Could Spokeo Mean Rough Road Ahead for FCRA, TCPA, FDCPA Plaintiffs?

Don Maurice

Yesterday’s oral argument before the U.S. Supreme Court in Spokeo v. Robins suggests a struggle to fashion an understanding of what can constitute an “injury in fact.” It pitted the issue of whether a plaintiff’s standing to sue requires a tangible, concrete injury (loss of money, a job or property right) against the concept that the law can identify a “harm” (in this case, inaccurate information in a credit report) which itself is a real injury.

Finding the Injury

Spokeo v. Robins concerns an alleged violation of the Fair Credit Reporting Act. Robins claimed Spokeo compiled a report about him that contained false information and so he sued under the FCRA in federal court. The trial court dismissed his case finding Robins had no tangible harm — he wasn’t denied a job or credit because of the false information. The Ninth Circuit Court of Appeals reversed and held that the statutory violation was enough to allow Robins his day in court.

Justices Elena Kagan and Sonia Sotomayor focused on “harm,” and the concept that Congress can identify a “harm” and make it tangible injury. For them, the concrete harm Robins suffered exists because of FCRA and the false information in the Spokeo report.  Justice Antonin Scalia countered by noting that FCRA is not triggered by false information, but the failure to follow procedures. The concern Justice Scalia had was that under FCRA, anyone can sue for the failure to follow procedures, even if they suffered no concrete injury. But Justice Stephen Breyer quickly pointed out that Spokeo is alleged to have published false information and to have violated FCRA procedures. Comments from Justice Breyer were directed at highlighting that Robins’ case is more than simply false information, but false information coupled with the failure to follow FCRA procedures. The failure to follow the procedures is the violation and the false information is the harm that allows standing to sue.

Chief Justice John Roberts posed an interesting hypothetical: Suppose a person had an unpublished telephone number and did not want that number released to the public. A credit reporting agency published a telephone number, but it was the wrong telephone number. It is clearly false information, but has the person been harmed to the extent they now have standing to sue? The hypothetical supports Justice Scalia’s issue and points out that the injury-at-law harm, the “false information,” is subject to absurd results.

In response Justice Sotomayor offered,”[i]sn’t there always a materiality question: What is the falsehood? Is it material to anything?” That comment should cause concern for many plaintiff’s attorneys, particularly because the “materiality” argument is a powerful defense that has found favor, most recently in the Third Circuit’s opinion in Jensen v. Pressler & Pressler.

Impact on FCRA and Other Consumer Protection Statutes

Many consumer protection statutes raise the same standing issues the Court is addressing in Spokeo. The federal Fair Debt Collection Practices Act, the Electronic Funds Transfer Act, the Telephone Consumer Protection Act and the Truth in Lending Act come to mind.

The Court may find that the simple existence of false or inaccurate information in a credit report can be an injury. But the justices’ comments suggesting that certain false information plainly poses no harm and Justice Sotomayor’s remark that false statements should be “material,” suggest a decision that could limit claims to those who have or will cause non-speculative harm to the plaintiff. Having to demonstrate such harm would change the way FDCPA, TILA and EFTA lawsuits are litigated, particularly in the context of claims arising from failed disclosures. It could also make it more difficult to certify classes in certain cases where the injury analysis could require assessment of individualized facts. That could bring some relief to the financial services industry.

Be Careful What You Wish For

It is also possible that Spokeo will prevail. If the Court finds there is no standing in federal courts for claims asserting only a statutory violation where no actual “injury-in-fact” occurred, it still might not spell the end of such claims under the FCRA and other statutes. Many of these statutes allow claims to be brought in state courts as well. It will be up to each state to decide whether their courts can hear such claims. Comments from Justice Breyer during the Spokeo oral argument touched on states having “public action” statutes that allow persons to bring claims for statutory violations even where they have suffered no injury.

The Court has no timetable to hand down its decision, but it is likely to be delivered between April and June 2016.

Editor’s note: Read more about the history of the Spokeo case here.