The Supreme Court and Spokeo: Much Ado About Nothing

« Back to list

May 13, 2015

Since April 27, a lot of digital ink has been spilled over the Supreme Court's decision to grant certiorari in the Spokeo case. Pundits are predicting the demise of the consumer class-action when the Supreme Court issues its opinion next year. Perhaps the Court will make a sweeping decision that changes the legal landscape of the Fair Credit Reporting Act and other consumer protection statutes, but I think not. Count me as one, maybe the only one, who believes that the Supreme Court’s decision in Spokeo will be a bust.

I know it's hard for non-lawyers to believe this, but the Supreme Court doesn't like making new law or making drastic changes to existing law. The Court avoids hard legal questions whenever possible, and the Spokeo case is no exception. In Spokeo, the Supreme Court has an obvious and easy "out" that will allow it to correct the 9th Circuit’s mistake and dispose of the case without drastically changing the law.

Under the FCRA, a “consumer report” is an “… oral, written or other communication” of information about a consumer that is made for one of the purposes specified in 15 U.S.C. Section 1681a(d)(1). (Emphasis added.) The key term here is the word “communication.” The FCRA expressly requires that a consumer report be a “communication.” Information contained in a consumer reporting agency’s file is not a consumer report unless and until it is communicated to an employer or a creditor or an insurer or some other third-party who has a permissible purpose for obtaining the report. To put it in industry terminology, an end-user makes an inquiry about a consumer for a permissible purpose and, in response, the consumer reporting agency issues a consumer report to the end-user. If there is no inquiry, there is no “communication” and hence no consumer report.

In Spokeo, the plaintiff did not allege, and apparently cannot prove, that an inquiry was made on his file or that Spokeo “communicated” the contents of his file to any third-party/end-user. Therefore, Spokeo is not alleged to have issued a consumer report about the plaintiff, and the plaintiff has no standing to assert the claims that require the issuance of a consumer report, e.g. violations of 15 U.S.C. Section 1681e(b) (maximum possible accuracy) and 15 U.S.C. Section 1681b(b) (employment-related disclosure requirements). If the Supreme Court holds that the plaintiff has no standing because there is no allegation that Spokeo issued a consumer report about him, then the 9th Circuit’s decision can be reversed without addressing the broader issue of the quantum of injury required to recover statutory damages under the FCRA and possibly other consumer protection statutes.

It is true that the plaintiff in Spokeo asserts claims that do not require the issuance of a consumer report to confer standing. For example, in Count 3 of the First Amended Complaint, the plaintiff asserts a claim for violation of the annual file disclosure requirement contained in 15 U.S.C. Section 1681j. However, the plaintiff never alleges that he made a request for an annual disclosure from Spokeo or that Spokeo refused to provide him with a file disclosure. Here again, the plaintiff failed to allege facts that would create standing for his claims, giving the Supreme Court an easy way to avoid a decision on the statutory damages question.

As I argued in the January/February issue of the NAPBS Journal, the 9th Circuit set a dangerous precedent when it decided the Spokeo case and that decision needs to be reversed. However, there is no need for the Supreme Court to re-write the law of statutory damages to correct the 9th Circuit’s mistake. The plaintiff in Spokeo has no standing because there is no allegation that Spokeo issued a consumer report on him. It’s that simple. Is it possible that the Supreme Court will take the Spokeo case as an opportunity to “make law” and stem the tide of consumer class actions asserting claims for statutory damages? Sure, but don’t bet on it.