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Class action defendants benefit from Spokeo’s ruling on standing

Sharon Rosenberg May 17, 2016

On May 16, the U.S. Supreme Court decided Spokeo Inc. v. Robins, in which it ruled that the Ninth Circuit incorrectly applied the Article III standing inquiry to a named plaintiff in a putative class action seeking damages for violations of the Fair Credit Reporting Act (FCRA).

The Court’s decision, while narrow in its holding, is broad in term of its implications. Although the Court left open the door that Robins, the named plaintiff in Spokeo, may have standing, it cautioned Congress and plaintiffs’ counsel alike that statutory violations are no substitute for a concrete injury in fact. While Spokeo did not answer every open question regarding when a plaintiff alleging a statutory violation will satisfy Article III’s standing requirements, it did come down firmly on the side of defendants in that a plaintiff may not assert a no-injury class action for statutory damages, without more.

Plaintiff Robins and the Fair Credit Reporting Act
In Spokeo, Robins alleged that a website had posted inaccurate information about his personal and financial situation. Specifically, the website reported he was married with children, employed, and held a graduate degree. In fact, Robins was single, childless, unemployed, and without an advanced degree. The FCRA, among other things, requires consumer reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” It further provides that “[a]ny person who willfully fails to comply with any requirement imposed under [the Act] with respect to any consumer is liable to that consumer” for either actual damages or statutory damages of between $100 and $1000 per violation. 

The decisions below
The District Court had dismissed for lack of standing, and the Ninth Circuit had reversed. The Ninth Circuit held that Robins had satisfied Article III’s injury-in-fact requirement because the defendant violated “his statutory rights” and his “personal interests in the handling of his credit information are individualized.” In a 6-2 opinion authored by Justice Alito, the Court vacated and remanded for the Ninth Circuit to reconsider the injury-in-fact requirement. According to the Court, the Ninth Circuit incorrectly “focused on the second characteristic (particularity)” of the injury-in-fact requirement, “but it overlooked the first (concreteness).”

Article III’s standing requirement
The Court in Spokeo repeated the “irreducible constitutional minimum” of standing: (1) injury in fact, (2) fairly traceable to the defendant’s conduct, (3) that is likely redressed by a favorable decision. Spokeo focuses on the injury-in-fact requirement’s dual mandate of injury that is both “concrete and particularized.” “For an injury to be ‘particularized,’ it ‘must affect the plaintiff in a personal and individual way.” And, separately, for an injury to be “concrete,” it must be “‘real,’ and not ‘abstract.’” Analyzing the latter requirement of concreteness, the Court recognized a role for Congress in “identifying and elevating intangible harms,” but denied “that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorized that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation.”

The standing requirement as applied to the plaintiff
The Court stressed that it took “no position as to whether the Ninth Circuit’s ultimate conclusion—that Robins adequately alleged an injury in fact—was correct.” But at least a risk of harm is easy to imagine. As Justice Ginsburg explained in her dissent (joined by Justice Sotomayor), the misinformation could have “made [Robins] appear overqualified for jobs he might have gained, expectant of a higher salary than employers would be willing to pay, and less mobile because of family responsibilities.” The misinformation could also have hurt his dating prospects, as a suitor might falsely believe he was married with children.

If this risk of harm is sufficient to constitute an injury in fact, then a remand would seem unnecessary—precisely the criticism lodged by the dissent. If, on the other hand, these risks are conjectural, and impermissibly speculative to satisfy Article III, the decision provides little guidance on remand. The majority opinion devoted little attention to when a risk of harm was “actual or imminent,” which is the aspect of the standing inquiry that is likely determinative.

Takeaway for class action defendants
So why then did the Supreme Court bother to remand as it did?  One answer could be because it recognized the far-reaching implications of its decision with respect to class actions. Arguably, the more critically a court must look at the concreteness of an individual injury to find Article III standing, the less likely it is to find standing and the more individualized the factual and legal issues become. The Article III standing inquiry focuses on the named plaintiff, regardless whether that plaintiff purports to represent an absent class. As the Court observed in a footnote, “That a suit may be a class action… adds nothing to the question of standing, for even named plaintiffs who represent a class ‘must allege and show that they personally have been injured.” 

Even so, the injury that a plaintiff must plead to state a claim may affect a court’s decision whether: 

  • A class representative will adequately represent the class or if his claims are typical, as required by Rule 23(a);

  • Common issues predominate in a Rule 23(b)(3) class action; or

  • A class definition is too broad for including large numbers of uninjured class members.

The Court explained that the concreteness mandate in the statutory violation context meant that Robins could not “satisfy the demands of Article III by alleging a bare procedural violation,” as “[a] violation of one of the FCRA’s procedural requirements may result in no harm.” One of the Court’s examples of a “bare procedural violation” that would likely result in no “concrete” harm was a defendant disseminating inaccurate, but immaterial, information, such as an incorrect zip code. It specifically noted that it “express[ed] no view about any other types of false information.”

This has serious implications for class actions. For instance, suppose that a plaintiff brings suit under the FCRA and alleges injuries related to the harm of future employers passing him over for a job based on false information. He, individually, may have a concrete injury in fact and standing under Article III. But further suppose that his class is defined as all individuals about whom the defendant published inaccurate data. Among other possible infirmities, a class may not be appropriate as to individuals whose sole injury was a harm to romantic prospects. Alternatively, the class may be overbroad to the extent that it includes consumers about whom the only false information was an incorrect zip code.

Only time will tell the full import of Spokeo. In the meantime, its lesson is clear for class action defendants: (1) always scrutinize a named plaintiff’s standing, and particularly with respect to statutory causes of action, and (2) strategize at the outset how arguments on a motion to dismiss with respect to a lack of standing will intersect with potential arguments down the road in opposing class certification.    

Sharon Rosenberg is a business litigation partner at Thompson Coburn LLP. She can be reached at srosenberg@thompsoncoburn.com or (314) 552-6173.