KT Class Action Blog

Category: Spokeo

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 (unpublished), the named plaintiff (Miles) alleged that the defendants generated and provided a copy of a receipt revealing the first six digits and the last four digits of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, October 30 2017 at 6:37 pm by
Third Circuit Endorses Standing for Putative Class of Eye Drop Consumers, Rejecting Seventh Circuit’s View

by Joe Reynolds

Takeaway: Ever since the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), federal courts have grappled with the threshold standing question of what constitutes concrete injury in consumer class action litigation. Earlier this year, the Seventh Circuit, in an amusing opinion by Judge Posner, likened a putative class of eye drop purchasers complaining about the size of their eye drops to a group of cat owners dissatisfied with the purchase of an expensive drinking fountain for their cats. Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017). After the Seventh Circuit dismissed the action with prejudice, we suggested in a prior post [Spokeo Dismissals – With Prejudice, Without Prejudice or Something Else?] that the Seventh Circuit viewed the case as frivolous, since federal courts generally dismiss cases for lack of standing without prejudice. But faced with “materially identical allegations,” the Third Circuit rejected the Seventh Circuit’s view, holding that the eye drop purchasers sufficiently alleged concrete injury. Cottrell v. Alcon Labs., — F.3d —, 2017 WL 4657402, at *6 (3d Cir. Oct. 18, 2017). This divergent approach is another reminder that class action attorneys must stay current on the ever-evolving standing doctrine.

In Cottrell, the plaintiffs – purchasers of eye drops – filed suit against the manufacturers and distributors of the eye drops for violation of various states’ consumer protection statutes. Plaintiffs alleged the tip of the bottle of eye drops necessarily dispensed too large of an eye drop, around 50 microliters. Since a “plethora” of scientific research shows that an eye can only handle 7 to 10 microliters of fluid, plaintiffs alleged that any portion of the drop in excess of 7 to 10 microliters is “entirely wasted.” Id. at *1. As a result, plaintiffs claimed the defendants caused them to suffer “substantial” economic injury by manufacturing and selling eye drops in bottles that “emit such large drops.” Id. at *2.

These allegations are materially identical to the allegations made by the consumer-plaintiffs in Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017).  Writing for the Seventh Circuit, Judge Posner suggested plaintiffs there were simply dissatisfied with a product and its price, likening them to cat owners who sued cat breeders for duping them into buying expensive drinking fountains for their cats: “[W]ould anyone think they could successfully sue the breeders? For what?” 850 F.3d at 317. Judge Posner observed “[y]ou cannot sue a company and argue only—‘it could do better by us’—which is all they are arguing.” Id. at 318. Citing Spokeo, Judge Posner concluded the consumers had no standing to sue: “The fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; it is just a regret or disappointment—which is all we have here, the class having failed to allege ‘an invasion of a legally protected interest.’” Id.

The Third Circuit expressly rejected the Seventh Circuit’s reasoning. Writing for the majority, Judge Restrepo held the Seventh Circuit’s “logic flips the standing inquiry inside out, morphing it into a test of the legal validity of the plaintiffs’ claims of unlawful conduct.” Cottrell, 2017 WL 4657402, at *7. According to Judge Restrepo, “the Court in Eike blended standing and merits together” by determining the consumers had no cause of action; reasoning they had no injury because they had no cause of action; and concluding they had no standing to sue because they had no injury. Id. The Seventh Circuit erred by not focusing on whether plaintiffs alleged an invasion of a “legally protected interest.” Id. at *5. After noting that economic interests have traditionally been treated as legally protected interests for purposes of the standing doctrine, the Third Circuit held plaintiffs sufficiently alleged their “interests in the money they had to spend on medication that was impossible for them to use.” Id. at *6. And, by manufacturing and selling bottles of eye drops with tips that necessarily dispense too large of an eye drop, plaintiffs sufficiently alleged “Defendants’ conduct … caused harm to these interests.” Id.

Judge Roth dissented, holding the consumers “manufacture[d] a purely speculative injury.” Id. at *11 (Roth, J., dissenting). Judge Roth agreed plaintiffs’ injury boiled down to “the money spent on that portion of a single eye drop which exceeds the medically necessary volume.” Id. But Judge Roth noted plaintiffs did not argue they were charged more than market price for eye drops; instead, “they argue that the defendants could manufacture a hypothetical eye dropper that would dispense the exact amount of fluid needed to maximize efficacy without waste.” Id. (emphasis in original). Plaintiffs then assumed that once defendants’ conduct changed, no other aspects of the market would change—that is, “changing the eyedropper size would … change the price of the medicine.” Id. at *13. In Judge Roth’s view, this is an unreasonable assumption because the pharmaceutical market is shifting to pricing medicine based on effective doses, not volume. So even if defendants modified their eye dropper, plaintiffs might still pay the same price they’re paying now. Accordingly, Judge Roth could not accept such an “imaginative” economic theory and so rejected “the plaintiffs’ alleged economic injury as overly speculative and untenable under existing precedent.” Id.

In Eike, Judge Posner disregarded plaintiffs’ claims as mere “regret or disappointment” and dismissed the claims with prejudice, thereby foreclosing re-filing of the suit in any court. Judge Roth’s dissent in Cottrell did not go so far, but she did say the majority’s decision “flouts” the principle that “jurisdiction is a strict master” and that she is “troubled by both the legal and practical ramifications of the Majority’s decision.” 2017 WL 4657402, at *14. That distinguished jurists can disagree so strongly shows that the concept of “actionable injury” under Spokeo remains unclear, and the directly conflicting rulings on the identical claim might catch the eye of a Supreme Court looking to clarify its recent Spokeo ruling.

Posted on Monday, August 21 2017 at 11:56 am by
The Spokeo saga continues: Ninth Circuit finds that incorrect consumer report about age, marital status, wealth, education level, and profession gives rise to concrete injury

by Jay Bogan

Takeaway: In Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (“Spokeo II”), the Supreme Court ruled that not every statutory violation gives rise to a concrete injury for standing purposes. An inaccurate report of a person’s zip code, for example, might be a technical violation of the Fair Credit Reporting Act (“FCRA”), but such a violation does not cause the concrete injury required for Article III standing. On remand from the Supreme Court, the Ninth Circuit addressed the concrete injury requirement in Spokeo III (Robins v. Spokeo, Inc., No. 11-56843, 2017 WL 3480695 (9th Cir. Aug. 15, 2017)), ruling that Spokeo’s dissemination of information to the effect that the plaintiff was employed (when he was actually unemployed), and that he was wealthier and better-educated than he actually was, gave rise to a concrete injury. While it may be that Spokeo III is a fact-specific decision, it does appear that, in the Ninth Circuit, a FCRA-alleged inaccuracy must be trivial in the extreme to fall short of Article III’s concrete injury requirement.

As background, the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et. seq., requires consumer reporting agencies to do a number of things, such as “follow reasonable procedures to assure maximum possible accuracy” of the information contained in a consumer report. Id. at § 1681e(b).

Spokeo operates a website that aggregates personal information about individuals and generates individual profiles about them, for use by anyone, including employers. Thomas Robins discovered that Spokeo had a profile about him that contained incorrect information. The profile “falsely stated his age, marital status, wealth, education level, and profession, and … included a photo of a different person.” Spokeo III, 2017 WL 3480695, at *2. Claiming that the report harmed his employment prospects and caused him emotional distress, Robins sued Spokeo in federal court, alleging violations of FCRA and seeking to represent himself and a putative class.

Spokeo’s procedural history is now well-known. The district court dismissed Robin’s complaint for lack of standing, specifically, for failure to allege an actual injury-in-fact. The Ninth Circuit reversed, ruling that Robin’s alleged injuries were sufficiently “particularized” to him, that they were caused by the FCRA violation, and that they were “redressable” in court. Robins v. Spokeo, Inc., 742 F.3d 409 (9th Cir. 2014) (“Spokeo I”). The Supreme Court granted certiorari and reversed, holding in Spokeo II that the Ninth Circuit had not analyzed whether Robin’s injuries were sufficiently “concrete” for standing purposes.

On remand, the Ninth Circuit held that Robin’s alleged injuries were sufficiently concrete to satisfy Article III standing. Following the Supreme Court’s reasoning in Spokeo II, the Ninth Circuit observed that “Robins may not show an injury-in-fact merely by pointing to a statutory cause of action.” Spokeo III, 2017 WL 3480695, at *4. Some statutory violations, however, are by themselves sufficient to constitute concrete harm. Adopting the Second Circuit’s recent formulation of the concrete injury standard in Strubel v. Comenity Bank, 842 F.3d 181 (2d Cir. 2016), the Ninth Circuit boiled the analysis down to two questions: “(1) whether the statutory provisions at issue were established to protect [Robin’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.” Spokeo III, 2017 WL 3480695, at *4.

As to the first question, “given the ubiquity and importance of consumer reports in modern life,” and given that FCRA’s protections “resemble other reputational and privacy interests that have long been protected in the law,” the Ninth Circuit concluded “that the FCRA procedures at issue in this case were crafted to protect consumers’ (like Robins) concrete interest in accurate credit reporting about themselves.” Id. at *4-*5 (emphasis added).

As to the second question, the Ninth Circuit acknowledged that any inaccuracy would not suffice, referencing the “incorrect zip code” example given by the Supreme Court in Spokeo II. Id. at *6 (citing Spokeo, II, 136 S.Ct. at 1550). Spokeo II, according to Ninth Circuit, demanded an examination of the nature of the credit reporting inaccuracies “to ensure that they raise a real risk of harm to the concrete interests that FCRA protects.” Id.

According to the Ninth Circuit, Robin’s allegations met this test, “because it is clear to us that Robin’s allegations relate facts that are substantially more likely to harm his concrete interests than the Supreme Court’s example of an incorrect zip code.” Id. at *7. Robins alleged Spokeo incorrectly reported (among other things) that he is employed in a technical or professional field, that he has a graduate degree, and that he is wealthier than he actually is, when in fact he is unemployed and searching for a job. In light of Robin’s allegations of harm to his employment prospects and the anxiety the Spokeo report caused him, and that the information involved was of “the type that may be important to employers or others making use of a consumer report,” the Ninth Circuit was satisfied that Robins’ allegations “present[ed] a sincere risk of harm to the real-world interests that Congress chose to protect with FCRA.” Id.

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.

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