On March 30, the Supreme Court will hear arguments on whether a damages class action, is permitted by Article III of the Constitution or Rule 23 of the Federal Rules of Civil Procedure where the majority of the class has suffered no actual injury. Notably, this is the first time the Supreme Court will apply the rulings of Spokeo, which held that a plaintiff “cannot satisfy the demands of Article III by alleging a bare procedural violation,” to an entire class. The Supreme Court’s forthcoming decision will have significant implications on defenses to class actions, and could possibly expand liability for companies most often entangled in class actions with plaintiffs that have tenuous claims based only on statutorily created rights of action.
The change in the White House administration combined with a potential ground-breaking Supreme Court decision may move the oversight and enforcement for marketing by the fintech sector from the Federal Trade Commission (“FTC”) to the Consumer Financial Protection Bureau (“CFPB”). This would be a tectonic shift.
In the latest piece to come out of the FTC’s new focus on emerging technologies, the FTC Bureau of Consumer Protection issued new guidance on the use of artificial intelligence (“AI”) and algorithms. The guidance follows up on a 2018 hearing where the FTC explored AI, algorithms, and predicative analysis. As the FTC recognizes, these technologies already pervade the modern economy. They influence consumer decision making – from what video to watch next, to what ad to click on, or what product to purchase. They make investment decisions, credit decisions, and, increasingly, health decisions, which has also sparked the interest of State Attorneys General and the Department of Health & Human Services. But the promise of new technologies also comes with risk. Specifically, the FTC cites an instance in which an algorithm designed to allocate medical interventions ended up funneling resources to healthier, white populations.
On August 15, 2017, the Ninth Circuit delivered the latest episode in the Robins v. Spokeo saga, reaffirming on remand from the Supreme Court that plaintiff Robins had alleged an injury in fact sufficient for Article III standing to bring claims under the Fair Credit Reporting Act (FCRA).
Robins had brought a putative class action against Spokeo, which operates a “people search engine” that compiles consumer data into online reports of individuals’ personal information. Robins alleged that Spokeo had willfully violated the FCRA’s procedural requirements, including that consumer reporting agencies must “follow reasonable procedures to assure maximum possible accuracy of the information” in consumer reports, because Spokeo’s report on Robins allegedly listed the wrong age, marital status, wealth, education level, and profession, and included a photo of a different person. According to Robins, the inaccuracies in the report about him harmed his employment prospects and caused him emotional distress.
On October 5, 2016, two district courts came to opposite conclusions on whether putative class action plaintiffs had standing to bring claims based on prospective employers’ failure to comply with Fair Credit Reporting Act (FCRA) disclosure requirements.
Standing under Article III of the Constitution requires (1) an injury in fact (2) fairly traceable to the challenged conduct of the defendant and (3) likely to be redressed by a favorable judicial decision. Earlier this year, the Supreme Court in Spokeo, Inc. v. Robins clarified that to confer standing, an injury in fact must be both particularized – affecting the plaintiff in a “personal and individual” way – and concrete – “real, not abstract.”
On May 16, 2016, the Supreme Court decided Spokeo, Inc. v. Robins, ruling that a plaintiff must sufficiently allege an injury that is both concrete and particularized in order to have Article III standing, and further that a “bare procedural violation” of a plaintiff’s statutory right may not be sufficiently “concrete” under this analysis. This ruling has the potential to affect class actions generally, but may prove especially influential in privacy and data security class actions.