Seyfarth Synopsis: On March 20, 2019, in Frank, et al. v. Gaos, No. 17-961, 2019 WL 1264582 (U.S. Mar. 20, 2019), the U.S. Supreme Court held that the Article III standing preconditions to federal court litigation, as described in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), will not be undermined. The ruling is important for any corporate counsel involved in defending class actions and in negotiating the resolution of such litigation.
We previously blogged on the supplemental briefing development before the Supreme Court in Frank v. Gaos, No. 17-961, and now we can report on the Supreme Court’s decision. Commentators had expressed the view that the case would provide the Supreme Court with an opportunity to determine whether cy pres provisions in settlement are appropriate. The Supreme Court’s ruling did not go that far.
The Supreme Court’s Decision
In Frank v. Gaos, the Supreme Court has affirmed Spokeo by remanding the case to the U.S. Court of Appeals for the Ninth Circuit without considering whether a class settlement that provides cy pres payments but no money to absent class members is “fair, reasonable, and adequate” under Rule 23(e)(2). The Supreme Court made its remand ruling in an unusual per curiam decision. The Supreme Court reiterated, again, that a federal statutory violation alone does not equate to Article III standing. It remanded because of “a wide variety of legal and factual issues not addressed in the merits briefing before us or at oral argument.” Id. at *3. The Supreme Court opined that Article III standing turns on “whether any named plaintiff has alleged [statutory] violations that are sufficiently concrete and particularized to support standing.” Id.
The stakes on remand are high, of course — a lack of standing means no day at all in federal court.
The Implications of the Supreme Court’s Decision
There are a number of lessons to be learned from the Frank v. Gaos decision:
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Litigants should expect federal district courts to conduct an exacting analysis of Article III standing where the allegations in a complaint do not obviously allege concrete monetary damages. Since the existence, or not, of concrete injury may raise “a wide variety of legal and factual issues,” litigants should expect federal district courts to conduct early evidentiary hearings where the complaint allegations appear to raise only technical statutory violations.
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Litigants also should expect more lawsuits to be commenced in state court if federal court Article III standing appears weak. Many states do not have constitutions with the same Article III standing precondition to litigation that appears in the U.S. Constitution. Where a claim arises under only federal law, such as breach of fiduciary duty litigation under 29 U.S.C. § 1132(a)(3), defendants should pay much more attention to Spokeo.
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Federal agency officials may be under more pressure to vindicate federal statutory rights where Spokeo issues appear in the complaints.
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Lastly, the Supreme Court’s ruling sends a signal to the lower federal courts that Spokeo provides a very real way for the courts to opt out of federal court litigation. Declining jurisdiction may be preferable to messy litigation that often, these days, present strong partisan political controversies with no easy resolution.
It thus makes eminent sense for litigants to consider, again, what Spokeo held — a plaintiff seeking to invoke federal jurisdiction must show: (1) an injury in fact (2) caused by the defendant’s conduct that is (3) redressable by a favorable federal court decision.
