November 19, 2014 Articles

SCOTUS Approaches Review of Question: Does the Violation of a Statutorily Created Right Create Article III Standing?

At stake is nothing less than what a consumer must show to bring a claim for violations of federal law

by Randall W. Edwards, Sabrina Heron Strong, and Mimi Vu

Can consumers establish Article III injury-in-fact standing, as required to maintain a lawsuit in federal court under the U.S. Constitution, by alleging that the defendant violated a federal statute in its conduct toward the plaintiff, if the plaintiff cannot, or does not try to, establish actual harm?

On October 6, 2014, the U.S. Supreme Court invited the Solicitor General’s briefing on whether to grant certiorari review of this constitutional standing question in Spokeo, Inc. v. Robins, No. 13-1339. (See the SCOTUSblog for this case.) Many consider this step to be a good indication the Court will grant certiorari review in the high-profile putative class action, which has already garnered 10 amicus briefs filed on behalf of 17 individual companies, trade associations, and other organizations. Previously, the Ninth Circuit found the plaintiff had established injury-in-fact standing based on Spokeo’s alleged violation of his rights under the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681 et seq., even though the plaintiff failed to allege actual or imminent harm as is required under Article III. Robins v. Spokeo, Inc., 742 F.3d 409 (9th Cir. 2014), petition for cert. filed, No. 13-1339 (U.S. May 1, 2014). The Supreme Court’s review could resolve the Article III standing question the Court previously punted in First American Corp. v. Edwards, 610 F.3d 514 (9th Cir. 2010), a Ninth Circuit decision that recognized Article III standing even without a showing of monetary or actual harm.

No matter the outcome, any opinion from the Court in Spokeo will likely have a sweeping impact on consumer class actions premised on alleged statutory violations, especially in privacy and data security cases in which plaintiffs have increasingly sought to meet standing and damages requirements by bringing claims based on statutes that provide for private rights of action and statutory damages.

Background on the FCRA and the Lower Court Rulings

The Fair Credit Reporting Act. The FCRA regulates the collection, use, and disclosure of consumer data used in certain circumstances, such as for the extension of credit or insurance or for employment determinations. The statute requires consumer reporting agencies to “follow reasonable procedures to assure maximum possible accuracy” of consumer reports used for employment purposes. 15 U.S.C. § 1681e(b). When a plaintiff sues for willful violations of the statute, the FCRA provides for actual damages or statutory damages between $100 and $1,000, and some courts have interpreted this provision to allow recovery even when there is no showing of actual harm. Id. § 1681n(a); see Robins, 742 F.3d at 412 (holding the FCRA “does not require a showing of actual harm when a plaintiff sues for willful violations”); Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 705–7 (6th Cir. 2009) (ruling the FCRA “permits a recovery when there are no identifiable or measurable actual damages”).

The district court’s ruling. Spokeo operates a website that provides information about individuals, including contact data, marital status, age, occupation, and wealth level. The plaintiff claimed Spokeo’s website stated he held a graduate degree and was wealthy, when neither was true. The plaintiff, who was unemployed, alleged the misinformation harmed his “employment prospects” and also caused him anxiety, stress, and other psychological harm. After initially denying Spokeo’s motion to dismiss, the court reconsidered its ruling and dismissed the case, finding the plaintiff failed to plead an injury in fact—or any injuries—that were traceable to Spokeo’s alleged violations.

The Ninth Circuit’s ruling. On February 4, 2014, the Ninth Circuit Court of Appeals reversed the district court’s decision in a unanimous opinion written by Judge Diarmuid F. O’Scannlain. The Ninth Circuit held the plaintiff had Article III standing to sue the website operator under the FCRA for allegedly publishing inaccurate information about him because “a plaintiff can suffer a violation of the statutory right without suffering actual damages.” The court ruled that, because the plaintiff was “among the injured” (i.e., he alleged the defendants violated his statutory rights conferred under the FCRA) and his “personal interests in the handling of his credit information are individualized rather than collective,” a willful violation of the FCRA was sufficient to create a legally cognizable injury and confer Article III standing.

The Ninth Circuit noted that it was following its earlier decision in First American Corp. v. Edwards, in which it ruled the plaintiff had Article III standing to sue for violations of the Real Estate Settlement Procedures Act, even though the plaintiff suffered no actual harm from the alleged violation. In June 2012, the Supreme Court punted this Article III standing question in Edwards after it had originally granted certiorari review, stating only that certiorari had been “improvidently granted.” This decision thus left an important question unresolved.

Spokeo’s Appeal to the Supreme Court

Those previously disappointed by the Supreme Court’s refusal to consider the constitutional standing question originally framed in Edwards are likely pleased with the recent developments in Spokeo.

On May 1, 2014, Spokeo filed a petition for writ of certiorari review of the Ninth Circuit’s ruling on Article III standing and framed the question as follows: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.”

In support of certiorari, Spokeo argued that the courts of appeals are divided over whether an “injury in law” based on the violation of a statutory right satisfies Article III’s injury-in-fact requirement. Spokeo explained that, like the Ninth Circuit, the Sixth Circuit has held that a plaintiff has Article III standing to bring an FCRA action even though the plaintiff suffered no actual harm as a result of practices alleged in the complaint. Defendant-Appellant’s Petition for Writ of Certiorari at 9, Spokeo, Inc. v. Robins (citing Beaudry, 579 F.3d at 705–7). Spokeo also pointed to the Seventh Circuit’s decision to reverse a class-certification denial, where statutory damages are available under the FCRA “without proof of injury,” without addressing the Article III standing question. Id. (citing Murray v. GMAC Mortg. Corp., 434 F.3d 948, 952–53 (7th Cir. 2006)).

In contrast, the Second and Fourth Circuits have rejected arguments that violations of a right created under a federal statute constitute injury in fact sufficient for constitutional standing in the context of the Employee Retirement Income Security Act. Id. at 10 (citing David v. Alphin, 704 F.3d 327, 338–39 (4th Cir. 2013); Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112, 121 (2d Cir. 2009)). According to Spokeo, there is “no doubt” the district court’s decision would have been affirmed, rather than reversed, had it been filed in the Second or Fourth Circuit as opposed to the Ninth.

Spokeo also highlighted the importance of the Court’s review for similar injury-in-fact issues arising under a broad range of federal statutes beyond the FCRA, including the Truth in Lending Act, the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, the Lanham Act, the Americans with Disabilities Act, and the Video Privacy Protection Act. These statutes create private rights of action for consumers, and many contain statutory damages provisions. According to Spokeo, “[l]itigation under those laws is likely to raise the question presented here.”

Request for Solicitor General’s Brief

On October 6, 2014, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States. Many consider this a strong indication the Court is giving serious consideration to whether to grant certiorari.

The Solicitor General’s opinion is likely to have a significant impact on the Court’s decision. The Supreme Court follows the Solicitor General’s recommendation to grant or deny certiorari in over 75 percent of cases in which the United States has been invited to express an opinion. See SCOTUSblog, “Stat Pack, October Term 2013” (Apr. 11, 2014); Margaret Meriwether Cordray et al., “The Solicitor General’s Changing Role in Supreme Court Litigation,” 51 B.C. L. Rev. 1323, 1334 (2010).

And although the Supreme Court overwhelmingly reverses cases it reviews (last term, its reversal rate was 78 percent), when the Solicitor General participates as an amicus at the merits stage, the government is on the winning side 70–80 percent of the time, regardless of which side it supports. Cordray, supra, at 1335. In Edwards, the Solicitor General took a position squarely in favor of recognizing Article III standing based on the violation of a statutorily created right. See Brief for the United States as Amicus Curiae, First Am. Fin. Corp. v. Edwards, No. 10-708 (U.S. June 28, 2010). Thus, if the Solicitor General takes a similar position in Spokeo, that could significantly boost the plaintiff’s chances of winning an affirmance of the Ninth Circuit’s opinion.

Potentially Sweeping Impact of Supreme Court Review

If the Supreme Court denies the petition—or affirms the lower court’s ruling—the Ninth Circuit will likely continue to follow its precedent in Edwards and Spokeo, allowing plaintiffs to bring private causes of action for violations of federal statutes, even where the plaintiffs suffered no actual harm.

However, a Supreme Court grant of certiorari and subsequent reversal of Spokeo likely would dramatically limit the circumstances in which a consumer may bring such a claim by requiring plaintiffs to establish actual harm. This would transform the consumer class action landscape, not just under the FCRA but under a host of other federal statutes that allow for private rights of action or statutory damages. A reversal could have a particularly significant impact on consumer privacy and data breach class actions, as the plaintiffs in those actions have historically struggled more than traditional consumers to establish actual harm traceable to a defendant’s conduct.

The potentially wide-ranging impact of a Supreme Court decision is underscored by the filing of 10 amicus briefs by 17 different companies, trade associations, and other organizations, including the Consumer Data Industry Association, the Chamber of Commerce of the United States, eBay, Facebook, Google, Yahoo, and some of the nation’s largest consumer reporting agencies.

At stake in Spokeo’s appeal to the Supreme Court is nothing less than what a consumer must show to bring a claim for violations of federal law.

Keywords: litigation, class actions,  Spokeo, Inc. v. Robins, right of action, injury in fact, Article III standing, Fair Credit Reporting Act

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