Supreme Court Sets High Bar for Lawsuits Over Bad Consumer Data

Real Injury Must Result, Court Says in Spokeo Case

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Spokeo has been running ads on Facebook suggesting that its service can help uncover cheating.
Spokeo has been running ads on Facebook suggesting that its service can help uncover cheating. Credit: Spokeo

The Supreme Court on Monday may have made it harder for consumers to seek damages from data firms over inaccurate information about them.

In a lawsuit against the personal information provider Spokeo, Thomas Robins claimed that incorrect data on his age and employment status, among other things, prevented him from getting hired. The court sent the case back to the Ninth District in a 6-2 decision, indicating in the process that the plaintiff did not have strong legal standing to sue Spokeo. "We have made it clear time and time again that an injury in fact must be both concrete and particularized," wrote Justice Samuel Alito in the majority opinion.

The opinion suggests that bad information -- common enough among the files of data brokers often used by marketers -- is not in itself enough to sue.

"If I'm advertising something and there's a factual error, and it doesn't cause anyone any harm there can be no lawsuit over that," said Richard Gottlieb, a partner at Manatt, Phelps and Phillips.

The Supreme Court took up the case last year to determine whether Spokeo violated the Fair Credit Reporting Act, which requires that data providers like Spokeo to take reasonable steps to make sure the information they publish is right.

"Not all inaccuracies cause harm or present any material risk of harm," Justice Alito wrote . "An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm."

Marketing data firms and privacy advocates alike have kept an eye on the case because of its implications for the larger data industry. Data brokers like Spokeo, Acxiom and Experian use much of the same data, some of it publicly available, on college degrees, marital status, property ownership and bank loans.

Errors in that information could not only could affect how people are categorized and targeted by marketers, but hurt their credit scores, increase their insurance rates or make it harder to get a job. The potential damage led the Federal Trade Commission in its May 2014 report on data brokers to call for firms that buy, sell and manage data to create an online hub providing information on what they collect and how it's used. That hasn't happened.

The ruling should not have any impact on the ability of the FTC or other federal agencies to intervene when privacy violations harm consumers, Mr. Gottlieb said. Rather, it affects the ability for plaintiffs to sue over alleged violations that are deemed exceedingly technical.

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