Supreme Court case pits privacy rights against Internet data brokers

Reporting from Washington —  The Supreme Court is set to hear a clash between privacy laws that protect American consumers and the desire of online data providers to avoid potentially crippling lawsuits if they post inaccurate information on the Web.

On Monday the justices will take up the case of Thomas Robins, a Virginia man who sued Spokeo, a Pasadena-based tech company that calls itself a “people search engine.”

Spokeo sells profiles of people drawn from data available online. When the company produced a profile of Robins, he was surprised to see himself described as married with children, in his 50s, with a graduate degree and a professional job.

None of that was true. He was 29, unmarried and unemployed.

Robins sued. He did so with the help of Jay Edelson, a Chicago-based class-action attorney who proudly cites a newspaper article that says he may be the “most hated person” in Silicon Valley. Edelson brought the case as a class action on behalf of “millions of individuals” like Robins whose profiles appear on Spokeo.

The suit is based on the federal Fair Credit Reporting Act of 1970. Congress passed that law after hearing tales of people who had been denied mortgages or insurance because of false information in their credit files. It said victims of false reports could claim damages of $100 to $1,000.

Fast-forward to today, and multiply that amount by a class of a million or more. It sends a shudder through corporate America.

“If you have automatic damages for statutory violations, it is a ticket for class actions to sue for millions and even billions on behalf of people who didn’t suffer any harm,” said Washington lawyer Roy T. Englert, who represents the U.S. Chamber of Commerce.

Robins lost the first round, before a federal district judge in Los Angeles, who tossed out his case in 2011 saying he could not sue because he had not shown he had actually been hurt by a profile that made him appear better-educated and more successful.

He had claimed his job prospects were hurt by Spokeo’s inaccurate profile, but U.S. District Judge Otis Wright called that “speculative” and “implausible.”

Robins did better at the 9th Circuit Court of Appeals, which revived his case. Congress gave Americans protection against inaccurate credit reports, Judge Diarmuid O’Scannlain wrote, ruling that the “alleged violations of Robins’s statutory rights are sufficient” to give him his day in court.

Spokeo’s attorneys appealed to the Supreme Court. They cited 29 similar class-action claims that had been filed in just four previous months. They also pointed to a dozen other laws that call for small-damage claims.

Plaintiffs can seek damages for unwanted phone calls or text messages, they noted, as well as improper disclosure of videos, mislabeled food, a failure to provide full notices involving loans or debts and retaining or disclosing personal information from credit cards and other electronic transactions.

Lawyers for Google, Facebook, Netflix, Twitter and Ebay told the court they too now faced or were threatened by huge class claims for alleged technical violations in which no one had proven they suffered actual harm. Over objections of the Obama administration, the justices agreed to consider the case.

Joining the case on Spokeo’s side, corporate and tech lawyers have urged the high court to close the courthouse door to such massive claims. They argue that although Congress authorized damages for individuals, the Constitution bars lawsuits from people who cannot show they suffered real harm, or a true “injury in fact.”

“Mr. Robins has conceded that nothing happened to him because of the allegedly inaccurate information,” said Jason Matthes, general counsel for Spokeo. “We rely on the public data we collect, and we make it as accurate as possible.”

Consumer and privacy advocates have rallied behind Robins and his class-action claim. They point to the growth of data banks that compile thousands of bits of information on every person, some of which is accurate and some not. And they cite the well-publicized security breaches that may expose the personal information of millions to hackers and thieves.

If the court makes class-action cases harder to bring, few individuals will take the trouble to challenge companies for violating their privacy if all they can recover is a small sum, they say.

“We think the loss of privacy is very serious. This is no time for the court to make it harder to bring lawsuits against companies that are making money for the data of individuals,” said Marc Rotenberg, president of the Electronic Privacy Information Center.

Last year, the Federal Trade Commission reported on nine data brokers (not including Spokeo) that collect, compile and sell vast amounts of personal information.

One broker claimed to have 3,000 data points on nearly every U.S. consumer, describing everything from shopping and personal habits to medical troubles and political leanings. Another claimed to have a billion profiles of people around the world. At the same time, the FTC said, most consumers have no way to check or confirm the information.

Consumer-rights advocates say class-action suits can enforce federal privacy protections and force data brokers to do more to ensure their profiles of people are accurate.

“The business community is urging the court to make a sweeping and pretty radical change in the law,” said Paul Bland, executive director of Public Justice.

The legal question involved is who has standing to sue. The Constitution says that federal courts have authority over “all cases, in law and equity, arising under this Constitution [and] the law of the United States.”

Since Robins sued Spokeo for violating the federal law on credit reports, he would appear to have standing as a plaintiff.

But the Supreme Court has said that “cases” refers to actual disputes in which a person or group can show a specific injury. In 1992, for example, the court tossed out a suit by environmentalists who had accused the Bush administration of failing to enforce protections for endangered species. Justice Antonin Scalia said the members of Defenders of Wildlife who sued could point to no personal harm they had suffered.

The case of Spokeo vs. Robins poses a major question of whether Congress can create legal rights for Americans — such as a protection against inaccurate credit reports — that would then give people a right to sue in federal court.

Judge Wright, when he dismissed the case, said that a simple violation of the Federal Credit Reporting Act does not by itself confer standing because if it did, “the federal courts [would] be inundated by Web surfers’ endless complaints.”

But the 9th Circuit, in its ruling, said that all a plaintiff would need to show to get into court was that a statutory right had been violated.

The justices will hear arguments from both sides Monday and will probably issue a ruling in the spring.

For more on the Supreme Court, follow @DavidGSavage

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