- U.S. Supreme Court Hears Argument on Viability of ‘No-Injury’ Class Actions under Fair Credit Reporting Act and Other Statutes
- November 12, 2015 | Author: James A. McKenna
- Law Firm: Jackson Lewis P.C. - Chicago Office
- Whether a plaintiff who alleges no injury may bring a lawsuit, including a class action, based on a violation of statutory rights was the central issue before the U.S. Supreme Court on November 2, 2015, when the Court heard oral argument in Spokeo, Inc. v. Robins, et al., No. 13-1339.
This case is of major importance to employers in light of the increasing number of class actions brought under the Fair Credit Reporting Act (FCRA) and other statutes. Indeed, a ruling in favor of the defendant could substantially narrow the scope of litigation under the FCRA and other statutes that permit the recovery of statutory damages for “bare” violations of statutory rights. Such a ruling also could make class certification more difficult to obtain.
Facts of Case
Spokeo, Inc. is an internet “people search” service. It compiles information about individuals from data on the World Wide Web and offers options for obtaining that information, including certain basic information available for free on its website and more complete and detailed information sold in reports. Spokeo’s information contains written disclaimers to the effect that the company does not verify or evaluate each piece of data and makes no guarantees about any of the information offered. Spokeo also informs its users that none of the information offered by Spokeo is to be used to determine any person’s “eligibility for credit, insurance, employment, or for any other purposes covered under FCRA.”
In 2010, Thomas Robins brought a class action under FCRA against Spokeo. Robins alleged that Spokeo’s website contained inaccurate personal information about him. The Spokeo site reported that Robins had a graduate degree, that he was employed in a professional or technical field, that his “economic health” was “very strong” and his wealth level was in the “Top 10%,” and that he was a married man in his 50s with children. In fact, Robins had no graduate degree, was out of work and seeking employment, was not in his 50s, and was unmarried and had no children.
The complaint alleged that Spokeo violated the FCRA, 15 U.S.C. § 1681e(2), by failing to follow reasonable procedures to “assure maximum possible accuracy” of the reports it prepared. The FCRA provides for the recovery of actual damages sustained and, where the violation is “willful,” for “statutory damages” of not less than $100 and not more than $1,000. Robins alleged that Spokeo’s violations were willful and sought an award of statutory damages for himself and members of the class, along with attorneys’ fees and punitive damages.
Spokeo, however, contended that it was not a consumer reporting agency within the meaning of the FCRA and, therefore, was not subject to the FCRA requirements alleged in the complaint. Spokeo also moved to dismiss the complaint, contending that Robins had not alleged any concrete injury to himself apart from the alleged violation of statutory rights created by the FCRA. Spokeo argued that Robins’s failure to allege such “injury in fact” meant that Robins lacked standing under Article III of the U.S. Constitution to bring the lawsuit.
The federal district court granted Spokeo’s motion to dismiss, ruling that a mere violation of the FCRA does not confer Article III standing where no injury is present. On appeal, the Ninth Circuit Court of Appeals reversed, holding “the violation of a statutory right is usually a sufficient injury in fact to confer standing,” even without any other alleged injury.
The Supreme Court agreed to review the case on the following question: “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.”
The parties and the Supreme Court Justices appeared to agree on the legal standard that, to establish standing to sue under Article III, a plaintiff must allege and prove an injury that is “concrete and particularized.” They also appeared to agree that Robins’s alleged injury was sufficiently “particularized,” since the false information was about him. However, there was a sharp disagreement about whether Robins had alleged a sufficiently “concrete” injury to give him standing to sue.
Counsel for Spokeo argued that Article III “injury in fact” requires actual or imminent “tangible” harm, not simply a statutory violation that has no tangible consequences. Counsel was confronted with numerous questions from four of the Justices, led by Justice Elena Kagan, that made the point that Robins had suffered a concrete injury by virtue of having false information published about him. Counsel responded that making false statements or disseminating inaccurate information did not equate to an actual injury. In response to Justice Samuel Alito’s question about “how much more” Robins would have to allege or prove to show injury in fact, Spokeo’s counsel said that Robins would have to show an actual “consequence to him from the false information.” This led Justice Kagan to point out that such proof could be very hard to get and that loss of credit or employment could be “the quintessential kind of injury you will never be able to detect and surely not to prove.”
Counsel for Robins and counsel for the United States, as a friend-of-the-court, argued that a violation of any legally protected interest — in this case, the right of a person not to have false information circulated about him — was sufficient to constitute injury in fact. Chief Justice John Roberts and Justice Antonin Scalia took issue with this in a series of hypothetical questions. One hypothetical posed by the Chief Justice involved a person with an unlisted telephone number who did not want his number disclosed. If Spokeo were to publish the person’s unlisted number, but get it wrong, would that be an instance in which the publishing of false information caused no harm, Roberts asked. Counsel for Robins answered that the person would nevertheless have standing.
Two other issues arose during the oral argument that could have far reaching effects, if the Court reaches them in its decision:
(1) whether, through statutory interpretation of the FCRA, the availability of statutory damages for violations of the FCRA’s many procedural requirements will be scaled back; and
(2) whether the decision will affect class certification.
As counsel for Spokeo argued, the FCRA contains many technical procedural requirements, the violation of which can lead to the imposition of statutory damages. Two Justices noted that the Supreme Court has held that a violation of a procedural right does not by itself suffice to give standing. Justice Kagan responded that there is standing to sue for violations of procedural requirements if those procedures are directed to the protection of a concrete interest of a particular person, in this case, to the interest in having accurate information in consumer reports. Justice Scalia used the example of the FCRA’s requirement that a consumer report had to include a toll-free 800 number as an example of a provision that allowed anyone to sue for its violation, even if there was no inaccuracy in the underlying information. Counsel for Spokeo proposed an interpretation of the FCRA that would require a plaintiff to prove tangible harm, but allow statutory damages to be awarded in recognition that quantifying that harm in monetary terms would be difficult. This interpretation of the FCRA has been largely rejected by the lower courts, which have approved statutory damages without the allegation or proof of any tangible harm. If this interpretation of the FCRA were adopted by the Court in Spokeo, the effect on FCRA litigation would be far reaching.
The ultimate decision in Spokeo also could affect class certification in FCRA cases. A majority of the Justices appeared to agree that a bare violation of the “reasonable procedures” provision of Section 1681e, absent at least proof of the falsity of the information reported, did not give standing. Accordingly, Justice Kagan stated to counsel for Robins that “the class as you’ve defined it is not going to be certified, and I think that that’s the right answer.” Counsel for Robins admitted that class certification would require common proof, such as the use by Spokeo of the same algorithm that led to the inaccuracies among all class members. Counsel for Spokeo described the issue when he stated that if FCRA liability could be established based on a bare statutory violation, “it’s a pretty clear pathway to class certification ... and that’s what has happened in case after case.” However, if falsity or what might be called “falsity plus injury” is required, class certification would be more difficult in many cases because individualized issues could predominate over common issues.
There are enough “moving parts” to make the outcome of Spokeo difficult to predict. Moreover, because much of the oral argument addressed issues that the Ninth Circuit opinion had not reached, the majority opinion in Spokeo (if there is one) could be narrow or sweeping. However, even a narrow decision likely will be significant, and is awaited with great interest.