Spokeo Challenge in Accretive Health Debt Collection Case Receives Mixed Result

Yesterday the U.S. District Court for the Southern District of Alabama affirmed the lower court’s decision in favor of the defendant in the case of Mahala A. Church v. Accretive Health, Inc. (Case No. 15-15708, United States Court of Appeals for the Eleventh Circuit)

A copy of the case can be viewed here.

The Appellant (Church) had filed a putative class action against Accretive Health (Defendant, or Accretive) alleging violations of the Fair Debt Collection Practices Act (FDCPA), claiming that Accretive failed to include required disclosures in a letter it sent to her advising that she owed a debt to its client, Providence Hospital.

Because the FDCPA applies only to “debt collectors,” the only issue raised at the time of summary judgment in district court was whether the debt in question was in default at the time it was obtained by Accretive.

At that time the court noted that:

1. The FDCPA specifically exempts, “any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained by such person” 15 U.S.C. § 1692a(6)(F).
2. Accretive argued that the debt was not in default at the time it was obtained from Providence Hospital.

The court agreed with Accretive, and as a result, granted summary judgment in favor of the company.

In her original pleadings, Church alleged that she “was very angry” and “cried a lot” as a result of her receipt of the letter. She did not allege, however, that she suffered actual damages.

Fresh off the recent Supreme Court decision in Spokeo v. Robins, which said that a plaintiff must have incurred actual damages (injury-in-fact) in order to have standing to sue, Accretive raised the issue of standing during the appeal in the Church case. The company argued that Church’s injury was not sufficiently concrete to support Article III standing because no actual damages were incurred.

Church countered that,

1. Accretive didn’t raise this issue previously
2. A violation of a procedural right granted by statute can in fact constitute injury-in-fact.

On the first matter, the court determined “we are obliged to consider standing sua sponte [of its own accord] even if the parties have not raised the issue.”

On the second matter, the court cites Havens Realty Corp. v. Coleman 455 U.S. 363, 373 (1982), which alleged that an African American “tester” inquiring about the availability of apartments to rent from a landlord was given different information (no apartments available) from that which was given to a white tester (apartments were available). Although the tester had no intent to rent an apartment and as a result – it could be determined – suffered no actual harm, it was determined that the Fair Housing Act (The Act) establishes a right to truthful information about the availability of housing, and that the misrepresentation constituted injury within the meaning of The Act.

The connection is then made between the right of the tester to the statutorily-created truthful housing information in the Havens case to the right of Church to her statutorily-created right to certain disclosures under the FDCPA.

The court therefore determined that this right, created by Congress, has also established an injury – not receiving such disclosures, and that “although this injury may not have resulted in tangible economic or physical harm that courts often expect, the Supreme Court has made clear an injury need not be tangible to be concrete (Spokeo, Inc., 578 U.S. at ___, 136 S. Ct. at 1549).

The court concluded that the injury-in-fact requirement was satisfied, and Church indeed had standing to bring the case.

After six pages devoted to the question of standing, the court, in one paragraph, established that it agreed with “the district court’s well-reasoned opinion granting summary judgment in favor of Accretive Health,” and affirmed the lower court’s decision.

insideARM Perspective

The FDCPA does not define the term “default.” For reasons that vary from industry to industry, but especially complex in healthcare, it is extremely difficult to pin down a consistent definition.

This case is very interesting in light of its relevance to the currently developing process of CFPB rulemaking for first party activity. Especially in the healthcare market, there is a significant amount of communication with patients regarding bills during the process of sorting out who is responsible to pay. This can take months. The point at which a patient is determined to be responsible is not consistent from hospital to hospital, or even for a particular patient, as each situation is unique. Although the letter that was sent to Church by Accretive is under its own name and references its relationship as a “third-party,” the content of the letter resembled “first party” type of communication.

While the CFPB is appropriately sensitive to patient rights, the contemplated idea of broader application of the FDCPA to so-called “first party” activities should be undertaken very carefully, as it could have the unintended consequence of cutting off communication with a patient during the process of identifying billing accuracy, charitable care, or other payment options. A bill is not the same thing as a debt in collection.

A final note, this appeals case was deemed by the court to be “unpublished.” “In the legal world, an unpublished opinion is a decision of a court that is not available for future citation as precedent because the court deems the case to have insufficient precedential value.”