On Friday, the Supreme Court came out with its long awaited decision in Spokeo, Inc. v. Robins. In a nutshell, the Court really decided little: it vacated the previous 9th Circuit decision and remanded the case back to that court for further consideration. In some quarters, that would be called a “punt.”

Nevertheless, perhaps the result can be summarized at best as a tie for defendants – the Court was clear that the mere allegation of the violation of a statute that contains a monetary penalty would not support standing. But at worst for defendants the decision clearly leaves the door open for claims that involve only a statutory violation and penalty can proceed where there is some sort of undefined link between the penalty and some tangible or intangible harm.

Some background: The key issue facing the Court in Robins was whether Article III standing could be conferred when a plaintiff suffers no injury, but instead seeks only to recover statutorily imposed penalties.  Article III of the U.S. Constitution requires that a plaintiff suffers an injury in fact – injury or damage that is concrete and which the law recognizes – in order to maintain an action. We had previously reported on this case in several posts: “O’ Standing, Where Art Thou”; “On the Brink of a Class Action Sea Change? SCOTUS to Hear Robins and Critical Standing Issues” and “Robins v. Spokeo Inc: the Light at the End of the Tunnel for Rule 23 Privacy Class Actions...or the Headlights of an Oncoming Train.”

The importance of the decision the Supreme Court faced was significant. Most privacy-related statutes contain monetary penalties recoverable by affected consumers or users; it is the compounding effect of such penalties across a class of individuals that have the plaintiffs’ class action bar salivating. The Telephone Consumer Protection Act (TCPA), the Video Privacy Protection Act (VPPA), the Stored Communications Act (SCA), the Electronic Communications Privacy Act (ECPA)  – not to mention a whole slew of more traditional consumer protection acts – are just a few of the statutes that contain such penalties.

In Robins, the act in question – the Fair Credit Reporting Act (FCRA) – imposed penalties collectible by affected consumers of not less than $100 and no more than $1,000 per violation for publishing inaccurate personal information.  Spokeo operated a website that provided users with information about individuals.  Unfortunately, it published inaccurate information about Mr. Robins, who brought suit on his own behalf and on behalf of a class of allegedly similarly situated individuals.

Robins was originally decided by the 9th Circuit, which determined that statutory penalties were alone sufficient without other injury or damage to provide Article III standing. In doing so, the 9th Circuit joined the 6th, 10th and D.C Circuits and a number of other courts. The 2nd and 4th Circuits and several other lower courts have found directly to the contrary.

As we previously noted, had SCOTUS sided completely with the 9th Circuit, the floodgates for data breach and other class actions would be opened wide. Based on this “no injury” concept, plaintiffs’ attorneys have brought and are bringing class actions that net millions of dollars in settlements due to the enormous exposure presented by these claims. For example, Netflix recently faced class claims in the billions of dollars and Google in the trillions. Facebook was presented with claims of a class composed of over 3.6 million people whose statutory claims each ranged from $2,500 to $10,000 per violation.         

But while SCOTUS did not side completely with the 9th Circuit - by a 6-2 majority it remanded the case back to the appeals court for further proceedings - there was enough troubling language to give the defense bar concern.

The Supreme Court first noted that to establish Article III standing, there must be an injury in fact traceable to the conduct of another and which can be redressed by a decision. The burden of pleading and proving these elements, noted the Court, falls on the plaintiff.

The issue presented by Robins was the injury in fact prong of Article III standing-was the injury alleged by Robins concrete and particular? According to the Supreme Court, Robins satisfied the particularity prong by alleging that harm had been done to him personally. The 9th Circuit erred, however, by not considering whether the harm alleged was concrete: did the harm in fact exist?

SCOTUS then proceeded to state that an intangible or threatened harm could itself satisfy Article III standing if there was a “close relationship” to an actual harm.  Thus, standing could be supplied by a statutory violation and penalty.

So while Congress could not erase standing by giving standing to one who did not otherwise have it, a plaintiff need not allege additional harm beyond what Congress intended. What a plaintiff must plead and eventually show however is that the statutory penalty being used to support standing has some tie to an actual harm. How this must be pled and established is open to interpretation - SCOTUS didn’t say other than by noting, for example, that an incorrect zip code, which could constitute a violation of Fair Credit Reporting Act, would not supply standing because there would not be a sufficient tie to an actual harm.

So now the case goes back to the 9th Circuit for further review and consideration.  Whether this reflects the standard judicial preference for deciding cases on the narrowest of grounds or an unspoken desire of the Court to not decide significant cases while being short-handed is unknown. Although the Court also declined to decide an important case under the Affordable Care Act and remanded it back to the lower court a day after it decided Robins.

Nevertheless, Robins leaves the door open for standing claims based on statutory penalties. But it also leaves the door open for substantial litigation over what and how the tie of the penalty to the harm must be pled and proved.   In essence, we still don’t know whether and how these “no injury” actions can proceed. And that clearly favors the plaintiffs.