Caveat Vendor

Ninth Circuit Issues Important Case Interpreting Article III Requirements in Statutory Rights Cases

February 05, 2014

Thomas A. Counts, Sean D. Unger, and Ryan C. Nier

One of the hurdles facing privacy claims (or, at least those that would be filed in federal court) has been, “even if you’re right, are you really injured?”  Article III of the US Constitution, which requires a ‘cognizable injury,’ has operated as a gatekeeper of privacy actions in federal court, even where the statute being relied upon provides statutory damages without the need to prove any actual damages.  Today, the Ninth Circuit issued a decision that may have broad-reaching impact on litigation strategies in those cases.  In Robins v. Spokeo, Inc., Case. No. 11-56843 (February 4, 2014), the Ninth Circuit held that in most circumstances, the allegation of a statutory violation will alone satisfy Article III’s pleading-stage standing requirement.

In Robins, the Ninth Circuit asked “whether an individual has Article III standing to sue a website’s operator under the Fair Credit Reporting Act for publishing inaccurate personal information.”  The district court had granted the defendant’s motion to dismiss for lack of subject matter jurisdiction, agreeing with the defendant that despite pleading a statutory violation (and being potentially entitled to statutory damages), plaintiff suffered no actual injury in fact.  The Ninth Circuit disagreed and reversed, holding that by pleading a redressable statutory violation, the plaintiff met the Article III standing pleading burden.

Looking deeper into the question presented, the Ninth Circuit—in an opinion written by Judge O’Scannlain and joined by Judges Graber and Bea—saw an important sub-question.  Specifically, the Court understood the broader implication of the question, and the relationship between a statute, damages, harm and Article III.  The Court considered whether Congress could create “standing by statute” in the absence of traditional economic or physical harm – the harm frequently missing in privacy actions.  In concluding that yes, Congress could create such standing, the Ninth Circuit reconfirmed two principles.
First, the Court held that “Congress’s creation of a private cause of action to enforce a statutory provision implies that Congress intended the enforceable provision to create a statutory right.”
Second, the Court held that “the violation of a statutory right is usually a sufficient injury in fact to confer standing.”  The Court understood that Article III and the Constitution did limit Congress’s ability to create standing out of whole cloth, but that Congress has the ability to elevate “to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.”
The Court ultimately held that, within the context of the Fair Credit Reporting Act, Congress did elevate such de facto injuries to a level that satisfies Article III where the plaintiff could allege that his or her statutory rights were violated and the harm alleged was individual rather than collective harm.  The Ninth Circuit borrowed its reasoning in part from a Sixth Circuit decision in Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 705-07 (6th Cir. 2009), which reached a similar result.  While the Court acknowledged plaintiffs are also required to establish the other two prongs of the Article III standing analysis – causation and redressibility – it also admitted that those additional prongs generally provide no impediment, because “[w]here statutory rights are asserted, however, our cases have described the standing inquiry as boiling down to essentially the injury-in-fact prong.”  A copy of the decision is available at http://cdn.ca9.uscourts.gov/datastore/opinions/2014/02/04/11-56843.pdf

While this decision arises out of a Fair Credit Reporting Act case, we expect it will be cited by would-be plaintiffs in privacy cases when faced with an argument that they suffered no concrete harm despite the availability of statutory damages.  The message for litigants in statutory cases may be to focus on the scope of the harm required by the cause of action alleged to determine the precise scope of the statutory right, and whether it is collective or individual, if they intend to challenge standing.  Article III will also continue to prevent “private attorney general” type claims where the plaintiff attempts to vindicate some other person’s rights.   Otherwise, ongoing focus on the specific, substantive elements of the claims alleged, as opposed to attacks on standing, may prove more fertile ground for early pleading challenges.

Caveat Vendor is Paul Hastings' Consumer Issues blog. We welcome your feedback. Please contact our blog editor with any thoughts or suggestions.

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