On May 16, 2016, the Supreme Court of the United States decided a case, Spokeo, Inc. v. Robins, (No. 13–1339), involving standing to maintain an action in federal court. In the Spokeo case, an individual claimed that a search engine company willfully failed to comply with the Fair Credit Reporting Act (FCRA) by providing inaccurate information about him, among other violations. According to the Supreme Court’s decisions, the Ninth Circuit Court of Appeals wrongly concluded that the individual had properly pleaded injury in fact as required by Article III of the U.S. Constitution and because the Ninth Circuit had failed to consider both aspects of the injury-in-fact requirement, the appeals court’s standing analysis was incomplete. Although the case deals with damages resulting from a consumer reporting agency's alleged failure to comply with the FCRA, its holding may impact damage claims against employers.

Background

Spokeo, Inc. operates a people search engine that obtains, compiles, and distributes information at the request of visitors to its site. Thomas Robins discovered that the profile that Spokeo generated on him contained a large number of inaccuracies (e.g., that he was married, has children, is in his 50's, has a job, is relatively affluent, and holds a graduate degree—none of which was accurate, according to Robins). As a result, Robins filed a complaint on his own behalf and on behalf of a class of similarly situated individuals, alleging that Spokeo willfully failed to comply with the FCRA’s requirements (among others, Spokeo’s FCRA obligation to follow reasonable procedures to assure maximum possible accuracy of background check reports like the one completed on Robins).

After the lower federal district court earlier dismissed the case for lack of standing, on appeal, the Ninth Circuit reversed and ruled that Robins had adequately alleged injury in fact as required for standing under Article III. The Supreme Court agreed to review the case to decide whether Congress—by authorizing a private right of action based on a bare procedural violation of a federal statute (in this case, the FCRA)—may confer Article III standing upon a plaintiff who does not suffer actual harm.

The Supreme Court’s Decision 

Justice Alito’s majority opinion started with the three requirements to establish standing: “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” To establish injury in fact—which is the requirement at issue in this case—“a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’”

The remainder of the decision primarily focused on the concreteness requirement. According to the Court, the Ninth Circuit failed to fully appreciate the distinction between concreteness and particularization. Instead, the Supreme Court noted, the Ninth Circuit focused merely on the particularization analysis (finding that Robins alleged that Spokeo violated his statutory rights and not just the statutory rights of others and that “Robins’s personal interests in the handling of his credit information are individualized rather than collective”). Noting that “[p]articularization is necessary to establish injury in fact, but it is not sufficient,” the Court vacated the Ninth Circuit’s ruling because the Ninth Circuit did not consider concreteness and thus its standing analysis was incomplete. 

Spokeo includes analysis and quotations likely to be used by both plaintiffs and employers/defendants. The Court held that a concrete injury need not be a tangible injury. The Court also deferred to Congress in creating statutory rights and said that the risk of real harm could satisfy the concreteness requirement. In some cases, the Court found, the violation of a procedural right created by statute can be sufficient to establish injury in fact, in which case no additional harm beyond the one identified by Congress is required. In other cases, alleging a bare procedural violation is not enough. The Court then remanded to the Ninth Circuit for further consideration of both the particularization and the concreteness tests.

Justice Thomas filed a concurring opinion in which he opined on the levels of injury required to maintain standing for private rights/cases versus public rights/cases. Private actions presume a de facto injury to a plaintiff; public actions require evidence of special damages. It is unclear whether Justice Thomas would classify an FCRA class action as a private right/action or a public right/action.

The dissent, authored by Justice Ginsburg and joined by Justice Sotomayor, opined that Robins had established the concrete damages necessary to maintain standing—indicating that the misinformation about his education, family situation, and economic status bore on Robins’s ability to find a job by creating the erroneous impression that that he was overqualified for the job which he was seeking, that he might be unwilling to relocate for a job due to family commitments, or that his salary demands might exceed what prospective employers were prepared to offer him.

Key Takeaways

According to Stephen R. Woods, a shareholder in the Greenville office of Ogletree Deakins and the chair of the firm's Background Check Practice Group, “The Spokeo decision helps employers—by making it harder for plaintiffs’ lawyers simply to point to either extraneous information in a background check disclosure form/screen or an adverse action without the required pre-adverse action letter and attachments and, by doing so, automatically establish a ‘concrete’ harm. The decision, however, leaves the door open on what the Ninth Circuit and other courts will decide qualifies as a concrete harm. A court may find concreteness if, for example, the disclosures include a ‘liability release’ sentence or the disclosures are sandwiched in the middle of employment application elements. Employers also should remember that Spokeo does not diminish state and local mini-FCRA requirements (for example, the California Investigative Consumer Reporting Agencies Act (ICRAA), New York's Article 23-A, and New York City's Fair Chance Act). As with the federal FCRA (especially until we see how lower courts will interpret Spokeo), employers should continue to be vigilant in complying with these local, state, and federal requirements."

All federal and state background check requirements are summarized in Ogletree Deakins’ O-D Comply: Background Checks and O-D Comply: Employment Applications subscription materials, which are updated and provided to O-D Comply subscribers as the law changes.