A California Court of Appeal Stands with Federal Courts: No Injury, No Standing Under FCRA

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The California Court of Appeal, Fifth District, recently held in Limon v. Circle K Stores Inc., 84 Cal.App.5th 671, 2022 WL 14391789 (Oct. 25, 2022), that California plaintiffs bringing Fair Credit Reporting Act (“FCRA”) claims must allege a “concrete or particularized injury” to have standing. In holding so, the California court aligned the state’s standing law with federal standing law, which enforces “no injury, no standing.”

Ernesto Limon applied for a job with Circle K Stores Inc. and received a set of FCRA disclosures during the application process. Circle K gave him a form requesting his consent to obtain a background report and allowing him to check a box to request a copy of the background report. The form also informed Limon that by signing, he agreed to release from liability any entity providing information for the background report. Limon signed the forms, and Circle K requested the background report. Circle K hired Limon.

Limon later sued Circle K in federal court in California for violations of the FCRA’s disclosure provisions, § 1681b(b)(2)(A)(i) and (ii). He alleged Circle K’s consent form violated the FCRA because it did not include the disclosures in a “standalone” document, did not “clearly and conspicuously” inform him that a report would be procured, did not appropriately request his consent in writing to obtain the background report, and included the liability release for providers of background information. Critically, Limon did not allege Circle K’s alleged failures harmed him in any way. Therefore, at summary judgment, the federal court dismissed the case for lack of standing under Article III of the U.S. Constitution. The court allowed Limon to provide more evidence to establish an injury necessary for standing, but he conceded he could not.

Limon then re-filed his claims in California state court. The California trial court also dismissed the case for lack of standing. Limon appealed, and the California Court of Appeal affirmed, confirming that, “under California law[,] . . . an informational injury that causes no adverse effect is insufficient to confer standing upon a private litigant to sue under the FCRA.”

The court’s decision – holding California plaintiffs in the Fifth District to a standing burden akin to the Article III standard in federal court – is momentous. To reach it, the court thoroughly analyzed Limon’s no-harm concession against the backdrop of the FCRA’s purpose and California standing law. It then systematically rejected Limon’s arguments for a no-injury standing jurisprudence.

The court first emphasized that the FCRA disclosure provisions underpinning Limon’s claims exist to protect job applicants’ privacy rights, but Limon conceded privacy was not violated. Even if Circle K’s form technically violated the FCRA, holding Circle K responsible for a violation that hurt nobody did not support the FCRA’s purposes.

Then the Court summarized California’s standing doctrine, which requires a plaintiff to “have a personal interest in the litigation’s outcome” or be “beneficially interested” to maintain an action. If a plaintiff “has neither suffered nor is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented,” he lacks a “real interest” in the case and has no standing in a California court. Importantly, while Article III does not bind California courts like it does federal courts, the California “beneficially interested” test is equivalent to the Article III injury-in-fact-prong, and “there are, in many instances, commonalities between California’s standing doctrine and federal standing doctrine.”

Against that background, the Court of Appeal systematically rejected Limon’s three arguments that a California plaintiff has standing without suffering any concrete injury.

• First, the court rejected Limon’s assertion that California standing “simply requires that the action be maintained in the name of the person who has the right to sue under the substantive law.” Limon’s argument came from California Code of Civil Procedure section 367, which requires “[e]very action [to] be prosecuted in the name of the real party in interest.” The court concluded that the statute states a prerequisite but does not automatically confer substantive standing when it is fulfilled. Bringing a suit in the real party in interest’s name is necessary, but not sufficient, for standing.
• Second, the court rejected Limon’s argument that California has blanketly allowed plaintiffs to sue without alleging a concrete injury. Limon’s cases in support merely demonstrated that in very narrow circumstances, the courts have identified standing through public interest considerations or per se injurious statutory violations. In certain taxpayer suits, for example, the California Legislature has granted parties “public interest standing” to maintain a suit for the public good without first suffering a personal injury. In civil rights cases where the courts have found standing without evidence of personal injury, the statutory violations were per se injurious. However, those cases are exceptions to, not repudiations of, the rule that a plaintiff must have a “beneficial interest” in a suit to have standing. The court held that the FCRA does not confer public interest standing but rather confers authority on federal and state agencies and officials—not individuals—to vindicate the public interest in the face of FCRA violations.
• And third, the court rejected Limon’s argument that an uninjured plaintiff can obtain a statutory “penalty” for an FCRA violation. In other words, the Court of Appeal held that FCRA violations are not per se injurious, and a plaintiff must still show a “beneficial interest” in the case. Limon argued that the FCRA’s provision for statutory “penalties” in § 1681n(a)(1)(A) is distinguishable from the provision for “damages” in § 1681s, meaning a court may assess a monetary penalty against a defendant notwithstanding a plaintiff’s lack of personal damage from the violation. The court, however, adopted Circle K’s argument on this point: statutory “penalties” punish wrongdoers, whereas “damages” compensate injured parties and “require an injury to compensate.” The court held that the plain meanings of “penalties” and “damages,” coupled with Congress’s intentional use of these words in different places in the FCRA, indicate that an individual FCRA plaintiff can recover “damages” only if he is injured.

Having untangled and dismantled Limon’s standing arguments, the Court of Appeal held Limon lacked standing to pursue his FCRA claims in California court. Limon had suffered no injury to his privacy rights because he willingly submitted to the background check, he consented in writing to Circle K’s procuring the background report, and he conceded he would have signed an FCRA-compliant form allowing Circle K to do exactly what it did. He never alleged he did not receive a copy of the background report or that the report contained any inaccurate or damaging content.

In holding Limon failed to satisfy California’s standing requirements, the Court of Appeal drew an important connection between California and federal standing law. The wave of Article III standing cases following TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), will continue, and state practitioners should be aware of their state’s standing requirements. Limon joins the ranks as another potent weapon in a California defendant’s arsenal against purely statutory claims.

This alert was authored by Leah A. Tedford, associate in the Firm’s Class Action Group. Leah can be reached at 215-772-7401 or ltedford@mmwr.com.