The Secure Times

An online forum of the ABA Section of Antitrust Law's Privacy and Information Security Committee


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Ninth Circuit Holds Actual Injury Not Required For Article III Standing under FCRA

On February 4, 2014, in Robins v. Spokeo, Inc., the Ninth Circuit reversed a district court and held that a plaintiff had standing to pursue a claim for damages under the Fair Credit Reporting Act (FCRA).

Spokeo is a data broker that operates a “people search” website that allows users to obtain information about other individuals, including contact information, marital status, age, occupation, economic health, and wealth level.  The complaint asserted that Spokeo violated a number of provisions of the FCRA, such as the requirement that the company, as an alleged “consumer reporting agency,” did not follow reasonable procedures to assure the requisite accuracy of information about consumers or provide notices to providers and users of information.  With respect to harm, the named plaintiff, bringing the action on behalf of a putative class, asserted that Spokeo had provided inaccurate information about him – namely, that he had a graduate degree and was wealthy – which diminished his employment prospects and led to anxiety and stress about his damaged ability to obtain work.

The Ninth Circuit easily dispensed with the challenge to standing as a statutory matter.  The court reasoned that because the FCRA provides a private right of action that does not require proof of actual damages, so, too, the statute does not require a plaintiff to plead actual damages to have standing.

As for Article III injury-in-fact, the Ninth Circuit required no more in the way of pleading actual damages.  The court explained that, first, a plaintiff must allege that his statutory rights have been violated.  Second, the statutory rights at issue must protect against “individual, rather than collective, harm.”  The plaintiff alleged that he personally was injured by Spokeo’s provison of inaccurate information about him.  And his “personal interests in the handling of his . . . information are individualized rather than collective,” and therefore constitute “concrete de facto injuries.”  As for causation and redressability, once again, the statutory cause of action controlled:  the alleged violation of a statutory provision “caused” the violation of a right conferred by that provision.  Likewise, the court reasoned that statutory damages are presumed to redress the alleged injury.

The Ninth Circuit’s Spokeo decision follows the reasoning of Beaudry v. TeleCheck Services, Inc., 579 F.3d 702 (6th Cir. 2009).  At the same time, such statutory cases stand in contrast to the many – but by no means all – class actions where plaintiffs have struggled to plead injury-in-fact to pursue state common law claims seeking damages following the loss of personal information in a data breach.  See, e.g., Reilly v. Ceridian Corp., 664 F.3d 38 (3d Cir. 2011) (dismissing complaint for lack of standing); Key v. DSW Inc., 454 F. Supp. 2d 684 (S.D. Ohio 2006) (same); but see, e.g., Pisciotta v. Old Nat’l Bancorp, 499 F.3d 629 (7th Cir. 2007) (holding plaintiff demonstrated standing).


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What’s More Challenging? Establishing Privacy Class Action Standing, or Climbing Mount Kilimanjaro?

Two opinions recently issued from the Northern District of California have important implications for parties seeking privacy class actions. Both opinions highlight the evolving jurisprudence around establishing standing for consumer privacy lawsuits.

In re Apple iPhone Application Litigation

On November 25, 2013, Judge Lucy Koh granted Apple’s motion for summary judgment on all of plaintiffs’ claims in In re Apple iPhone Application Litigation, 11-MD-02250-LHK (N.D. Cal. Nov. 25, 2013). Plaintiffs alleged that Apple violated its Privacy Policy by allowing third parties to access iPhone users’ personal information. Based on those misrepresentations, plaintiffs claimed they overpaid for their iPhones, and that their iPhones’ performance suffered. Plaintiffs also alleged that Apple violated its Software License Agreement (“SLA”) when it falsely represented that customers could prevent Apple from collecting geolocation information by turning off the iPhone’s Location Services setting. Plaintiffs alleged that, contrary to this representation, Apple continued to collect certain geolocation information from iPhone users even if those users had turned the Location Services setting off. Based on the SLA misrepresentations, plaintiffs alleged they overpaid for their iPhones and suffered reduced iPhone performance. Plaintiffs argued that Apple’s alleged conduct constituted a violation of California’s unfair competition law (“UCL”) and the Consumer Legal Remedies Act (“CLRA”).

Judge Koh disagreed, finding that plaintiffs failed to create a genuine issue of material fact concerning their standing under Article III, the UCL, and the CLRA. Judge Koh held that plaintiffs presented enough evidence of injury—that plaintiffs purportedly overpaid for their iPhones and suffered reduced iPhone performance. Conversely though, Judge Koh held that plaintiffs could not establish that such injury was causally linked to Apple’s alleged misrepresentations. Judge Koh ruled that actual reliance was essential for standing. Accordingly, plaintiffs must have (1) seen the misrepresentations; and (2) acted on those misrepresentations.  Judge Koh noted that none of the plaintiffs had even seen the alleged misrepresentations prior to purchasing their iPhones, or at any time thereafter. Because none of the plaintiffs had even seen the misrepresentations, they could not have relied upon such misrepresentations. Without reliance, Judge Koh held that plaintiffs’ claims could not survive.

In re Google, Inc. Privacy Policy Litigation

On December 3, 2013, Judge Paul Grewal granted Google’s motion to dismiss in In re Google, Inc. Privacy Policy Litigation, Case No. C-12-01382-PSG (N.D. Cal. Dec. 3, 2013), but not based on lack of standing. The claims stemmed from Google’s change in its privacy policies. Before March 1, 2012, Google maintained separate privacy policies for each of its products, and those policies purportedly stated that Google would only use a user’s personally-identifying information for that particular product. Google then introduced a new privacy policy informing consumers that it would commingle data between products. Plaintiffs contend that the new privacy policy violated Google’s prior privacy policies. Plaintiffs also alleged that Google shared PII with third parties to allow third parties to develop apps for Google Play.

In assessing standing, Judge Grewal noted that “injury-in-fact has proven to be a significant barrier to entry,” and that establishing standing in the Northern District of California is akin to climbing Mount Kilimanjaro. Notwithstanding the high burden, Judge Grewal found that plaintiffs adequately alleged standing.

Plaintiffs alleged standing based on (1) commingling of personally identifiable information; (2) direct economic injury; and (3) statutory violations. With respect to the commingling argument, plaintiffs contended that Google never compensated plaintiffs for the value associated with commingling PII amongst different Google products. Judge Grewal rejected this argument, noting that a plaintiff may not establish standing by pointing to a defendant’s profit; rather, plaintiff must actually suffer damages as a result of defendant’s conduct.

With respect to plaintiffs’ allegations of direct economic injury, Judge Grewal held that those allegations sufficed to confer standing. Plaintiffs argued they suffered direct economic injuries because of reduced performance of Android devices (plaintiffs had to pay for the battery power used by Google to send data to third parties). Plaintiffs also argued that they overpaid for their phones and had to buy different phones because of Google’s practices. These allegations sufficed to establish injury. Based on Judge Koh’s opinion in Apple, one key issue in the Google case will likely be whether any of the plaintiffs actually read and relied upon Google’s privacy policies.

Finally, Judge Grewal found that standing could be premised on the alleged violation of statutory rights. This ruling is consistent with the trend in other federal courts. Though Judge Grewal ultimately dismissed the complaint for failure to state a claim, the opinion’s discussion of standing will be informative to both the plaintiff and defense bars in privacy litigation.

The Apple and Google lawsuits represent a fraction of the many lawsuits seeking to recover damages and/or injunctive relief for the improper collection and/or use of consumer information. Establishing standing remains a difficult hurdle for plaintiffs in consumer privacy lawsuits, though courts are increasingly accepting standing arguments based on statutory violations and allegations of economic injuries. The Apple decision is on appeal, so we will see if the Ninth Circuit sheds further light on issues of standing in privacy lawsuits.