On May 11, 2017, the U.S. Court of Appeals for the Fourth Circuit issued an opinion in Dreher v. Experian Information Solutions, Inc., reversing and dismissing a nearly $12 million award in a Fair Credit Reporting Act (“FCRA”) class action. The court applied the U.S. Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), to find that the representative plaintiff lacked Article III standing to bring his claims. This significant decision sheds light on the viability in the Fourth Circuit of mere informational injury under Spokeo. The plaintiff originally filed his complaint against consumer reporting agencies and a tradeline servicer (“defendants”) in the U.S. District Court for the Eastern District of Virginia, alleging a dispute about plaintiff’s 2010 credit report listing an “Advanta” tradeline. Plaintiff attempted to challenge the tradeline and ultimately determined the identity of the current servicer of the account. The servicer was appointed to handle Advanta accounts after Advanta was closed by the Utah Department of Financial Institutions, and the servicer continued to do business under Advanta’s name to make the transition go smoothly for consumers.
Plaintiff brought FCRA claims against defendants, arguing that defendants violated 15 U.S.C. § 1681g(a)(2), which requires a consumer reporting agency, upon request, to “clearly and accurately disclose to the consumer . . . the sources of information” included on a consumer’s file. Plaintiff alleged that defendants willfully violated § 1681g(a)(2) by failing to list the servicer as the “source” for the Advanta tradeline. That failure, plaintiff argued, also constituted injury sufficient for Article III standing under Spokeo.
At the district court level, all defendants were dismissed prior to the summary judgment stage, with the exception of Defendant Experian Credit Solutions, Inc. (“Experian”). The district court granted summary judgment in favor of the plaintiff on his willful violation claim. Following summary judgment, the case was not tried to a jury — rather, Experian stipulated to an award of $170 statutory damages for each member of the class, resulting in an $11.7 million judgment.
Experian appealed the judgment, arguing that the plaintiff lacked Article III standing because he suffered no actual harm. The Fourth Circuit reversed the judgment and remanded the case with instructions to dismiss on the basis of the Supreme Court’s Spokeo decision. The Fourth Circuit underscored the notion that injury in the form of a statutory violation alone, “divorced from any real world effect,” does not constitute actual injury for standing purposes. The court did acknowledge that injury of this type might, in some circumstances, create Article III standing, but that this case did not present those circumstances. Here, the court characterized the harm alleged as “informational” harm, primarily “customer service” issues about “knowing who you’re dealing with,” rather than the type of “real world harm” sufficient to convey constitutional standing. The Fourth Circuit held that “receiving a creditor’s name rather than a servicer’s name — without hindering the accuracy of the report or efficiency of the credit resolution process — worked no real world harm on [the plaintiff].”
What Does This Mean For You? – The Dreher case is significant and should be welcome news for defendants facing technical claims — often broad, putative class actions premised on allegations of hypothetical or informational injuries. The Fourth Circuit is trending toward requiring real, concrete harm to find Article III standing. The Fourth Circuit’s opinion in Dreher is in line with Beck v. McDonald, 848 F.3d 262 (4th Cir. 2017), in which the Fourth Circuit held that an “enhanced risk of future identity theft” due to a data breach was simply too speculative to result in actual harm sufficient for Article III standing. We previously reported on Beck here.
Sufficient injury for Article III standing post-Spokeo continues to evolve as the federal circuit courts of appeals apply and interpret the decision. While the parameters of sufficient actual injury remain somewhat amorphous, the Fourth Circuit’s Dreher decision provides some much needed clarity on the outer bounds of injury, particularly when class action plaintiffs allege some type of “informational injury” in that jurisdiction.
Plaintiff’s petition for rehearing en banc in Dreher is currently pending.
