In the class action context, the named plaintiffs as class representatives must allege and show that they personally have been injured, not just that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent. If the named plaintiff cannot establish Article III standing, she may not seek relief on behalf of herself or any other class member, and it will lead to dismissal of the action for lack of subject matter jurisdiction. As the 11th Circuit recently noted, see Muransky v. Godiva Chocolatier, Inc., — F.3d —- , No. 16-16486 & 16-16783, 2020 WL 6305084 (11th Cir. October 28, 2020), the question whether pleading merely that a statutory requirement was violated is enough to establish standing, even when the plaintiff suffered no injury from the alleged violation, was a question that had bedeviled litigants, scholars, and lower courts. At least, up until Spokeo Inc. v. Robins, 136 S. Ct. 1540, 194 L.Ed.2d 635 (2016), in which the Court explained that a party does not have standing to sue when it pleads only the bare violation of a statute.
FYI, defendant Godiva began as a family business nearly 100 years ago in Brussels, and yes, was named after the legend of Lady Godiva and the associated values of boldness, generosity, and a pioneering spirit. Like StarWars, this legend started over a tax protest. Anyway, in 1968, Godiva was appointed official chocolatier to the Royal Court of Belgium. Great stuff.
Article III standing consists of three elements: an injury in fact, that is fairly traceable to the challenged conduct of the defendant, and that is likely to be redressed by a favorable judicial decision. These elements are an indispensable part of the plaintiff’s case.
In Muransky, plaintiff had pleaded the case as a pure statutory violation of the the Fair and Accurate Credit Transactions Act (“FACTA”). He alleged that Godiva chocolate stores had printed too many credit card digits on hundreds of thousands of receipts over the course of several years, and pointed out that those extra numbers were prohibited under a federal law apparently aimed at preventing identity theft. His complaint disclaimed any recovery for actual damages.
The parties settled before the Supreme Court clarified the law of standing, and the district court approved the deal days after Spokeo, without really addressing its possible impact. But objectors appeared, and the case landed in the 11th Circuit for a fairness review where Spokeo turned out to be central. This timing, said the court, had landed the “litigants in an awkward spot” because even if the parties wished to bargain around Spokeo, “we cannot indulge them. Federal courts retain a constitutional duty to evaluate whether a plaintiff has pleaded a concrete injury.” On appeal, therefore, the named plaintiff tried to take on the burden he thought he had avoided below, to say that those claims did show concrete injury under Spokeo in any event. (It appears the terms of the settlement did not allow the defendant to take any position on the standing issue.)
A panel first affirmed, finding plaintiffs had met the requirements of Article III—even considering Spokeo. A few months later, the panel vacated its opinion and issued a new one in its place. Although the superseding opinion contained a revised standing analysis, it reached the same conclusions as the
first: Muransky had Article III standing, the objections failed on the merits, and the class settlement was properly approved.
The panel’s standing analysis posited a rule to the effect that when Congress adopts procedures designed to minimize the risk of harm to a concrete interest, then a violation of that statutory procedure, even if it causes only a marginal increase in the risk of harm to the interest, is sufficient to constitute a concrete injury. Muransky v. Godiva Chocolatier, Inc., 922 F.3d 1175, 1188 (11th Cir.), reh’g en banc granted, opinion vacated, 939 F.3d 1278 (11th Cir. 2019). The level of risk required was described by the panel as “no more than an identifiable trifle.” Id. at 1186. So, in the panel’s view, by setting out a statutory requirement for the number of digits on a receipt, Congress had judged that any violation of that requirement would increase the consumer’s risk of identity theft—and the courts are somehow bound to accept that congressional assessment of injury.
The 11th Circuit granted rehearing en banc, and rejected that new rule, instead finding no standing. Said the 11th Circuit en banc, “the emperor still has no clothes [mixing legends about bare royalty?]… the bare procedural violation the plaintiff alleges is just as bare as it ever was [again?]. Because the plaintiff alleged only a statutory violation, and not a concrete injury, he has no standing.” That meant the court had no ability to evaluate the fairness of the parties’ settlement, and had to vacate the district court’s order approving it.
Amici, including the Chamber of Commerce, weighed in, arguing that allowing standing for no-injury
FACTA claims like this would expose businesses to job-killing existential damages, even where admittedly no one has been harmed. The Circuit would be transformed into a nationwide haven for no-injury class actions. Such FACTA class actions impose a risk of “annihilative damages” because, ordinarily, a company that violates FACTA will do so not once or twice, but instead thousands or even millions of times, owing to the fact that there was a delay in updating its equipment. FACTA therefore “threatens businesses of every size with devastating class-wide liability for what may be harmless statutory violations.”
At the heart of this case, said the court, is one question: whether the judiciary must assume that whenever Congress creates a legal entitlement, any violation of that entitlement causes a concrete injury. In the eyes of the court, the Supreme Court has already rejected the argument that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate the right. Spokeo, 136 S. Ct. at 1549. And that rejection is derived from the now-familiar admonition that alleging a “bare procedural violation, divorced from any concrete harm” is not enough to support standing. Id. Spokeo cautioned that Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Id. at 1549. So although a congressional judgment may be “instructive,” it is not sufficient.
Article III of the Constitution limits federal courts to deciding “Cases” or “Controversies.” U.S. Const. art. III, § 2. The existence of a case or controversy is a “bedrock requirement” of jurisdiction. Raines v. Byrd, 521 U.S. 811, 818, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997) (quoting Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 471, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982)). What is required, then? Injury in fact means “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical. A plaintiff needs to plead (and later support) an injury that is concrete, particularized, and actual or imminent, rather than conjectural or hypothetical. Lujan, 504 U.S. at 560, 112 S.Ct. 2130.
The issue here was concreteness. A lot of ink has been spilled to explain what concrete means, but the best word, said the court, may also be the simplest—“real.” Plaintiffs must show, and the courts must ensure, that an alleged injury is concrete, or else there is no jurisdiction. As the Supreme Court explained in Spokeo, a concrete injury “must be ‘de facto’; that is, it must actually exist.” In other words, it must be “real” and not “abstract.”
Plaintiffs generally can show a concrete, or “real,” harm by showing, for example, that the statutory violation itself caused a real harm. It’s safe to say that pointing to a direct harm is the most straightforward way to show a concrete injury—in fact, it’s probably what most people think of naturally. Tangible harms are the most obvious and easiest to understand; physical injury or financial loss come to mind as examples. Claims of intangible harm, on the other hand, can be tricky: some are concrete, some are not. Questions whether alleged intangible harms are concrete have an extra wrinkle when the plaintiff’s claim stems from the violation of a statute. Again, congressional judgment only goes so far, and does not relieve the judiciary of a constitutional duty to independently determine whether the plaintiff has suffered a concrete injury. The Supreme Court has found certain intangible injuries to be concrete. For instance, a “real risk of harm” may be able to satisfy the requirement under certain circumstances. Violations of the rights to free speech or free exercise, for instance, are intangible harms that are also both direct and concrete. Spokeo, 136 S. Ct. at 1549 (collecting cases). But courts are charged with considering the magnitude of the risk. The degree of risk must be sufficient to meet the concreteness requirement.” Id. at 1550. So, the risk must be “material,” which means important; essential; relevant. And whatever “material” may mean, conceivable and trifling are not on the list.
The Supreme Court has long indicated that standing predicated on a risk of harm must be based on something more than a minor or theoretical risk. See, e.g., Thole, 140 S. Ct. at 1622 (“substantially increased risk”); Dep’t of Commerce v. New York, ––– U.S. ––––, 139 S. Ct. 2551, 2565, 204 L.Ed.2d 978 (2019)(“a substantial risk that the harm will occur” (quoting Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158, 134 S.Ct. 2334, 189 L.Ed.2d 246 (2014))); Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 153, 155, 130 S.Ct. 2743, 177 L.Ed.2d 461 (2010) (“substantial risk” or “significant risk”); Pennell v. City of San Jose, 485 U.S. 1, 8, 108 S.Ct. 849, 99 L.Ed.2d 1 (1988) (“realistic danger of sustaining a direct injury” (citation omitted)); Blum v. Yaretsky, 457 U.S. 991, 1000, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982) (“sufficiently substantial” threat).
Thus, plaintiff’s reliance on the theoretical risk attached to the statutory violation was insufficient. And the 11th Circuit joins the 2nd, 7th and 9th Circuit in dismissing various FACTA class actions on standing grounds. The D.C. Circuit found standing in a case that involved the arguably different situation in which a receipt was reproducing the customer’s entire credit card number and expiration date. Jeffries v. Volume Servs. Am., Inc., 928 F.3d 1059, 1066 (D.C. Cir. 2019).
So Muransky argued, alternatively, that Godiva’s alleged violation was analogous to a common-law tort for breach of confidence. If the violation bears a close enough relationship to a traditional actionable tort harm, it could provide standing. So, he argued, defendant “disclosed” information that he provided in confidence and thus qualifies as a concrete harm. The court noted that the history of this “tort” was a bit spotted, and warned of being unnecessarily drawn into an arcane evaluation of the tort’s origins. But even giving the plaintiff the benefit of the doubt on this, a breach of confidence claim requires the unconsented, unprivileged disclosure to a third party of nonpublic information that the defendant has learned within a confidential relationship. E.g., Kamal v. J. Crew Grp., Inc., 918 F.3d 102, 114 (3d Cir. 2019); Vassiliades v. Garfinckel’s, 492 A.2d 580, 591 (D.C. 1985). The alleged violation here involved no disclosure to a third party, and Muransky did not have a confidential relationship with the Godiva retail store. So this argument for standing also fell short.
Two of the judges on the original panel filed lengthy dissents from the en banc ruling. The decision comes on the heels of Johnson v. NPAS Solutions, LLC, No. 18-12344, 2020 WL 5553312 (11th Cir. Sept. 17, 2020), in which the Eleventh Circuit frowned on incentive awards intended to sweeten the pot for class action plaintiffs.