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U.S. Supreme Court Will Review Ninth Circuit Decision Involving Consumers’ Standing to Sue Without Evidence of Financial Harm

man-147091_640.pngThe U.S. Supreme Court has agreed to hear the appeal of a Ninth Circuit Court of Appeals ruling that held that a plaintiff has standing to sue under a federal consumer protection statute, despite presenting no evidence of direct financial injury. The question presented to the court in Spokeo, Inc. v. Robins is whether a statute can authorize a private right of action when the only alleged injury is a violation of the plaintiff’s statutory rights. The case could affect numerous federal statutes and therefore countless American businesses. The court will not hear arguments in the case until the October 2015 term.

The case involves alleged violations of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. The defendant operates a website that allows users to obtain personal information about others. The plaintiff alleged that the website contains inaccurate information about him, and that the availability of this information threatens his ability to find employment or obtain credit or insurance. The district court dismissed his original complaint in January 2011, finding that he had not alleged an injury in fact, and that “possible future injury” is not enough to confer standing under Article III of the U.S. Constitution. Robins v. Spokeo, 742 F.3d 409, 410 (9th Cir. 2014).

In an amended complaint, the plaintiff alleged that the inaccurate information on the website had caused “actual harm to [his] employment prospects,” cost him money, and caused him distress. Id. at 411. The district court denied the defendant’s motion to dismiss, finding that the amended complaint had met the pleading requirements for Article III standing. After the defendant sought an interlocutory appeal, however, the court reversed its own order and dismissed the case.

“Standing” in a federal lawsuit has three essential components. A plaintiff must plead an “injury in fact” that is actual or imminent, the injury must be “fairly traceable” to the defendant’s alleged act, and a “favorable decision” from the court must be likely to redress the plaintiff’s injury. Id. at 412, quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81 (2000). If a plaintiff cannot establish standing, the court does not have subject matter jurisdiction.

The defendant argued to the Ninth Circuit that a plaintiff must show actual harm in order to have standing under the FCRA. The Ninth Circuit disagreed, noting that the statute imposes liability for any “willful[] fail[ure] to comply with any requirement imposed under this subchapter with respect to any consumer.” Id., quoting 15 U.S.C. § 1681n(a). The court cited a Sixth Circuit decision holding that a plaintiff could establish standing by alleging a violation of statutory rights conferred by the FCRA, and by showing that the right in question guards against “individual, rather than collective, harm.” Id. at 413, quoting Beaudry v. Telecheck Svcs., Inc., 579 F.3d 702, 707 (6th Cir. 2009). It held that the plaintiff had met all of these requirements. The Supreme Court granted the defendant’s petition for certiorari on April 27, 2015.

If you or your business needs assistance with a legal matter, such as business formation, transactions, contracts, or a business dispute, a skilled and experienced commercial law attorney can help you understand your rights and obligations and can advocate for your interests. James G. Schwartz has represented businesses and business owners in the Bay Area since 1976. Contact us today online or at (925) 463-1073 to schedule a free and confidential consultation to discuss your case.

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