octubre 31 2022

The Courts of Appeals’ Rigorous Application of TransUnion’s Standing Analysis Continues To Provide Defendants With Strong Arguments For Defeating Non-Injury Class Actions


Motions to dismiss federal-court actions based on a lack of Article III standing are succeeding more frequently—thanks to the Supreme Court’s 2021 decision in TransUnion LLC v. Ramirez.  That ruling reaffirmed and clarified that every plaintiff must plausibly allege a “concrete injury” that is “‘real,’ and not ‘abstract,’” even when the plaintiff claims a violation of federal statutory rights.

This past June, the U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) issued TransUnion and Concrete Harm: One Year Later, a 68-page report that we authored for ILR. It explains the multiple arguments made available, or strengthened, by TransUnion and discussed key post-TransUnion lower court decisions.

TransUnion continues to be applied by dozens of federal courts each month.  Several federal court of appeals decisions issued since June provide powerful additional support for defendants’ arguments.

In this post, we summarize TransUnion’s impact on standing jurisprudence and explain how those arguments gain additional support from recent appellate decisions.

Background—TransUnion’s explication of the concrete harm inquiry

TransUnion has its roots in the modern phenomenon of no-injury class actions—cases based on statutes creating private causes of action that give plaintiffs the option of seeking either actual damages based on harm suffered, or statutory damages (a specified minimum amount per statutory violation).  Plaintiffs’ lawyers used the statutory damages option to multiply damages claims into tens or hundreds of millions of dollars, asserting that an entire class could recover by alleging a bare statutory violation without any actual injury.

The Supreme Court rejected that argument in Spokeo, Inc. v. Robins (which our team litigated), holding that “concrete injury” is required. But a number of lower courts read Spokeo narrowly, and continued to uphold standing in the absence of real-world injury.  

TransUnion closed the door on those arguments. It rejected decisions limiting Spokeo to “procedural” statutory violations and those finding standing based on harm to generalized statutory “interests” rather than real-world harm to the plaintiff.

It also clarified the content of the concrete harm requirement.  The Court:

  • Reiterated that, to qualify as sufficiently concrete, a claimed intangible injury must bear “a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.” The ultimate reference point is the harms actionable at the Founding—because the question is whether the claim satisfies Article III’s limitation of the judicial power to “Cases” and “Controversies”—but injuries with a lengthy common-law pedigree may also satisfy the “close relationship” standard;
  • Confirmed that Congress may create causes of action to redress real-world concrete harms that were not previously actionable, but it may not displace the concrete harm requirement and courts ultimately must determine for themselves whether the asserted harm satisfies the constitutional standard;
  • Rejected the notion, endorsed by some lower courts, that when a statute requires a party to provide information and the party fails to do so, the failure to provide information by itself constituted a concrete injury satisfying Article III—real-world harm resulting from the failure to provide information is required to establish standing; and
  • Held that a risk of future harm that has not materialized cannot support standing to recover statutory damages.  

In addition, TransUnion makes clear that, when plaintiffs’ lawyers seek to obtain class certification of statutory damages claims, they cannot obtain a class-wide judgment without proving  concrete, real-world harm to the plaintiff and every absent class member—which means that standing is likely to be an individualized issue that weighs heavily against class certification in these damages actions.

And TransUnion provides an important new argument to defendants faced with class actions asserting federal claims in state court. Many states already follow federal standing requirements in their own courts. Even in those states that do not, the TransUnion Court’s grounding of the real-world harm requirement in the Constitution’s allocation of executive authority to the President—because suits by uninjured parties seek to vindicate a general interest in enforcement of federal law and therefore intrude on the President’s exclusive powers under Article II—gives defendants a significant new argument that the federal Constitution bars state court adjudication of injury-free lawsuits based on federal statutes.

These arguments, and the relevant authorities, are spelled out in detail in the ILR report.

More recent court of appeals decisions provide still more support for those arguments.

The en banc Eleventh Circuit and the Fifth Circuit demonstrate how to apply the “traditionally actionable harm” standard

When a plaintiff asserts standing based on alleged intangible harm, the critical question is likely to be whether that claimed harm bears the necessary “close relationship” to a harm that was actionable at the time Article III was adopted, considering both the nature and the degree of the harm.  Two recent court of appeals decisions make clear that the harm alleged by the plaintiff must satisfy all of the common-law elements that made the injury actionable; loose comparisons that ignore or discard some of those standards are not permissible.

Hunstein v. Preferred Collection and Management Services, Inc. involved an alleged violation of the Federal Fair Debt Collection Practices Act (FDCPA). The plaintiff asserted that the defendant, a collection agency, violated the Act’s prohibition against disclosure of information to third parties by providing Hunstein’s name and information about the debt to the company hired to produce the collection agency’s debt notification letters.

The en banc Eleventh Circuit held that Hunstein lacked Article III standing by an 8-4 vote. 

The majority first explained that “for intangible harms, analogizing to longstanding torts is an important way to determine whether an alleged intangible injury meets the concreteness requirement.” Importantly, “when an element ‘essential to liability’ at common law is missing from an alleged harm, the common-law comparator is not closely related to that harm” and the intangible injury cannot satisfy Article III’s concrete harm requirement.

The plaintiff alleged that the disclosure of information to the mail vendor was “an act similar to the tort of public disclosure.” But, the court held, “[t]he problem with his comparison is evident from the start: the disclosure alleged here lacks the fundamental element of publicity. And without publicity, there is no invasion of privacy—which means no harm, at least not one that is at all similar to that suffered after a public disclosure.”

The court explained that in the tort context “[t]he effect of a disclosure is what matters—not the number of people to whom it is made. This is why, rather than playing a numbers game, we ask whether the disclosed information ‘reaches, or is sure to reach, the public.’”  Because Hunstein alleged at most that the information would reach the mail vendor and its employees, and not that it was shared generally, he asserted “a qualitatively different harm” than the one actionable at common law: “having some finite number of people know (true) details about your life is fundamentally different than having that information disseminated to the general public.”

Hunstein thus makes clear that TransUnion requires an “element-for-element approach” in comparing the plaintiff’s claimed harm with the common-law comparator. “[T]he common law analogy collapses if we can rewrite a traditional tort to exclude an essential element.” (Indeed, Chief Judge Pryor wrote a concurring opinion, joined by Judge Tjoflat, pointing out that the plaintiff’s harm allegations lacked additional elements of the common law public disclosure tort.)

Another recent decision, from the Fifth Circuit, applies the same rigorous approach in assessing claimed concrete injuries—requiring that the harm asserted by the plaintiff have all of the same elements as the harm remedied by the common-law cause of action invoked by the plaintiff to demonstrate compliance with Article III.  

Perez v. McCreary, Veselka, Bragg, & Allen, P.C. also involved a claim under the FDCPA. The defendant sent the plaintiff a letter demanding payment of a debt without stating that the limitations period for the debt had elapsed. The district court upheld the named plaintiff’s standing and certified a class of individuals who had received the same letter about time-barred debt.

The court explained that “a plaintiff doesn’t need to demonstrate that the level of harm he has suffered would be actionable under a similar, common-law cause of action. But he does need to show that the type of harm he’s suffered is similar in kind to a type of harm that the common law has recognized as actionable.” It concluded that Perez’s allegations failed that test.

First, the court rejected the argument that alleging a violation of her “substantive right to be free  from misleading information” was sufficient to satisfy Article III, holding that “regardless of whether a statutory right is procedural or substantive, Spokeo emphasized that “Article III standing requires a concrete injury even in the context of a statutory violation.”

Second, Perez claimed that she was confused by the law firm’s letter, analogizing her injury to the harm remedied by fraudulent misrepresentation claims. But “[t]he nature of the harm recognized by fraudulent misrepresentation is a traditional, tangible harm: the ‘pecuniary loss’ the plaintiff sustains. And that means Perez’s confusion—which can only be an intangible harm, if it’s a harm at all—is necessarily different ‘in kind’ from her common-law analog.” The Fifth Circuit therefore “join[ed] several of our sister circuits in holding that the state of confusion, absent more, is not a concrete injury under Article III.”

Third, the court held that Perez could not establish concrete injury based on her time spent consulting with lawyers about the collection letter. “[W]e are not aware of any tort that makes a person liable for wasting another’s time. Although tort plaintiffs can sometimes recover damages for the opportunity costs attributable to the tort, the nature of the underlying harm is different—e.g., physical damage in the case of a personal injury suit.”  Perez failed to demonstrate the necessary link to an injury traditionally actionable in court.

Finally, Perez could not rest on an analogy to the common-law tort of intrusion upon seclusion because “Congress didn’t elevate the receipt of a single, unwanted message to the status of a legally cognizable injury in the FDCPA.” The court explained that the statutory provision invoked by Perez addressed fraud rather than privacy-based harms and, in addition, when Congress prohibited intrusions (such as harassing telephone calls) it required “repeated[] or continuous[]” activity.  Because Congress did not elevate the receipt of a single, unwanted communication to a legally cognizable injury, the court did not need to decide whether Congress could do so.     

Courts of appeals recognize that claims based on failure to comply with a statutory obligation to provide information require the plaintiff to demonstrate downstream harm from the lack of information.

TransUnion made clear that “[a]n ‘asserted informational injury that causes no adverse effects cannot satisfy Article III.’” The plaintiff must have suffered concrete, adverse “downstream consequences” as a result of the non-disclosure.

Campaign Legal Center v. Scott, another recent Fifth Circuit decision, applied this requirement in the context of a claim alleging that Texas violated a disclosure requirement imposed by the National Voter Registration Act (NVRA) because it failed to provide a list of voters identified as potential non-U.S. citizens. The plaintiffs “offered no meaningful evidence regarding any downstream consequences from an alleged injury in law under the NVRA”:  they asserted “a statutory right of the public to the ‘visibility’” of Texas’s process, but without “concrete and particularized harm to these Plaintiffs from not obtaining the requested personal voter information,” they could not satisfy Article III.

The court rejected the plaintiffs’ argument that claims under “sunshine” statutes requiring disclosure of information to the public do not require proof of downstream harm: “even in public disclosure-based cases, plaintiffs must and can assert ‘downstream consequences.’”

The Third Circuit, in Kelly v. RealPage, Inc., applied the downstream consequence standard and found it satisfied.

The case involved an alleged violation of the Fair Credit Reporting Act based on the defendant’s failure to disclose to the plaintiffs the third-party sources for what the plaintiffs alleged was erroneous information in their credit reports produced by the defendant.

The court of appeals stated that “a plaintiff seeking to assert an informational injury must establish a nexus among the omitted information to which she has entitlement, the purported harm actually caused by the specific violation, and the ‘concrete interest’ that Congress identified as ‘deserving of protection’ when it created the disclosure requirement.” In particular, the court said (quoting TransUnion), “a plaintiff must allege that ‘they failed to receive … required information,’ and that the omission led to ‘adverse effects’ or other ‘downstream consequences.”

The Kelly plaintiffs sufficiently alleged adverse downstream consequences. The credit reports were requested in connection with the plaintiffs’ applications for apartments. The defendant’s failure to provide the required information “impaired [the plaintiffs’] ability to correct” the errors in the reports and both “were denied the apartments for which they applied.” 

Lower courts are applying TransUnion’s holding that plaintiffs lack standing to recover damages when they rely on a risk of future harm that never materialized

TransUnion explained that standing must be assessed separately with respect to each claim for relief asserted by a plaintiff.  With respect to a claim for damages, “the mere risk of future harm, standing alone, cannot qualify as a concrete harm—at least unless the exposure to the risk of future harm itself causes a separate concrete harm.” “If the risk of future harm does not materialize, then the individual cannot establish a concrete harm sufficient for standing” to recover damages—absent a separate concrete harm from the risk itself.

The Fifth Circuit applied that principle in Perez, rejecting standing to seek damages based on the plaintiff’s claim of a risk of future financial harm.  It held that “if a risk hasn’t materialized, the plaintiff hasn’t yet been injured. TransUnion held that merely being subjected to a risk of future harm cannot support a suit for damages. A plaintiff can sue for damages if the risk materializes or causes a separate injury-in-fact, such as emotional distress.  But those are suits based on those injuries, not the risk itself.” The court concluded that “the unmaterialized risk Perez experienced can’t support her suit for damages.”

The Perez court further held that Perez lacked standing to seek injunctive or declaratory relief.

It recognized that “[a] plaintiff can sometimes show standing by pointing to a concrete injury that is ‘imminent.’ Accordingly, ‘a material risk of future harm’ permits the plaintiff to sue ‘to prevent the harm from occurring, at least so long as the risk of harm is sufficiently imminent and substantial.’”

But here, any risk of financial harm that she suffered was, the court emphasized, “in the past” and “dissipated once she consulted her attorney. She hasn’t alleged facts that show she might receive another misleading letter from [the defendant] in the future. So she can’t point to an ‘imminent’ concrete harm to support her request for forward-looking relief.”

The Third Circuit, in Clemens v. Execupharm Inc., a data breach case, held that the plaintiff could assert a damages claim, even though she had not suffered harm from the theft and posting on the Dark Web of her personal and financial information, because she suffered “several additional concrete harms . . . as a result of that risk”—including “purchas[ing] three-bureau credit monitoring services for herself and her family for $39.99 per month for additional protection.” That makes clear that the risk of imminent harm is not sufficient to support a claim for damages; in the Clemens court’s words, “a plaintiff suing for damages can satisfy concreteness as long as he alleges that the exposure to that substantial risk [of harm] caused additional, currently felt concrete harms.”  (But that showing is highly likely to be individualized, making class certification in such cases less likely.)

New authority confirms that the concrete harm requirement makes it harder for plaintiffs to obtain class certification

TransUnion held that “[e]very class member must have Article III standing in order to recover individual damages.”

The Eleventh Circuit applied this requirement in the context of the settlement of a class action under the Telephone Consumer Protection Act in Drazen v. Pinto.  The case involved claims based on unwanted texts and telephone calls from GoDaddy.com. The parties reached a settlement, and described the settlement class as anyone in the United States who received a call or text message from the defendant during a specified period—and the district court approved the settlement.

The court of appeals vacated that approval because the class included persons that lacked Article III standing—under Eleventh Circuit precedent, the receipt of a single text, without more, does not qualify as concrete harm.  The district court had concluded that only the named plaintiffs had to satisfy Article III, and that, in any event, class members who received a single text would have standing under the decisions of other circuits.

Both of those determinations were wrong, the court of appeals held.  Class members who did not suffer concrete harm cannot recover, even pursuant to a settlement.  And the district court was obligated to apply Eleventh Circuit precedent defining concrete harm.  The case was remanded to the district court “in order to give the parties an opportunity to redefine the class with the benefit of TransUnion and its common-law analogue analysis”—including whether receipt of a single unwanted telephone call qualifies as concrete harm under that analysis.

*     *     *     *     *

Parties facing lawsuits—especially putative class actions—in which the plaintiffs’ injury allegations involve a claimed intangible harm should continue to closely monitor the federal courts’ application of TransUnion.  That ruling is significantly restricting plaintiffs’ ability to pursue class-wide claims based on “injuries” that don’t involve any real-world concrete harm.

The post The Courts of Appeals’ Rigorous Application of TransUnion’s Standing Analysis Continues To Provide Defendants With Strong Arguments For Defeating Non-Injury Class Actions appeared first on Class Defense Blog.

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