Demarais v. Gurstel Chargo, P.A.

869 F.3d 685

Steven DEMARAIS, Plaintiff-Appellant,

v.GURSTEL CHARGO, P.A. ; RAzOR Capital, LLC, Defendants-Appellees,DBA International, Inc., Amicus on Behalf of Appellee(s).

No. 16-3173

United States Court of Appeals, Eighth Circuit.

Submitted: March 8, 2017

Filed: August 29, 2017

Counsel who appeared on the brief and presented argument on behalf of the appellant was Darren Brayer Schwiebert, of Minneapolis, MN.

Counsel who appeared on the brief and presented argument on behalf of the appellee was Manuel H. Newburger, of Austin, TX. The following attorney(s) appeared on the appellee brief; Amy M. Goltz, of Golden Valley, MN.

The following attorney(s) appeared on the amicus brief; Donald S Maurice, Jr., of Flemington, NJ., Thomas Robert Dominczyk, of Flemington, NJ., Kevin Hudspeth, of Maineville, OH.

Before BENTON, BEAM, and MURPHY, Circuit Judges.

BENTON, Circuit Judge.

Steven Demarais alleges Gurstel Chargo, P.A., violated the Fair Debt Collection Practices Act (FDCPA) while collecting a consumer debt owned by RAzOR Capital, LLC. The district court dismissed Demarais's complaint. Having jurisdiction under 28 U.S.C. § 1291, this court reverses and remands.

I.

This court considers the facts alleged by Demarais. He incurred debt to Citibank, N.A. No later than 2010, Citibank charged off the debt. Following the charge off, no one sent him statements showing the accumulation of interest.

In June 2014, RAzOR—represented by law firm Gurstel Chargo—sued Demarais in a Minnesota state court. RAzOR, claiming to be the successor in interest to Citibank, said Demarais owed it $20,591.11 plus $5,030.21 in interest. According to Demarais, RAzOR sought post-charge-off interest that it had no right to collect.

Demarais did not timely answer RAzOR's state-court complaint. Gurstel Chargo did not move for default judgment. It instead allowed the court to set the case for an October 5, 2015, trial. When alleged debtors do not file answers, Gurstel Chargo often allows the cases to be set for trial rather than moving for default judgments. On the trial date, Gurstel Chargo appears without any client representatives, witnesses, or other evidence. Gurstel Chargo does this, Demarais says, to avoid a Minnesota statute about default judgments on consumer debts, Minn. Stat. § 548.101. Rather than seeking default judgments, Gurstel Chargo seeks judgments based on non-appearance at trial. If a consumer appears for trial, Gurstel Chargo either requests a continuance or dismisses the suit.

On October 5, Gurstel Chargo appeared for Demarais's scheduled trial and about 17 other consumer-debt trials. Gurstel Chargo had no client representative, witnesses, or other evidence. Demarais claims Gurstel Chargo assumed he would not appear for trial, and its appearance for trial was an attempt to collect the post-charge-off interest. But Demarais did appear, with an attorney, prepared for trial. Gurstel Chargo asked for a continuance. The court reset the trial for January 4, 2016.

Demarais then served discovery requests on RAzOR. RAzOR did not timely respond. Demarais's attorney asked Gurstel Chargo about the responses. It asked for an extension, and Demarais's attorney agreed. Gurstel Chargo never responded to the discovery requests.

On January 4, Demarais appeared with his attorney, prepared for trial. Gurstel Chargo appeared, but was not prepared—again, no client representatives, no witnesses, and no evidence. Gurstel Chargo dismissed RAzOR's case against Demarais with prejudice. Gurstel Chargo also appeared for plaintiffs in two other trials that day. In one, it sought a judgment against the consumer-defendant based upon non-appearance at trial.

Demarais provides case numbers for six other cases where he alleges Gurstel Chargo obtained or is obtaining judgments despite appearing without the ability to introduce evidence. He also provides case numbers for seven cases where he alleges Gurstel Chargo appeared without supporting documentation and, when the court asked for it, requested a continuance and then ignored the case.

On January 22, 2016—eighteen days after dismissal—Gurstel Chargo served Demarais with interrogatories and document-and-admission requests bearing the caption and number of the dismissed case. The letter said it was a communication "from a debt collector and is an attempt to collect a debt." It said he was required to provide responses within 30 days. This was false, Demarais says, because the claim had been dismissed.

On February 5, 2016, Demarais sued Gurstel Chargo and RAzOR in federal district court, claiming they violated the FDCPA. (This court refers to the parties collectively as "Gurstel Chargo.") He alleged they violated 15 U.S.C. §§ 1692e and 1692f by falsely representing the amount of debt, falsely threatening to take action, using unfair means to attempt to collect debt, and attempting to collect debts not owed. Gurstel Chargo moved to dismiss. The district court dismissed, concluding any violation at the October 5 hearing was barred by the statute of limitations, Gurstel Chargo's statements in court were "permissible litigation tactics and not actionable false assertions," and the January 22 letter was not likely to deceive anyone. Demarais appeals.

II.

Gurstel Chargo argues, for the first time on appeal, that Demarais lacks standing because he has not alleged he suffered a concrete injury in fact. To have standing, a "plaintiff must have ... suffered an injury in fact." Spokeo, Inc. v. Robins, ––– U.S. ––––, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). "To establish injury in fact, a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical." Id. at 1548 (internal quotation marks omitted). "A ‘concrete’ injury must be ‘de facto ’; that is, it must actually exist." Id. Both tangible and intangible injuries can be concrete. Id. at 1549. At the motion to dismiss stage, "the standing inquiry must ... be done in light of the factual allegations of the pleadings." City of Clarkson Valley v. Mineta, 495 F.3d 567, 570 (8th Cir. 2007), citing Lujan v. Defs. of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

Demarais says Gurstel Chargo's actions caused concrete injuries: (A) its January 22 letter—an attempt to collect a debt not owed in violation of § 1692f(1) ; and (B) its October 5 appearance and continuance request—an attempt to collect debt not owed in violation of §§ 1692f(1) and 1692e(2), and an improper threat to take an action that it could not and did not intend to take in violation of § 1692e(5).

A.

Demarais does not allege any tangible harms from the January 22 letter. He alleges only that Gurstel Chargo sent him a letter stating it was "an attempt to collect a debt" and serving him with interrogatories, requests for production of documents, and requests for admissions. The discovery requests had the caption and number of the dismissed state case and said he was "required" to respond within 30 days. According to Demarais, this conduct violated § 1692f(1) because it was an attempt to collect a debt that was extinguished after Gurstel Chargo dismissed its state-court complaint with prejudice. See Dykes v. Sukup Mfg. Co. , 781 N.W.2d 578, 583 (Minn. 2010) ("Consequently, the judgment of dismissal with prejudice and on the merits was an adjudication that extinguished and discharged the right of the Dykes to bring claims against Superior in a subsequent lawsuit...."). See also Daewoo Elecs. Corp. of Am. v. W. Auto Supply Co. , 975 F.2d 474, 478 (8th Cir. 1992) ("The dismissal extinguished Daewoo's underlying claim."). A debt collector violates § 1692f(1) when it sends a letter attempting to collect money not permitted by law. Duffy v. Landberg, 215 F.3d 871, 875 (8th Cir. 2000).

"[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, 136 S.Ct. at 1549. The violation of the statute must cause a concrete injury. That concrete injury can be "the risk of real harm." Id. Where "the violation of a procedural right granted by statute" creates the risk of real harm, a plaintiff "need not allege any additional harm beyond the one Congress has identified." Id.

With § 1692f(1), Congress identified a harm—being subjected to attempts to collect debts not owed. This "alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts." Id. It is similar to the harm suffered by victims of the common-law torts of malicious prosecution, wrongful use of civil proceedings, and abuse of process. See, e.g. , Bertero v. Nat'l Gen. Corp., 13 Cal.3d 43, 118 Cal.Rptr. 184, 529 P.2d 608, 614 (1974) (in bank) ("The individual is harmed because he is compelled to defend against a fabricated claim which not only subjects him to the panoply of psychological pressures most civil defendants suffer, but also to the additional stress of attempting to resist a suit commenced out of spite or ill will, often magnified by slanderous allegations in the pleadings."); Carter v. Oster, 134 Mo.App. 146, 112 S.W. 995, 999 (1908) ("But there are torts of which mental distress is the proximate and natural result, and for which damages may be assessed. Such are malicious prosecutions...."); Baglini v. Lauletta, 338 N.J.Super. 282, 768 A.2d 825, 839 (2001) ("Courts have required little or no proof with regard to intangible damages for malicious use of process, apparently in the belief that a ‘normal person’ subjected to wrongful litigation would have suffered at least some damages."). See also Restatement (Second) of Torts §§ 674, 681 (June 2017 update) ; Dan B. Dobbs et al., The Law of Torts § 593 (2d ed. June 2017 update) ("According to most counts, a majority of American courts allow the...