Arguing Class Actions is a monthly column by Adam J. Levitt for the National Law Journal.
Reprinted with permission from the April 1, 2024 edition of the National Law Journal. © 2024 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
The issue du jour for any company defending against a class action involving economic losses seems to be that of “standing”—or, whether a federal court has jurisdiction to issue a judgment against a defendant in any given case. If a defendant is successful in arguing that a court lacks standing to hear the case, then—for many class actions—it becomes the death knell for that case, requiring its dismissal. Ostensibly trying to clarify the standing analysis, over the past several years, the U.S. Supreme Court has issued a slew of seemingly inconsistent rulings as to when the federal courts may hear a “case or controversy” consistent with Article III of the Constitution.
For consumers, however, making sense of these opinions is not difficult—so long as the plaintiffs’ lawyers are creative.
What, exactly, does Article III, Section 2 say?
Importantly, the concept of “standing” as it pertains to class actions filed in federal court is found in Article III of the Constitution. Article III, Section 1, establishes that “the judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” Article III, Section 2, provides that this “judicial Power shall extend to all Cases, in Law and in equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their authority; . . [and] between Citizens of different States.” While the concepts of “federal” and “diversity” jurisdiction have been fairly spelled out in 28 U.S.C. §§ 1331 and 1332, what constitutes an actual “case” has been the subject of a considerable about of judicial interpretation.
The court’s modern jurisprudence concerning standing began with Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). In Lujan, the court clarified that the “constitutional minimum of standing” consists of three elements. First, the case must concern an invasion of a legally protected interest that is: (a) “concrete and particularized”; and (b) “actual or imminent, not conjectural or hypothetical.” Id. at 560 (cleaned up). Second, there must be a “causal connection between the injury and the conduct complained of” (that is, the injury must be “fairly traceable to the challenged action of the defendant”). Id. (cleaned up). And, finally, “it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Id. at 560-61 (cleaned up).
Unfortunately, the post-Lujan standing cases have done precious little to clarify what these concepts mean. In Clapper v. Amnesty International USA, 568 U.S. 398 (2013), the court found that a concern about potential, future government surveillance was insufficient to demonstrate standing. Id. at 411-12. Then, in Spokeo v. Robins, 578 U.S. 330 (2016), the Supreme Court found that a violation of a procedural requirement of a statute—without more—was insufficient to confer standing. This was reiterated in the court’s recent TransUnion v. Ramirez case, 594 U.S. 413 (2021), wherein the court found standing for class members whose inaccurate credit reports (more specifically, whose credit reports stated that they were terrorists) were disseminated to third parties (akin to defamation), but not to those whose reports were not.
What have consumers done in response to these rulings?
What the Supreme Court’s more recent standing opinions make clear is that consumers cannot maintain actions in federal court for “bare procedural violations” of statutes without a corresponding “close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts.” Ramirez, 594 U.S. at 425. In response, consumers have done one of two things. On one hand, they either make specific allegations in their complaints which tie their claims to those claims that existed at common law (such as a loss of property or damage to reputation). To that end, consumers in class cases have also been seeking—in addition to statutory penalties, restitution, and compensatory damages—nominal damages, which the Supreme Court has expressly found satisfies the “redressability” element of standing, in Uzuegbunam v. Preczewski, 592 U.S. 279, 141 S. Ct. 792, 797, 209 L. Ed. 2d 94 (2021).
On the other hand, and perhaps even more creatively, consumers have reverted to the pre-Class Action Fairness Act strategy of filing class action cases in state court, seeking attorneys’ fees if the defendants in those cases remove them to federal court (thus, asserting that the federal court has jurisdiction) and then move to dismiss those cases for lack of standing, while simultaneously—and incredibly—arguing that the federal court lacks jurisdiction. See Zhirovetskiy v. Zayo Group, No. 17-CV-05876, 2018 WL 11195494, at *2 (N.D. Ill. Mar. 7, 2018) (granting plaintiff’s request for costs and attorney fees associated with additional litigation arising from defendant’s removal and then challenging standing). While subject matter jurisdiction is not “waivable,” and standing may be examined by the court at any point during the case, consumers would be well served to file their cases in state court to stave off any motion to dismiss for lack of Article III standing—as the appropriate remedy is not dismissal, but remand.
Should consumers change their strategy based upon the Supreme Court’s more recent standing cases?
The Supreme Court’s judicially created standing “cocktail” of existing or immediate common law injuries, combined with “traceability,” with a chaser of “redressability” has long been law.
Interestingly, however, some recent cases challenge what constitutes an “actual or imminent, not conjectural or hypothetical” injury. Take, for example, the Supreme Court’s opinion in 303 Creative LLC v. Elenis, 600 U.S. 570 (2023). In that case, the court found that a plaintiff had standing to challenge a Colorado anti-discrimination law based upon the mere threat that she might have to make a website celebrating a hypothetical gay couple’s wedding—when she, herself, had never designed a wedding website before.
While 303 Creative seems to be directly at odds with Clapper, consumer plaintiffs should not rush to file complaints based upon mere threats, alone. If the threat of a consumer’s credit report being disclosed were sufficient to find standing, then many more individuals in Ramirez would have been able to find TransUnion liable for its conduct.
For now, consumers should continue focusing on pleading injuries that would have had remedies at common law—especially because the court has repeatedly found that such allegations can avoid dismissal—or commencing their cases in state court.
Thank you to DiCello Levitt senior counsel Daniel Schwartz for contributing to this column.
Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups. He can be reached at [email protected].