November 01, 2012 Articles

Article III and the Supreme Court's 'Non-Decision' in Edwards

The Supreme Court's non-decision in Edwards v. First American Corp. creates lingering uncertainty on the Article III injury requirement in consumer cases.

Whitty Somvichian and Kyle Wong – November 1, 2012

Lost in the news coverage over the Supreme Court’s historic health-care decision on June 28, 2012, was the Court’s decision on the same day to withdraw certiorari in Edwards v. First Am. Corp., 610 F.3d 514 (9th Cir. 2010), a case that was anticipated to have significant impact on the litigation of consumer claims. The withdrawal creates uncertainty as to how constitutional standing requirements should be applied in consumer cases brought in federal court.

The Article III Issue

Article III of the Constitution requires that a plaintiff pursuing a claim in federal court “show (1) it has suffered an ‘injury in fact’ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180–81 (2000).

In various contexts, consumer plaintiffs may claim that a defendant’s practices violate a statute yet be unable to show that they suffered any actual economic or other injury from the practices they seek to challenge. In these circumstances, a critical threshold question is whether plaintiffs can establish standing under Article III by merely alleging a violation of a statute and without pleading facts to show they suffered actual injuries.

The Supreme Court’s current guidance on this issue is less than clear. The following discussion from Tyler v. Michaels Stores, Inc., 840 F. Supp. 2d 438, 449 n. 8 (D. Mass. 2012) illustrates the difficulties that courts have had in trying to apply the Supreme Court’s precedents to answer this specific question.

The current Supreme Court jurisprudence is not entirely clear as to whether a defendant's violation of a statute that confers a private right of action in and of itself constitutes an “injury in fact” to those protected under the statute. In Warth v. Seldin,422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975), the Supreme Court stated that “[t]he actual or threatened injury required by Article III may exist solely by virtue of statutes creating legal rights, the invasion of which creates standing. . . .” Id. at 500, 95 S.Ct. 2197 (citing Linda R.S. v. Richard D., 410 U.S. 614, 617 n. 3, 93 S.Ct. 1146, 35 L.Ed.2d 536 (1973)). Later in the same paragraph, the Supreme Court went on to state that “Article III's requirement remains: the plaintiff still must allege a distinct and palpable injury to himself.” Id. at 501, 95 S.Ct. 2197.

This ambiguity in the Supreme Court’s holdings has resulted in divergent approaches by the courts of appeal of the various federal circuits.

Some courts have questioned whether Article III standing can be predicated on a statutory violation alone. For example, the First Circuit in Conservation Law Foundation of New England, Inc. v. Reilly, 950 F.2d 38, 40 (1st Cir. 1991), held that a statutory violation does not confer Article III standing unless plaintiffs can show they suffered a “distinct and palpable injury” from the violation, explaining that “Congress may not expand by statute the standing limitations imposed upon it by Article III.” Id. at 41. See also United States ex rel. Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1154 (2d Cir. 1993) (“[S]ome injury-in-fact must be shown to satisfy constitutional requirements, for Congress cannot waive the constitutional minimum of injury-in-fact.”); Doe v. Nat’l Bd. of Med. Exam’rs, 199 F.3d 146, 153 (3d Cir. 1999)(“The proper analysis of standing focuses on whetherthe plaintiff suffered an actual injury, not on whether a statute was violated. Although Congress can expand standing by enacting a law enabling someone to sue on what was already a de facto injury to that person, it cannot confer standing by statute alone.”); United States v. Weiss, 467 F.3d 1300, 1310–11 (11th Cir. 2006) (“While it is true that Congress may enact statutes creating legal rights . . . [a] federal court’s jurisdiction . . . can be invoked only when the plaintiff himself has suffered some threatened or actual injury resulting from the putatively illegal action[.]” (internal citations and quotation marks omitted)).

Other courts of appeal have concluded that Article III standing can be based on the violation of a statutory right without a further showing of injury. See Carter v. Welles-Bowen Realty, Inc., 553 F.3d 979, 988–89 (6th Cir. 2009) (stating that Congress “has the authority to create a right of action whose onlyinjury-in-fact involves the violation of [a] statutory right”); Alston v. Countrywide Fin. Corp., 585 F.3d 753, 763 (3d Cir. 2009) (applying Carter and finding standing based on violation of Real Estate Settlement Procedures Act (RESPA) statute).

The Edwards Decision in the Ninth Circuit

The Ninth Circuit’s position on this issue is set forth in Edwards v. First Am. Corp., 610 F.3d 514 (9th Cir. 2010). Edwards concerns RESPA, which prohibits the payment of kickbacks in connection with a “federally related mortgage loan.” Plaintiff Donna Edwards alleged that when buying her home in 2006, her settlement agent referred her to First American, which (unbeknownst to her) partly owned her settlement agent. Edwards claimed that First American overpaid for an interest in Edwards’s settlement agent as an incentive for the agent to refer clients to First American. Notably, Edwards did not allege that she paid more for title insurance or received lower-quality service because of the alleged kickbacks or had suffered any other form of actual injury. Instead, she brought a class action against First American, seeking the statutory penalties authorized under RESPA. If successful, each member in the putative class would receive three times the amount that they paid for title insurance, up to a cap of $500,000 or one percent of the defendant’s net value. First American moved to dismiss for lack of jurisdiction under Article III, but the district court denied the motion. The Ninth Circuit affirmed, holding that the plaintiff could rely on the alleged statutory violation to satisfy the injury-in-fact requirement of Article III, without alleging further injury. Edwards, 610 F.3d at 518. Under the Ninth Circuit’s decision, the “standing question . . . is whether the constitutional or statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff’s position a right to judicial relief.” Id. at 517 (citation and quotation omitted).

The Supreme Court granted certiorari to review this decision, and the matter was fully briefed and argued on November 28, 2011. During the pendency of the matter before the Supreme Court, the case received broad attention from both practitioners and lower courts expecting guidance on an important unresolved issue.

For example, the district court in Tyler noted: “Clarity on this issue is likely forthcoming, since on June 20, 2011, the Supreme Court granted certiorari in [Edwards], to review the question whether plaintiffs who allege a statutory right violation, but suffered no actual injury, have standing.” In Charvat v. First National Bank, No. 8:12CV97, 2012 WL 2016184 (D. Neb June 4, 2012) (discussed further below), the court dismissed a statutory claim for lack of Article III standing but initially stayed its order pending further anticipated guidance from the Supreme Court decision in Edwards. Id. at *6.

It now appears that no such guidance is forthcoming. While the Supreme Court initially granted certiorari to review the Ninth Circuit’s decision, the justices apparently were unable to come to a consensus and dismissed the appeal. On June 28, 2012, in a one-sentence order, the Supreme Court dismissed the writ of certiorari, noting only that its initial grant was “improvidently granted.”

The Current Landscape

Given the Supreme Court’s decision not to review Edwards, it seems district courts will need to continue addressing Article III issues on a case-by-case and statute-by-statute basis. Indeed, the district-court decisions issued during the pendency of Edwards before the Supreme Court and thereafter reflect a broad range of approaches to applying Article III to claims involving statutory rights. Even within the Ninth Circuit, courts appear to have reached differing conclusions as to the appropriate interpretation of Edwards and whether its holding is applicable in all circumstances

For example, in Charvat, involving the federal Electronic Funds Transfer Act (EFTA), the District Court of Nebraska found that although the defendant bank had failed to post fee notices required under EFTA, and although EFTA does contain a civil remedy for violating that notice requirement, the plaintiff had not alleged any actual injury from the violation and thus did not have standing under Article III. 2012 WL 2016184, at *2. The court distinguished “injury in fact,” required by Article III, from the plaintiff’s statutory “injury in law,” which the court found was not sufficient by itself to satisfy constitutional minimums. Id. at *3.

In contrast, another district court has held that an alleged EFTA violation is sufficient to confer Article III standing. In Sucec v. Greenbrier, CA No. 5:11-0968, 2012 WL 3079233, at *4 (S.D.W.Va. Jul. 10, 2012), the district court explained its rationale as follows:

15 U.S.C. § 1693m(a) [under the EFTA] authorizes Plaintiff's recovery of actual damages, if any, statutory damages and attorney's fees if he is successful. Clearly, the statute is properly read in favor of the rights of consumers in Plaintiff’s position to allow Plaintiff a right to statutory damages though he may have no actual damages.

Courts have also grappled with the Article III question in a number of decisions involving privacy-related issues. For example, in LaCourt v. Specific Media, Inc., the district court found that browser cookies allegedly placed on the plaintiffs’ computers without consent cause no cognizable harm under Article III. No. SACV-10-1256-GW (JCGx), 2011 WL 1661532, at *1 (C.D. Cal. Apr. 28, 2011). The LaCourt plaintiffs argued that their personal data had value because it could be bought and sold, citing numerous articles stating that a “value exchange” occurs when consumers trade their information for free online services. The court dismissed the claims, stating that the plaintiffs had not demonstrated how, by “taking and retaining” the plaintiffs’ browsing history, the defendant deprived them of economic value. Id. at *4–5.

Other district courts addressing other privacy-related statutes have allowed claims to proceed where plaintiffs relied primarily on an alleged statutory violation as the basis for Article III standing. See Gaos v. Google, No. 5:10-CV-4809 EJD, 2012 WL 1094646, at *3 (N.D. Cal. Mar. 29, 2012) (noting that “the [Stored Communications Act] provides a right to judicial relief based only on a violation of the statute without additional injury.”); In re Hulu Privacy Litig., No. C 11–03764 LB, 2012 WL 2119193, at *7 (N.D. Cal. Jun. 11,2012) (finding standing based on an alleged violation of the Video Privacy Protection Act (VPPA) because “[t]he VPPA provides a private right of action to any person aggrieved by unlawful disclosure of information under the statute” and “Congress can define a ‘legal right, the invasion of which establishes standing’”). Compare Sterk v. Best Buy Stores, L.P., No. 11 C 1894, 2012 WL 5197901, at *5 (N.D. Ill. Oct. 17, 2012) (holding in a case involving the VPPA that “a plaintiff must plead an injury beyond a statutory violation to meet the standing requirement of Article III” because the statute requires a plaintiff to be “aggrieved”).

Even where courts have accepted the general premise that a statute can potentially define an Article III injury, the analysis in these decisions shows that the question will still turn on the individualized circumstances in each case. See In re iPhone Application Litig., 844 F. Supp. 2d 1040, 1056 (N.D. Cal. 2012) (emphasizing that an alleged statutory injury must nonetheless be “fairly traceable” to the conduct of the defendants to satisfy Article III, and examining the specific allegations in the complaint for compliance with this requirement); Gaos, 2012 WL 1094646, at *3 (explaining that Article III standing conferred by statute still requires that “the injury [the plaintiff] suffered was specific to her.”) (citation omitted).


Keywords: consumer litigation, standing requirement, Constitution, Edwards v. First American Corporation, RESPA, EFTA, VPPA


Whitty Somvichian is a partner with Cooley LLP in San Francisco, California, and is a cochair of the Consumer Litigation Committee. Kyle Wong is an associate with the firm.

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