When Should Your Member Be Allowed To Sue You?

November 3, 2015 at 9:36 am 1 comment

Should credit unions, banks and businesses face lawsuits from consumers for technical violations of laws and regulations that don’t  harm anybody?

Does Congress have the power to allow people to bring these lawsuits simply by authorizing statutory damages for violations?

Why did Terry Collins wait so long to pull Matt Harvey in the Ninth inning of a World Series game? Just making sure you are paying attention.

A case in which these question are being grappled with is Spokeo, Inc. v. Robins, 135 S. Ct. 1892, 191 L. Ed. 2d 762 (2015). Oral arguments were heard by the Supreme Court yesterday.  Spokeo is a website which   provides users with information about other individuals, including contact data, marital status, age, occupation, economic health, and wealth level.   Robins claims that the website violated the Fair Credit Reporting Act by publishing false information about him. The Court of appeals for the Ninth Circuit concluded that even though his “allegations of injury were sparse” since the FCRA authorizes statutory damages for violations all the plaintiff had to prove was that a violation of the FCRA with his information had occurred in order to sue the company.

Not so, says the company. Article III of the Constitution requires the plaintiff to demonstrate not only that a law was violated but that he was” actually injured” by the misconduct. Technical violations, it argues,  don’t meet this standard.

To put this in concrete terms many credit unions faced threats of lawsuits by consumers who argued that they were in violation of the EFTA by not adequately posting fee disclosures alongside their ATMS. Should these plaintiffs have had to show not only that a credit union made a mistake,  but that they were actually harmed by these oversights?

The outcome of this case has potentially huge implications for anyone responsible for compliance which is why businesses ranging from Facebook to the American Bankers Association submitted briefs to the Court explaining how it’s decision could impact them . What the ABA said of banks is certainly true of credit unions: They are already subject to a broad range of government enforced laws and regulations.  Notwithstanding this broad and pervasive government oversight banks are constantly faced with the threat of lawsuits that amount to “technical nitpicking.” (Love that line).

The Scotus blog reported that reaction to yesterday’s arguments broke into three distinct camps among the justices: Two justices who  suggested that a technical violation of the FCRA is all that has to be proven for the lawsuit to proceed;  a group of more conservative justices who argued that the  plaintiff must demonstrate not only a  technical violation of the law but also how he was harmed by it;  and a third faction which  suggested that the dissemination of inaccurate information was an actual injury.

As the Blog explained the third option “would allow Robins’s lawsuit to go forward, without forcing the Court to choose between opening the federal courts to frivolous but possibly massive class-action lawsuits (Spokeo’s prediction if Robins were to prevail) and closing the courthouse doors to potentially important privacy, civil rights, environmental, and patent lawsuits (Robins’s prediction if Spokeo were to prevail. “

I hope the court doesn’t decide on these narrow grounds. We live in a world of regulation and all businesses need and deserve bright line rules putting them on notice of what happens when they make hyper technical mistake implementing o voluminous regulatory mandates.  Here is a link to more information about the case.




Entry filed under: Legal Watch. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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