Key Notes:

  • Injury in fact is required to assert a claim under a federal statute and have Article III Standing
  • Congress cannot bypass constitutional standing requirements by creating a private right of action
  • Spokeo provides arguments that standing may not exist for some plaintiffs for claims brought under similar federal statutes such as the Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the Fair Debt Collection Practices Act

Yesterday, in Spokeo, Inc. v. Robins, the Supreme Court held that a plaintiff’s bare allegation that the defendant violated a federal statute was not sufficient to show standing to file a lawsuit. The decision has the potential to provide additional defenses in individual and class actions alleging violations of federal law.

In Spokeo, Robins filed a class action against Spokeo, a website that provides users with information about individuals, alleging that Spokeo violated the Fair Credit Reporting Act (FCRA) by falsely reporting that he had a graduate degree and was wealthy, information that Robins claimed hampered his job prospects and caused him anxiety and stress. The district court dismissed the action because the complaint did not allege that the failure to comply with the FCRA caused the plaintiff any actual damages. The Ninth Circuit Court of Appeals reversed, holding that “[w]hen, as here, the statutory cause of action does not require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages,” and that the statutory violation is sufficient to satisfy the injury-in-fact requirement of Article III. Robins v. Spokeo, Inc., 742 F.3d 409, 413 (9th Cir. 2014). Although the Ninth Circuit’s decision was consistent with the law in the Sixth Circuit (Beaudry v. TeleCheck Servs., 579 F.3d 702, 708 (6th Cir. 2009)), the Eighth Circuit had suggested that proof of actual damages may be required (Dowell v. Wells Fargo Bank, NA, 517 F.3d 1024, 1026 (8th Cir. 2008)).

Yesterday, the Supreme Court held that “Article III standing requires a concrete injury even in the context of a statutory violation.” Spokeo, Slip. op. at 9. Thus, allegations of “a bare procedural violation, divorced from any concrete harm,” are insufficient to demonstrate standing. Id. at 9-10. In reaching its conclusion, the Court reaffirmed Article III’s bedrock standing requirements: (1) injury in fact, (2) that is fairly traceable to the defendant’s conduct, and (3) that may be redressed by a decision in the plaintiff’s favor. Id. at 6. The Court reiterated that “at the pleading stage, the plaintiff must clearly … allege facts demonstrating” each element. Id.

Focusing on the first element, the Court explained “that an injury in fact must be both concrete and particularized.” Id. at 8. To be particularized, an injury must “affect the plaintiff in a personal and individual way.” Id. at 7. To be concrete, an injury “must be ‘de facto’; that is, it must actually exist.” Id. at 8.

The Court drew a line between these two requirements, concluding that the plaintiff’s allegations concerning his individualized statutory and personal rights demonstrated only “particularization, not concreteness.” Id. The Court recognized, however, “that the risk of real harm” might “satisfy the requirement of concreteness,” and that “the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact.” Id. at 10. The Court concluded that the Ninth Circuit “failed to fully appreciate the distinction between concreteness and particularization,” and therefore “its standing analysis was incomplete.” Id. at 11. The Court vacated the Ninth Circuit’s decision and remanded for consideration of “whether the particular procedural violations alleged in this case entail a degree of risk sufficient to meet the concreteness requirement.” Id.

The Supreme Court also made plain that Congress cannot bypass constitutional standing requirements by creating a private right of action: “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. For that reason, Robins could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. at 9-10.

The Supreme Court’s opinion has potentially enormous impact on lawsuits alleging technical violations of federal statutes and regulations. In the last 50 years, Congress has enacted a variety of consumer protection legislation that has resulted in volumes of administrative regulations. Consumers have filed lawsuits alleging that the violations of these regulations give rise to claims for statutory damages and attorney’s fees—both on an individual and class action basis—even if the violations were hyper-technical, and even if the violations caused no real harm. For example, the Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the Fair Debt Collection Practices Act impose a myriad of detailed timing and content requirements for consumer transactions and communications. Plaintiffs have frequently filed claims based on technical violations of these regulatory requirements without any allegation of actual damages. Although defendants have often challenged standing in those lawsuits, they now have additional support for those arguments under Spokeo.

In addition to Spokeo’s obvious impact on litigation involving financial institutions or credit reporting agencies, plaintiffs have also filed class action lawsuits alleging that products have latent defects, even though those defects have not caused harm to individual class members. Spokeo bolsters the arguments that class actions may not be maintained without a showing of both concrete and particularized harm.

Thompson Hine lawyers routinely defend national banks and other financial institutions, manufacturers, mortgage servicers and others in individual and class actions involving federal and state regulatory violations.