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Hunstein: The Eleventh Circuit Cavalry Arrives

  • Written by Steel Rose

It’s been a long, strange trip through the 11th U.S. Circuit Court of Appeals for Hunstein v. Preferred Collection & Management Services Inc, a Fair Debt Collection Practices Act case that exemplifies the challenge for appellate courts in applying the U.S. Supreme Court’s test for constitutional standing.

On Wednesday, the 11th Circuit said that it had voted to review the case en banc. The court's order came just a few weeks after an Oct. 28 panel decision that allowed the plaintiff, Richard Hunstein, to proceed with claims that the debt collector violated the FDCPA by sharing sensitive personal information about him with the outside vendor that mails out Preferred’s dunning letters. The en banc 11th Circuit didn't even wait for Preferred's lawyers at Kaufman Dolowich & Voluck to ask for a rehearing.

That Oct. 28 opinion – which was vacated in Wednesday’s en banc order -- has its own unusual history. Judges Adelberto Jordan, Kevin Newsom and Gerald Tjoflat first heard the Hunstein case last March. They issued a unanimous decision only a month later, holding that under the Supreme Court’s 2016 ruling in Spokeo, Inc v. Robins, Hunstein had Article III standing to sue because his allegation was akin to a common-law action for invasion of privacy (more on that later).

The panel’s April 21 ruling was a jolt not just for debt collectors but for the entire financial services industry, which relies on outside contractors to communicate with consumers. Amicus briefs piled into the 11th Circuit in support of Preferred’s petition for rehearing.

Instead of rehearing the case, the original three-judge panel issued the Oct. 28 opinion, addressing sua sponte the arguments in Preferred’s petition and the amicus briefs – as well as the Supreme Court’s tightened rules for standing from the justices’ June 25 ruling in TransUnion LLC v. Ramirez.

In the revised opinion, Newsom and Jordan insisted that TransUnion did not alter their original conclusion that Hunstein had Article III standing. But Tjoflat sharply dissented, arguing that the majority had focused on secondary considerations in TransUnion instead of the Supreme Court's concentration on "history and the judgment of Congress.”

Presumably, it was Tjoflat's dissent that prompted the 11th Circuit to decide to hear the case en banc. The debt collector’s lead counsel, Richard Perr of Kaufman Dolowich, said he expects the appeals court to issue a subsequent order specifying the issues it wants the parties to brief for en banc consideration. Hunstein counsel Thomas Bonan of Seraph Legal didn’t respond to my query.

It seems likely that the key question in the en banc case will be whether Hunstein’s allegations of a violation of the federal law barring abusive debt collection practices align closely with the common-law tort of invasion of privacy. (There’s not much doubt that Hunstein failed to raise adequate allegations of a concrete injury or imminent risk of one.)

Plaintiffs' lawyers claimed that Preferred ran afoul of the debt collection law when it provided information to the mail vendor CompuMail about debt Hunstein owed to Johns Hopkins All Children’s Hospital for his son’s medical treatment. The transmission of sensitive information about his son’s medical care, Hunstein alleged, was an improper public disclosure of private facts.

The Supreme Court’s TransUnion case, which also arose from an alleged privacy violation, actually addressed the issue of whether a business that shares information with an outside vendor has “published” that information, albeit in a footnote. Citing an unpublished 11th Circuit ruling, the justices cast doubt on the theory that disclosure to a vendor amounts to an actionable publication under tort law.

The majority in the now-vacated Oct. 28 acknowledged that the TransUnion footnote was at odds with Hunstein’s claims. But Jordan and Newsom said it’s not clear from the record in the Hunstein case whether employees at CompuMail read about his son’s medical issues after Preferred sent the data to the mail vendor.

Newsom and Jordan said that under TransUnion and 11th Circuit precedent, “a plaintiff need only show that his alleged injury is similar in kind to the harm addressed by a common-law cause of action, not that it is similar in degree.” So even if Preferred’s disclosure of Hunstein’s sensitive personal information was limited just to CompuMail employees, the majority said, the disclosure was similar in kind, if not degree, to publication that triggers the tort of privacy invasion.

 Tjoflat’s dissent said that reasoning was flat wrong: “Communication of a fact to a small group of persons is not publicity,” he wrote. And without showing that Preferred "published" his information, Tjoflat said, Hunstein can’t claim an invasion of his privacy.

The majority’s focus on "kind, not degree," he said, was mere “lip service” to an “ancillary” point in the Supreme Court decision.

Preferred counsel Perr, who came into the case after the debt collector’s initial loss at the 11th Circuit, said in the company’s petition to rehear that first ruling that CompuMail generates dunning letters electronically, without any actual person reading the information in the mailings. Perr also pointed out – as did Tjoflat in his dissent in the Oct. 28 decision – that in the 1977 statute, Congress expressly allowed debt collectors to disclose information to telegraph operators -- an old-school version of mail vendors that send out collection notices. To read more of the Reuters article click here.

Attorneys at Alston & Bird provided this insightful analysis of the case detailing what happened, what does it mean and what happens next:

Today, like Yogi Berra, we have a sense of déjà vu all over again. Yesterday, (lighting a cigarette) we published a client update bemoaning the fact the Eleventh Circuit panel in Hunstein v. Preferred Collection and Management Services Inc. had, after a five-month silence on a rehearing petition, reaffirmed in Hunstein II its holding that a debt collector’s thoroughly unremarkable (and industry standard) practice of sending data to a third-party vendor to have debt collection letters printed and mailed violated Section 1692c(b) of the Fair Debt Collection Practices Act (FDCPA). We noted that Preferred planned to file a new en banc petition but warned that relief could be months or even years away and that defendants might have to live with Hunstein II for a while. 

But hard on the heels of our advisory, the Eleventh Circuit bus arrived in the form of a sua sponte grant of en banc review, coupled with an order vacating the Hunstein II decision. En banc review may be conducted under Federal Rule of Appellate Procedure 35(a) on a vote of the majority of the circuit judges who are in active service, without the filing by a party of a petition for rehearing en banc. Review under FRAP 35(a) is limited to circumstances where “en banc consideration is necessary to secure or maintain uniformity of the court’s decisions,” or “the proceeding involves a question of exceptional importance.” A majority of the active circuit judges has determined that the Hunstein II decision falls into one or both of these categories. 

What happened? Petitions for panel rehearing and rehearing en banc are considered in “behind closed doors” mode in the appellate courts, but we can speculate a bit, based on published internal operating procedures, about what may have happened. When, in May, Preferred filed a petition for panel hearing or for rehearing en banc, the petition and the 17 amicus briefs filed in support of it would have been distributed to all the judges of the Eleventh Circuit. However, under the Eleventh Circuit’s Internal Operating Procedures, the filing of a petition for rehearing en banc along with a petition for panel rehearing “does not take the appeal out of plenary control of the panel deciding the appeal.” Here, the original panel granted panel rehearing, which caused the panel to retain control of the proceeding until it issued its opinion in Hunstein II on October 28. Once the revised opinion was issued, the Internal Operating Procedures permitted any active circuit judge to request that the court be polled on whether rehearing en banc should be granted. A poll was clearly requested, and likely informed by the original petition and the amicus briefs filed with the court, a majority of the 11 active circuit judges voted to grant en banc review. 

What does it mean? The court’s order explicitly vacates the Hunstein II decision, which is customary on a grant of en banc review. The hundreds of cases that have been filed on the premise that Hunstein I’s or Hunstein II’s interpretation of Section 1692c(b) of the FDCPA is controlling have now lost their footing. Plaintiffs can attempt to keep their actions alive by urging courts to follow the logic laid out in the Hunstein appellate decisions, but those decisions are no longer precedential. District courts – even district courts within the Eleventh Circuit – are free to disagree with that logic. Defendants in such cases should be well equipped to defeat those arguments in trial courts – the 17 amicus briefs filed on the original Hunstein en banc petition contain a broad range of arguments about why a debt collector’s transfer of letter data to a mailing house does not violate Section 1692c(b) of the FDCPA. Defendants have a lot of breathing room, at least until the en banc panel issues a decision that interprets Section 1692c(b). 

What’s next? The chief judge of the Eleventh Circuit will appoint appeal managers who will prepare and circulate to the other members of the en banc court a proposed notice to the parties specifying the issues to be briefed, brief lengths, and whether oral argument should be heard. When the notice has been approved by the court, the clerk will transmit it to the parties. The contents of that notice will be telling: will the full court request briefing on only the standing issue, on only the FDCPA issue, or on both? If the full court does not request briefing on Section 1692c(b), its en banc decision will not ultimately address that section. If, on the other hand, the full court requests such a briefing, there remains a possibility that an appellate court could, in time, re-adopt the Hunstein panel’s surprising and disruptive interpretation of Section 1692c(b). 

If you are interested in more information about Hunstein and its impact on debt collection practices, Alston & Bird LLP can provide guidance.