Consumer Finance Litigation

In the wake of Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (May 16, 2016), the Supreme Court decision that had the chance to be legendary, but instead settled for punting back to the Ninth Circuit Court of Appeals, we are left wondering who the real winner was and what is the fallout for mere procedural violations of statutes for consumer claims?

Spokeo, Inc. v. Robins: Straight Back to the Ninth Circuit

In a 6-2 decision, with Justice Thomas concurring and Justices Ginsburg and Sotomayor dissenting, the Supreme Court held that that the Ninth Circuit Court of Appeals had failed to properly review the "injury-in-fact" element of the plaintiff's standing to bring his Fair Credit Reporting Act ("FCRA") claims. See generally id. Relying on its own progeny concerning Article III standing, the Court rehashed the familiar elements of standing: (1) an injury-in-fact, (2) that is traceable to conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision. Id. at 6 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992); Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 180-181 (2000)). Focusing only on the "injury in fact" requirement, the Court echoed its prior decisions, which have held "time and time again" that the injury must be both "concrete" and "particularized." Id. at 8 (citing Susan B. Anthony List v. Driehaus, 573 U.S. ____, ___ (2014) (slip op., at 8); Summers v. Earth Island Institute, Bellwood, 441 U.S. 91,100 (1979)).

According to the majority, the problem with the Ninth Circuit's ruling was it failed to consider the "concrete" aspect of the plaintiff's alleged injury in fact. Spokeo, 136 S.Ct. 1540, at 2. The Ninth Circuit's holding purported to review both the "concrete" and "particularized" components in upholding plaintiff's injury in fact because he alleged: (a) "Spokeo violated his statutory rights, not just the statutory rights" of others, and (b) the "handling of his credit information" was his individual interest, as opposed to a collective interest. See Spokeo, 136 S.Ct. 1540, at 8. But, the Supreme Court said these considerations both relate to particularization, not to concreteness.

A "particularized" harm means the injury must personally affect the plaintiff. Id. at 7. A "concrete" injury is more difficult to define - it is "de facto," must "actually exist," must be "real" and "not abstract." Id. However, this does not mean the injury must be "tangible," and what is more, Congress has the ability elevate certain "intangible" injuries that were previously inadequate at law to the level of "de facto" concrete injuries. Id. at 9. This latter part is significant because, in Spokeo, the analysis of injury in fact focused on whether a "bare" procedural violation of a federal statute was enough to establish a "concrete injury in fact." The Supreme Court acknowledged Congress's ability to elevate certain intangible harms, but cautioned that just because Congress has identified and elevated an intangible harm, does not automatically mean a plaintiff has satisfied the "injury-in-fact" requirement whenever he or she alleges a bare procedural statutory violation divorced from any concrete harm. Id. at 9-10.

After wading through this "actual" but possibly "intangible" but "not automatic" analysis, the Court attempted to provide some guidance by way of an example of a potential procedural violation that does not result in a concrete harm, explaining that in the current case inaccurate reporting of a zip code would be a procedural violation of the FCRA, but it is "difficult to imagine how the dissemination of an incorrect zip code, with nothing more, could work any concrete harm." Id. at 11. Declining to actually say whether or not plaintiff had alleged a concrete harm in conjunction with the procedural violation of the FCRA, the Supreme Court remanded the case back to the Ninth Circuit to figure that part out. Id.

While Spokeo had the potential to close the door on consumer attempts to establish Article III standing for "bare" procedural violations of statutes, the Supreme Court was not willing to make that jump. The Court's somewhat oscillating opinion leaves the door open for a lot of arguments for both sides of the issue. The most we can glean from the majority's opinion is that, at the very least sometimes, an actual additional harm will have to be established in order to pursue a statutory violation. Simply put, if a statute is violated, but no harm befalls you, then you do not have standing to bring your claim. The difficulty is determining the threshold for establishing harm and if and when Congress can determine the harm threshold. The Telephone Consumer Protection Act ("TCPA"), 447 U.S.C. § 227, et seq., presents a prime example of an attempt by Congress to elevate certain intangible harms to the level of "concrete." The TCPA is generally regarded as a strict liability statute, distinguishing it from the FCRA, but does that change the Spokeo concrete injury analysis? In the short period of time since the Supreme Court's decision, District Courts have come out on just about every side.

Concrete Injury in Fact and the TCPA

Prior to Spokeo, the most recent Circuit Court cases governing a "concrete injury-in-fact" for TCPA claims, Palm Beach Golf Ctr.-Boca, Inc. v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245 (11th Cir.2015) and Imhoff Investment, L.L.C. v. Alfoccino, Inc., 792 F.3d 627 (2015), both held that the TCPA creates a cognizable right and, therefore, any violation of the right is a "concrete injury in fact." Palm Beach Golf, 781 F.3d at 1252; Imhoff Investment, 792 F.3d at 633. Both cases dealt with claims for unsolicited fax advertisements and each court reasoned that Congress specifically created the TCPA to remedy certain problems, including unwanted faxes tying up phone lines and the cost of paper and ink printing faxes. See generally id. Relying heavily on earlier rulings regarding "injury-in-fact" for alleged TCPA violations, these cases further established the general ease a plaintiff had in alleging a concrete injury for mere procedural violations of the TCPA.

Standing and the TCPA Since Spokeo

Despite the Spokeo Court's emphasis on alleging a "concrete" harm, the general trend of District Courts in applying the Spokeo analysis in TCPA claims has focused on the Supreme Court's analysis of Congress's ability to elevate intangible harms, and reliance on the earlier "injury-in-fact" TCPA decisions that held violations of the TCPA satisfy the concrete "injury-in-fact" requirement.

For instance, in Rogers v. Capital One Bank (USA), N.A., the Northern District of Georgia held that the plaintiffs had alleged a concrete injury in fact under the TCPA for unwanted calls made to their cell phones. Case No. 1:15-CV-4016-TWT, 2016 WL 3162592 (N.D. Ga. June 7, 2016). Relying first on Spokeo for an explanation of what a "concrete" and "particularized" injury is, the Northern District turned back to the Eleventh Circuit's ruling in Palm Beach Golf, holding that, with respect to the TCPA, "Congress intended to create a concrete injury where the statute was violated, meaning so long as the plaintiff has been affected personally by the conduct that violates the statute, standing exists." Id. at * 2. The District Court further held there was a sufficient injury in fact because the plaintiffs alleged unwanted calls to their cell phones and their cell phone lines were not available for use during the unwanted calls. Id. (citing Palm Beach Golf, 781 F.3d at 1252).

While clearly acknowledging Spokeo's holding, the Rogers Court was unwilling to entertain the idea that Spokeo had any new effect on the analysis of a "concrete injury-in-fact" for TCPA claims. Additionally, the Rogers Court's holding that the injury was "concrete" because Congress said it was "concrete" is at odds with Spokeo's holding that "bare" procedural violation without a concrete harm is not sufficient. See Spokeo, 136 S.Ct. 1540, at 2. Nonetheless, the holding is still generally consistent with Spokeo because the court relied on both the allegations that the calls were to the plaintiffs' "personal cell phones" (particularized) and the cell phone lines were "unavailable for legitimate use during the unwanted calls" (concrete). See id. at *2.

In A.D. v. Credit One Bank, the Northern District of Illinois went a step further, holding that the TCPA differs from the FCRA because it provides a substantive right to be free from unwanted calls, and thus, no allegation of harm beyond the violation of the TCPA was necessary. Case No. 14-C-10106, 2016 WL 4417077 (August 19, 2016). The plaintiff was the daughter of the defendant's customer and was allegedly receiving unwanted calls to her cell phone from defendant. Id. at *1-3. Defendant, relying on Spokeo, asserted that plaintiff's bare allegations of statutory damages for alleged TCPA violations, without more, failed to meet Article III standing requirements and was barred by Spokeo. Id. at *7. However, the District Court adamantly disagreed, asserting defendant confused "damage" with "harm" or "injury." Id. Furthermore, the District Court distinguished the FCRA from the TCPA, noting that the FCRA imposed "record-keeping and procedural obligations" to protect against inaccurate reporting. Id. at *6. However, unlike the FCRA, the TCPA does not require adoption of procedures to decrease the congressionally protected risk, but instead prohibits making telephone calls to certain types of phones without the consent of the owner in order to protect against that risk. Id. In other words, while some violations of the FCRA might not result in any harm, violations of the TCPA differ because Congress has identified the violations involving unwanted calls as a concrete injury. See id. Moreover, the District Court held that the TCPA establishes a substantive, rather than a procedural right, to be free from unwanted calls. Id. at *7. Consequently, the Court held that it does not matter whether a plaintiff lacks additional tangible harm like wasted time, actual annoyance, and financial loss. Id. Because Congress had specifically created a substantive -- not procedural -- right to be free from telemarketing calls, the District Court held plaintiff had alleged a de facto concrete injury in fact. Id.

The A.D. court is correct that the constraints regulated by the FCRA and TCPA are distinct and, therefore, require slightly different analysis of whether or not a procedural violation is a "concrete" harm, but the A.D. Court's holding goes too far, essentially holding that any procedural violation of the TCPA is always a concrete harm. While procedural violations of the TCPA will often result in concrete harm due to Congress's clear prohibition of unwanted calls and faxes, it is still not an "automatic" violation without some sort harm to the plaintiff. For instance, if a defendant makes an unwanted dialer call to a cell phone without a party's consent to call that number, but there is a network outage or the phone line is busy, under Spokeo, there is a strong argument that there was no "concrete" injury to the plaintiff for these calls. There is no annoyance, wasted time, or tied up phone line because the call never went through, yet the defendant did make an unwanted auto-dialed call to the cell phone number without the owner's consent in violation of the TCPA. While the Spokeo Court acknowledged there may be times where a violation of a statutory right may be enough, if the TCPA violation causes no harm to the plaintiff or the plaintiff is not even aware of the violation, it is "difficult to imagine how" simply dialing a cell phone number with an automatic dialer, "with nothing more, could work any concrete harm." Spokeo, 136 S.Ct. 1540, at 11.

Likewise, not all District Courts have fallen back on Congress's ability to elevate an intangible harm to uphold a TCPA plaintiff's injury in fact. See Sartin v. EKF Diagnostics, Inc., Case No. CV 16-1816, 2016 WL 3598297, at *4 (E.D. La. July 5, 2016) (holding plaintiff's allegations amounted to "bare" violations of the TCPA, "divorced from any concrete harm," and, therefore, plaintiff "failed to demonstrate a judicially-cognizable injury in fact"); see also Stoops v. Wells Fargo Bank, N.A., Case No. CV 3:15-83, 2016 WL 3566266, at *13 (W.D. Pa. June 24, 2016) (holding that, although, the Third Circuit Court of Appeals has held that a plaintiff demonstrates a violation of privacy interest and an injury in fact for receiving automated calls, the plaintiff in the current action did not have her privacy violated because she purchased the cell phone in order to file TCPA lawsuits. Consequently, the plaintiff did not suffer an injury-in-fact and, therefore lacked constitutional standing to assert her claim against defendant).

Most notably, the Southern District of California recently held that a plaintiff alleging TCPA claims for calls to her cell phone without her consent failed to establish a concrete injury in fact. Romero v. Dep't Stores Nat'l Bank, No. 15-CV-193-CAB-MDD, 2016 WL 4184099 (S.D. Cal. Aug. 5, 2016). The plaintiff alleged that the defendant violated the TCPA and plaintiff suffered "severe and substantial emotion distress, including physical and emotional harm, including but not limited to: anxiety, stress, headaches…back, neck and shoulder pan, sleeping issues…anger, embarrassment…" etc. Id. at *1. While at odds with several other post-Spokeo district court decisions, the court's application of Spokeo raised novel points about what actual harm can ever result from a TCPA violation. First, the Court held that while the plaintiff asserts that her claims are for the very harm Congress sought to address by the TCPA, that argument relates to the "particular" component of the alleged harm, not the "concrete" element. Id. at *3. Next, the Court broke down the calls at issue into three categories: (1) calls the plaintiff did not hear ring; (2) calls the plaintiff heard ring, but did not answer, and (3) calls plaintiff answered. Id. at *4-5. As for the first category, the court held that if the plaintiff was not aware of the calls, none of her alleged injuries were plausibly caused by the alleged TCPA violations. Id. at *4. For the second category, the court focused on the fact that each alleged violation is a separate claim for which a separate injury must be alleged, and "[n]o reasonable juror could find that one unanswered telephone call could cause lost time, aggravation, distress, or an injury sufficient to establish standing." Id. For the final category, the plaintiff failed to offer any evidence demonstrating that the use of an automatic dialer caused her greater damage than had she answered a manual call. Id. at *5. The plaintiff argued that Congress intended to protect against a public harm caused by repeated unwanted calls to consumers using an automatic dialer. Id. However, the Court was not persuaded, noting Congress's finding that the proliferation of unwanted calls from telemarketers causes harm does not mean that the receipt of one telephone call that was dialed using an [automatic dialer] results in concrete harm. Id. Because the plaintiff's alleged concrete harm was divorced from the alleged violation of the TCPA, the Court held that the plaintiff could not establish Article III standing. Id.

Spokeo left the door open for defendants to continue to assert a lack of standing for failure to assert an injury-in-fact in consumer protection statute cases where no additional harm is alleged by the plaintiff. While there is a general trend of District Courts following the earlier TCPA standing cases, the fallout from Spokeo and the subsequent TCPA "injury-in-fact" cases are still playing out. Because the TCPA prohibits certain activities as opposed to requiring defendants to implement certain policies and procedures, TCPA defendants may have a harder time trying to assert a lack of "concrete" injury. However, given Spokeo's analysis of a need for a concrete harm and the potential for a procedural violation of the TCPA that does not result in harm, TCPA plaintiffs will need to be able to allege a concrete injury resulting from the alleged procedural violation of the TCPA. While the threshold for a TCPA injury is not high, it still must be "concrete."