Did The Supreme Court Just Take A Sledge Hammer To Copyright's Statutory Damages?
from the possibly... dept
Last week, in a somewhat controversial decision in the TransUnion v. Ramirez case, the Supreme Court ruled, 5 to 4, that plaintiff's in a class action lawsuit did not have standing to sue under the Fair Credit Reporting Act (FRCA). The issue may seem wholly unrelated from copyright, but in reading through the decision, it's possible it could lead to a vastly different world for copyright going forward, because the same issues that the Court finds fault with in the FRCA also apply to copyright law -- and, indeed, it's the part of copyright law that is most widely abused in lawsuits.
I should be clear that I think the holding in the TransUnion case is problematic and seems... well... weird. But if what the majority decided is true, then I don't see how copyright's statutory damages can remain constitutional. Let's dig into the case to explore why. The majority opinion, written by Justice Kavanaugh gives the basic overview right upfront:
To have Article III standing to sue in federal court, plaintiffs must demonstrate, among other things, that they suffered a concrete harm. No concrete harm, no standing. Central to assessing concreteness is whether the asserted harm has a “close relationship” to a harm traditionally recognized as providing a basis for a lawsuit in American courts—such as physical harm, monetary harm, or various intangible harms including (as relevant here) reputational harm.
The issue in this case involved TransUnion's credit reports damaged people by flagging their reports to say that they might be listed on an Office of Federal Assets Control (OFAC) watchlist. Basically, if TransUnion thought that someone's name matched someone on the OFAC list, it would put that in their credit report. For a lot of people who aren't actually on the OFAC list, that can really suck. That resulted in this lawsuit. The court found that for those on that list who could show actual damage, they had standing. But, for others who were flagged by TransUnion, but could not show any actual harm, they did not have standing to sue.
In this case, a class of 8,185 individuals sued TransUnion, a credit reporting agency, in federal court under the Fair Credit Reporting Act. The plaintiffs claimed that TransUnion failed to use reasonable procedures to ensure the accuracy of their credit files, as maintained internally by TransUnion. For 1,853 of the class members, TransUnion provided misleading credit reports to third-party businesses. We conclude that those 1,853 class members have demonstrated concrete reputational harm and thus have Article III standing to sue on the reasonable-procedures claim. The internal credit files of the other 6,332 class members were not provided to third-party businesses during the relevant time period. We conclude that those 6,332 class members have not demonstrated concrete harm and thus lack Article III standing to sue on the reasonable-procedures claim.
The constitutional analysis focuses on the power of the judiciary to deal with actual cases and controversies:
Therefore, we start with the text of the Constitution. Article III confines the federal judicial power to the resolution of “Cases” and “Controversies.” For there to be a case or controversy under Article III, the plaintiff must have a “‘personal stake’” in the case—in other words, standing. Raines, 521 U. S., at 819. To demonstrate their personal stake, plaintiffs must be able to sufficiently answer the question: “‘What’s it to you?’” Scalia, The Doctrine of Standing as an Essential Element of the Separation of Powers, 17 Suffolk U. L. Rev. 881, 882 (1983).
To answer that question in a way sufficient to establish standing, a plaintiff must show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief. Lujan v. Defenders of Wildlife, 504 U. S. 555, 560– 561 (1992). If “the plaintiff does not claim to have suffered an injury that the defendant caused and the court can remedy, there is no case or controversy for the federal court to resolve.” Casillas v. Madison Avenue Assocs., Inc., 926 F. 3d 329, 333 (CA7 2019) (Barrett, J.).
So, then the open question is whether or not a law that allows a private right of action over something that is a potential, but not concrete, harm meets the standard. And the majority decides it does not. And then, it goes even further, and notes that even if Congress creates a statutory "prohibition or obligation," courts can't just accept that as evidence of a concrete harm:
Importantly, this Court has rejected the proposition that “a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Spokeo, 578 U. S., at 341. As the Court emphasized in Spokeo, “Article III standing requires a concrete injury even in the context of a statutory violation.” Ibid.
Congress’s creation of a statutory prohibition or obligation and a cause of action does not relieve courts of their responsibility to independently decide whether a plaintiff has suffered a concrete harm under Article III any more than, for example, Congress’s enactment of a law regulating speech relieves courts of their responsibility to independently decide whether the law violates the First Amendment. Cf. United States v. Eichman, 496 U. S. 310, 317– 318 (1990). As Judge Katsas has rightly stated, “we cannot treat an injury as ‘concrete’ for Article III purposes based only on Congress’s say-so.” Trichell v. Midland Credit Mgmt., Inc., 964 F. 3d 990, 999, n. 2 (CA11 2020) (sitting by designation); see Marbury, 1 Cranch, at 178; see also Raines, 521 U. S., at 820, n. 3; Simon v. Eastern Ky. Welfare Rights Organization, 426 U. S. 26, 41, n. 22 (1976); Muskrat v. United States, 219 U. S. 346, 361–362 (1911).
As the Court then says explicitly, just because someone will have claimed to have violated a statutory cause of action that does not automatically mean there is a concrete harm:
For standing purposes, therefore, an important difference exists between (i) a plaintiff ’s statutory cause of action to sue a defendant over the defendant’s violation of federal law, and (ii) a plaintiff ’s suffering concrete harm because of the defendant’s violation of federal law. Congress may enact legal prohibitions and obligations. And Congress may create causes of action for plaintiffs to sue defendants who violate those legal prohibitions or obligations. But under Article III, an injury in law is not an injury in fact. Only those plaintiffs who have been concretely harmed by a defendant’s statutory violation may sue that private defendant over that violation in federal court.
Indeed, the majority argues that this is, fundamentally, a separation of powers issue:
In sum, the concrete-harm requirement is essential to the Constitution’s separation of powers. To be sure, the concrete-harm requirement can be difficult to apply in some cases. Some advocate that the concrete-harm requirement be ditched altogether, on the theory that it would be more efficient or convenient to simply say that a statutory violation and a cause of action suffice to afford a plaintiff standing. But as the Court has often stated, “the fact that a given law or procedure is efficient, convenient, and useful in facilitating functions of government, standing alone, will not save it if it is contrary to the Constitution.” Chadha, 462 U. S., at 944. So it is here.
The main dissent, written by Justice Thomas (it's an ideologically odd pairing: Justice Thomas with the three Justices most commonly found on the other end of the ideological spectrum: Justices Breyer, Sotomayor, and Kagan) is actually fairly compelling regarding the issue of concrete harm:
The principle that the violation of an individual right gives rise to an actionable harm was widespread at the founding, in early American history, and in many modern cases. See Uzuegbunam, 592 U. S., at ___–___ (slip op., at 5–8) (collecting cases); Havens Realty Corp. v. Coleman, 455 U. S. 363, 373 (1982) (“[T]he actual or threatened injury required by Art. III may exist solely by virtue of statutes creating legal rights, the invasion of which creates standing” (citing cases; brackets and internal quotation marks omitted)). And this understanding accords proper respect for the power of Congress and other legislatures to define legal rights. No one could seriously dispute, for example, that a violation of property rights is actionable, but as a general matter, “[p]roperty rights are created by the State.” Palazzolo v. Rhode Island, 533 U. S. 606, 626 (2001). In light of this history, tradition, and common practice, our test should be clear: So long as a “statute fixes a minimum of recovery . . . , there would seem to be no doubt of the right of one who establishes a technical ground of action to recover this minimum sum without any specific showing of loss.” T. Cooley, Law of Torts *271.3 While the Court today discusses the supposed failure to show “injury in fact,” courts for centuries held that injury in law to a private right was enough to create a case or controversy.
Thomas also goes back to the issue of statutory damages in copyright to prove his point:
The First Congress enacted a law defining copyrights and gave copyright holders the right to sue infringing persons in order to recover statutory damages, even if the holder “could not show monetary loss.” Muransky v. Godiva Chocolatier, Inc., 979 F. 3d 917, 972 (CA11 2020) (Jordan, J., dissenting) (citing Act of May 31, 1790, §2, 1 Stat. 124–125). In the patent context, a defendant challenged an infringement suit brought under a similar law. Along the lines of what TransUnion argues here, the infringer contended that “the making of a machine cannot be an offence, because no action lies, except for actual damage, and there can be no actual damages, or even a rule for damages, for an infringement by making a machine.” Whittemore v. Cutter, 29 F. Cas. 1120, 1121 (No. 17,600) (CC Mass. 1813). Riding circuit, Justice Story rejected that theory, noting that the plaintiff could sue in federal court merely by alleging a violation of a private right: “[W]here the law gives an action for a particular act, the doing of that act imports of itself a damage to the party” because “[e]very violation of a right imports some damage.” Ibid.; cf. Gayler v. Wilder, 10 How. 477, 494 (1851) (patent rights “did not exist at common law”).
But this example in the dissent now seems to serve the opposite point: and effectively argues that under the majority decision, copyright's statutory damages may not be available at all if a plaintiff cannot show "concrete harm."
That's a very big deal in the copyright context. For years, we've pointed out the problematic nature of statutory damages in copyright. Under copyright law, if the work is registered before the infringement, statutory damages are available. And the whole theory behind them is that it's supposedly difficult to show the concrete harm of infringement, and therefore, you don't need to show any actual harm to get statutory damages, and those damages are wholly unrelated to any actual harm. As we noted a decade ago, this makes it "too attractive to sue." Basically, the possible payout from statutory damages, without having show any actual harm or damages at all, is massively distortionary.
And, now, looking at this ruling, it seems that there's an open argument if copyright plaintiffs will now be able to rely on statutory damages if they can't show any harm at all. This wouldn't completely take away statutory damages, but would, at the very least require plaintiffs to show some kind of harm.
Of course, when it comes to copyright law, one of the things we've noted is that courts seem to ignore every other precedent and treat everything related to copyright as if it's different. And, if this issue ever comes back to the court, I'd predict we'd see that same thing again. Judges will bend over backwards to insist that copyright is somehow "different." And it's possible that the majority ruling has an escape valve for that: it mentions repeatedly that part of the way of judging whether or not there's concrete harm is whether or not the issue is "traditionally recognized as providing a basis of a lawsuit in American courts." And, as the Thomas dissent makes clear, that's definitely been the case for copyright law and statutory damages going back basically to the beginning.
However, I do wonder if there's another interesting opening here on that: while in the early 2000s, Larry Lessig pushed a variety of failed cases to try to argue that the massive changes brought about by more recent copyright law changes raised constitutional issues. The Supreme Court rejected those arguments (wrongly in my opinion), but I do wonder if this ruling in TransUnion, at the very least, raises questions about statutory damages under the 1976 Copyright Act, since it covers so much more content, for so much longer, than was "traditional" under copyright law for the first two centuries of the country.
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Filed Under: concrete harm, copyright, ofac, ramirez, statutory damages, supreme court
Companies: transunion
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Fat chance
I think Scary Devil Monastery was right in calling © a "cult" (even if I do use it, but I do use a BY-NC creative commons licenses to minimize harm) considering how there will likely be special exceptions that the precedence of this lawsuit would apply to ©…
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Aside from its other constitutional issues, the Texas abortion law that allows anyone to sue over abortion would run afoul of this ruling. The law allows anyone to sue, but the courts wouldn't let anyone without standing proceed regardless of what the legislature intended.
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This might not be quite the win that it seems like, even were it to percolate up into copyright case law.
Even non-commercial infringement is a federal crime (misdemeanor instead of felony?). Should civil lawsuits prove unviable, there may be a push to use the feds more thoroughly in prosecuting these crimes. Remember that the $5000 threshold for FBI involvement won't have quite the same rigorous standards as those of the top nine judges in the nation.
Mostly, the FBI feels that this stuff is beneath them (with the exception of high profile cases), but their sentiment could be swayed by the correct propaganda campaign. No more inept pro-copyright lawyers being sanctioned in civil court, but AUSAs coercing plea deals to avoid federal prison.
Could be trading bad for worse if this stands.
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Re: Fat chance
Eh, religion, maybe.
Cults aren't just about worship or dogma, they're designed to isolate people from the outside and make it difficult for them to leave.
Nobody's forcing anyone who worships at the altar of copyright to do so. They can leave at any time.
Also: If you refer to precedent as "precedence", it's a pretty good sign you don't have the expertise to interpret it.
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Re: Re: Fat chance
I meant "precedent". Thanks for the catch.
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Re:
I don't htink so. This ruling is about standing in federal court. Lawsuits under a Texas law would normally be filed in Texas state court. The state courts would not necessarily hold this ruling as binding on standing in said state courts (I would hope it would be influential, but it does not have to be).
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Patents also
Would this also apply to patent trolls. I mean, if they haven't been producing anything, and don't have any real plans to produce something with a given patent, can they still show harm?
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But does this mean that inserting false information in a person's credit report is now entirely OK. Unless a person could prove unequivocally that failure to rent a home, get a job, buy a home or car was specifically tied to the false information then no concrete harm?
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Of course, when it comes to copyright law, one of the things we've noted is that courts seem to ignore every other precedent and treat everything related to copyright as if it's different.
Yeah, sadly the whole time I was reading this I was thinking "but copyright and themeparks are different!" head+desk
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Re:
Not at all. The decision seemed clear that the people who were disqualified from the putative class were those who could not (or did not) demonstrate that the false information was disclosed to a third party by way of a "hard" credit pull. That is, their credit report had false information, but it was never used or seen by anyone other than the person themselves (in conjunction with the lawsuit)
In my non-lawyer opinion, this distinction was whether the credit bureau commited a tort the moment they included false information in the file; or only later when that false information was disclosed to a third party. The ruling appeared to say that false information in a credit report does not rise to a violation of duty until the moment it is disclosed to another.
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Concrete Harm can still be alleged by loss of control
I regularly litigate in federal courts regarding consumer cases similar to FCRA cases. (I litigate over FDCPA claims; Fair Debt Collection Practices Act claims.)
Ramirez is a bad case for consumer law in many ways. Not the least of which is that it seems to gut the ability of consumers to bring class action claims for widespread violations of consumer laws by a company like TransUnion. This can truly limit how well these folks comply with federal consumer protections.
However, Ramirez actually strengthens the argument that in non-class, individual cases the ability to allege the concreteness element of standing is more broad than many Federalist Society and US Chamber of Commerce friendly judges otherwise believe.
In short—a concrete harm does not need to be monetary, but can include emotional harms, invasions of privacy, and loss of control over property.
Moreover, those same Federalist Society and Chamber of Commerce judges seem more than willing to find economic harms in areas in which they agree with—I.E. copyright protections (because property rights)—than in areas in which they disagree—I.E. consumer protections.
TLDR—all a copyright owner will be required to plead in a federal copyright violation case to show concreteness of harm is to plead that by making use of, distributing, or copying the protected work the Defendant otherwise deprived the Plaintiff—copyright owner of the ability to control its property, including its distribution, and to otherwise monetize that control and distribution.
This is a LOW bar, despite how they keep trying to raise it for consumer law cases.
The Spokeo Inc v. Robins case was the predecessor to the TransUnion v. Ramirez case: (https://en.wikipedia.org/wiki/Spokeo,_Inc._v._Robins).
Really, the key to these cases—and some others—is a conservative judiciary chipping away at the ability of folks to bring class actions.
There are, however, unintended consequences to this. For example, look for the various stories about how some lawyers have taken advantage of arbitration fee-shifting and brought voluminous and valid arbitration claims for which the large company that forced the arbitration on a consumer or employee must now pay the lion's share, or even 100% of, the arbitration fees.
(To give you an idea, federal court filings cost $402 for plaintiffs, nothing for defendants to answer. Arbitrations, on a consumer fee track, on average cost the company enforcing the arbitration—think Wells Fargo, Bank of America, or AT&T—a minimum of $5k PER EACH ARBITRATION, and sometimes ongoing arbitration fees, with arbitrators charging $500+ per hour. Double-edged swords.)
Still, I don't see Ramirez—sadly—affecting copyright trolls. It definitely hurts the class-side of consumer cases, but copyright cases are not brought as class actions and Ramirez actually makes it arguably easier for individual plaintiffs to meet the Article III standing requirement, including for concreteness.
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Re: Re: Re: Fat chance
Precedent vs precedence
Never underestimate the power of a good speelchucker or autocorrupt to change the intent of your writing. "Now, where's my morning cup of covfefe?", a former Precedent of the US may have said.
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Re: Concrete Harm can still be alleged by loss of control
If I could rate that comment insightful more than once, I'd do it in a heartbeat!
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Re: Fat chance
Thank you for the cred.
Two reasons why I call it a cult, really; The first one being that in order for anything assumed true by copyright law to hold water you first have to deny factual reality. The "lost sale", copying something being theft, students and poor people copying media being incentivized to commit terrorism, drug dealing and sex trafficking. On top of the murky waters where someone who decidedly owns an item is deprived of the ownership of the patterns on it - which is owned by some undisclosed third party somewhere.
The second reason hails back to the medieval church; Where a cadre of stakeholders assumed control over a certain set of information and persecuted anyone not in the club for making copies or reading the material out loud. And where violations against intangible victimless "crimes" could be exonerated in exchange for a license - or as it was called then, letters of indulgence.
With the mechanism and the theory behind copyright both hailing to religious arguments and ownership of ideology and information I made the call that it's a cult no different than scientology or Aum Shinriko.
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Re: Concrete Harm can still be alleged by loss of control
How does "loss of control" meet the requirement "that the injury would likely be redressed by judicial relief"? If it's the nebulous "control" that has been lost, how can the court make the plaintiff whole? It (the control) is gone and the idea to be controlled has escaped. There's no putting the genie back in the bottle there.
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Re: Re: Concrete Harm can still be alleged by loss of control
Ah. This is a good question.
The answer is the favorite and most important thing to all Federalist Society and US Chamber of Commerce adherents—money.
You can redress an injury through judicial relief with money. Loss of control can be remedied by compensation for the lost value of that control.
There is also a possibility of an equitable remedy—the destruction of all copies in possession of the offending defendant might be imposed, or an injunction prohibiting the defendant from acquiring copies.
(The best way to remember legal remedies versus equitable remedies is that legal remedies result in money changing hands; equitable remedies result in actions being taken, or prohibited. Most courts prefer legal remedies because equitable remedies smack a bit more like compulsion to act, which offends First Amendment sensibilities and then the later-acquired disaffection towards slavery.)
You are correct that there is no putting the genie back in the bottle.
At the same time, there is no bringing a dead person back to life, but we do have wrongful death lawsuits that seek to provide some form of judicial relief through monetary compensation for the loss of someone's life.
There is a lot to get into as to the concepts of judicial philosophy, moral rights, property rights, the power of the courts and government to compel, etc wrapped up in this question.
The short answer, however, is money.
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Re: Re:
This is correct—standing is a feature of federal court.
The mantra you learn in law school is that "federal courts are courts of limited jurisdiction."
They seek to limit how and when they can hear cases.
Some state judiciaries have adopted concepts of concrete harm and redressability similar to the federal concept, but this is not as common as of yet.
(The US Chamber of Commerce, corporations, and Federalist Society adherents are pushing for this, however—it limits how and when and the scope of lawsuits they might face for hurting, harming, harassing, or killing people through negligence or recklessness.)
Notably, Copyright cases must be brought in federal court as Copyright is a creature of federal law (and the US Constitution).
This could be modified (Trademark cases can be heard in state court; patents, however, must also be in federal court), but it has not yet been and is unlikely to be for a number of reasons.
In contrast, Fair Credit Reporting Act (FCRA) cases like the one in Ramirez can be heard in state courts, including state courts with lower standing thresholds than federal court.
This is the likely result of cases like Spokeo v. Robbins and TransUnion v. Ramirez—consumer protection class actions will shift to state court litigation. In fact, I can see it already happening in my practice (primarily the FDCPA), and I have indeed myself brought more actions in state court so as to avoid more complex standing analysis.
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Would be great if it worked out like that for sure. But I'm not holding my breath.
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Re: Creative Commons BY-NC
Why NC? What do you use your commercial monopoly for?
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Re: Re: Creative Commons BY-NC
The reason is because I couldn't get paid by BMI or my publisher Songtrust had I not kept the commercial monopoly.
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Civil rights violations + no concrete harm == no section 1983?
If a person's 4th amendment rights are violated by, say, having their vehicle searched without probable cause, but nothing was found so there was no arrest or charges, does that mean, under this doctrine, that you cannot sue for a section 1983 violation of rights claim, as there was no actual damage?
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