The Supreme Court has decided a case involving injury-in-fact and standing issues that may have significant impacts on class actions. See Spokeo Inc. v. Robins, No. 13-1339 (U.S. 5/16/16).

Spokeo, Inc. operated a “people search engine,” which searches a wide spectrum of databases to gather and provide personal information about individuals to a variety of users, including employers wanting to evaluate prospective employees. After respondent/plaintiff Robins discovered that his Spokeo-generated profile allegedly contained inaccurate information, he filed a federal class action complaint against Spokeo, alleging that the company willfully failed to comply with the Fair Credit Reporting Act’s requirements.

The District Court dismissed Robins’ complaint, holding that he had not properly pleaded injury in fact as required by Article III. The Ninth Circuit reversed. Based on Robins’ allegation that “Spokeo violated his statutory rights” and the fact that Robins’ “personal interests in the handling of his credit information are individualized,” the appeals court ruled that Robins had adequately alleged an injury in fact.

The Supreme Court ruled that the Ninth Circuit failed to consider both aspects of the injury-in-fact requirement, so its Article III standing analysis was incomplete. A plaintiff invoking federal jurisdiction bears the burden of establishing the “irreducible constitutional minimum” of standing by demonstrating (1) an injury in fact, (2) fairly traceable to the challenged conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife, 504 U. S. 555, 560–561. Particularly relevant here, the injury-in-fact requirement requires a plaintiff to show that he or she suffered “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Id. at 560.

The Ninth Circuit’s injury-in-fact analysis neglected the independent “concreteness” requirement. Both observations it had made about the statutory claim concerned only “particularization,” i.e., the requirement that an injury “affect the plaintiff in a personal and individual way,” Id.at 560, n. 1. But an injury in fact must be both concrete and particularized. Concreteness is quite different from particularization and requires an injury to be “de facto,” that is, to actually exist.

The Ninth Circuit also failed to address whether the alleged procedural violations entail a degree of risk sufficient to meet the concreteness requirement. A “concrete” injury need not always be a physical or “tangible” injury. See, e.g., Pleasant Grove City v. Summum, 555 U.S. 460. To determine whether an intangible harm constitutes injury in fact, both history and the judgment of Congress are instructive. Congress is well positioned to identify intangible harms that meet minimum Article III requirements, but a plaintiff does not automatically satisfy the injury-in-fact requirement whenever a statute grants a right and purports to authorize a suit to vindicate it. Article III standing requires a concrete injury even in the context of a statutory violation. So, the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact; in such a case, a plaintiff need not allege any additional harm beyond the one identified by Congress, see Federal Election Comm’n v. Akins, 524 U. S. 11, 20–25. But in some circumstances a mere alleged violation of a federal statute will not be sufficient. Plaintiffs cannot automatically satisfy the demands of Article III by alleging a bare procedural violation. In addition, not all substantive inaccuracies cause harm or present any material risk of harm.

The Court remanded for consideration of these issues (which means the case may come back up).

The ruling that a mere allegation of a statutory violation by itself and mere procedural violations of a statute do not necessarily create standing will likely impact numerous class actions. Lead plaintiffs will not be able to assert mere statutory violations as a means to show standing with respect to each absent putative class member. Often, there will need to be an individualized inquiry as to each class member on issues surrounding the concreteness of each injury, the degree of risk posed by each violation to each class member, such as the nature and level of information the defendant allegedly got wrong. Many plaintiff lawyers, in order to maximize damages, seek to draw their class so broadly as to almost certainly include many individuals who have only a technical claim. The need for individual inquiry will loom large in the predominance analysis. Absent a proper standing analysis, the economy will continue to see huge payouts in no-injury lawsuits, a wealth transfer that overcompensates for non-existent injuries and over-deters insubstantial or technical regulatory violations.