Chai v. Velocity Investments, LLC
What’s at Stake
Standing is the legal principle that decides who gets to bring a lawsuit. Traditionally, a person who has experienced the violation of a statute has standing to bring a claim for that violation. For example, the California Fair Debt Buying Practices Act (CFDBPA) says that people can bring claims when a debt collector does not include notices in their letters explaining debtors’ rights. However, in recent years the U.S. Supreme Court has held that in order to sue in federal court, the person alleging the violation must also show that they suffered an injury distinct from the statutory violation. Following this holding, people who had their rights violated also have to prove they suffered concrete harm beyond the statutory violation before they can go to court. Meanwhile, a company that knowingly broke the law sees no consequences.
This case is about whether the Sixth Appellate District of the California Court of Appeals will continue to recognize that having statutory claims is enough to sue in state court or whether it will follow the federal courts and require concrete harm separate from the statutory violation itself to bring a lawsuit.
Summary
David Chai opened a Citibank credit card. After he was unable to pay, Citibank wrote off the debt and it was sold to Velocity Investments, a debt buyer. Velocity sent David a letter to collect the debt, but it failed to include the notice required by the CFDBPA, which requires debt buyers to disclose information about their right to collect the debt and the amount of the debt, among other information.
David filed a class action against Velocity for violation of the CFDBPA, seeking statutory damages for the lack of notice. Velocity did not dispute that it had failed to provide the required notice in violation of the statute, but it argued that David lacked standing because he had not been injured by the violation. The trial court held that, although the CFDCPA provides that a debt buyer “shall be liable” for statutory damages for any violation, David did not have standing to sue because he had not sufficiently alleged a concrete injury. Relying in part on another case, Limon v. Circle K, where the Fifth Appellate District held that the plaintiff lacked standing to sue for violations of the Fair Credit Reporting Act because he had not shown a “concrete injury,” the court held that proving a statutory violation was not enough to have standing to seek statutory damages and that David was required to prove that he suffered a “concrete harm” or an “injury in fact.” The court also rejected David’s argument that being denied the notice was itself an injury.
Core Legal Issues
Our amicus brief, written by the Berkeley Center for Consumer Law and Economic Justice, argued that Limon v. Circle K was wrongly decided by the Fifth Appellate District and that California courts should not import the harsh injury requirements from federal law, particularly from the U.S. Supreme Court’s TransUnion v. Ramirez decision. It also explained the importance of allowing people to recover statutory damages when companies break the law even when there were not demonstrable harms separate from the statutory violation.
The Sixth Appellate District agreed, reversing the trial court and rejecting the application of Limon. The appellate court reasoned that, in enacting the CFDBPA, the California legislature created the right to sue for violations of that act in state court, and that requiring more would undermine the legislature’s power to do so.