Also By Robert T. Szyba, and Ephraim J. Pierre

Seyfarth Synopsis: In deciding Spokeo v. Robins, the U.S. Supreme Court reaffirmed that plaintiffs seeking to establish that they have standing to sue must show “an invasion of a legally protected interest” that is particularized and concrete — that is, the injury “must actually exist.” Bare procedural violations are not enough.supreme-court

Today, the U.S. Supreme Court issued its long awaited decision in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016), which we have been watching closely for its possible dramatic implications on the future of workplace class action litigation.

In a 6 to 2 opinion authored by Justice Samuel A. Alito, Jr., the Supreme Court held that the Ninth Circuit’s injury-in-fact analysis under Article III was incomplete. According to the Supreme Court, of the two required elements of injury in fact, the Ninth Circuit addressed only “particularization,” but not “concreteness,” which requires a plaintiff to allege a “real” and not “abstract” injury. Nevertheless, the Supreme Court took no position on the correctness of the Ninth Circuit’s ultimate conclusion: whether Robins adequately alleged an injury in fact.

Based on its conclusion, the Supreme Court vacated the Ninth Circuit’s ruling and remanded for further consideration consistent with the Opinion. Justice Thomas concurred, while Justice Ginsburg (joined by Justice Sotomayor) dissented.

Given the stakes and the subject matter, the ruling is a “must read” for corporate counsel and all employers.

The Case’s Background

This ruling is likely to have substantial impact on class action litigation overall, as we have discussed in our prior posts here, here, and here.

In Spokeo, the issues focused on the Fair Credit Reporting Act (“FCRA”), which requires that consumer reporting agencies (“CRAs”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

The purported CRA in this case was Spokeo, Inc. (“Spokeo”), which operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered . . .,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a putative class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages. Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000 for himself, as well as for each member of the purported nationwide class.

The district court dismissed the case, finding that “where no injury in fact is properly pled” a plaintiff does not have standing to sue. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed the following question to the Supreme Court: “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.” Spokeo highlighted a circuit split, as the Fifth, Sixth, and Seventh Circuits previously lined up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits generally disagreed and required an actual, concrete injury.

After being granted certiorari, Spokeo argued that the Ninth Circuit’s holding was inconsistent with the Supreme Court’s precedents, the Constitution’s text and history, and principles of separation of powers. More specifically, Spokeo argued that Robin’s bare allegations of FCRA violations, without any accompanying concrete or particularized harm, were insufficient to establish an injury in fact, and thus failed to establish Article III standing.

Robins responded that the Supreme Court’s precedent established that Congressmay create private rights of action to vindicate violations of statutory rights that are redressable through statutory damages.

The U.S. Solicitor General also weighed in, appearing as an amicus in support of Robins, and argued that the Supreme Court should focus on the specific alleged injury — the public dissemination of inaccurate personal information — and, specifically, the FCRA. The Government argued that the FCRA confers a legal right to avoid the dissemination of inaccurate personal information, which is sufficient to confer standing under Article III.

The Supreme Court’s Decision

Writing for the majority on the Supreme Court, Justice Alito held that Ninth Circuit failed to consider both aspects of the injury-in-fact requirement under Article III when analyzing Robin’s alleged injury, therefore its Article III standing analysis was incomplete. Slip. Op. at *8. The Supreme Court determined that to establish injury in fact under Article III, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete and particularized.” Slip. Op. at *7. For an injury to be “particularized,” it “must affect the plaintiff in a personal and individual way.” Id. “Concreteness,” the Supreme Court found “is quite different from particularization.” Id. at *8. A concrete injury must “actually exist” and must be “real” and not “abstract.” Id.

The Supreme Court further stated that concreteness includes both easy to recognize tangible injuries as well as intangible injuries. Id. at 8-9. The Supreme Court instructed that when considering intangible injuries, “both history and the judgment of Congress play important roles.” Id. In particular, Congress may identify intangible harms which meet Article III’s minimum requirements. Id.Nevertheless, the Supreme Court cautioned that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action. Id. Thus “Robins could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. The Supreme Court also added that the “risk of real harm” may also satisfy the concreteness requirement, where harms “may be difficult to prove or measure.” Id.

Viewing the FCRA in light of these principles, the Supreme Court recognized that while Congress “plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk . . .[,] Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.” For example, the Supreme Court noted it would be “difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” Id. at * 11.

Justice Thomas concurred, reviewing the historical development of the law of standing and its application to public and private rights of action, finding the standing requirement a key component to separation of powers.

Justice Ginsberg, joined by Justice Sotomayor, largely agreed with the majority, but nevertheless dissented. She departed from the majority’s reasoning on the issue of concreteness, but based on the injury alleged, not on the fact that concrete harm wasn’t required. Id. at *3 (Ginsberg, J., dissenting). Under her analysis, Justice Ginsberg would have found that the nature of Robin’s injury was sufficiently concrete because of his allegation that the misinformation caused by Spokeo “could affect his fortune in the job market.” Id. at *3-5 (Ginsberg, J., dissenting).

Implications For Employers

Spokeo can be interpreted as a compromise – with some useful language and reasoning for employers to use in future cases. While the Supreme Court avoided a broader question of Congress’s ability to create private rights of action and other weighty separation of powers issues, it announced the proper analytic framework for assessing the injury-in-fact requirement under Article III. The Supreme Court provided some good news for employers, consumer reporting agencies, and other corporate defendants, as well as potential plaintiffs with respect to class action litigation under a variety of federal statutes, including the FCRA. In particular, the Supreme Court was clear that alleged injuries must be both particular and concrete, meaning that injuries must be “real” and not “abstract.” Thus, a mere procedural violation without any connection to concrete harm cannot satisfy the injury-in-fact requirement of Article III.

However, the Supreme Court may not have shut the door on lawsuits alleging intangible injuries based on violations of statutory rights. While the Supreme Court’s opinion today may discourage some consumer, workplace, and other types of class actions seeking millions in statutory damages, potential litigants will likely have to be more creative in how they frame alleged injuries tied to violations of statutory rights.

Spokeo also transcends the employment context, as the constitutional requirement of Article III applies in all civil litigation. Plaintiffs seeking to file lawsuits in other regulated areas, such as under ERISA, the Americans with Disabilities Act, as well as a host of other statutes are likewise affected by today’s decision. Without particularized, concrete injury, federal jurisdiction is beyond the reach of plaintiffs seeking statutory damages for technical violations.

This blog was cross-posted with our Workplace Class Action Blog:

www.workplaceclassaction.com

 

WebinarOn Thursday, September 10 at 12:00 p.m. Central, Seyfarth attorneys Michael Burns, Robert Milligan and Jason Stiehl will present the second installment of our 2015 Class Action Webinar Series. Presenters will discuss the climate to help retailers avoid becoming targets of litigation. This webinar will provide an overview of the current class action lawsuit landscape complete with discussion of recent cases, hot areas, and valuable takeaways to inform strategy. In addition, the panel will explain business practices that retailers should implement to reduce their risk of becoming a defendant in a class action lawsuit, including class action waivers.

Topics will include:

  • Telephone Consumer Protection Act (TCPA);
  • Song Beverly Consumer Warranty Act and similar state statutes;
  • Call Recording;
  • False Advertising and Comparative Pricing Fraud; ‘
  • Gift Cards/Loyalty Programs; and
  • Data Privacy.

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If you have any questions, please contact events@seyfarth.com.

*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

 

“Injury-in-fact is not Mount Everest,” Supreme Court Justice Samuel Alito once opined. The threshold to establish constitutional standing — which requires that plaintiffs establish an “injury-in-fact” — is low; so low that in most types of lawsuits, plaintiffs have no trouble scaling the requirement.  While standing may not be Mount Everest, in consumer privacy lawsuits, particularly those involving internet privacy, it can be more than a molehill.  Indeed, in some cases, plaintiffs alleging harm based on alleged privacy violations have found standing to be an insurmountable defense.  In particular, plaintiffs bringing claims based on the online collection, sharing, or dissemination of their personal information without more have been unable to show any “actual or imminent” harm (rather than purely speculative or possible future injury) from the allegedly unlawful conduct.  See e.g., In Re Iphone Application Litig., No. 11-MD-2250, 2011 U.S. Dist. LEXIS 106865 (N.D. Cal. Sept. 20, 2011) (granting defendant’s motion to dismiss for lack of Article III standing).

Are privacy violations sufficient to constitute an injury-in-fact under the Fair Credit Reporting Act (“FCRA”)?  This is one of the nuanced issues that the Ninth Circuit is pondering in connection with the appeal in Robins v. Spokeo, Inc., No. 11-56843 (9th Cir. 2012)Although Judges Diarmund O’Scannlain, Susan P. Graber or Carlos T. Bea likely should base their ruling on narrow, well-settled standing principles, it is possible that they may stretch the concept of standing under the FCRA to include harm resulting from violations of privacy interests.

Proceedings At The District Court Level

Spokeo is a website that describes itself as an aggregator of information.  Unlike traditional search engines like Yahoo!, Google, or Bing, Spokeo’s search engine focuses on finding people.

Spokeo issues prominent disclaimers to users that it is not a consumer reporting agency.  See Spokeo, No. 11-56843, ECF No. 26 (Brief of Appellee Spokeo, Inc.), at 4-6.  It also requires users to agree that information they obtain from Spokeo cannot “be considered for purposes of determining a consumer’s eligibility for credit, insurance, employment, or for any other purpose authorized by the FCRA.”  See id.  Nevertheless, Plaintiff claims Spokeo is a consumer reporting agency as defined under the FCRA.  In fact, he contends that Spokeo not only “assembles” data from a variety of sources, it also creates data not available from other sources, including information that allegedly bears on individuals’ economic wealth and purported creditworthiness.  See Spokeo, No. 11-56843, ECF No. 8 (Appellant’s Opening Brief), at 8.

Plaintiff filed a complaint against Spokeo for violation of the FCRA, arguing that the “reports generated by Spokeo.com contain inaccurate consumer information that is marketed to entities performing background checks.”  According to Plaintiff, Spokeo’s search results stated that Plaintiff had more education and professional experience that he actually has, stated he was married when in fact he is not, and inflated his financial position.  Though the inaccuracies favored Plaintiff, he allegedly was concerned that Spokeo’s search results would affect his ability to obtain credit, employment, or insurance.

Spokeo moved to dismiss the complaint for lack of standing.  After flip-flopping on the standing issue, the district court ultimately agreed with Spokeo.  Initially, Plaintiff argued that a statutory violation (i.e., FCRA violation) is sufficient to constitute an injury-in-fact.  But because the district court was unconvinced (it granted Spokeo’s first motion to dismiss), Plaintiff added allegations to his amended complaint that Spokeo’s dissemination of inaccurate information about him caused him actual harm in the form of diminished employment prospects, as well as anxiety, stress, and concern.  The district court initially accepted these allegations as sufficient and denied Spokeo’s second motion to dismiss but when Spokeo sought interlocutory appeal the district court dismissed the Plaintiff’s amended complaint.

Issues On Appeal

In this post, we focus on the standing issues raised in the Spokeo case.  However, we note that Plaintiff in this case is pushing the envelope on other arguments as well: he is alleging that Spokeo, an internet search engine, is a consumer reporting agency, and he is arguing that Spokeo is not entitled to a defense that it is an “aggregator” merely passing through publicly available information and, thus, immune from FCRA liability.

On appeal, the Plaintiff urges the Ninth Circuit to find standing and revive his complaint. According to Plaintiff, Article III’s requirements are met when a plaintiff alleges a statutory violation where the statute creates legal rights.  Borrowing from arguments plaintiffs have made (with limited success) in internet privacy cases, he argues, the injury-in-fact is the statutory violation itself and not the harmful consequences that may ultimately result.  Plaintiff claims that the FCRA is a “privacy statute designed to protect consumers from unlawful or inaccurate dissemination of their confidential consumer credit information.” Even if the FCRA required actual harm, according to Plaintiff, the harm at issue here is the “invasion of consumer’s right of privacy” arising from Spokeo’s dissemination of inaccurate information that arguably bears on creditworthiness even absent any allegations of a specific economic injury.  Thus, Plaintiff claims he adequately alleged an injury because Spokeo violated Plaintiff’s FCRA rights to be free from inaccurate dissemination of consumer information.

Spokeo counters that the concept of standing is a “screen” that is meant to limit the individuals who can enforce statutory and regulatory requirements.  It contends that although the FCRA creates a cause of action for statutory damages, only those individuals who can establish a concrete injury (actual harm) have standing to pursue a cause of action.  Spokeo points out that Plaintiff failed to allege any consequence resulting from Spokeo’s allegedly harmful conduct; and although he is concerned that incorrect information appears in a Spokeo search might affect his job prospects, he alleges no facts to substantiate his concern.

Implications

Defendants can be on the hook for millions of dollars in consumer class actions filed in the wake of data breaches or other privacy violations.  Given the stakes, standing arguments have been a primary defense in internet privacy class actions.  However, in some privacy cases, courts have held that plaintiffs have standing by virtue of asserting claims under certain statutes, such as those that provide civil relief to persons whose electronic communications are intercepted or accessed without their authorization.  In Spokeo, the Plaintiff is attempting to advance a similar argument to assert standing under the FCRA.  It remains to be seen whether the Ninth Circuit will accept this argument and in so doing lower the standing bar so much so that it is no more than a speed bump for FCRA plaintiffs.