United States: Plaintiffs' Lawyers Try To Spin Spokeo

A peculiar thing happened after the Supreme Court announced its decision in Spokeo, Inc. v. Robins (pdf) on Monday.

Even though the Court ruled in favor of Spokeo—vacating the Ninth Circuit's ruling that the plaintiff had standing to sue and holding that the court of appeals had applied a legal standard too generous to plaintiffs—both sides declared victory. (Full disclosure: I argued on behalf of Spokeo in the Supreme Court.)

Spokeo tweeted:

Jay Edelson,

What's going on?

Spin—the effort to shape public perception that infects virtually every aspect of official Washington—has come to the world of Supreme Court rulings. The theory is that if you call a horse a cow with enough certainty and repetition, some people will say: "Yes, it's a cow." Others will report: "Opinion is divided. Some say the animal is a horse, some say it is a cow."

Here, the plaintiffs' loss is a matter of plain fact: the Ninth Circuit had held that Mr. Robins had standing to sue and the Supreme Court vacated that determination. The plaintiffs are worse off than they were before. And when viewed from a broader perspective, the decision will make life much more difficult for plaintiffs' lawyers who want to bring statutory-damages class actions.

Let's take a step back and examine what really happened in Spokeo. (If you're looking for a concise explanation of the Supreme Court's ruling, read our discussion.)

The Spokeo case is a classic example of the "no-injury class action." Here's how they work: a putative class action is filed on behalf of a very large potential class alleging violation of a federal or state statute that makes statutory damages available for violations. The plaintiff bases his or her standing to sue on the bare claim that the statute was violated—the claimed "injury in fact" is the statutory violation alone, not any "real" harm actually incurred or anticipated by the plaintiff.

Proof of the statutory violation by itself is claimed to establish everything the plaintiff needs to prevail: standing, the defendant's liability, and entitlement to statutory damages. And, the plaintiff inevitably asserts, class certification necessarily should follow because the only issue in the case—whether the statute was violated by the procedures employed by the defendant or the disclosures published by the defendant—is common to the whole class.

Plaintiffs have instituted hundreds of these class action lawsuits under a variety of statutes: the Fair Credit Reporting Act (invoked in Spokeo), the Telephone Consumer Protection Act, the Real Estate Settlement Procedures Act, the Video Privacy Protection Act and the Truth in Lending Act, and many state statutes. The amicus briefs filed in Spokeo by media companies (pdf), technology companies (pdf), and others (pdf), document the large number of these lawsuits and the exorbitant damages claims—often hundreds of millions or billions of dollars. Because many lower courts applied the same "rubber-stamp" standing rule as the Ninth Circuit, these cases often were permitted to proceed—even past the class certification stage, when they usually settled.

The named plaintiff in Spokeo, Mr. Robins, claimed that Spokeo, which operates a people search website, is subject to the Fair Credit Reporting Act and failed to comply with a number of that law's requirements. Claiming to represent a class of every individual about whom information is posted on Spokeo's website (more than 100 million people), the plaintiff sought statutory damages for each violation—which would have exceeded several billion dollars. (And the proposed class did not differentiate between people like Mr. Robins, who asserted that certain facts about him were inaccurate, and people for whom the information is accurate: everyone was in.)

Although Mr. Robins alleged that he had been affected adversely by inaccurate information posted about him, the district court found that the alleged adverse consequences were not sufficiently concrete to qualify as injury in fact under the Supreme Court's precedents. Robins appealed and the Ninth Circuit said it didn't have to address that question because the alleged statutory violations by themselves were sufficient to establish standing, even if Robins suffered no concrete—that is, "real" or actual—harm.

Spokeo asked the Supreme Court to determine whether the Ninth Circuit was correct, presenting the following question in its certiorari petition:

Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.

The Supreme Court squarely answered that question "no." Here is the relevant passage from the Court's opinion:

Congress' role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation.

A "bare" failure to comply with a statutory requirement "divorced from any concrete harm," the Court explained, cannot "satisfy the injury-in-fact requirement of Article III." The Ninth Circuit erred because it ignored the "concreteness" element, which requires that the plaintiff show that his or her alleged concrete harm "actually exist[s]" and that it is "'real,' and not 'abstract.'"

It is difficult to imagine a more complete rejection of the Ninth Circuit's rule, which the plaintiffs and their amici urged the Supreme Court to uphold.

Plaintiffs and their allies are claiming victory anyway

Perhaps they think they can rely on this passage of the Court's opinion: "the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact. In other words, a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified." But all the Court is saying is that sometimes the cause of action itself requires proof of concrete harm, and in that case the plaintiff is not obliged to prove additional concrete harm beyond the harm required by statute. The Court wasn't saying that plaintiffs could avoid proof of concrete harm altogether.

The bottom line: the legal theory on which standing had been upheld in dozens of no-injury class actions is no longer valid and plaintiffs will have to find new arguments to justify standing to sue in these cases.

Why didn't the Supreme Court order the Ninth Circuit to dismiss the case? Because the plaintiffs, perhaps recognizing that they would lose on the "bare statutory violation constitutes injury in fact" contention, advanced new arguments to try to justify standing—arguments that had not been advanced in the Ninth Circuit. For example, they claimed that in the FCRA context, making available any false personal information about a consumer inflicts concrete harm; and that Congress had specifically determined that lawsuits in federal court were appropriate in that circumstance and that determination satisfied Article III's requirement.

The plaintiffs' claim of "victory" apparently rests on the fact that the Supreme Court did not opine on these new arguments. But that is wrong as a matter of Supreme Court procedure—the Court almost never addresses issues neither raised in nor addressed by the lower court. (Perhaps the caricatured view of the Supreme Court as reflexively anti-class action led some to believe that the Court would reach out to decide these issues; but that would have been inconsistent with the way the Court typically works.)

Most important, the plaintiffs' declaration of "victory" ignores the inconvertible facts that (a) plaintiffs now must establish standing based on an injury other than the mere existence of a statutory violation—a new obligation that did not exist before; (b) the Spokeo Court's discussion of the standards for determining the existence of the required concrete harm will impose a significant burden on plaintiffs in many cases; and (c) the obligation to establish concrete harm will make it much more difficult for plaintiffs to obtain class certification.

Given these facts, the declaration of victory by the plaintiffs' bar seems awfully hollow. And digging into these new obligations imposed on plaintiffs shows just how hard it will be for plaintiffs to establish standing without the "bare statutory violation" shortcut they have relied on in hundreds of past class actions.

The Obligation to Prove Concrete Harm

Although the Supreme Court did not resolve the new arguments raised by the plaintiffs, it did provide guidance regarding the meaning of the injury-in-fact standard and how it may be satisfied. That guidance indicates that the new burden that plaintiffs must carry—proving concrete harm rather than simply a statutory violation—is a heavy one.

To begin with, the Court emphasized that concrete harm is harm that "actually exist[s]" and that it is "'real,' and not 'abstract.'" It cited prior decisions making clear that harm can be either tangible—such as financial loss—or intangible. That statement simply reaffirms existing precedent: the Court has found the injury-in-fact test satisfied by claimed loss of enjoyment of parks and other government resources and by alleged discriminatory treatment based on race, sex or other prohibited characteristics (even if the discriminatory treatment has no financial consequences).

The Court also observed that its precedents made clear that the plaintiff need not have suffered concrete harm in order to sue: a "risk of real harm" can in some circumstances satisfy the concrete harm requirement. It cited its prior ruling in Clapper v. Amnesty International USA, which stated that a "'threatened injury must be certainly impending to constitute injury in fact,' and that '[a]llegations of possible future injury' are not sufficient."

Some of the post-decision statements by plaintiffs' lawyers indicate plans to argue that the violation of a statute constitutes intangible harm—essentially circumventing Spokeo's holding by asserting that every statutory violation inflicts intangible harm.

That word game is not going to work. The passages of the opinion discussed above make clear that the plaintiff must demonstrate harm (tangible or intangible) beyond the bare violation of a statute. Plaintiffs cannot avoid their obligation to demonstrate existing or impending concrete harm.

Another mischaracterization of Spokeo is the assertion by plaintiffs' lawyers that Spokeo argued that tangible injury (financial or otherwise) is required for injury in fact, and that the Court broke new ground in holding that concrete intangible harm can satisfy Article III. One advocate for the plaintiffs' bar, Paul Bland of Public Citizen, said that "[e]very justice agreed – the decision is unanimous – that consumers can bring claims for statutory damages . . . even if the consumer has not lost money or suffered a personal injury."

No "victory" for the plaintiffs' bar there. Spokeo didn't argue that financial loss or physical injury is required; it recognized in its briefs that some intangible injuries can satisfy Article III—the precedents regarding loss of enjoyment of national parks and race discrimination, for example. And the Court's recognition of its own precedents certainly plowed no new ground.

But Spokeo emphasized that not all claims of intangible injuries suffice.

The Court expressly agreed. It set forth a test for identifying the types of intangible injuries sufficient to permit suit in federal court. The Court said:

"[B]oth history and the judgment of Congress play important roles." Therefore "it is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts." And, Congress's judgment about whether a particular intangible harm satisfies Article III is "instructive and important."

These inquiries, of course, are statute-specific, because the injury-in-fact identified as the basis for standing is tied to two other standing requirements: the injury must be (as the Court explained in Lujan v. Defenders of Wildlife) "fairly traceable to the challenged action of the defendant" and it must be "likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision."

How would the argument that the Spokeo plaintiffs advanced for the first time in the Supreme Court' argument—that conveying any inaccurate information about a person is sufficient to constitute concrete harm—fare under these standards? Poorly.

It plainly flunks the history test: A false statement, standing alone, almost never was sufficient to provide grounds for suit at common law. We explained in our briefs in Spokeo that no action lies for defamation (written or spoken, per se or otherwise) unless the challenged statement harms the plaintiff 's reputation—and the few situations in which harm was presumed from the false statement itself were limited to very specific statements virtually certain to inflict harm, such as an accusation of criminal activity or a claim that the plaintiff suffered from a serious communicable disease. (See the discussion at pages 49-52 of our opening brief (pdf), and pages 18-19 of our reply brief (pdf).)

And there is no evidence that Congress determined that every inaccurate statement inflicts harm sufficient to justify a lawsuit in court. That is because the statutory damages provision of the FCRA does not require proof of a false statement—rather, it applies across-the-board to every statutory violation, whether or not the violation involves a false statement. There accordingly is no congressional determination that is "instructive" about whether conveying false information always inflicts concrete harm. Congress simply did not address that issue. (See the discussion at pages 22-24 of our reply brief.)

To be sure, one of the purposes of the FCRA is to enhance the accuracy of credit information. But that does not mean that Congress intended every FCRA violation that leads to conveying any inaccurate information to be actionable. The Spokeo Court specifically stated that "not all inaccuracies cause harm or present any mate¬rial risk of harm. An example that comes readily to mind is an incorrect zip code."

In sum, plaintiffs will have a very hard time convincing a court that any inaccurate information, standing alone, inflicts concrete harm—and an even harder time prevailing on the theory of a "certainly impending" risk of harm based on inaccurate information.

The Impact on Class Certification

But even if plaintiffs could overcome that hurdle, they still would have to win class certification. And if harmful, or potentially harmful, inaccurate information about an individual is required to confer standing upon that individual,, then an individualized inquiry will be needed to determine whether each class member was the subject of inaccurate information that was sufficiently harmful to meet the constitutional standard. That is why Justice Kagan, at oral argument, asked counsel for the plaintiff the following question:

You said you you need for the information to be inaccurate to have standing here. That is going to mean that the class, as you've defined it, is not going to be certified. And I think that that's the right answer, but I just want to make sure that we're on the we're on the same page here.

As Justice Kagan observed, the significant burden of showing that information is "inaccurate" for each class member will make it much more difficult for a plaintiffs' lawyer to show that common issues predominate, as Federal Rule of Civil Procedure 23 requires. Similar difficulties for class certification are likely to attend cases under the TCPA; for example, a putative class member who never hears her landline phone ring could hardly assert that she had suffered "real" harm.

In short, while it may take some time to play out in the lower courts, Spokeo is a game-changer for defendants who face "no-injury" statutory damages class actions: plaintiffs will have to prove concrete injury, alleging a statutory violation is no longer enough; plaintiffs relying on intangible injury will have to provide that the claimed injury meets the "concreteness" test spelled out in Spokeo; and plaintiffs who do that will face new and significant challenges in obtaining class certification.

Hard to see the victory for the plaintiffs' bar in that.

Originally published May 18, 2016

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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