July 19, 2016 Articles

Shorthanded SCOTUS Hands a Victory to Data Aggregation Site—For Now

The Spokeo opinion reads as a compromise that sought to avoid a 4–4 decision.

By Ashley Bruce Trehan and Kenneth L. Racowski

“[E]ven if you are given a right to the procedure, that alone does not suffice for standing.” “[I]t has to be something more than just the violation of . . . what Congress says is a legal right.” Transcript of Oral Argument at 57, Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (No. 13-1339). At the November 2, 2015, oral argument in Spokeo, Inc. v. Robins, Justice Antonin Scalia stated these characteristically firm opinions, among others, about the plaintiff’s statutory claims under the Fair Credit Reporting Act (FCRA), leaving no room for doubt that, in his mind, that plaintiff’s case has no place in federal court.

After all, this is one of many “no injury” statutory class actions brought in federal court based on a technical violation of a consumer protection statute.

Justice Scalia’s concern was that allowing this case to move forward in federal court would mean that essentially anyone could sue under this statute or other similar statutes, allowing Congress effectively to nullify Article III’s injury-in-fact requirement. And given Justice Kennedy’s apparent doubts about the plaintiff’s “circular” argument and other comments made by the conservative wing of the Court, it seemed the defense bar may have been on the verge of a sweeping victory against these “no injury” statutory cases. And then, suddenly, unexpectedly, Justice Scalia passed away.

Justice Scalia’s concern was that allowing this case to move forward in federal court would mean that essentially anyone could sue under this statute or other similar statutes, allowing Congress effectively to nullify Article III’s injury-in-fact requirement. And given Justice Kennedy’s apparent doubts about the plaintiff’s “circular” argument and other comments made by the conservative wing of the Court, it seemed the defense bar may have been on the verge of a sweeping victory against these “no injury” statutory cases. And then, suddenly, unexpectedly, Justice Scalia passed away.

Three months after Justice Scalia’s passing, the U.S. Supreme Court handed down its ruling in Spokeo v. Robins, 136 S. Ct. 1540 (May 16, 2016), which vacated and remanded the case to the Ninth Circuit with the instruction to conduct an additional analysis. The opinion reflects the High Court’s post-Scalia trend of issuing narrow, middle-ground holdings in cases that could have otherwise produced decisive precedential decisions.

Background
The FCRA (15 U.S.C. § 1681et seq.) is a federal consumer protection act with the purpose of ensuring, among other things, that credit reporting agencies and creditors who report to those agencies offer accurate information. It grants consumers a private right of action to seek damages of up to $1,000 each, attorney fees, and punitive damages.

In Spokeo, the plaintiff alleged that the profile displayed by the data aggregation website Spokeo reflected incorrect information about him, including that he is married, has children, is in his 50s, has a job, is relatively affluent, and holds a graduate degree. The plaintiff claimed that the website diminished his job prospects.

Lower Court Rulings
The plaintiff filed a class action complaint alleging FCRA violations, which Spokeo moved to dismiss. After initially denying Spokeo’s motion, the U.S. District Court for the Central District of California reconsidered and dismissed the complaint with prejudice, finding the plaintiff did not properly plead an injury in fact.

The Court of Appeals for the Ninth Circuit disagreed and found that the allegations were sufficient to satisfy Article III’s injury-in-fact requirement. Among other noteworthy statements, the appellate court stated that “the violation of a statutory right is usually a sufficient injury in fact to confer standing.” 742 F.3d at 412.

High Court Ruling
After the U.S. Supreme Court granted certiorari, there was a sense among those closely following this case that the Ninth Circuit’s statement—that is, that a mere statutory violation can amount to Article III standing—might be the cornerstone of the Court’s decision. Following oral argument, that conclusion seemed inevitable.

However, while the Court did indeed vacate and remand, it did so on a narrow basis. The upshot of the opinion is that the Ninth Circuit failed to address the “concreteness” factor of Article III’s injury-in-fact requirement and must reevaluate that factor in a subsequent ruling.

The majority opinion (written by Justice Alito and joined by Chief Justice Roberts and Justices Kennedy, Thomas, Breyer, and Kagan) set forth the three Article III standing requirements (i.e., injury in fact, that the injury is fairly traceable to the challenged conduct, and that the injury is likely to be redressed by a favorable judicial decision) and honed in on the first requirement—the injury in fact. That requirement has two components that, the Court noted, some lower federal courts including the Ninth Circuit conflate: particularity and concreteness. Only the latter is at issue in Spokeo.

Regarding “concreteness,” the Court explained that an injury in fact “must actually exist,” be “real,” and not be “abstract.” And in rebuttal to the Ninth Circuit’s statement quoted above, the Court stated that “Article III standing requires a concrete injury even in the context of a statutory violation”—a “bare procedural violation” is not sufficient to show concrete harm.

But at the opposite end of the spectrum from a “bare procedural violation” lie “some circumstances” that might constitute the requisite injury in fact. Those “circumstances,” according to the Court’s case citations, would include certain groups’ inability to obtain information that Congress decided to make public or subject to disclosure under federal statutes. As applied to the plaintiff’s case, an incorrect zip code would not be considered “concrete harm” but other false information might.

The Court found the appellate court “failed to fully appreciate the distinction between concreteness and particularization,” thus resulting in an “incomplete” analysis. The Court narrowly instructed the Ninth Circuit to address, specifically, “whether the particular procedural violations alleged in this case entail a degree of risk sufficient to meet the concreteness requirement,” taking no position as to whether the ultimate conclusion was correct.

Spokeo’s Immediate Aftermath
One federal court of appeals and a handful of district courts have already taken the opportunity to examine and apply Spokeo’s analysis. In Hochendoner v. Genzyme Corp., 2016 WL 2962148 (1st Cir. May 23, 2016), the First Circuit evaluated the injury-in-fact prong not analyzed in Spokeo: the particularity requirement. There, the appellate court affirmed the trial court’s dismissal of class action claims for lack of standing because the plaintiffs failed to allege a sufficiently particularized injury. (For more information about Hochendoner, please see the Practice Point in this issue.)

District court opinions applying Spokeo’s criteria to statutory claims have yielded mixed results. In Smith v. Ohio State University, No. 15-cv-3030, 2016 WL 3182675 (S.D. Ohio June 8, 2016), the court dismissed the plaintiffs’ FCRA claims for lack of Article III standing because, although they alleged “they suffered harm when their ‘privacy was invaded and they were misled as to their rights under the FCRA,’” they also admitted they did not suffer a concrete consequential damage as a result of the alleged FCRA violation.

However, in Rogers v. Capital One Bank (USA), N.A., No. 15-cv-4016, 2016 WL 3162592 (N.D. Ga. June 3, 2016), the court denied the defendant’s motion to dismiss claims brought under the Telephone Consumer Protection Act (TCPA) because, “[a]s the Eleventh Circuit has held [pre-Spokeo], a violation of the TCPA is a concrete injury.” The court also found particularity was met because, when the plaintiffs received the allegedly violating calls, their cell phone lines were unavailable for other use.

And in a case brought under the Fair Debt Collection Practices Act, a district court found that the defendant’s affirmative defense asserting lack of standing failed as a matter of law and met Spokeo’s test where the defendant had attempted to collect a debt by filing a lawsuit against the plaintiff. Nyberg v. Portfolio Recovery Assocs., Inc., No. 15-cv-01175, 2016 WL 3176585 (D. Or. June 2, 2016).

Rogers and Smith appear to be the closest calls under Spokeo’s analysis, raising the question of whether the respective courts of appeals—or even the U.S. Supreme Court, again—might need to provide more a workable test to determine “concreteness.”

Remand and Beyond
Spokeo’s significance at this time lies not in what it is but in what it is not:

It is not a resolution of the case. The Court could have reversed the Ninth Circuit’s ruling and upheld the trial court’s dismissal, but it instead remanded the case to the appellate court for further analysis of one discrete issue.

It is not a blanket ban on “no injury” statutory class actions. The eight-justice Court had an opportunity to take a bold step with a bright-line rule that “no injury” class actions could not proceed in federal court. Many businesses and defense attorneys hoped—and plaintiffs’ attorneys feared—this would be the outcome following oral argument.

But it is also not a validation of “no injury” statutory class actions. The majority opinion is peppered with nods to Justice Scalia’s opinions that a mere procedural violation cannot confer standing and that Congress cannot obviate Article III’s requirements.

Despite the Court’s emphasis on the need for concreteness, Spokeo is far from concrete in delineating what is or is not a “concrete” injury in fact under Article III. The opinion recognizes that “standing requires a concrete injury” and, yet, also that the technical violation of a statute “can be sufficient in some circumstances.” Rather than deciding the issue, the opinion serves only to further frame the question for future courts. As a result, large companies will continue to face potentially large legal exposure from plaintiffs that might not have suffered any actual harm.

Perhaps due to Justice Scalia’s absence, the opinion reads as a compromise that sought to avoid a 4–4 decision so the Court could reach a majority opinion that could have precedential impact. After all, Chief Justice Roberts and Justices Alito, Thomas, and Kennedy appeared to side with Spokeo at oral argument, while the same was not true for Justices Breyer and Kagan. Whatever the Court’s motivation, the resulting middle-ground approach will likely have only marginal applicability beyond the Spokeo case itself, at least for now.

Given the volume of “no injury” statutory class actions, the issue is not going away. Quite the opposite: Plaintiffs will continue to file statutory class actions, and when faced with Article III standing issues, federal courts will continue to determine whether the claimed injury is “concrete.” While it is now clear that a “concrete” injury must be more than a “bare procedural violation,” that injury need not be “tangible” and could even be a mere “risk of real harm,” at least in “some circumstances.” What those “circumstances” are remains to be seen. Stay tuned.

Keywords: litigation, class actions, Article III, injury in fact, concreteness, particularity

Ashley Bruce Trehan and Kenneth L. Racowski – July 19, 2016