Spokeo Dismissals – With Prejudice, Without Prejudice or Something Else?

by Kilpatrick Townsend & Stockton LLP

Takeaway: In the wake of the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), federal courts and litigants have grappled not only with what constitutes an actionable injury sufficient to confer standing to sue, but also the issue of whether a dismissal for lack of standing should be with or without prejudice. While litigants lacking standing usually have their claims dismissed without prejudice, a recent opinion by Judge Posner suggests dismissal with prejudice may be appropriate in some circumstances. Other authorities suggest a third option – dismissal for lack of federal jurisdiction – meaning the dismissal bars a future federal filing but would not bar a state filing pressing the same claims.

In Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir.), reh’g denied (Apr. 7, 2017), the Seventh Circuit vacated certification of classes consisting of Illinois and Missouri residents with glaucoma who used defendants’ eyedrops. The glaucoma sufferers claimed defendants’ products dispensed unnecessarily large eye drops; in the words of the district court, defendants’ oversized eye drops had the effect of “creating wastage of medication and forcing the plaintiffs to spend more money on medication.” Eike v. Allergan, Inc., No. 12-cv-1141-SMY-DGW, 2016 WL 4272127, at *1 (S.D. Ill. Aug. 15, 2016). Plaintiffs further alleged the increased size of the eye drops added no therapeutic value. Id.

Judge Posner had no patience for the theory of plaintiffs’ case, which he viewed as mere “dissatisfaction” with a product and its price. In classic Posner fashion, he analogized the case to a dissatisfied group of cat owners who, at the cat breeders’ suggestion, purchased an expensive drinking fountain because “cats prefer to drink out of a fountain (where gravity works for them) rather than out of a bowl (where gravity works against them).” Eike, 2017 WL 881834, at *1.  “Yet,” Judge Posner writes, “would anyone think they could successfully sue the breeders?” Id. According to Judge Posner, “It’s the same here … you cannot sue a company and argue only—‘it could do better by us’—which is all they are arguing.” Id. at *1-*2. Plaintiffs’ suit, he concluded, failed for lack of standing. Citing Spokeo, he ruled: “The fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; it is just a regret or disappointment—which is all we have here, the class having failed to allege ‘an invasion of a legally protected interest.’” Id. at *2.

Judge Posner then remanded the case to the district court “with directions to dismiss the suit with prejudice.” Id. (emphasis added). The plaintiffs quickly filed a petition for rehearing en banc, arguing the dismissal should have been without prejudice because a court without jurisdiction should not rule on the merits. See, e.g., Fredericksen v. City of Lockport, 384 F.3d 438, 438 (7th Cir. 2004) (holding “a suit dismissed for lack of jurisdiction cannot also be dismissed ‘with prejudice’; that’s a disposition on the merits, which only a court with jurisdiction may render”). The petition for rearing, however, was denied.

In Frederiksen, moreover, Judge Easterbrook viewed “no jurisdiction” and “without prejudice” as “mutually exclusive” categories. Id. In other words, “[a] jurisdictional disposition is conclusive on the jurisdictional question: the plaintiff cannot re-file in federal court. But it is without prejudice on the merits, which are open to review in state court to the extent the state’s law of preclusion permits.” Id. Judge Easterbrook further observed: “Some of our decisions, however, have affirmed dismissals ‘without prejudice,’ which misleadingly implies that the plaintiff may pursue the same claim again in federal court, or ‘with prejudice,’ which implies that even a state court is powerless to act.” Id. Indeed, in a prior case, Hill v. Potter, Judge Posner himself (at least from Judge Easterbrook’s view), made that mistake, when he ruled that “[d]ismissals for want of subject-matter jurisdiction are always denominated without prejudice, because they signify that the court did not have the power to decide the case on the merits.” 352 F.3d 1142, 1146-47 (7th Cir. 2003).

So did Judge Posner mistakenly use the words “with prejudice” in Eike? Or did he mean to preclude the plaintiffs from bringing the action in any court (state or federal)? That Judge Posner analogized plaintiffs’ cause of action to people being upset about buying their cats a luxury fountain suggests he ruled intentionally and dismissed the case with prejudice on grounds of frivolity.

As Judge Posner stated in El v. AmeriCredit Financial Services, Inc., dismissals for lack of federal jurisdiction “ordinarily are without prejudice.” 710 F.3d 748, 751 (7th Cir. 2013) (emphasis added). But courts recognize an exception for frivolity: “if the reason there’s no federal jurisdiction is the plaintiff’s having predicated jurisdiction on a frivolous federal claim, dismissal with prejudice is appropriate for such a suit will go nowhere in any court.” Id.; see also Georgakis v. Illinois State Univ., 722 F.3d 1075, 1078 (7th Cir. 2013) (Posner, J.) (holding a frivolous suit “can justifiably be dismissed with prejudice to avoid burdening the court system with a future suit that should not be brought—anywhere.”); United States v. Funds in the Amount of $574,840, 719 F.3d 648, 652 (7th Cir. 2013) (Posner, J.) (“And there are at least two situations in which even though the standing issue merges with the merits, a ruling rejecting standing has res judicata effect. One … is where the suit either is frivolous (and so does not engage the jurisdiction of the court) or is intended to harass, and in either case the court by dismissing with prejudice can preclude burdening itself or another court with a future suit that simply should not be brought.”); Beauchamp v. Sullivan, 21 F.3d 789, 790-91 (7th Cir. 1994) (Posner, J.) (“Unless the plaintiff has standing, a court cannot reach the merits of his case. But there is an exception for the frivolous case. A frivolous case does not engage the jurisdiction of the court. So frivolousness is an alternative jurisdictional ground for dismissal to lack of standing.”).

Judge Posner did not state explicitly that he dismissed Eike with prejudice because he viewed the claims as frivolous. The only cases he cites in the entire opinion are Spokeo and Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). But his reasoning and typically colorful illustrations strongly suggest a frivolous action lacking an actionable injury should be dismissed with prejudice, thereby foreclosing re-filing of the suit in any court. After all, many suits that fail to allege an actionable injury under Spokeo might naturally lead a person to ask: Would anyone think they should be able to successfully someone anywhere (including in state court) for that?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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