SCOTUS Casts Doubt on Plaintiffs’ Right to Sue for Purely Statutory Damages
Class Action Law Update 05/16/16 Douglas Knox, Sarah Anchors, Zachary Foster
The doctrine of standing ensures that federal courts hear only actual "cases and controversies" as permitted by Article III of the U.S. Constitution. Under this doctrine, the Supreme Court has long required a plaintiff seeking relief in a federal court to establish an "injury in fact" by showing that he or she suffered "an invasion of a legally protected interest" that is, among other things, "concrete and particularized." A recent hot topic in litigation is whether a plaintiff seeking only statutory damages has sufficiently alleged an injury in fact. Several federal statutes, for instance, permit a plaintiff to recover so-called "statutory damages" for a violation of a statute, even if the plaintiff does not allege or prove "actual damages," i.e. an actual harm or loss suffered as a result of the violation of the statute. Under such statutes, a plaintiff may be entitled to recover thousands of dollars in statutory damages, even if the alleged violation of the statute caused the plaintiff no actual harm. The Supreme Court's recent decision in Spokeo, Inc. v. Robins, casts doubts on whether a plaintiff who seeks only such statutory damages has alleged a cognizable injury in fact as required to confer Article III standing.
In Spokeo, Robins filed a class-action complaint under the Fair Credit Reporting Act (the "FCRA"). His complaint alleged that Spokeo's "people search engine" had disseminated incorrect information about the plaintiff, and the complaint sought statutory damages based on Spokeo's alleged violation of the FCRA. The District Court eventually dismissed the complaint for lack of standing, but the Ninth Circuit reversed. It reasoned that Robins had sufficiently alleged a violation of a statutory right, and that he had a personal interest in the handling of his credit information, which, according to the Ninth Circuit, sufficiently alleged injury in fact.
The Supreme Court, however, held that the Ninth Circuit's standing analysis was incomplete. The Ninth Circuit erred by focusing only on whether Robins's alleged injury was particularized while overlooking whether the injury was concrete. The Court stressed that particularity and concreteness are different aspects of injury, and Article III standing requires both "even in the context of a statutory violation." Thus, Robins could not "allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III." The Court explained that a plaintiff could feasibly allege a bare procedural violation of the FCRA that would result in no concrete harm to the plaintiff. For example, the Court noted the possibility that a consumer reporting agency could fail to provide the required notice to a user of the agency's consumer information, but that information may prove to be entirely accurate. In that scenario, the plaintiff would have suffered no concrete injury. Similarly, the Court explained that "not all inaccuracies cause harm or present any material risk of harm." For example, the Court noted that it was "difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm."
Because the Ninth Circuit failed to consider whether Robins sufficiently alleged a concrete, as opposed to merely particularized, injury, the Supreme Court vacated the lower court's decision and remanded the case for consideration of that issue. Although the Supreme Court did not address whether Robins would be able to satisfy this requirement, Spokeo provides litigants defending claims of statutory damages in federal courts with ample grounds for challenging standing. In FCRA cases, where a plaintiff alleges only that the defendant violated the statute but does not allege any resulting harm or risk of real harm (such as a denial of a loan application), then Spokeo may dictate dismissal. Likewise, Spokeo supports dismissal where a plaintiff merely alleges that the defendant made a call or sent a fax or text that violated the Telephone Consumer Protection Act ("TCPA") (regulating topics such as calls made with automatic dialers or pre-recorded messages, blast marketing faxes and texts, and the Do Not Call registry), and does not allege any harm or risk of real, non-speculative harm. Such a situation would include when the plaintiff received an allegedly violative call, text or fax, but incurred no cost as a result of the communication. Numerous federal statutes provide for statutory damages, such as the Federal Debt Collection Practices Act, Real Estate Settlement Procedures Act, Truth in Lending Act, Electronic Fund Transfer Act, often without requiring any showing of actual damages. This list is not meant to be exhaustive. Regardless, Spokeo casts doubt on a plaintiff's standing to sue for statutory damages based upon merely procedural violations of these and other statutes.
Importantly, we expect that Spokeo will pose additional hurdles for class-action claims under the TCPA and other similar consumer protection statutes. Now class action complaints should define the class only as those persons who suffered a concrete (as well as particularized) injury. In the context of the TCPA, a prospective class should not be as broad as all persons who received a text or received a call where the person did not give prior express consent; plaintiffs should be required to identify more specific concrete harm. Likewise, Spokeo's focus on concrete injury affords class action defendants greater means to argue against class certification on the grounds that that plaintiffs cannot establish common questions of fact that predominate over individual questions, as the concrete harm each individual class member suffers may differ among the class members.
While Spokeo weakens standing for plaintiffs bringing claims based on bare statutory violations, it leaves open the possibility that some statutory violations in themselves will create sufficient injury in fact. Nonetheless, the decision's focus on concrete injury warrants revisiting defense strategies in a host of consumer protection claims.
If you have questions about the subject matter of this update, please contact Doug Knox (email@example.com/(813) 387-0271), Sarah Anchors (firstname.lastname@example.org/(602) 229-5788), Zachary Foster (email@example.com/(813) 387-0273), or your Quarles & Brady attorney.