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Class Action: Supreme Court Rules That Federal Plaintiffs Must Show a “Concrete” Injury

Some may view it as a blow to consumer class actions, while others might characterize it as an example of a high court “punting” on a key issue, but regardless of one’s characterization, the United States Supreme Court’s 6-2 decision in Spokeo Inc. v. Robins is reverberating throughout the legal community. In a long awaited opinion, the Supreme Court vacated a Ninth Circuit ruling that had deemed so-called technical violations of the Fair Credit Reporting Act (“FCRA”) sufficient to establish an injury-in-fact for purposes of satisfying the standing requirements to bring a lawsuit under federal jurisdiction. According to the Supreme Court, the Ninth Circuit’s standing analysis was not complete because it failed to consider whether the alleged injury was “concrete.” The Supreme Court has remanded the case to the Ninth Circuit to re-consider the standing issues in light of the Court’s guidance. While the Court may have refused to decide the underlying issue of standing, it did make a significant, and potentially momentous, finding that could curtail the spread of consumer class action lawsuits in which lead plaintiffs identify no actual harm from the violation of a statute.

In its decision, The Court explained that a plaintiff cannot satisfy the injury-in-fact requirement for standing “by alleging a bare procedural violation” of the FCRA because such a violation “may result in no harm.” While, according to the Court, “Congress plainly sought to curb the dissemination of false [credit] information by adopting procedures designed to decrease that risk,” a technical violation of the FCRA may not cause a concrete injury. For instance, the Court reasoned, “it is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.”   How the Ninth Circuit construes the Court’s opinion in reconsidering the issue will be especially illuminating as it will likely signal how other lower courts will proceed.

In Spokeo Inc. v. Robins, an individual brought a putative class action against Spokeo, Inc., which operates a “people search engine” of personal credit information, for allegedly reporting inaccurate information in its credit profiles in violation of the FCRA. The FCRA requires consumer credit reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of” consumer credit reports, and imposes liability on “any person who willfully fails to comply with any requirement [of the FCRA] with respect to any” person.  The District Court dismissed the lawsuit, holding that the plaintiff had not pleaded the injury-in-fact necessary to establish federal standing under Article III of the Constitution. Constitutional law requires plaintiffs invoking federal jurisdiction to allege an injury-in-fact, not merely a generalized or hypothetical grievance, to proceed with a lawsuit.  The facts in Spokeo specifically highlight the tension between technical statutory violations and injury. The allegedly incorrect credit information contained in the plaintiff’s profile was not necessarily defamatory.  Instead, the inaccurate credit profile depicted a more positive credit profile than it would have if the information had been correct. Nevertheless, plaintiff was seeking statutory damages due to the inaccurate profile.     

The Ninth Circuit reversed, holding that the alleged violation of statutory rights under the FCRA and the plaintiff’s “individualized” interest in the handling of his credit information were sufficient allegations of an injury-in-fact. In other words, while the plaintiff had not alleged any actual and direct injury as a result of the alleged inaccuracies on his credit report, because such inaccuracies may technically violate the FCRA and give rise to statutory penalties, the plaintiff may proceed with the lawsuit. The Circuit Court’s holding opened the door for plaintiffs’ attorneys to bring similar class action lawsuits under other federal statutes, alleging merely that defendants committed a technical violation, irrespective of any alleged harm to consumers.

In light of the Supreme Court’s holding, however, alleged technical violations of federal statutes, even where the statute provides a cause of action, may not be sufficient to establish standing under Article III of the constitution.  According to the Court, the  injury-in-fact  requirement  requires  a plaintiff to show that he or she suffered “an invasion of a legally protected interest”  that  is  “concrete  and  particularized”  and  “actual  or imminent,  not  conjectural  or  hypothetical.”  The Ninth Circuit’s analysis failed to consider whether Spokeo’s alleged misconduct caused a “concrete” injury, and instead merely considered whether the alleged injury “affect[ed] the plaintiff in a personal and individual way.”  According to the Court, a “concrete” injury means an injury that “actually exist[s].”   The Court clarified that a “concrete” injury need not be a “tangible” injury, but a court must at least consider the “degree of risk” to plaintiffs posed by statutory violations and whether Congress intended for such risks to be sufficient to establish standing. 

The Court did note that “the  violation  of  a procedural  right  granted  by  statute  can  be  sufficient  in  some circumstances to constitute injury in fact,” because the plaintiff “need not allege any additional harm beyond the one congress has identified.”  However, not every procedural right granted by statute, such as those granted by the FCRA, corresponds with such a harm. Plaintiffs in future actions, however, will likely appeal to this language and suggest that the statutory violations raised in their complaint are sufficiently connected with a concrete harm. Ultimately, the Court concluded that the Ninth Circuit “did not address . . . whether the particular procedural violations alleged in this case entail the degree of risk sufficient to meet the concreteness requirement.”  However, the Court took “no position as to whether the Ninth Circuit’s ultimate conclusion—that Robins adequately alleged an injury in fact—was correct.”

This is an example of a high-profile case in which both sides can arguably claim a narrow victory – class action defendants now have strong Supreme Court precedent holding that mere technical violations of federal consumer protection statutes are not sufficient to convey standing; meanwhile, plaintiffs’ attorneys will highlight the rather minimal threshold that exists for demonstrating “harm,” and find room to argue that a “concrete” injury does not necessarily mean a substantial injury.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.