Oct 182011
 
 October 18, 2011  Business, Court, Featured News

Ah, thumbs up to EPIC – they jumped into a SCOTUS case that Facebook, LinkedIn, and Zynga had tried to use as an opportunity to free themselves from litigation where consumers could not demonstrate actual harm. The firms filed an amicus brief that argued that there should be no standing or statutory damages absent a showing of actual harm:

Specifically, under the Ninth Circuit’s ruling, if any of the millions of consumers who interact with one of these companies is willing (or can be enticed by a plaintiffs’ attorney) to allege that a generalized practice or act of the company violated a law providing for statutory damages, she could launch a putative class action on behalf of herself and millions of other “similarly situated” users—and pursue a concomitant multi-billion dollar statutory damages claim—without herself or a single other class member having suffered any injury from the practice or act at issue.

Allowing plaintiffs to file such no-injury class action lawsuits could subject businesses such as amici to damages demands that, at least on their face, would be potentially bankrupting. Just the threat of these massive damages claims create strong incentives to end even baseless suits with settlement payments, essentially rewarding plaintiffs (and their opportunistic counsel) for filing extortionate strike suits. While Internet businesses such as amici would almost certainly have valid defenses on the merits to such lawsuits, if they were unable to eliminate these strike suits “at the courthouse door,” the in terrorem effect of even a small chance of a devastating loss, as well as the prospect of significant litigation costs, would increase the likelihood of meritless suits being settled by monetary payments that benefit only plaintiffs’ attorneys.

While I think there are some meritless lawsuits, it is already hard enough for consumers to demonstrate standing and the elimination of statutory damages would make things even harder. Thankfully, EPIC responded with their own brief:

EPIC filed a “friend of the court” brief in the United States Supreme Court urging the Court to affirm Congress’ power to enact strong statutes that protect consumer privacy. First American v. Edwards presents the question of whether a person can sue to enforce a provision of the Real Estate Settlement Procedures Act (RESPA), which gives individuals a right to untainted real estate referral services, and enforces this right by specifying an amount of damages for which violators are liable. Surprisingly, Facebook, Linkedin, Yahoo, and Zynga filed a brief in support of the bank First American and arguing against enforcement of privacy statutes in certain circumstances. EPIC then filed a brief in support of the consumer Edwards and argued that if the Court did not uphold statutory damage provisions, “it would become virtually impossible to enforce privacy safeguards in the United States.” Statutory damage provisions help ensure compliance with Fair Information Practices, the foundation of modern privacy law.

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