Consumer Finance Litigation

Since the Constitution was ratified, 226 years ago, potential plaintiffs have been required to first establish that they have a "case or controversy" before a court can consider the merits of any legal claim. As the U.S. Supreme Court has phrased it, "the person seeking to invoke the jurisdiction of the court must establish the requisite standing to sue." Whitmore v. Arkansas, 495 U.S. 149, 154 (1990). There are three components of standing:

1) the plaintiff has suffered an "injury in fact" that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical;

2) the injury is traceable to the challenged action of the defendant; and

3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81 (2000). In other words, "no injury" equals "no claim." In most lawsuits, it is easy for a plaintiff to hurdle the low bar set by Article III's "case and controversy" requirement. However, the Constitution's standing provision can become cloudy when applied to the alphabet soup of federal consumer protection statutes. In its most simple terms, the question courts often face is as follows: If a plaintiff has suffered no actual damage (i.e. economic or emotional harm), does that plaintiff have standing if he or she may be entitled to statutory damages, even in the absence of actual harm? The problem is one created by Congress, which has drafted numerous federal consumer protection statutes that allow statutory damages in the absence actual harm. The driving force behind lawsuits asserting claims for violations of these statutes-which include the Fair Debt Collection Practices Act ("FDCPA"), Telephone Consumer Protection Act ("TCPA"), Real Estate Settlement Procedures Act ("RESPA") and Fair Credit Reporting Act ("FCRA"), among others-is the promise of a statutory damage award and, with the exception of the TCPA, attorney's fees. To date, the U.S. Supreme Court has yet to weigh in on whether the promise of statutory damages, alone, can satisfy Article III's "case and controversy" requirement. In 2011, numerous commentators, including the author of this blog, enthusiastically trumpeted the decision by the U.S. Supreme to grant certiorari in the case First American Financial Corp. v. Edwards, 131 S.Ct. 3022 (2011). At the time that cert was granted, it was considered "the most noteworthy RESPA litigation development of the year." See John P. Kromer, Sanford Shatz & Jonathan W. Cannon, There's a New Sheriff in Town -- 2011 Survey of RESPA Developments, 67 Bus. Law 553 (2012). It appeared the Supreme Court was prepared to resolve the question of whether the plaintiff-who alleged a kickback in connection with a settlement service for which she was charged, without alleging that the kickback impacted the price or quality of the service that she purchased-lacked standing to sue because she had not suffered an "injury-in-fact." A decision would have had far-reaching ramifications that impacted not only RESPA litigation, but all federal consumer finance statutes with statutory damage provisions. However, the Supreme Court ultimately decided not to make a determination on the issue presented in Edwards, issuing a statement on June 28, 2012 that "[t]he writ of certiorari is dismissed as improvidently granted." First American Financial Corp. v. Edwards, 132 S.Ct. 2536 (2012). The Supreme Court remained silent on the "case and controversy" issue presented by statutory damages provisions until it granted certiorari on April 27, 2015 in the case Spokeo, Inc. v. Robins, --- S.Ct. ----, 2015 WL 1879778 (Apr. 27, 2015). The issue presented by the Robins petition is nearly identical to that in Edwards, specifically: Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based upon a bare violation of a federal statute. While Edwards involved an alleged RESPA violation, Robins involves an alleged violation of the FCRA. In Robins, a consumer brought suit alleging that a website operator, Spokeo, published inaccurate information about him. Spokeo provides information about individuals, including contact data, marital status, age, occupation, economic health and wealth level. The plaintiff in Robins alleged that Spokeo inaccurately described him as holding a graduate degree and as wealthy, both of which were alleged to be untrue. Robbins, who is unemployed, described the misinformation as causing harm to his employment prospects. At the lower court level, Spokeo moved to dismiss for lack of subject-matter jurisdiction on the grounds that Robins lacked standing under Article III. At first, the district court denied the motion and concluded that Robins had alleged a sufficient injury in fact. However, after Spokeo moved to certify an interlocutory appeal, the district court reconsidered its previous ruling and held, contrary to its first order, that Robins failed to plead an injury in fact and that any injuries pled were not traceable to Spokeo's alleged violations, dismissing the action. See Robbins v. Spokeo, Inc., No. CV10-05306-ODW, 2011 WL 11562151 (C.D. Cal. Sept. 19, 2011). Robbins appealed the district court's dismissal to the Ninth Circuit Court of Appeals. On February 4, 2014, the Ninth Circuit issued a ruling reversing the lower court's order and remanding the case. See Robins v. Spokeo, Inc., 742 F.3d 409 (9th Cir. 2014). The Ninth Circuit held that while the Constitution limits the power of Congress to confer standing, that the Constitution "does not prohibit Congress from 'elevating to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate at law.'" Id. (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 578 (1992)). Thus, the court stated that the relevant issue was whether violations of statutory rights created by the FCRA are "concrete, de facto injuries" that Congress can so elevate. The Sixth Circuit answered that question in the affirmative, stating that Robins had properly alleged: (1) that Spokeo violated his own statutory rights, not just the rights of others and (2) that the interests protected by the statutory rights at issue were sufficiently "concrete and particularized" that they could be elevated by Congress. Robins, 742 F.3d at 414-15. More than fourteen months after the Ninth Circuit's decision, the Supreme Court has now granted certiorari. Thus, many in the consumer finance industry will be looking to the Supreme Court-like we did in 2011 with Edwards-to see if a decision will be made that could drastically alter the consumer finance litigation landscape. As this case moves along, expect additional updates on this blog regarding developments and the potential ramifications from a decision by the Court.