Merced v. Resurgent Capital Services L.P.

Background

Carlos Merced brought a proposed class action against Resurgent Capital Services L.P. under the Fair Debt Collection Practices Act, a federal law regulating debt-collection practices. Merced received a collection letter on April 29, 2022, concerning a $988.93 debt originally owed to Credit One Bank, N.A. The letter stated that the debt was old enough that LVNV Funding LLC would not sue to collect it, but that it might report or continue reporting the unpaid debt to credit-reporting agencies. The letter also explained New York requirements concerning expired legal deadlines for collecting debts.

Merced alleged that the letter left him concerned and uncertain, caused him to spend time and money determining how to respond, and led to detrimental inaction or nonpayment. He further alleged that continued negative credit reporting and dissemination to third parties caused reputational harm, and that he suffered stress, anxiety, and lost sleep.

Motion and governing standards

Resurgent moved to dismiss for lack of standing and for failure to state a claim. Standing is the requirement that a plaintiff show a concrete, individualized injury that was likely caused by the defendant and could likely be remedied by a court. The court also described the Fair Debt Collection Practices Act provisions that prohibit false, deceptive, or misleading representations about a debt, including misrepresentations about its legal status. However, because the court found that Merced lacked standing, it did not decide Resurgent’s arguments about whether the complaint stated a claim under the Act.

Court’s analysis

The court held that Merced’s allegations of emotional harm—stress, anxiety, and lost sleep—were insufficient to establish the required concrete injury. It also held that his allegations of reputational harm were insufficient because he did not state anywhere in his submissions that the credit report had actually been disseminated to third parties, or identify how or to whom it was allegedly disseminated.

The court rejected Merced’s allegation that he spent time, money, and effort mitigating the risk of future harm. It explained that such expenditures may qualify as injury when they are closely connected to a sufficient risk of a recognized harm, but that time and money spent because of concern and confusion are not concrete harms by themselves. The court therefore found that Merced had not pleaded a sufficient particularized injury and lacked the constitutional standing required to bring the action in federal court.

Disposition

The court granted Resurgent’s motion to dismiss Merced’s claims for alleged violations of the Fair Debt Collection Practices Act without prejudice. The court granted Merced leave to file an amended complaint consistent with the order by April 2, 2024. The opinion does not state a ruling on the merits of whether Resurgent violated the Act.