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!