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The Supreme Court's ruling on the Affordable Care Act was
not the only surprise decision on Thursday. Although the
nation's attention was focused on the health care law, the
Court was also expected to issue an important opinion in First
American Financial Corp. v. Edwards, a case involving issues of
constitutional standing in consumer-protection cases. Instead, the
Court dismissed the Edwards case without issuing a
decision, prompting speculation that the Justices were unable to
agree on a majority opinion. The unexpected dismissal means that
constitutional standing will remain a volatile and frequently
litigated issue in consumer-protection suits.
In Edwards, the plaintiff sued her title insurer (First
American), claiming that the insurer violated the Real Estate
Settlement Practices Act (RESPA) by paying an illegal
"kickback" to plaintiff's title agent when the
plaintiff purchased her home. First American moved to dismiss the
lawsuit, arguing that the plaintiff did not have constitutional
standing because she was not actually injured by the alleged RESPA
violation. The alleged "kickback" scheme had not impacted
the price of the plaintiff's title insurance, nor had she been
injured in any other way. The plaintiff's response: First
American's statutory violation was alone sufficient to
establish standing. The Ninth Circuit agreed with the plaintiff,
and the U.S. Supreme Court granted First American's petition
for review.
Edwards' potential impact stretched beyond RESPA, which is
only one of many federal consumer-protection statutes allowing
consumers to recover minimum "statutory" damages, even in
the absence of "actual" damages. The banking, lending,
and consumer credit industries are plagued by similar lawsuits
under, among others, the Truth in Lending Act1, the Fair
Debt Collection Practices Act2, the Electronic Fund
Transfer Act3, and the Fair Credit Reporting
Act4. Likewise, internet companies, communications
providers, advertisers, and other businesses are vulnerable to
liability under a growing number of federal privacy laws, such as
the Stored Communications Act5, the Video Privacy
Protection Act6, the Cable Communications Privacy
Act7, and the Driver's Privacy Protection
Act8.
From the defense bar's perspective, these types of statutes
incentivize individuals and their attorneys to hunt for technical
statutory violations and file "strike suits" against
defendants, even when there has been no injury. In the aggregate,
nuisance lawsuits can amount to a massive headache for defendants
and raise the cost of doing business, particularly where plaintiffs
file class-actions on behalf of other consumers.
Many thought that the Edwards case presented an opportunity for
the Supreme Court to limit Congress' legislative power to
authorize these types of suits. Regardless of what a federal
statute might allow, the constitutional doctrine of standing
prevents a federal court from hearing a case unless the plaintiff
has suffered some "injury-in-fact." The question in
Edwards was whether Congress can create an injury-in-fact by
enacting federal statutes such as RESPA, or whether the
constitutional standing requirement represents a "hard
floor" that "cannot be removed by
statute."9
Because of its potential impact beyond RESPA, Edwards was
closely monitored. For example, the world of electronic privacy law
took a keen interest in the Edwards
caseâ€"indeed, Facebook, Linkedin, Yahoo, and
Zynga banded together to file an amicus brief in support of First
American, citing their potential liability under federal statutes
similar to RESPA. And earlier this month, in In re Hulu Privacy
Litigation,10 a federal district court decided to defer
its ruling in a major consumer-privacy lawsuit against Hulu, the
online-video website, pending the outcome of Edwards.
But with the surprise dismissal of Edwards behind us, lower
courts will be left to decide standing challenges without
additional guidance from the Supreme Court. Whether the Court will
someday revisit the issue raised in Edwards remains to be seen.
This update is for information purposes only and should not
be construed as legal advice on any specific facts or
circumstances. Under the rules of the Supreme Judicial Court of
Massachusetts, this material may be considered as
advertising.
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