This week, the Ninth Circuit addresses the distinction between Article III and statutory standing, and it considers issues arising from the sinking of a drydock in a marine sanctuary.
The Court holds that Plaintiffs pleaded an injury-in-fact for purposes of Article III standing but failed to plead the statutory injury required to state a claim under the Washington Privacy Act.
The panel: Judges Hawkins, Graber, and McKeown, in a per curiam opinion.
Key highlight: “To establish a constitutional minimum for Article III jurisdiction, a plaintiff must plead an injury-in-fact; this creates a pleading floor. A particular cause of action may require more—for instance, a particular type of injury or a threshold magnitude of injury—without raising the constitutional pleading floor. A failure to plead the more-specific or more-demanding statutory injury shows a failure to state a claim, not a failure to establish standing.”
Background: Defendant Ford Motor Co. sells cars with an “infotainment” system that allows drivers and passengers to use their cellphones while driving. The infotainment system allegedly downloads and stores the cellphone’s call logs and text messages. Plaintiff Mark Jones, who owns a Ford, exchanged text messages with Plaintiff Michael McKee. Together, they filed a putative class action in Washington state court alleging that Ford had violated the Washington Privacy Act (“WPA”) by making unlawful recordings of their private communications.
Ford removed the case to federal court under the Class Action Fairness Act. The federal district court then dismissed the complaint for failure to state a claim. Among other things, the district court concluded that plaintiffs failed to plead the requisite injury under the WPA, which requires that a privacy violation injure the plaintiff’s “business, his or her person, or his or her reputation.”
Result: The Ninth Circuit affirmed. Plaintiffs argued that the district court lacked jurisdiction and should have therefore remanded to Washington state court, rather than dismissing on the merits. They contended that Ford had “self-rebutted” Article III standing (and thus jurisdiction) by asserting that Plaintiffs alleged no injury. The Ninth Circuit rejected this argument, holding that Plaintiffs had adequately pleaded an injury-in-fact for purposes of Article III standing but had not pleaded the statutory injury required to state a claim under Washington law.
As for Article III injury, the Court explained that the complaint’s allegations that “the vehicle’s system downloads all text messages and call logs from Plaintiffs’ cellphone” and “permanently stores the private communications without Plaintiffs’ knowledge or consent” was enough to establish “violation of a substantive privacy right.” The district court therefore properly retained jurisdiction of the case.
But, the Court continued, the district court had also correctly concluded that Plaintiffs failed to state a claim. The Court rejected Plaintiffs’ argument that any violation of the privacy rights set forth in the WPA was itself sufficient to constitute a claim under that statute. Rather, the statute also expressly required Plaintiffs to show that “a violation of [the WPA] has injured his or her business, his or her person, or his or her reputation,” and much of this language would be surplusage if any “violation” constituted the requisite injury. Thus, “an invasion of privacy, without more, is insufficient to meet the statutory injury requirements.” And because Plaintiffs had not alleged that any violation injured their “business,” “person,” or “reputation,” their claim failed.
A divided Court affirms a judgment dividing mitigation costs stemming from the sinking of a drydock.
The panel: Judges W. Fletcher, Paez, and VanDyke, with Judge Fletcher writing the majority opinion and Judge VanDyke dissenting in part.
Key highlight: “Vigor’s insurance policy was not a wholly independent source. The Tow Agreement required Vigor to purchase insurance, and Western determined its contractual fee based in part on Vigor’s doing so. As the district court correctly noted, agreed payments to Vigor were calculated ‘pursuant to insurance policies that Vigor was required to procure under the Towing Agreement.’ The collateral source rule therefore does not apply.”
Background: Vigor owned a drydock—“a floating enclosed basin that allows cleaning or repairing parts of a ship that would ordinarily be underwater”—which had been constructed in 1945 and was in need of substantial repairs. Vigor decided to sell it for scrap, and it hired Western to tow it from Seattle to a shipyard in Ensenada, Mexico. Western made it as far as San Francisco before the drydock began to list. Ultimately, the drydock sank in the Monterey Bay Sanctuary. The U.S. National Oceanic and Atmospheric Administration issued a letter saying that, given that location, the parties could be responsible for the resulting damage, which Vigor ultimately paid about $415,000 to mitigate.
Vigor and Western sued one another. Western claimed that Vigor had breached their contract by failing to pay for Western’s towing services and had been negligent because the drydock was not seaworthy. Vigor countered that Western had breached the contract and been negligent by allowing it to sink in the Sanctuary. At summary judgment, the district court determined that Western had been negligent as a matter of law. After a bench trial, the court found that Vigor had also been negligent in failing to provide a seaworthy tow. Comparing the parties’ negligence, the court determined that Western was 40 percent negligent while Vigor was 60 percent negligent. It ordered Western to pay Vigor 40,000—40% of the $100,000 in Vigor’s mitigation expenses that had not been covered by insurance (that is, the deductible). Both parties appealed.
Result: The Ninth Circuit affirmed in large part. The Court began by rejecting Western’s argument that the district court had erred in granting summary judgment on its negligence. The Court explained that there was no evidence “that anyone at Western, including [the ship’s captain], was aware of the legal consequences of allowing the drydock to sink in the Monterey Bay Marine Sanctuary.”
Next, the Court rejected Vigor’s argument that it was entitled to 40% of the total amount it had spent in mitigation, and not simply the amount not covered by insurance. As the Court reasoned, the “collateral source rule”—which “allows a tortfeasor to be assessed the full amount of damages when the victim receives compensation from a source collateral to the tortfeasor”—did not apply because Vigor’s insurance policy was not a “wholly independent source”: the parties’ agreement required the purchase of the insurance policy, and the compensation under their contract was determined in part by the policy.
The Court also rejected both parties’ arguments that the district court had erred in assessing their comparative negligence, finding there was “no clear error.” The Court further concluded that Western had waived its argument that a “hold harmless” provision in the contract precluded Vigor’s recovery. And because Western had not raised to the district court the argument that another contract provision entitled it to 60% of its contractual fee, that contention was also waived.
The Court did, however, reverse and remand for the district court to calculate prejudgment interest based on the date of Vigor’s mitigation expenditures—and not, as the district court had done, from the date the drydock sank.
Judge VanDyke dissented with respect to Western’s “hold harmless” provision argument. Judge VanDyke would have held that Western’s argument on appeal necessarily encompassed the assertion that the district court had erred in deeming this provision inapplicable to mitigations costs associated with damages to a third party (i.e., the government). And, Judge VanDyke continued, he agreed with that contention: the relevant provisions provided that the parties must “look solely” to insurance for the recovery of any losses and that each party was responsible for its own deductibles. As a result, Judge VanDyke deemed most of the majority’s other conclusions unnecessary.