U.s. Supreme Court Cases May Have Drastic Impact On Consumer Class Actions

PDF

The Supreme Court recently announced that it will hear two cases that will have a major impact on class action litigation. The first case, Spokeo, Inc. v. Robins, addresses whether violating a statutory right without further harm will satisfy the injury in fact requirement to have standing to sue in federal court. The second case, Campbell-Ewald Co. v. Gomez, concerns whether a cause of action becomes moot upon an offer of judgment that provides complete relief for the plaintiff’s claims.

In Spokeo, the plaintiff sued Spokeo, Inc., which operates an online “people search” engine, for violating the Fair Credit Reporting Act (FCRA). FCRA allows a consumer whose information has been distributed in willful violation of the statute to collect statutory damages between $100 and $1000, without showing any actual injury or harm resulting from the violation. Plaintiff brought a putative class action against Spokeo, Inc. alleging that Spokeo, Inc. had willfully violated FCRA, but the plaintiff could not allege an actual injury arising from these purported violations. The Ninth Circuit held that a consumer who alleges a violation of FCRA without showing actual harm has standing to sue in federal court. The Supreme Court will decide whether Congress can create standing to sue in federal court for a bare statutory violation unaccompanied by any injury in fact.

If the Supreme Court reverses the Ninth Circuit and determines that a statutory violation cannot confer standing, the decision will render the damages provisions in FCRA and similar statutes significantly less threatening to defendants. Individuals attempting to bring claims under these statutes in federal court will have to demonstrate tangible or actual harm arising from the alleged violations to have standing-a difficult task for most would-be plaintiffs. Such a ruling would make the class action vehicle inaccessible to the majority of plaintiffs, leaving FRCA and similar statutes effectively unenforceable.

The Gomez case considers the consequences when an offer of judgment provides a plaintiff complete relief. Gomez involves a violation of the Telephone Consumer Protection Act (TCPA). TCPA is aimed at protecting consumers against unsolicited phone calls, texts, and faxes, whether or not those communications cause any actual harm. The Gomez case presents two questions relevant to class actions. The first is whether an individual plaintiff’s case becomes moot when the plaintiff receives an offer of judgment from the defendant that provides complete relief for that plaintiff’s claim. Several federal circuits hold that such an offer, even when it is rejected by the plaintiff, moots his individual claim. The second question is whether the claims of an entire class become moot when the representative plaintiff receives an offer of judgment prior to class certification, but after asserting a class.

There are, practically speaking, three possible outcomes of the Court’s decision in Gomez.

1.An unaccepted offer of judgment will moot neither an individual plaintiff’s claim nor the claims of a putative class, so a plaintiff who rejects an offer may proceed individually or as a representative of the class.

2.An unaccepted offer of judgment will moot an individual plaintiff’s claim, but not the claims of the remainder of the putative class. To proceed with its claims, the class must obtain a different representative plaintiff.

3.An unaccepted offer of judgment will moot both the individual plaintiff’s claim and the claims of the putative class, since the class no longer has a lead plaintiff to represent its interests.

If the Court determines that an offer of judgment renders the claims of the entire class moot, a strategic defendant may avoid the costs of prolonged litigation by “picking off” lead plaintiffs. If, however, the Court rules that such an offer affects neither an individual plaintiff’s claim nor the claims of an uncertified class, defendants will have fewer tools to employ against class actions.