Brace for more class action challenges post-Spokeo

May 16, 2016

(Reuters) – When both sides in one of the biggest business law cases of the U.S. Supreme Court term claim victory, you know the one indisputable outcome of the court’s decision will be more litigation.

On Monday, the Supreme Court finally issued its ruling in Spokeo v. Robins, the case that presented the potentially seismic question of whether Congress can confer constitutional standing on plaintiffs who have suffered no concrete injury aside from the violation of a consumer statute. In a 6-to-2 opinion written by Justice Samuel Alito, the justices said Congress cannot erase Article III requirements by granting a right to sue for statutory violations. “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,” the court said. That’s a boon to class action defendants, who had argued that courts were allowing otherwise uninjured plaintiffs to bring class actions based merely on statutory violations.

But the Supreme Court also confirmed that intangible injuries can provide plaintiffs with constitutional standing. The justices suggested two considerations: historical practice in English and American courts and Congressional judgment. “Congress is well positioned to identify intangible harms that meet minimum Article III requirements,” the opinion said. “The violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact; in such a case, a plaintiff need not allege any additional harm beyond the one identified by Congress.” That’s good news for the class action bar, which feared that the justices would adopt the “real world injury” requirement pushed by the business lobby.

So who won the Spokeo case – class action plaintiffs or defendants? I talked Monday to Andrew Pincus of Mayer Brown, who argued at the Supreme Court for Spokeo, the data broker, and to Jay Edelson of Edelson, who represents the named plaintiff, Thomas Robins, suing Spokeo for publishing false information about him. Both called the Supreme Court’s ruling a win, though both said the immediate effect of the opinion will be more litigation over class certification.

Pincus focused on the Supreme Court’s holding that plaintiffs can’t rely simply on a statutory violation to establish standing. Class action plaintiffs suing under these federal statutes will now have to show a concrete injury. In Pincus’ reading, the court’s opinion will permit defendants to defeat class certification by arguing that individual issues predominate over classwide proof of standing. In Robins’ case, for instance, the justices remanded the class action to the 9th Circuit to determine whether Spokeo’s alleged misreporting of his personal information amounted to a concrete injury; the justices said that some violations of the Fair Credit Reporting Act, like failure to provide required notice, and even some inaccuracies in credit reports, such as an incorrect zip code, are not sufficiently concrete to provide constitutional standing but other violations are.

Pincus said that Spokeo’s guideposts for establishing injury require unique inquiries about a particular plaintiff’s circumstances. Even if a lead plaintiff like Robins can show he is entitled to statutory damages, Pincus said, defendants will claim the facts of his case don’t translate into classwide claims.

Moreover, defendants will use the Spokeo guidelines to challenge the definition of an injury in dozens of federal laws granting private damages for statutory violations, according to Pincus. “There’s some wiggle room here and there,” Pincus said, “but the theory on which so many class actions have been upheld has now been rejected.”

Class action lawyer Edelson agreed with Pincus on that point, predicting a couple years of “increased billings by defense lawyers” trying to use Spokeo to block class certification or get cases dismissed. Ultimately, though, the Supreme Court agreed that broad categories of intangible injuries can establish standing, according to Edelson. When plaintiffs can show defendants’ conduct injured entire classes – as he maintains he will be able to prove with regard to a Spokeo algorithm that allegedly led to inaccurate reporting of people’s personal and professional history – those classes can be certified, Edelson said.

“This opinion feels like a reaffirmation of standing doctrine,” Edelson said. “Spokeo and the Chamber of Commerce wanted the Supreme Court to institute a ‘real world injury’ test. Not a single justice was willing to do that.” Edelson said he and his team couldn’t think of a single federal consumer statute in which plaintiffs can’t plausibly argue a concrete injury, like invasion of privacy or inadequate notification, under the Spokeo test. “This is overall a major win for consumers and privacy advocates,” he said.

I think we’re going to have to see how lower courts interpret and apply Spokeo’s loose guidelines for an injury before we call the opinion a victory for one side or the other. Once again, as in the Tyson case earlier this term and the Halliburton securities case in 2014, the Supreme Court thought hard about big changes in class action law and decided not to make them.

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