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Will SCOTUS Take Up Spokeo v. Robins and Address the No Harm, No Foul Claim?

Terry W. Clemans
Jul 08, 2014

Several interested parties, including the National Consumer Reporting Association (NCRA) have filed amicus briefs in the U.S. Supreme Court urging it to hear the case of Spokeo v. Robins and reverse the Ninth Circuit’s conclusion that “the violation of a statutory right” in itself is “a sufficient injury in fact to confer standing” under Article III [Robins v. Spokeo Inc., 742 F.3d 409, 412 (9th Cir. 2014)]. The Ninth Circuit found that “the statutory cause of action does not require a showing of actual harm” (id.), and held that the plaintiff had sustained injury-in-fact under Article III by virtue of the bare statutory violation of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. The importance of this issue has a broad impact far beyond the FCRA claim it specifically addresses. There are many federal and state statutes that provide statutory damages that arguably may be recovered in the absence of any showing of actual consumer harm. By holding that causation is effectively automatic in statutory damages cases, the Ninth Circuit’s rule makes it very easy to certify a class of plaintiffs: if a statute was violated, then every consumer was hurt. That rule raises a defendant’s exposure in class-action statutory damages cases to a level that is not survivable by most businesses. In order for a federal court to be able to hear a case, Article III of the U.S. Constitution requires a plaintiff to have standing. Basically, they need to have suffered a concrete, particularized harm. In Spokeo v. Robins, the plaintiff filed a class-action suit based on a “bare allegation” that the defendant had violated FCRA by issuing consumer reports in willful violation of that statute. Spokeo is a Web site that offers information on consumers, claiming to have searched social media, criminal records, and public filings to put together estimates of their wealth and character. The named plaintiff found his profile on Spokeo, but never lost a job or was denied credit. In fact, Spokeo’s Web site listed him as having more wealth than he actually did. The issue in the Spokeo case is whether an allegation of a willful violation, standing alone, is enough of a “harm” to justify the exercise of federal jurisdiction. This issue is particularly important under FCRA, which creates statutory damage liability for willful violations ranging from $100 to $1000 per consumer. Even a small consumer reporting agency issues reports on thousands of individuals per month, and a small disclosure mistake that goes unnoticed for only a couple of months could result in a liability that would eliminate the company’s ability to survive. It would also outstrip any actual harm caused by the award. This is not news to the class-action bar, which is showing an increased interest in filing these kinds of suits and is filing growing numbers of them. This Supreme Court has attempted to rein in the excesses of class-action litigation through, for example, enforcing arbitration clauses that prohibit class-action suits and tightening pleading standards so that defendants cannot be forced to endure discovery or to enter in terrorem settlements based on a naked claim that a violated a statute that affected the plaintiff and a few thousand of his closest friends. In fact, last year, the mortgage industry was at the center of another case important to this one, that of First American Financial v. Edwards. That case took a very similar issue involving the presence of conflicts of interest in real estate transactions. The Court dismissed that appeal as improvidently granted, meaning that a majority of them thought that the facts of First American presented a bad vehicle to decide the question presented. Spokeo, however, represents a better vehicle due to the fact that there is no question of whether or not this plaintiff was harmed (he wasn’t), and if the Supreme Court were to review this decision, there is a good chance that they would reverse it. As the Supreme Court, however, hears very few cases, amicus participation at the petition stage is critical. NCRA joined with the National Association of Professional Background Screeners (NAPBS) and PreCheck, a background screening company, to retain the Washington, D.C. law firm of Meyer, Klipper & Mohr PLLC (thank you to Chris Mohr of the firm for assistance with this article) to file a friend-of-the-court brief explaining the harm that these suits are doing to this industry, and urging them to take the case. For a copy of the NCRA brief, click here. Terry W. Clemans is executive director of the National Consumer Reporting Association (NCRA). He may be reached by phone at (630) 539-1525 or e-mail [email protected]  
Published
Jul 08, 2014
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