The U.S. Supreme Court heard oral argument in Spokeo, Inc. v. Robins on November 2, 2015, an important case presenting the question of whether a plaintiff who cannot show any actual harm from a violation of the Fair Credit Reporting Act (FCRA) nevertheless has standing under Article III of the U.S. Constitution to sue for statutory damages in federal court.

As discussed in our prior alert, a Supreme Court decision in favor of the defendant in Spokeo could have far-reaching consequences because numerous statutes other than the FCRA allow plaintiffs to recover statutory damages where actual damages for violations are often difficult to prove or nonexistent. Also, a ruling in favor of the defendant would affect state law statutory damages claims that are filed in federal court and could discourage the filing of class actions. In countless class actions filed in federal court, the plaintiffs’ class action bar has obtained massive recoveries based on alleged technical violations that did not cause any actual injury to the named plaintiffs and class members.

In Spokeo, the plaintiff claimed that the defendant website operator willfully violated several FCRA provisions, including the requirement for a consumer reporting agency (CRA), when preparing a consumer report, to follow “reasonable procedures to assure maximum accuracy of the information concerning the individual about whom the report relates.” The plaintiff alleged that the defendant had issued a consumer report containing inaccurate personal information about him, including his age and wealth, that he was employed, had a graduate degree, and was married with children. The complaint did not allege any actual damages, and instead only sought statutory damages under the FCRA. The case was brought as a class action on behalf of millions of persons.

The district court initially denied the defendant’s motion to dismiss based on standing but subsequently reconsidered and dismissed the action, ruling that the plaintiff had failed to plead an injury in fact, and any injuries pled were not traceable to the defendant’s alleged FCRA violations. The Ninth Circuit reversed, holding that the defendant’s alleged violation of the plaintiff’s FCRA statutory rights was sufficient in itself to establish an injury for purposes of Article III standing. The Court concluded that it was constitutionally permissible for Congress to treat violations of such rights as “concrete, de facto injuries” and elevate such injuries “to the status of legally cognizable injuries.”

Comments made by Justices Sotomayor and Ginsburg suggest they are open to the argument that a statutory violation alone can provide standing. However, comments made by Justices Kagan and Breyer, as well as by Justice Sotomayor, suggest the three justices might be willing to rule that the plaintiff has standing not merely because he has alleged a statutory violation but because Congress has determined that the publication of inaccurate information about him constitutes actual harm.

Justice Kagan was the most vigorous in pursuing this position. After commenting that “the dissemination of false information about a particular person…seems like a concrete injury to me,” she observed that “we’ve said many times that Congress gets to look beyond the common law tradition and gets to identify real world problems out there in the world, harming people in real world ways. And that, it seems, is what Congress did here.” Later in the argument Justice Kagan stated that “it seems pretty clear what they wanted to do here. That this statute is entirely about preventing the dissemination of inaccurate information in credit reports which they seem to think is both something that harms the individual personally and also harms larger systemic issues. And then they gave the cause of action to the people it harmed personally.”

Justice Breyer appeared to find merit in Justice Kagan’s comments, asking the defendant’s counsel “why isn’t what [Justice Kagan] said right?  That one kind of harm could be the harm suffered when someone tells a lie about you or gives false information?” Justice Sotomayor also seemed willing to consider the publication of inaccurate information as actual harm, stating “I will tell you that I know plenty of single people who look at whether someone who’s proposed to date is married or not. So if you’re not married and there’s a report out there saying you are, that’s a potential injury. Now, I know the court below said it was speculative, but that’s what Congress was worried about: both creditworthiness and your stature as a person, your privacy, your sense of self, that…others can identify me with some accuracy.”

On the other hand, questions asked by Chief Justice Roberts and Justice Scalia suggest they are highly skeptical of the argument that a statutory violation can create standing in the absence of  actual harm. For example, Chief Justice Roberts asked whether someone whose unlisted phone number was published incorrectly (and thus would not receive unwanted calls as a result) would have standing to sue under a hypothetical statute that provided for damages of $10,000 for a company’s publication of false information about an individual. After the defendant’s counsel noted that the FCRA requires CRAs to have an 800 number available for certain purposes, Justice Scalia commented that “if you believe [the plaintiff], anybody whose information is not accurate can sue to get the statutory damages for failure to provide an 800 number.” In response to Justice Scalia’s comment, the defendant’s counsel remarked that “respondents would say, even if the information was accurate, you could sue to get the statutory damages.”

Justice Scalia also seemed prepared to reject the argument that, in drafting the FCRA, Congress had identified misinformation as actionable harm. Commenting on the response of the defendant’s counsel to a question from Justice Kagan asking why that could not have been Congress’ approach, Justice Scalia stated “I would have thought your answer…would have been, Congress did not identify as the harm for which it allowed suit to be brought, misinformation. It did not. It identified as the harm the failure to follow the procedures that it imposed upon credit reporting agencies. It said nothing about people who have been hurt by misinformation being able to sue. It said anybody can sue who’s been reported on, if the agency failed to use the procedures. So, in fact, Congress has not identified misinformation as a sueable harm. That’s not what this statute does.” While Justices Kennedy and Alito also questioned counsel, their questions were not particularly revealing of their likely positions.

The U.S. Department of Justice, joined by the Consumer Financial Protection Bureau, filed a brief in the case as amicus curiae in which it supported the plaintiff. In their questioning of the Assistant Solicitor General appearing for the United States, the justices echoed the views they signaled in their questioning of the parties’ counsel. A decision is expected next year.

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.

For more information, please contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky, John L. Culhane, Jr., Christopher J. Willis, or Burt M. Rublin.


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