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No Standing, No Settlement?

In a recent decision, the Eighth Circuit weighed in on the requirement that federal courts assess Article III standing before approving a settlement agreement. In the case at issue, plaintiff filed a putative class action for purported violations of the Fair Credit Reporting Act (“FCRA”) against a data company in state court. Defendant removed to the District Court for the Western District of Missouri.

Shortly after the parties reached a tentative settlement agreement, defendant moved to dismiss the case based on standing issues. Rather than making a determination on standing at that point, the district court denied the motion and ordered the parties to submit their settlement agreement to the court for review.

On appeal, defendant argued that the district court erred by refusing to evaluate standing before rendering a judgment in the case by approving the settlement agreement. The Eighth Circuit expressly opposed the district court’s determination that it was justified in failing to address standing at that point because “standing to bring the FCRA claims underlying [the] settlement [was] irrelevant to whether [plaintiff] has standing to enforce the parties’ settlement agreement.” The Eighth Circuit cited to Supreme Court authority noting that district courts are obligated to ensure that standing requirements are met at all phases of adjudication.

On behalf of the class, plaintiff relied on a Third Circuit case to argue that the district court’s order should stand because a party cannot avoid a settlement agreement based only on a change in the law that could have affected the settlement agreement calculation. Plaintiff specifically pointed to Spokeo v. Robins as the purported “change in law,” which was a decision rendered only four days after the parties entered into the agreement. However, the Eighth Circuit rejected this argument, noting that Spokeo did not actually change the substantive law; rather, it simply restated the existing requirements for Article III standing. As a result, the Eighth Circuit vacated the district court’s decision and remanded for an evaluation of the standing issues.

Those monitoring the issue should follow Frank v. Gaos, in which the Supreme Court granted certiorari last year to address the use of cy pres (charitable contributions in lieu of payments to class members) relief in class action settlements. In an amicus brief supporting neither party, the Solicitor General argued that the Supreme Court should remand the case to the lower court to address the preliminary question of jurisdiction. Specifically, the Solicitor General’s brief questioned whether the named plaintiffs satisfied Article III’s standing requirement of concrete harm as a result of defendant search engine’s alleged sharing of users’ search data with third parties. Following oral argument, the Supreme Court ordered the parties to submit supplemental briefing on the issue. Petitioners contended that the standing requirement was met, while Respondent search engine agreed with the Solicitor General that the Court should remand for further consideration of the standing issue. What will the Supreme Court decide? Stay tuned to the Classified blog for more developments.

Schumacher v. SC Data Center, Inc., No. 17-3112 (8th Cir. Jan. 8, 2019).

©2011-2019 Carlton Fields, P.A.

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About this Author

Laura Wall Casualty Insurance Annuity Litigation Lawyer
Associate

Laura Wall is developing her practice in the areas of property and casualty insurance, and life insurance and annuity litigation.

During law school, Laura worked as a summer intern in the Environmental Torts Branch of the Department of Justice. There, she collaborated with attorneys to develop case strategy for various environmental tort cases. Before her internship, Laura was a litigation assistant with Becker & Poliakoff, P.A. in Miami. In that role, she managed federal loan litigation and updated case information submitted to the Department of Justice.

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