Supreme Court Has Opportunity to Halt Lawsuits by Uninjured Plaintiffs

supreme courtFederal courts have been inundated in recent years by suits filed by plaintiffs who have suffered no injury but who allege that a federal statute provides them with “standing” to sue for alleged violations of federal law. Such lawsuits can be extremely lucrative for the plaintiffs’ bar when the statute provides for an award of statutory damages (typically, $100 to $1,000) for each violation; by filing their suits as nationwide class actions, attorneys can often plausibly seek to recover billions of dollars. The Supreme Court may soon make it much more difficult for such suits to survive a motion to dismiss. The Court on Friday will consider whether to grant review in Spokeo v. Robins, a case that squarely addresses whether plaintiffs can assert Article III standing where their only “injury” is the affront to their sensibilities caused by the belief that someone is not complying federal law. The Court has indicated a strong interest in addressing the issue; Spokeo is an appropriate vehicle for doing so and ought to be granted.

The U.S. Solicitor General recently filed a brief recommending that the Court not hear Spokeo. That brief may, ironically, increase the likelihood that the Court will agree to hear the case, because the Solicitor General very pointedly declined to endorse the appeals court’s rationale for concluding that the plaintiff has standing.

Spokeo involves claims filed under the Fair Credit Reporting Act (FCRA), one of dozens of federal statutes that offer a bounty (in the form of statutory damages) to those who demonstrate a violation of a federal statute. Spokeo, Inc. operates a “people search engine”—it aggregates publicly available information from phone books, social networks, and other sources into a database that is searchable via the Internet, and displays the results of searches in an easy-to-read format. It has always emphasized that it does not verify or evaluate any piece of data and does not guarantee the accuracy of information offered.

The plaintiff, Thomas Robins, claims that Spokeo—which posted some innocuous information about him—violated his rights under the FCRA. The FCRA governs “consumer reporting agencies” (CRAs), and one issue in the case is whether Spokeo is subject to the FCRA at all—Spokeo denies that it is a CRA since it does not purport to evaluate anyone’s credit worthiness. But the more basic issue is whether Robins has suffered an injury sufficient to confer standing. The Ninth Circuit deemed it irrelevant that Robins could not identify any real injury. Reversing a trial court dismissal, it concluded that any statutory violation directed at an individual is sufficient to establish standing.

What were the alleged statutory violations? Spokeo was alleged to have failed to take steps required of CRAs under the FCRA, including: (1) posting toll-free telephone numbers to allow consumers to request consumer reports; (2) issuing notices to providers and users of information to tell them of their rights and responsibilities under the FCRA; and (3) following reasonable procedures to assure maximum possible accuracy of the information it posted. The Ninth Circuit concluded that because the information at issue involved Robins, he had standing to sue Spokeo and to seek statutory damages in connection with each violation. When one factors in that Robins seeks to represent a class consisting of millions of similarly situated consumers across the country, his damage claims total billions of dollars. Not a bad day’s work.

Washington Legal Foundation Web Seminar program on “no-injury” class actions, December 9, 2014

By providing for statutory damage awards under the FCRA (and numerous other federal statutes) to individual plaintiffs who cannot prove any actual damages, Congress clearly intended to encourage individuals to file lawsuits alleging noncompliance with federal law. But the question raised by Spokeo’s certiorari petition is whether the Constitution grants federal courts jurisdiction to hear lawsuits filed by individuals whose only injury consists of violation of a statute creating legal rights. The question has not been addressed by the Supreme Court, and it has sharply divided the federal appeals courts.

In 1992’s Lujan v. Defenders of Wildlife, the Supreme Court held that the invasion of statutory rights is sufficient by itself to create standing only if the rights consist of “concrete, de facto injuries that were previously inadequate in law” but that now (by virtue of the newly adopted statute) have been “elevated to the status of legal cognizable injuries.” It seems far-fetched to suggest that an individual could suffer a “concrete, de facto injury” because a company, e.g., failed to post toll-free numbers to assist the individual in obtaining free credit reports. The Ninth Circuit nonetheless determined that Robins had standing to sue for each of his enumerated FCRA violations, reasoning that Article III standing requirements are satisfied so long as the plaintiff alleges that the defendant violated his statutory rights—e.g., the plaintiff was among those whose information the defendant collected.

No-injury cases of this sort are a thing of beauty in the eyes of plaintiffs’ lawyers. If individual plaintiffs are claiming actual damages, it may be very difficult for counsel to get his case certified as a class action because common issues of fact are unlikely, in such cases, to predominate over individual issues—a prerequisite to certification of a Rule 23(b)(3) class. But if the only injury suffered by every putative class member is the violation of a statutory provision and the only relief claimed is the recovery of statutory damages, there are unlikely to be substantial obstacles to class certification since virtually every class member’s claim will be identical. The result: numerous companies have been coerced into massive class-wide settlements, particularly in cases filed within those circuits (the Sixth, Eighth, and Ninth) that unambiguously uphold the standing of uninjured plaintiffs to sue for statutory violations.

The Supreme Court agreed to decide this issue several years ago. But the Court ended up dismissing that case, First American Financial Corp. v. Edwards, as improvidently granted, likely because the justices belatedly concluded that the supposedly uninjured plaintiffs had actually suffered some injuries. No similar problem is lurking in Spokeo because the Ninth Circuit made clear that it was upholding Robins’s standing without regard to whether Spokeo’s alleged statutory violations injured him in any way.

The Solicitor General’s brief recommending that the Court deny review focused on allegations that some of the information posted by Spokeo may have been inaccurate. For example, Robins claims that he was unemployed at a time when information posted by Spokeo stated that he had a job. Even if Robins’ claim is correct, it is difficult to comprehend how an unemployed individual can be harmed by reports that he is gainfully employed. More importantly, by focusing solely on the alleged inaccuracies and declining to defend the Ninth Circuit’s actual holding—that individuals have standing to sue for violation of their statutory rights even if they are uninjured by the violation—the Solicitor General’s brief serves to highlight the need for review of the Ninth Circuit’s standard.

The Solicitor General suggests that the proper approach is to determine whether the federal statute protects an interest that was also protected at common law. He argues that at common law, an individual could sue others for publishing inaccurate information about him, and that evidence of injury was not required because injury could be presumed to flow from the inaccurate information. While there is strong reason to doubt the accuracy of the Solicitor General’s claim that the common law presumed injury based on any inaccuracies (as opposed to libelous inaccuracies that exposed the plaintiff to contempt or ridicule), that approach to standing issues—i.e., looking to the common law for guidance—makes a good deal of sense. But the important point here is that that is not the approach adopted by the Ninth Circuit in this case. Instead, the appeals court has adopted a standard that is inconsistent with Lujan and that exposes numerous companies to potentially ruinous class-action judgments.

By granting review in Spokeo and reversing the Ninth Circuit, the Court can bring a halt to the proliferation of lawsuits filed by uninjured plaintiffs who lack the requisite Article III standing to sue for infractions of federal statutes. Such a ruling would remind Congress that it cannot expand federal courts’ jurisdiction beyond the limits set out in the Constitution.

Also published by Forbes.com at WLF’s contributor page

4 thoughts on “Supreme Court Has Opportunity to Halt Lawsuits by Uninjured Plaintiffs

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