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No Harm, No Foul? "No-Injury" Lawsuits After Spokeo
Practical Law Legal Update w-002-4637 (Approx. 6 pages)
No Harm, No Foul? "No-Injury" Lawsuits After Spokeo
by Practical Law Litigation
| Published on 31 May 2016 • USA (National/Federal) |
In a highly anticipated decision, the US Supreme Court recently held that a bare procedural statutory violation, without any concrete harm, does not satisfy Article III's injury-in-fact requirement for standing to sue in federal court. By requiring plaintiffs to demonstrate concrete, "real" harm, the Court's holding may significantly reduce the number of so-called "no-injury" class actions that regularly threaten defendants with staggering liability.
Numerous federal statutes authorize statutory damages without regard to any actual injury suffered by the plaintiff. Plaintiffs (and their attorneys) have relied on these statutes to bring putative class actions seeking up to billions of dollars in statutory damages, even where the plaintiffs suffered no concrete injury (see, for example, Evans v. U-Haul Co. of California, (C.D. Cal. Aug. 14, 2007) (plaintiff sought between $115 million and $1.5 billion in statutory damages, despite admitting that she suffered no harm)).
The Supreme Court recently weighed in on these actions, clarifying that a bare procedural statutory violation, without any concrete harm, does not satisfy Article III's injury-in-fact requirement (see Spokeo, Inc. v. Robins, (May 16, 2016)). That holding may make it more difficult for plaintiffs to bring so-called "no-injury" actions in federal court, and arm defendants with an additional argument to defeat class certification, where individual questions of actual injury predominate.
Statutory Damages and Article III
In Spokeo, Inc. v. Robins, the Court addressed whether plaintiffs have Article III standing to sue for statutory damages regardless of whether they suffered any concrete harm. The case involved claims that Spokeo, which operates an online "people search engine," violated the Fair Credit Reporting Act (FCRA) by gathering and reporting incorrect information about the plaintiff. When the plaintiff learned about these alleged inaccuracies (which included statements that overestimated plaintiff's wealth and education level), he filed suit on his own behalf and on behalf of a class of similarly situated individuals, seeking statutory damages under the FCRA.
The district court dismissed plaintiff's action for lack of Article III standing, and the Ninth Circuit reversed, holding that plaintiff adequately alleged a "concrete, de facto" injury for two reasons:
- Plaintiff alleged that Spokeo violated his statutory rights and not just the rights of other people.
- His personal interest in the handling of his credit information was individualized rather than collective.
In holding that plaintiff's "statutory rights" automatically constituted a concrete injury, the court deepened a circuit split on what satisfies Article III's injury-in-fact requirement (compare Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 705-07 (6th Cir. 2009) (no injury required) with David v. Alphin, 704 F.3d 327, 338-39 (4th Cir. 2013) (requiring actual injury for Article III standing in an ERISA case) and Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112, 121 (2d Cir. 2009) (same)).
The Supreme Court granted certiorari and reversed, holding that to establish Article III standing, a plaintiff must allege an injury that is both:
- Concrete (that is, real and not abstract).
- Particularized.
The Ninth Circuit erred, the Court concluded, because its standing analysis only focused on particularization, not concreteness.
The Supreme Court clarified that Article III standing requires a concrete injury even in the context of a statutory violation. A bare procedural violation of the FCRA without any concrete harm (for example, reporting an incorrect zip code or violating "procedures designed to decrease" the risk of inaccuracy but nonetheless reporting "entirely accurate" information) would not satisfy Article III's injury-in-fact requirement. For an injury to be concrete, "it must actually exist."
An injury actually exists, the Court explained, where a plaintiff can demonstrate that she suffered a tangible "real harm," a material risk of harm, or a sufficiently concrete intangible harm. The Court said little in Spokeo about which "intangible" injuries would be sufficient to establish standing, but did note that historical practice and the judgment of Congress are relevant considerations. As for when the mere "risk of real harm" would suffice, the Court also left much unanswered, but did notably cite Clapper v. Amnesty International USA, in which the Court stated that a "threatened injury must be certainly impending to constitute injury in fact" (133 S. Ct. 1138, 1147 (2013)).
The Supreme Court remanded the case to the Ninth Circuit, to consider whether Spokeo's alleged procedural violations satisfied these requirements.
"No-Injury" Actions After Spokeo
By requiring plaintiffs to demonstrate concrete, "real harm," the Court's decision in Spokeo may significantly reduce the number of so-called "no-injury" class actions that regularly threaten defendants with staggering liability. For example:
- Concrete injury. At the outset of litigation, plaintiff's counsel must be prepared to show that the named plaintiffs (and any putative class members) suffered an actual, concrete injury.
- Predominance and class certification. Even where the named plaintiffs satisfy Article III's "real harm" requirement, defense counsel will be armed with the additional argument that each putative class member's standing to sue is a predominating individualized question that precludes class certification. In some cases, it may be difficult for plaintiffs to demonstrate that the alleged injury is sufficiently concrete for Article III standing, yet sufficiently general to be litigated on a classwide basis. In Spokeo, for example, the dissent argued that the plaintiff adequately alleged injury because the nature of the allegedly inaccurate information about the plaintiff, who was unemployed and seeking work, "could affect his fortune in the job market." It may be difficult to demonstrate that this sort of individualized inquiry is suitable for class action treatment.
- FCRA willfulness claims. Although the FCRA permits a plaintiff claiming willfulness liability to seek only statutory damages (15 U.S.C. § 1681n(a)(1), the Court in Spokeo emphasized that:
- alleged violations of FCRA procedural rights do not necessarily cause concrete harm; and
- not all inaccuracies in a consumer report cause harm or present any risk of harm.
- FCRA employer background checks. In the employment context, it may be more difficult for employees or job applicants to bring viable class actions based on allegations of technical non-compliance with the FCRA’s employer background check requirements.
- Statutory damages under federal law. The decision's potential impact is not limited to claims arising under the FCRA. Numerous federal statutes provide for statutory damages without regard to any actual injury suffered by the plaintiff (see, for example, 15 U.S.C. § 1692f and 1692k(a)(2)(B) (Fair Debt Collection Practices Act); 47 U.S.C. § 227(b)(3) Telephone Consumer Protection Act)). In putative class actions arising under these and other statutes, plaintiffs frequently claim no actual injury, but nevertheless seek hundreds of millions or even billions of dollars in statutory damages.
Practical Law's Class Action Certification and Causes of Action Toolkits have numerous resources designed to assist attorneys with litigating class actions. For more information on litigating private consumer lawsuits under the FCRA, see Practice Note, FCRA Litigation: Key Issues and Considerations.