Introduction

On November 2, 2015, the U.S. Supreme Court heard a contentious round of oral arguments in a case that may significantly change the landscape of consumer class actions.(1)

The case, Spokeo, Inc. v. Robins, is a class action arising under the Fair Credit Reporting Act (“FCRA”). Like other class actions, the case began when Robins, the lead plaintiff, claimed that he represented similarly situated persons who were wronged by the defendant’s actions. Robins claimed that the defendant, Spokeo, published false information online that misrepresented his identity. Spokeo is an online services company that aggregates public information on individuals and makes summary reports available upon request. Robins alleged that the information was false in that it misrepresented him as wealthy, married with children, and a holder of a graduate degree. In fact, he was none of these things. Robins also alleged that this false information harmed his employment prospects.

The issue before the Supreme Court is the threshold requirements for class action plaintiffs to maintain such lawsuits in federal court. In order to have standing to sue in federal court, a plaintiff must have a particularized “injury in fact.” Accordingly, oral argument focused on the meaning of the “injury” suffered by Robins.

Injury Under the FCRA

The FCRA regulates companies that publish personal information on consumers which may affect their credit rating and reputation. Like other federal consumer protection statutes, the FCRA authorizes private litigants to bring lawsuits to remedy violations by claiming damages of $1,000 per violation as provided under the statute. Because the class action would aggregate the damages of millions of people who have similar claims against the defendant company, the total liability could be astronomically high.

Specifically, Robin’s lawsuit is based on a FCRA provision that allows private litigants to bring a lawsuit premised upon any violation of FCRA standards. Thus, the statute on its face could authorize a lawsuit even where a plaintiff does not suffer any economic harm from false information published by an online services company such as Spokeo. According to Spokeo, this statutory provision flouts Supreme Court and common law precedents that require actual injury to the plaintiff in order for the plaintiff to maintain a justiciable case before a federal court. In response, Robins argues that Spokeo’s violation of the statute is in itself a form of injury tied to reputational harm to Robins.

The Justices’ Divergent Views at Oral Argument

At oral argument, the justices of the Court sparred with one another as well as the litigants’ counsel. Some of the reputedly liberal justices of the Court began by disputing Spokeo’s arguments against standing based on common law precedent. Justices Kagan and Ginsburg questioned Spokeo’s premise that the Court should accord greater weight to case precedents as authority over an act of Congress. Justice Sotomayor expressed her view that common law rights in practice depend on positive legislation for enforcement. Justice Breyer then questioned the premise that false information should not constitute injury when courts recognize psychic harm and economic harm as actual injury to bring lawsuits.

When Spokeo’s counsel countered that a plaintiff must show actual harm from the publication of false information under traditional defamation suits, Justice Kagan noted “that’s a really hard thing to do,” because a person would not know whether the false information was given to someone who then denied employment to that person. Justice Sotomayor added: “I will tell you that I know plenty of single people who look at whether someone who’s proposed to date is married or not. So if you’re not married and there’s a report out there saying you are, that’s a potential injury.” Justice Scalia, who is conservative by reputation, countered that the statute appears to premise liability upon the failure to follow statutory procedures, which potentially awards remedies even where there is no false information.

When Robins’ counsel presented his arguments, the reputedly conservative justices took their turn questioning the bases for the plaintiff’s alleged injury. Justice Kennedy argued that Robins’ reasoning is circular, because Robins essentially argues that he has a stake in litigation simply because the statute states that he has a stake.

Chief Justice Roberts then framed a hypothetical scenario where a company publishes inaccurate information regarding a person, but that information is of a type that cannot lead to any harm, such as a person’s unwillingness to receive unsolicited telephone calls. The Chief Justice maintained that the Court’s precedents always required injury in fact such that a statute cannot trump case precedents simply by calling a violation an injury.

At this point, Justices Breyer, Scalia, and Kennedy argued with counsel and one another as to whether it would be sufficient, even if putative class members belong to a subset of the population that are potentially adversely affected by false information, because case precedents require that the injury must be “particularized” with respect to that plaintiff.

The conservative justices then questioned the evidentiary basis for alleged reputational harm to the lead plaintiff. Justice Alito asked for evidence that anyone actually accessed the plaintiff’s report; counsel conceded that no such evidence was apparent from the trial record. Chief Justice Roberts noted that Spokeo’s service also contained a disclaimer against any guarantees regarding the accuracy of the information. Justice Scalia then suggested that the FCRA provision may be invalid because it purports to authorize lawsuits even for people who suffer no harm, and the fact that a plaintiff in a case actually suffered harm may not save that statute.

Impact for Online Services Companies

Because the FCRA’s statutory damages provision has major implications for potential class actions against other online services companies, and because the FCRA provision resembles other federal consumer protection statutes, a number of key players in the e-commerce industry, including eBay, Facebook, Google, and Yahoo!, filed amicus briefs in support of Spokeo.

As an indication of the potential ramifications of this case, Experian, a credit reporting agency, is embroiled in a similar lawsuit under the FCRA, and that court ordered a stay to await the Supreme Court’s ruling in Spokeo.(2) Similarly, in a class action lawsuit against Florida-based Caribbean Cruise Line, Inc. for robo-calling in violation of the Telephone Consumer Protection Act, the defendant company cited Spokeo to seek a stay of that case as well.(3)

Conclusion

As the justices have clearly set forth their positions during oral arguments, it appears that the eventual decision in this case will be a split opinion. The ultimate decision may favor Spokeo and thus limit the scope of plaintiffs who may bring class actions under the FCRA and similar federal statutes. If the majority rules that class action plaintiffs must show actual harm from reputational damage, it may severely impact their ability to sustain a lawsuit. The executives at the major e-commerce companies, such as Google, eBay, Facebook, LinkedIn, Yahoo!, Netflix, and Twitter, likely will await the decision with baited breath.

Endnotes

(1) No. 13-1339, cert. granted (U.S. Apr. 27, 2015).
(2) Jody Godoy, Consumers Say Experian Row Needn’t Wait for Spokeo Ruling, Law360 (Nov. 24, 2015).
(3) Diana Novak Jones, Cruise Cos. Want Stay Until High Court’s Spokeo Ruling, Law360 (Nov. 23, 2015).