No-Injury Class Action Plaintiffs Suffer Concrete Harm in Supreme Court’s Decision on the Requirements for Article III Standing

Defense Digest, Vol. 23, No. 3, September 2017

By David J. Oberly, Esq.*

Why It Matters

In Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), the United States Supreme Court held that a mere violation of a statutory right—without more—is insufficient to confer Article III standing because such “injuries” do not satisfy the injury-in-fact element of standing, which requires the harm to be “concrete,” or “real, and not abstract.” The decision is a significant win for companies and corporate defendants who have faced a significant threat of class action litigation that has proliferated in recent years. Conversely, Spokeo dealt a noteworthy blow to statutory-damages, no injury class action plaintiffs, as these claimants must now demonstrate a “concrete” injury in the form of harm that “actually exists” above and beyond a mere statutory “injury-in-law” to establish a sufficient injury-in-fact to confer Article III standing.

Factual & Procedural Background

Spokeo, a consumer reporting agency, runs a “people search engine” that searches a wide spectrum of databases to gather and provide personal information about individuals to a variety of users. Upon finding that Spokeo provided the world with inaccurate information about him, Thomas Robins filed a federal class action lawsuit against Spokeo, claiming the company willfully failed to comply with the requirements of the Fair Credit Reporting Act, which mandates that consumer reporting agencies adhere to reasonable procedures to ensure maximum possible accuracy of consumer reports.

The Law

Standing stems from Article III of the United States Constitution, which limits the powers of the federal judiciary to the resolution of “cases and controversies.” To demonstrate standing in federal court, a plaintiff must satisfy a three-part test and is required to show: (1) an injury-in-fact; (2) sufficient causal connection between the injury and the conduct complained of; and (3) a likelihood that the injury will be redressed by a favorable decision. Most importantly, a plaintiff must establish the injury-in-fact element of standing by showing an injury that is concrete and particularized and actual or imminent, not conjectural or hypothetical.

United States Supreme Court Decision

Before reaching the Supreme Court, the Ninth Circuit had held that Robins alleged a sufficient injury-in-fact as required by Article III based on the combination of Robins’ allegation that “Spokeo violated his statutory rights” and the fact that Robins’ “personal interests in the handling of his credit information are individualized.” Spokeo appealed, and the Supreme Court granted certiorari on the following question:

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 Court held that for a plaintiff to establish a sufficient injury-in-fact to fulfill Article III’s standing requirement, the plaintiff must plead an injury that is both concrete and particularized. Thus, the Court found that the Ninth Circuit’s analysis of the issue of injury-in-fact was flawed because it only went halfway, in that the appellate court focused exclusively on particularization, but completely disregarded concreteness.

In rendering its decision, the Court provided litigants on both sides of the class action table guidance as to what constitutes a “concrete” injury. For an injury to be “concrete,” “it must actually exist,” that is, be “real” and not “abstract.” Importantly, the Court noted that while intangible harm may be sufficiently concrete where it “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit” at common law, a bare procedural violation, “divorced from any concrete harm,” is inadequate as a matter of law to confer Article III standing. Rather, Article III requires concrete harm “even in the context of a statutory violation,” mandating that plaintiffs plead concrete harm apart from a “bare procedural violation.”

Turning to the dispute between Spokeo and Robins, the Court found that Robins could not simply allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III, as deprivation of a procedural right without some concrete interest affected by the deprivation is insufficient by itself as a matter of law to create Article III standing. Because the Ninth Circuit did not address whether the particular procedural violations alleged by Robins entailed a degree of risk sufficient to meet the concreteness requirement, the Supreme Court vacated the judgment of the Ninth District, remanding the case to evaluate whether Robins adequately alleged an injury that was sufficient to satisfy the concreteness element of Article III’s injury-in-fact requirement.

Takeaways

Importantly, the Court answered the question it was tasked with resolving—whether a class action claimant can sue based solely on a statutory “injury-in-law”—with a resounding “no.” In doing so, the Spokeo Court drew a clear line in the sand—consequential statutory violations that encompass a “real” impact are sufficient to demonstrate standing, while breaches of purely technical, procedural rights fall short of satisfying a cognizable injury-in-fact sufficient to confer Article III standing.

As a result, Spokeo will likely aid in pumping the brakes on the litany of no-injury class actions that have rapidly expanded in scope and value in recent years. In particular, the Spokeo ruling will likely dissuade and temper the current wave of data breach and consumer class action litigation seeking multi-million dollar damages awards for mere statutory violations. The decision is particularly noteworthy for federal data breach defendants, where many cases involve plaintiffs and putative class members that have not suffered any actual harm as a result of the purported breach. Critically, violations of data breach statutes, by themselves, will no longer suffice to demonstrate standing.

Moving forward, class action plaintiffs will have to demonstrate a “concrete” injury—one that is “real, not abstract,” and “actually exists”—to satisfy the requirements of standing. Taken together, Spokeo has laid down a significant challenge to class action plaintiffs who often face robust motions to dismiss from their counterparts at the outset of litigation on the issue of standing. In the absence of a particularized, concrete injury, federal jurisdiction cannot be obtained by plaintiffs alleging statutory damages for technical violations. In this regard, Spokeo will serve as a valuable weapon in defending the increasing number of actions involving mere technical violations of federal statutes providing for statutory damages, and it can be wielded to cut down no-injury class actions before they gain steam by bolstering arguments for the dismissal of statutory-violation class actions at the outset of litigation.

*David is an associate in our Cincinnati, Ohio office. He can be reached at 513.372.6817 or djoberly@mdwcg.com.

_{Defense Digest, Vol. 23, No. 3, September 2017. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2017 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}