The Eighth Circuit recently provided a reminder that district courts must ensure Article III standing, including case and controversy requirements, exists throughout a case and not just when the complaint is filed. In Schumacher v. SC Data Ctr., Inc., No. 17-3112, 2019 U.S. App. LEXIS 505 (8th Cir. Jan. 8, 2019), the three-judge panel held that the District Court for the Western District of Missouri committed reversible error by not deciding if the plaintiff could satisfy Article III standing prior to approving a class settlement agreement. The Court therefore vacated the district court’s approval of the settlement agreement and remanded the case to determine if the plaintiff has standing to pursue her Fair Credit Reporting Act class action claims.
In February 2016, plaintiff Ria Schumacher brought a class action lawsuit against defendant SC Data Center, Inc., doing business as Colony Brands, Inc., on behalf of herself and all others similarly situated. Schumacher alleged that SC Data Center violated the FCRA by failing to provide her with a copy of her consumer report and rescinding her offer of employment without providing a reasonable time to cure or explain purported inaccuracies in the report. Schumacher claimed further FCRA violations in alleging that SC Data Center provided a misleading FCRA disclosure form with extraneous information and procured her consumer report without her proper authorization.
In May 2016, through mediation, the parties reached a settlement agreement. However, four days after reaching their agreement, the Supreme Court published its opinion in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), which vacated and remanded a Ninth Circuit FCRA decision because the Court failed to properly analyze Article III standing.
In light of the ruling in Spokeo, SC Data Center moved to dismiss the action, arguing that Schumacher lacked standing to pursue her claims. The district court disagreed and held that “Schumacher’s standing to bring the FCRA claims underlying [the] settlement is irrelevant to whether she has standing to enforce the parties’ settlement agreement.” The district court therefore denied SC Data Center’s motion and subsequently approved the settlement. SC Data Center timely appealed the decision.
On appeal, the Eighth Circuit “agree[d] with SC Data Center that the district court erred by not assessing standing before enforcing the settlement agreement.” The Court explained that Article III standing presents a question of justiciability and “if it is lacking, a federal court has no subject-matter jurisdiction of the claim.” The Court further explained that a district court has a continuing obligation to ensure standing continues to exist throughout the case and not merely at the time the complaint is filed. The Court found that standing requirements are applicable to class action settlements because “[a]n approved settlement takes the form of a judgment of the court, and without both Article III power and proper subject-matter jurisdiction, the court cannot act.”
Citing Ehrheart v. Verizon Wireless, 609 F.3d 590, 596 (3d Cir. 2010), Schumacher argued that it was improper to reassess standing after Spokeo because a court cannot invalidate a settlement agreement based on a change in the law. However, the Court disagreed and explained that Spokeo “was not a change in the substantive law bearing on Schumacher’s claim that would have ‘altered the settlement calculus.’” The Court pointed to other decisions holding that “Spokeo did not change the law of standing and thus was not a post-agreement change in the law. It merely reiterated that an Article III injury must be both particular and concrete.”
The Court held that because standing was a continuing obligation and there was nothing in the record to indicate whether Schumacher had standing, it was vacating the district court’s approval of the settlement agreement and remanding the case to determine if Schumacher has standing to pursue her FCRA claims.