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.