9th Circuit raises bar for Article III Standing

The 9th U.S. Circuit Court of Appeals has become a battleground between plaintiffs and defendants on the issue of Article III standing, particularly in the context of the Fair Credit Reporting Act, 15 U.S.C. Section 1681, et seq. In an unpublished decision entered on March 25, in Jaras v. Equifax, Inc., 17-15201, the 9th Circuit again considered the standing of an FCRA plaintiff, and this time held that inaccurate credit reporting that allegedly caused a credit score reduction is not a concrete injury sufficient to establish standing.

Understanding the significance of this ruling requires a brief background as to how we arrived here. Standing under Article III of the Constitution, requires (1) an injury-in-fact, (2) fairly traceable to the challenged conduct, (3) that is likely to be redressed by a favorable judgment. Spokeo, Inc. v. Robins, 136 U.S. 1540, 1547 (2016). For the injury-in-fact requirement, a plaintiff must establish 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 Supreme Court's decision in Spokeo is the seminal case addressing the concreteness standard. In that case, the Supreme Court instructed that the concrete and particularized requirements for an injury-in-fact are to be evaluated separately, and clarified that "Article III standing requires a concrete injury even in the context of a statutory violation." In other words, a plaintiff cannot satisfy the injury-in-fact requirement by alleging a statutory violation that is "divorced from any concrete harm." Concrete injuries can be tangible or intangible, but, if the injury is intangible, it must be real and have a close relationship to common law harms. Applying this in context of the FCRA, the Supreme Court concluded that "not all [credit report] inaccuracies cause harm or present any material risk of harm."

In the wake of Spokeo, the 9th Circuit has landed on both sides of the spectrum when evaluating the standing of FCRA plaintiffs. It held that plaintiffs established a concrete injury in certain cases, like Robins v. Spokeo, Inc., 867 F.3d 1108 (9th Cir. 2017) and Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), while finding otherwise in other cases, like Dutta v. State Farm, 895 F.3d 1166 (9th Cir. 2018). Jaras allowed the 9th Circuit to consider whether a credit reporting agency's publication of allegedly inaccurate information that caused a reduction in the plaintiffs' credit scores met Spokeo's concreteness requirement.

In Jaras, the majority of a split panel answered this question in the negative and held that the plaintiffs lacked standing. The majority confirmed that statutory violations of the FCRA -- even violations based on alleged inaccurate credit reporting -- are not alone a concrete harm. To establish a concrete injury, the plaintiffs needed to make accompanying allegations of real world harm, such as an "allegation of the credit reporting harming Plaintiffs' ability to enter a transaction with a third party." The plaintiffs' "[b]road generalizations" of reduced credit scores were insufficient because plaintiffs did not explain how the lower scores were caused by the defendants or actually impacted the plaintiffs (if at all). Circuit Judge Marsha S. Berzon dissented, asserting that the allegations of inaccurate credit reporting should constitute a concrete injury.

This decision ups the ante for FCRA plaintiffs and may keep many out of federal court. Jaras is persuasive (albeit unpublished) authority that inaccurate credit reporting -- one of the most popular allegations in support of FCRA claims -- does not alone meet the concreteness standard. This is noteworthy because many FCRA plaintiffs do not suffer real injuries. As the 9th Circuit explained in Jaras, an allegedly reduced credit score does not mean that the plaintiff suffered a concrete harm. Establishing a real harm often requires evidence that a plaintiff was denied credit or employment as a result of the FCRA violation. Even that may not be enough if there is no clear connection between the denial and the FCRA violation, such as where the plaintiff has other negative items on his or her credit profile, as was the case in Jaras.

Despite giving ammunition to defendants, Jaras' takeaway is not that a standing challenge is appropriate in every FCRA lawsuit. Consideration of whether to challenge standing will be unique to each case. From a cost and time perspective, the Jaras defendants may have preferred that the 9th Circuit address the merits of the FCRA claims, which could have resulted in a dismissal with prejudice. Since dismissals based on a lack of standing are always without prejudice, the Jaras plaintiffs may elect to re-file their claims with new allegations, after which the defendants could file another round of motions to dismiss that will lead the parties back to the 9th Circuit.

Finally, it bears noting that the plaintiffs' deadline to seek a rehearing or en bac determination has been extended to May 23. Although it is unlikely that any such motion will be successful, Jaras will not be final until those motions are resolved.