After remand from the Supreme Court of the United States, the U.S. Court of Appeals for the Ninth Circuit in Spokeo recently reversed the trial court's dismissal of a consumer's lawsuit alleging that the operator of a website that compiles consumer data and provides consumer information profiles willfully violated the federal Fair Credit Reporting Act (FCRA), holding that the injury to the plaintiff's statutory rights were sufficiently concrete and particularized to satisfy the injury-in-fact requirement of Article III of the United States Constitution and the plaintiff thus had standing to sue.
A copy of the opinion is available at: Link to Opinion
As you may recall, Spokeo "operate[d] a website that compiles consumer data and builds individual consumer-information profiles. At no cost, consumers can use [the website] to view a report containing an array of details about a person's life, such as the person's age, contact information, marital status, occupation, hobbies, economic health, and wealth. More detailed information is available for users who pay subscription fees. [Defendant] market[ed] its services to businesses, claiming that its reports provide a good way to learn more about prospective business associates and employees."
The plaintiff viewed his profile on the defendant Spokeo's website and sued for willfully violating the FCRA, "which imposes a number of procedural requirements on consumer reporting agencies to regulate their creation and use of consumer reports. The statute gives consumers affected by a violation of such requirements a right to sue the responsible party, including the right to sue (and to recover statutory damages) for willful violations even if the consumer cannot show that the violation caused him to sustain any actual damages."
The plaintiff alleged that Spokeo violated the FCRA at section 1681e(b) by failing to "'follow reasonable procedures to assure maximum possible accuracy' of the information in [plaintiff's] consumer report" because his report "falsely stated his age, marital status, wealth, education level, and profession, and [also] included a photo of a different person." The plaintiff alleged that these inaccuracies "harmed his employment prospects at a time when has was out of work and that he continues to be unemployed and suffers emotional distress as a consequence."
The trial court dismissed the first amended complaint holding that the plaintiff "lacked standing to sue under Article III of the United States Constitution[,]" reasoning that plaintiff had "alleged only a bare violation of the statute and did not adequately plead such violation caused him to suffer an actual injury-in-fact."
The plaintiff appealed to the Ninth Circuit, which reversed ("Spokeo I"), holding that plaintiff's "allegations established a sufficient injury-in-fact—that is, that he allegedly suffered a concrete and particularized injury—because [he] alleged that [defendant] violated specifically his statutory rights, which Congress established to protect against individual rather than collective harms." The Ninth Circuit also held that the harm to the plaintiff's statutory rights was "caused" by defendant's FCRA violations and that "statutory damages could redress such injury" and "remanded to the district court for further proceedings."
Spokeo filed a petition for writ of certiorari to the Supreme Court, which reversed and vacated the Ninth Circuit's opinion ("Spokeo II"), holding that its "standing analysis was incomplete" because while it did address whether the injury was particularized, it "did not devote appropriate attention to whether the alleged injury is sufficiently concrete as well."
On remand, the Ninth Circuit's inquiry was limited to whether the plaintiff "sufficiently pled a concrete injury under" the Supreme Court's Spokeo II rationale.
The Ninth Circuit again agreed with plaintiff's argument that Spokeo's failure to reasonably ensure the accuracy of his consumer report was itself sufficient to show concrete injury because the purpose of the FCRA is to protect a consumer's right to accurate credit and other information.
The Court summarized the Supreme Court's decision as requiring a "'real' and not 'abstract' or merely 'procedural' [injury]. … In other words, even when a statute has allegedly been violated, Article III requires such violation to have caused some real — as opposed to purely legal — harm to the plaintiff."
The Ninth Circuit then reasoned that Congressional intent "plays an important role in the concreteness inquiry, especially in cases — like this one — in which the plaintiff alleges that he suffered an intangible harm." Although such injuries "are often harder to recognize, intangible injuries — for example restrictions on First Amendment freedoms or harm to one's reputation — may be sufficient for Article III standing."
Citing the Supreme Court ruling in Spokeo II, the Ninth Circuit reasoned that "Congress may 'elevate to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate at law … [and, in addition,] Congress has the power to define injuries and articulate chains of causation that will give rise to a case or controversy where none existed before." Finally, "Congress may likewise enact procedural rights to guard against a 'risk of real harm,' the violation of which may 'be sufficient in some circumstances to constitute injury in fact.'"
Thus, the Ninth Circuit held, while a plaintiff cannot establish injury-in-fact simply by alleging a statutory violation, "the Supreme Court also recognized that some statutory violations, alone, do establish concrete harm."
The Ninth Circuit adopted the Second Circuit's articulation of the Spokeo II concreteness requirement, which explained that Spokeo II "instruct[s] that an alleged procedural violation [of a statute] can by itself manifest concrete injury where Congress conferred the procedural right to protect a plaintiff's concrete interests and where the procedural violation presents 'a risk of real harm' to that concrete interest."
Thus framed, the Ninth Circuit's inquiry became: "(1) whether the statutory provisions at issue were established to protect [plaintiff'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."
The Court answered both questions affirmatively.
First, the Ninth Circuit found "that Congress established the FCRA provisions at issue to protect consumers' concrete interests" in ensuring the accuracy of reported information about them and to protect their privacy. Section 1681e(b) of the FCRA does this by requiring "reporting agencies to 'follow reasonable procedures to assure maximum possible accuracy' of the information contained in an individual's consumer report."
The Court concluded that "these interests protected by the FCRA's procedural requirements are 'real,' rather than purely legal creations" because material inaccuracies on a consumer's report have "real-world implications" given the "ubiquity and importance of consumer reports in modern life—in employment decisions, in loan applications, in home purchases, and much more…."
The Ninth Circuit then likened the interests protected by the FCRA to "other reputational and privacy interests that have long been protected in the law. … For example, the common law provided remedies for a variety of defamatory statements, including those which falsely attributed characteristics 'incompatible with the proper exercise of [an individual's] lawful business, trade, profession or office." Thus, the Court reasoned that "[j]ust as Congress's judgment about an intangible harm is important to our concreteness analysis, so is the fact that the interest Congress identified is similar to others that traditionally have been protected."
Because it found that the alleged harm resulting from inaccurate consumer reports that Congress intended to protect against is similar to the harm resulting from traditional common law causes of action like defamation, the Ninth Circuit concluded that "the FCRA procedures at issue in this case were crafted to protect consumers' (like [the plaintiff's]) concrete interest in accurate credit reporting about themselves."
The Ninth Circuit also concluded that the violations at issue actually caused the plaintiff real harm or created a material risk of harm to his concrete interest in accurate reporting about himself.
Unlike the Supreme Court's example in Spokeo II of the dissemination of a wrong zip code as an example of a bare procedural violation without any real harm or risk thereof to a concrete interest protected by the FCRA, the Ninth Circuit held that even though the plaintiff alleged that Spokeo falsely reported his marital status, age, employment, educational level and wealth as higher than they really were, "[e]nsuring the accuracy of this sort of information … seems directly and substantially related to the FCRA's goals."
This was so even though on the surface it may appear this would actually help rather hurt the plaintiff because, as pointed out by the Consumer Financial Protection Bureau in an amicus brief on the plaintiff's behalf, "even seemingly flattering inaccuracies can hurt an individual's employment prospects as they may cause a prospective employer to question the applicant's truthfulness or to determine that he is overqualified for the position sought."
Thus, according to the Ninth Circuit, the violations at issue were more than "mere technical violation[s] which are too insignificant to present a sincere risk of harm to real-world interests that Congress chose to protect with FCRA." The plaintiff's complaint thus "sufficiently alleg[ed] that he suffered a concrete injury."
Finally, the Court rejected the defendant's argument, based on the Supreme Court's 2013 decision in Clapper v. Amnesty International USA, that plaintiff's "allegations of harm are too speculative to establish a concrete injury" because he only alleged that the subject "inaccuracies might hurt his employment prospects, but not that they present a material or impending risk of doing so."
The Ninth Circuit reasoned that Spokeo's "reliance on Clapper is misplaced" because in that case, "the plaintiffs sought to establish standing on the basis of harm they would supposedly suffer from threatened conduct that had not happened yet but which they believed was reasonably likely to occur…." The "Supreme Court explained that a plaintiff cannot show injury-in-fact unless the 'threatened injury [is] certainly impending' as opposed to merely speculative." By contrast, in the case at bar, "both the challenged conduct and the attendant injury have already occurred" because the defendant "published a materially inaccurate consumer report about [the plaintiff]." Likewise, the intangible but concrete injury to his interest in accurate information about himself had also already occurred and "[i]t is of no consequence how likely [the plaintiff] is to suffer additional concrete harm as well (such as the loss of a specific job opportunity)."
In sum, the Ninth Circuit found that the plaintiff "alleged injuries that are sufficiently concrete for the purposes of Article III[,] … the alleged injuries were also sufficiently particularized to [plaintiff] and … they were caused by [defendant's] alleged FCRA violation and are redressable in court". Accordingly, the Court concluded that plaintiff had standing to sue, and reversed and remanded.
Ralph T. Wutscher
Maurice Wutscher LLP
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