Supreme Court Rejects “No Injury” Claims For Statutory DamagesMonday morning, the United States Supreme Court issued its long-awaited opinion in Spokeo, Inc. v. Robins (No. 13-1339), which addresses the question of whether a bare allegation of a statutory violation, unaccompanied by allegation of injury, is enough to satisfy Article III’s standing requirements and provide a federal court with subject-matter jurisdiction. The Court reversed the Ninth Circuit and held that Article III standing requires more than a mere recitation of a statutory violation to show injury. The holding has important ramifications for companies in a broad range of industries, but especially financial institutions, given their potential liability under a variety of statutes providing for statutory damages.

Spokeo involved a claim under one such statutory damage statute, the Fair Credit Reporting Act (FCRA). The plaintiff claimed that Spokeo had violated the statute by providing incorrect information about him through its “people search engine” website function and brought a claim under the FCRA on behalf of himself and a putative class of individuals. Although the district court dismissed the case for lack of subject-matter jurisdiction due to the lack of a pleaded injury in fact, the Ninth Circuit reversed, holding that an alleged violation of the plaintiff’s statutory rights was “sufficient to satisfy the injury-in-fact requirement of Article III” Robins v. Spokeo, Inc., 742 F.3d 412, 413-14 (9th Cir. 2014).

By a vote of 6-2 (with Justices Ginsburg and Sotomayor dissenting), the Supreme Court reversed the Ninth Circuit. The Court stated that “Article III standing requires a concrete injury even in the context of a statutory violation.” Spokeo slip op. at 9. The Court explained that a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. at 9-10. The Court noted that violation of a statute’s procedural requirements may result in no harm, and thus fail to provide a basis for subject matter jurisdiction (such as, for example, an incorrect zip code). Id. 10-11. In the Court’s view, Article III can only be satisfied where a statutory violation is accompanied by “real” harm, or at least “the risk of real harm” under the standards articulated in Clapper v. Amnesty International USA, 133 S. Ct. 1138 (2013). Id. at 10. However, the Court re-affirmed its holding from Warth v. Seldin, 422 U.S. 490, 518 (1975) that when “a case is at the pleadings stage, the plaintiff must ‘clearly . . . allege facts demonstrating’ each element” of Article III standing, including the necessity of injury-in-fact. Id. at 6.

The Spokeo decision may require dismissal of some pending federal statute-based claims, whether brought individually or as class actions. The decision was a long time coming. In 2011, the Supreme Court granted certiorari in Edwards v. First American Financial Corporation to consider this issue, but then later determined on the last day of its term that certiorari had been improvidently granted. 132 S. Ct. 2536 (June 28, 2012). The Court then refused to take up the issue during its 2012-2013 term. Mutual First Fed. Credit Union v. Charvat, 134 S. Ct. 1515 (2014). Now that there is finally some guidance on the subject, defendants and plaintiffs alike will have to determine how that affects their cases, particularly those alleging technical violations of legal or statutory duties unaccompanied by allegation of any clear corresponding harm or injury.

One area that will be particularly affected by the Spokeo decision is class actions involving federal data breach claims. In many of those cases, the plaintiffs and putative class members have not suffered any actual harm as a result of the alleged breach. Similarly, Spokeo may come into play in cases alleging Fair Debt Collection Practices Act (FDCPA) violations, which recently have become an active area of class action litigation. Defense counsel may be able to effectively deploy Spokeo to obtain dismissals of those claims.