Thursday, March 25, 2021

FYI: 7th Cir Upholds Order Remanding Putative Class Action Back to State Court for Lack of Article III Standing

The U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court's order granting a putative class plaintiff's motion to remand a case back to state court for lack of standing.


In so ruling, the Seventh Circuit held that the complaint described only a general regulatory violation, not something that is particularized to the plaintiffs and concrete, and that this was not enough to present a case that confers the plaintiffs with Article III standing to sue.


A copy of the opinion is available at:  Link to Opinion


The defendant company provided a facial recognition tool to "scrape" pictures from social media sites such as Facebook, Twitter, Instagram, LinkedIn, and Venmo.


The defendant's software harvests from each scraped photograph the biometric facial scan and associated metadata (time and place stamps); that information is put onto a database, which is stored on multiple servers. The defendant offers access to this database to users who want to know more about the person in a photograph.


After the New York Times published an article about the defendant and its database, a wave of lawsuits followed. The plaintiffs here filed one such lawsuit, on behalf of themselves and a proposed class, in state court.


The initial complaint asserted violations of three subsections of the Illinois Biometric Information Privacy Act (BIPA), 740 ILCS 14/15(a), (b), and (c). The defendant removed that case to federal court, but shortly after removal the plaintiffs voluntarily dismissed the action.


The plaintiffs then returned to state court with a new, narrower lawsuit against the defendant. The new action was more focused in two respects: first, it alleged only a violation of BIPA, 740 ILCS 14/15(c); and second, the class definition was more constrained.


The defendant again removed the case to federal court. This time, the plaintiffs filed a motion to remand, in which they asserted that the violation of section 15(c) they described was only a "bare procedural violation, divorced from any concrete harm," see Spokeo, Inc. v. Robbins, 136 S. Ct. 1540, 1549 (2016), and thus did not support Article III standing.


The trial court agreed with the plaintiffs and ordered the case remanded to state court.


Because the case met the criteria of the federal Class Action Fairness Act, 28 U.S.C. § 1332(d), the defendant sought permission to appeal from the trial court's order. The Seventh Circuit agreed to take the appeal.


The Seventh Circuit noted that the party that wants the federal forum is the one that bears the burden of establishing that the court has subject matter jurisdiction over the case and that it falls within "the Judicial Power" conferred in Article III. See Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752, 758 (7th Cir. 2009); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447 (7th Cir. 2005). Typically, the plaintiff has this burden, but not in cases of removal.


To establish standing under Article III of the Constitution, a party must demonstrate (1) that the plaintiff suffered an injury in fact that is concrete, particularized, and actual or imminent, (2) that the injury was caused by the defendant, and (3) that the injury would likely be redressed by the requested judicial relief. Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1618 (2020), citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992).


In this case, the Seventh Circuit focused exclusively on the injury-in-fact requirement, noting that the other two elements were not in dispute.


The plaintiffs' complaint raised only one claim under BIPA: that the defendant violated section 15(c), which reads:


c) No private entity in possession of a biometric identifier or biometric information may sell, lease, trade, or otherwise profit from a person's or a customer's biometric identifier or biometric information.


740 ILCS 14/15(c).


Additionally, the plaintiffs used the following class definition:


All current Illinois citizens whose biometric identifiers or biometric information were [sic], without their knowledge, included in the [the defendant's] Database at any time from January 1, 2016 to January 17, 2020 (the "Class Period") and who suffered no injury from defendant's violation of Section 15(c) of BIPA other than statutory aggrievement ...


The complaint concedes that none of the named plaintiffs, and no class member, "suffered any injury as a result of the violations of Section 15(c) of BIPA other than the statutory aggrievement alleged in Paragraph 38."


On appeal, the defendant urged the Seventh Circuit to equate a person's potential injury from the sale of her data with the injury from retention of that data that the Court recognized in Fox v. Dakkota Integrated Systems, LLC, 980 F.3d 1146 (7th Cir. 2020), or the injury it recognized in Bryant v. Compass Group USA, Inc., 958 F.3d 617 (7th Cir. 2020) from the collection of that data and the failure to obtain written consent.


In Fox, the Seventh Circuit held that "an unlawful retention of a person's biometric data is as concrete and particularized an injury as an unlawful collection of a person's biometric data." Fox 980 F.3d at 1155. In Bryant, the Court concluded that "allegations that [the defendant] had violated section 15(b)'s requirement both to inform those from whom it was collecting data that it was doing so and why, and to obtain their written consent, was both concrete and particularized, and thus were enough to support standing." Bryant 958 F.3d at 1154.


Indeed, the Seventh Circuit believed that a different complaint may have survived remand. The plaintiffs might have asserted, for example, that by selling their data, the defendant had deprived them of the opportunity to profit from their biometric information.


Or the plaintiffs could have argued that the act of selling their data amplified the invasion of their privacy that occurred when the data was first collected. The plaintiffs might even have asserted that the scraping of data from social media sites raises the cost of using those sites in some respect.


Here, however, the Seventh Circuit concluded that the plaintiffs intentionally offered a class definition too narrow for Article III standing, and the rule that the plaintiffs control their own cases applied.


Furthermore, the Court noted, there is nothing that prevents a putative class representative from taking a conservative approach to a class definition. And if the plaintiffs decide to broaden their class definition in the state court, the defendant will be able to attempt to remove the case again to federal court.


The Seventh Circuit decided that the plaintiffs have described only a general, regulatory violation, not something that is particularized and concrete.


The plaintiffs took care in their allegations, and especially in the scope of the proposed class they would like to represent, to steer clear of federal court, and, in general, plaintiffs may do this. As long as their allegations are in good faith, the plaintiffs may take advantage of the fact that Illinois permits BIPA cases that allege bare statutory violations, without any further need to allege or show injury. See Rosenbach v. Six Flags Entertainment Corp., 2019 IL 123186 ¶¶ 22–23.


The Seventh Circuit expressed no opinion as to the adequacy of the plaintiffs' complaint as a matter of Illinois law. Instead, the Court held that on the basis of the allegations of this complaint, the trial court correctly decided that the plaintiffs did not present a case that lies within the boundaries set by Article III, and so the court properly remanded the case to the state court.


Accordingly, the Seventh Circuit affirmed the trial court's order to remand the case to state court.




Ralph T. Wutscher
Maurice Wutscher LLP
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