U.S. Supreme Court and Its Private Rights v. Public Rights Problem in Bankruptcy (Spokeo v. Robins)

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Protecting public rights or private rights?

By:  Donald L. Swanson

The opinion in the U.S. Supreme Court is Spokeo, Inc. v. Robins (issued on May 16, 2016, in Case No. 13-1339).

The Facts of the Case

Here are the facts:

Spokeo, Inc., operates a “people search engine”: you can search its website for a person’s name and get information about him/her.

Spokeo posts a picture of Mr. Robins and reports him to be in his 50s, married, employed in a professional or technical field, with children, a graduate degree, a “Very Strong” economic status, and a wealth level in the “Top 10%.”

The truth, back then, is that Mr. Robins is out-of-work, without a family, and actively seeking employment. And the picture Spokeo posts is of someone else.  [Note: It’s sort-of like the play, “I’m Not Rappaport.”]

Mr. Robins’s class action lawsuit alleges violations of the Fair Credit Reporting Act [the “Act”]. His expressed concern in the lawsuit is that Spokeo’s report creates “imminent and ongoing actual harm” to his employment prospects by making him “appear overqualified for jobs he might have gained, expectant of a higher salary than employers would be willing to pay, and less mobile because of family responsibilities.”

The Standing Doctrine Issue

The issue in the case is whether Mr. Robins has “standing” to bring this action against Spokeo under the Act. The majority of Supreme Court justices (Alito, Roberts, Kennedy, Thomas, Breyer and Kagan) answer this question in the negative: Mr. Robins does NOT have standing because the alleged damage is not sufficiently “concrete.” Two justices (Ginsburg and Sotomayor) dissent.

A History / Civics Lesson on Standing: Private Rights v. Public Rights

What’s interesting about this case is the history / civics lesson on “standing” provided by Justice Thomas in his concurring opinion.  Here is a sampling from the history / civics lesson he provides:

The “standing” doctrine preserves separation of powers by preventing the judiciary’s entanglement in disputes that are primarily political in nature. This entanglement concern is generally absent from a lawsuit by an individual seeking to enforce only his/her personal rights against another private party.

Such a distinction between “primarily political rights” (aka “public rights”) and “personal rights” (aka “private rights”) comes from the common-law courts, which “more readily entertained” suits by private plaintiffs alleging a violation of their own rights over suits by private plaintiffs asserting “claims vindicating public rights.”

Private rights traditionally include “rights of personal security (including security of reputation), property rights, and contract rights.” In suits to enforce such rights, courts historically presumed that a plaintiff’s right to sue arises “merely from having his personal, legal rights invaded.” Here’s an example:

“when one man placed his foot on another’s property, the property owner needed to show nothing more to establish” standing-to-sue.

In such a private rights suit, courts historically presumed a plaintiff has standing “merely from having his personal legal rights invaded.”

As to private parties asserting “claims vindicating public rights,” however, common-law courts required “a further showing of injury.” Public rights are duties owed “to the whole community . . . in its social aggregate capacity.” These include “free navigation of waterways, passage on public highways, and general compliance with regulatory law.” Generally, “only the government has the authority to vindicate a harm to the public at large”: criminal laws are a prime example.

To achieve standing for enforcing public rights, common-law courts required “a further showing of injury”: the plaintiff had to show “some extraordinary damage, beyond the rest of the community.”

This is a separation-of-powers issue under the U.S. Constitution. By limiting the ability of Congress to delegate law enforcement authority to private plaintiffs and the courts, the standing doctrine preserves executive discretion.

Overlap With Bankruptcy Law

What’s interesting about the foregoing is its overlap with bankruptcy law. Every bankruptcy attorney will recognize this public rights v. private rights distinction: it’s from struggles, in judicial opinions, over the extent of (and limits on) bankruptcy jurisdiction under Articles I (bankruptcy courts) and III (district courts) of the U.S. Constitution. The rule is that private rights require resolution by an Article III judge, while public rights may be resolved by an Article I judge.

A Bankruptcy Problem

The private rights / public rights distinction seems to make a lot of sense in the “standing” doctrine context.

But it creates huge difficulties and confusion in the bankruptcy context. Consider this:

–The enforcement of contract rights has always been viewed, unequivocally, as a private rights issue: contract disputes must be resolved by an Article III court.

–The filing, objection and resolution of proof of claim issues in bankruptcy has always been viewed, unequivocally, as a public rights issue: this process can generally be handled—from start-to-finish—by an Article I bankruptcy court.

–But the vast majority of all proofs of claim filed in bankruptcy cases assert contract claims.

So . . . how do we justify that?!! And the claims filing and resolution process is one of the most-basic of all bankruptcy functions.

The answer is that courts have experienced great difficulty in articulating the private rights v. public rights justification and applying that justification consistently across the broad spectrum of bankruptcy issues.

I suggest that we need a new-and-different way of looking at, and dealing with, bankruptcy court jurisdiction issues.

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