A recent argument and non-decision at the Supreme Court could have significant effects on plaintiffs’ lawsuits under consumer data protection and privacy laws. Last week, the Court heard arguments on the standard of harm for establishing standing under the Fair Credit Reporting Act, and declined to review a Driver’s Privacy Protection Act case in which the harm to the potential class was uncertain.
The cases, Spokeo Inc. v. Robins, et al. and Senne v. Palatine, Illinois, interpret actual or potential harm as a requirement for standing in actions brought under laws that protect consumers’ personal information. While the justices appeared divided on whether Spokeo’s publication of false consumer information online constituted injury sufficient to allow a plaintiff to sue under FCRA, the Court’s denial of the plaintiff’s appeal in Palatine let stand the Seventh Circuit’s decision that the benefits of including personal information on parking tickets should be balanced against the “negligible harm” of disclosing the information. The law that results inSpokeo and the new Seventh Circuit interpretation of the DPPA have the potential to make it more difficult for plaintiffs to get their privacy law cases into court.
During the Spokeo arguments, the parties wrestled with the recognition of harms created by legislative fiat. While some justices appeared to support the position that the incorrect information that Spokeo published online about the plaintiff was enough to give him standing to sue under FCRA, others spoke out against the theory that bare legal harm resulting from violation of statutory rights is enough for standing, with Chief Justice John Roberts emphasizing the “actual injury in fact” requirement under Article III.
In denying certiorari to the plaintiff appealing a district court’s decision to grant summary judgment in his suit against the Village of Palatine, the Court ended years of wrangling over whether the Village’s facedown placement of parking tickets with personal information on car windshields was a disclosure in violation of the DPPA that exposed drivers to identity theft. The Court left intact a significant Seventh Circuit decision that establishes a new concept of harm and a balancing test to the DPPA.
“[T]he potential harm of such disclosure is negligible but the benefits nonnegligible,” wrote Judge Richard Posner in the April decision affirming the grant of summary judgment to the Village, citing testimony from the Village police chief that the information on tickets has positive effects, such as encouraging payment of tickets. On the other hand, he wrote, the plaintiff presented no evidence that anyone had ever examined a parking ticket in the Village and used the information to commit a crime. By evaluating the degree of harm and balancing it against potential benefits of the disclosure, the Seventh Circuit introduced stringent new tests into DPPA interpretation that strike against the statute’s imposition of strict liability. The statute defines certain specific permissible uses of drivers’ information, and imposes an exceptionally high $2,500 penalty per violation when the information is disclosed for another reason.
The plaintiffs in both Spokeo and Palatine sought class certification despite presenting no evidence of actual harm. Instead, they alleged that the simple violation of consumer privacy protection laws should be enough to give them and other potential class members standing to sue. If the justices require a showing of actual harm for standing, the Spokeo decision could throw cold water on those types of cases. Similarly, the Seventh Circuit decision in Palatine has the potential to just as easily frustrate plaintiffs’ firms’ privacy law work by introducing a new test that will be difficult to overcome. Even when companies make disclosures of consumer information, the utility of their products and services and the benefits of efficiency should outweigh negligible or nonexistent harm from disclosure in every case. If courts apply Posner’s harm and balancing tests to other privacy laws, the landscape for plaintiffs’ firms could change significantly.