Litigating Statutory Damages Class Actions After Spokeo

Transcription

1 Litigating Statutory Damages Class Actions After Spokeo Bryan A. Merryman White & Case LLP 555 South Flower Street, Suite 2700 Los Angeles, CA (213)

2 Bryan A. Merryman, with White & Case LLP, has a national practice defending class actions. His recent achievements encompass a number of prominent and precedent setting wins, including one of the first district court opinions on Article III standing after the Supreme Court s decision in Spokeo, later affirmed by the Seventh Circuit; the first dismissal decided in a string of federal class actions advancing a new legal theory based on corporate responsibility and transparency regarding commercial supply chains, now on appeal in the Ninth Circuit; and the Glauser v. GroupMe, Inc. decision, regarding the definition of an autodialer under the Telephone Consumer Protection Act.

3 Litigating Statutory Damages Class Actions After Spokeo Table of Contents I. Article III Standing...5 II. Spokeo v. Robins Background...5 III. Effects and Interpretations of the Decision by Statute...6 A. Fair and Accurate Credit Transactions Act...6 B. Fair Credit Reporting Act...7 C. Fair Debt Collection Practices Act...7 D. Telephone Consumer Protection Act...7 E. Other Statutory and Common Law Claims...8 IV. Decisions by Circuit Courts...8 A. Second Circuit...8 B. Third Circuit...8 C. Fourth Circuit...9 D. Fifth Circuit...9 E. Sixth Circuit...9 F. Seventh Circuit...9 G. Eighth Circuit...9 H. Ninth Circuit...9 I. Eleventh Circuit...10 J. D.C. Circuit...10 V. Class Certification...10 VI. No Removal Followed by Motion to Dismiss Under Spokeo...11 VII. Consider State Standing Doctrines Before Challenging Article III Standing...11 Litigating Statutory Damages Class Actions After Spokeo Merryman 3

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5 Litigating Statutory Damages Class Actions After Spokeo The Supreme Court s decision in Spokeo v. Robins, on May 16, 2016, has had a significant effect on the analysis of Article III standing. 136 S. Ct (2016). So-called no injury consumer class actions in federal courts involving statutory claims with little to no actual damages have undoubtedly been impacted most by Spokeo. We will review the Spokeo decision, the types of claims it has impacted and how courts have analyzed Article III standing since Spokeo, and consider how these changes may affect our strategic decisions. I. Article III Standing As set out in Lujan v. Defenders of Wildlife, the constitutional minimum for standing consists of three elements. 504 U.S. 555, 560 (1992). A plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. Id. at To establish injury in fact, a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical. Spokeo at 1548 (quoting Lujan, 504 U.S. at 560) (emphasis added). In order to be concrete, an injury must be de facto, or actually exist. Intangible injuries can satisfy this standard, such as reputational injuries, invasion of privacy, and risk of harm. In determining whether an intangible harm constitutes injury in fact, both history and the judgment of Congress play important roles. Id. at The harm the plaintiff suffers does not necessarily need to be in the past to meet the standing requirement, as a risk of real harm can suffice. Id. at Although Congress has the power to define injuries, Article III standing requires a concrete injury even in the context of a statutory violation and a bare procedural violation will not suffice. Id. II. Spokeo v. Robins Background Spokeo is a people search engine that accumulates public information about individuals and provides it to users in an online database. Plaintiff Robins discovered that his information displayed on Spokeo was inaccurate, including incorrectly stating that he was married, highly educated, and was wealthier than he actually was. Robins subsequently filed a federal class action complaint alleging that Spokeo is a consumer reporting agency subject to the Fair Credit Reporting Act of 1970 (FCRA). 15 U.S.C Robins claimed that the company willfully failed to comply with its requirements to follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates. 15 U.S.C. 1681e(b) (emphasis added). The FCRA imposes liability on [a]ny person who willfully fails to comply with any requirement [of the Act] with respect to any consumer. 15 U.S.C. 1681n(a). The district court dismissed Robins complaint for lack of standing under Article III, holding that his complaint did not adequately plead injury in fact. On appeal, the Ninth Circuit reversed, noting that Robins adequately alleged injury in fact simply by claiming that Spokeo violated his statutory rights. The Supreme Court vacated and remanded the case back to the Ninth Circuit, observing that the appellate court erroneously focused solely on the particularized element of the injury and neglected to analyze whether or not the injury was concrete. The Supreme Court did not decide whether Robins adequately alleged a concrete injury, and left that issue for the Ninth Circuit to decide. The Ninth Circuit heard oral argument on December 13, 2016, and has not ruled yet. This has left litigants arguing the meaning of a concrete injury in hundreds of federal cases across the country involving many types of statutory claims. Litigating Statutory Damages Class Actions After Spokeo Merryman 5

6 Justice Thomas, in his concurrence, explains how the injury in fact requirement relates to different types of rights. He presents the distinction between private plaintiffs alleging a violation of their own private rights and those private plaintiffs asserting claims to vindicate public rights. [W]hen a plaintiff seeks to vindicate a public right, the plaintiff must allege that he has suffered a concrete injury particular to himself. Spokeo at This concreteness requirement often stymies a private plaintiff s attempt to vindicate the infringement of public rights, but does not apply as rigorously when a private plaintiff seeks to vindicate his own private rights. Id. A plaintiff seeking to vindicate a statutorily created private right need not allege actual harm beyond the invasion of that private right, while a plaintiff seeking to vindicate a public right embodied in a federal statute... must demonstrate that the violation... has caused him a concrete, individual harm distinct from the general population. Id. Justice Thomas notes that Robins does not have standing to sue Spokeo for violations that Spokeo owes to the public collectively without showing he has suffered concrete and particular harm. Alternatively, Section 1681e(b), supra, arguably creates a private cause of action to vindicate a privately held right, in which a violation of this legal duty would suffice for standing. Spokeo at The Court of Appeals must consider whether this section vests any and all consumers with the power to police the reasonable procedures of Spokeo, or whether Congress created a private duty owed personally to Robins to protect his information. Id. III. Effects and Interpretations of the Decision by Statute Unsurprisingly, the Spokeo decision has had a large impact, with over 400 decisions nationwide interpreting and applying it to consumer protection statutes in the last year. The majority of these decisions have involved four consumer protection statutes: The Fair and Accurate Credit Transactions Act (FACTA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), and the Telephone Consumer Protection Act (TCPA). Other federal statutes where courts have considered the potential impact of Spokeo on Article III standing include the Cable Communications Privacy Act (CCPA), the Driver s Privacy Protection Act (DPPA), the Electronic Funds Transfer Act (EFTA), the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), and the Video Privacy Protection Act (VPPA), as well as state common law claims. Overall, almost sixty percent of cases with an analysis of Spokeo have found the plaintiff to have Article III standing. The outcomes vary greatly by statute, exemplified by courts finding standing in 87 percent of TCPA cases, while courts found standing in only 30 percent of FACTA cases. Whether a court has found standing exists in a particular case is also influenced by jurisdiction and individual judge, as courts have reached opposite results in numerous cases that are practically indistinguishable on the facts presented. A. Fair and Accurate Credit Transactions Act FACTA prohibits businesses from printing more than the last 5 digits of the [credit] card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction. 15 U.S.C.S. 1681c(g). Since the Spokeo decision, there have been twenty cases addressing its effect on claims for statutory damages under FACTA. This includes the Seventh Circuit case, Meyers v. Nicolet Rest., in which the court held there was no injury in fact for the violation of FACTA by failing to remove the expiration date on the receipt. 843 F.3d 724 (7th Cir. 2016). The plaintiff Meyers discovered the violation immediately and nobody else ever saw the noncompliant receipt, so it is hard to imagine how the expiration date s presence could have increased the risk 6 Class Actions July 2017

7 that Meyers identity would be compromised. Id. at 727. The court also held that the characterization of the right as substantive or procedural is irrelevant, as with either one the violation of the right must be accompanied by an injury in fact. Id. at 727 n.2. Of the other nineteen FACTA cases addressing Spokeo, thirteen concluded there was no standing, while six held there was standing. Most of the cases in which the courts found standing were decided prior to the Meyers decision. However, one district court case subsequent to Spokeo held that the additional inconvenience that a consumer must undertake in order to secure his own rights [safekeeping a noncompliant receipt], when a statute places that burden on others, is surely a concrete harm. Deschaaf v. Am. Valet & Limousine Inc., 2017 U.S. Dist. LEXIS (D. Ariz. 2017). Since Meyers, the trend is moving toward finding no standing in FACTA cases. B. Fair Credit Reporting Act There has been a major divide by jurisdiction regarding the analysis of Article III standing for cases brought under the FCRA since Spokeo. Out of the eighty-three cases addressing Spokeo, forty-two have found no standing while forty-one have found standing. The Ninth Circuit and courts in the Ninth Circuit favor standing, while decisions from courts in the Seventh and Eighth Circuits tend to hold that standing does not exist. Third Circuit decisions are split, with half finding standing and the other half holding there is no standing. Some major factors influencing how courts rule on standing include whether the violation results in a disclosure to a third party and whether the violation impacts an adverse employment decision. C. Fair Debt Collection Practices Act Out of the seventy-six FDCPA cases addressing Spokeo, fifty-six have held there was a sufficiently concrete injury to find standing exists. Standing is typically found in these cases upon viewing the disclosure obligations as substantive protections, although a tangible injury is not always found. Remington v. Fin. Recovery Servs., 2017 U.S. Dist. LEXIS 36637, *5 (D. Conn. 2017) ( the alleged harm is impairment of an FDCPAcreated substantive right to truthful, non-deceptive information in debt collection communications ). In the cases where no standing is found, courts classify the violations as technical in nature such as a two week delay in providing the appropriate information, failure to note on a credit report that a debt was disputed, or errors in the advertised terms of debt repayment plans. Yeager v. Ocwen Loan Servicing, 2017 U.S. Dist. LEXIS 24269, 12 (M.D. Ala. 2017) (holding a thirteen-day notice delay in violation of the FDCPA unaccompanied by any harm or material risk of harm does not meet the concreteness requirement). D. Telephone Consumer Protection Act Since the Spokeo decision just over a year ago, there have been seventy-eight TCPA cases addressing the standing issue. The TCPA regulates the manner in which companies can communicate regarding products or services via phone, fax, and text message without the prior express consent from the consumer. 47 U.S.C.S. 227(b)(1). 68 of those decisions analyzing Article III standing under TCPA claims have found standing to exist. The Ninth Circuit recently held in Van Patten v. Vertical Fitness Grp. that a violation of the TCPA amounts to a concrete injury, as [u]nsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients. 847 F.3d 1037, 1043 (9th Cir. 2016). Hence, a plaintiff alleging a TCPA violation does not need to allege any additional harm beyond the statutory violation to have sufficient Article III standing. Id. The cases where courts dismissed TCPA claims for lack of standing have tended to involve a single call or text, or some other fairly unique fact situation. Litigating Statutory Damages Class Actions After Spokeo Merryman 7

8 E. Other Statutory and Common Law Claims The remaining approximately 200 decisions citing Spokeo have involved challenges to standing in cases involving other federal and state statutes, as well as state common law claims. The outcomes in these cases have split fairly evenly and often depended on the statute at issue, the jurisdiction, and the individual facts of each case. IV. Decisions by Circuit Courts When presented the opportunity, most circuit courts fall in line with the Spokeo decision and have dismissed cases for lack of standing where there has not been an allegation of concrete harm beyond the mere violation of a statutory right. As shown below, others have held that a mere violation can constitute a concrete harm in itself sufficient for Article III standing. A. Second Circuit The Second Circuit has addressed Spokeo on multiple occasions, with the most in-depth analysis in Strubel v. Comenity Bank, 842 F.3d 181 (2d Cir. 2016), and Ross v. AXA Equitable Life Ins. Co., 2017 U.S. App. LEXIS 3239 (2d Cir. N.Y. 2017). In Strubel, the plaintiff alleged four violations of the Truth in Lending Act, and the court found a sufficient injury in two of the four claims for relief. These two claims pertained to required notice that (1) certain identified consumer rights pertain only to disputed credit card purchases not yet paid in full, and (2) a consumer dissatisfied with a credit card purchase must contact the creditor in writing or electronically. Strubel at 190. The court reasoned that a mere violation of these requirements gives rise to a risk of real harm because a consumer not given notice of these obligations is likely not to satisfy them and, thereby, unwittingly to lose the very credit rights that the law affords him. Id. The other two claims involved failure to inform the consumer about auto pay and billing error obligations where there was no auto pay plan at hand and no claim of a billing error. See Id. In Ross, the appellants alleged a violation of a New York Insurance Law prohibiting insurers from making misrepresentations about themselves U.S. App. LEXIS 3239 (2d Cir. N.Y. 2017). The court held that there was no injury in fact for the bare violations, as there was no actual or imminent harm from these representations. The Second Circuit again addressed the issue of standing in light of Spokeo in March In Mount v. PulsePoint, Inc., the court held that the appellees violation of the Computer Fraud and Abuse Act in setting cookies on consumer devices was a loss of privacy sufficient for standing U.S. App. LEXIS 5262 (2d Cir. 2017). The court reasoned that the alleged unauthorized accessing and monitoring of plaintiffs web-browsing activity implicates harms similar to those associated with the common law tort of intrusion upon seclusion so as to satisfy the requirement of concreteness. Id. at 3. B. Third Circuit The Third Circuit appears to be the most lenient in granting standing to plaintiffs in the privacy context, as exemplified in In re Nickelodeon Consumer Privacy Litig., 827 F.3d 262 (3d Cir. 2016) and In re Horizon Healthcare Services Data Breach Litig., 846 F.3d 625 (3d Cir. 2017). These two cases involved the disclosure of personal information sufficient to meet the injury standard for Article III standing. The court noted that the improper dissemination of information can itself constitute a cognizable injury. In re Horizon at Class Actions July 2017

9 C. Fourth Circuit In the recent decision of Dreher v. Experian Info. Solutions, Inc., the Fourth Circuit found the plaintiff did not allege concrete injury under a FCRA claim where the defendant credit agency listed a defunct credit card company, rather than the name of its servicer, as a source of information on the plaintiff s credit report U.S. App. LEXIS 8358 (4th Cir. 2017). This appellate decision vacated an $11,747,510 judgment in a 69,000 member class action. D. Fifth Circuit The Fifth Circuit has fallen in line with other circuits in Lee v. Verizon Commc ns, 837 F.3d 523 (5th Cir. 2016). The court held that there was no Article III standing for an Employee Retirement Income Security Act (ERISA) claim, as the plaintiff did not allege concrete harm aside from the statutory violation in which the defendant had allegedly breached its fiduciary duty. E. Sixth Circuit The Sixth Circuit held in Lyshe v. Levy that there was no injury in fact under an FDCPA claim where the plaintiff alleged no concrete harm from the violation of state procedural rules. 854 F.3d 855 (6th Cir. 2017). The Sixth Circuit also looked at standing under Spokeo in Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576 (6th Cir. 2016). The plaintiff alleged a violation of ERISA, but failed to allege any concrete harm beyond the violation of the statute. The district court dismissed the complaint for lack of standing and affirmed on appeal. F. Seventh Circuit In Diedrich v. Ocwen Loan Servicing, LLC, the Seventh Circuit found that the plaintiff had standing to state a RESPA claim. 839 F.3d 583 (7th Cir. 2016). The borrower sufficiently alleged an injury based on damage to credit and having to pay more money and higher interest rates as a result of an untimely response to an inquiry in violation of RESPA. The Seventh Circuit held in Gubala v. Time Warner Cable that there was no injury from an alleged violation of the Cable Communications Policy Act. 846 F.3d 909 (7th Cir. 2017). The cable company allegedly retained the plaintiff s personally identifiable information beyond the statutory deadline, but this did not amount to an injury as the company had not disclosed the information nor was there a risk of it being disclosed. G. Eighth Circuit The Eighth Circuit decided a similar case alleging a CCPA claim in Braitberg v. Charter Commc ns, and similarly held, as in Gubala, that no injury in fact existed for the mere retention of the information without disclosure, or risk of disclosure. 836 F.3d 925 (8th Cir. 2016). H. Ninth Circuit In Syed v. M-I, LLC, the Ninth Circuit found sufficient standing in a prospective employer s violation of 15 U.S.C. 1681b(b)(2)(a) when it procure[d] a job applicant s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure U.S. App. LEXIS 4954, *1 (9th Cir. 2017). The statute creates a right to privacy by enabling applicants to withhold permission to obtain the Litigating Statutory Damages Class Actions After Spokeo Merryman 9

10 report from the prospective employer, and a concrete injury when applicants are deprived of their ability to meaningfully authorize the credit check. Id. at 10. The Ninth Circuit found no standing in Smith v. Bank of Am. when the defendant provided the plaintiff with a Form 1098 that did not comply with the requirements of 26 U.S.C. 6050H U.S. App. LEXIS 2757 (9th Cir. 2017). This was because the plaintiff did not file erroneous tax returns in reliance on the form, and the court reasoned that the [m]ere receipt of an erroneous form, without more, is insufficient to establish injury-in-fact. Id. at 2. I. Eleventh Circuit In Nicklaw v. CitiMortgage, the defendant allegedly delayed recording a mortgage after the New York statutory deadline. 839 F. 3d 998 (11th Cir. 2016). Because the plaintiff did not allege consequential harm resulting from the violation, the court held there was not Article III standing and dismissed the case. The Eleventh Circuit again addressed the issue of standing in light of Spokeo in Perry v. CNN, Inc., 854 F. 3d 1336 (11th Cir. 2017). The plaintiff alleged that through CNN s news app, it collected his personal information and transmitted it to a third party without his consent, violating the Video Privacy Protection Act. The court found standing to be sufficient although there was no additional harm beyond the statutory violation, concluding that the violation of the VPPA constitutes a concrete harm. Id. Although the plaintiff ultimately conceded that his complaint failed to state a claim under the VPPA, this ruling provides insight as to how this Circuit may rule on standing in cases alleging a privacy violation. In Church v. Accretive Health, Inc., the plaintiff received a letter stating that she owed a debt to defendant hospital. 654 Fed. Appx. 990 (11th Cir. 2016). The letter did not contain all of the FDCPA s required disclosures and the plaintiff did not allege any additional harm outside of the violation. The court found that the alleged FDCPA violation conferred on the plaintiff a concrete injury because the invasion of Church s right to receive the disclosures is not hypothetical or uncertain. Id. at 995. J. D.C. Circuit The D.C. Circuit Court of Appeals held in Hancock v. Urban Outfitters that where the defendant asked consumers to provide zip codes at purchase in violation of a D.C. consumer protection statute, there was no injury because no concrete consequence resulted from the act. 830 F.3d 511 (D.C. Cir. 2016). * * * * As shown in the Circuit Court opinions, the Supreme Court s decision in Spokeo has impacted many statutory claims in federal courts. Courts analyzing statutory violations constituting invasions of privacy find the mere violation to be a concrete injury, while those violations omitting certain disclosures or withholding information without additional harm tend to find no concrete injury sufficient for Article III standing. As stated previously, the outcome of a concrete injury and thus standing are fact dependent and vary by jurisdiction, as courts are left to interpret Spokeo without much guidance. These appellate decisions serve as a starting point for district courts to follow when determining standing. V. Class Certification We have yet to see whether Spokeo will impact whether all class members must have Article III standing to certify a class. Pre-Spokeo, Circuits were split on this issue. The Second and Eighth Circuits require standing for all plaintiffs. See Denney v. Deutsche Bank AG, 443 F.3d 253 (2d Cir. 2006) ( no class may be certified that contains members lacking Article III standing ); 10 Class Actions July 2017

11 Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010) ( [a] class must therefore be defined in such a way that anyone within it would have standing ). The Third, Sixth, Seventh, and Ninth Circuits require only the named plaintiff to establish standing. See Neale v. Volvo Cars of North America, LLC, 794 F.3d 353 (3d Cir. 2015) ( We now squarely hold that unnamed, putative class members need not establish Article III standing. Instead, the cases or controversies requirement is satisfied so long as a class representative has standing, whether in the context of a settlement or litigation class. ). VI. No Removal Followed by Motion to Dismiss Under Spokeo Defendants often attempt to remove class actions to federal court under the Class Action Fairness Act (CAFA) because they perceive federal court to be a better and fairer forum. However, a defendant cannot remove under CAFA and then move to dismiss for lack of Article III standing. In Mocek v. Allsaints USA Limited, the court found the defendant s positions on removal and standing to be incompatible and ordered the defendant to pay $58, for lacking an objectively reasonable basis for seeking removal U.S. Dist. LEXIS , 9-10 (N.D. Ill. 2016); see Schartel v. One Source Technology, LLC, 2016 WL (.D. Ohio Oct. 14, 2016). Thus, a state court action cannot be removed if Spokeo applies. VII. Consider State Standing Doctrines Before Challenging Article III Standing Standing doctrines vary by state and often do not align with federal requirements for standing. We have recognized often that the constraints of Article III do not apply to state courts, and accordingly the state courts are not bound by the limitations of a case or controversy or other federal rules of justiciability even when they address issues of federal law. ASARCO, Inc. v. Kadish, 490 U.S. 605 (1989). Following are examples of state standing doctrines. In Lansing Sch. Educ. Ass n v. Lansing Bd. of Educ., the Michigan Supreme Court rejected prior standing principles that mirrored the federal requirements. 792 N.W. 2d 686 (2010). Instead, the court favored a more liberal policy, which confers standing to a litigant (1) whenever there is a legal cause of action, (2) whenever the litigant meets the state rules to seek a declaratory judgment, or (3) in the court s discretion. Id. at 699. The court of appeals of Colorado held in Grossman v. Dean that [a]lthough federal decisions may be considered for guidance, we are ultimately governed here by state principles of standing, rather than the federal principles created by Article III of the United States Constitution. 80 P.3d 952, 959 (Colo. App. 2003). Rather, to determine standing in Colorado, the courts consider (1) whether the plaintiff was injured in fact, and (2) whether the injury was to a legally protected right, which may lead to a more expansive view of standing under Colorado law than that expressed under federal law. Id. at The Florida Supreme Court held the doctrine of standing certainly exists in Florida, but not in the rigid sense employed in the federal system. Dep t of Revenue v. Kuhnlein, 646 So. 2d 717, 720 (Fla. 1994). Florida s general standing requirement merely calls for a case to involve a real controversy as to the issue or issues presented. Id. The standing requirement in Wisconsin is also more relaxed than the federal standard, as discussed in McConkey v. Van Hulen, where the state Supreme Court stated that the law of standing is construed liberally, and even an injury to a trifling interest may suffice. 783 N.W. 2d 855, 860 (Wis. 2010). Litigating Statutory Damages Class Actions After Spokeo Merryman 11

12 California does not have an explicit standing doctrine, but rather the requirements will vary from statute to statute based upon the intent of the Legislature and the purpose for which the particular statute was enacted. Midpeninsula Citizens v. Westwood Invs., 271 Cal Rptr. 99, 104 (Cal. Ct. App. 1990); Thompson, J. & Schiff, D., California Standing Doctrine: The Enigma Explained (April 5, 2011). As these examples show, state standing requirements are often more lenient than Article III. Litigants should consider the state standing standard before rushing to file a motion to dismiss based on Article III, although federal courts may decide the issue sua sponte. 12 Class Actions July 2017