Search results for: Spokeo

A district judge in the Southern District of Florida recently dismissed a FACTA class action on Spokeo grounds even though he had previously approved a near-$600,000 settlement in the same case.  In 2016, lead plaintiff Eric Kirchein filed suit against Pet Supermarket, Inc, contending that the retailer violated the Fair and Accurate Credit Transactions Act (“FACTA”) when it printed more than five digits of his and other consumers’ credit card numbers on sales receipts.  The parties reached a preliminary settlement agreement later that year, with Pet Supermarket agreeing to pay $580,000 to a class of almost 30,000 consumers.

The deal ran into trouble soon thereafter, as the parties had difficulty finding and locating individual class members.  Further complicating matters, the size of the class increased, as Pet Supermarket discovered the class was approximately ten percent larger than initially thought.  Plaintiffs’ counsel requested additional settlement funds to compensate for the additional class members, leading the parties to try to renegotiate the settlement.  Despite these issues, the court declined requests to vacate the settlement agreement.

Even though the parties had an agreement in principal, Pet Supermarket later challenged the court’s subject matter jurisdiction based on Spokeo grounds.  The court agreed with the retailer that Kirchein could not show he had suffered concrete harm resulting from the alleged FACTA violation.  Judge Robert N. Scola, Jr. chiefly relied on his own previous decisions in similar FACTA cases – specifically Gesten v. Burger King, which found that the plaintiff failed to allege that any disclosure of his private information actually occurred – to reach a similar conclusion regarding Kirchein’s claims.  Without any allegation that his private data had been divulged, the court found that Kirchein could not establish standing.

Though the court acknowledged that there was “substantive work that remains to be done” in the case, the absence of subject matter jurisdiction prevented further activity by the court, including a fairness hearing or issuing an order approving the proposed settlement agreement.

The case is Kirchein v. Pet Supermarket, Inc., Case No. 0:16-cv-60090.

In recent years, defendants have been attempting to curtail class actions in federal court by arguing that the named plaintiff lacked standing under the Supreme Court’s holding in Spokeo, Inc. v. Robins.  Although defendants have had success in asserting Spokeo in “no injury” class actions, this success has not been without a price.  Often, a successful Spokeo challenge results in defendants litigating in state court instead of the federal side of the ledger.  As the upside of Spokeo has waned in certain scenarios, however, a new avenue of dismissal for certain class claims is gaining traction in federal courts, specifically, the theory that a court does not have personal jurisdiction to render a judgment on behalf of a class of non-resident plaintiffs against an out-of-state defendant.

In DeBernardis v. NBTY, Inc., the District Court for the Northern District of Illinois became the most recent district court to dismiss class claims based on the Supreme Court’s ruling in Bristol-Myers Squibb Co. v. Superior Court of California.  In DeBernardis, the plaintiff brought a nationwide class action in Illinois federal court alleging various fraud and warranty claims under state law.  The defendants moved to dismiss the case as to the class of plaintiffs that were not Illinois residents.  The defendants argued, based on Bristol-Myers, that the court did not have personal jurisdiction over the claims of the non-resident plaintiff class against the out-of-state defendants.  The Court agreed.

The opinion stated that when assessing whether a court has personal jurisdiction, the court must look at the burden a defendant faces in having to litigate in a foreign court against a class or mass of non-residents.  The court must also look at the fairness of forcing an out-of-state defendant to submit “to the coercive power of a State that may have little legitimate interest in the claims in question.”  Indeed, the court in Bristol Myers noted that the Constitution’s Due Process Clause may sometimes “divest the state of its power to render a valid judgment” with respect to a mass action of non-resident plaintiffs.  Although the court in DeBernardis found the issue to be a “close question,” it ultimately dismissed the portion of the claims brought on behalf of the “out-of-state plaintiff classes” for lack of personal jurisdiction.

The Bristol-Myers decision could become a powerful tool in dismissing certain classes of plaintiffs in nationwide class actions.  There are risks, however, in deploying this tool.  It may ultimately result in plaintiffs’ counsel bringing multiple state-specific class actions instead of one nationwide class action.  It may also lead to more lawsuits in a defendant’s home state, where it may be subject to general jurisdiction.  We will continue to track developments related to Bristol-Myers as they unfold.

On January 22, 2018, the United States Supreme Court denied the second petition for a writ of certiorari filed by Spokeo, Inc. in its landmark, Article III standing case against Plaintiff Thomas Robins. Previously, on August 15, 2017, the Ninth Circuit issued its decision on remand in the same case, reversing and remanding the case to the California district court after finding that Robins had standing to pursue his claims. Spokeo appealed that ruling to the U.S. Supreme Court, arguing that the Court’s prior opinion created massive uncertainty among lower courts as to the contours of Article III standing – particularly in cases alleging statutory claims based on purely technical or procedural violations.

The denial of cert means that such confusion and disagreement may continue to fester. It also signals the Court’s unwillingness to dive back into its 2016 Spokeo ruling so soon after publication –paving the way for continued litigation and legal development in the lower courts.

Troutman Sanders will continue to monitor decisions grappling with these standing issues and report on any future developments.

On January 5, Troutman Sanders filed an amicus brief on behalf of the National Association of Professional Background Screeners (“NAPBS”) in support of Spokeo, Inc.’s second petition for certiorari to the United States Supreme Court in Spokeo, Inc. v. Robins (U.S. No. 17-806).  The new petition requests that the Court revisit its prior ruling and add clarity to the divergence in lower court rulings over the past two years.

The NAPBS’s amicus brief contends that the Ninth Circuit’s Spokeo decision on remand misapplied the Court’s instruction to limit federal court jurisdiction to actual cases and controversies under Article III by allowing plaintiffs to file technical, no-injury claims or claims based on bare procedural violations.  In the class action context, such technical claims led to in terrorem settlements under the FCRA’s statutory damages scheme which does not cap the damages multiplier in a class case.  The NAPBS and its members “face a practical reality in which ruinous potential liability and litigation expense grossly outweigh any harm actually caused to consumers – which oftentimes is no injury whatsoever.”  In turn, the divergence in interpretations of Spokeo I coupled with the ability to command in terrorem settlements has resulted in forum shopping by plaintiffs in favorable jurisdictions like the Ninth Circuit.  “Clarity is warranted,” according to the NAPBS.

The NAPBS is a trade association representing over 900 small and large background screening firms whose mission is to advance excellence in the screening profession and provide a unified voice in the development of national, state, and local regulation of professional screening services.

A copy of the amicus brief can be found here.

In Long v. Southeastern Pennsylvania Transportation Authority (“SEPTA”), the Third Circuit is set to rule on a challenge to the named plaintiffs’ lack of Article III standing in a Fair Credit Reporting Act putative class action.

As we previously reported, in Long the named plaintiffs alleged that SEPTA violated the FCRA by failing to provide job applicants with a clear and conspicuous disclosure that a consumer report may be obtained about the applicant for employment purposes, and by failing to provide the plaintiffs with a pre-adverse action letter and copy of the consumer report before revoking their conditional offers of employment.  The plaintiffs did not allege that their consumer reports were inaccurate in any way.  SEPTA filed a motion to dismiss, arguing that the plaintiffs failed to allege facts sufficient to satisfy the standing requirements under Spokeo.  The United States District Court for the Eastern District of Pennsylvania granted SEPTA’s motion to dismiss, holding that the “Plaintiffs’ allegations amount to bare procedural violations without concrete harm.”

The plaintiffs appealed the Court’s decision, arguing that the district court erred in finding that they lacked standing under Article III.  The Third Circuit held oral arguments on December 12.  Counsel for the plaintiffs specifically argued that the district court’s decision creates an impossible pleading requirement by requiring plaintiffs to show that the consumer reports (of which they never received copies) contained inaccurate information that harmed their employment prospects.

The Third Circuit took the matter under advisement after the hearing.  We will continue to monitor the case for a final decision.

On December 5, a Court of Appeals for the state of Ohio affirmed dismissal of a putative FCRA class claim against Ohio State University on the basis that the plaintiffs lacked standing to assert their no-injury, statutory claim in Ohio state court.  The state appellate court declined to adopt a “statutory standing” doctrine in Ohio that would allow standing for a federal statutory claim without the existence of an alleged injury-in-fact.

Background

In 2012 and 2014, OSU hired the plaintiffs as a facility manager and a housekeeper. In October 2015, the plaintiffs, individually and on behalf of a class of others similarly situated, filed suit against OSU under the FCRA. They alleged that as part of their application and hiring process, OSU provided a background check disclosure and authorization to each of them that improperly included extraneous information and a liability release in violation of 15 U.S.C. § 1681b(b)(2)(A)(ii).

The following month, OSU removed the action to the United States District Court for the Southern District of Ohio, Eastern Division, based on federal question jurisdiction. In June 2016, the federal court found that appellants failed to allege that they sustained any injury-in-fact due to OSU’s alleged violations of the FCRA, and that they therefore lacked standing under Article III of the United States Constitution. Consequently, the federal court remanded the matter to the Ohio trial court pursuant to 28 U.S.C. 1447(c).

In July 2016, OSU moved to dismiss the action in the Ohio trial court based on its contention that the appellants lacked standing to bring their claims in Ohio state court because they alleged no injury-in-fact resulting from violations of the FCRA. In response, the appellants argued that Ohio law recognizes standing even in the absence of an injury-in-fact, when that standing is conferred by statute. In February 2017, the Ohio trial court dismissed the appellants’ claims against OSU based on its conclusion that they failed to plead any particularized injury-in-fact and lacked statutory standing to pursue their claims in the absence of a cognizable injury. The plaintiffs appealed.

Appellate Ruling

Noting the instructive ruling by the United States Supreme Court in Spokeo, the Court of Appeals of Ohio stated that the plaintiffs were relying on a concept of “statutory standing” that, according to the plaintiffs, provided standing to sue for a statutory violation “even in the absence of an alleged injury-in-fact.” The appellate court nevertheless disagreed with that argument, adding:

Ohio and federal law have diverged on the issue of whether a party may have standing to sue in the absence of an injury-in-fact. However, even though Ohio courts have, in some circumstances, found standing despite no allegation of concrete injury, appellants fail to cite, and our independent research does not reveal, any case in which an Ohio court has analyzed and found standing to exist on the basis of a federal statute despite the absence of an alleged injury-in-fact.

Ultimately, “[t]o the extent the ‘statutory standing’ doctrine constitutes an exception to the traditional principles of standing in Ohio,” the Ohio appellate court declined “to extend that exception to this circumstance involving the application of a federal statute.”

To find statutory standing here, the court said that it “would need to find that Congress intended to abrogate the Ohio common-law requirements to establish standing.” Yet, “there [was] no indication that Congress intended the pertinent FCRA statute to supplant the traditional requirements of standing in Ohio state court. Further, such a finding would be improper as it would permit Congress to affect the parameters of standing in Ohio courts, even though it is well-settled that Ohio law determines standing in Ohio courts.”

Troutman Sanders will continue to monitor these developments, especially as they relate to Spokeo and its progeny, and provide any further updates as they are available.

On November 6, a judge in the Southern District of New York dismissed a proposed class action alleging that Wolfgang’s Steakhouse impermissibly printed payment card expiration dates on customers’ receipts, relying on the U.S. Supreme Court’s decision in Spokeo to find that customers were not actually harmed by any information revealed.

Relying on the Second Circuit’s recent decision in Crupar-Weinmann v. Paris Baguette America, Inc., District Judge Katherine Polk Failla concluded that plaintiff Cynthia M. Fullwood could not prove that the steakhouse’s disclosure of her credit card’s expiration date on her receipt harmed her because Wolfgang’s did not print Fullwood’s full credit card number.  Without any injury, Fullwood did not have standing to seek statutory damages under the Fair and Accurate Credit Transactions Act.  The court rejected Fullwood’s arguments that redacting credit cards’ expiration dates was the “core object” of FACTA and also dismissed her contention that requiring her to show actual harm would “write FACTA out of the statute books.”

Even though the court permitted Fullwood to amend three times previously, Judge Failla was convinced that further amendment would be futile.  “Plaintiff’s amendments to her pleading are no match for the rising tide of binding precedent holding that a bare procedural violation of FACTA, without more, does not confer Article III standing,” the judge wrote.  “Plaintiff never alleges that defendants made her receipts accessible to the public in any way, nor does she claim to have been the victim of identity theft or to have had her credit card used fraudulently.”  Without any explanation as to how she could establish standing, the court denied Fullwood further leave to amend.

A copy of the court’s opinion is available here.

On August 15, 2017, the Ninth Circuit issued its decision on remand in Spokeo, reversing and remanding the case to the District Court after finding that the named Plaintiff, Thomas Robins, has standing to pursue his claims.

Background

In Spokeo, Inc. v. Robins, Plaintiff Robins sued the “people search engine” for alleged violations of the Fair Credit Reporting Act (“FCRA”). Robins alleged Spokeo published inaccurate (though not harmful per se) information about him, including that Robins had a graduate degree and was married and had children. At issue was the fact the Complaint alleged only statutory violations and no injury-in-fact. Spokeo argued that this statutory violation alone was insufficient to confer Article III standing because it does not meet the “irreducible constitutional minimum” to establish standing, which required a plaintiff to have suffered an injury-in-fact by sustaining an “actual or imminent” harm that is “concrete and particularized.”

The District Court for the Central District of California originally dismissed the case, holding Robins failed to allege any injury-in-fact and, therefore, did not have Article III standing. The Ninth Circuit reversed, holding the alleged violation of Robins’ statutory rights alone was sufficient to satisfy Article III’s requirements, regardless of whether the plaintiff can show a separate actual injury.

On May 16, 2016, the Supreme Court in a 6-2 decision vacated and remanded the Ninth Circuit’s decision. The Supreme Court found the Ninth Circuit’s injury-in-fact analysis “incomplete” because it “focused on the second characteristic (particularity), but it overlooked the first (concreteness).” According to the Court, “a ‘concrete’ injury must be ‘de facto’; that is, it must actually exist” in a “‘real,’ and not ‘abstract’” sense, but is not “necessarily synonymous with tangible.”

While noting Congress’s role in identifying and elevating intangible harms to create standing for statutory violations, the majority made clear that this “does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” More (i.e., a concrete injury) is necessary. Indeed, this is exactly why Robins could not “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”

Ninth Circuit’s Decision on Remand

On August 15, 2017, a unanimous Ninth Circuit issued its decision authored by Judge O’Scannlain regarding whether Robins had sufficiently pled a concrete injury required to establish Article III standing. The Court held true to its original conclusion finding Robins has standing to pursue his claim.

In evaluating Robins’s claim of harm, the Ninth Circuit considered two main issues: (1) “whether the statutory provisions at issue were established to protect [Robins’s] concrete interests (as opposed to purely procedural rights), and if so, (2) whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests.”

As to the first question, the Ninth Circuit answered in the affirmative. The Court held “that Congress established the FCRA provisions at issue to protect consumers’ concrete interests,” namely their interests in ensuring fair and accurate credit reporting and protecting consumer privacy. “Even if there are differences between FCRA’s cause of action and those recognized at common law, the relevant point is that Congress has chosen to protect against a harm that is at least closely similar in kind to others that have traditionally served as the basis for [a] lawsuit.”

With respect to the second question, the Ninth Circuit held because Robins alleged Spokeo prepared an inaccurate report and published that report on the Internet, his claim “clearly implicates, at least in some way, Robins’s concrete interests in truthful credit reporting.” The Ninth Circuit emphasized however that “in many instances, a plaintiff will not be able to show a concrete injury simply by alleging that a consumer-reporting agency failed to comply with one of the FCRA’s procedures.” Rather, the consumer must show that the violation materially affected the consumer’s protected interests in accurate credit reporting. In other words, the Supreme Court’s decision “requires some examination of the nature of the specific alleged reporting inaccuracies to ensure that they raise a real risk of harm to the concrete interests that FCRA protects.”

“We are satisfied that Robins has alleged injuries that are sufficiently concrete for the purposes of Article III,” held the Court. Based on its previous finding that Robins’s injuries were also sufficiently particularized, the Court concluded that Robins has “adequately alleged the elements necessary for standing.”

Conclusion

In Spokeo, the Supreme Court laid down an important marker that federal lawsuits should be based on claims of real harm. Since then, courts across the nation have issued varying decisions attempting to interpret the contours of the Supreme Court’s decision. The Ninth Circuit’s decision represents one in a wave of cases discussing the requirement of “concrete harm” in FCRA matters.

We will monitor this case on remand as well as report on other circuit court cases that continue to grapple with these standing related issues.

Troutman Sanders is also hosting an FCRA webinar on August 24, 2017, which will include a Spokeo-related discussion. To register for the webinar, please click here

On July 25, the Missouri Court of Appeals affirmed a state trial court’s dismissal of a putative Fair Credit Reporting Act class action against a large retailer based on standing issues.  Most notably, the court did so in reliance on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (May 16, 2016), and Article III standing rules, holding that Missouri law requires that a plaintiff have suffered a concrete injury-in-fact in the same way Article III does. 

The plaintiffs in the case, Joshua Corozzo and Arthor Ruff, filed a putative class action in the Circuit Court of Cole County, Missouri, accusing the defendant employer of FCRA violations.  Corozzo and Ruff alleged they applied to work for the defendant and were provided a seven-page background check disclosure and authorization form.  They alleged the disclosure form contained extraneous information and did not provide them (or proposed class members) “a clear and conspicuous disclosure in writing in a document that consisted solely of the disclosure” as required by the FCRA. 

The defendant moved to dismiss and the trial court granted the motion, finding Corozzo and Ruff had alleged only a “bare procedural violation” of the FCRA and did not assert any concrete injury sufficient to make their claims justiciable under Missouri law.  Corozzo and Ruff appealed and the Missouri Court of Appeals affirmed. 

The Court of Appeals noted Missouri’s “justiciability” requirement, which itself encompasses the idea of standing.  In evaluating standing, the Court looked to the Supreme Court’s decision in Spokeo v. Robins, which defined the contours of FCRA standing for federal court Article III purposes.  The court expressly rejected Corozzo and Ruff’s argument that Spokeo, being a federal case, was inapplicable to a Missouri state court action, holding that Article III and Missouri’s standing rules are largely coextensive. 

Relying on Spokeo and similar guidance from the Eighth Circuit Court of Appeals, the Missouri appellate court concluded Corozzo and Ruff had not pleaded actually injury.  They noted the claim was simply that the format of the disclosure failed to comply with the FCRA’s requirements, but there was no allegation Corozzo and Ruff either did not receive the disclosure or did not authorize the defendant to procure a consumer report.  Without any further allegations, the court held that the claim could not proceed and did not satisfy the Missouri standing requirement. 

The Missouri Court of Appeals’ decision is important because it short circuits, at least in Missouri, attempts to rely on perceived lenient state court standing rules to avoid the holding of Spokeo.

 

The Cheesecake Factory Restaurants, Inc. recently asked a New York federal district judge to dismiss a putative Fair and Accurate Transactions Act putative class action that accuses the restaurant chain of printing too many credit card numbers on consumers’ receipts.  Relying on the Supreme Court’s decision in Spokeo, Cheesecake Factory argues that the class action complaint “should be dismissed for lack of subject matter jurisdiction because Plaintiffs have failed to plead anything more than a bare, one-time statutory violation.”  For instance, according to Cheesecake Factory, “Plaintiffs do not allege that they lost money, their credit suffered, their identities were stolen, or that improper charges were made on their credit cards.”  Accordingly, the plaintiffs have failed to allege a “concrete harm” sufficient to confer subject matter jurisdiction on the Court.

In response, the plaintiffs claim that various courts “have found that merchants cause consumers a concrete injury in fact by printing their personal financial information in violation of FACTA’s substantive provisions.”  The plaintiffs further argue that Cheesecake Factory was well aware of FACTA’s prohibitions but still “allowed its computerized payment system to routinely print ten digits, thus giving Cheesecake employees and anyone else who saw the receipts (that are routinely left unattended on the tables of Cheesecakes 208 restaurants), access to this information, and forcing Plaintiffs to take steps to protect the receipt from further disclosure.”

The case is Tibbetts v. The Cheesecake Factory Restaurants Inc., case number 2:17-cv-00968, in U.S. District Court for the Eastern District of New York.  We will continue to monitor the case for a final decision on Cheesecake Factory’s motion to dismiss.