On August 15, 2022, the U.S. Court of Appeals for the Fifth Circuit vacated a class-certification order on a Rule 23(f) appeal after sua sponte holding that the named plaintiff had no standing to sue. The case is yet another example of how federal courts closely examine standing following the U.S. Supreme Court’s mandate in TransUnion LLC v. Ramirez, — U.S. —, 141 S. Ct. 2190 (2021): “Every class member must have Article III standing in order to recover individual damages.” Id. at 2208.
In Perez v. McCreary, Veselka, Bragg & Allen, P.C., et al., No. 21-50958, 2022 WL 3355249 (5th Cir. 2022), the named plaintiff, Perez, sued a law firm specializing in collecting debts owed to Texas local governments. Perez did so after receiving a letter demanding the payment of outstanding debts. The law firm’s letter did not disclose the fact that the limitations on that debt had run, however. Consequently, Perez alleged that the law firm’s letter violated the Fair Debt Collection Practices Act (“FDCPA”) by making a misrepresentation in connection with an attempt to collect her debts. See 15 U.S.C. § 1692e. Perez also sought to certify a class of Texans with similar time-barred debts and who had received the same letter.
At the summary judgment stage, the law firm argued that Perez did not have standing to sue because she had not suffered a concrete injury-in-fact under the Supreme Court’s decision in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016). Notably, the Supreme Court decided TransUnion before the district court ruled on the parties’ pending motions for summary judgment. TransUnion stands for the proposition that a plaintiff is not automatically granted standing to sue a private defendant in federal court after the violation of a statute enacted by Congress. Instead, a statutory violation must concretely harm the plaintiff to confer standing. But regardless of that decision, the district court held that Perez suffered a concrete injury-in-fact when the law firm violated her rights under the FDCPA, risked financial harm, and caused Perez to suffer confusion. The district court also certified the proposed class under Rule 23(b)(3).
On appeal (after the law firm’s Rule 23(f) petition had been granted), the Fifth Circuit vacated the class-certification order and remanded the case with instructions that the district court dismiss the lawsuit for lack of jurisdiction. Indeed, the unanimous panel held that Perez had no standing. Judge Jerry E. Smith first explained that TransUnion foreclosed Perez’s claim that the violation of her statutory rights qualified as a concrete injury. Judge Smith also explained Perez’s receipt of the law firm’s letter, without more, did not constitute a concrete injury because Perez only pleaded a “material risk of financial harm”—i.e., a risk that Perez would pay her time-barred debts. TransUnion similarly barred that argument. Finally, Judge Smith found that Perez’s state of confusion, without more, was not a concrete injury under Article III.
The law firm’s appeal only challenged the class-certification order even though it argued that Perez did not suffer a concrete injury before the district court in its class certification opposition. But recognizing the obligation of courts to ensure proper jurisdiction at all stages, even in limited interlocutory appeals, Judge Smith’s opinion thoroughly explains why TransUnion and separation of powers concerns prevent lawsuits like Perez’s from continuing in federal court.
The opinion is also a good reminder for class action litigators to be mindful that the concrete-harm requirement is no longer an overlooked pleading standard. It should be raised early and often, even if the trial court has previously rejected it. Courts and litigators must closely examine whether Article III standing exists for every alleged claim and every remedy sought in federal court.