The Supreme Court’s recent decision to hear the appeal in Spokeo, Inc. v. Robins may have significant implications for data breach litigation in particular and consumer class action litigation generally. At issue is whether a plaintiff who has suffered no actual injury or harm nonetheless has standing under Article III of the United States Constitution to seek recovery in federal court based on an alleged violation of a statutory right. Depending on how the Supreme Court resolves the issue, companies defending data breach lawsuits and other consumer class actions may find it tougher to obtain dismissal at the motion to dismiss stage.
The petition originates from a class action lawsuit filed in the United States District Court for the Central District of California against Spokeo, a search engine operator that aggregates information on individuals from public sources. The plaintiff alleged that the information Spokeo maintained on him was inaccurate and violated the Fair Credit Reporting Act. The plaintiff did not allege, however, any actual injury or harm, only that the inaccurate information could harm him in the future. For instance, the plaintiff alleged that the incorrect information could prevent him from, among other things, gaining employment and obtaining credit.
In the district court, the court granted a motion to dismiss by Spokeo on the ground that the plaintiff had failed to adequately allege injury in fact – a requirement for Article III standing – because he had not alleged “any actual or imminent harm.” On appeal, the Ninth Circuit reversed, finding that the “creation of a private cause of action to enforce a statutory provision implies that Congress intended the enforceable provision to create a statutory right,” and that “the violation of a statutory right is usually a sufficient injury in fact to confer standing.”
The federal circuits have been split on this issue. The Sixth, Seventh, Eighth, and Ninth Circuits have previously found a violation of the FCRA sufficient to confer Article III standing, while the Second and Fourth Circuits have taken the opposite view. Beyond clarifying the law in this area, a ruling in favor of the plaintiff would likely open the doors wider to plaintiffs seeking recovery in federal court for statutory violations, while at the same time reduce the arsenal of defenses that defendants frequently employ in seeking dismissal at the motion to dismiss stage. Notably, the Supreme Court came close to resolving this issue in First American Financial Corp. v. Edwards, 131 S. Ct. 3022 (2011), but after granting oral argument, dismissed the petition as improvidently granted.
Stay tuned for more developments.