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January 21st, 2011

No Injury? No Lawsuit, Says DC Court of Appeals

On January 20, the District of Columbia’s highest court rejected two claims that threatened to make the nation’s capital a magnet for consumer lawsuit abuse.   The consolidated cases of Grayson v. AT&T Corp. and Breakman v. AOL LLC, had earned the District of Columbia a spot on the latest Judicial Hellholes “Watch List.”

In the first of the absurd cases, Alan Grayson, a former member of Congress from Florida, sued AT&T and others on behalf of D.C. residents and the city claiming that phone card companies somehow misled consumers by not turning over leftover balances on calling cards (referred to as “breakage”) to the city as “unclaimed property.”  In the second case, Paul Breakman, a District resident, sued AOL for offering better deals to new members than current members for the same basic internet service.   Mr. Breakman, however, was not even an AOL member himself, yet he sought actual damages, treble damages, punitive damages, an injunction, and reasonable attorneys fees against AOL for each individual D.C. subscriber.

The D.C. Court of Appeals dismissed both claims, which were brought under the District’s Consumer Protection and Procedures Act (CPPA).  It found that while Mr. Grayson at least alleged that he bought a calling card in the District, he failed to identify anything the company said that misled consumers about the obvious nature of calling cards that would make them think the city or a charity would receive any leftover balance.  Mr. Breakman, the Court found, lacked standing to bring a suit.  In other words, he had not made even a rudimentary showing that he suffered an injury.  The requirement of standing, the Court recognized, ensures that a person who sues has a personal stake in the outcome of a controversy and that judicial power is used only to redress or otherwise protect a person against injury.

The broader message of the decision is that a person or organization that sues for the generous damages and attorneys’ fees authorized by the District’s consumer protection statute must show “concrete injury-in-fact to himself.”  The alternative, the Court recognized, “would open our courts to any person from anywhere who decides to lodge a complaint labeled as a ‘representative action’ under the CPPA, even though that person has suffered no injury-in-fact related to a District of Columbia merchant’s unlawful trade practice.”  Such rampant lawsuit abuse had occurred in California, until voters finally intervened through passing Proposition 64 in 2004.  Fortunately, the D.C. Court of Appeals’ decision will avoid such bogus, extortionate claims in Washington, D.C.

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