In a 2/1 opinion, the Ninth Circuit raised the bar for consumer bankrupts to establish standing justifying a lawsuit under the federal Fair Credit Reporting Act, 15 U.S.C. § 1681s-2(b).
The decision is peculiar because the appeals court seemingly established a pleading requirement throughout the Ninth Circuit, yet the opinion was nonprecedential. The persuasive value of the majority’s holding was further undercut by a cogent dissent.
In five consolidated appeals, the plaintiffs alleged that the major credit reporting agencies violated the FCRA and its California counterpart by refusing to change how some debts were reported in view of the confirmation of their chapter 13 plans. The district court reached the merits and dismissed the complaints because the reports were not inaccurate.
In an unsigned opinion on March 25, the Ninth Circuit upheld dismissal, but on a different ground.
The Majority’s Opinion
The majority based its opinion on Spokeo Inc. v. Robins, 136 S. Ct. 1540 (2016), and the Ninth Circuit’s treatment of the case after remand from the Supreme Court.
In Spokeo, the high court held that alleging a violation of a statutory right by itself will not establish constitutional standing without alleging an injury-in-fact. To read ABI’s report on Spokeo, click here.
On remand, the Ninth Circuit ruled there was a sufficiently concrete injury to justify Article III standing because the reporting agency misrepresented the plaintiff’s age, marital status, education and profession. Robins v. Spokeo Inc., 867 F.3d 1108, 1111 (9th Cir. 2017). The appeals court said that the misrepresentations “were more material than a zip code error,” an example given by the Supreme Court for an allegation that would not show concrete injury. To read ABI’s report on the decision by the Ninth Circuit after remand, click here.
In the case on appeal, the majority found the complaints inadequate because the plaintiffs “gave no indication that they had tried to engage in or were imminently planning to engage in any transactions for which the alleged misstatements in their credit reports made or would make any material difference.”
“The absence of allegations that Plaintiffs have suffered or imminently will suffer a concrete injury compels dismissal of the Complaints for lack of standing.” Nonetheless, the majority said, dismissal “should be without prejudice.”
In other words, the plaintiffs could amend their complaints to satisfy the pleading requirement, whereupon the district court presumably will dismiss the suits a second time on the merits. On a second appeal, the Ninth Circuit may be forced to issue an important opinion on the merits.
The Dissent
Circuit Judge Marsha S. Berzon dissented, believing that the plaintiffs had alleged “concrete injury.”
The plaintiffs, Judge Berzon said, all alleged that the inaccuracies lowered their credit scores. “Those allegations satisfy the concrete harm requirement,” she said. There is no requirement in the circuit’s existing case law to allege that an inaccuracy “affected a specific previous or imminent transaction.”
Spokeo and the case at bar were the same, Judge Berzon said. On remand, the Ninth Circuit found standing even though the plaintiff in Spokeo only alleged that inflating his experience and qualifications “might hurt his employment prospects.”
For Judge Berzon, “adverse information on a credit report . . . constitutes reputational injury creating a material risk of harm.”
Observations
One day, the Supreme Court will rule on a sequel to Spokeo by telling us whether plaintiffs must show actual harm from false credit reports. So, we won’t guess whether the majority or the dissent was correct in the Ninth Circuit.
If the majority prevails, there are important ramifications in FCRA litigation. It may be impossible to attain class action status if the unique injury to every class member is such an important element of the claim. Moreover, the ability of the plaintiffs’ bar to enforce the FCRA will be impaired if courts require the showing of a potentially adverse result from a misstatement.
Ninth Circuit Lays Down Additional Pleading Requirements for F C R A Complaints
In a 2 to 1 opinion, the Ninth Circuit raised the bar for consumer bankrupts to establish standing justifying a lawsuit under the federal Fair Credit Reporting Act.
The decision is peculiar because the appeals court seemingly established a pleading requirement throughout the Ninth Circuit, yet the opinion was nonprecedential. The persuasive value of the majority’s holding was further undercut by a cogent dissent.