In its decisions in Spokeo v. Robins and TransUnion v. Ramirez, the Supreme Court held that consumers lack Article III standing to challenge violations of the Fair Credit Reporting Act absent the showing of some concrete harm beyond the publication of inaccurate credit information.
On Tuesday, the Fourth Circuit confronted how those decisions interact with state-law claims initially filed in state courts, but removed to federal court.
In O’Leary v. TrustedID, a plaintiff brought claims in South Carolina state court under South Carolina’s Financial Identity Fraud and Identity Theft Protection Act, on behalf of a putative class, alleging that TrustedID’s requirement that consumers provide six digits of their social security number to access its website violated state law. TrustedID then removed the case to federal district court under the Class Action Fairness Act, and moved to dismiss the case for failure to state a claim. The plaintiff responded by filing a motion “to determine subject matter jurisdiction” or, in the alternative, to remand. The district court found that the plaintiff had met the Article III standing requirements, and then proceeded to grant the motion to dismiss on the merits.
Plaintiff appealed the Rule 12(b)(6) dismissal. On appeal, the parties agreed that plaintiff had Article III standing. But the Fourth Circuit disagreed, finding plaintiff had not shown that the violation of state law increased his risk of identity theft or had a close relationship to any traditional or common-law analog.
Had the claim been brought in federal court from the get-go, the Fourth Circuit would have likely ordered dismissal for lack of subject-matter jurisdiction. But since the case was first filed in state court, where Article III does not apply, the court ordered the case remanded to state court–and vacated the adverse merits determination. In such an awkward procedural scenario, the consumer plaintiffs’ loss on standing actually resuscitated their otherwise dead case.