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A Meaningful Class Action Defense Tool?

On May 16, 2016 the High Court finally spoke on Spokeo, the long anticipated case involving what injury is necessary to sustain Article III standing in federal court.  Some predicted a blow to consumer protection and privacy related class actions in which neither the class representative nor the class as a whole suffered anything but a technical federal statutory violation without real harm.

In the underlying case, Thomas Robins claimed that Spokeo published false information about him on its search engine site, in violation of his rights under the Fair Credit Reporting Act (FCRA). Fair enough. After all, the defendant allegedly violated a federal statute which authorized a private right of action.  However, although Robins could “particularize” a literal statutory violation, he had no proof of actual economic harm.  No harm no foul?

The District Court ruled that under Article III of the Constitution, a plaintiff must suffer an “injury-in-fact” in order to maintain a lawsuit. In February 2014 the Ninth Circuit reversed, finding Article III standing existed “by virtue of alleged violations of his statutory rights” without more. The Supreme Court confronted the question whether a plaintiff pleading a non-concrete injury has standing to maintain a suit solely for violation of a statute?

In a 6-2 decision (Justices Ginsburg and Sotomayor dissenting) the Court vacated the Ninth Circuit’s holding that plaintiffs can maintain an FCRA statutory claim without alleging some “actual injury.” Writing for the majority, Justice Alito addressed the "'first and foremost' of standing's three elements"—injury in fact. Rejecting the Ninth Circuit’s focus “on particularization, not concreteness,” injury in fact requires a showing of a "concrete and particularized" invasion of a protected interest. According to the majority, the Ninth Circuit's "observations concern particularization, not concreteness." Translation: you may be able to point to a technical or even literal violation of a statutory standard or right, but unless you have suffered some meaningful, personal harm you do not have a lawsuit.

The majority’s decision, while undoubtedly favorable for defendants, may not offer the sweeping victory observers on the defense side sought. From a purely practical standpoint, the standing issue remains unresolved in this particular case as the Opinion leaves open whether the Ninth Circuit’s ultimate conclusion that Robins adequately alleged standing was wrong—the case is remanded for further consideration of the concreteness of the injury alleged.

Although “injury-in-law” is clearly not enough, there is precious little guidance on what it takes to get over the line from an amorphous allegation of harm to a concrete and particular injury in fact that affects the individual in an individual and personal way. To be fair, the Court did offer examples of FCRA violations that lack any material risk of harm and presumably do not meet the Article III threshold: (i) the failure to provide the required notices on accuracy of consumer information, and (ii) minor errors (i.e., an incorrect zip code).

But these and many other imaginable situations appear to create fact intensive inquiries, of dubious value on a motion to dismiss. While misstatements on Robins’ zip code may be insubstantial and not a “real” injury, what other circumstances will suffice for other litigants to state a concrete and particularized harm for violation of a statute? What if the statute provides for attorneys’ fees for a nominal recovery? What if the statute provides penalties for violations, i.e. double or treble even nominal damages? What about costs to obtain injunctive relief?

As I noted in a recent post, many commentators believed it unlikely a plaintiff need only prove a violation of a federal statute without any showing of real world, concrete harm. Some boldly predicted a landmark shift to limit standing in class actions involving technical statutory violations that do not cause real damages or harm.

Spokeo does not go that far at least in terms of any broad pronouncement of a new standard. The decision’s treatment of the FCRA might well impact treatment of claims under other federal statutes, such as the Telephone Consumer Protection Act (TCPA) and the Fair and Accurate Credit Transactions Act (FACTA), which have permitted claims for statutory damages absent any actual harm. But lawyers will be creative in asserting forms of harm that sound particularized and “real” if not concrete. Lower courts will have to sort through an increase in motions asserting the lack of standing arguments, with development of clear lines of demarcation blurred.  And, of course, the new race of laxity is how plaintiffs are able to get class actions to remain in state court for state law violations, to which Spokeo does not speak at all.

But all is not lost for the class action defendant. The opinion may create useful arguments on the necessity of individualized determinations of concrete and individualized harm—necessarily impacting the determination of whether a plaintiff is an adequate class representative, whether individualized issues outweigh common questions, and whether there is a common methodology to prove class-wide harm or damage.  Thus, the impact of the decision may ultimately bear more heavily on the suitability of statutory claims for class certification.

Spokeo soundbites speak loudly in this regard. But the final word has not been spoken.