KT Class Action Blog

Category: Injury

Posted on Monday, December 4 2017 at 12:49 pm by
Following Federal Courts’ Lead, North Carolina Superior Court Dismisses No-Injury Class Action For Lack of Standing

by Joe Dowdy and Phillip Harris

The United States Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), which holds plaintiffs without concrete injury lack standing to sue in federal court, relies on federal constitutional and jurisprudential principles. Because federal standing flows from Article III of the Constitution, Spokeo does not control the standing issue in state court litigation. As a recent North Carolina trial court decision shows, however, federal Spokeo precedents can be persuasive to a state court judge faced with a class action in which the named plaintiff cannot allege or prove a concrete injury.

In Miles v. The Company Store, Inc., at al., No. 16-CVS-2346 (Alamance Cnty, N.C. Sup. Ct. Nov. 16, 2017) (slip op.) (unpublished), the named plaintiff (Miles) alleged that the defendants generated and provided a copy of a receipt revealing the first six digits and the last four digits of the credit card plaintiff used to make a purchase. Miles sought recovery on a class-wide basis for alleged intentional violations of the Fair and Accurate Credit Transactions Act (“FACTA”) (see 15 U.S.C. §§ 1681(c)(g)(1)), which prohibits the display of “more than the last 5 digits of the card number . . . upon any receipt provided at the point of the sale or transaction.” Problematically, however, Miles did not allege the receipt was seen by anyone other than himself. Miles, slip. op. at 2. Further, although Miles alleged he faced an increased risk of identity theft, he did not say that he actually suffered identify theft. Id.

North Carolina Superior Court Judge Richard S. Gottlieb ruled that the allegations did not confer standing for Miles to bring suit in state court. Judge Gottlieb relied upon North Carolina appellate decisions and did not cite Spokeo. He did, however, cite to federal cases that relied on Spokeo. See id. at 3 (“This court agrees that the injury alleged here does not meet the concreteness requirement to establish an injury in fact in order to support standing.”).

Miles predictably argued that North Carolina required less for state-court standing than Spokeo and its progeny require in federal court. But Judge Gottlieb found the no-injury claims insufficient under North Carolina standing law just as under federal standing decisions:

Plaintiff correctly notes that the Supreme Court of North Carolina has identified some circumstances where standing is proper in North Carolina even when it would not be proper under federal law. However, standing still requires a plaintiff to allege such a personal stake in the outcome of the controversy as to assure that concrete adverseness . . . sharpens the presentation of issues. For example, . . . a plaintiff c[an] maintain standing if they have [been] injuriously affected, even if they [cannot] show an injury in fact which is concrete and particularized. Here, Plaintiff has only alleged that Defendants provided him a copy of his own personal information, exceeding federal statutory limits. Since Plaintiff already has access to his personal information, this does not have an injurious effect or create any other personal stake in the controversy sufficient to assure concrete adverseness. Therefore Plaintiff does not have standing to pursue a claim.

Id. at 3 (citations and quotation marks omitted).

Miles might appeal the decision, which could result in a published decision on the issue from the North Carolina Court of Appeals or the North Carolina Supreme Court. In the meantime, defendants facing no-injury state-court class actions should consider carefully urging Spoke-type standing challenges wrapped in state law standing limitations.

Key Takeaway: Spokeo can impact the standing analysis in no-injury class action at the state level, when a state trial court is left to analyze state constitutional and jurisprudential principles. Accordingly, a defendant in a state court no-injury class action should marshal state law and consistent elements of Spokeo jurisprudence to mount the most effective challenge to state-court standing in such cases.

Posted on Monday, November 27 2017 at 8:51 am by
FCRA Injury Requirement Remains Murky Following Supreme Court Denial of Certiorari

by Annica Bianco

On November 12, 2017, the U.S. Supreme Court declined to hear a case that would have clarified an important issue in Fair Credit Reporting Act (FCRA) litigation, a popular source of no-injury class action litigation. The petition sought review of a Ninth Circuit decision in a putative class action holding that an “informational injur[y]” constitutes a “real-world harm” sufficient to establish standing for purposes of FCRA litigation. Petition for Writ of Certiorari at 4, M-I LLC v. Syed, No. 16-1524 (June 19, 2017).

What constitutes an informational injury, practically speaking? The answer is far from clear. In Syed, the alleged “informational injury” arose from the simple fact that the prospective employer combined into one document the required FCRA disclosure with a liability waiver. Syed v. M-I, LLC, 853 F.3d 492, 499 (9th Cir. 2017). Plaintiff’s signature on that single document served as both an authorization for the employer to procure his consumer report and as a broad release of liability. Id. Plaintiff alleged that the combination generated confusion concerning his rights and that he would not have authorized the disclosure had it been a standalone document. Id. The Ninth Circuit held those allegations were sufficient to establish standing. Id. at 500.

Stated more generally, the Ninth Circuit found that an informational injury can arise in the FCRA context “when applicants are deprived of their ability to meaningfully authorize [a] credit check.” Id. at 499. In reaching this conclusion, the court reasoned that FCRA’s requirement that a job candidate authorize the collection of consumer information by a prospective employer creates a right to privacy because the candidate can withhold permission. Id.

But the takeaway is broader: so-called “informational injuries” can provide the requisite injury-in-fact to establish standing to pursue a FCRA claim. This is important because FCRA violations can result in statutory penalties ranging from $100 to $1,000 per violation, as well as punitive damages at the discretion of the court, and attorneys’ fees and costs. On a class level, these numbers add up. In a 1,000 member class, for example, statutory penalties alone can reach $1,000,000.

Syed broadened the universe of harms that may give rise to a FCRA claim, and following the Supreme Court’s denial of certiorari in Syed, the concept of an “informational injury” will continue to be subject to broad judicial interpretation.

The Supreme Court’s decision not to hear Syed is also important because it leaves intact the Ninth Circuit’s ruling on the merits. After finding the plaintiff had standing, the court went on to hold that the prospective employer’s combination of the required FCRA disclosure with a liability waiver was not only a statutory violation, but a willful violation of the statute. Id. at 503. Effectively, the court held that the combination of the forms was knowing or reckless. Id. (citing Safeco Insurance co. of America v. Burr, 551 U.S. 47 (2007)). Under this precedent, employers will continue to face the risk of FCRA liability from even technical violations.

The landscape is different in other circuits. In August of this year, for example, the Seventh Circuit considered an analogous situation to Syed and came to the opposite conclusion. Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017). In that case, the plaintiff alleged that the prospective employer’s failure to provide a FCRA compliant disclosure constituted a concrete informational injury. In Groshek, like Syed, the alleged violation stemmed from the inclusion of “extraneous information” in the disclosure. Id. at 885. The Seventh Circuit found, however, that while the plaintiff had alleged a statutory violation, it was “completely removed from any concrete harm or appreciable risk of harm.” Id. at 887.

But Groshek distinguished Syed on the facts. The Seventh Circuit reasoned that Syed, unlike Groshek, presented factual allegations plausibly suggesting that the disclosure, as structured, created confusion, and that the plaintiff in Syed would not have signed the disclosure had it been a standalone document, as required by the FCRA. Id. at 889.

The Supreme Court’s denial of certiorari preserves this arguable split in circuit authority for now. But if the plaintiff in Groshek has his way, the issue will be before the Supreme Court soon. On October 30, 2017, the Groshek plaintiff petitioned the Supreme Court for certiorari.

Until the Supreme Court decides whether to hear the Groshek appeal, employers concerned about potential FCRA liability should give careful attention to their disclosure forms to ensure they comply with the letter of the statute, to minimize the risk of litigation. If certiorari is granted, regardless of how the Supreme Court decides the matter, the issue of FCRA standing and injury could finally be clarified.

Posted on Monday, July 31 2017 at 12:59 pm by
What the Third Circuit’s Decision in Susinno Means for Spokeo-Based Standing Arguments in TCPA Cases

by Joe Dowdy and Phillip Harris

Telephone Consumer Protection Act (“TCPA”) plaintiffs often file putative class actions seeking potentially crippling statutory damages. Not surprisingly, TCPA defendants often seek an early dismissal based on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), particularly when the named plaintiff alleges minor, technical TCPA violations. The Spokeo argument typically contends that, despite a technical violation of the TCPA, the plaintiff has not suffered a “concrete injury” sufficient to confer Article III standing. Following the Ninth Circuit, the Third Circuit recently rejected this defense. See Susinno v. Work Out World Inc., No. 16-3277, 2017 WL 2925432 (3d Cir. July 10, 2017); Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037, 1043 (9th Cir. 2017). Particularly after the Third Circuit’s decision in Susinno earlier this month, some observers are questioning the viability of Spokeo arguments in TCPA cases, but consideration of these cases in context reveals that this conclusion may be somewhat premature.

The Susinno complaint alleged what can only be described as a minor TCPA violation. The named plaintiff claimed that the defendant fitness company placed a single, unsolicited, and unanswered call to her cell phone and left a one-minute voicemail message. 2017 WL 2925432, at *1. The district court found this insufficient to establish standing, finding a single solicitation not “‘the type of case that Congress was trying to protect people against’” and that the plaintiff suffered no concrete injury. Id.

Following In re Horizon Healthcare Services Inc. Data Breach Litigation, 846 F.3d 625 (3d Cir. 2017), the Third Circuit broadly interpreted Spokeo to provide standing where a party brings a statutory claim “alleging ‘the very injury [the statute] is intended to prevent,’ and the injury ‘has a close relationship to a harm … traditionally … providing a basis for a lawsuit in English or American courts.’” 2017 WL 2925432, at *4 (citing Horizon, 846 F.3d at 638-40). In the Third Circuit’s view, the Susinno plaintiff met this standard because: (1) the TCPA “addresses itself directly to single prerecorded calls” for the purpose of protecting consumers’ interests in privacy and avoidance of nuisances, and (2) in enacting the TCPA, Congress sought to protect the same interests implicated in the traditional common law cause of action for invasion of privacy. Id. Thus, Plaintiff’s claim of nuisance and an invasion of privacy sufficed. Id. 

The Third Circuit also favorably cited Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037, 1040-41 (9th Cir. 2017), where the Ninth Circuit found standing under Spokeo where the plaintiff received two unwanted text messages from a fitness company. In the Ninth Circuit’s view, the plaintiff possessed standing because “[t]he TCPA establishes the substantive right to be free from certain types of phone calls and texts absent consumer consent” and “[u]nsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients.” Id. at 1043. As a technical matter, however, the Van Patten decision holds only that the plaintiff sufficiently alleged standing, and the court did not engage in a detailed factual analysis even though the case had proceeded to the summary judgment phase. Id. at 1040.

Key takeaways. The Susinno decision demonstrates that, when confronted with a complaint alleging that the plaintiff incurred the type of harm the TCPA seeks to address, at least some post-Spokeo courts will remain hesitant to find a lack of standing. In these jurisdictions, Rule 12 motions to dismiss will largely be unsuccessful. A defendant might be better served by deposing the plaintiff and developing direct evidence that the plaintiff’s alleged harms are inconsequential, and hoping that a fact-based attack on the standing issue will produce a dismissal on summary judgment.

Posted on Friday, July 21 2017 at 7:53 pm by
California’s Automatic Renewal Law Continues to Create Class Action Risk

by Nancy Stagg

A recent federal district court opinion highlights the class action risks companies selling consumer goods and services in California face from California’s Automatic Renewal Law, California Business & Professions Code §17600 (“ARL”). The ARL, which was enacted in 2010, requires companies selling goods and services in California through continuous service programs, or automatically-renewing consumer contracts, or when offering free trials, to clearly and conspicuously disclose the terms, obtain the consumer’s affirmative consent before imposing a charge, and provide an acknowledgment that contains the terms, the cancellation policy, and an easy-to-use method to cancel the service. Given the increasing popularity of subscription services for everything from streaming music to beauty products, numerous class action lawsuits have been filed against goods and service providers alleging violations of the ARL. In an order dated July 17, 2017 by U.S. District Judge William Alsup in the Northern District of California in Gregory Ingalls, et al., v. Spotify USA, Inc. (Case No. 3:16-CV-03533 WHA), the District Court granted in part and denied in part Spotify’s motion for summary judgment on a plaintiff’s claims brought under the ARL and California’s Unfair Competition Law, California Business & Professions Code §17200 (“UCL”). The District Court granted summary adjudication and dismissed plaintiff’s claim brought under the ARL but denied summary judgment on plaintiff’s UCL claim. (At the time of this publication, plaintiff’s motion for class certification was pending before the District Court.)

The District Court’s order dismissing plaintiff’s claim based on the ARL itself is in line with other recent orders from the Eastern and Central Districts of California that have found that the ARL does not provide a private right of action. See Johnson v. Pluralsight, LLC, — F. Supp. 3d —, 2017 WL 661953 (E.D. Cal. Feb. 17, 2017) (Judge Morrison England, Jr.); Roz v. Nestle Waters N. Am.,Inc., No. 2:16-cv-04418-SVM-JEM, 2017 WL 132853 (C.D. Cal. Jan. 11, 2017) (Judge Stephen Wilson). However, because a UCL claim can be based upon the violation of a statute, the District Court found that the alleged violation of the ARL could be the predicate unlawful act upon which a UCL claim (and class action) could be based.

The District Court also rejected Spotify’s claim that the plaintiff lacked Article III standing to bring the unfair competition claim. The District found that plaintiff’s expenditure of $9.99 a month for 3 months for an online music streaming service, considered in light of his testimony that he did not expect to be charged for the service, no longer wanted it, and did not use it after the first 2 weeks of his 3-day free trial, was sufficient to establish injury-in-fact.

In examining each of the three grounds upon which the plaintiff based his claim that Spotify violated the ARL, the District Court determined that the plaintiff raised a genuine issue of material fact as to “but for” causation, which precluded summary judgment for Spotify. First, the plaintiff’s testimony – to the effect that, if the terms had been properly presented to him, he would have read them and cancelled his subscription prior to the end of the free trial – was sufficient to support his claim that Spotify’s failure to disclose its automatic-renewal terms in a clear and conspicuous manner caused him harm. The District Court rejected Spotify’s argument that, because the plaintiff admitted he did not read Spotify’s automatic renewal disclosure, his injury was not traceable to Spotify’s conduct. Plaintiff’s allegations were not related to the actual content of the disclosure, according to the District Court, but were instead “predicated on a prophylactic law requiring businesses to present disclosures in a conspicuous manner.”

Second, the District Court found that the plaintiff sufficiently established causation as to his claim that Spotify failed to obtain his affirmative consent to the automatic renewal program:  “Had Spotify presented [plaintiff] with an opportunity to affirmatively consent, he may have read whatever he was consenting to.”

Finally, in assessing plaintiff’s third claim that Spotify failed to provide an appropriate acknowledgment of the automatic renewal disclosure, the District Court noted that the receipt plaintiff received after signing up contained only a link to the online terms and not a copy of the actual terms. Because Spotify failed to address the adequacy of this type of disclosure in its motion, the District Court also denied summary judgment as to this claim.

Practice Tip: While many other states have enacted similar laws, California’s Automatic Renewal Law is considered to be among the most stringent in the United States. California is currently a hot spot for the filing of automatic-renewal disclosure class action cases. To avoid being targeted, companies offering subscription service programs, automatic renewals, and free trials should carefully review their compliance with California law and make any necessary changes to their sign-up process to provide clear and conspicuous disclosure, obtain affirmative consent, and provide an appropriate acknowledgement to the consumer.

For more information, please contact Kilpatrick Townsend Partner Nancy L. Stagg at nstagg@kilpatricktownsend.com.

 

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