The U.S. Supreme Court has handed people-directory site Spokeo of Pasadena a victory in its defense of a class-action lawsuit alleging the company should be held financially liable for publishing false information.
Justice Samuel Alito’s opinion stated that California’s 9th Circuit Court of Appeals needed to spend more time examining whether the plaintiff suffered “concrete harm,” an outcome viewed as positive for Spokeo, which operates a searchable database of personal information using data aggregated from online and offline sources.
The Fair Credit Reporting Act lawsuit, filed in Los Angeles federal court in 2010, asks financial institutions to take reasonable precautions to make sure the information they publish about individuals is accurate. Plaintiff Thomas Robins alleged that the website’s profile of him wrongfully included information that claimed he was wealthy, had a graduate degree, a wife, and children.
“It’s a tremendously important opinion and it is really as much as the defendant could have asked for,” said Stephen Newman, a partner at Stroock & Stroock & Lavan in Century City, who's not affiliated with the case. He added that the court’s focus on concrete harm limits other companies’ liabilities for technical violations of the law. “There are plenty of law firms that will look for a minor issue, done a million times, and try to recover penalties for customers that weren’t even aware that there was a hypothetical legal violation and weren’t harmed by it.”
Because of the potentially large number of liabilities the case could have created for online publishers, several tech companies, including Facebook Inc., Google Inc., and Yahoo Inc., filed briefs with the court in favor of Spokeo’s position.
“This ruling will help innovation because a company can roll out a product to large numbers of people without fear that if they make one small mistake the litigation will shut them down,” said Newman.