Commercial Litigation Alerts

May 24th, 2016

Was Anyone Hurt? - New Supreme Court Test Raises the Bar for Class Action Plaintiffs

There's good news for companies defending or girding for consumer class actions. On May 16th, the Supreme Court held that plaintiffs alleging so-called "statutory violations" must also allege "injury in fact." Going forward, mere technical violations of a statute are unlikely to support a class action. While the decision focused on complicated concepts found in Article III of the United States Constitution, companies should take a moment to see how the playing field has shifted. Here's a summary.

Spokeo Inc. v. Thomas Robins

Plaintiff Thomas Robins filed a class-action lawsuit against Spokeo, Inc., a consumer reporting agency, alleging his Spokeo-generated profile contained inaccurate information in violation of the Fair Credit Reporting Act of 1970 ("FCRA"). The federal trial court dismissed his complaint, holding that alleged incorrect profile information (e.g., about his marital and employment status) could not constitute a sufficient "injury in fact." An appeals court reversed, concluding that Robins had alleged a sufficient "injury in fact" to proceed in court. Spokeo appealed to the Supreme Court.

The Supreme Court held that in cases alleging the violation of a statute, the Constitution "requires a concrete injury" before plaintiffs will be permitted to advance a case. A "bare procedural violation" is not enough. The Court wrote that "not all inaccuracies [in a Spokeo consumer profile] cause harm or present any material risk of harm." The Court cited an incorrect zip code as an example of a technical inaccuracy that ----  by itself ----  would not create "concrete harm."

However, the Court tempered this rule by adding that "the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact." The Court sent the Spokeo case back to the appeals court to evaluate whether the misreporting of Robins' information was sufficiently concrete to satisfy the new test.

The take-away

The Spokeo decision gives defendants a powerful weapon against consumer class actions alleging statutory violations. For example, class actions against advertisers and marketers alleging technical violations of the Telephone Consumer Protection Act, or technical violations of privacy and data breach statutes ----  will be subject to the Supreme Court's higher bar for stating a claim or certifying a class action.

If you have questions about the Spokeo decision, or about other advertising or privacy-related litigation, please contact Craig Whitney at (212) 826 5583 or cwhitney@fkks.com, or any other member of the Frankfurt Kurnit Litigation, Advertising, and Privacy & Data Security Groups.