Contributing Author: Christina Marino

On the last day of the 2011 Term, the Supreme Court dismissed First American Financial Corp. v. Edwards, No. 10-708, 2012 WL 2427807 (June 28, 2012), a case that raised the issue of whether plaintiffs have standing to sue for violations of federal statutes, even when the plaintiffs have suffered no actual injury by the alleged violation.

The case was an appeal from a 2010 decision of the Ninth Circuit Court of Appeals (610 F.3d 514), which held that plaintiffs had standing to sue under the kickback provision of the Real Estate Settlement Procedures Act (RESPA) even if they had not suffered monetary damages or other harm.  The class representative, a Cleveland homebuyer, alleged that her title insurance company provided kickbacks to her title agency in violation of RESPA.  But plaintiff did not pay an inflated price for the title insurance (since Ohio requires all title insurers to charge the same price), nor did plaintiff allege that the quality of her insurance policy was diminished.

First American claimed plaintiff lacked standing to sue, arguing that Article III of the Constitution only confers standing on persons actually injured by a defendant’s conduct.  The Ninth Circuit disagreed, holding that an actual injury can exist when an individual’s statutory rights are violated. Id. at 517.  If RESPA prohibited the defendant’s conduct, the court reasoned, then plaintiff demonstrated an injury sufficient to confer standing.  The Ninth Circuit concluded that under the Act defendants who pay kickbacks are liable to any person who paid a charge for settlement services, even statutorily fixed fees.  Plaintiff’s technical statutory allegation that her transaction had been tainted by kickbacks was enough to avoid dismissal.

The Supreme Court dismissed the appeal as “improvidently granted,” thus leaving the Ninth Circuit ruling intact and allowing the suit to proceed.  It is not clear why the appeal  was dismissed – whether it was because there was no reason to grant it in the first place, as implied, or because this just was not the right case for such a difficult issue.  It is worth noting that earlier this year, in FAA v. Cooper, the Court decided a case on what “actual damages” means under the Privacy Act.  It declined to read actual damages under the Privacy Act to include emotional distress damages, which led to a sharp dissent by Justice Sotomayor, who reasoned that often the only damages sustained because of an invasion of privacy are emotional distress damages.  While the Edwards case deals with cognizable injury not damages, it raises the same sort of issue – can a plaintiff have access to the courts when he or she has not suffered a pecuniary loss?

The Edwards case had been closely-watched because of its wide-ranging implications in other class action litigation relying on statutory violations where there has been no harm, such as the Fair Credit Reporting Act, the Telephone Consumer Protection Act, the Truth in Lending Act and the Stored Communications Act.   (See our blog post in the Gaos v. Google case from April 2, 2012.) The ability to recover statutory damages, without any proof of actual injury, could threaten to multiply the number of class actions across industries.