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

The class action plaintiffs’ bar celebrated yesterday’s Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo (pdf), rejecting Tyson’s challenge to class certification. One lawyer called it “a huge David v. Goliath victory.”

But when plaintiffs’ lawyers wake up this morning and focus on the details of the Court’s opinion, they are in for a serious post-celebration hangover.

The Court’s reasoning for the first time maps a clear route for defendants to use in challenging plaintiffs’ use of statistical evidence in class actions. It also provides important guidance for defendants about preserving the ability to challenge plaintiffs’ reliance on statistics.

Continue Reading What does Tyson Foods, Inc. v. Bouaphakeo mean for class actions?

Concept-Changes_Hughway_Sign_44809020Rule 23 may be in for some major changes. The Advisory Committee has commissioned a Rule 23 subcommittee to investigate possible revisions to the class action rules. That subcommittee issued a report (pdf) discussing its progress, and recently has been conducting a “listening tour” of sorts regarding potential rule changes.

Our initial view is that the business community should have serious concerns about the approach that at least some members of the subcommittee appear to be taking, as several proposals are aimed at rolling back judicial decisions—including Supreme Court decisions—that are critical to ensuring that class actions satisfy the requirements of due process.

Here are ten things you need to know from the subcommittee’s report.

Continue Reading Ten Things Class Action Practitioners Need To Know About Potential Amendments To Federal Rule Of Civil Procedure 23

Supreme Court imageArticle III of the Constitution limits the jurisdiction of the federal courts to “cases” and “controversies.” The Supreme Court has held that “‘an actual controversy … be extant at all stages of review, not merely at the time the complaint is filed.’” Arizonans for Official English v. Arizona, 520 U.S. 43, 67 (1997). Accordingly, “[i]f an intervening circumstance deprives the plaintiff of a ‘personal stake in the outcome of the lawsuit,’ at any point during litigation, the action can no longer proceed and must be dismissed as moot.” Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523, 1528 (2013). In Genesis, the Court recognized that one “intervening circumstance” may arise under Rule 68 of the Federal Rules of Civil Procedure, which permits a party to offer to allow judgment in favor of its adversary on specified terms. A party who rejects a Rule 68 offer, but obtains a judgment “not more favorable than the unaccepted offer,” must pay the costs accrued by the offering party between the offer and judgment. (We’ve previously blogged about Genesis.)

Today, the Court granted certiorari in Campbell-Ewald Company v. Gomez, No. 14-857, to determine whether a defendant’s unaccepted offer of judgment, made before a class is certified, that would fully satisfy the claim of a would-be class representative renders the plaintiff’s individual and class claims moot. The Court also granted certiorari to decide whether the derivative sovereign immunity doctrine recognized in Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940), applies only to claims for property damage caused by public works projects.

Continue Reading Supreme Court to decide whether an offer of judgment for full relief moots a named plaintiff’s class-action claims

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.

In NECA-IBEW v. Goldman Sachs, the Second Circuit arguably opened up a new door in class action litigation when it held that investors in one securities offering had standing to represent a putative class of investors in other offerings, as long as the fraud claims on both securities gave rise to “the same set of concerns.” (Our past coverage of that decision is here.) The Second Circuit’s recent decision in Policemen’s Annuity and Benefit Fund v. The Bank of New York Mellon, argued by our colleague Charles Rothfeld, clarifies and narrows that ruling, especially as to claims for breach of contract.

At issue in Policemen’s Fund were a series of residential mortgage-backed securities (RMBS) trusts. These trusts hold pools of mortgages and thus receive the stream of interest and principal payments from mortgage borrowers; beneficial ownership interests in the trusts are then sold to investors. The Policemen’s Fund plaintiffs are investors in 15 residential mortgage securitizations who sued the trustee (the Bank of New York Mellon) for alleged breaches of the trust agreements, state law duties, and the federal Trust Indenture Act. The question in the case was whether the named plaintiffs—who had invested in some RMBS trusts within the class definition but had not invested in many others —nonetheless had standing to sue on behalf of putative class members who had invested in those other trusts. (The case also involved questions about the scope of the Trust Indenture Act; the court ultimately decided that the TIA doesn’t apply to most RMBS; please see our report on the securities-law aspects of the decision for more details.)

The Second Circuit held that the named plaintiffs did not have standing to sue on behalf of the putative class members who had invested in trusts that the named plaintiffs had not. And helpfully for defendants, the court held that the named plaintiffs’ claims did not implicate the “same set of concerns” as those of the other class members by focusing on the proof required for each claim. Specifically, the court observed that “the absent class members’ claims” in NECA “were similar to those of the named plaintiffs in all essential respects,” because the alleged misstatements were in a shelf registration statement, and all of the securities were issued from the same shelf. In other words, the court explained, “the defendants’ alleged Securities Act violations inhered in making the same misstatements across multiple offerings.” By contrast, the court explained, the claims at issue in Policemen’s Fund required that the alleged misconduct “be proved loan-by-loan and trust-by-trust”; the claims depend upon the potentially varying conduct of the trustee and the entities the trustee purportedly should have supervised.

The Second Circuit’s analysis thus represents a rejection of a free-floating and malleable approach, which some commentators have argued that NECA permits, to the question whether the claims involve the “same set of concerns.” Indeed, the court shot down the plaintiffs’ arguments that relied on such a nebulous conception of class standing. First, the plaintiffs had suggested that it was the trustee’s allegedly common “policy of inaction” that was at issue, not its loan-specific conduct. That doesn’t solve the standing problem, the Second Circuit held, because “they would still have to show which [securitization] trusts actually had deficiencies that required BNYM to act in the first place.” Second, the plaintiffs proposed to use statistical sampling to show defects across securitizations. But the court held that such a methodology, (which we have criticized before) would require that plaintiffs “augment” the proof that they would have offered on their own claims; that prospect “does nothing to reassure us that Plaintiffs themselves have any real interest in litigating the absent class members’ claims.”

Policemen’s Fund is an important step toward reining in what—if NECA-IBEW were interpreted the wrong way—could have been an unbounded test for class standing (itself a novel and amorphous doctrine). Now, if the proof that the plaintiff would present on its own claim does not—at a minimum—go a long way toward proving the claims of absent class members, then the tag-along claims may be dismissed at the pleading stage for lack of standing rather than waiting for class certification. That aspect of the Policemen’s Fund ruling significantly limits the ability of plaintiffs’ firms to leverage small investor clients who are not representative of a proposed class to bring overly broad class actions.

The Supreme Court is currently considering a petition for certiorari in Spokeo Inc. v. Robins (pdf), which raises the 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. This question of Article III standing potentially impacts a wide variety of lawsuits that we (and others) view as “no-injury” class actions.

In Spokeo (in which we represent the petitioner), the Supreme Court recently called for the views of the Solicitor General concerning whether certiorari should be granted. It is already clear that the business community views Supreme Court review as essential—at least ten amicus briefs representing the views of seventeen amici were filed in support of the petition.

As observers on all sides watch to see what the Supreme Court will do, the Washington Legal Foundation will be conducting a webinar next Tuesday (December 9) discussing the Spokeo case and the issue of “no-injury” class actions. My colleague Andy Pincus, who is counsel of record in Spokeo, will be speaking on the webinar. More information about the webinar is available here (pdf).

Update:  A video of the webinar is available here.

 

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.”

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