U.S. Supreme Court Provides Some Defense for Class Action Defendants in Decision

By William Thomson

Federal statutes such as the Fair Credit Reporting Act (FCRA), the Truth in Lending Act (TILA), and the Telephone Consumer Protection Act (TCPA) have long provided fertile hunting grounds for plaintiffs’ attorneys seeking lucrative class action settlements. Plaintiffs’ attorneys like these statutes because they impose substantial statutory damages for even hyper-technical violations, thus allowing a class to recover potentially enormous aggregate damages without requiring class members to prove actual damages. Fortunately for class action defendants, a recent Supreme Court decision, Spokeo, Inc. v. Robins, could provide a new basis for fending off class actions brought under these and similar statutes.

Spokeo addressed whether a plaintiff can have standing to sue for a technical violation of a statute without showing that violation caused him any actual harm. The plaintiff, Robins, brought a class action claiming that Spokeo, a web-based “people search engine,” violated the FCRA by reporting false information about him and other class members, and by failing to follow various procedural requirements. The district court dismissed the suit for lack of standing, but the Ninth Circuit reversed, holding that Robins had adequately alleged an “injury in fact” because he had claimed a “particularized” injury – in other words, that Spokeo had “violated his statutory rights, not just the statutory rights of other people.”

In reversing the Ninth Circuit, the Supreme Court explained that, to establish standing, a plaintiff must do more than show that it was his own statutory rights that were violated – he must also show that the violation caused him some real or “concrete” harm. The Supreme Court did not attempt to narrowly define what might constitute a concrete harm, noting that “intangible” as well as “tangible” injuries can suffice, and that Congress’s judgment that the violation of a statutory right is a real harm should be given deference. But the Court was clear that a plaintiff “cannot satisfy the demands of Article III by alleging a bare procedural violation.” In the context of the FCRA, the Court explained that certain violations, such as reporting an incorrect zip code or failing to provide a required notice to a credit report user when the credit report was nonetheless completely accurate, might cause no actual harm and thus not confer standing on a plaintiff.

Ultimately, the Court declined to decide whether Robins had adequately alleged a concrete injury, instead remanding the case for the Ninth Circuit to undertake that inquiry. Nonetheless, the case could become a useful new weapon in the arsenal of class action defendants seeking to defeat a class action at the motion to dismiss or class certification stages. Because Spokeo requires plaintiffs to show how a violation caused them real harm, defendants may now be able to argue that, even if a lead plaintiff adequately alleged actual injury, individualized inquiries will be necessary into each class member's claim of concrete injury. If a defendant can show that individualized issues predominate over common ones, that class membership is not readily ascertainable, or that a lead class member’s claim of harm is not typical of the class’, it may be able to defeat class certification – and avoid giving plaintiffs' attorneys their payday.

William Thomson is a member of the firm's Business Litigation practice group. William works from the firm's Minneapolis office. For more information please contact Mr. Thomson or your usual Stinson Leonard Street contact.

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