Court Allows Fair Credit Reporting Act Claims Against Spokeo to Move Forward — Robins v. Spokeo

[Post by Venkat Balasubramani with comments from Eric]

Robins v. Spokeo, No. CV10 05306 ODW (AGRx) (C.D. Cal.; May 11, 2011)

I previously blogged about Spokeo, which is being sued for disseminating reports which allegedly contain inaccurate information about plaintiff. The court initially dismissed the lawsuit without prejudice due to plaintiff’s failure to allege actual harm.

Plaintiff refiled its lawsuit and alleges harm sufficient to satisfy the court:

the court finds that plaintiff has alleged sufficient facts to confer Article III standing. Specifically, Plaintiff has alleged an injury in fact – the “marketing of inaccurate consumer reporting information about plaintiff” – that is fairly traceable to defendant’s conduct – alleged FCRA violations – and that is likely to be redressed by a favorable decision from this court.

This just sounds like a formulaic recitation of harm, but it’s good enough for the court. To allege standing under certain statutes you, just have to allege a violation of the statute. In other cases, you have to allege actual harm.

Apart from lack of standing, Spokeo argued that it is not a “consumer reporting agency” under the Fair Credit Reporting Act. Spokeo pointed its disclaimers which stated that the reports furnished by Spokeo “cannot be used for FCRA purposes.” The court is not swayed by this argument and points to plaintiff’s allegations that Spokeo marketed its reports to “HR professionals and potential employers.” Plaintiff presented the court with some typical gotcha website copy that easily made the case at the pleading stage that regardless of what the disclaimers said, Spokeo intended the reports to be used for employment and credit verification purposes.

Spokeo also argued that it was entitled to protection under Section 230. The court punts on the Section 230 issue. The court’s discussion of this issue is somewhat disappointing in that it gives the parties very little to work with as far as how the court will ultimately deal with the issue. The details around how the collection and dissemination of information occur could end up being important to the Section 230 analysis. (Prof. Goldman’s post on Accusearch discusses this: “Roommates.com Infects the Tenth Circuit–FTC v. Accusearch.”) Spokeo should be able to take in information from various agencies, aggregate it, and redistribute it without losing Section 230 protection. (See, e.g., AOL v. Drudge.) To the extent Spokeo is just taking in reports that third parties already create, it should be difficult for plaintiff to argue that Spokeo falls under the Ninth Circuit’s Roommates decision and somehow plays a role in the creation of the content. It’s also worth separating the “score” assigned by Spokeo, with respect to which Spokeo will likely be able to argue some First Amendment protection (see Brown v. Avvo), from the information that is taken in from third parties and disseminated. Maybe the pleadings and the briefing didn’t highlight what exactly whether plaintiff was complaining about the information that came from third parties or the “score” assigned by Spokeo, but these seem like issues the court could have delved into in order to provide some clarity to the parties.

The court also dismisses plaintiff’s claims under California’s unfair competition statute on the basis that the plaintiff did not allege that he “lost money or property” as a result of the unfair competition. Here the court finds that the plaintiff’s conclusory allegations of lost income from continued unemployment are insufficient.

Previous post: “Court Dismisses Class Action Against Spokeo for Lack of Standing”

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Eric’s comments

The court’s 47 USC 230 discussion is terse. The entire substantive discussion:

Defendant asserts that it is immune under the CDA because it is an “interactive computer service” that “passively displays content that is created entirely by third parties.” Plaintiff, however, alleges that CDA immunity does not apply to Defendant because unlike information content providers that simply reorganize information obtained from other content providers, “Defendant develops original content based on information obtained from a variety of sources and posts it online[.]” Accordingly, application of the immunity is not clear at this time and the Court declines to dismiss the Complaint on this basis.

This could be another example of a judge being too cautious to use 230 on a motion to dismiss. The court appears to have allowed the bald assertion that Spokeo “develops” content to survive the dismissal motion. As Venkat says, what the judge should have done is require the plaintiff to be more specific about exactly what Spokeo did to develop the content.

We’ve seen a couple other recent examples where courts have let bald assertions like this survive a 230 dismissal, only to come to its senses at the summary judgment stage and decide 230 applied after all. (See the Kruska and Smith cases). My guess is that something similar will happen here too, with the twist that anything Spokeo actually develops will be its protected opinion (much like the Avvo case, as Venkat notes). A late 230 defense is better than no 230 defense, but it still incurs a lot of needless costs and wasted motion. It’s unfortunate this judge wasn’t more aggressive at policing the obvious 230 issue at the pleading stage.