Opinion: Why the Supreme Court should side with data brokers
The Supreme Court will consider听on Monday听a case that听may determine whether "privacy" becomes the next goldmine for the plaintiffs鈥� bar,听which would听threaten to cripple听the modern digital economy.听
Depending on how the court rules,听Spokeo Inc. v. Robins could unleash a听torrent听of litigation against Internet companies over how those firms听collect and use听data even听when consumers suffer听no actual harm.听
It's a听class action case that centers on allegations by Thomas Robins, a Virginia man, against Spokeo, a California aggregator of publicly available personal data. Mr. Robins claims that Spokeo violated provisions of the Fair Credit Reporting Act (FCRA) because its records were inaccurate 鈥� they showed Robins was richer and more educated than he was.听
Robins alleged that Spokeo鈥檚 inaccurate information was hurting his employment prospects, costing him money and causing him "worry about his diminished employment prospects." The district court dismissed the class action for lack of standing. The Constitution allows federal courts to hear only "cases or controversies" 鈥� that is, disputes that involve some sort of injury that courts can fix.听The link between Robin's situation and Spokeo's inaccuracies were just too speculative.
The Ninth Circuit, however, reversed that decision. In its view, whether Spokeo actually caused Robins' harm was irrelevant; as long as FCRA allowed individuals to sue, "a plaintiff can suffer a violation of the statutory right without suffering actual damages."
Spokeo raises weighty separation of powers issues 鈥� does Congress or the judiciary control access to the federal courts? But beyond this vital Constitutional question, the outcome could have sweeping implications听for the digital economy.
In recent years, enterprising plaintiffs' attorneys have made a cottage industry of recasting the data flows that are the lifeblood of the modern information economy as violations of Cold War-era statutory schemes, such as the Video Privacy Protection Act (VPPA) or the Electronic Communications Privacy Act (ECPA).
What do these statutes have in common? Like FCRA, they allow consumers to bring their own suits and provide statutory damages. A $10,000 penalty for violating听ECPA听may not seem like much, but when multiplied by a proposed class such as "all US resident non-Gmail users who have used their non-Gmail accounts to receive and e-mail from an '@gmail.com' address or to send an e-mail message to an '@gmail.com' e-mail address," which was proposed in privacy class action against Google, it's easy to see why these statutes are the perfect vehicles to extort multimillion dollar settlements.
It's also easy to see why avoiding having to have suffered an actual injury is so important to plaintiffs' lawyers who bring these privacy lawsuits. Consider the 2013 privacy litigation against Netflix from the听Ninth Circuit. Netflix had the temerity to store its customers' viewing habits, and share them with third-party analytics firms to 鈥� wait for it 鈥� improve its selection algorithm.听This action would be thrown out of court for lack of standing if brought as a tort for the simple reason that there isn't any harm to be redressed.听
Indeed, none was pled in the complaint. Not to be deterred, plaintiffs' lawyers dusted off the VPPA and voila, a multimillion-dollar suit appears. Netflix鈥檚 attempt to improve its product was rewarded with a $9 million settlement, of which $2.25 million went to attorneys, and nearly $6 million went听to privacy advocates to "educate" consumers about privacy (translation: scare consumers about the horrors of targeted advertising). 听
The Netflix case is representative of this new shakedown scheme that benefits both the trial bar and privacy activists, who have always been uncomfortable with the ad-supported online ecosystem. Plaintiffs' lawyers similarly have conjured up cases from thin air by relabeling algorithmic review of e-mails or tweets, or the transmission of "referral headers" from one server to another into the more ominous sounding "interception of electronic communications," which not coincidentally tracks the language of ECPA.
If the Supreme Court upholds the Spokeo decision, it听would cement听plaintiffs'听ability听to听magically听transform听innocuous conduct into a lucrative class action by recasting it as a violation of ECPA or VPPA. 听
As usual, consumers will pay the price. The threat of these suits will make companies think twice before they use consumer data in beneficial ways, like increasing customization or matching consumers with more relevant ads. What鈥檚 more, these companies will be reluctant to share data with academic researchers, which will deprive society of beneficial insights that can be gleaned from big data.听
These suits could serve a purpose if they were addressing privacy concerns that were otherwise being ignored, but that just isn鈥檛 the case. There鈥檚 simply nothing to suggest that the millions of consumers who engage in the digital economy on a daily basis are silently suffering.
To the contrary, the data reveal that consumers seem largely comfortable with the current state of affair: Adult use of social media has听听in the past decade; barely 10 percent of consumers engage antitracking technologies on their browsers; and empirical work by academics consistently finds that consumers not willing to pay very much to prevent tracking of their behavior.
As some leading economists in the field听, "the adoption of privacy-enhancing technologies lags vastly behind the adoption of sharing technologies." What鈥檚 more, recent听听from the Brookings Institution suggests that consumers have far fewer privacy concerns when computers rather than people are viewing their data 鈥� highly relevant, as most of these cases are built on the notion that servers, rather than people, are doing the "intercepting" and "reading." There just isn鈥檛 any support for the notion that the rash of ECPA and VPPA class actions serve any purpose other than to enrich the plaintiffs' bar.听
We鈥檝e seen what trial lawyers have done to other industries. The Supreme Court can stop the same thing from happening to the digital economy by reversing the Ninth Circuit's听Spokeo decision.
is the Director听of the Program on Economics & Privacy and a lecturer in law听at George Mason University School of Law.
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