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On April 27, 2015, in a development that could have significant implications for a wide variety of class action lawsuits, the United States Supreme Court granted the petition of for a writ of certiorari of online search firm Spokeo. The cert grant sets the stage for the Court to consider whether Congress may confer Article III standing on a plaintiff who had suffered no specific or concrete harm but who alleges a violation of a federal statute. Depending on which way the Court rules, it could have very significant impact on class action lawsuit under a wide range of consumer protection statutes. It could also have significant implications for the proliferating lawsuits alleging online privacy violations.
Well-established and time-honored legal principles have established that Article III of the U.S. Constitution requires that in order for a claimant to be able to pursue an action in federal court, the claimant must have “standing” – that is, as discussed here, “the party seeking to sue must personally have suffered some actual or threatened injury that can fairly be traced to the challenged action of defendant and that the injury is likely to be redressed by a favorable decision.”
In the Spokeo case, an individual sued the company under the Fair Credit Reporting Act, claiming that information Spokeo had gathered about the plaintiff and published on its website was incorrect. Spokeo argued that the plaintiff lacked standing to assert his claim because he did not allege any concrete harm. The district court agreed and granted Spokeo’s motion to dismiss, holding that the plaintiff had failed to allege an “injury-in-fact” and therefore lacked Article III standing. However, in a February 4, 2014 opinion (here), the Ninth Circuit reversed the district court, holding that the plaintiff’s allegations that his statutory rights had been violated alone were sufficient to satisfy Article III’s standing requirement.
In its cert petition, Spokeo framed the question it sought to have the Court address as follows: “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.”
As Alison Frankel notes in her April 27, 2015 post on her On the Case blog (here), Spokeo’s counsel in the case had argued in Spokeo’s cert petition that the Supreme Court’s answer to the question the company has posed will affect class action lawsuits not only under the Fair Credit Reporting Act, but also the Telephone Consumer Protection Act, the Americans with Disabilities Act, the Truth-in- Lending Act and numerous other federal statutes authorizing consumers to file damages actions.
Several technology companies, including Facebook, eBay, Yahoo, and Google, submitted a joint amicus brief in support of Spokeo’s petition in which they argued that they would be particularly harmed if plaintiffs who have not been injured can file class action lawsuits for damages. They argue that if any of the hundreds of millions of their daily users can file a damages lawsuit based solely on alleged statutory violations without any actual injury, they could be subject to massive class actions filed purportedly on behalf of many users who suffered no harm and may even be unaware the alleged statutory violation took place.
Another important area to consider with respect to the potential impact of this case is discussed in an April 27, 2015 post on the Privacy & Security Law Blog (here). As the blog’s authors note, this case could have “vast consequences for online privacy cases.” In an April 28, 2015 post on the McDonald Hopkins law firm’s litigation blog (here), Richik Sarkar adds that the case could have important implications for cases “stemming from data breaches and cyber-attacks.”
As Alison Frankel observed in her blog post, “Big businesses have been complaining for years that these laws give plaintiffs and their lawyers an unfair advantage because they can assert statutory damages claims for hundreds of millions of dollars on behalf of thousands of consumers who suffered no concrete harm.”
If the Supreme Court reverses the Ninth Circuit and holds that a plaintiff must alleged an a concrete injury in order to establish Article III standing, and that a mere alleged statutory violation alone is insufficient to establish standing, it could, as discussed in an April 28, 2015 memo from the Troutman Sanders law firm (here), “mean the death-knell of ‘no harm’ class action lawsuits that have proliferated under statutes that allow for statutory damages without proof of actual harm.”
For their part, the plaintiffs’ advocates who oppose Spokeo’s position argue that the supposed distinction between injuries-in-fact and injuries-in-law are meaningless, and that the availability damages for violations of legal right has long been a part of our legal system. When Congress statutorily classifies identified matters as legally cognizable injuries it is merely codifying principles of harm.
In any event, this case, which will be argued and decided in the Court’s term beginning in October 2015, will be one to watch. Big business has a rooting interest in this case, in which they hope to see Spokeo prevail. There is of course no way of knowing for sure, but the mere fact that the Court granted cert in this case could be interpreted to suggest that the Court will reverse the Ninth Circuit and lower the boom on these type of “no injury” lawsuits. In its brief submitted in response to a request from the Court in connection with Spokeo’s cert petition, the U.S. Solicitor General’s office had argued that the Court should not grant the cert petition because the Ninth Circuit had correctly decided the issue. The fact that the Court granted the cert petition despite the SG’s brief suggests, at a minimum, that the cert grant is at odds with the government’s position, and may also be interpreted to suggest that at least four members of the Court (the number required to grant cert) disagree with the SG and consider the Ninth Circuit’s opinion to be wrong.
SEC Chair Mary Jo White Praises and Defends Whistleblowers: In an April 30, 2015 speech on the topic of the SEC whistleblower program delivered at the Corporate and Securities Law Institute at Northwestern University Law School (here) , SEC Chair Mary Jo White said, among other things, “in the post-financial crisis era when regulators and right-minded companies are searching for new, more aggressive ways to improve corporate culture and compliance, it is past time to stop wringing our hands about whistleblowers. They provide an invaluable public service, and they should be supported. And, we at the SEC increasingly see ourselves as the whistleblower’s advocate.”
Delaware Bill to Ban Fee-Shifting Bylaw Introduced: On April 29, 2015, a bill was introduced in the Delaware Senate that would ban fee-shifting bylaws for Delaware stock corporations (non-stock corporations would continue to be able to adopt fee-shifting bylaws). Even though the bill was just introduced, the battle over the bill has already begun. The U.S. Chamber of Commerce’s Institute for Legal Reform is circulating a letter from its Presidentcriticizing the proposed legislation, and arguing that the ability to adopt fee-shifting bylaws will help companies fight abusive litigation. The debate over the proposed legislation, which has in fact been going on for months, is likely to get louder as the proposed legislation moves forward.
Disability Lawsuits: The April 25, 2015 issue of Economist Magazine has an article entitled “Hobbling Businesses: A Law Designed to Help People with Disabilities Enriches Lawyers Instead” (here), which comments on the growing phenomenon in the U.S. of lawsuits seeking damages for alleged violations of the American with Disabilities Act. The article notes that the Department of Justice’s ADA implementing regulations, which went into effect in 2012, are “well-meaning but confusing.” The government largely leaves that enforcement of the regulations up to people with disabilities, using litigation as the enforcement mechanism. The result is what the article describes as a “cottage industry” of ADA lawsuits.
Specifically, the article notes, with respect to lawsuits filed by disabled persons, that
More than 4,430 reached federal courts in 2014 – a 63% rise in one year, according to new data from Seyforth Shaw…. Many more cases rattle around state courts; most end in a confidential settlement. The lion’s share took place in California … and Florida (which has a high concentration both of lawyers and of frail elderly residents). … More lawsuits may soon be on the way, as the Justice Department is expected to apply new ADA rules to websites in June. For example, each picture must have text describing it, so that the screen-reader programmes can tell blind people what is there.
Readers will note that in anticipation of the new ADA rules, I added a caption to the image at the top of the post. The new rules may not go into effect until June, but might as well get used to the requirements now.
Blessed Be the Peacemakers: Overheard today — “I’m still hoping Mayweather and Pacquiao can figure out a way to settle their differences without fighting.” Amen, brother. Too much violence in the world as it is.
Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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