The Spokeo Decision & its Effect on Business

How Will the Supreme Court’s Spokeo Decision Impact NJ Businesses?

The U.S. Supreme Court recently sent Spokeo v. Robins back to the Ninth Circuit of Appeals.
According to the majority, the federal appeals court failed to properly assess whether the lead plaintiff in the class-action lawsuit alleged an injury in fact.

The Facts of the Spokeo Case

Thomas Robins is the lead plaintiff in a class-action lawsuit alleging that Spokeo, Inc. violated the Fair Credit Reporting Act of 1970 (FCRA). The federal statute requires consumer reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of” consumer reports, and imposes liability on “[a]ny person who willfully fails to comply with any requirement [of the Act] with respect to any” individual.

What is Spokeo?

Spokeo operates a “people search engine,” which searches numerous databases to gather and provide personal information about individuals to a variety of users, including employers seeking to evaluate prospective employees. After Robins discovered that his Spokeo-generated profile contained inaccurate information, he filed a federal class-action lawsuit against Spokeo, alleging that the company willfully failed to comply with the FCRA’s requirements.

The District Court dismissed Robins’ complaint, holding that he had not properly pleaded injury in fact as required by Article III of the U.S. Constitution. The Ninth Circuit reversed. Based on Robins’ allegation that “Spokeo violated his statutory rights” and the fact that Robins’ “personal interests in the handling of his credit information are individualized,” the court held that Robins had adequately alleged an injury in fact.

The question presented before the Supreme Court was 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’s Decision

By a vote of 6-2, the Court ordered the Ninth Circuit to examine the standing question again. “Because the Ninth Circuit failed to consider both aspects of the injury-in-fact requirement, its Article III standing analysis was incomplete,” the Court held.

Under existing Court precedent, the “irreducible constitutional minimum” of standing consists of three elements. The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. As Justice Samuel Alito further highlighted in the majority opinion, the plaintiff’s injury must be both “concrete and particularized.” 

According to the Court, the Ninth Circuit “elided” the two requirements of the test. As Justice Alito explained, concreteness is quite different from particularization. However, he was also quick to point out that “concrete” is not necessarily synonymous with tangible. While the Court stated that Congress is well positioned to identify intangible harms that meet minimum Article III requirements, it also noted:

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.

The take-away

Nonetheless, the majority did acknowledge that the violation of a statutory right “can be sufficient in some circumstances to constitute injury in fact.” With regard to the case before the Court, Justice Alito wrote:

[T]hese general principles tell us two things: On the one hand, Congress plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk. On the other hand, Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.

Going forward, the Court provided some guidance to the Ninth Circuit. It noted that “even if a consumer reporting agency fails to provide the required notice to a user of the agency’s consumer information, that information regardless may be entirely accurate” and accordingly would result in no concrete harm sufficient to create Article III standing. “In addition,” the Court added, “not all inaccuracies cause harm or present any material risk of harm. An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.”

The decision is also expected the impact data privacy lawsuits based on “technical” violations.

The Impact on NJ Businesses

The Spokeo decision did not create the bright-line rule that many litigators would have liked. However, it should make it more difficult for plaintiffs to bring lawsuits where the only injury alleged is a statutory violation. For instance, the Supreme Court’s decision may also help Monmouth County businesses defend lawsuits under the Telephone Consumer Protection Act (TCPA). The TCPA is frequently the subject of class-action suits because it authorizes statutory damages of $500-$1,500 per violation, regardless of the actual damages suffered by the recipient.

The decision is also expected the impact data privacy lawsuits based on “technical” violations. In fact, a Maryland district court judge specifically cited Spokeo in remanding a data breach class action to a Maryland state court for failure to meet federal standing requirements. “Although ‘Congress may ‘elevate to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law,’ a ‘bare procedural harm’ under a federal statute, ‘divorced from any concrete harm,’ would not ‘satisfy the injury-in-fact requirement,’” the judge wrote.