The U.S. Court of Appeals for the Eighth Circuit recently addressed an important issue that the U.S. Supreme Court avoided last year concerning whether a consumer must suffer actual economic harm to have standing to sue for statutory damages.

In Charvat v. Mutual First Federal Credit Union, the Eighth Circuit held that being denied a statutory right is a sufficient injury to confer standing, even if the injury is only "informational" and does not include "an additional economic or other injury." The Eighth Circuit reversed the trial court, which had dismissed two ATM "fee sticker" class actions for lack of standing because the plaintiff had not alleged an "actual" harm from the absence of the required sticker on the ATM.

Last year, in First American Financial Corp. v. Edwards, the Supreme Court had agreed to decide whether Article III standing exists where a consumer alleges a violation of a federal consumer protection statute but does not allege any economic injury. After extensive briefing and oral argument, however, the Court ultimately avoided the issue by dismissing the writ of certiorari as improvidently granted. 

Charvat consolidated two putative class actions alleging violations of the Electronic Fund Transfer Act (EFTA). The allegations in Charvat mirrored those made in numerous EFTA suits filed before Congress's December 2012 amendments to the EFTA: the plaintiff made withdrawals from the financial institutions' ATMs; he was charged a transaction fee each time; the ATM screen provided notice of the fee, which the plaintiff accepted; but there were no exterior, physical notices of the fee on or near the ATMs as was then required under the EFTA. The district court concluded that the plaintiff lacked standing, reasoning that he had not alleged an injury in fact resulting from the alleged lack of an exterior fee notice, but rather only an "injury in law." 

In its reversal, the Eighth Circuit noted that "Congress may … create legal rights via statute, the invasion of which can create standing to sue." The court also held that the alleged charging of ATM transaction fees without the statutorily required exterior fee notice was, even if only an "informational injury," still an injury that "alone [was] sufficient to confer standing … ."

The Eighth Circuit observed that the district court's dismissal "was based largely on the determination that a statutory violation, standing alone, was not a sufficient injury in fact." But that determination, the Eighth Circuit stated, ignored several "instances where the denial of a statutory right to receive information [was held] sufficient to establish standing." The court also observed that the EFTA provided statutory damages, which are "directly related to the consumer's [EFTA] injury." The court concluded that a "claim of statutory damages is sufficiently related to [the alleged informational injury] to confer standing." 

Plaintiffs' counsel around the country will undoubtedly seek to extend the Charvat holding outside the EFTA context. Indeed, they will now argue that any consumer statute that requires notice to consumers—including the Truth in Lending Act and the Real Estate Settlement Procedures Act—gives rise to the sort of "informational injury" that the Charvat court deemed sufficient to confer standing.

Compelling arguments can be made, however, that Charvat was wrongly decided. In Lujan v. Defenders of Wildlife, a 1992 ruling, the Supreme Court held that, to establish standing under Article III, Section 2 of the Constitution, a plaintiff must show that he or she "suffered an injury in fact." This "injury in fact" requirement is not met merely because a statute provides a plaintiff with a cause of action.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, or Burt M. Rublin at 215.864.8116 or rublin@ballardspahr.com. 


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