Upcoming Supreme Court Decision Could Boost Hulu In Privacy Lawsuit

by Wendy Davis, Jun 12, 2012, 7:11 PM

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It might sound unlikely, but a pending Supreme Court case stemming from a real estate deal could knock out a large number of privacy lawsuits against Web companies -- including a pending case against online video provider Hulu.

That's because the main issue in the real estate case centers on whether consumers have "standing" to sue in federal court when they haven't suffered any economic injury -- an issue that comes up in nearly every privacy lawsuit against online companies. If consumers lack standing, they can't proceed with their cases.

The real estate matter involves a lawsuit by home buyer Denise Edwards, who says she was affected by an illegal kickback deal that required her to purchase title insurance through the company First American Financial. Edwards argues that she can sue because a law (the Real Estate Settlement Act) prohibits some types of kickbacks for title insurance and says consumers can recover triple the amount they paid.

First American counters that Edwards shouldn't be able to sue at all because she didn't overpay; Edwards purchased her home in Ohio, where all title insurers are required to charge the same amount.

A trial judge and the 9th Circuit Court of Appeals allowed Edwards to proceed with her case, but First American appealed to the Supreme Court, which accepted the case last summer.

That lawsuit has drawn the attention of Web companies and consumer advocates. Yahoo, LinkedIn, Facebook and Zynga weighed in with a friend-of-the-court brief against Edwards. The Electronic Privacy Information Center took the opposite view.

The Supreme Court is still considering the matter.

Meantime, a judge on Monday said Supreme Court's decision in the Edwards case could determine the fate of a privacy class-action against Hulu.

That lawsuit alleges that Hulu violated the federal Video Privacy Protection Act, a 1988 law that prohibits video rental companies from sharing information about the movies consumers watch without their written consent. The law provides for damages of up to $2,500 per violation.

Hulu filed papers in April asking for the lawsuit to be dismissed. The company argued that the VPPA only applies to brick-and-mortar stores, as opposed to Web services that stream movies. The company also says that consumers lack "standing" to sue in federal court when they haven't suffered an economic injury.

On Monday, U.S. Magistrate Judge Laurel Beeler in San Francisco asked both sides to file additional papers addressing whether consumers can sue in federal court when they haven't suffered any financial loss.

Beeler specifically told the parties to file briefs this summer, after the Supreme Court issues a ruling in the Edwards case."The court’s decision in Edwards likely will alter the standing analysis," Beeler wrote in the order.

Of course, a ruling against Edwards won't automatically mean that Hulu also wins. It's possible that a lawsuit alleging a privacy violation -- which can cause psychological harm, if not economic loss -- will be treated differently from cases like Edwards' lawsuit, where the only potential harm was financial.

Still, a decision against Edwards would certainly give Hulu, and other Web companies, a big boost in privacy lawsuits.

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