In a May 16, 2016 opinion, the United States Supreme Court issued a holding which could offer debt collectors substantial protection against frivolous consumer suits and class actions in the federal courts.
In a May 16, 2016 opinion, the United States Supreme Court issued a holding which could offer debt collectors substantial protection against frivolous consumer suits and class actions in the federal courts. While the Spokeo case was focused upon the Fair Credit Reporting Act (“FCRA”), the Supreme Court’s opinion could drastically reduce the consumer defense bar’s ability to weaponize the Fair Debt Collection Practices Act (“FDPCA”) and Telephone Consumer Protection Act (“TCPA”) in order to generate million-dollar claims against debt collectors who visited no genuine harm upon the consumer.
Some brief background is necessary. The Spokeo Plaintiff, Thomas Robins, claimed that he was “injured” when Spokeo disseminated inaccurate information about him in response to internet-based queries for consumer reports. Accordingly, Robins retained counsel and filed a federal class-action suit in the U.S. District Court for the district of California, alleging that Spokeo had wilfully failed to comply with the requirements of the FCRA by publishing inaccurate information in the body of a consumer report. However, something was glaringly absent from Mr. Robins’ Complaint: an injury. Robins did not allege that he lost a job as a result of the inaccurate information, and did not even assert that the information painted him in a particularly negative light. Rather, he claimed only that the information produced by Spokeo was wrong, and that the FCRA provided him with the right to sue Spokeo when it generated inaccurate information in the body of a consumer report.
Ultimately, the Supreme Court torpedoed Robins’ purported class action upon the basis of the Constitutional principle of “standing.” Standing is a doctrine which limits the class of plaintiffs that can file suit in federal court with regard to an alleged wrong suffered by those plaintiffs. Specifically, the standing doctrine says that one cannot press a claim in federal court unless the potential plaintiff has: (i) an injury in fact; (ii) which is fairly traceable to the defendant’s alleged misconduct; and (iii) which is likely to be redressed by a favorable judicial decision.
The Spokeo opinion focuses the bulk of its analysis on the first factor: “injury in fact.” In “order to establish an injury in fact, a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.” Spokeo at p. 7. The Supreme Court further clarified that a “concrete injury . . . must actually exist . . . [must be] real and not abstract.” Spokeo at p. 8.
Unfortunately, as all key players in the creditors’ rights industry are aware, congress has created artificial statutory classes of injuries for which a plaintiff can seek redress from the creditor or debt collector. The FCRA, FDCPA, and TCPA provide that a plaintiff-consumer can seek to recover substantial penalties from an entity which leaves that consumer an unsolicited voicemail, or misstates an irrelevant date in a letter. These plaintiffs suffered no real or practical “injury,” but (until today) they carried compensable claims under the FCRA, FDCPA, or TCPA. Thankfully, the Spokeo opinion may substantially limit these plaintiffs’ ability to press such frivolous claims. Most importantly, the Supreme Court held that:
a plaintiff does not “automatically satisfy 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. [S]tanding 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.” Spokeo at pp. 9-10.
While it is true that the Spokeo opinion dealt only with a violation of the FCRA (a statute that debt collectors are not typically charged with violating), the decision could have a much broader impact. Standing and “injury in fact” concerns are not limited to FCRA actions, but are centrally pertinent to all federal court matters, including consumer class actions. Further, the Court’s reasoning appears to be in lockstep with the position of the creditors’ rights industry, as evidenced by statements such as the following: “not all inaccuracies cause harm or present any material risk of harm. [ . . . ] It is difficult to imagine how the provision of an incorrect zip code, without more, could work any concrete harm.” Spokeo at p. 11.
Until today, that provision of an “incorrect zip code” would likely have been held to be an FDCPA violation capable of subjecting the debt collector to significant class-action liability exposure. However, in a post-Spokeo world, these consumers would lack standing to press a class action without first demonstrating an actual injury in fact.
Spokeo, Inc. v. Robins. Supreme Court of the United States, No. 13-1339, May 16, 2016