# Pearl v. Financial Recovery Services, Inc.

> District Court, E.D. New York · November 29, 2021

URL: https://www.frixlaw.com/law-library/cases/10307167

## Case

- **Court:** District Court, E.D. New York
- **Decided:** November 29, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
JOSEPH CICCONE, individually and
on behalf of all others similarly
situated,

Plaintiff,
MEMORANDUM & ORDER
-against- 21-CV-2428(JS)(JMW)

CAVALRY PORTFOLIO SERVICES, LLC,
and CAVALRY SPV I, LLC,

Defendants.
----------------------------------X
MICHAEL PEARL,

Plaintiff,

-against- 21-CV-3764(JS)(AYS)

FINANCIAL RECOVERY SERVICES, INC.,

Defendant.
----------------------------------X
APPEARANCES
For Plaintiff
Joseph Ciccone: David M. Barshay, Esq.
Barshay, Rizzo, & Lopez, PLLC
445 Broadhollow Road, Suite CL18
Melville, New York 11747

For Plaintiff
Michael Pearl: Raymond Nardo, Esq.
Raymond Nardo, P.C.
129 Third Street
Mineola, New York 11501

For Defendants
Cavalry Portfolio
Services, LLC &
Cavalry SPV I, LLC: Donald S. Maurice, Jr., Esq.
Thomas R. Dominczyk, Esq.
Maurice Wutscher LLP
5 Walter Foran Boulevard, Suite 2007
Flemington, New Jersey 08822
For Defendant
Financial Recovery
Services, Inc.: Michael Thomas Etmund, Esq.
Moss & Barnett
150 South Fifth Street, Suite 1200
Minneapolis, Minnesota 55402

SEYBERT, District Judge:
The cases addressed in this order invoke the so-called
“mailing vendor” theory of liability under the Fair Debt Collection
Practices Act (“FDCPA”). After the Supreme Court issued its
decision in TransUnion, LLC v. Ramirez, this Court ordered
Plaintiffs in these actions to demonstrate how the allegations in
their respective complaints could establish Article III standing
under TransUnion. Having considered their responses, the Court
concludes that Plaintiffs lack standing in these cases.
Accordingly, for the reasons set forth below, the Complaints are
DISMISSED.
BACKGROUND
I. Facts
Plaintiffs allege that Defendants-debt collectors
violated the FDCPA by using third-party vendors to print and mail
Plaintiffs “dunning” letters to advise them of their debt
obligations. (Pearl v. Fin. Recovery Servs., Inc. (“The Pearl
Action”), No. 21-CV-3764 (E.D.N.Y. 2021); Ciccone v. Cavalry
Portfolio Servs., LLC (“The Ciccone Action”), No. 21-CV-2428
(E.D.N.Y. 2021).) Plaintiffs allege Defendants conveyed “private
information” to third-party vendors -- including Plaintiffs’ names
and addresses; status as debtors; the precise amounts of their
alleged debts; the entities to which Plaintiffs allegedly owed

debts; and information that Plaintiffs defaulted on the debts --
so the vendors could draft and mail collection letters to each
Plaintiff regarding his debt obligations. (The Pearl Action,
Compl., ECF No. 1, ¶¶ 2, 14-15; The Ciccone Action, Compl., ECF
No. 1, ¶¶ 25-27, 29-32.) According to Plaintiffs, Defendants’
conduct violates the FDCPA, which provides that, subject to several
exceptions not relevant here, “a debt collector may not
communicate, in connection with the collection of any debt,” with
anyone other than the consumer “without the prior consent of the
consumer given directly to the debt collector.” 15 U.S.C.
§ 1692c(b). Plaintiffs claim that this “unauthorized disclosure
of such private and sensitive information” harmed them. (The

Ciccone Action, Compl. ¶¶ 46, 62; The Pearl Action, Compl. ¶ 25
(“The communication of this legally protected information about
Plaintiff’s consumer debt to a third party harmed Plaintiff, and
Plaintiff’s reputation, by disclosing information about
Plaintiff’s repayment of debts, truthfulness, solvency, and
trustworthiness.”).)
The Ciccone Action, styled as a class action, also
alleges Defendants there violated a separate provision of the FDCPA
which prohibits the use of any false representation or deceptive
means to collect on a debt. (The Ciccone Action, Compl. ¶¶ 70-84
(alleging Defendants violated 15 U.S.C. § 1692e).) Specifically,
Plaintiff alleges that the collection letter he received failed to

specify which debt-collector entity -- Cavalry Portfolio Services,
LLC or Cavalry SPV I, LLC -- offered him a discount, in violation
of the least sophisticated consumer test. (Id. ¶¶ 75-79.)
Plaintiff alleges no facts to demonstrate how this alleged
statutory violation injured him.
II. Procedure
On October 4, 2021, this Court issued an order directing
the parties to brief the issue of Article III standing in the wake
of the Supreme Court’s decision in Transunion LLC v. Ramirez, 141
S. Ct. 2190 (June 21, 2021). (See Oct. 4, 2021 Order to Show Cause
(following In re FDCPA Mailing Vendor Cases, 2021 WL 3160794
(E.D.N.Y. July 23, 2021) (Brown, J.)).1 The parties in The Pearl

Action and The Ciccone Action complied with the Court’s directive,
filing letter responses addressing the standing issues raised
therein. (See The Pearl Action, Pl. Ltr, ECF No. 11, Defs. Ltr.,
ECF No. 12; The Ciccone Action, Pl. Ltr., ECF No. 20.) Plaintiffs

1 The following six cases were subject to the Order to Show Cause:
Ciccone v. Cavalry Portfolio Services, LLC, No. 21-CV-2428; Ford
v. Client Services, Inc., No. 21-CV-2588; Damian v. Commonwealth
Financial System, Inc., No. 21-CV-3604; Pearl v. Financial
Recovery Services, Inc., No. 21-CV-3764; Corea v. Radius Global
Solutions LLC, No. 21-CV-3765; and Ceron v. Midland Credit
Management, Inc., No. 21-CV-4257.
did not oppose dismissal in the remaining four actions.
DISCUSSION
I. Legal Standard

Article III standing requires the plaintiff to show
“(1) an ‘injury in fact,’ (2) a ‘causal connection’ between that
injury and the conduct at issue, and (3) a likelihood ‘that the
injury will be redressed by a favorable decision.’” Maddox v.
Bank of New York Mellon Trust Co., No. 19-CV-1774, 2021 WL 5347004,
at *3 (2d Cir. Nov. 17, 2021) (quoting Lujan v. Defs. of Wildlife,
504 U.S. 555, 560-61 (1992)). The issue in these cases is whether
Plaintiffs have met the injury-in-fact requirement.
“To demonstrate injury in fact, a plaintiff must show
the invasion of a [1] legally protected interest that is
[2] concrete and [3] particularized and [4] actual or imminent,
not conjectural or hypothetical.” Id. at *3 (quoting Strubel v.

Comenity Bank, 842 F.3d 181, 188 (2d Cir. 2016)). At issue here
is the requirement Plaintiffs show a concrete harm. As the Supreme
Court began in its recent TransUnion decision: “No concrete harm;
no standing.” 141 S. Ct. at 2200.
The plaintiffs in TransUnion consisted of a class of
8,185 individuals who alleged that TransUnion, a credit reporting
agency, violated the Fair Credit Reporting Act (“FCRA”) by failing
to use reasonable procedures to ensure the accuracy of their credit
files, as maintained internally by TransUnion. Id. Specifically,
TransUnion placed an alert on each plaintiffs’ respective credit
file indicating that his or her name was a “potential match” to a
name on the U.S. Treasury Department’s Office of Foreign Assets

Control list of “specially designated nationals” who threaten the
nation’s security, which includes “terrorists, drug traffickers,
or other serious criminals.” Id. at 2201. The plaintiffs also
claimed that TransUnion failed to adhere to the FCRA’s formatting
requirements in the mailings used to inform the plaintiffs about
the potential match. Id.
The Supreme Court first “considered the characteristics
that make a harm ‘concrete’ for purposes of Article III.” Maddox,
2021 WL 5347004, at *4 (quoting TransUnion, 141 S. Ct. at 2204).
To determine whether the plaintiff alleges a concrete harm
sufficient to confer standing, courts should consider “whether the
harm has a ‘close relationship’ to a harm traditionally recognized

as providing a basis for a lawsuit in American courts.”
TransUnion, 141 S. Ct. at 2204 (quoting Spokeo, Inc. v. Robins,
578 U.S. 330, 341 (2016)). “That inquiry asks whether plaintiffs
have identified a close historical or common-law analogue for their
asserted injury.” Id. The Court further observed that Congress’s
view may be “instructive” in determining whether a harm is
sufficiently concrete, although it cautioned that “an injury in
law is not an injury in fact.” Id. at 2204-05 (In the context of
Article III standing, “an important difference exists between
(i) a plaintiff’s statutory cause of action to sue a defendant
over the defendant’s violation of federal law, and (ii) a
plaintiff’s suffering concrete harm because of the defendant’s

violation of federal law.”).
Applying these requirements to the case at hand, the
Supreme Court found that a subset of the plaintiffs sufficiently
alleged standing. Id. at 2208. Specifically, the 1,853 class
members whose credit reports were disseminated to third-party
businesses could demonstrate standing, because they suffered a
harm with a “close relationship” with the reputational harm
associated with the tort of defamation. Id. at 2208-09. However,
for the remaining 6,332 class members whose credit files were
maintained by TransUnion but not provided to any potential
creditors during the class period, the Court held that they could
not establish standing by analogizing to the tort of defamation,

which requires publication of the alleged falsity. Id. at 2209-
10 (“Publication is ‘essential to liability’ in a suit for
defamation.”). Nor could those plaintiffs proceed by asserting
that they were exposed “to a material risk that the information
would be disseminated in the future to third parties and thereby
cause them harm.” Id. at 2210. According to the Court, this risk
would need to have caused the plaintiffs “some other injury” to
furnish Article III standing. Id. at 2211. Last, with respect to
the plaintiffs’ claim that TransUnion violated the FCRA by failing
to provide them with their complete credit files upon request, the
Court found that the plaintiffs failed to “demonstrate that they
suffered any harm at all from the formatting violations.” Id. at

2213 (emphasis in original).
II. Analysis
A. The Mailing-Vendor Theory
As Plaintiffs recognize, the TransUnion decision
“substantially and materially changed” a district court’s analysis
of Article III standing in statutory consumer law cases. (See The
Ciccone Action, Pl. Ltr. at 1.) In fact, sister courts, within
and without the Second Circuit, have dismissed FDCPA actions
invoking the mailing-vendor theory for lack of Article III
standing. See In re FDCPA Mailing Vendor Cases, 2021 WL 3160794,
at *5-6; Shields v. Prof’l Bureau of Collections of Maryland, Inc.,
No. 20-CV-2205, 2021 WL 4806383, at *3 (D. Kan. Oct. 14, 2021).

For substantially the same reasons as those persuasively set forth
in Judge Brown’s omnibus order dismissing several FDCPA cases
pursuing the mailing-vendor theory, the Court similarly concludes
that Plaintiffs in these actions have failed to allege a concrete
injury sufficient to confer Article III standing. Because the
caselaw in this context has developed since Judge Brown’s order,
the Court considers these developments.
First, Plaintiffs point to the Eleventh Circuit’s
decision in Hunstein v. Preferred Collection & Mgmt. Servs., Inc.
(“Hunstein I”), 994 F.3d 1341 (11th Cir. 2021), which sanctioned
the mailing-vendor theory. However, subsequent developments in
Hunstein undermine Plaintiffs’ reliance. Upon petition for

rehearing after the intervening Supreme Court decision in
TransUnion, the Hunstein I panel vacated the opinion on which
Plaintiffs rely. Hunstein v. Preferred Collection & Mgmt. Servs.,
Inc. (“Hunstein II”), No. 19-CV-14434, 2021 WL 4998980, 17 F.4th
1016 (11th Cir.), reh’g en banc granted, opinion vacated, 17 F.4th
1103 (11th Cir. 2021). And while the majority in Hunstein II
concluded that plaintiff’s mailing-vendor allegations could
establish Article III standing, that opinion was vacated pending
rehearing en banc. 17 F.4th 1103 (11th Cir. 2021). However the
Eleventh Circuit eventually rules, its decision does not bind this
Court, and at this juncture, the vacated opinions are of little
persuasive value.

In any event, the Court finds the facts in Hunstein
distinguishable from those alleged in these cases, rendering its
standing analysis inapposite. In Hunstein, the plaintiff incurred
a debt arising out of his minor son’s medical treatment. Hunstein
II, 2021 WL 4998980, at *2. Thus, the debt collector communicated
to the third-party vendor not only the plaintiff’s status as a
debtor and the balance of his debt, but also that the debt
concerned his son’s medical treatment and his son’s name. Id. As
a result, when the Hunstein II majority examined whether the
plaintiff alleged a “close historical or common-law analogue for
[his] asserted injury,” the majority analogized to the common-law
tort of “public disclosure of private facts,” pursuant to which

“[o]ne who gives publicity to a matter concerning the private life
of another is subject to liability to the other for invasion of
his privacy, if the matter publicized is of a kind that (a) would
be highly offensive to a reasonable person, and (b) is not of
legitimate concern to the public.” Id. at *7 (quoting RESTATEMENT
(SECOND) OF TORTS § 652D (1977)). Here, Plaintiffs do not allege
Defendants communicated to the third-party vendors “intensely
private information” like that at issue in Hunstein. Id.
Accordingly, it is “difficult to suggest” that the type of
information Defendants communicated to their third-party vendors,
such as Plaintiff’s name and address; Plaintiff’s status as a
debtor; or the precise amount of the alleged debt, “would be highly

offensive to a reasonable person.” In re FDCPA Mailing Vendor
Cases, 2021 WL 3160794, at *6 (“[I]t would be difficult to suggest,
using the ‘invasion of privacy’ analysis adopted in Hunstein, that
communication of purported non-payment of a relatively de minimis
debt to a mailing vendor constitutes a ‘matter publicized . . . of
a kind that . . . would be highly offensive to a reasonable
person.’”). Put otherwise, Plaintiffs are alleging a different
type of harm than that which would give rise to liability under
the common-law tort of public disclosure of private facts.2
There are additional problems with the Hunstein II
panel’s comparator analysis, as summarized by the dissent in that

case. 2021 WL 4998980, at *17-22 (Tjoflat, J., dissenting). For
example, at common law, the public disclosure of private facts
tort required the information at issue to be “publicized.”
RESTATEMENT (SECOND) OF TORTS § 652D cmt. A. According to the
allegations here, Plaintiffs’ debt-related information was
communicated to a third-party vendor, whose employees presumably
viewed it. But “[c]ommunication of a fact ‘to a small group of
persons is not publicity.’” Id. at *18. Rather, courts analyzing
this privacy tort have required “publicity in the broad, general
sense of the word ‘public.’” Id. (quoting Tureen v. Equifax, Inc.,
571 F.2d 411, 418 (8th Cir. 1978)). As such, the information at
issue here did not attain the requisite level of publicity.

The Court recognizes that TransUnion and Spokeo spoke of
a “close relationship” between the alleged injury and a harm
traditionally recognized as providing grounds for a lawsuit in
American courts, not an “exact duplicate.” TransUnion, 141 S. Ct.
at 2204. In the only Second Circuit decision to follow and apply

2 See RESTATEMENT (SECOND) OF TORTS § 652D cmt. A, illus. 1 (“A, a
creditor, writes a letter to the employer of B, his debtor,
informing him that B owes the debt and will not pay it. This is
not an invasion of B’s privacy under this Section.”).
TransUnion to date, the panel applied this test3 by examining
whether the “type” of harm alleged was “well established as
actionable at common law.” See Maddox, 2021 WL 5347004, at *6

(holding a lender’s delay in recording a mortgage satisfaction,
which “risks creating the false appearance that the borrower has
not paid the underlying debt and is thus more indebted and less
creditworthy,” causes the “type of reputational harm -- i.e., one
that flows from the publication of false information -- [that] is
well established as actionable at common law”); see also Melito v.
Experian Mktg. Sols., Inc., 923 F.3d 85, 93 (2d Cir.), cert. denied
sub nom. Bowes v. Melito, 140 S. Ct. 677 (2019) (“[T]he harms
Congress sought to alleviate through passage of the [Telephone
Communications Protection Act] closely relate to traditional
claims, including claims for ‘invasions of privacy, intrusion upon
seclusion, and nuisance.’”). This approach may involve

consideration of the common-law analogue’s “essential” or “key”
elements to ensure the alleged harm and analogue bear a close
resemblance. See TransUnion, 141 S. Ct. at 2209 (concluding that
plaintiffs’ alleged harm had no historical or common-law analog

3 To date, the Second Circuit has not embraced or otherwise
considered the degree-kind distinction used by other circuit
courts in this context, which asks whether the “alleged injury is
similar in kind to the harm addressed by a common-law cause of
action, not that it is similar in degree.” Hunstein II, 2021 WL
4998980, at *5-7 (summarizing circuit decisions applying the
degree-kind distinction).
where an element essential to liability under the proposed common-
law analog, defamation, was lacking); Maddox, 2021 WL 5347004,
at *6 (concluding the plaintiffs did not allege reputational harm

because they could not demonstrate communication of the harmful
information to a third party, as required to sustain a defamation
claim at common law); Hunstein II, 2021 WL 4998980, at *18-22
(Tjoflat, J., dissenting) (analyzing common-law comparator’s
essential elements); see also Melito, 923 F.3d at 93 (relying on
decisions from sister circuits that did not require the alleged
harm to be actionable at common law to be closely related). Thus,
by looking to the contours of the public disclosure of private
facts tort as it developed under the common law, the Court is not
demanding an exact duplicate, but rather looking for similarities
on which to hang its hat. Plaintiffs provide none.
Plaintiff in The Pearl Action also raises the concern

that the information the debt collector shared with the third party
could be compromised by a data breach. (Pl. Ltr. at 4.) It is
true that “a plaintiff’s knowledge that he or she is exposed to a
risk of future physical, monetary, or reputational harm could cause
its own current emotional or psychological harm.” TransUnion, 141
S. Ct. at 2211 n.7. But Plaintiffs must “plead enough facts to
make it plausible that they did indeed suffer the sort of injury
that would entitle them to relief.” Maddox, 2021 WL 5347004, at 6.
Here, there are no allegations in the Complaint that The Pearl
Action Plaintiff suffered a “separate concrete harm” as a result
of this exposure. TransUnion 141 S. Ct. at 2211.
Last, Plaintiffs argue, and the Court agrees, that the

Court must consider Congress’s view, which is “instructive” in
determining whether a harm is sufficiently concrete. TransUnion,
141 S. Ct. at 2204. Plaintiffs reference the congressional
findings embodied in the FDCPA’s preface, namely, the finding that
abusive debt collection practices contribute to “invasions of
individual privacy.” 15 U.S.C. § 1692(a). In this context, the
Court is hesitant to rely heavily on the congressional findings,
which are written in general, hortatory terms. Cf. National Org.
for Women, Inc. v. Scheidler, 510 U.S. 249, 260 (1994) (“We also
think that the quoted statement of congressional findings is a
rather thin reed upon which to base a requirement.”) This is
especially the case where other, more specific provisions of the

FDCPA condone the use of intermediaries to communicate with
debtors. As Judge Tjoflat reasoned in his dissenting opinion in
Hunstein II, the FDCPA presupposes debt collectors may use
telegrams to communicate with debtors, “even though that means the
contents of the telegram would be transmitted through a telegram
operator.” Hunstein II, 2021 WL 4998980, at *22-23 (Tjoflat, J.,
dissenting).4 Thus, the Court finds the judgment of Congress does

4 In fact, the Bureau of Consumer Financial Protection (“CFPB”)
recently found that “over 85 percent of debt collectors surveyed
not favor Plaintiffs. TransUnion, 141 S. Ct. at 2204-05 (“[U]nder
Article III, an injury in law is not an injury in fact.”).
B. Alleged Deceptive Practices

As noted supra, The Ciccone Action also alleges
Defendants violated a separate provision of the FDCPA by failing
to specify in their collection letter which debt-collector entity,
Cavalry Portfolio Services, LLC or Cavalry SPV I, LLC, offered
Plaintiff a discount, in violation of the least sophisticated
consumer test. However, Plaintiff has not alleged that he suffered
any harm at all from this violation. Plaintiff does not allege
that the wording confused or distressed him, let alone that he
relied on it to his detriment in any way, or that he would have
availed himself to the discount had the wording been clearer. Cf.
TransUnion 141 S. Ct. at 2213. “Without any evidence of harm
caused by the format of the mailings, these are ‘bare procedural

violation[s], divorced from any concrete harm,’” which do not
suffice for Article III standing. Id.

by the Bureau reported using letter vendors.” Thus, as Judge
Tjoflat reasoned, Congress’s view can also be gleaned from the
fact that the CFPB, which has the authority to issue rules under
the authority of the FDCPA, issued new rules that “expressly
contemplate the use of mail vendors in debt collection.” Hunstein
II, 2021 WL 4998980, at *23 n.13 (Tjoflat, J., dissenting) (citing
85 Fed. Reg. 76734, 76738 (Nov. 30, 2020) (to be codified at
12 C.F.R. § 1006), 86 Fed. Reg. 5766, 5845 n.446 (Jan. 19,
2021) (to be codified at 12 C.F.R. § 1006)).
CONCLUSION
For the stated reasons, Plaintiffs in each of these cases
have not sufficiently alleged a concrete injury in fact sufficient

to confer Article III standing. As such, the Court lacks
jurisdiction over these claims, and the cases are DISMISSED WITHOUT
PREJUDICE. The Clerk of the Court is respectfully directed to
terminate the motion pending at ECF No. 19 in The Ciccone Action
as MOOT, and mark these cases CLOSED.

SO ORDERED.

_/s/ JOANNA SEYBERT__________
Joanna Seybert, U.S.D.J.

Dated: November 29 , 2021
Central Islip, New York

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10307167. Public record. Not legal advice.