News & Events

SCOTUS reaffirms standing requires “a harm traditionally recognized as providing a basis for a lawsuit in American courts,” casting further doubt on the viability of lawyer-driven claims.

Recently, we have written about the “entrepreneurial model” of lawyer-driven class actions and how a case’s entrepreneurial features can give rise to various defenses, including lack of standing.  As we’ve explained, where there is evidence that the “injury” underlying a class action (or any action, for that matter) was effectively “manufactured” by counsel, courts should consider it as part of the threshold standing analysis  Under such circumstances, the claimant has not suffered a bona fide injury in fact, and certainly not one that should be deemed sufficient to confer standing under Article III of the United States Constitution.

The Supreme Court’s recent standing jurisprudence supports this view.  As the Court stated in its seminal decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016), “[i]n determining whether an intangible harm constitutes injury in fact . . . it is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.”  Self-inflicted or lawyer-manufactured “harms” should not pass muster under this standard.

Last month, in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), the Court reaffirmed that, in order to confer standing, “the alleged injury to the plaintiff” must have “a ‘close relationship’ to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.”  Id. at 2204 (quoting Spokeo, 136 S. Ct. at 1549).  The Court then elaborated on the types of harm that are, and are not, “sufficiently concrete to qualify as an injury in fact.”  Id.

TransUnion involved a class of 8,185 individuals who “sued TransUnion under the Fair Credit Reporting Act for failing to use reasonable procedures to ensure the accuracy of their credit files.”  Id. at 2197.  In particular, they claimed that the credit reporting agency had placed misleading “alerts” on their credit reports “indicating that the[ir] name was a ‘potential match’ to a name on  . . . a list maintained by the U. S. Treasury Department’s Office of Foreign Assets Control (OFAC) of terrorists, drug traffickers, and other serious criminals.”  Id.

It was stipulated that the credit files of each of the class members contained the misleading OFAC alerts, that 1,853 class members (including the named plaintiff) had their misleading credit reports provided to third parties during the 7-month period specified in the class definition, and that the credit files of the other 6,332 class members were not provided to third parties during the relevant time period.  Id.  The Court held that the class members whose misleading credit reports were disclosed to third parties had standing, while the remaining class members had “not demonstrated concrete harm and thus lack Article III standing to sue on the reasonable-procedures claim.”  Id. at 2200.

In reaching its holding, the Court expounded on the contours of standing “in the context of a statutory violation,” stressing that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”  Id. at 2205 (quoting Spokeo, 136 S. Ct. at 1549).  To illustrate this point, the Court offered the example of “two different hypothetical plaintiffs”:

Suppose first that a Maine citizen’s land is polluted by a nearby factory. She sues the company, alleging that it violated a federal environmental law and damaged her property. Suppose also that a second plaintiff in Hawaii files a federal lawsuit alleging that the same company in Maine violated that same environmental law by polluting land in Maine. The violation did not personally harm the plaintiff in Hawaii.***

The first lawsuit may of course proceed in federal court because the plaintiff has suffered concrete harm to her property[, b]ut the second lawsuit may not proceed because . . . the plaintiff who sues in those circumstances is, by definition, not seeking to remedy any harm to herself but instead is merely seeking to ensure a defendant’s “compliance with regulatory law.”

Id. at 2205-06 (quoting Spokeo, 136 S. Ct. at 1551 (Thomas, J., concurring)).

The Court’s hypothetical “Hawaii” plaintiff is loosely analogous to the claimant in a lawyer-driven, entrepreneurial model consumer class action.  Even if the defendant’s product, or labelling, or conduct allegedly violated some statute in some technical sense, the plaintiff in a lawyer-driven case has not suffered any true “harm to herself” resembling “a harm traditionally recognized as providing a basis for a lawsuit in American courts.”  Id. at 2205-06.  Rather, the plaintiff and her lawyer effectively manufactured an “injury” for the purpose of bringing a lawsuit.  Cf. Barber v. Bryant, 860 F.3d 345, 353 (5th Cir. 2017) (“[Standing] cannot be manufactured for the purpose of litigation.”).

In the end, “Article III grants federal courts the power to redress harms that defendants cause plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions.” TransUnion, 141 S. Ct. at 2205 (quoting Casillas v. Madison Ave. Assocs., Inc., 926 F.3d 329, 332 (7th Cir. 2019) (emphasis added)).  In fact, in the TransUnion majority’s view, allowing plaintiffs who have not been genuinely harmed “to sue defendants who violate federal law not only would violate Article III but also would infringe on the Executive Branch’s Article II authority.”  Id. at 2207.  This is because “[t]he choice of how to prioritize and how aggressively to pursue legal actions against defendants who violate the law falls within the discretion of the Executive Branch, not within the purview of private plaintiffs (and their attorneys),” who “are not accountable to the people and are not charged with pursuing the public interest in enforcing a defendant’s general compliance with regulatory law.”  Id.

Consistent with these principles, private plaintiffs and their lawyers who buy products or engage services for the purpose of bringing a lawsuit should be found to lack Article III standing.  Our great common law has “traditionally recognized” many and varied harms “as providing a basis for a lawsuit in American courts”—but manufactured claims are not one of them.