Constangy, Brooks, Smith & Prophete, LLP

If you have ever played in or watched a game in which the players called their own fouls, penalties or rules violations, you probably heard one of them respond to an alleged infraction by claiming, albeit with more colorful language, “I barely touched you!” or “That was no foul!”

In the world of litigation, such a retort is the same as saying, “You lack standing to sue me,” and the concept of standing has gotten a lot of attention lately.

In an effort to be merciful, I will not attempt to explain how the United States Constitution, which limits federal courts to hearing “cases and controversies,” resulted in a requirement that a plaintiff have standing in order to pursue a lawsuit. Nor will I make your hair hurt by trying to explain (even if I could) the more than 200 years of jurisprudence on the topic of standing. Rather, I will start with what the Supreme Court of the United States has described as the “bare minimum” for establishing standing to sue: (1) that the plaintiff has suffered an injury in fact, (2) which is fairly traceable to the challenged conduct of the defendant, and (3) which is likely to be redressed by a favorable judicial decision. Translated into schoolyard parlance, “I’m hurt. You hurt me. The Principal can take care of this.” This article addresses the first element.

To establish an injury in fact, a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete, particularized and real, but which need not be tangible. For example, few people would have trouble understanding that a broken arm or the loss of $10,000 is a real, concrete and particularized injury. But, as the Supreme Court has made clear, intangible injuries can create standing and the dictionary defines “intangible” as something unable to be touched or grasped, or not having a physical presence. (Is your hair starting to hurt?)

As most of you are aware, some statutes establish monetary penalties for violations of their terms. For example, COBRA (the Consolidated Omnibus Budget Reconciliation Act) requires that COBRA notices include, among other things, the name, address, and phone number of the plan’s administrator, and permits recovery of a $110-per-day penalty for failure to include that information in the notice. Similarly, the Fair Credit Reporting Act requires that applicants receive a “stand-alone” disclosure of the employer’s intent to request a background report and permits recovery of a penalty of $100 to $1,000 per person for a willful failure to provide the disclosure. When dealing with thousands of applicants or plan participants, penalties like these can reach staggering amounts and attract class action attorneys like bees to honey.

But what happens when the person bringing the suit clearly has not suffered any “real world” concrete injury due to the employer’s failure to comply with the statutory requirements? For example, what if a COBRA notice fails to comply with the statute but the employee suing for that violation suffered no lapse in coverage, denial of health care, or unpaid medical bills because of that failure? Similarly, what if an employer’s FCRA notice is included in the job application, which probably means it’s not a compliant “stand-alone” disclosure, but the employee is hired and suffered no real world injury because of that violation?

Although you might think that no one would bring a lawsuit in these circumstances, there have been plenty of them lately. Most are predicated on an intangible “informational injury” – in other words, the statute requires that certain information be provided or provided in a certain way, the defendant failed to provide it, and the plaintiff is injured by the failure. Lately, a fair number of courts have dismissed lawsuits like these for lack of standing, including COBRA and FCRA class actions predicated solely on a claim that the plaintiff suffered an informational injury. But other courts have permitted such lawsuits to proceed.

Although employers can take some comfort in knowing that “no harm” may lead to a finding of “no foul,” there is no guarantee that the absence of real world, concrete injury will result in dismissal. Why leave such things to the vagaries of whether the applicant, employee, or former employee suing you has suffered a real world injury? Considering the dislocations caused by the current pandemic, and eventual rebound with associated hiring, why not take the time now to make sure that your COBRA and FCRA notices are compliant? Unless, of course, you like high stakes gambling.

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