On July 26, 2016, the D.C. Circuit rejected a consumer class action complaint based on alleged violations of two D.C. consumer protection statutes.[1]  Citing the recent U.S. Supreme Court decision in Spokeo, Inc. v. Robins, No. 13-1339, 578 U.S. — (2016), the D.C. Circuit found that the lead plaintiffs did not sufficiently allege any harm suffered from the alleged violations.  As reported in May,[2] Spokeo held that a technical violation of the federal Fair Credit Reporting Act, without other alleged harm to the plaintiff, fails to meet the constitutional requirement of standing for the plaintiff to maintain the lawsuit in federal court.

The Hancock case in the D.C. Circuit similarly arose out of two consumer protection statutes under D.C. law.  According to the complaint, the lead plaintiffs purchased clothing at retail stores where the cashiers ran their credit cards in the card readers and then requested the plaintiffs’ zip codes for entry into the point of sale registers.  The plaintiffs claimed that these actions violated the D.C. Use of Consumer Identification Information Act, which makes it illegal, “as a condition of accepting a credit card as payment for a sale of good or services, [to] request or record the address or telephone number of a credit card holder on the credit card transaction form.”[3]  According to the plaintiffs, the stores violated this prohibition by requesting their zip codes.

The plaintiffs also claimed that the stores’ actions violated the D.C. Consumer Protection Procedures Act, which prohibits material misrepresentations, material omissions, or deceptive representations in connection with sales of goods or services.[4]  Plaintiffs claimed that the stores falsely implied that disclosure of zip codes was necessary to make the purchase; that the stores failed to disclose the fact that the zip codes were optional; and that the stores deceptively represented the requests as legal and necessary to complete the sale.

The trial court dismissed the complaint by finding that the plaintiffs failed to state a claim under Federal Rule of Civil Procedure 12(b)(6).  On appeal, the D.C. Circuit held that the rule pronounced in Spokeo similarly requires dismissal of the Hancock complaint.  The appellate court found, however, that the lower court should not have dismissed the complaint on the grounds of failure to plead legally cognizable claims, but rather on the grounds that the court lacked jurisdiction due to the plaintiffs’ lack of standing.

According to the D.C. Circuit, the Hancock plaintiffs failed to allege that they suffered any concrete harm from the alleged violations of the D.C. law, apart from the technical violations of the statutes.  According to Spokeo, the statutory violation must cause harm that “affect[ed] the plaintiff in a personal and individual way.”  Indeed, the D.C. Circuit noted that the Spokeo court specifically posited a hypothetical scenario where a company disseminates an incorrect zip code for an individual, which could be deemed a technical violation of the Fair Credit Reporting Act.  The D.C. Circuit quoted a passage from Spokeo that was particularly illuminating: “It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.”  Because Spokeo held that such technical violations by themselves do not constitute legally sufficient harm for standing, the Hancock plaintiffs also could not maintain a lawsuit in federal court.

Because the Spokeo decision was based on Article III of the U.S. Constitution, which limits the power of federal courts, the D.C. legislature could not overcome that constitutional limitation through local legislation.  The D.C. Circuit thus held that the district court should not have addressed the merits of the plaintiffs’ claims when the trial court lacked the power to entertain the lawsuit in the first place.  Although the plaintiffs made a last ditch effort to salvage their case by asking for an opportunity to amend their complaint, the D.C. Circuit found that the plaintiffs had forfeited that opportunity by failing to request amendment in the proceedings below.

As predicted, Spokeo has impacted a wide variety of consumer class actions since it was decided earlier this year.”[5]  Although Spokeo related specifically to the dissemination of consumer credit information, its reasoning applies with equal force to all lawsuits that seek to enforce consumer protection laws in federal courts.  It is worth noting, however, that Spokeo applies only to federal courts.  The Hancock complaint was based on local law (D.C. law), and thus the D.C. Superior Court could have provided an alternate forum for the complaint.  Consequently, plaintiffs may increasingly turn to state courts in the future to prosecute their claims under state consumer protection laws.

Endnotes:

[1] Hancock v. Urban Outfitters, Inc., No. 14-7047, _ F.3d _, 2016 WL 3996710 (July 26, 2016).

[2] “The Supreme Court Hates Your No-Damage Class Action: Spokeo Decision Likely to End Big-Dollar TCPA Class Actions” (May 16, 2016), available at http://consumerfinancialserviceslaw.us/the-supreme-court-hates-your-no-damage-class-action-spokeo-decision-likely-to-end-big-dollar-tcpa-class-actions/.

[3] D.C. Code § 47-3153.

[4] D.C. Code § 28-3904.

[5] “Online Services Companies Await Supreme Court Ruling on Standing to Bring Class Actions under Fair Credit Reporting Act” (Dec. 28, 2015), available at http://consumerfinancialserviceslaw.us/online-services-companies-await-supreme-court-ruling-on-standing-to-bring-class-actions-under-fair-credit-reporting-act/.