Where's The Harm in That? Supreme Court Rules on Class Action Injuries

Class action lawsuits, by their nature, work best when the issue at stake is one that would be hard to fight on a case-by-case basis.

If a company makes a product that poisons you, it makes sense to file an individual lawsuit. But, when a company misleads you about whether an ingredient is organic, it’s harder to justify the cost and time of going to court – unless you can band together, as class actions allow consumers to do.

It’s true, though, that the very heart of class actions has also been their critics’ biggest issue: that the “injuries” suffered by consumers often seem, well, trivial. There’s been a lot of back and forth over the years about where the line is between consumers complaining about a problem and consumers suffering harm and, therefore, deserving compensation.

Going back to the analogy, poisoning is a clear case of harm caused by a company’s actions – but can you really say you’ve been harmed if, for example, you get spam text messages? Some would say yes and attach value to the time wasted dealing with the messages or the disturbance and disruption caused. And others argue that, though there’s no physical or financial harm, companies must face consequences for violating federal laws, even if the violation seems fairly tame. Laws must be followed, after all – both big and small.

Turn now to the Supreme Court’s ruling earlier this month in a case being watched closely by class action critics and supporters alike. The case in question is fairly simple: Spokeo Inc., a “people search engine,” was accused of violating the Fair Credit Reporting Act (FRCA) by inaccurately sharing information about a plaintiff’s state of employment.

In a ruling in 2014, the Ninth Circuit agreed with the plaintiff that he had standing to sue despite not alleging any actual injury and allowed the case to continue. But the company disagreed, pointing out that since the plaintiff failed to state an injury, the case had no merit. Things got complicated and the Supreme Court found itself ruling on what is, effectively, a proxy case on whether statutory violation class actions – that is, lawsuits that allege a federal statue has been broken – need to define specific injuries to be viable.

In the best tradition of the Supreme Court, this month’s ruling landed somewhere in the middle of the debate. The court criticized the Ninth Circuit’s earlier ruling, finding that it was based on an incomplete analysis of the facts. Because of this, the precedent laid down in 2014 – that plaintiffs do not need to allege specific injury to maintain their statutory class action claims – is essentially overturned. The court also ruled that statutory violation claims – lawsuits that allege violations of the FCRA, for example, or the ever-popular TCPA – do still need a concrete injury to be viable. Consumers can’t just use a technical violation of the law as a stand-in for their “injury.”

However (keeping up?), the Supreme Court agreed that statutory violation cases could continue as long as the accusations are accompanied by either tangible or intangible injuries. The court also held off from making a ruling on the Spokeo case itself, preferring to consider the larger question of how class actions will work in the future, and sent the case back to the Ninth Circuit.

Clear as mud, right?

While these things can be difficult to pin down, the main takeaway from all of this is that:

As ever with these things, it will take some time to see the effects of the ruling. The Ninth Circuit still has its own ruling to make, but at least now there’s some more defined parameters in which to do so.

It’s fair to say that, for average consumers, whether Spokeo wins their case or not doesn’t matter – but how and when we can file class actions against companies that break federal law does. So, it’s good to see these questions being raised and thoughtfully considered.