By Gerald L. Maatman, Jr., Pamela Q. Devata, & Robert T. Szyba

Seyfarth Synopsis: Following remand from the U.S. Supreme Court, the Ninth Circuit found that the plaintiff suing Spokeo, Inc. under the Fair Credit Reporting Act alleged sufficient injury to establish standing to proceed in federal court and to proceed with his class action.

On August 15, 2017, the U.S. Court of Appeals for the Ninth Circuit issued the latest opinion in the Robins v. Spokeo, Inc. litigation that gave us last year’s U.S. Supreme Court opinion on Article III standing (which we discussed here).  After the Supreme Court found that the Ninth Circuit, in its prior February 2014 opinion (found here), had analyzed only whether the alleged injury was particular to Plaintiff, it remanded the case back for the second part of the analysis to determine whether Plaintiff alleged a concrete injury-in-fact, as required by Article III.

This new ruling is a “must read” for employers, as it has the potential to allow plaintiffs to launch more workplace class actions.

Case Background

The case was originally filed in the U.S. District Court for the Central District of California in 2010 against Spokeo, Inc., which operates an online search engine by the same name that compiles publicly available information on individuals into a searchable database on the internet.  The plaintiff alleged that Spokeo’s database showed inaccurate information about him, such as that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any).  Instead of any actual damages, the plaintiff alleged that Spokeo, as a consumer reporting agency, failed to “follow reasonable procedures to assure maximum possible accuracy of the information concerning” Plaintiff, and that its violation of section 1681e(b) of the Fair Credit Reporting Act (FCRA) was “willful” in order to seek statutory damages of between $100 and $1,000 for himself, as well as for each member of a putative nationwide class.

U.S. Supreme Court Decision

The issue of whether the plaintiff had standing to sue for the alleged statutory violation made its way to the U.S. Supreme Court, which in 2016 (in a 6 to 2 opinion by Justice Samuel A. Alito, Jr.) explained that “an invasion of a legally protected interest” that is both “concrete and particularized” is required to establish standing to proceed in federal court.  To be concrete, the alleged injury must “actually exist” and must be “real” and not “abstract.”  The Court further discussed that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action.   The plaintiff here, therefore, “could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”  Because the Ninth Circuit had not completed both parts of the standing analysis, however, the case was remanded for further review.

Ninth Circuit’s Standing Analysis

In light of the Supreme Court’s directive, the Ninth Circuit opened by affirming the threshold principle that “even when a statute has allegedly been violated, Article III requires such violation to have caused some real—as opposed to purely legal—harm to Plaintiff.”  The Court explained that intangible harms, such as restrictions on First Amendment freedoms and harm to one’s reputation, can be concrete enough for standing, though the Court noted this is a “murky area.” Either way, Plaintiff cannot simply point to a statutory cause of action to establish an injury-in-fact.

Turning to its standing analysis of the plaintiff’s particular allegations, the Ninth Circuit conducted a two-step inquiry:

  1. “whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights)”; and, if so
  2. “whether the specific procedural violations alleged in [the] case actually harm, or present a material risk of harm to, such interests.”

First, the Ninth Circuit cited a long history of protections against dissemination of false information about individuals that underlies the FCRA, including common law protections against defamation and libel, to find that the interests protected by the FCRA are real and concrete.  The harm alleged in the case, the Ninth Circuit concluded, “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit,” even if it is not the exact historical harm itself.

In the second step, the Ninth Circuit reasoned that in many cases, “a plaintiff will not be able to show a concrete injury simply by alleging that a consumer-reporting agency failed to comply with one of the FCRA’s procedures.”  The statute may be violated, but the violation alone is not enough.  Here, however, the plaintiff pointed to multiple examples of information (e.g., his education level, etc.) that might be relevant to a prospective employer.  A court also has to look at the nature of the inaccuracy as part of its analysis.  Even if the inaccuracy has a debatable negative impact (e.g., a greater level of education could make a plaintiff deemed to be overqualified and passed over for a job), the information is nevertheless relevant, and the Court held, its dissemination is not simply a technical statutory violation.  The Ninth Circuit also pointed out that the injury alleged in this case was not speculative because the dissemination of information already occurred, and the dissemination itself was the harm.  The Court commented that further alleged harm, such as being able to point to an actual missed job, was not required.

Outlook

Overall, the Ninth Circuit’s decision adopted an expansive interpretation of the type of harm that will suffice for Article III standing, though indicating that this interpretation will not extend so far as to find standing to sue for bare statutory or procedural violations.  In the present case, however, the Ninth Circuit focused on the specific allegedly inaccurate information to find harm, in line with Justice Ginsburg’s dissent (found here) to the Supreme Court’s majority, which was concerned more with the reporting of allegedly false information that “could affect [the plaintiff’s] fortune in the job market.”  Further allegations of actual injury, according to the Ninth Circuit, were not required to establish standing.  However, the Ninth Circuit stopped from opining on other specific circumstances and noted that the specific facts will need to be considered to determine if the threshold of “concrete harm” is satisfied.

Thus, the Ninth Circuit provides further guidance on standing, affirming that bare statutory violations continue to be insufficient.  The specific factual allegations of such cases, however, may present courts with greater latitude to find standing in civil litigation alleging violations of the FCRA, as well as cases under ERISA, the Americans With Disabilities Act, and a host of other workplace statutes.  As courts address similar inquiries, we are likely to see increased guidance regarding standing.   Additionally, with this decision, there seems to be more evidence of a potential split among the federal Courts of Appeals, which could result in another petition to the U.S. Supreme Court.

By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In Harrington v. Sessions, No. 15-8009, No. 16-5285 & No. 16-5286 (D.C. Cir. July 21, 2017), the U.S. Court of Appeals for the D.C. Circuit found that absent class members may intervene in an appellate court proceeding to pursue a Rule 23(f) petition abandoned by a settling class representative, even if the intervention motion is filed after the dismissal of the settling representative’s claims.  The D.C. Circuit’s ruling illustrates that even the denial of class certification and final settlement of a class representative’s claims may not put an end to class action litigation.

***

In Harrington v. Sessions, No. 15-8009, No. 16-5285 & No. 16-5286, 2017 U.S. App. LEXIS 13111 (D.C. Cir. July 21, 2017), the D.C. Circuit addressed whether it had jurisdiction to rule upon absent class members’ motion to intervene in an appellate court proceeding to pursue a Rule 23(f) petition abandoned by a settling named plaintiff-appellant.  The absent class members filed their motion to intervene after the settling plaintiff-appellant had already filed a stipulated dismissal of his settled claims.

The D.C. Circuit found that it indeed had jurisdiction to entertain the absent class members’ motion to intervene in the Rule 23(f) petition.  It explained that the elimination of an Article III case or controversy does not preclude a district court or appellate court from entertaining a subsequent motion to intervene for purposes of filing an appeal, as long as the intervenor has a sufficient Article III stake in the appeal.  The D.C. Circuit further opined that absent class members may have a sufficient stake to appeal the denial of class certification even if the named plaintiff does not appeal.  As such, the D.C. Circuit found that it had jurisdiction under Rule 23(f) to hear the absent class members’ motion to intervene for purposes of appealing the denial of class certification.

On the merits, the D.C. Circuit found that the absent class members satisfied the prerequisites for intervention as a matter of right and, thus, it addressed their Rule 23(f) petition.  However, the D.C. Circuit declined to review the denial of class certification under Rule 23(f) as the absent class members presented no special circumstances justifying such review.

Case Background

In 2008, U.S. Marshal David Grogan filed a putative class action in the U.S. District Court for the District of Columbia against the U.S. Marshals Service (the “Marshals”) alleging racial discrimination under Title VII of the Civil Rights Act of 1964.  2017 U.S. App. LEXIS 13111, at *2-3 (D.C. Cir. July 21, 2017).  The complaint sought both injunctive and monetary relief, but alleged that “injunctive and declaratory relief [we]re the predominant forms of relief sought.”  Id. at *3.

By 2013, after pleading and motion practice, the named plaintiff Herman Brewer (“Plaintiff”) was the sole plaintiff representing the putative class.  Id. at *4.  Plaintiff retired from the Marshals a few months before discovery closed.  Id.  After discovery closed, Plaintiff filed: (i) a motion to amend the complaint to substitute four additional plaintiffs as class representatives; and (ii) a Rule 23 motion for class certification.  Id. at *5.

The district court denied Plaintiff’s motion to substitute new plaintiffs, finding that Plaintiff had not diligently pursued such substitution.  Id.

The district court also denied Plaintiff’s motion for class certification.  Id. at *5-6.  The district court found that, because Plaintiff had retired and was no longer an employee of the Marshals, Plaintiff could not adequately represent a class predominantly seeking injunctive relief.  Id. at *6.  The district court also found that Plaintiff’s individual claims for monetary relief were not typical of the class-wide claims for injunctive relief and, as such, did not provide a basis to certify a class either.  Id.  Finally, the district court refused to certify a narrower class, seeking damages only, because doing so constituted “claim splitting” and jeopardized class members’ ability to subsequently pursue other claims in the face of potential res judicata arguments. Id.

Plaintiff timely petitioned the D.C. Circuit under Rule 23(f) for interlocutory review of the denial of class certification.  Id.  However, during the pendency of the petition, Plaintiff settled his individual claims and filed a stipulation of dismissal under Rule 41(a)(1)(A)(ii).  Id. at *7.

On the same day Plaintiff filed the stipulated dismissal, three current and one former African-American employee of the Marshals (the “Intervenors”) moved to intervene in the district court to appeal the district court’s denial of class certification and moved to intervene in the appellate court to pursue the Rule 23(f) petition filed by Plaintiff.  Id.

While their motion to intervene in the district court was still pending, the Intervenors filed a notice of appeal from: (i) Plaintiff’s stipulated dismissal; (ii) the order denying class certification; and (iii) the “effective” denial of their motion to intervene insofar as the district court had not decided their motion to intervene within the time Intervenors believed they had to file a notice of appeal (i.e., within 60 days of Plaintiff’s stipulated dismissal).  Id. at *7-8.  Thereafter, the district court dismissed the Intervenors’ motion to intervene based on the rationale that the Intervenors’ notice of appeal stripped the district court of jurisdiction to rule on the motion.  Id. at *8.

On the Intervenors’ motion, Plaintiff’s Rule 23(f) petition and the Intervenors’ appeal were consolidated before the D.C. Circuit.  Id.

The Decision

The D.C. Circuit first addressed whether it had jurisdiction.  Id. at *9.  The stipulated dismissal of Plaintiff’s claims, which removed any live Article III case or controversy from the district court and appellate court, presented a quandary.  Although intervention could cure that quandary by substituting Intervenors for Plaintiff, the D.C. Circuit had to have jurisdiction in the first place to rule on the intervention motion.  See id. (“Thus, the situation may appear to present a Catch-22: Intervention can overcome the apparent jurisdictional problem created by the stipulated dismissal, but a court may grant intervention only if it has jurisdiction to do so.”).  The D.C. Circuit resolved the quandary by finding that it had jurisdiction over the Intervenors’ motion to intervene in the Rule 23(f) petition.  Id.

In so finding, the D.C. Circuit rejected the decisions of other courts that have held that a stipulated dismissal precludes a court from taking further action on motions filed after, or even before, such a dismissal.  Id. at *11-12.  The D.C. Circuit explained that a stipulated dismissal and a court-ordered dismissal are no different in their jurisdictional effect – both eliminate a live case or controversy.  Id. at *12-14.   As such, the D.C. Circuit found that it had jurisdiction to entertain any motion after a stipulated dismissal that it could entertain after a court-ordered dismissal.

In that regard, the D.C. Circuit explained that it is well-established that, even in the absence of a live controversy, courts retain jurisdiction to hear motions to intervene for purposes of appealing dismissed claims, as long as the intervenor has an Article III interest sufficient to pursue the appeal.  Id. at *14 (citations omitted).  Moreover, the D.C. Circuit asserted that it is similarly well-established that absent class members may have a sufficient Article III interest to appeal the denial of class certification even if the named plaintiff does not appeal.  Id. at *14-15 (citing Twelve John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997)).  Indeed, “[w]hen an absent plaintiff intervenes to appeal a denial of class certification, he has the same Article III stake on appeal as he would have had in the action had the class been certified.”  Id. at *15 (citing Twelve John Does, 117 F.3d 571, 575).  The D.C. Circuit reasoned that, because the absence of an Article III controversy does not preclude a court from hearing a motion to intervene for purposes of appealing and because an appellate court has jurisdiction to hear an absent plaintiff’s appeal from the denial of class certification, it had jurisdiction under Rule 23(f) to hear the Intervenors’ motion to intervene.  Id. at *15-16.

In finding such jurisdiction, the D.C. Circuit distinguished the recent U.S. Supreme Court decision of Microsoft Corp. v. Baker, 137 S. Ct. 1702, 1712-1713 (2017), wherein the Supreme Court held that a plaintiff’s voluntary dismissal of his claims, subsequent to an appellate court’s denial of his Rule 23(f) petition, did not create a final, appealable order.  Harrington, 2017 U.S. App. LEXIS 13111, *16.  The D.C. Circuit explained that, unlike Baker, the issue here involved only a petition for review under Rule 23(f), not an appeal from a final order.  Id. at *17.  Furthermore, equitable considerations present in Baker, where the plaintiff had orchestrated guaranteed appellate review of his Rule 23 claims through voluntary dismissal, were not present here.  Id.  (For further discussion of Microsoft Corp. v. Baker, see here).

Next, the D.C. Circuit turned to the motion to intervene.  It stated that it could address the motion to intervene in the first instance on appeal primarily for purposes of judicial economy.  Harrington, 2017 U.S. App. LEXIS 13111, *18-19 .  The D.C. Circuit then found that the Intervenors easily met the criteria for intervention as a matter of right under Rule 24(a)(2).  Id. at *19-23.

Nonetheless, the D.C. Circuit rejected the Intervenors’ Rule 23(f) request and declined to review the district court’s denial of class certification.  Id. at *24-31.  It found that the Intervenors failed to show that any special circumstances warranted such review.  Id.

Finally, the D.C. Circuit dismissed the Intervenors’ appeal from final judgment in the case below, restoring the district court’s jurisdiction over the case.  Id. at *31.  It ordered that, on remand, the district court should allow reasonable time for the Intervenors to file both a motion to substitute a new class representative and a renewed motion for class certification.  Id.

Implication for Employers

Defeating the class representative does not necessarily end class litigation.  Absent class members may be able to pursue such litigation after the class representative exits.  Accordingly, employers should litigate with an eye toward defeating the class even where they anticipate that a named representative is inadequate or that the claims of a named representative may be defeated.

supremecourtBy Gerald L. Maatman, Jr., Pamela Q. Devata, Robert T. Szyba, and Ephraim J. Pierre

Seyfarth Synopsis: In deciding Spokeo v. Robins, the U.S. Supreme Court reaffirmed that plaintiffs seeking to establish that they have standing to sue must show “an invasion of a legally protected interest” that is particularized and concrete — that is, the injury “must actually exist.” Bare procedural violations are not enough.

Today, the U.S. Supreme Court issued its long awaited decision in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016), which we have been watching closely for its possible dramatic implications on the future of workplace class action litigation.

In a 6 to 2 opinion authored by Justice Samuel A. Alito, Jr., the Supreme Court held that the Ninth Circuit’s injury-in-fact analysis under Article III was incomplete. According to the Supreme Court, of the two required elements of injury in fact, the Ninth Circuit addressed only “particularization,” but not “concreteness,” which requires a plaintiff to allege a “real” and not “abstract” injury. Nevertheless, the Supreme Court took no position on the correctness of the Ninth Circuit’s ultimate conclusion: whether Robins adequately alleged an injury in fact.

Based on its conclusion, the Supreme Court vacated the Ninth Circuit’s ruling and remanded for further consideration consistent with the Opinion. Justice Thomas concurred, while Justice Ginsburg (joined by Justice Sotomayor) dissented.

Given the stakes and the subject matter, the ruling is a “must read” for corporate counsel and all employers.

The Case’s Background

This ruling is likely to have substantial impact on class action litigation overall, as we have discussed in our prior posts here, here, and here.

In Spokeo, the issues focused on the Fair Credit Reporting Act (“FCRA”), which requires that consumer reporting agencies (“CRAs”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

The purported CRA in this case was Spokeo, Inc. (“Spokeo”), which operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered . . .,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a putative class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages. Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000 for himself, as well as for each member of the purported nationwide class.

The district court dismissed the case, finding that “where no injury in fact is properly pled” a plaintiff does not have standing to sue. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed the following question to the Supreme Court: “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.” Spokeo highlighted a circuit split, as the Fifth, Sixth, and Seventh Circuits previously lined up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits generally disagreed and required an actual, concrete injury.

After being granted certiorari, Spokeo argued that the Ninth Circuit’s holding was inconsistent with the Supreme Court’s precedents, the Constitution’s text and history, and principles of separation of powers. More specifically, Spokeo argued that Robin’s bare allegations of FCRA violations, without any accompanying concrete or particularized harm, were insufficient to establish an injury in fact, and thus failed to establish Article III standing.

Robins responded that the Supreme Court’s precedent established that Congress may create private rights of action to vindicate violations of statutory rights that are redressable through statutory damages.

The U.S. Solicitor General also weighed in, appearing as an amicus in support of Robins, and argued that the Supreme Court should focus on the specific alleged injury — the public dissemination of inaccurate personal information — and, specifically, the FCRA. The Government argued that the FCRA confers a legal right to avoid the dissemination of inaccurate personal information, which is sufficient to confer standing under Article III.

The Supreme Court’s Decision

Writing for the majority on the Supreme Court, Justice Alito held that Ninth Circuit failed to consider both aspects of the injury-in-fact requirement under Article III when analyzing Robin’s alleged injury, therefore its Article III standing analysis was incomplete. Slip. Op. at *8. The Supreme Court determined that to establish injury in fact under Article III, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete and particularized.” Slip. Op. at *7. For an injury to be “particularized,” it “must affect the plaintiff in a personal and individual way.” Id. “Concreteness,” the Supreme Court found “is quite different from particularization.” Id. at *8. A concrete injury must “actually exist” and must be “real” and not “abstract.” Id.

The Supreme Court further stated that concreteness includes both easy to recognize tangible injuries as well as intangible injuries. Id. at 8-9. The Supreme Court instructed that when considering intangible injuries, “both history and the judgment of Congress play important roles.” Id. In particular, Congress may identify intangible harms which meet Article III’s minimum requirements. Id. Nevertheless, the Supreme Court cautioned that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action. Id. Thus “Robins could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. The Supreme Court also added that the “risk of real harm” may also satisfy the concreteness requirement, where harms “may be difficult to prove or measure.” Id.

Viewing the FCRA in light of these principles, the Supreme Court recognized that while Congress “plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk . . .[,] Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.” For example, the Supreme Court noted it would be “difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” Id. at * 11.

Justice Thomas concurred, reviewing the historical development of the law of standing and its application to public and private rights of action, finding the standing requirement a key component to separation of powers.

Justice Ginsburg, joined by Justice Sotomayor, largely agreed with the majority, but nevertheless dissented. She departed from the majority’s reasoning on the issue of concreteness, but based on the injury alleged, not on the fact that concrete harm wasn’t required. Id. at *3 (Ginsburg, J., dissenting). Under her analysis, Justice Ginsburg would have found that the nature of Robin’s injury was sufficiently concrete because of his allegation that the misinformation caused by Spokeo “could affect his fortune in the job market.” Id. at *3-5 (Ginsburg, J., dissenting).

Implications For Employers

Spokeo can be interpreted as a compromise – with some useful language and reasoning for employers to use in future cases. While the Supreme Court avoided a broader question of Congress’s ability to create private rights of action and other weighty separation of powers issues, it announced the proper analytic framework for assessing the injury-in-fact requirement under Article III. The Supreme Court provided some good news for employers, consumer reporting agencies, and other corporate defendants, as well as potential plaintiffs with respect to class action litigation under a variety of federal statutes, including the FCRA. In particular, the Supreme Court was clear that alleged injuries must be both particular and concrete, meaning that injuries must be “real” and not “abstract.” Thus, a mere procedural violation without any connection to concrete harm cannot satisfy the injury-in-fact requirement of Article III.

However, the Supreme Court may not have shut the door on lawsuits alleging intangible injuries based on violations of statutory rights. While the Supreme Court’s opinion today may discourage some consumer, workplace, and other types of class actions seeking millions in statutory damages, potential litigants will likely have to be more creative in how they frame alleged injuries tied to violations of statutory rights.

Spokeo also transcends the employment context, as the constitutional requirement of Article III applies in all civil litigation. Plaintiffs seeking to file lawsuits in other regulated areas, such as under ERISA, the Americans with Disabilities Act, as well as a host of other statutes are likewise affected by today’s decision. Without particularized, concrete injury, federal jurisdiction is beyond the reach of plaintiffs seeking statutory damages for technical violations.

thCADQZ9HPBy Gerald L. Maatman, Jr., Pamela Q. Devata, Robert T. Szyba

This morning the U.S. Supreme Court heard oral arguments in Spokeo, Inc. v. Robins, No. 13-1339. As our loyal blog readers know, this is a case that corporate counsel need to follow closely in light of the stakes for the future of class action litigation.

Spokeo arises as a putative class action brought under the Fair Credit Reporting Act (“FCRA”) and addresses one of the fundamental prerequisites to civil litigation: Does this plaintiff have standing under Article III of the U.S. Constitution to bring this case under the FCRA in the first place?  Groups on both sides of this argument have been watching this case closely (as we have noted here, here, here, and here), as the Supreme Court’s determination may have a very significant impact on consumers (as well as employees and prospective employees), employers, and the consumer reporting industry as a whole.

The question specifically presented to the Supreme Court is straight-forward — “Does a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation, have standing to bring a claim on behalf of himself or a class of individuals?”

We were at the SCOTUS today to hear the parties’ arguments, as well as the Justices’ questions.  Here is our take based on the argument (a copy of the argument transcript is here).

The Case’s Background And Context

Among its provisions, the FCRA requires that a consumer reporting agency (“CRA”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

Spokeo, Inc. (“Spokeo”) operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered…,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a purported class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages.  Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000.  The district court held that “where no injury in fact is properly pled” the plaintiff does not have standing to sue, and dismissed the case. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed this question to the Supreme Court: “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.”  The answer, as it turns out, is likely to resolve a circuit split, as the Fifth, Sixth, and Seventh Circuits are lining up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits have generally disagreed and have required an actual, concrete injury to have standing.

The Company’s Position

Spokeo’s briefing argued that in order for any plaintiff to bring a “case” or “controversy” of the type that the courts can hear, the plaintiff must point to a concrete, actual, and particularized harm, as supported by the Supreme Court’s precedents and centuries of history dating back to the beginnings of the English common law. A technical violation of the statute, even if coupled with a monetary bounty to the plaintiff, is not, and has never been, enough. And the fact that the statute purports to provide redress does not itself evidence a harm, as here it merely awards damages to an uninjured plaintiff.  Spokeo further argued that analogizing Robins’ claim to a common law defamation claim also does not help, because at their core, common law defamation claims require injury. Lastly, the mere possibility of harm to his employment prospects is also not an actual, concrete harm. Thus, Spokeo maintained that the plaintiff has no standing, and therefore cannot proceed with his putative class action.

The Consumer’s Position

Robins took the opposite position on every point. He argued that so long as Congress provides a cause of action and allows a plaintiff to recover damages, that is all that is required for Article III standing.  No actual or concrete harm is necessary because the statutory violation suffices.  Looking to much of the same history and precedents, he disagreed with the company on whether a concrete harm is actually required. And even if it were, Robins argued he had “pocket-book Injury” — that is, if the company violated the law, it owed him the statutory damages. He analogized his cause of action to one of defamation, in that the litigation was centered on statements about Robins, although updated by Congress from the claims “fossilized” form to remove the requirement that plaintiffs point to an actual harm.

Both sides raised concerns over separation of powers, pointing out that eliminating the requirement of concrete harm runs the risk of courts reaching beyond their limited role to deciding “cases” and “controversies,” and the risk of Congress delegating to private (and thus financially interested) plaintiffs the Executive’s enforcement function. On the other hand, a determination that concrete hard is required would impermissibly override Congress’s policy determination to create a legal protection for consumers.

Today’s SCOTUS Oral Argument

Both sides encountered intense, probing questions from the Justices this morning.

If a questioning scorecard is indicative of the issues, it broke out this way by our rough tally:

Questions To Spokeo – 26 in the opening argument and 3 questions in the rebuttal argument [questions by Justice – Kagan (9), Sotomayor (6), Scalia (5), Ginsburg (4), Kennedy (2), Alito (1), Breyer (1), and Roberts (1)]

Questions To Robins – 36 in the opposition argument [questions by Justice – Scalia (13), Roberts (9), Breyer (3), Kennedy (3), Kagan (3), Ginsburg (2), and Sotomayor (1)]

From the start of the argument, Justices Kagan and Sotomayor challenged the company’s position, pressing for an explanation why, if Congress determined that the dissemination of false information is something it sought to protect, should the Court find that a plaintiff has no standing when seeking to recover statutory damages after false information was disseminated.  The justices zeroed in on the dissemination of inaccurate information, in and of itself, as potentially creating the injury required for standing.  Justice Kagan further pointed out that it could be difficult to know exactly what the impact dissemination of false information might be have, and Justice Sotomayor challenged whether the argument simply sought to superimpose of the word “concrete” onto the requirement to identify a legally protected right being violated.  Justice Scalia interjected in the questioning to point out that the statutory text did not identify “misinformation” as a remedy the statute sought to right, but instead the statute sought to require procedures that would be followed, such as the inclusion of a toll-free phone number, and pointing out that Robins’ interpretation would allow anyone to sue if the toll-free number was not provided (or any other technical violation), regardless of whether there was any concrete injury.

In terms of questioning directed to the Robins’ counsel, Justice Kennedy pointed out the circular logic that a plaintiff should be considered to sustain a monetary injury simply because a statute attributes an amount to a technical violation.  Chief Justice Roberts also posed the hypothetical of where a plaintiff’s phone number was disseminated in violation of a statute, but the phone number that was given was wrong.  The Chief Justice expressed skepticism that an injury could be established.  Indeed, Justice Breyer went on to characterize the respondent’s position as arguing that individuals who sustained no harm should be entitled to sue simply because they have knowledge that non-compliant procedures were followed, not because they sustained a concrete injury.  Justice Alito interjected to ask whether anyone actually performed a search of Robins, pointing out that if no search had been performed this would be the “quintessential speculative harm.”  Chief Justice Roberts followed with another hypothetical, where an individual was paid double a statutorily-required fee — would that constitute an injury because the statute was violated when the individual was paid the wrong amount (i.e., double)?  Robins’ counsel conceded there would be no standing there.  As to the analogy to defamation, Justice Scalia pointed out that defamation requires injury and thus does not help the respondent.

The Solicitor General, as amicus, also argued in support of Robins.  Chief Justice Roberts expressed concern about the possibility of Congressional attempts to authorize private litigants to enforce laws in a way that would interference with the Executive Branch, a phenomenon in which the Solicitor General’s office should have interest.  Justice Scalia also pointed out that violations of procedure do not give rise to standing, having previously pointed out that the FCRA requirements are procedural in nature.

What’s Next?

A decision from the Supreme Court as to the requirements for standing have clear and obvious implications for the future of putative class actions brought under the FCRA in general and perhaps other class actions too.  Indeed, the implications here would likely apply in a variety of other contexts, such as consumer class actions and other federal statutory claims.  The questioning this morning reveals that Justices Kagan, Sotomayor, and Ginsburg might be receptive to the notion that the dissemination of false information in and of itself suffices to confer standing, whereas Chief Justice Roberts, and Justices Scalia, Breyer, and Alito might require a plaintiff to identify a harm beyond a technical violation of a statutory provision.  Regardless of possible leanings, the argument made clear that the Justices have an interest in and have given thought to the issue.  We expect a decision in the winter/spring 2016, so stay tuned!

 

By Gerald L. Maatman Jr. and Howard M. Wexler

Earlier this year, the U.S. District Court for the Northern District of Texas dismissed a high profile lawsuit brought by the State of Texas against the EEOC regarding its “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII.  In State of Texas v. EEOC, Case No. 5:13-CV-255 (N.D. Tex. Aug. 20, 2014), the District Court held that Texas lacked standing to maintain its suit because it did not allege that any enforcement action had been taken against it in relation to the EEOC’s guidance.

Texas wasted no time and filed an appeal with the U.S Court of Appeals for the Fifth Circuit seeking to overturn the dismissal of its lawsuit. On November 19, 2014, Texas filed its opening brief in support of its appeal. It is a “must read” for all employers, especially those who have been caught in the EEOC’s “do as we say, not as we do” tactics (given that the EEOC itself conducts criminal background investigations as a condition of employment for all positions, and conducts credit background checks on approximately 90 percent of its positions).

Case Background

In April 2012, the EEOC issued guidance urging businesses to avoid a blanket rule against hiring individuals with criminal convictions, reasoning that such rules could violate Title VII if they create a disparate impact on particular races or national origins. Like various other states, Texas has enacted statutes prohibiting the hiring of felons in certain job categories. In November 2013, Texas sued the EEOC, seeking to enjoin the enforcement of this guidance, which Texas has termed the “Felon Hiring Rule.”

The District Court dismissed Texas’ lawsuit entirely on a lack of subject matter jurisdiction. Because Texas did not allege that any enforcement action had been taken against it by the Department of Justice (as the EEOC cannot bring enforcement actions against States) in relation to the Guidance, the District Court held that there was not a “substantial likelihood” that Texas would face future Title VII enforcement proceedings from the Department of Justice arising from the Guidance. As standing to bring suit cannot be premised on mere speculation the District Court held that Texas lacked the necessary standing to maintain its suit against the EEOC.

Texas’ Appellate Brief

In the opening pages of its Fifth Circuit brief, Texas sets the stage by noting that this case presents “issues of exceptional importance throughout the State of Texas and the Nation” as it concerns the EEOC’s “felon-hiring regulations” which it adopted “without allowing the public to see it or comment on it” and “preempts various state laws that ban employers from hiring felons.” Id. at 7.

Given that the District Court’s dismissal was based entirely on issues of standing, Texas sets forth several reasons why the District Court erred in dismissing the suit on this basis. Specifically, Texas asserts that its lawsuit is not based on the “mere speculation” of injury and that it has standing to pursue its challenge of the “Felon Hiring Rule” because:

  • In processing job applications, Texas state agencies apply various no-felons policies required by state law which are prohibited by the EEOC’s Felon Hiring Rule. The conflict makes the State an “object” of the EEOC’s administrative action thus satisfying the standing requirements of Article III”;
  • The EEOC cannot attempt to both change the State’s hiring policies [through adopting the Felon Hiring Rule] and nonetheless object to the State’s standing to change that attempt;
  • The Rule expressly purports to preempt state law no-felons policies, like those required by Texas law, and as a result, vests Texas with Article III standing to defend its laws;
  • The lawsuit represents a facial challenge to the EEOC’s rule, and because “without federal court intervention, the [EEOC] will be able to continue to use its threat of enforcement to bully employers into abandoning their no-felons policies;
  • The Felon Hiring Rule is a final agency action that is reviewable to the extent that it binds the EEOC’s staff and/or forces regulated entities to change their behavior; and
  • The fact that the Felon Hiring Rule is not a “legislative rule” does not foreclose judicial review since otherwise “agencies like the EEOC could promulgate self-proclaimed guidance documents, use them to bully regulated entities, and forever avoid judicial review of their coercive efforts.”

Id. at 16-19.

Implications For Employers

While the EEOC has yet to file its opposition brief, one can expect it to advance similar arguments that it made in support of its motion to dismiss. Namely, that the District Court lacked jurisdiction to hear the case because the EEOC’s guidance is not legally binding and does not constitute a final agency action and because its guidance has no binding authority, and thus renders Texas without standing to pursue its claims. This is most certainly “one to watch” given the stakes involved and the extent to which the EEOC has “gone to the mat” defending its criminal background guidance document. We will be sure to keep our readers informed as this case makes its way through the appeals process. Stay tuned!

Readers can also find this post on our EEOC Countdown blog here.

 

glass_ceiling.jpgBy Laura Maechtlen and Brian Wong

It is not uncommon for an employer to face vague or overbroad class claims premised on one employee’s injury limited to a specific set of facts. However, in a recent ruling in Singleton v. BP Amoco Chemical Co., No. CVV-12-J-255-5 (N.D. Ala. April 3, 2012), an Alabama federal district court judge limited an individual plaintiff’s attempt to bring Title VII class claims on behalf of a large group of women, finding that the plaintiff lacked standing to represent the group of female employees she sought to include in the putative class. This decision provides an interesting roadmap for employers seeking to challenge a plaintiff’s standing under Title VII.  

Key Facts In The Case

In Singleton, the named plaintiff Debbie Singleton brought suit on behalf of herself and a purported group of similarly situated women, alleging gender discrimination in violation of Title VII of the Civil Rights Act and 42 U.S.C. § 1981a. Singleton had previously worked for BP from 2000 through 2009, and returned to BP as a contract employee in September 2010. In November 2010, Singleton applied for a permanent position, which required her to pass a “WorkKeys” test. Singleton repeatedly failed the test and was not rehired as a permanent employee. After Singleton filed an EEOC charge, however, the employer dispensed with the WorkKeys test in favor of a different applicant process. By the time she filed her complaint, Singleton had taken and passed the new test, and was awaiting an interview for a permanent position.

Nevertheless, in filing suit, Singleton sought to represent a class of all women and applicants affected by the employer’s alleged discriminatory hiring policies and procedures, including prior use of the WorkKeys test to intentionally exclude females from employment. The claim asserted on behalf of the class is that the employer engaged in a general pattern or practice of discrimination against all women employees and applicants in all aspects of employment.

In response, the employer moved to dismiss Singleton’s claims on multiple grounds, arguing that Singleton lacked standing to sue on behalf of purported class members because the plaintiff’s only injury stemmed from the failure to pass one section of the WorkKeys test. Plaintiff argued that her injury in fact was the failure to be hired, which resulted in her failure to pass the test.

The Court’s Analysis Of The Standing Defense

The Court agreed with the employer and recognized that a plaintiff necessarily is limited to the issues as to which the employee is aggrieved, and as such, Singleton lacked standing to assert claims on behalf of a class for purported injuries she did not herself suffer. 

The Court based its holding on the rule that “a claim cannot be asserted on behalf of a class unless at least one named plaintiff has suffered the injury that gives rise to the claim.” Id. at  6. In the context of Title VII, the Court noted “[t]he mere fact that an aggrieved private plaintiff is a member of an identifiable class of persons of the same race or national origin is insufficient to establish his standing to litigate on their behalf all possible claims of discrimination against a common employer.” Id. It further recognized that, if the testing procedures are the basis for the disparity in women hired, as the plaintiff alleged, then only women who were not hired because of the testing procedures could possibly allege an injury from those procedures.

In the end, because Singleton herself was not discouraged from applying for a job with BP, nor barred from positions with defendant, applied for jobs with defendant, and was hired by defendant, more than once, she lacked “standing to assert claims on behalf of females discouraged from applying with [BP], regardless of the reasons for non-application.” Id. at 10. Similarly, the Court held Singleton lacked standing to assert claims on behalf of women allegedly injured before she applied for a permanent position in November 2010 or after the date the employer eliminated the WorkKeys test, or women who were not hired for reasons other than the WorkKeys test. Plaintiff did, however, have standing to represent those females who did not pass the Work Keys test post-2009. Id. at 13.

In addition to “necessarily limit[ing]” the scope of Singleton’s class claims, the Court also dismissed her request for injunctive relief, and denied BP’s motion to dismiss her § 1981a claim. Id.  

Lessons To Be Drawn From The Ruling

This case serves as a reminder to employers that aggressive challenges to a named plaintiff’s standing can be an effective method of narrowing the scope of an improperly broad class discrimination claim. This defense can be asserted up front through a Rule 12 pleading.