June 3, 2014

Plaintiffs in federal court must show an actual injury before suing

By Deborah J. La Fetra Senior Attorney

Spokeo Inc., runs a website that collects and publishes consumer “credit estimates.”  Thomas Robins, an unemployed man, sued Spokeo for willful violations of the Fair Credit Reporting Act (FCRA), alleging that Spokeo published false information, such as Robins was married, had a graduate degree, and was wealthy.  The trial court held that this publication, while prohibited by statute, did not cause Robins anything other than speculative harm, and that he therefore lacked standing under Article III of the United States Constitution.  The Ninth Circuit Court of Appeals reversed, holding that Robins’ allegation that Spokeo “willfully” violated the FCRA by retransmitting inaccurate personal information was sufficient for Article III standing.  The court collapsed the three-part standing inquiry – injury, causation, and redressability – into a single question of whether the plaintiff was subjected to a statutory violation.  Spokeo is petitioning the United States Supreme Court for a writ of certiorari and PLF filed an amicus brief urging the Court to grant the petition.

Article III permits federal courts to hear only “cases or controversies,” defined as cases brought by plaintiffs who have suffered actual (not speculative) harm that can be redressed by court action.  Article III provides the outside limit on Congress’s authority to grant standing.  Absent some injury caused by the statutory violation, plaintiffs lack standing to proceed in federal court (they retain the options to sue in state court or ask a regulatory agency to seek penalties).  This is a recurring issue because many statutes include substantial statutory damages that, in the context of a class action, can result in exposure to tens or hundreds of millions in damages for technical violations that harmed no one or nearly no one.  The Ninth Circuit lowers the bar still further for plaintiffs to bring such actions, survive dismissal, and succeed in certifying a class.  Given the potential for exorbitant damage awards, these actions impose massive transaction costs and are difficult to defeat early in the litigation process.   ‘No harm’ lawsuits – particularly ‘no harm’ class actions, as in this case – are a drain on both economic and judicial resources, to no one’s benefit except the plaintiffs’ bar.

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