On May 16, 2016, in an action originally filed under the Fair Credit Reporting Act (FCRA), the Supreme Court of the United States held that a plaintiff’s injury must be both “concrete and particularized,” casting at least some doubt on whether the flurry of “no injury” class actions filed in recent years against mortgage lenders and others can stand [see Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 194 L. Ed. 2d 635, 2016 U.S. LEXIS 3046, 84 U.S.L.W. 4263 (May 16, 2016)].

While it isn’t totally clear what the Ninth Circuit will do with the case after remand, the majority of the Supreme Court, in its 6-2 decision, appears to have erected important and real hurdles for primary plaintiffs who seek to sue mortgage lenders. Those same barriers may also make it more difficult for plaintiffs to gain class certification.

The Spokeo Case

Spokeo is one of a number of search engines that provide personal information (e.g., age, address, telephone number, marital, and occupational status). Plaintiff Thomas Robins filed suit against Spokeo after he learned his personal information was inaccurate. Spokeo had apparently reported that Robins was in his 50s, employed, married, and affluent. Instead, he is younger, unemployed, unmarried, and of modest means. Spokeo countered that Robins had not been harmed in any way by the error.

Robins alleged nevertheless that the inaccuracies violated the FCRA and that the violations had been “willful,” entitling him – and the other members of a putative class – to statutory damages plus attorney’s fees and costs. The federal district court dismissed his claim, finding that he had not sustained “an injury-in-fact.” The Ninth Circuit reversed and the Supreme Court granted certiorari in order to answer that question for itself.

What Does This Have to Do With Mortgage Lending?

In recent years, numbers of plaintiffs have alleged that their mortgage lender (or its servicing agent) has violated FCRA through erroneous paperwork. Quite often, the alleged violations have amounted only to inconsequential matters, such as incorrect zip codes or transposed characters in a phone number, but plaintiffs have maintained that errors are errors and that they support class actions against the lenders.

Spokeo Decision’s Implications

Spokeo may have a profound effect on how “no injury” class actions are litigated since the decision erects hurdles not only for those who wish to state a claim against a lender, but also for those seeking certification of a class. Justice Alito, speaking for the majority, indicates at one point that styling a case as a class action “adds nothing to the question of standing” [Opinion at n.6].

Attorneys for some mortgage lenders have said that if named plaintiffs must prove that they have experienced concrete and particularized harm in order to state a claim for statutory damages, it should also follow that the plaintiffs must prove that unnamed plaintiffs have been damaged as well in order to obtain certification. This may take the teeth out of some new filings.

Mortgage Lenders Still Face Difficulties

Even after Spokeo, mortgage lenders still face a number of difficulties. In addition to the general market/business issues, there is the maze of governmental rules and regulations that must be successfully maneuvered. Having an experienced, skilled business attorney and litigator at the helm can be a true advantage. The law firm of CKB VIENNA has provided both legal and business consultation to mortgage lenders and others in commercial lending for years. We have drafted core loan documentation and have assisted lenders in managing the risks associated with the FCRA and Truth in Lending rules. Our firm is skilled in all forms of litigation. Our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA LLP has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

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