Carl Ward v. NPAS, Inc.

Citation: Not availableDocket: 21-6189

Court: Court of Appeals for the Sixth Circuit; March 24, 2023; Federal Appellate Court

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Carl Ward filed a lawsuit against NPAS, Inc. under the Fair Debt Collection Practices Act (FDCPA). A prior panel determined that Ward lacked Article III standing, prompting him to amend his complaint and provide additional documentation to demonstrate concrete harm. The district court ruled that while Ward established standing, he could not win on the merits since NPAS did not qualify as a debt collector under the FDCPA. 

Ward had received medical treatment at Stonecrest Medical Center in July and October 2018, signing an agreement that made him financially responsible for charges not covered by insurance. This agreement indicated that Stonecrest could use a third-party service (referred to as an EBO Servicer) for billing and that accounts would not be considered delinquent while serviced by this entity. An account would only be deemed delinquent after being returned to Stonecrest, which could then initiate collection actions.

Following treatment, Stonecrest billed Ward for $80 after insurance, with payment due upon receipt. After Ward failed to pay, his accounts were referred to NPAS for servicing. NPAS subsequently contacted Ward multiple times via mail and voicemail, clearly identifying itself as managing his account for Stonecrest. The statements included specific due dates and a FAQ section explaining NPAS's role. The original bills from Stonecrest were not part of the record, but it was acknowledged that they were sent at the beginning of each month. The court affirmed the district court's decision regarding both standing and the merits of the case.

Ward contacted a law firm after receiving two voicemail messages from NPAS. The firm mistakenly sent a cease-and-desist letter to NPAS Solutions, not NPAS, Inc., so NPAS did not receive it. Ward received a third voicemail on March 14, 2019, and subsequently sued NPAS in June 2019, claiming violations of the Fair Debt Collection Practices Act (FDCPA) for failing to adequately disclose its identity, using a misleading name, and calling him after he attempted to send a cease-and-desist letter. The district court granted summary judgment to NPAS, ruling it did not qualify as a "debt collector" under the FDCPA. On appeal, NPAS questioned Ward's Article III standing, arguing he had not suffered a sufficient injury. Ward contended he experienced confusion from NPAS's identification, incurred legal expenses, and felt injured due to the FDCPA violations. The appellate panel rejected these claims but reserved judgment on whether the third voicemail constituted an injury. Upon remand, Ward amended his complaint to include allegations about the cease-and-desist letter and the subsequent voicemail, stating the intrusion aggravated him because he believed he had invoked his rights against such calls. NPAS moved for summary judgment again, which the district court denied concerning standing but granted on liability. Ward's appeal continued, with the requirement to establish standing involving demonstrating a concrete injury that is actual or imminent, as defined by precedent. The burden of proof for these standing elements lies with Ward, focusing particularly on the concrete injury aspect.

Ward does not automatically possess standing to sue under the Fair Debt Collection Practices Act (FDCPA) solely based on Congressional authorization. Article III standing necessitates a concrete injury, even with a statutory violation, as established in Spokeo, Inc. v. Robins. Ward cannot merely claim a procedural violation of the FDCPA without demonstrating a concrete harm to meet the injury-in-fact requirement. To establish a concrete injury, Ward must show either that the procedural violation itself constitutes a recognized concrete injury or that it resulted in an independent concrete injury.

Concrete harms can be tangible, like physical or monetary damages, or intangible, such as intrusion upon seclusion, a common law tort that requires proof of intentional intrusion into another's privacy. Unwanted phone calls exemplify this type of privacy invasion. However, tort liability typically arises from persistent and frequent calls, suggesting that a single unwanted call may not constitute a substantial intrusion. Despite this, the assessment of Article III standing focuses on whether the harm is similar in kind to recognized common law harms, rather than the severity of the harm. The intrusion from unwanted calls is deemed comparable to traditional harms that the common law aims to protect, regardless of whether a low volume of calls is actionable under common law.

Congress has the authority to recognize previously inadequate concrete injuries as legally cognizable, as demonstrated in the case of Ward, where a single unwanted phone call constitutes sufficient injury. Various circuit courts have supported this view under the Telephone Consumer Protection Act (TCPA), with rulings that multiple unwanted communications can amount to Article III injuries. For example, five unwanted text messages, two phone calls in a year, or even a single unwanted call or text have been deemed sufficient. The Tenth Circuit has similarly ruled that a single unwanted phone call can establish standing under the Fair Debt Collection Practices Act (FDCPA).

NPAS contends that the TCPA and FDCPA serve different purposes, suggesting that this distinction negates the applicability of TCPA reasoning to FDCPA claims. However, it is asserted that both statutes aim to protect consumer privacy, with the TCPA addressing telemarketing intrusions and the FDCPA targeting abusive debt collection practices. While the statutes employ different mechanisms—such as do-not-call lists and cease-and-desist letters—they both uphold privacy rights.

NPAS argues that without proper notification from Ward to halt communications, there can be no FDCPA injury recognized. However, the validity of Ward's notification is a matter of the merits of his claim, not of standing. To establish a "legally protected interest," Ward only needs to demonstrate a potential right to relief based on his interpretation of relevant laws. The merits of the claim, including NPAS's alleged violation of the FDCPA by failing to use its full name and continuing communications after a cease-and-desist letter, are separate from the standing analysis.

Ultimately, the assessment concludes that Ward experienced an Article III injury by receiving an unwanted phone call, affirming that he has standing to assert his claim.

Ward appeals the district court's summary judgment favoring NPAS, which is reviewed de novo. Summary judgment is warranted if NPAS demonstrates no genuine dispute over material facts, as outlined in Fed. R. Civ. P. 56(a). A genuine issue arises when sufficient evidence exists for a jury to favor the nonmoving party. Under the Fair Debt Collection Practices Act (FDCPA), liability is limited to "debt collectors." The district court concluded that NPAS does not qualify as a debt collector, which is supported by the FDCPA’s definition and exclusions regarding debts not in default at the time of acquisition.

For NPAS to be considered a debt collector, Ward's debts to Stonecrest needed to be in default when referred to NPAS. The statute does not define "default," but dictionaries and the parties’ contract provide guidance. Black’s Law Dictionary defines default as the failure to fulfill a legal or contractual obligation, particularly in payment. Courts evaluate the status of debt defaults based on contractual terms.

The contract between Ward and Stonecrest specified that while NPAS serviced the account, it would not be classified as delinquent, past due, or in default. Stonecrest could not declare the account in default until NPAS notified Ward and returned the debt. Thus, under the contract, Ward's debt was not in default during NPAS's handling. However, NPAS asserts that the relevant statute only considers the status of the debt at the time of acquisition, indicating that if the debt was in default before being obtained by NPAS, the subsequent classification should not affect NPAS's liability.

A loan servicer can be classified as a debt collector based on whether the debt was assigned for servicing before any default occurred. In this case, Ward argues he defaulted before NPAS acquired his debt, asserting that default means failing to fulfill payment obligations. He claims default occurred the day after receiving statements from Stonecrest marked "due on receipt," prior to NPAS’s acquisition. However, the record does not support this claim, as the statements did not indicate immediate payment failure as a breach, and Stonecrest did not treat the delay in payment as such. For an extended period, Stonecrest waited for payment before referring the account to NPAS, which then sent statements with later due dates and no interest charged. Importantly, Stonecrest agreed not to consider Ward's account "delinquent, past due, or in default" while NPAS held it, meaning they could not collect late fees, report to credit agencies, or initiate legal action. Consequently, neither Stonecrest nor NPAS regarded the debt as in default at the time of acquisition. The district court's conclusion that NPAS is not a debt collector under the Fair Debt Collection Practices Act (FDCPA) is supported and affirmed.