DUNN v. ENHANCED RECOVERY COMPANY, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

DEDE DUNN and MURIEL LYTLE, on )

behalf of themselves and others )

similarly situated, )

)

Plaintiffs, )

)

v. ) 21-CV-665

)

ENHANCED RECOVERY COMPANY, )

LLC, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

This putative class action alleges violations of state and

federal law related to debt collection activity. Before the court

is Plaintiffs’ motion to remand (Doc. 20) and motion for partial

judgment on the pleadings (Doc. 23). The motions are fully

briefed. For the reasons set forth below, Plaintiffs’ motion to

remand will be granted and Plaintiffs’ motion for partial judgment

will be denied as moot.

I. BACKGROUND

Defendant Enhanced Recovery Company, LLC (“ERC”) is a debt

collector and collection agency incorporated under the laws of

Delaware with a principal place of business in Florida. (Doc. 14

at ¶¶ 9-10.) ERC is regularly engaged in the business of

collecting debts owed by consumers in North Carolina. (Id. at

¶ 11.) Plaintiffs Dede Dunn and Muriel Lytle are citizens and

residents of North Carolina and allegedly owe debts to ERC. (Id.

at ¶¶ 7,8.)

Plaintiffs commenced this action by filing their complaint in

the General Court of Justice, Superior Court Division, of Rowan

County, North Carolina on July 9, 2021. (Doc. 2.) The complaint

alleges that in the process of seeking to collect the alleged debt,

ERC unlawfully shared their sensitive financial information with

unauthorized third-party vendors in violation of the Fair Debt

Collection Practices Act, 15 U.S.C. § 1692 (“FDCPA”), the North

Carolina Debt Collection Act, N.C. Gen. Stat. § 58-50 et seq.

(“NCDCA”), and the North Carolina Unfair and Deceptive Trade

Practices Act, N.C. Gen. Stat. § 75-1.1. (Doc. 14 at ¶ 1.) On

August 25, ERC removed the action to this court asserting federal

question jurisdiction pursuant to 28 U.S.C. § 1331. (Doc. 1.)

Plaintiffs filed an amended complaint on October 10, adding a claim

under the North Carolina Collection Agency Act, N.C. Gen. Stat.

§ 58-70. (Doc. 14.) ERC filed an answer, generally denying

Plaintiffs’ allegations. (Doc. 16.)

Plaintiffs now move the court to remand the case to state

court, arguing they lack standing for the federal claim and

therefore the court lacks jurisdiction. (Doc. 20.) Plaintiffs

also move the court for partial judgment on the pleadings, arguing

that the briefing makes clear that ERC violated the FDCPA and

NCDCA, and the only issues to be determined at a later date are

class certification and damages. (Doc. 23.) ERC opposes both

motions.

II. ANALYSIS

The court applies the usual test for analyzing standing at

the pleadings stage and will accept as true the factual allegations

in the complaint. See Beck v. McDonald, 848 F.3d 262, 270 (4th

Cir. 2017) (accepting as true factual allegations in complaint

when analyzing standing at the pleadings stage). A party invoking

federal jurisdiction must establish standing for a court to review

his claims. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61

(1992). As ERC is the party invoking federal jurisdiction, it

must show that the complaint includes “clearly allege[d] facts

demonstrating each element” of standing. Spokeo, Inc. v. Robins,

578 U.S. 330, 338 (2016) (internal quotations and citations

omitted); Strawn v. AT&T Mobility LLC, 530 F.3d 293, 296-97 (4th

Cir. 2008). To establish standing, a party must first show that

the plaintiff has suffered an “injury in fact.” Lujan, 504 U.S.

at 560-61. That injury must be “fairly traceable to the challenged

conduct of the defendant, and . . . likely to be redressed by a

favorable judicial decision.” Spokeo, 578 U.S. at 338.

To suffice, the allegations in the complaint must claim that

a plaintiff has suffered a concrete harm. Id. at 339-40. Tangible

harms, such as physical or monetary harms, “readily qualify as

concrete injuries under Article III.” TransUnion LLC v. Ramirez,

141 S. Ct. 2190, 2204 (2021). Intangible harms may also qualify

as concrete injuries. Spokeo, 578 U.S. at 340. Those harms are

sufficiently concrete when they have a “close relationship to harms

traditionally recognized as providing a basis for lawsuits in

American courts.” TransUnion, 141 S. Ct. at 2204. A plaintiff

does not “automatically 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.” Spokeo,

578 U.S. at 341. Put differently, “an injury in law is not an

injury in fact.” TransUnion, 141 S. Ct. at 2200-01. At the

pleading stage, “general factual allegations of injury resulting

from the defendant’s conduct may suffice.” Lujan, 504 U.S. at

561.

Plaintiffs allege that ERC violated the FDCPA and the NCDCA

by communicating information regarding their debts to a third-

party vendor retained to assist with collection activity. (Doc.

14 at ¶ 2.) The third-party vendor would take that information,

place it into a prewritten template, and mail that document to

Plaintiffs and other individuals who owed outstanding debt. (Id.

at ¶ 25.) Though Plaintiffs base their federal claim on this

conduct, several courts have found, after the Supreme Court’s

decision in TransUnion, that the sharing of such information with

the third-party vendor is not actionable under the FDCPA. See,

e.g., TransUnion, 141 S. Ct. at 2210 n.6 (finding the argument

that TransUnion had injured the plaintiffs by distributing

information to vendors “unavailing,” because American courts did

not traditionally recognize “disclosures to printing vendors as

actionable publications” (citations omitted)); Cavazzini v. MRS

Assocs., --- F. Supp. 3d ----, 2021 WL 5770273, at *6 (E.D.N.Y.

2021) (noting Congress did not intend to target “all communications

by debt collectors to third parties,” and disclosure of private

data to a third-party vendor did not constitute an injury under

the FDCPA); Ciccone v. Cavalry Portfolio Servs., LLC, No. 21-CV-

2428(JS)(JMW), 2021 WL 5591725, at *5 (E.D.N.Y. Nov. 29, 2021)

(same); Stewart v. Healthcare Revenue Recovery Grp., LLC, No. 3:20-

CV-00679, 2022 WL 200371, at *17 (M.D. Tenn. Jan. 21, 2022) (same);

Liu v. MRS BPO, LLC, No. 21 C 2919, 2021 WL 5630764, at *4 (N.D.

Ill. Nov. 30, 2021) (same); Brown v. Alltran Fin., LP, No. 1:21-

CV-595, 2022 WL 377001, at *6 (M.D.N.C. Feb. 8, 2022) (same); Sputz

v. Alltran Fin., LP, No. 21-CV-4663 (CS), 2021 WL 5772033, at *3

(S.D.N.Y. Dec. 5, 2021) (same). Here, the court need not reach

that question, which is more properly a challenge pursuant to

Federal Rule of Civil Procedure 12(b)(6), and can assume, without

deciding, that sharing Plaintiffs’ information with the third-

party mailing vendor would be a violation of the FDCPA. That is

because a statutory violation alone is insufficient to confer

standing; a violation does not necessarily cause a concrete harm,

and none is alleged here. Spokeo, 578 U.S. at 341; TransUnion,

141 S. Ct. at 2205.

In TransUnion, a class of consumers sued TransUnion, a credit

reporting agency, alleging violations of the Fair Credit Reporting

Act. 141 S. Ct. at 2200. TransUnion had allegedly failed to adopt

procedures to maintain accurate credit files when it wrongfully

designated plaintiffs as drug traffickers, potential terrorists,

and other serious criminals. Id. at 2200-01. For some of the

class members, TransUnion distributed these credit files with

incorrect information to third-party entities, such as employers,

retailers, and auto dealerships, who sought credit history

information of the class members. Id. at 2200. For other members

of the class, the credit files were kept internal to TransUnion

and were never disclosed to third parties. Id.

The Supreme Court equated the harm suffered by class members

whose incorrect files were distributed to third-party creditors to

the harm suffered in an action for defamation. Id. at 2208-09.

“Under longstanding American law,” the Court stated, “a person is

injured when a defamatory statement that would subject him to

hatred, contempt, or ridicule is published to a third party,” and

TransUnion’s incorrect classification of the class members as

potential terrorists, drug traffickers, or criminals which was

then disclosed to third parties subjected those members to a

substantially similar concrete harm. Id. at 2208-09.

The class members whose credit files were not shared with a

third party, however, lacked standing. Although their files

contained the same incorrect information, there was no common law

analogue “where the mere existence of inaccurate information,

absent dissemination, amounts to concrete injury.” Id. at 2209.

As such, the risk of harm had the information been distributed did

not create a concrete harm as there was no common law analogue and

the harm was speculative in nature. Id. at 2211-12.

Importantly, there is no allegation here that the information

disseminated by ERC to the third-party mailing vendor contained

any misleading information akin to the credit files at issue in

TransUnion. Nevertheless, violations of the FDCPA could cause

intangible harm sufficient to constitute an injury in fact. See

Foley v. Mary Washington Healthcare Servs., Inc., No. 21-CV-239,

2021 WL 3193177, at *3 (E.D. Va. July 28, 2021) (finding standing

where plaintiff suffered the nominal economic harm of purchasing

a stamp to dispute a debt in writing). However, Plaintiffs here

have alleged no concrete injury.

The original complaint is silent on the type of harm

Plaintiffs are alleged to have suffered from ERC’s illegal sharing

of information to the third-party vendor. Plaintiffs allege ERC

“disclosed information to a third party without [their] prior

consent.” (Doc. 2 at ¶ 44.) ERC did so “with reckless disregard

for the harm to Plaintiffs and the classes that could result from

Defendant’s unauthorized disclosure of private and sensitive

information.” (Id. at ¶ 56.) According to Plaintiffs, that

disclosure was “both unfair and unconscionable.” (Id. at ¶ 58.)

Even if that were true, ERC’s failure to consider future harms

caused by its disclosure of information to the third-party vendor

is not a concrete harm, as it is too speculative. TransUnion, 141

S. Ct. at 2211-12. Nowhere do Plaintiffs allege what harm was

caused by ERC’s actions, merely alleging instead that ERC violated

a statute and that doing so was “unfair.”

Plaintiffs’ amended complaint provides no additional insight.

ERC directs the court to paragraphs in the amended complaint which

do not relate to the harm allegedly suffered by Plaintiffs. For

instance, Plaintiffs allege that “Defendant’s conveyance of

information regarding the Debt to a third-party vendor is an

unreasonable publication,” and “Plaintiffs did not consent to

Defendant’s communication to the third party concerning

Plaintiffs’ personal and/or confidential information.” (Doc. 14

at ¶¶ 24, 50.) None of that describes an injury suffered by

Plaintiffs. ERC has not “identified specific allegations of injury

in fact from the alleged disclosure at issue,” and, as such, “[t]he

Court does not have subject matter jurisdiction and remand is

appropriate.” Brown v. Alltran Financial, LP, No. 1:21-CV-595,

2022 WL 377001, at *6 (M.D.N.C. Feb. 8, 2022).

ERC proffers numerous arguments against this conclusion.

Each is unpersuasive. For instance, ERC first argues that

Plaintiffs’ motion to remand is untimely, because Plaintiffs’

“facial challenge” to standing “was required to be filed within 30

days of removal.” (Doc. 22 at 3.) Standing is a threshold

jurisdictional requirement and can be raised by any party or sua

sponte by the court at any time. See Plyler v. Moore, 129 F.3d

728, 731 n.6 (4th Cir. 1997) (holding that issues regarding

subject-matter jurisdiction “may be raised at any time by either

party or sua sponte by this court”).

ERC points to 28 U.S.C. § 1447(c), which requires that motions

to remand “on the basis of any defect other than lack of subject

matter jurisdiction” be filed within 30 days after the filing of

a notice of removal. ERC contends that, when a party challenges

subject matter jurisdiction by attacking the allegations

supporting jurisdiction in the complaint and the court sustains

that “facial attack,” the court is not finding a lack of subject

matter jurisdiction but rather concluding “that jurisdiction has

not been properly alleged.” (Doc. 22 at 4.) Because the court

has not found a lack of subject matter jurisdiction, ERC argues,

the subject matter exception in § 1447(c) does not apply. Under

this theory, Plaintiffs’ motion to remand was required to have

been filed within 30 days after the filing of the notice of

removal.

This argument is also unpersuasive. If ERC were correct, it

would prevent parties from challenging subject matter jurisdiction

by raising facial challenges to the court’s jurisdiction after

§ 1447(c)’s 30-day window. That construction is impermissible

given the plain text of § 1447(c) that requires a remand notice to

be filed within 30 days after the filing of the § 1446(a) notice

of removal for “any defect other than lack of subject matter

jurisdiction.” 28 U.S.C. § 1447(c) (emphasis added). It also

contradicts the well-founded case law that objections to standing

“may be raised at any time.” Henderson v. Shinseki, 562 U.S. 428,

434 (2011). Indeed, § 1447(c) clearly states that “[i]f at any

time before final judgment it appears that the district court lacks

subject matter jurisdiction, the case shall be remanded,” 28 U.S.C.

§ 1447(c).

While ERC notes that “establishing an actual lack of subject

matter jurisdiction can require discovery,” discovery is not

needed where the allegations of the complaint, even accepted as

true, are insufficient in themselves. See SunTrust Bank v. Vill.

at Fair Oaks Owner, LLC, 766 F. Supp. 2d 686, 689 (E.D. Va. 2011)

(noting that because the motion to dismiss did “not challenge[]

the accuracy of the complaint’s allegations,” but rather that

subject matter jurisdiction was lacking even based on those

allegations, no discovery was needed); Diop v. BMW of N.A., LLC,

511 F. Supp. 3d 679, 684 (E.D.N.C. 2021) (noting discovery is

needed where facts necessary to resolving the motion “are not

apparent on the face of the complaint” (citing Cruz v. Maypa, 773

F.3d 138, 146-47 (4th Cir. 2014)). Because Plaintiffs’ motion to

remand is based on the sufficiency of the allegations of the

complaint which the court accepts as true, no discovery is needed.

See Beck v. McDonald, 848 F.3d 262, 270 (4th Cir. 2017) (accepting

as true factual allegations in complaint when analyzing standing

at the pleadings stage). In fact, Plaintiffs’ reply brief makes

clear that Plaintiffs do not seek any damages from alleged viewing

of their information by the third-party vendor. (See Doc. 25 at

3 (“ERC contends there is a factual issue over whether Defendant’s

letter vendor and employees ever reviewed the sensitive financial

information transmitted by ERC. [DE 22, p.9]. Plaintiffs did not

make that allegation. See generally [DE 14].”) This renunciation

renders any discovery on that issue moot.

ERC further contends that “[t]o properly challenge this

Court’s subject matter jurisdiction more than 30 days after

removal, Plaintiffs must file evidence demonstrating an actual

lack of standing.” (Doc. 22 at 3.) It may be that many subject

matter challenges may require an evidentiary record. But here

the burden to prove removal, and thus this court’s subject matter

jurisdiction, rests on ERC as the removing party. See Scott v.

Cricket Comms., LLC, 865 F.3d 189, 194 (4th Cir. 2017) (“If the

plaintiff challenges removal, however, the defendant bears the

burden of demonstrating that removal jurisdiction is proper”

(internal quotations and citations omitted)). “If a plaintiff

files suit in state court and the defendant seeks to adjudicate

the matter in federal court through removal, it is the defendant

who carries the burden of alleging in his notice of removal and,

if challenged, demonstrating the court’s jurisdiction over the

matter.” Strawn v. AT&T Mobility LLC, 530 F.3d 293, 296-97 (4th

Cir. 2008) (emphasis added). Moreover, as already noted, a

sufficient showing can be made where the allegations of the

complaint are themselves deficient.

Finally, ERC points to an Eleventh Circuit opinion to argue

that “Plaintiffs’ standing is further supported by the case law

that was in effect at the time this matter was filed against ERC.”

(Doc. 22 at 7.) In that case, a panel of the Eleventh Circuit

concluded that a debt collector’s interactions with a third party,

a violation of the FDCPA, was properly viewed as an invasion of

individual privacy, which bore “a close relationship to a harm

that has traditionally been regarded as providing a basis for a

lawsuit in English or American courts.” Hunstein v. Preferred

Collection & Mgmt. Servs., 994 F.3d 1341, 1347 (11th Cir. 2021)

(quoting Spokeo, 578 U.S. at 341). As such, the violation of the

FDCPA conferred standing on the plaintiffs and thus subject matter

jurisdiction to the court. After TransUnion, the Eleventh Circuit

revisited its decision in Hunstein, again concluding that there

was standing over these claims. Hunstein, 17 F.4th 1016, 1033

(11th Cir. 2021).

However, those opinions have been vacated while the Eleventh

Circuit reconsiders Hunstein and its embedded issue of standing en

banc. Hunstein, 17 F.4th 1103 (11th Cir. 2021). Two, now vacated,

opinions from an out-of-circuit court are thin support for standing

in this case. In contrast, the conclusion that a violation of the

FDCPA, without an articulation of any concrete harm, is

insufficient to confer standing is consistent with the vast

majority of cases to have addressed the issue. See Brown v.

Alltran Fin., LP, No. 1:21-CV-595, 2022 WL 377001, at *6 (M.D.N.C.

Feb. 8, 2022) (remanding similar case where plaintiff had failed

to show violation of the FDCPA caused her an injury in fact);

Asbury v. Credit Corp Sols., Inc., No. 1:21-CV-650, 2022 WL 377011

(M.D.N.C. Feb. 8, 2022) (same); Hatchett v. Fin. Bus. & Consumer

Sols., Inc., No. 1:21-CV-622, 2022 WL 377002 (M.D.N.C. Feb. 8,

2022) (same); Barclift v. Keystone Credit Servs., LLC, ---

F.Supp.3d ----, 2022 WL 444267 (E.D. Pa. 2022) (same); see, e.g.,

Nabozny v. Optio Sols., LLC, --- F.Supp.3d ----, 2022 WL 293092

(W.D. Wis. 2022); Williams v. Portfolio Recovery Assocs., LLC, No.

21-CV-5656(DRH), 2022 WL 256510 (E.D.N.Y. Jan. 27, 2022); Luisi v.

Portfolio Recovery Assocs., LLC, No. 21-CV-6252(JS)(SIL), 2022 WL

198530 (E.D.N.Y. Jan. 21, 2022); Stewart v. Healthcare Revenue

Recovery Grp., LLC, No. 3:20-cv-00679, 2022 WL 200371 (M.D. Tenn.

Jan. 21, 2022); Soto v. Fin. Recovery Servs., Inc., No. 21-CV-

5524(JS)(AYS), 2022 WL 203657 (E.D.N.Y Jan. 21, 2022); Nyanjom v.

NPAS Sols., LLC, No. 21-CV-1171-JAR-ADM, 2022 WL 168222 (D. Kan.

Jan. 19, 2022); Keller v. Client Servs., Inc., No. 3:21-cv-50218,

2021 WL 5578794 (N.D. Ill. Nov. 30, 2021).

In summary, the allegations in the complaint and amended

complaint, even if true, merely assert that ERC violated the FDCPA

without Plaintiffs’ consent. Because Plaintiffs have alleged only

a statutory violation and not a concrete injury in fact, subject

matter jurisdiction is lacking and remand is necessary.

III. CONCLUSION

For the reasons stated,

IT IS THEREFORE ORDERED that the motion to remand (Doc. 20)

is GRANTED for lack of subject matter jurisdiction over the FDCPA

claim, and the case is REMANDED to the General Court of Justice,

Superior Court Division, of Rowan County, North Carolina.

IT IS FURTHER ORDERED that Plaintiffs’ motion for partial

judgment on the pleadings (Doc. 23) is DENIED without prejudice as

moot as the court lacks subject matter jurisdiction.

/s/ Thomas D. Schroeder

United States District Judge

July 6, 2022