When the Supreme Court agreed to hear a Fair Credit Reporting Act (FCRA) case from the Ninth Circuit, the plaintiffs’ and defense bars collectively held their breath. The case, Spokeo, Inc. v. Robins, 742 F.3d 409 (2014) addressed whether a plaintiff in an FCRA case–there, a putative class action–needed to allege that he suffered an articulable injury aside from the breach of a statutory duty. What garnered the attention of many outside the realm of consumer credit cases was the extremely broad question presented in the accepted cert petition: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.” That question implicated a great many more statute-based actions than just the FCRA. See Erwin Chemerinsky, What are the limits of congressional power to authorize suits?, A.B.A. J. (Oct. 28, 2015).
In May, a divided Supreme Court provided a rather opaque answer. Spokeo Inc. v. Robins, 136 S. Ct. 1540 (2016). The Court reversed the Ninth Circuit’s decision, finding that the Ninth Circuit had not considered whether the alleged injury was both concrete and particularized–treating the point as two distinct questions–and remanded the case to the Ninth Circuit to consider both facets of standing. The two-justice dissent differed only in that they thought it unnecessary to remand the case because the plaintiff had clearly articulated a concrete harm.
Since the decision, both sides of the aisle have claimed victory. A Telephone Consumer Protection Act (TCPA) case from the Northern District of West Virginia, summarized the narrow scope of the decision:
In Spokeo, the defendant sought a ruling that would have eviscerated causes of action seeking statutory damages. But the Supreme Court did no such thing. Instead, it issued a narrow ruling remanding the case to the Ninth Circuit solely on the basis that it failed to address the extent to which Robins’ injuries were “concrete” as opposed to merely particularized, notwithstanding prior Supreme Court precedent requiring a finding of both. The Supreme Court explicitly took no position on whether Robins’ injuries were in fact concrete for standing purposes.
Spokeo thus created no new law; it merely remanded the case to allow the Ninth Circuit to conduct the proper analysis. As Justice Alito noted, “[w]e have made it clear time and time again that an injury in fact must be both concrete and particularized.”
Mey v. Got Warranty, Inc., F. Supp. 2d, No. 5:15-cv-101, 2016 U.S. Dist. LEXIS 84972, at *7, 2016 WL 3645195 (N.D. W. Va. June 30, 2016) (citations omitted).
Although it is inevitable that district courts across the nation will split on what Spokeo means and guidance from the circuit courts will be necessary before the ultimate impact is understood, as occurred in the wake of Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), there is a clear problem lurking on the horizon for the defense bar in too enthusiastically clinging to Spokeo. The problem was well illustrated in another recent TCPA case, this time from the Eastern District of Arkansas. In Davis Neurology v. DoctorDirectory.com, LLC, No. 4:16-CV-00095 BSM, 2016 U.S. Dist. LEXIS 84391 (E.D. Ark. June 29, 2016), District Judge Brian Miller was faced with a case, which had begun in state court. Invoking federal question jurisdiction, the defendant removed the case to the district court. Once in the district court, the defendant looked to Spokeo to argue that the plaintiff lacked standing to pursue its statutory damages claim. Relying upon the rule that any doubt as to jurisdiction should be construed in favor of remand, the court declined to resolve the question of whether the plaintiff had standing and remanded the case to state court.
The importance of Davis Neurology is not that it provides district courts an outlet to avoid tackling Spokeo. Its importance stems from the reminder that standing is not an adjudication on the merits of the case; it is an issue of subject matter jurisdiction–i.e., a federal court’s authority to hear the case. Media Techs. Licensing, LLC v. Upper Deck Co., 334 F.3d 1366, 1370 (Fed. Cir. 2003); St. Pierre v. Dyer, 208 F.3d 394, 400 (2d Cir. 2000). Most, if not all, federal statutory damages actions are subject to concurrent state jurisdiction. Indeed, there used to be a circuit split over whether states had exclusive jurisdiction in the context of the TCPA. That split was resolved in Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740 (2012) (finding concurrent jurisdiction between state and federal courts). State courts are not bound by Spokeo. The standing inquiry in Spokeo derives from Article III’s cases and controversies requirement. Indiana, for example, has no such requirement. Mosley v. State, 908 N.E.2d 599, 603 (Ind. 2009). Indiana, due to Seventh Circuit caselaw granting state court’s exclusive jurisdiction in TCPA cases prior to Mims, has a long history of deciding TCPA cases. It is also a jurisdiction with a robust body of state constitutional law. Consequently, while an Indiana district court could be argued to not have subject matter jurisdiction, and Indiana superior court absolutely would.
When a case is removed and the federal court subsequently discovers that it lacks subject matter jurisdiction, 28 U.S.C. § 1447(c) obligates the court to remand the case to state court. Maine Ass’n of Interdependent Neighborhoods v. Comm’r, Me. Dep’t of Human Servs., 876 F.2d 1051, 1054 (1st Cir. 1989) (Breyer, C.J.). Thus, following Davis Neurology, any action filed in state court and removed should be remanded once a defendant invokes Spokeo. It is no secret that defendants generally prefer federal court to state courts; conversely, plaintiffs typically prefer the state court forum. Emily L. Buchanan, A Comity of Errors: Treading on State Court Jurisdiction in the Name of Federalism, 55 S. TEX. L. REV. 1, 9 (2013); E. Farish Percy, Making a Federal Case of It: Removing Civil Cases to Federal Court Based on Fraudulent Joinder, 91 IOWA L. REV. 189, 191 (2005). Consequently, the rush for defendants to invoke Spokeo to stave off statutory damage cases may act to undo the victories gained in Mims and the Class Action Fairness Act (CAFA).
Let us consider for a moment the effect of successfully creating case law in the Seventh Circuit holding that TCPA statutory damage plaintiffs lack standing. If an Indiana plaintiff is procured and a defendant is subject to personal jurisdiction in Indiana, a nationwide class action may be filed in state court and would be impossible to remove to federal court. CAFA can no more grant standing than the TCPA can grant concrete injury. Remember, the argument by the defense bar is that Spokeo means Congress cannot grant Article III standing to a plaintiff who has suffered no concrete harm; CAFA is simply an act of Congress.
Although Davis Neurology deals exclusively with cases removed to federal court, the outcome is largely unaffected for cases originally filed in federal court. Even where the action is dismissed for lack of standing after expiration of the statute of limitations savings statutes codifying the common law journey’s account rule and American Pipe tolling (in the case of class actions), provide a vehicle for re-filing in state court. See Michelle M. Sehee, The Kansas Savings Statute Revives a Timely Filed Cause of Action, Despite the Passing of the Statute of Limitations, 35 WASHBURN L.J. 346, 357 (1996); Colin E. Flora, Saving a Claim After Dismissal: Indiana Journey’s Account Statute, YLS NETWORK 6 (June 2015).
Put simply, the legacy of Spokeo, if ever a victory for defendants, may prove to be Pyrrhic. If Spokeo continues to be swung as an unwieldy axe, the net result may be the creation of exclusive jurisdiction in state courts, an outcome more deleterious to defendants’ interests than an out-right loss in Spokeo.
Colin E. Flora is a civil litigations attorney who focuses his practice on appeals, class actions, business disputes, and personal injury cases with Indianapolis-based Pavlack Law, LLC. He obtained his bachelor’s degree in political science from Indiana University South Bend in 2008 where he benefited from selection into the inaugural class of Herbert Presidential Scholars and graduated with high distinction. In 2011, he graduated with honors from the I.U. McKinney School of Law. Mr. Flora is the author of several journal articles, more than 100 posts for the Hoosier Litigation Blog, and is recipient of the 2015 Harrison Legal Writing Award (3rd Place). He is an Associate Fellow of the Litigation Counsel of America.