Supreme Court Decision Could Boost Consumers In Privacy Lawsuits

by Wendy Davis, Jun 28, 2012, 5:34 PM

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Health care wasn't the only issue decided by the Supreme Court today. The court also left in place a decision allowing consumers to sue in federal court -- even when they can't necessarily show they suffered financial harm.

The Supreme Court matter stemmed from a real estate case. But the legal question is the same one presented by many privacy cases: Do people have "standing" to sue when a law has been broken, but the violation hasn't cost them any money? That issue has taken center stage in recent class-actions against Facebook and Hulu, among others.

In the real estate case, home buyer Denise Edwards said she was affected by an illegal kickback arrangement, which required her to purchase title insurance through the company First American Financial. The Real Estate Settlement Act outlaws certain kickbacks for title insurance, and also provides that consumers are entitled to recover triple the amount they paid.

But Edwards purchased her home in Ohio -- where all title insurers are required by state law to charge the same amount. Therefore, the scheme didn't make any financial difference to her. First American argued that Edwards' case should be thrown out of court because she hadn't lost money. The trial judge and the 9th Circuit Court of Appeals disagreed and allowed Edwards' lawsuit to proceed, but First American appealed to the Supreme Court.

The Supreme Court accepted the case last year. Today, it dismissed First American's appeal without issuing an opinion -- a move that leaves the 9th Circuit's decision in place.

The appeal drew the attention of Yahoo, LinkedIn, Facebook and Zynga, which filed a friend-of-the-court brief against Edwards. The Web companies argued that consumers shouldn't be able to sue unless they've been harmed -- even if they can allege violations of a specific statute, such as laws aimed at ensuring the privacy of email messages, or movie rental records.

On the other side, the Electronic Privacy Information Center filed papers arguing that Congress has the ability to allow consumers to sue for privacy violations regardless of whether they can prove economic injury. “Harms suffered as a result of privacy violations are often difficult to quantify,” EPIC wrote. “The growing public concern about the misuse of personal data, make it especially important that Congress retain the power to respond to changing technology and new business practices by updating privacy laws to address new challenges."

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