“No Injury” Consumer Class Actions Weakened, but Not Killed, by Supreme Court

The U.S. Supreme Court held Monday that the Ninth Circuit erred when it ruled consumers can sue companies without alleging actual injury. The Supreme Court ruled that a consumer could not sue Spokeo Inc. for mere technical violations of the Fair Credit Reporting Act. Its holding left the door open for plaintiffs in other cases to use statutory violations to establish standing, however.

In a 6-2 decision, the high court vacated and remanded the Ninth Circuit’s February 2014 ruling that plaintiffs do not need to allege actual injury to maintain statutory class action claims like the ones asserted in this case by Thomas Robins. Mr. Robins had alleged that Spokeo, a “people search engine,” violated the FCRA by falsely reporting that Robins was wealthy, married and had a graduate degree. Robins asserted that he was in fact struggling to find work.

The majority held that because the Ninth Circuit failed to consider both aspects of the “injury-in-fact” requirement — namely, that an injury is both particularized and concrete — its Article III standing analysis was incomplete. “Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right,” Justice Alito wrote.

Article III standing requires a concrete injury even in the context of a statutory violation. For that reason, Robins could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”

However, the justices took no position as to whether the Ninth Circuit’s ultimate conclusion — that Robins adequately alleged an injury in fact — was correct. “The violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury-in-fact,” Justice Alito wrote. “In other words, a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified.” In essence, the Supreme Court directed the Ninth Circuit to make sure that (and articulate that) its ultimate conclusion was based on a complete and accurate analysis, not the “incomplete analysis” faulted by the high court.

Experts had predicted that a high court ruling in favor of Robins would result in an explosion of class actions, because it would validate the Ninth Circuit’s willingness to allow a consumer action, even a class action, to proceed in the absence of an allegation of actual injury. A  June 2014 amicus brief filed by Facebook Inc., Google Inc., eBay Inc., Yahoo Inc. and many other high-profile businesses had underscored that point, contending that permitting the Ninth Circuit’s ruling to stand would open the floodgates for an avalanche of “no injury” class actions brought under various consumer protection statutes. While the Supreme Court’s ruling did not bless the Ninth Circuit’s “no injury” approach, this was not an outright repudiation of the notion that a violation of a statutory procedural requirement can be sufficient to create injury and confer standing.