Intangible Harm and Standing: Can Congress confer standing by authorizing statutory damages?

What must a plaintiff allege to establish Article III standing when the sole cause of action is a violation of a federal statute seeking statutory, not actual damages? This is the central question presented in Spokeo, Inc. v. Robins, a closely watched case that the U.S. Supreme Court decided on May 16, 2016, by vacating and remanding the case to the Ninth Circuit to conduct a full analysis of whether the plaintiff adequately alleged that he suffered a concrete injury. In essence, the Court punted, but it provided some guiding principles for lower courts to consider. The statute at issue is the Fair Credit Reporting Act (FCRA), a federal statute that requires consumer reporting agencies, which Spokeo is alleged to be, and users of consumer reports prepared by those agencies to follow certain procedural safeguards in the preparation, dissemination, and use of consumer reports.

In enacting the FCRA, Congress created a damages scheme allowing plaintiffs to recover up to $1000 in statutory damages for willful violations of the Act, with no requirement that plaintiffs make a threshold showing of harm. Though the question in Spokeo focused on consumer reporting agencies, the issue has much broader application, including to employers obtaining pre-employment background checks.

The Supreme Court held that the Ninth Circuit, which earlier ruled that the plaintiff had standing, failed to fully consider the constitutional requirement that a plaintiff allege facts showing a concrete injury. The Court did not opine on whether a mere statutory violation, such as the one presented, can cause concrete injury, though it directed parties to review both history and the judgment of Congress in making the determination. It clarified that intangible injuries can be constitutionally-sufficient injuries. An allegation of a “bare procedural violation, divorced from any concrete harm,” however, will not suffice.

Lower courts (and parties) will now be faced with carrying out Spokeo’s guidance. The opinion is short, while the list of cases relying upon it for guidance is long. Dozens of similar class-action cases (involving both the FCRA and other consumer protection statutes) are currently stayed in lower courts.

Nilan Johnson Lewis labor and employment attorney Sarah Riskin, who advises employers on and litigates FCRA compliance matters, notes that users of reports, including employers, will want to consider their processes and impacts of those processes in assessing risk. “With so many cases stayed pending a decision in Spokeo, we can expect there to be rapid development in case law on this issue, particularly in the FCRA context. We will likely see less consensus nationally before we see more, and plaintiffs will forum shop as a key strategy,” said Riskin.

Sarah Riskin can be reached at 612.305.7713 or sriskin@nilanjohnson.com. For media inquiries, contact Aaron Berstler at 651.789.1264 or aaron@kohnstamm.com.

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