Midland’s $87.40 in court costs) in monthly
installments of $50 until paid in full. The Blatt law firm,
acting on behalf of Midland, automatically withdrew the $50
payments from Nettles’s bank account for three months but
then stopped when the firm dissolved. At this point Nettles
owed Midland $539.37.
4 No. 19-3327
In June 2018 Midland Credit Management, Inc., a
Midland affiliate, sent Nettles a letter stating that it would be
servicing the debt on behalf of Midland Funding and that
her current balance was $643.59, about $104 more than her
actual outstanding balance. Nettles responded with this
lawsuit against Midland and its affiliate. 2 (The appeal
doesn’t require us to distinguish between the two, so we
refer to them collectively as “Midland.”)
The complaint alleges that the collection letter was false,
misleading, or otherwise unfair or unconscionable in viola-
tion of §§ 1692e and 1692f of the FDCPA. Nettles sought
actual and statutory damages and proposed to represent a
class of consumers who received similar letters overstating
their account balances. Midland moved to compel arbitra-
tion, invoking the arbitration provision in the Credit One
cardholder agreement. The judge denied the motion, con-
cluding that the claim was beyond the scope of the arbitra-
tion provision. He reasoned that the dispute concerned a
matter relating to the consent judgment entered in Michigan
court—not Nettles’s Credit One account.
Midland appealed under the Federal Arbitration Act,
which authorizes an immediate appeal from an order deny-
ing a motion to compel arbitration. 9 U.S.C. § 16(a)(1); see
Hennessy Indus. v. Nat’l Union Fire Ins. Co., 770 F.3d 676, 678
(7th Cir. 2014).
2The complaint also named the Blatt law firm as a defendant, but Nettles
voluntarily dismissed her claim against the firm.
No. 19-3327 5
II. Discussion
Most of the briefing concerns the arbitration issue, but
the parties also identify a possible problem with Nettles’s
standing to sue. Their attention to the standing issue is
belated; in the district court, no one addressed whether
Nettles adequately pleaded an injury traceable to the alleged
FDCPA violations. But Article III standing is jurisdictional
and cannot be waived. FW/PBS, Inc. v. City of Dallas, 493 U.S.
215, 231 (1990); Freedom from Religion Found., Inc. v. Nicholson,
536 F.3d 730, 737 (7th Cir. 2008). The standing inquiry re-
solves this appeal.
As the case comes to us, our analysis of Article III stand-
ing asks whether the complaint “clearly allege[s] facts”
demonstrating that Nettles has “(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 favora-
ble judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540,
1547 (2016). An injury in fact is an “invasion of a legally
protected interest that is concrete and particularized and
actual or imminent, not conjectural or hypothetical.” Id. at
1548 (quotation marks omitted). A concrete injury is a real
injury—that is, one that actually exists, though intangible
harms as well as tangible harms may qualify. Id. at 1548–49.
Nettles alleges that Midland’s collection letter violated
her rights under the FDCPA. But a plaintiff does not “auto-
matically satisf[y] the injury-in-fact requirement whenever a
statute grants a person a statutory right and purports to
authorize that person to sue to vindicate that right.” Id. at
1549. To the contrary, “Article III standing requires a con-
crete injury even in the context of a statutory violation.” Id.6 No. 19-3327
Our recent decisions in Casillas and Larkin applied these
principles to claims alleging violations of the FDCPA. In
Casillas the plaintiff alleged that the defendant debt collector
violated her rights under § 1692g of the Act by sending her
an incomplete collection letter omitting one part of the
statutorily required notice about how to exercise her right to
dispute her debt. Casillas, 926 F.3d at 332. We explained that
the plaintiff lacked standing because she had not alleged that
the incomplete notice harmed her or created any real risk of
concrete harm to her. Id. at 334. She did not claim, for exam-
ple, that she tried to dispute the debt or even considered
contacting the defendant to dispute or verify the debt. Id. So
there was no risk that the defendant’s error could have
caused her to lose § 1692g’s statutory protections because
she did not ever consider using them. Id. at 336.
In Larkin we extended the reasoning of Casillas to claims
under §§ 1692e and 1692f of the FDCAP. 2020 WL 7332483,
at *3–4. We acknowledged that § 1692g—the provision at
issue in Casillas—imposes procedural obligations on debt
collectors, while §§ 1692e and 1692f are substantive provi-
sions prohibiting “false, deceptive, or misleading representa-
tions” and “unfair or unconscionable” debt-collection
practices. Id. at *3. We held that the distinction between
procedural and substantive statutes has no effect the stand-
ing analysis: “An FDCPA plaintiff must allege a concrete
injury regardless of whether the alleged statutory violation
is characterized as procedural or substantive.” Id. (citing
Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1621 (2020)). The
plaintiffs in Larkin alleged that certain statements in the
defendant debt collector’s dunning letters were false, mis-
leading, and unfair, but the complaints contained no allega-
tions of harm or “even an appreciable risk of harm” from the
No. 19-3327 7
alleged statutory violations. Id. at *4. We concluded that the
claims must be dismissed for lack of standing. Id.The same result is required here. Nettles alleges that
Midland violated §§ 1692e and 1692f when it overstated the
amount of her debt in its collection letter. But her complaint
does not allege that the statutory violations harmed her in
any way or created any appreciable risk of harm to her.
Indeed, on appeal she admits that the letter didn’t affect her
at all and that her only injury is receipt of a noncompliant
collection letter. She invites us to reconsider Casillas under
Circuit Rule 40(e). We decline the invitation. 3 As something
of an afterthought at oral argument, Nettles argued that
becoming annoyed and consulting a lawyer suffice to estab-
lish injury for standing purposes. We rejected that argument
in Gunn v. Thrasher, Buschmann & Voelkel, P.C., No. 19-3514,
2020 WL 7350278, at *2 (7th Cir. Dec. 15, 2020).
Larkin and Casillas are dispositive here. Because Nettles
has not alleged that she suffered an injury from the claimed
FDCPA violations, she has failed to plead facts to support
her standing to sue. We VACATE the order denying
Midland’s motion to compel arbitration and REMAND with
instructions to dismiss the case for lack of jurisdiction.
3 Nettles relies in part on the Sixth Circuit’s decision in Macy v. GC
Services Ltd. Partnership, 897 F.3d 747, 757 (6th Cir. 2018), which held that
an alleged violation of § 1692g is itself enough to create standing. But in
Casillas we explicitly rejected Macy as inconsistent with Spokeo, acknowl-
edging that in doing so, we created a circuit split. Casillas v. Madison Ave.
Assocs., Inc., 926 F.3d 329, 335–36 (7th Cir. 2019). And as required by
Circuit Rule 40(e), Casillas was circulated to the full court. Id. at 336 n.4.
Another Rule 40(e) circulation on the same issue would be pointless.