Seyfarth Synopsis: On November 6, 2018, the United States Supreme Court signalled that the Article III standing preconditions to federal court litigation, as described in Spokeo, Inc. v. Robins, 136 S .Ct. 1540 (2016), are not likely to be diminished any time soon. The Court did so by requesting supplemental briefing on the application of Spokeo after oral argument had occurred.

In Frank v. Gaos, No. 17-961, awaiting decision by the Court, the plaintiffs alleged that Google violated the Stored Communications Act (SCA), 18 U.S.C. § 2710 et seq., by disclosing their search terms, thereby allowing third parties to “reidentify” them and connect them to particular searches. The plaintiffs reached a class action settlement with the defendant in which it agreed to pay $8.5 million into a settlement fund. After accounting for attorneys’ fees and named plaintiff awards, the parties agreed that the money would be distributed to charities (also known as cy pres payments). Two individuals objected that the settlement fund should be distributed to class members rather than to charities. The objections were overruled. The objectors then successfully petitioned for certiorari. The United States filed an amicus brief before oral argument.

Following oral argument, the Court asked the parties and the United States to file supplemental briefing addressing “whether any named plaintiff has standing such that the federal courts have Article III jurisdiction over this dispute.” On November 30, 2018, the United States filed its supplemental brief. The United States took the position that the plaintiffs lack Article III standing, and for that reason, have no federal forum in which to raise their claim.

Spokeo is the backdrop to the unusual request for supplemental briefing and the position of the United States. Spokeo held that a plaintiff seeking to invoke federal jurisdiction must show: (1) an injury in fact (2) caused by the defendant’s conduct that is (3) redressable by a favorable federal court decision. While an injury in fact may exist solely by virtue of statutes creating legal rights, Article III jurisdictional requirements still require a concrete injury.

The United States now argues that plaintiffs in Frank v. Gaos do not allege Article III standing because Congress has not conveyed any express judgment that their alleged injury should provide a basis to sue. The government says that the “search term injury” does not have a foundation in tort law, such as libel or slander law. The government also argues that the allegations about potential reidentification are too speculative to create standing.

There are important lessons to be gleaned from the Frank v. Gaos supplemental briefing and the position of the United States:

1. The Supreme Court remains very interested in whether a federal court plaintiff has a sufficiently concrete injury to earn a federal forum, even if she can show a technical statutory violation.

2. Second, while Congress may impose laws on tech companies using web site data, a consequent inquiry will be — Can a plaintiff show a concrete injury that would allow a lawsuit in federal court? Without a private right of action that allows suit, the data protection law may lack teeth.

3. Third, Frank v. Gaos says nothing about state court jurisdiction. Expect more technical statutory violation cases to be brought in state court, provided standing exists under the state constitution. See, for example, our discussion here. This in turn may make it harder to develop uniform law throughout the Unites States on important social issues.

4. Fourth, the Supreme Court’s focus on Article III standing may be part of a broader push by the Court to limit the role of the federal courts in resolving conflict in the hyper-partisan political times in which we now live. In other words, the Supreme Court may be saying that we live in an federal judicial era where less is more when it comes to federal judicial intervention.

 

Today, the U.S. Supreme Court agreed to hear an appeal challenging an almost $6 million judgment awarded in a class action case against Tyson Foods, Inc.  See Bouaphakeo, et al. v. Tyson Foods, Inc., No, 12-3753 (8th Cir. 2014).

The Court will decide  (1) whether, in a class or collective action, liability and damages may be determined by statistical techniques that presume all class members are similar; and (2) whether a class or collective action may include individuals who were not injured.

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Case Background

Plaintiff employees brought a collective and class action against Tyson under the Fair Labor Standards Act (“FLSA”) and a parallel state law.  The plaintiffs alleged that they were entitled to damages because Tyson failed to compensate them for overtime spent “donning” and “doffing” protective equipment and walking to and from their work stations.  The district court certified a class based on the existence of common questions about whether those activities were “work” under the FLSA and the state law.  At trial, the plaintiffs proved liability and damages by using statistical evidence of the average donning, doffing, and walking times for employees.  The jury returned a verdict for the class, and the final judgment totaled $5.8 million.

On appeal, Tyson contended that certification was improper because employees’ individual routines varied and, thus, the litigation could not generate common answers apt to drive the resolution of the litigation as required under Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  Tyson pointed out that liability and damages were only inferred as to individual class members based on statistical evidence.  Tyson further noted that some class members did not work overtime and thus were not entitled to any damages.  The Eighth Circuit Court of Appeals rejected these arguments, holding that liability and damages could be proven by inference and that issues relating to individual damages do not preclude certification.

In March 2015, Tyson filed a petition for a writ of certiorari presenting the following issues:

(1) Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and

(2) whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.

Appellate courts are divided on these issues.  Like the Eighth Circuit, the Tenth Circuit has permitted damages in class actions to be extrapolated based on averages.  In contrast, the Second, Fourth, Fifth, Seventh, and Ninth Circuits have questioned the use of class certification in cases where individual damages would have to be inferred from averages or statistical sampling.  Similarly, the courts disagree on whether each putative class member must have standing for a class to be certified.

Potential Implications for Businesses

The Court will hear the case during its next term, along with Spokeo, Inc. v. Robins, which presents the question of whether an individual who did not suffer a concrete injury from a statutory violation has standing to sue on behalf of himself or a class for that violation.  The Supreme Court’s decisions in these cases could have broad implications for consumer, workplace, and other class actions, and the rulings will likely apply to numerous federal statutes, including the FLSA and consumer statutes such as the Fair Credit Reporting Act and the Telephone Consumer Protection Act.

Decisions requiring actual injury or rejecting the use of statistical sampling would hamper plaintiffs’ ability to certify classes and likely result in fewer class actions.  Conversely, decisions affirming the court of appeals rulings would likely solidify the importance of the class action and may result in increased filings.  Businesses should continue to monitor these cases closely.  For pending class action litigation, businesses should consider whether to seek a stay until the Supreme Court rules in Tyson and Spokeo.