The U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court's dismissal of a lawsuit at the summary judgment stage for lack of Article III standing.
In so ruling, the Seventh Circuit held that, when litigation moves beyond the pleading stage and Article III standing is challenged as a factual matter, plaintiffs cannot rely on mere allegations of injury. Instead, they must provide evidence of a legally cognizable injury in fact.
A copy of the opinion is available at: Link to Opinion
A magazine article described a controlled hack of a vehicle that exploited a vulnerability in the vehicle's "infotainment" system. The vehicle's manufacturer immediately issued a recall and provided a free software update to patch the vulnerability. Federal regulators supervising the recall determined that the patch eliminated the vulnerability.
Four plaintiffs sued the manufacturer and the designer of the infotainment system on behalf of every consumer who had purchased or leased 2013–2015 vehicles from the same manufacturer equipped with the same system, asserting federal and state warranty and consumer-fraud claims. The plaintiffs argued that, although the alleged defect never manifested again after the hack described in the magazine, they paid more for their vehicles than they would have if they had known about the cybersecurity vulnerability.
While discovery proceeded, the original trial judge overseeing the case retired, and the case was reassigned. After discovery closed, the plaintiffs failed to provide evidence in support of their claimed overpayment injury when faced with a motion to dismiss challenging their Article III standing.
The trial court thus dismissed the case for lack of standing, and the plaintiffs timely appealed.
As you may recall, the Constitution limits the jurisdiction of the federal courts to "Cases" and "Controversies." U.S. CONST. art. III, § 2. Standing is an essential component of the case-or-controversy requirement, Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992), and consists of three familiar elements: the plaintiff must have "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision," Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). Additionally, "the proof required to establish standing increases as the suit proceeds." Davis v. FEC, 554 U.S. 724, 734 (2008).
The plaintiffs here were faced with a factual challenge to their standing, asserting that there was in fact no "injury in fact". See Apex Digit., Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009). In response to a factual challenge, the plaintiff can no longer rest on the allegations in the complaint and must adduce specific evidence to satisfy each of the elements necessary to establish his standing to sue. Id.
Here, the Seventh Circuit held that the plaintiffs failed to meet their burden against the factual challenge.
The operative motion to dismiss for lack of standing —- filed at the close of discovery -— argued both that the alleged overpayment injury was not cognizable as a legal matter and that the plaintiffs had no competent evidence that they suffered an overpayment injury as a factual matter.
The Court determined that the plaintiffs' response to the motion to dismiss did exactly what the Supreme Court of the United States in Lujan said is inadequate in such circumstances; instead of citing specific evidence in the record and developing a factual argument demonstrating that they suffered an overpayment injury, the plaintiffs relied on mere allegations from their complaint.
The plaintiffs pointed to their expert reports as evidence in support of an overpayment injury, but they did so for the first time on appeal. The Seventh Circuit concluded that this was far too late because they have repeatedly reminded litigants that they will not consider evidence and factual arguments that were not presented to the trial court. E.g., Packer v. Trs. of Ind. Univ. Sch. of Med., 800 F.3d 843, 849 (7th Cir. 2015).
As a fallback argument, the plaintiffs contended that, as nonmovants, they are entitled to the benefit of the entire record under Rule 56 of the Federal Rules of Civil Procedure. Rule 56 permits the court to consider uncited materials in the record when ruling on a motion for summary judgment, but requires the court to consider "only the cited materials." FED. R. CIV. P. 56(c)(3).
However, the Seventh Circuit stated that Rule 56 also assigns to the parties the responsibility to "cit[e] to particular parts of materials in the record" when asserting that genuine factual disputes preclude summary judgment. Id. R. 56(c)(1)(A); see also Compania Administradora de Recuperacion v. Titan Int'l, Inc., 533 F.3d 555, 562 (7th Cir. 2008). The Court also reasoned that this latter requirement is especially important in cases involving a voluminous record, as was the situation here. See Sommerfield v. City of Chicago, 863 F.3d 645, 650 (7th Cir. 2017). Thus, the Court rejected the plaintiffs' Rule 56 argument.
The plaintiffs also argued that the law-of-the-case doctrine barred the second trial judge from reconsidering the question of standing because the original judge had already ruled on the issue on multiple occasions. The law-of-the-case doctrine "posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case." Arizona v. California, 460 U.S. 605, 618 (1983). When a case is transferred between trial judges midway through litigation, the doctrine discourages the new judge from reconsidering rulings made by the original judge. Gilbert v. Ill. State Bd. of Educ., 591 F.3d 896, 902 (7th Cir. 2010).
Nevertheless, the Seventh Circuit concluded that the law-of-the-case doctrine did not prevent the second trial judge from ruling on the factual challenge to the plaintiffs' standing.
First, the Court noted that law-of-the-case is a discretionary doctrine, not a rigid bar, Pepper v. United States, 562 U.S. 476, 506 (2011), and its force is lowest when applied to jurisdictional questions, Chi. Joe's Tea Room, LLC v. Village of Broadview, 894 F.3d 807, 818 (7th Cir. 2018). Second, the Court pointed out that law-of-the-case does not apply at all where the precise issue presented differs from the one decided earlier. Gilbert, 591 F.3d at 903. As the plaintiffs acknowledged, the second trial judge was presented with a factual challenge to standing, while the first judge ruled only on facial challenges.
Accordingly, the Seventh Circuit affirmed the trial court's dismissal of the case for lack of Article III standing.
Ralph T. Wutscher
Maurice Wutscher LLP
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