Supreme Court to Consider Constitutional Limits on Statutory Damages Suits

On Monday, April 27, 2015, the Supreme Court agreed to hear an important constitutional case that could dramatically limit the viability of class action lawsuits claiming millions or billions of dollars in statutory damages for technical violations of federal privacy, data breach, and consumer protection laws. The Supreme Court took the case at the urging of a number of companies and groups such as Facebook, Google, TransUnion, the U.S. Chamber of Commerce, and the Consumer Data Industry Association with a strong stake in discouraging such abusive and costly class actions.

At issue in Spokeo v. Robins (No. 13-1339) is whether Congress can lawfully confer Article III standing on a plaintiff or group of plaintiffs for a bare violation of a federal statute and in the absence of any concrete harm (so-called “statutory injury”). The case arises from a dispute between Spokeo, Inc., an operator of a “people search engine” that generates search results based on publicly-available information, and Thomas Robins, an individual who appeared in Spokeo’s search results. Robins filed suit against Spokeo in 2010 on behalf of a putative class of “millions of individuals” over allegedly willful violations of the Fair Credit Reporting Act (FCRA). The Ninth Circuit held that Robins possessed Article III standing to bring suit based on Congress’ creation of a private right of action for willful FCRA violations and that no further injury allegation was required.

The Supreme Court’s answer to the statutory injury question raised in Spokeo could have an enormous impact on class action defense, because of the number of laws providing for statutory damages, as well as the potential exposure that companies face under such statutes. Large corporations are often forced to defend against class action suits seeking statutory damages for technical violations of a host of federal laws: FCRA, the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act, the Fair and Comprehensive Credit Transactions Act, the Telephone Consumer Protection Act, the Truth in Lending Act, the Lanham Act, the Video Privacy Protection Act, the Electronic Communications Privacy Act, the Stored Communications Act, the Cable Communications Privacy Act, and others. And because many of these laws provide statutory damages of $1,000 per violation, a defendant’s potential exposure, including Spokeo’s exposure in this FCRA suit, often must be measured in the billions.

Frequent targets of class action suits should thus take note: a Supreme Court decision requiring a showing of concrete and individualized harm as a predicate for obtaining statutory damages could prove to be an extremely potent defense against costly class actions and even discourage some plaintiffs from bringing suit altogether. At the very least, a favorable ruling would make class certification much more difficult for plaintiffs, who would be required to allege and to prove injury individually (rather than class-wide) going forward. No matter what, Spokeo promises to be one of the most significant corporate cases in the Supreme Court’s 2015 term.

The merits briefs in Spokeo are due this summer, and the case will likely be argued this fall.

At ClearStar, we are committed to your success. An important part of your employment screening program involves compliance with various laws and regulations, which is why we are providing information regarding screening requirements in certain countries, region, etc. While we are happy to provide you with this information, it is your responsibility to comply with applicable laws and to understand how such information pertains to your employment screening program. The foregoing information is not offered as legal advice but is instead offered for informational purposes. ClearStar is not a law firm and does not offer legal advice and this communication does not form an attorney client relationship. The foregoing information is therefore not intended as a substitute for the legal advice of a lawyer knowledgeable of the user’s individual circumstances or to provide legal advice. ClearStar makes no assurances regarding the accuracy, completeness, or utility of the information contained in this publication. Legislative, regulatory and case law developments regularly impact on general research and this area is evolving rapidly. ClearStar expressly disclaim any warranties or responsibility or damages associated with or arising out of the information provided herein.