The United States Supreme Court Issues Two (2) Important Rulings Today which Provide Important Interpretations of what is Consumer Harm
Spokeo v. Robins, ___ U.S. ___ (2016)
Supreme Court Limits Consumer Right of Action in Fair Credit Reporting Act Case
In a 6-2 decision, the United States Supreme Court on Monday sided with an online "people search engine" company, Spokeo.com ("Spokeo"), to provide critical insight as to when and how consumers can sue for privacy violations under the Fair Credit Reporting Act (the "FCRA").
Thomas Robins filed a proposed class action against Spokeo in 2011, in the United States District Court for the Central District of California, arguing that because the website aggregates publicly available information upon request (from employers or otherwise), it qualifies as a "consumer reporting agency" under the FCRA. According to the Robins suit, a search result associated with his name contained inaccurate, but generally favorable, information as to his age, marital status, educational background, and professional accomplishments. Robins claimed the false online information contained on Spokeo had caused him harm.
The District Court dismissed the case because Robins had not "properly pled" a "concrete" harm, as required by Article III of the Constitution. On appeal, the Ninth Circuit reversed, holding that because Congress implicitly created a private cause of action to enforce statutory rights, Robins' "alleged violations of [those] rights [were] sufficient to satisfy the injury-in-fact requirement of Article III." Thus, Robins did not need to prove he was harmed because Spokeo violated the FCRA law, which allowed Robins to pursue statutory compensation. The Ninth Circuit's ruling highlighted a growing split amongst the Circuits on this issue.
Today, the Supreme Court, in an opinion written by Justice Samuel Alito, re-affirmed that an injury in fact to confer standing under Article III of the Constitution "must be both concrete and particularized." After analyzing each requirement in turn and certain types of mistakes that would not qualify (e.g., incorrect zip code without more), the Court held that "Robins cannot satisfy the demands of Article III by alleging a bare procedural violation." Thus, the Court vacated and remanded for further proceedings, "[b]ecause the Ninth Circuit failed to fully appreciate the distinction between concreteness and particularization, [and] its standing analysis was [,therefore,] incomplete."
The Spokeo decision is a victory for all defendants who are subject to potential claims under various federal financial consumer protection laws that contain a similar "statutory right" to sue and which now require plaintiffs seeking damages to assert a "concrete and particularized" injury in fact. The decision will have a significant impact on future consumer class actions. Because consumers now cannot solely rely on the penalties set forth in the statute to state a claim of actual harm, it will be harder for plaintiffs to prove damages. Time will tell, however, whether creative consumer attorneys will adjust their pleadings accordingly and whether a new round of motions to dismiss will determine their adequacy.
Sheriff et al. v. Gillie et al., ___ U.S. ___ (2016)
Supreme Courts Provides Insight as to the Intent and Purpose of the FDCPA
In a unanimous decision also issued today, the United States Supreme Court held that private attorneys hired by the Ohio Attorney General to collect debts owed to state agencies were "state officers" otherwise exempt from portions of the Fair Debt Collections Practices Act ("FDCPA"). Further, even if the private attorney did not have "state officer" status, the transmittal of letters on Ohio Attorney General letterhead did not otherwise violate specific sections of Section 1692e of the FDCPA.
Under Ohio law, the Attorney General is permitted to appoint special counsel to assist in the collection of debts. Exercising its power in this regard, two private law firms were appointed to send out collection letters on the Ohio Attorney General's letterhead. Some of these letters demanded payment in full and asked recipients to contact the private law firm who sent the letter originally. The letters were signed by the respective non-public sector attorneys with the designation that they were "Outside Counsel for Attorney General's Office."
Gillie, and others, filed a punitive class action asserting that the law firms violated the FDCPA by sending letters on Ohio Attorney General letterhead and by using deceptive and misleading means to collect a debt. The United States District Court for the District of Ohio granted summary judgment in favor of the law firms, finding: (1) they were officers of the State of Ohio and thus exempt from the FDCPA; and (2) use of the letterhead was not false or misleading. The Sixth Circuit reversed, holding that special counsel are independent contractors and not exempt from the FDCPA. The Circuit Court further concluded that whether a consumer was misled into believing that the Ohio Attorney General was collecting the account was an issue of fact.
The Supreme Court reversed and remanded the Sixth Circuit's decision. Writing for the Court, Judge Ginsberg found use of the "Special Counsel" designation neither false nor misleading as to any of the prohibitions contained in the FDCPA. Indeed, the designation of "Special Counsel" was completely accurate and whether the law firm use its own letterhead with a similar disclosure would not change the outcome under the FDCPA. As to the issues that the letters, by themselves, were deceptive and misleading to consumers, the Court was similarly unpersuaded. As the Court wrote, "[Section] 1692e bars debt collectors from deceiving and misleading consumers, it does not protect consumers from fearing the actual consequences of their debt."
The FDCPA is guided by the "least sophisticated consumer" standard, which safeguards "bill collectors from liability for 'bizarre or idiosyncratic interpretations of collection notices' by preserving at least a modicum of reasonableness." The Gillie decision follows the arguments made by many in the industry that words mean what they say and nothing more.
Clark Hill's Consumer Financial Services Regulatory & Compliance Group is a national leader in the field of consumer financial services law, providing strategic legal counsel to clients in all areas of consumer finance. We provide counsel, consultation and litigation services to financial institutions, law firms and debt buyers throughout the country. Our group can help you navigate this rapidly evolving regulatory environment. Our exceptional team of lawyers and government and regulatory advisors has extensive experience in – and an in-depth understanding of – the laws and regulations governing consumer financial products and services. We can assist you in developing and implementing compliance programs, as well as defending consumer litigation and regulatory enforcement actions.
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