At best, for defendants the Court was clear that the mere allegation of the violation of a statute that contains a monetary penalty would not by itself support standing under Article III of the Constitution. But at worst for defendants the decision unquestionably leaves open the door for claims that involve only a statutory violation and penalty as damage can proceed where there is some sort of ill-defined link between the penalty and some tangible or intangible harm.
For the plaintiffs’ bar, the decision left open the possibility for them to bring these claims and attempt to show that the penalty and statutory violation has the tie mentioned above. What all this means for everyone is that the cottage industry involving this kind of cases remains open for business albeit with perhaps some additional pleading and showing now necessary.
Why was the decision so important? 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. All of these could have been wiped out by an adverse decision in Robins.
On the other hand, had SCOTUS sided completely with the 9th Circuit, the floodgates for data breach and other class actions would have been opened very wide. Based on this “no injury” concept, plaintiffs’ attorneys have 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 $2500 to $10,000 per violation. The settlements of class claims brought under the TCPA are also legendary. Indeed, the in terrorem effect of such claims makes settlement the only viable option.
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.”
In Robins, the act in question – the Fair Credit Reporting Act – imposed penalties collectible by affected consumers of not less than $100 and no more than $1000 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, in February 2014 and held 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. See: In re Adobe Sys. Privacy Litig., 2014 U.S. Dist. LEXIS 124126, at *27-28 (N.D. Cal. Sept. 4, 2014); Moyer v. Michaels Stores, Inc., 2014 U.S. Dist. LEXIS 96588, at *19 (N.D. Ill. July 14, 2014); In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 996 F. Supp. 2d 942, 962 (S.D. Cal. 2014); see also Memorandum and Order, In re Target Corp. Customer Data Sec. Breach Litigation, No. 14-mdl-2522, slip op. at 3-4 (D. Minn Dec. 18, 2014); cf.Tierney v. Advocate Health & Hosps. Corp., 2014 U.S. Dist. LEXIS 158750, at *4-6 (N.D. Ill. Sept. 4, 2014).
The 2nd and 4th Circuits and other lower courts have found directly to the contrary.
See: e.g., Galaria v. Nationwide Mut. Ins. Co., 998 F. Supp. 2d 646, 655-60 (S.D. Ohio 2014); In re Sci. Applications Int’l Corp. (SAIC) Backup Tape Data Theft Litig., 45 F. Supp. 3d 14, 26-28 (D.D.C. 2014); In re Barnes & Noble Pin Pad, 2013 U.S. Dist. LEXIS 125730, at *8-9, 12 (N.D. Ill. Sept. 3, 2013); Lewert v. P.F. Chang’s China Bistro, Inc., 2014 U.S. Dist. LEXIS 171142, at *7-8 (N.D. Ill. Dec. 10, 2014); Remijas v. Neiman Marcus Group, LLC, 2014 U.S. Dist. LEXIS 129574, at *9-10 (N.D. Ill. Sept. 16, 2014).
Prior to deciding Robins, SCOTUS, in its most recent standing analysis, had held that Article III standing was not a speculative or conjectural concept; mere concern or fear of future harm does not suffice to confer standing. Rather, a plaintiff must demonstrate he has suffered a “concrete, particularized, and actual or imminent” injury, meaning the harm has either occurred or is “certainly impending.” (See Clapper v. Amnesty Int’l USA, 133 S.Ct. 1138 (2013)) This suggested to the defense bar at least that SCOTUS might reject the non-injury concept in toto and the 9th Circuit’s view.
On the other hand, the Court had the opportunity to do just that in 2010 in First American Financial Corp. v. Edwards and effectively punted the issue by dismissing the petition as improvidently granted. And just like in First American, the Court in essence punted in Robins: it vacated the previous 9th Circuit decision and remanded the case back to that Court for further consideration.
And while the SCOTUS did not side completely with the 9th Circuit—by a 6-2 majority it remanded the case back to that Court for further proceedings-there was enough troubling language to give the defense bar concern.
First, 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 sufficiently 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. According to the Court, the 9th Circuit erroneously believed that the concrete harm was satisfied by the allegation that Spokeo violated Robin’s statutory rights and that his interests in the handling of his credit information were “individualized”. These findings said SCOTUS went to the particularity requirement, not the concrete one.
Noting that a concrete injury was one that actually existed, the Court 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:
In determining whether an intangible harm constitutes injury in fact, both history and the judgment of Congress play important roles…[I] is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.
Thus, According to SCOTUS, standing could be supplied by a statutory violation and penalty although standing would not “automatically” be satisfied whenever a statute granted a stature right supported by a penalty and Congress could not erase standing by giving standing to one who did not otherwise have it.
But a plaintiff need not allege additional harm beyond what Congress identified. So plaintiffs have at least two avenues open to pleading viable standing: they can allege a harm identified by Congress and/ or they show that the statutory penalty being used to support standing has some tie to an actual harm.
How the latter avenue 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.
The defense bar would say that often the only real injury is irritation and disclosure of facts that really make little difference to anyone. The plaintiffs’ bar would say that even this type of intangible injury is not insubstantial, especially when compounded across a class.
No matter what, Robins clearly didn’t answer the question as to whether and how these “no injury” actions can proceed. That remains to be litigated, a fact given the enormous exposure of these cases that clearly favors plaintiffs.