Trimming back the already narrow definition of standing laid down in Spokeo Inc. v. Robins, 578 U.S. 330 (2016), the Supreme Court held 5/4 on June 25 that “an injury in law is not an injury in fact.” In other words, a violation of federal law doesn’t necessarily confer Article III standing to mount a lawsuit for the recovery of damages provided by statute.
A credit reporting agency maintained a list of individuals who were terrorists, drug traffickers and serious criminals. The majority held that those erroneously on the list had no standing to sue for statutory damages unless the false and defamatory report had been given to a third party.
The opinion is important in bankruptcy because the decision questions whether a debtor or trustee has standing to seek damages for violation of the automatic stay if the debtor can identify no concrete damages apart from violation of the statute. Arguably, the June 25 opinion means that a debtor or trustee is only entitled to an injunction barring further violations of the automatic stay, if the estate suffered no concrete damages from the original stay violation.
Five conservative justices were in the majority. The vigorous dissent by Justice Clarence Thomas indicates that the decision would have gone the other way were Justice Ruth Bader Ginsburg still on the bench.
As pointed out by Justice Thomas’s dissent, the majority arguably intruded on the separation of powers by depriving Congress of the ability to define individuals’ rights and create remedies to be enforced in federal court. Significantly, however, Justice Thomas explained in his dissent how plaintiffs in the future could bring the same claims in state courts.
Justice Brett M. Kavanaugh wrote the opinion of the Court, joined by Chief Justice Roberts and Justices Samuel A. Alito, Jr., Neil M. Gorsuch and Amy Coney Barrett. Justice Thomas wrote a dissent joined by Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan. Justice Kagan wrote a separate dissent, joined by Justices Breyer and Sotomayor.
To read ABI’s report on Spokeo, click here.
The Terrorist List
The government maintains lists of terrorists, drug traffickers and other serious criminals. For an extra fee, the credit reporting agency would tell its customers if someone’s name appeared on the list.
The credit agency listed people with the same or similar names. It did not compare birth dates, Social Security numbers or other available identifiers. Consequently, innocent people could appear on the credit agency’s list of terrorists and criminals.
The plaintiff negotiated to buy a car. The dealer refused to sell the car because the prospective buyer’s name appeared on the credit agency’s list of terrorists and criminals. Of course, the buyer was not a terrorist or criminal. He only shared a name with someone on the government’s list.
After being denied the ability to buy a car, the plaintiff requested a copy of his credit report from the credit agency. The agency sent him a copy of the report purporting to be complete, but the report did not show him as being on the list of criminals and terrorists.
Later, the agency sent him a letter telling him that he was a potential match with someone on the government list, but it again did not tell him that the information appeared on his credit report. The letter also did not tell the plaintiff about his rights to remove incorrect information from the credit report, as required by the Fair Credit Reporting Act.
The plaintiff filed a class action in federal district court in California under the FCRA. The class of about 8,000 individuals included everyone who was erroneously on the credit agency’s list during a specified time, whether or not their reports had been given to third parties. Among the class, erroneous reports for some 1,900 individuals had been given by the credit agency to third parties.
The class of 8,000 was certified. After trial, the jury awarded each of the 8,000 class members almost $1,000 in statutory damages and some $6,400 in punitive damages, for a total of more than $60 million. The Ninth Circuit affirmed 2/1 but reduced the total award to some $40 million.
The dissenter in the Ninth Circuit believed that class members had no standing if their erroneous reports had not been given to a third party, even though the FCRA gave them the right to damages.
The credit agency filed a petition for certiorari, which the Supreme Court granted in December 2020. It is not clear whether there was a circuit split. Oral argument was held on March 30.
The Majority Opinion
After laying out the facts, Justice Kavanaugh recounted the history of Article III standing, which requires that a plaintiff have a “personal stake” in the case. To meet the test, the plaintiff must show that (1) she or he suffered an injury that was concrete, particularized and actual or imminent; (2) the injury was likely caused by the defendant; and (3) the injury would likely be redressed by judicial relief.
In the case before the Court, Justice Kavanaugh said that the question under Spokeo was whether “the plaintiff’s injury was ‘concrete’ — that is, ‘real, and not abstract.’” Spokeo, he said, allowed for various intangible harms to be concrete, such as “reputational harms, disclosure of private information, and intrusion upon seclusion” or abridgement of free speech.
Justice Kavanaugh said that the views of Congress may be “instructive.” Legislation, he said, can elevate the status of concrete, de facto injuries that previously were inadequate in law.
Quoting the Sixth Circuit, Justice Kavanaugh said that Congress’s lawmaking power may not transform something that is not harmful into something that is. Citing Spokeo, he said that Article III standing requires a concrete injury even when there has been a statutory violation.
Justice Kavanaugh therefore held that “an injury in law is not an injury in fact. Only those plaintiffs who have been concretely harmed by a defendant’s statutory violation may sue that private defendant over that violation in federal court.” [Emphasis in original.] If the rules of Article III standing were different, he said, “Congress could authorize virtually any citizen to bring a statutory damages suit against virtually any defendant who violated virtually any federal law.”
Applying the law to the facts, Justice Kavanaugh had “no trouble” in concluding that the 1,900 class members had suffered “concrete harm” because their erroneous reports had been given to third parties. For the remainder, “the mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.”
The plaintiffs cited Spokeo for the proposition that the risk of real harm can sometimes satisfy the requirement of concreteness. Justice Kavanaugh countered by saying that someone “exposed to a risk of future harm may pursue forward-looking, injunctive relief to prevent the harm from occurring, at least so long as the risk of harm is sufficiently imminent and substantial.”
In other words, a plaintiff must show standing separately for each type of relief. “Therefore,” Justice Kavanaugh said, “a plaintiff’s standing to seek injunctive relief does not necessarily mean that the plaintiff has standing to seek retrospective damages.”
For the majority, Justice Kavanaugh reversed and remanded to the Ninth Circuit. The 1,900 class members whose reports were disseminated to third parties “suffered a concrete harm,” but the remainder did not and had no standing.
The Dissent by Justice Thomas
In his dissent joined by three liberal justices, Justice Thomas began by emphasizing the facts. The credit reports “flagged many law-abiding people as potential terrorists and drug traffickers” and in doing so violated several provisions in the FCRA. He continued:
Yet despite Congress’ judgment that such misdeeds deserve redress, the majority decides that [the credit agency’s] actions are so insignificant that the Constitution prohibits consumers from vindicating their rights in federal court. The Constitution does no such thing.
Justice Thomas noted how the notion of injury in fact only emerged in 1970, 180 years after ratification of Article III. To the contrary, he said that “courts for centuries held that injury in law to a private right was enough to create a case or controversy.” To his way of thinking, the entire class of 8,000 had “a sufficient injury to sue in federal court” given that the jury had found that the credit agency “violated each member’s individual rights.”
By way of contrast, Justice Thomas characterized the majority as holding that “the mere violation of a personal legal right is not — and never can be — an injury sufficient to establish standing.” [Emphasis in original.] In that regard, he insinuated that the Court was cutting back on Spokeo because the majority had said five years ago that “Congress is well positioned to identify intangible harms that meet minimum Article III requirements” and that “the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact.” Spokeo, id., 578 U.S. at 341, 342.
Justice Thomas characterized the import of the majority’s opinion as meaning that “legislatures are constitutionally unable to offer the protection of the federal courts for anything other than money, bodily integrity, and anything else that this Court thinks looks close enough to rights existing at common law . . . . Never before has this Court declared that legal injury is inherently insufficient to support standing.” [Emphasis in original.]
Consequently, Justice Thomas said, “this Court has relieved the legislature of its power to create and define rights.” If characterizing someone as a drug trafficker or terrorist was not enough, he wondered what could rise to the level of sufficient injury. What if someone were falsely labeled as a child molester or a racist? “Or what about openly reducing a person’s credit score by several points because of his race?”
“If none of these constitutes an injury in fact, how can that possibly square with our past cases . . . ? Weighing the harms caused by specific facts and choosing remedies seems to me like a much better fit for legislatures and juries than for this Court,” Justice Thomas said.
In a footnote near the end of his dissent, Justice Thomas observed that the majority’s decision “might actually be a pyrrhic victory” for the credit agency. The Court only held that some of the class lacked standing in federal court.
Justice Thomas said that state courts would become “the sole forum for such cases” because they are not bound by Article III’s requirement of a case or controversy. Moreover, defendants could not remove the suits to federal court, because federal courts would have no jurisdiction for lack of an Article III case or controversy.
“By declaring that federal courts lack jurisdiction,” Justice Thomas concluded his footnote by saying that “the Court has thus ensured that state courts will exercise exclusive jurisdiction over these sorts of class actions.”
Justice Kagan’s Dissent
Joined by Justices Breyer and Sotomayor, Justice Kagan further developed the majority’s intrusion into the separation of powers. She said that the “Court here transforms standing law from a doctrine of judicial modesty into a tool of judicial aggrandizement. It holds, for the first time, that a specific class of plaintiffs whom Congress allowed to bring a lawsuit cannot do so under Article III.”
Justice Kagan said that the reporting agency had “willfully violated” the statute by preparing credit files falsely reporting class members as potential terrorists and by obscuring the mistake when class members requested copies of their files. She said that finding no injury in the real world “is to inhabit a world I don’t know. [citation omitted] And to make that claim in the face of Congress’s contrary judgment is to exceed the judiciary’s ‘proper — and properly limited — role,’” quoting Warth v. Seldin, 422 U.S. 490, 498 (1975).
Justice Kagan ended her dissent by saying that “Congress is better suited than courts to determine when something causes a harm or risk of harm in the real world. For that reason, courts should give deference to those congressional judgments.”
Observations
Assume that a creditor willfully violates the Section 362 automatic stay but causes no injury. After last week’s decision, is the debtor or trustee entitled to damages such as attorneys’ fees, or is injunctive relief the only remedy?
In this writer’s opinion, the majority has reincarnated substantive due process, this time under Article III. If a remedy for an injustice was not known at common law, the majority are saying that relief other than an injunction is beyond the reach of Congress.
Trimming back the already narrow definition of standing laid down in Spokeo Inc. v. Robins, 578 U.S. 330 (2016), the Supreme Court held 5/4 on June 25 that “an injury in law is not an injury in fact.” In other words, a violation of federal law doesn’t necessarily confer Article III standing to mount a lawsuit for the recovery of damages provided by statute.
A credit reporting agency maintained a list of individuals who were terrorists, drug traffickers and serious criminals. The majority held that those erroneously on the list had no standing to sue for statutory damages unless the false and defamatory report had been given to a third party.
The opinion is important in bankruptcy because the decision questions whether a debtor or trustee has standing to seek damages for violation of the automatic stay if the debtor can identify no concrete damages apart from violation of the statute. Arguably, the June 25 opinion means that a debtor or trustee is only entitled to an injunction barring further violations of the automatic stay, if the estate suffered no concrete damages from the original stay violation.
Five conservative justices were in the majority. The vigorous dissent by Justice Clarence Thomas indicates that the decision would have gone the other way were Justice Ruth Bader Ginsburg still on the bench.