Fair Credit Reporting Act

Hundreds of lower courts have interpreted and applied the Supreme Court’s decision in Spokeo, Inc. v. Robins over the past ten months. We will provide a more comprehensive report on the post-Spokeo landscape in the near future, but the overarching takeaway is that the majority of federal courts of appeals have faithfully applied Spokeo’s core holdings that “Article III standing requires a concrete injury even in the context of a statutory violation,” and that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Nonetheless, a handful of other decisions have been receptive to arguments by the plaintiffs’ bar that Spokeo did not make a difference in the law of standing, and that the bare allegation that a statutory right has been violated, without more, remains enough to open the federal courthouse doors to “no-injury” class actions.

Two recent decisions by the Seventh and Third Circuits illustrate these contrasting approaches.

Continue Reading Two Recent Appellate Decisions Illustrate Divergent Approaches To Spokeo

330px-Supreme_Court_Front_Dusk-150x120.jpgA peculiar thing happened after the Supreme Court announced its decision in Spokeo, Inc. v. Robins (pdf) on Monday.

Even though the Court ruled in favor of Spokeo—vacating the Ninth Circuit’s ruling that the plaintiff had standing to sue and holding that the court of appeals had applied a legal standard too generous to plaintiffs—both sides declared victory. (Full disclosure: I argued on behalf of Spokeo in the Supreme Court.)

Spokeo tweeted:

Jay Edelson,

What’s going on?

Continue Reading Plaintiffs’ Lawyers Try to Spin Spokeo

The Supreme Court today issued its decision in Spokeo, Inc. v. Robins (pdf), a closely-watched case presenting the question whether Article III’s “injury-in-fact” requirement for standing to sue in federal court may be satisfied by alleging a statutory violation without any accompanying real world injury.

The Court held that a plaintiff must allege “concrete” harm—which it described as harm that is “real”—to have standing to sue, and that the existence of a private right of action under a federal statute does not automatically suffice to meet the “real” harm standard. The decision is likely to have a meaningful impact on class action litigation based on alleged statutory violations. Justice Alito authored the opinion for the Court, joined by Chief Justice Roberts and Justices Kennedy, Thomas, Breyer, and Kagan. (We and our colleagues represented Spokeo before the Supreme Court.)

Continue Reading Supreme Court Holds in Spokeo that Plaintiffs Must Show “Real” Harm to Have Standing to Sue for Statutory Damages

Under Article III of the U.S. Constitution, a plaintiff must allege that he or she has suffered an “injury-in-fact” to establish standing to sue in federal court. Today, the Supreme Court granted certiorari in Spokeo, Inc. v. Robins, No. 13-1339, to decide whether Congress may confer Article III standing by authorizing a private right of action based on a bare violation of a federal statute, even though the plaintiff has not suffered any concrete harm.

The Court’s resolution of this question in Spokeo could affect a number of different types of class actions that have been instituted in recent years seeking potentially massive statutory damages based solely on allegations of technical violations of federal statutes—even though the plaintiff has not suffered any of the different types of “injury-in-fact” usually required to establish standing. We represent the petitioner, Spokeo, Inc.

Congress has passed a number of statutes that permit recovery of statutory damages for statutory violations even in the absence of any proof of actual injury. These statutes are particularly common in the privacy and financial-services contexts. The statute at issue in Spokeo—the Fair Credit Reporting Act (FCRA)—stands at the intersection of these two fields. Among other things, it requires “consumer reporting agencies” to “follow reasonable procedures to assure maximum possible accuracy of” consumer reports. 15 U.S.C. § 1681e(b). It also requires the provision of notices to persons who provide information to a consumer reporting agency and to those who use the services of such agencies. Id. § 1681e(d). For a “willful” violation of these sections, a prevailing plaintiff may recover statutory “damages of not less than $100 or not more than $1,000,” id. § 1681n(a)(1), and also may seek punitive damages, id. § 1681n(a)(2).

The plaintiff in Spokeo, Thomas Robins, seeks to recover statutory damages on behalf of a putative class for alleged violations of FCRA. Specifically, Robins alleged that Spokeo, which is a “people search engine,” is a “consumer reporting agency” subject to FCRA and that it had published inaccurate information about him, including that he was married and that he was better situated financially than he actually is. Robins also alleged that Spokeo had failed to provide the notices required under the FCRA. The district court dismissed the case for lack of standing, concluding that Robins had not alleged the injury-in-fact necessary to satisfy Article III.

The Ninth Circuit reversed (pdf). It concluded that the “creation of a private cause of action to enforce a statutory provision implies that Congress intended the enforceable provision to create a statutory right,” and that “the violation of a statutory right is usually”—on its own—“a sufficient injury in fact to confer standing” when “the statutory cause of action does not require a showing of actual harm.”

Spokeo petitioned for certiorari (pdf), explaining that there is a persistent conflict among the courts of appeals over whether the allegation of a statutory violation—a bare “injury-in-law”—is sufficient to establish Article III standing. The petition also pointed to the importance of this question in light of the large number of class actions involving allegations of technical statutory violations that did not cause the plaintiff any concrete harm.

The Supreme Court will hear the case next Term. We look forward to making the case for Spokeo on the merits.

Congress and state legislatures have enacted many statutes that provide for minimum statutory damages recoveries that are far in excess of the actual damages most individuals will suffer. A prominent example is the Telephone Consumer Protection Act (TCPA), which offers $500 per violation of the statute, trebled to $1500 for willful violations. The idea is that offering such damages will create incentives for individual plaintiffs to pursue such claims in court when actual damages are minimal or difficult to measure. But the numbers can quickly add up when such statutory damages claims are aggregated as part of a putative class action. By the simple expedient of cutting and pasting standard class allegations into their complaints, plaintiffs’ lawyers can transform a $500 claim into one for $500 million. (For fans of the Austin Powers movies: Insert Dr. Evil impression here (or take a look at this clip).)

For good reasons, defendants find this phenomenon troubling, to say the least. My colleagues and I have argued in a pair of articles (here and here) that courts should refuse to certify class actions when the claims involve statutory damages. It is hard to believe that when Congress enacted laws providing for statutory damages, it intended to hand private plaintiffs (and their counsel) the ability to threaten massive liability—perhaps even bankruptcy—for often relatively minor or technical violations of a statute, especially when, as is common, the actual harm is minor or speculative.

That said, these arguments have met with mixed success in the courts. But a recent Supreme Court opinion issued earlier this week, Maracich v. Spears, No. 12-25, could provide defendants with new hope.

In Maracich, the Court held that attempts by lawyers to solicit clients did not qualify for the “litigation exception” to the Driver’s Privacy Protection Act of 1994 (DPPA). In an ironic twist, a group of plaintiffs’ lawyers had themselves become defendants in a class action. In order to solicit new plaintiffs for lawsuits against certain auto dealers, these lawyers had obtained personal information about customers of those auto dealers from the state DMV. Some of the customers didn’t like it, including one who happened to work for a defendant auto dealer. These customers sued the plaintiffs’ lawyers in a class action, alleging violations of the DPPA.

By a 5-4 vote, the Court held that soliciting clients doesn’t count under the DPPA’s litigation exception. We summarize that holding elsewhere. But to me the most interesting takeaway from Maracich is what the decision has to say about statutory damages.

Justice Ginsburg’s dissent expressed a concern with “astronomical liquidated damages”; the customers “sought $2,500 in statutory damages for every letter mailed—a total of some $200 million—and punitive damages to boot.” As she put it, “such damages cannot possibly represent a legislative judgment regarding average actual damage.”

In response, Justice Kennedy’s majority opinion recognized that the Court was leaving open two questions about the appropriateness of such massive awards. First, “[w]hether the civil damages provision in [the DPPA], after a careful and proper interpretation, would permit an award in this amount”—in other words, as a matter of statutory interpretation, did Congress intend to allow such enormous liability? Given the DPPA’s express language allowing individual claims for $2500, that question boils down to whether courts should assume that Congress intended to allow class actions that transform a $2500 claim into lawsuits for $200 million. Second, if that is what Congress intended, “whether principles of due process and other doctrines that protect against excessive awards would come into play.”

To be sure, the Court did not answer those questions; as Justice Kennedy pointed out, they were not “argued or presented in” Maracich. But it now seems clear that at least some Justices are open to the possibility that when class actions exponentially increase potential liability in statutory damages cases, such “astronomical” damages may violate constitutional limits.

Accordingly, businesses (and the lawyers who represent them) should read Maracich as extending an invitation to challenge class actions for statutory damages. Specifically, when businesses face class actions for massive damages under federal or state statutes—including the TCPA, Fair Credit Reporting Act, or some state consumer-protection statutes—they should consider arguing that class actions are not a superior method for adjudicating the statutory claims because the potential for extraordinarily massive liability imposes excruciating (and improper) pressure on defendants to settle, raising serious due process concerns.

 

Tomorrow, the Supreme Court will hear argument in United States v. Bormes, a case that apparently has not captured the attention of most class action practitioners. That’s understandable: The question presented (pdf) is “whether the Little Tucker Act, 28 U.S.C. § 1346(a)(2), waives the sovereign immunity of the United States with respect to damages actions for violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.” But the impetus for the federal government’s request for immunity—the enormous liability generated by aggregating statutory damages in a FCRA class action—is one that routinely affects businesses targeted by similar class actions. Businesses therefore should stay tuned to see what, if anything, the Court might say about the concerns that result from piling up large amounts of potential statutory damages in class actions.

Continue Reading Federal Government Acknowledges Undue Risk of Potentially Massive Liability from Class Actions for Statutory Damages Under the Federal Credit Reporting Act, but Proposes a Solution Good for One Defendant Only