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Rethink class action lawsuits in the digital age

It’s been said that making a mistake requires a person – making a big mistake requires a computer.  And we’ve all experienced this.  Accidentally hitting “reply all” or sending out a Tweet instead of a direct message.

While we all figured this pretty quickly, greedy attorneys figured this out too.  They realized they can mutate decades-old consumer protection rules into giant pay-days by combining harmless computer errors with class action lawsuits and statutory damages.  

{mosads}Statutory damages allow attorneys to collect a payout without showing their client was harmed.  Combining this with the multiplicative powers of the internet, these lawyers turn an otherwise reasonable fine into an outrageous penalty.

Fortunately, judges are starting to rethink class action lawsuits in the digital age — searching for real harms not inconvenience.

The first major change came last week when the Supreme Court found reason in an unreasonable class-action lawsuit.

In Spokeo, Inc. v Robins, Thomas Robins complained that his profile on Spokeo was wrong entitling him, and his attorney, to a giant pay-day.

What was so wrong about Thomas’s profile? Did it say he had a criminal record or list him in the sex offender registry?

No, it didn’t. 

Actually, Thomas’s Spokeo profile was incorrectly positive stating he is “married, has children, is in his 50’s, has a job, is relatively affluent, and holds a graduate degree.”

But, because of that “error,” Thomas complained that he was entitled to compensation under Fair Credit Reporting Act (FCRA).  And since FCRA includes mandated fines per violation, Thomas could look forward to thousands of dollars even his actual pain was $0.

It would have been bad enough if it was just Thomas.  But instead, Thomas’s attorney said that every person listed on Spokeo (which is pretty much every person in the country) was entitled to this payout. 

Fortunately, in a 6-to-2 decision, the Supreme Court said NO to Thomas and YES to reason.

As the Court put it,

“It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” 

Time, and time again, the Supreme Court has held that an injury can’t be “conjectural or hypothetical.” 

Since this ruling last week, we’ve seen other judges begin questioning these extortionary tactics used against tech businesses – rethinking class-action lawsuits caused by computer errors where no actual harm is shown.

Last Thursday, citing Spokeo, U.S. District Judge Theodore Chuang, remanded a class-action lawsuit against Children’s National Health System where plaintiffs failed to show actual damages.  Likewise, the 3rd U.S. Circuit Court of Appeals, and the Federal Court in Manhattan are considering dismissal of class-action lawsuits where plaintiffs are trying to claim statutory damages without showing harm in fact. 

Let’s hope more justices follow the Supreme Court’s sound judgment and appreciate that in the digital age, it’s more important than ever to find actual harm – not just asserting financial entitlements.

The peril of not doing so could force technological innovators to retreat from the market place, thus reverting our society from the digital age back to a place where harms from the lack of information are very real.

Carl Szabo is senior policy counsel for NetChoice, a trade association working to make the Internet more accessible and ubiquitous.



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