Header graphic for print
Class Defense Blog Cutting-Edge Issues in Class Action Law and Policy

Cert Petition Asks Supreme Court To Decide Whether Congress Can Allow Uninjured Plaintiffs To Sue In Federal Court

Posted in U.S. Supreme Court

For years, defendants have argued that federal courts may not entertain class-action lawsuits when the plaintiff does not allege that he or she suffered any concrete personal harm and instead relies solely on an “injury in law” based on an alleged exposure to a technical violation of a federal statute. As we (and others) have contended, Article III of the U.S. Constitution places limits on the jurisdiction of federal courts, and therefore forbids lawsuits when a plaintiff has not suffered an “injury in fact”—one of the critical elements of standing. That requirement has constitutional dimensions; as the Supreme Court explained in DaimlerChrysler Corp v. Cuno, “[n]o principle is more fundamental to the judiciary’s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.” Thus, although Congress enjoys significant latitude to create private causes of action, it cannot invent standing to sue in federal court when, in the absence of the federal statute, a plaintiff could not allege a real and palpable injury.

Nearly two years ago, the Supreme Court appeared poised to answer the question whether Congress can essentially create Article III standing in First American Financial Corp. v. Edwards. But—in a surprising turn of events—the Court dismissed the case as improvidently granted on the last day of its term. Readers can be forgiven if they don’t remember the occasion, as it was the same day that the Court issued its far more attention-getting rulings in the health-care cases. Yet the non-decision was extremely significant: as Deepak Gupta, one of the leading appellate lawyers in the plaintiffs’ bar, tweeted, “On pins and needles for First Am Fin’l v Edwards standing decision tomorrow. Oh yeah, and I hear there’s some health thing pending too.” Kevin Russell of SCOTUSblog similarly observed: “Lost in the hubbub of the health care decision is the Court’s surprise punt in a case that many (including myself) thought would be the sleeper case of the Term.”

Fast forward to now: As soon as next Friday (March 7), the Supreme Court will decide whether to grant a petition for certiorari (pdf) that we have filed in Charvat v. First National Bank of Wahoo, which presents essentially the same question as in First American: “Whether Congress has the authority to confer Article III standing to sue when the plaintiff suffers no concrete harm and alleges as an injury only a bare, technical violation of a federal statute.”

The facts in Charvat will strike a chord with businesses that have been beset by class actions involving claims for statutory damages for minor alleged violations of a federal statute. Plaintiff Jarek Charvat filed lawsuits against a pair of small Nebraska banks under the Electronic Funds Transfer Act. That statute, before it was amended in December 2012, required that ATM operators that charged fees for cash withdrawals disclose those fees in two ways: (1) with an on-screen notice of the fee; and (2) with a sticker on the ATM. The second form of notice is redundant, of course; as anyone who has ever used an ATM knows, a customer must accept and agree to pay the fee before he or she can withdraw cash from the machine. So too here; Mr. Charvat does not dispute that he consented to paying a $2 fee when he withdrew cash from the banks’ ATMs. But he claims that the EFTA was violated because the ATMs did not also have the sticker notice.

As we explain in our petition for certiorari, the harm Mr. Charvat complains of in his lawsuit—what the Eighth Circuit termed an “informational injury” because of the lack of the duplicative sticker notice—is, in a word, illusory. There is no particularized, concrete harm to Mr. Charvat—which is why his lawsuit does not seek actual damages. Instead, his claim rests entirely on the exposure to an alleged violation of law—and a mere technicality at that.

These lawsuits are not just harmful to businesses; they are damaging to our federal courts, which—by constitutional design—are open to private parties to hear only genuine disputes that involve real harms, not claims by self-appointed private attorneys general who have economic incentives to become Javerts of the judicial system, rooting out regulatory missteps whenever they can. And lest we be accused of being alarmist, consider the efforts of Mr. Charvat himself. As we point out in our reply brief in support of certiorari, Mr. Charvat visited three different ATMs on the same day (January 3, 2012) operated by three different entities—including one of the petitioners in our case—experienced the same “no sticker” violation at each ATM, and filed three separate class action lawsuits—represented by the same lawyers—five days later. It is a fair inference, we think, that this was a man in search of a problem. And that is precisely the type of rent-seeking behavior—and accompanying misuse of the federal courts—that loose Article III standards predictably will encourage.

We are hopeful that the Supreme Court will recognize these concerns and grant certiorari to address the question left unanswered two Terms ago in First American. Three amici—the U.S. Chamber of Commerce, Washington Legal Foundation, and ACA International—have filed briefs in support of our petition. For readers who are interested, links to all of the cert-stage briefs—including the brief in opposition filed by Mr. Charvat, who is represented by Deepak Gupta (a worthy opponent indeed)—are below.

Petition for certiorari
Brief in opposition
Reply in support of certiorari

Amicus brief of Chamber of Commerce of the United States
Amicus brief of Washington Legal Foundation
Amicus brief of ACA International